FirstGroup's share price rocketed after the company reported profit growth, despite a slide in revenues.
FirstGroup reported statutory revenue of £5.2bn for the year to 31 March, down 13.8 per cent from the year prior.
However, the company reported underlying revenue for the year down just 0.3 per cent, at £5.2bn. That accounts for changes in First Rail franchise portfolio.
Meanwhile, statutory profit before tax rose 7.3 per cent to £113.5m.
Earnings per share rose 21 per cent to 7.5p for 2016, up from 6.2p in 2015.
Why it's interesting
FirstGroup was already celebrating from getting the go-ahead to compete with Virgin Trains on the East Coast Main Line, before posting a rise in profits.
Revenues however slumped because of the loss of its ScotRail franchise and the First Capital Connect service in south-east England.
Still, it expects to make "strong progress in the year ahead despite a challenging trading environment in several of our markets".
"Following several years of reinvestment we expect to deliver a significant increase in net cash generation. Overall, we expect the considerable efforts of our people in recent years to be reflected in a significant improvement in our profile of sustainable returns and cash generation going forward," chief executive Tim O'Toole said.
It also said that its medium term future in the UK rail industry has been secured through the Great Western Railway and TransPennine Express contract awards.
Analysts at Liberum said that the challenging trading conditions are not a complete surprise, but the hope will always be that management can find additional initiatives to offset headwinds over time. "The turnaround opportunity remains," the analysts added.
What FirstGroup said
Chief executive Tim O'Toole said:
Overall we have made encouraging progress this year toward a profile of more consistent financial returns for the group. As we indicated at the start of the year, a smaller rail franchise portfolio and fewer operating days in our school bus business were factors that would make delivering headline growth this year challenging.
However, by being flexible with our plans we have delivered a comparable adjusted operating profit to last year and a net cash inflow ahead of our expectations.