US school buses hit profits at FirstGroup

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Robust trading on UK buses and trains failed to boost FirstGroup yesterday after the transport giant revealed more pressure at its US school bus arm.

The Aberdeen-based company said First Student's disappointing performance followed school budget cuts, exacerbated by recent severe weather.

Margins, which have been squeezed because of higher labour costs resulting from route changes, are expected to remain under pressure this year, it added.

FirstGroup shares fell 3.6 per cent to 347.4p despite improved trends in UK rail and its Greyhound coach operation, and a continued steady performance in UK buses.

Updating investors on its performance ahead of annual results on 11 May, FirstGroup said it expected to meet earnings targets for the year to 31 March.

It added: "We remain encouraged by improving trends in some of our markets; however, the trading environment for First Student remains challenging."

The yellow bus business, which runs 70,000 vehicles across the US and Canada, has taken a battering as school budgets have shrunk. And labour costs have risen, partly because school have altered routes in an effort to reduce their overall transportation costs.

The rail division, which runs the franchises Capital Connect, Great Western, ScotRail and TransPennine Express, expanded passenger revenues by 5.1 per cent over the year. The bus division saw passenger revenues rise 1.4 per cent.