Shares in FirstGroup (LSE:FGP) PLC fell over 5% after the company announced that although it is is keeping its expectations for fiscal 2022 unchanged, the pandemic means the pace of recovery remains uncertain.
Yesterday's government announcement that people should return to home working as much as possible in an effort to combat the spread of the new omicron variant of Coronavirus is set to impact travel on public transport such as buses and trains.
FirstGroup (LSE:FGP) said passenger volumes at its First Bus business have risen to 71% of 2019 levels in recent weeks, but there is evidence of a slowdown in the rate of recovery recently due to travel restrictions.
After disposing of its North American assets during the first half, FirstGroup is now focused on its UK operations.
Revenue from continuing operations grew to £2.13bn in the six months to 25 September 2021, compared with just over £2bn in the same period last year, the group said in its earnings release. The figure reflected improving First Bus passenger revenues, broadly offset by lower government grants, while First Rail revenue was broadly flat.
Adjusted operating profit from continuing operations was in line with expectations at £51.8mln, compared with £55.7mln in the year-ago period. An increase in the adjusted operating profit of First Bus was offset by a reduction in that of First Rail.
Statutory pre-tax profits amounted to £516.5mln, compared with a loss of £100mln.
FirstGroup also announced that it intends to start regular dividend payments within the next 12 months.
The company said it First Bus expects passenger volumes to reach 80%-90% of pre-pandemic levels during the full year following the end of restrictions.
Passenger volume recovery is being held back in some areas by a shortage of bus drivers, FirstGroup said, but added that its pricing strategy is expected to broadly offset the impact of this.
The group said it is confident that First Bus will deliver its 10% margin objective for the first full financial year after the end of pandemic-related restrictions on public transport.
First Rail's four management fee-based operations are performaning in line with management expectations.
The rail division launched its new Lumo open access operation in October with strong passenger bookings, while passenger volumes at the Hull Trains open access business are running “modestly ahead” of expectations and the industry average, the group said.
Both Lumo and Hull Trains serve leisure travellers, a segment that has returned to more than 90% of 2019 levels in recent periods, it said. The two open access operations are forecast to post a loss of £20mln in the current financial year, before making a profit contribution from full-year 2023.
Adjusted net cash stood at £137.3mln on 6 December.
The company said it expects to end the year with £10mln-£20mln in adjusted net debt.
Executive chairman David Martin said: "With a well-capitalised balance sheet and an operating model that supports our intention to begin regular dividends to shareholders within the next 12 months, FirstGroup is now a more resilient and flexible business. I am confident that we are well-placed to create long term, sustainable value from the opportunities ahead, underpinned by the UK policy backdrop which places public transport at the centre of the economic recovery, decarbonisation and levelling up agendas."
Shares fell 5.06% to 96.55p midmorning.