Firstgroup's rail division trading 'ahead of expectations'

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[ChrisB]

From Business Live, via MSN

Firstgroup's rail division has been performing better than anticipated, despite the UK^▸ (United Kingdom) government's radical reforms of the railway network that are raising industry-wide concerns.

On Tuesday, the publicly-traded transport company acknowledged that revenues from the Department for Transport (DfT^» (Department for Transport - about)) for contracted train operators surpassed previous projections, as reported by City AM.

The firm is also experiencing "strong demand" in its open access services, which are delivered by Lumo and Hull Trains.

Within the half-year period, Firstgroup secured access rights for two additional open access services and cemented a £500 million deal to lease 14 new trains manufactured in the UK.

However, the company has issued several warnings indicating that the establishment of the state-run Great British Railways (GBR^▸ (Great British Railways)) might constraint the expansion of open access services.

In comments to the DfT submitted on Monday, Firstgroup expressed apprehension that GBR could display "adverse monopolistic" behaviour, advocating for the Office of Rail and Road (ORR^» (Office of Rail and Road, formerly Office of Rail Regulation - about)) regulator, responsible for approving new routes, to be "empowered to adjudicate fairly and impartially with fair, transparent and open decision-making."

Graham Sutherland, the head of Firstgroup, mentioned existing agreements that would allow them to double their open access operations with possibilities for even further growth.

In a reflective statement, Firstgroup declared its balance sheet remains "strong," projecting its net debts to fall between £85 and £90 million by the year's end.

At First Bus, the company predicts a two per cent rise in passenger numbers, with revenue from First Bus London expected to reach between £300m and £350m annually. The firm also anticipates maintaining its adjusted earnings per share in 2026.

"We have continued our strong financial and operational delivery in the second half of our financial year and have committed significant capital to further grow and diversify our portfolio," Sutherland stated.

[ChrisB]

This Is Money's take on the same story

FirstGroup will 'double' private rail operations to counter Government's nationalisation push

FirstGroup has upgraded 2025 profit guidance after a better than expected showing from its rail division over the last year.

The FTSE 250 Avanti West Coast and Great Western Railway owner expects higher than forecast variable operator fees from the Department of Transport, while its non-taxpayer funded open access operations continued to perform well.

The Government passed a bill last year that will bring rail passenger services back into public ownership by appointing a public sector operator when existing contracts expire.

While the timing of nationalisations has not been confirmed, FirstGroup's South Western Railway and Great Western Railway will see DfT^» (Department for Transport - about) contracts expire in May and June, respectively.

Avanti West Coast's contract expires in October next year.

FirstGroup said its open access operations like Lumo and Hull Trains, which manage trains on mainline routes without government funding, had benefited from 'strong demand, effective yield management and continued high levels of customer satisfaction'.

It has acquired track access rights for two new open access services and signed a £500million agreement to lease 14 new UK^▸ (United Kingdom)-manufactured trains, to facilitate the growth of its open access operations.

Boss Graham Sutherland said First Rail has agreements in place to 'double the size of our open access operations with potential to go much further'.

Its First Bus division also saw revenue accelerate in the second half, buoyed by the January introduction of the £3 fare cap in England and the December acquisition of RATP London.

FirstGroup re-entered the London bus market with a 12 per cent share after agreeing the takeover worth £90million.

The firm said: 'Reflecting the stronger financial performance in First Rail and in-line performance at First Bus, the Group anticipates that its FY 2025 adjusted operating profit and adjusted earnings per share will be ahead of the Group's previous expectations.'

It added that its balance sheet 'remains strong' and it expects net debt to come in lower than expected at £85million to £90million for the 12 months to 29 March.

Sutherland said: 'We have continued our strong financial and operational delivery in the second half of our financial year and have committed significant capital to further grow and diversify our portfolio.'

FirstGroup shares were up 1.8 per cent to 162.1p in early trading, trimming 2025 losses to 0.6 per cent.