FirstGroup plans £1bn expansion into Europe

FirstGroup, the UK's biggest bus company and second-largest train operator, served notice yesterday that it could spend up to £1bn expanding into the European transport market.

The company, which runs four passenger train franchises and commands nearly a quarter of the UK bus market, has been looking at entering continental Europe for the past five years but has not found a company to buy. Last month First was outbid for the Spanish coach operator Alsa, which was bought for £461m by National Express.

Moir Lockhead, First's chief executive, said it was considering buying rail and bus companies, adding that Germany was the most attractive market. The group's finance director Dean Finch said that First had £250m of cash to spend but could easily increase that to £1bn for the right acquisition.

First reported a 14 per cent fall in interim profits to £55.3m after a £13m increase in fuel costs in its UK and US bus divisions because of surging oil prices. The group is expecting a similar increase in fuel costs in the second half.

Revenues were up 14 per cent to just under £1.4bn thanks to a sharp rise in income in its train division, which now includes the ScotRail franchise. Train revenues rose 18 per cent to £526m despite an estimated £8.5m loss of income caused by July's London bombings.

First is bidding for three new rail franchises - Thameslink, Integrated Kent and Greater Western, where it is the incumbent operator. Mr Lockhead said he would be pleased if it won one of them.