FirstGroup's share price drops on profit warning

Catherine Neilan
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FirstGroup, which owns Greyhound, has had a challenging quarter (Source: Getty)

FirstGroup's ​share price fell more than five per cent this morning after the transport operator issued a profit warning on the back of major flooding in the north of England.

The figures

Revenues in the third quarter fell by 9.5 per cent on a constant currency basis, on the back of changes to its rail franchise portfolio and the number of student discounts.

First Bus revenues were affected by lower than forecast high street retail footfall, with exceptionally wet weather and flooding in some markets meaning revenues were flat, while First Student experienced higher costs because of "acute driver shortages in certain locations, as a result of the tightening US employment market".

First Rail was also affected by the flooding and a drop in passenger demand in the weeks following the Paris attacks last November. Over the three months, revenue grew 5.6 per cent.

As a result, FirstGroup management's outlook for operating profit in the current financial year is "slightly lowered".

Why it's interesting

We're used to hearing about retailers struggling because of poor weather, but the FTSE 250-listed firm is also clearly not immune. Coupled with the impact of the terrorist attacks in Paris - which were among the issues cited by EasyJet earlier this week - and ongoing fundamental concerns, the company has had a less than perfect third quarter.

However the business is still upbeat about the prospects, and says the firm has not been "materially affected" by those one-off events.

But investors are sceptical, with the share price down 5.2 per cent in mid-morning trading.

What FirstGroup said

FirstGroup chief executive Tim O'Toole said: "While these issues have slightly moderated our trading performance in the period they are not of a magnitude to materially affect our multi-year transformation plans, which we expect to deliver significantly improved cash generation in our next financial year as planned.

"Our ability to create sustainable value in the medium term continues to strengthen through our improvements to First Student's contract pricing and cost efficiency, the transformation of Greyhound's business model through improved systems and the restoration of profitable commercial passenger revenue growth to First Bus, while our disciplined but ambitious approach to rail franchising has resulted in the award of the TransPennine Express franchise to at least 2023."

In short

One-off issues have hurt the company as it attempts to improve performance - but management is still confident about the future.

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