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FirstGroup Expects To Meet Annual Targets, But Cautions On UK Bus; Shares Down

Shares of FirstGroup Plc (FGP.L,FGROF.PK,FGROY.PK) declined around 14 percent on London Stock Exchange after the UK-based transport operator said it expects pressure on the performance of UK Bus business due to lower economic activity, particularly in Scotland and the North of England.

In its trading update for fiscal year ending March 31, the company said its overall trading since its third-quarter update in January has been in line with management's expectations and that it remains on course to achieve overall earnings and cash targets for the year.

The company added that its three North American businesses continue to demonstrate progress and the US macro economic outlook is showing positive signs. In UK Rail, the company sees robust revenue growth.

The First Student business in North America is well set on the path to recovery and trading has developed in line with expectations with US Dollar revenues expected to be reduced by 1.4 percent on a like-for-like basis while operating margin for the second half is expected to be slightly ahead of last year, the company said.

First Transit segment's US Dollar revenues are expected to grow by 1.5 percent on a like-for-like basis. The company also expects a 4.2 percent increase in like-for-like revenues of Greyhound segment.

In the UK Bus segment, annual like-for-like passenger revenue is expected to increase by 1.5 percent, even though the economic environment is presenting challenging trading conditions and performance during the year reflects the growing North-South divide.

In the UK Rail segment, like-for-like passenger revenue would increase 8.3 percent.

The company added that it has successfully pre-qualified for a further three rail franchises - Great Western, Thameslink and Essex Thameside - and look forward to submitting bids in due course.

The company is slated to release its annual preliminary results on May 23.

Looking ahead, FirstGroup said the year ending 2013 will be a year of transition. "We remain encouraged by continued progress in our North American operations and believe that improving trends in the US economy will be positive for our businesses," the company said in its statement.

In UK rail, the company has already pre-qualified for four franchises and are well placed to progress these and further opportunities from the Government's re-franchising program.

Meanwhile, in UK Bus segment, the company does not expect that revenue growth and cost efficiencies to be sufficient to offset the impact of reduced government subsidies and funding to the industry and increased fuel costs. The company currently expect UK Bus operating margin to be approximately 8 percent.

FirstGroup shares are currently trading at 249.70 pence, down 39.40 pence or 13.63 percent in London.

by RTT Staff Writer

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