C-charge bonanza for FirstGroup
MAYOR Ken Livingstone's hundreds of millions of pounds in handouts to London bus companies has sent profits at FirstGroup's bus operations soaring.
FirstGroup, London's third largest bus company - behind Arriva and Go-Ahead - has about a sixth of the market in the capital. It reported underlying half-year operating profits from its bus operation up 13% at £52m.
The company, headed by chief executive Moir Lockhead, said its turnover in London had risen by 23% on the back of Livingstone's current £600m a year in subsidies to red bus companies.
His aim is to get more vehicles on the road to pick up the slack from the effects on car users of the congestion charge and from passengers migrating off the creaking London Underground.
The boom on the buses made up for lacklustre performance from FirstGroup's rail operations, which have been hit by decreasing Government subsidies as well as a slug of group exceptional costs that include an £18m hit on dollar and sterling interest rate swaps after the company's treasury specialists were caught out by the market.
In the six months to the end of September, FirstGroup increased underlying profits by just 1% to £56.8m.
However, the effects of the swaps losses, the costs of restructuring its bus operations plus £6m of increased national insurance and pension costs - and the cost of bidding for new rail franchises - sent FirstGroup's bottom-line pre-tax profits tumbling by more than 50% to £23.7m.
The company, which is lining itself to become one of the country's biggest train operators, said profits from its rail operations dived by nearly 25% after it lost £7.7m from drying up subsidies and from the increase in payments it makes back to the Treasury from previously subsidised operations.
It is in the bidding to become a major, if not the major, train operating company after the current round of refranchising negotiations.
It was recently been selected for the new TransPennine franchise and is on the shortlist for the Scottish, enlarged northern England and new Greater Anglian franchises, the latter via its takeover in the summer of Anglia Railways operator GB Rail.
The company is also in pole position for a new Greater Western franchise after its First Great Western company yesterday beat the existing franchise-holder Go-Ahead to win the Thames Trains franchise.
The group also reported a 10% increase in profits from its US school Yellow Bus operations. The group interim dividend is rising by 5% to 3.75p.
