FirstGroup bus margins to fall

FIRSTGROUP’S shares plunged 14 per cent yesterday as the transport operator warned it would cut margins by over a third in its UK bus division next year.

In a pre-close trading update, the Aberdeen-based group said increased fuel costs, the growing north-south divide and the impact of reduced government subsidies and funding to the industry would drive operating margins down to eight per cent next financial year, from 13 per cent in 2010-2011.

Despite an expected passenger revenue growth of 1.5 per cent this year in its UK bus division, FirstGroup said Scotland and the North East of England – which account for 60 per cent of its UK bus revenues – are dragging the firm down. But things are looking up in the UK rail division, which should see a passenger revenue boost of 8.3 per cent this year.