UK's FirstGroup shares surge as bus business powers profit beat

By Radhika Anilkumar

(Reuters) -Britain's FirstGroup beat annual profit forecasts on Thursday after its bus passenger figures were boosted by a government scheme to cap fares, sending its shares as much as 18% higher.

The scheme to cap bus fares at 2 pounds was launched in January in England to help bring back passengers after the worst of the COVID-19 pandemic and at a time when many Britons were still working from home.

"I think it's a fair account that it's broadly positive for demand and it's helped create a little bit more passenger miles over the last couple of months," CEO Graham Sutherland said in an interview with Reuters.

The bus division, which saw passenger volumes increase by 20%, reported a 29% rise in adjusted operating profit to 58.4 million pounds.

The former owner of U.S. bus company Greyhound also launched an additional buyback of shares worth 115 million pounds following proceeds from exiting the North American market.

Despite a challenging economic and industrial relations backdrop, FirstGroup's bus division is expected to see further growth in 2024, with its train segment forecasted to perform in line.

Workers in several sectors across Britain, including transport, have gone on strike over the past year in pay disputes spurred by inflation hitting 40-year-highs.

However, Sutherland said FirstGroup had seen minimal impact from strikes on its earnings and margins.

"Keeping a cap on costs and managing ongoing industrial disputes will be key to improving performance over the coming 12 months, Mark Crouch, analyst at social investing network eToro, wrote in a note.

Shares in the company, which were at their highest since August, were up 16% at 0820 GMT.

The group's adjusted operating profit jumped more than 50% to 161 million pounds for the year ended March 25.

That topped the 149.1 million pounds expected by analysts in a company-compiled consensus.

(Reporting by Radhika Anilkumar in Bengaluru; editing by Jason Neely)