The public transport provider FirstGroup secured an extension to one of its key rail franchises and said it was making headway in turning around its UK bus operations.
Shares in the north-east-based company moved ahead marginally in Thursday morning trading as the group said it was performing in line with management expectations in a pre-close update to the markets.
The company said it had reached agreement with the Department for Transport (DfT) for a 23-month extension of its First Great Western rail franchise which operates trains into Devon, Cornwall and Wales.
The move is a boost to FirstGroup following the DfT debacle last year which saw the company awarded the franchise for the West Coast main line, one of the UK’s key pieces of transport infrastructure, before the decision was rescinded.
First said its rail division had turned in a “solid performance” in the six months to September 30, with like-for-like passenger revenues expected to increase by 5.7%.
The firm said it had also been named a shortlisted bider for the Thameslink, Southern and Great Northern franchises and was looking forward to the next stage of tendering.
The process will see First go head to head against Perth-based rival Stagecoach for some of the franchises.
Chief executive Tim O’Toole said the Great Western extension was “good news” for passengers, taxpayers and the company’s shareholder base.
He said: “As the UK’s largest and most experienced rail operator we remain committed to maintaining a leading position in the market, and look forward to the rail re-franchising programme gathering pace in the coming months.”
First said the UK bus division which has sold off a number of assets over the past year as part of a major restructuring was on course to post a 1.6% increase in like-for-like passenger revenues for the period and a marginal uplift in service users. While the firm said the division had made headway, it added that there was significant work still to be done.
“A number of our local markets continue to face challenging economic conditions and there remains considerable work to be done to meet our medium-term objective of double-digit margins for the division. But, as we progress through our transformation plans, our confidence continues to increase,” the company said in its update.
Mr O’Toole said he had confidence for the future of the group, which had a “fundamentally attractive portfolio” of transport businesses.
“While it is still early days, we are on track with our plans to return the group to a position of strength.
“The foundations have been laid for a more robust company, and we intend to continue the hard work and relentless focus that is needed to improve our operating performance, deliver enhanced growth and drive sustainable returns over the medium term.”