FirstGroup shares fall sharply after profit warning

FirstGroup said flooding in the north of England last month affected its bus business

FirstGroup shares fell sharply on Thursday after the transport giant lowered its full-year profits outlook.

The Aberdeen-based company said "terrible" weather and flooding at the end of last year hit its bus business.

It attributed a 9.5% fall in revenue in its third quarter mainly to the loss of recent rail franchises and the effect of changes to the school calendar on its US school bus division.

Shares dropped by more than 8% in early trading.

FirstGroup said its First Student division in the US was also hit by a driver shortage, while its UK bus services suffered from lower-than-expected high street footfall in the run-up to Christmas.

Like-for-like revenues in the division remained flat in the three months to the end of December.

FirstGroup warned its outlook for operating profits over the full year to the end of March was "slightly lowered" by the tough third quarter trading.

FirstGroup chief executive Tim O'Toole said: "Our transformation plans continue to make headway despite a challenging third quarter trading period in our markets, with disappointing retail footfall and the terrible weather affecting First Bus, and our largest division First Student experiencing acute driver recruitment and retention challenges in certain locations."

The firm also said its rail arm, which operates the Great Western Railway and First TransPennine Express franchises, suffered a drop-off in demand from passengers in the weeks following the Paris terrorist attacks last November, as well as disruption from the recent flooding.

But it grew like-for-like revenues at First Rail by 5.6% in the third quarter and said the division's full-year performance would not be impacted.

It insisted its turnaround of the First Student school bus business was making progress, despite facing higher costs to tackle an "acute" shortage of drivers in a tightening US labour market.

The group added that its third-quarter revenue performance also reflected the loss of recent rail franchises over the past few years, such as the East Coast Line and ScotRail.

But last month it won a seven-year contract to continue running the TransPennine Express train line and it has been shortlisted for the East Anglia franchise.