FirstGroup rail profits hit record level

FirstGroup, the biggest train operator in the country, unveiled a 23 per cent increase in profits yesterday from its rail franchises on the back of rising fares and passenger travel.

The group said operating profits from its four rail businesses - First Great Western, First Capital Connect, First TransPennine and First ScotRail - rose to a record £79.6m last year on turnover of £1.165bn.

First defended the soaring profits at a time of above-inflation rises in rail fares by maintaining that most of the increase in revenues came from higher traffic levels.

The company carries 250 million passengers a year and said volumes on its TransPennine route alone rose 6.5 per cent last year.

Moir Lockhead, the chief executive, also pointed out that a total of £1bn was being spent by First and Network Rail to improve Great Western's services out of Paddington while a further £52m was being invested over the next three years in the Capital Connect route, which runs from Bedford to Brighton through central London.

First is bidding for the South West Trains franchise, the biggest commuter network in the south-east of England, and said it would also be interested in the east coast main line if the financial problems of GNER's parent company Sea Containers resulted in it losing the franchise.

The improvement in the performance of the rail division helped First to increase group profits for the year to 31 March from £155.7m to £157.4m, despite a £31m hit from higher fuel prices in its UK and North American bus divisions. Underlying operating profits rose 7 per cent to £229.7m.

The group, which is also the UK's biggest bus operator with about one-fifth of the market, said it expected fuel costs to rise by £47m in the current year.

The UK bus business reported a 6 per cent decline in profits to £108.6m, but profits from First's North American operations, where it is the second-largest operator of yellow school buses, rose 7.5 per cent to £67.1m.

Shares in FirstGroup closed up 0.5p yesterday at 402p.