First joins FTSE 100 on high

Abstract

BUS and rail company FirstGroup may sell its iconic Greyhound bus business in the US, which came with the acquisition of American bus company Laidlaw.

FirstGroup, which is also Britain's largest bus operator, said it had spent Pounds 28m over the period on low floor, easy access buses for towns and cities including Bradford, Leeds, Glasgow and Manchester.

FirstGroup became one of the world's biggest transport companies when it completed the acquisition last month of Laidlaw, giving it the famous Greyhound brand and 63,000 school buses.

BUS and rail company FirstGroup may sell its iconic Greyhound bus business in the US, which came with the acquisition of American bus company Laidlaw.

FirstGroup, which is poised to enter the FTSE 100 index of leading shares, announced a review of the Greyhound business yesterday alongside a 24 per cent increase in first-half profits to Pounds 74.5m.

The group, which is the largest rail operator in Britain with a quarter of the passenger network, said its First TransPennine Express franchise had gone from strength to strength over the six months to September 30 following good passenger and revenue growth.

The TransPennine Express, which connects York, Leeds and Sheffield to Manchester, Liverpool and the Lake District, was hit by heavy flooding in June which disrupted a number of services.

Hull Trains, the group's open access intercity train service between Hull and London Kings Cross, delivered good growth during the period.

In September the new Paragon Interchange opened in Hull, an Pounds 18m redevelopment that will allow travellers to benefit from easy access to trains, buses and coaches all under one roof.

FirstGroup, which is also Britain's largest bus operator, said it had spent Pounds 28m over the period on low floor, easy access buses for towns and cities including Bradford, Leeds, Glasgow and Manchester.

The investment included 20 new vehicles for the relaunch of the X78 service between Sheffield, Rotherham and Doncaster which reported a 9 per cent increase in passenger journeys.

In August the group launched its ftr service in Leeds following a formal agreement with Leeds City Council and Metro which includes local authority investment in highway infrastructure improvements.

It said it had been encouraged by a 10 per cent increase in passenger journeys on the ftr service in Leeds since the full service went live in June.

In spite of the group's improved results, its shares closed down almost 6 per cent at 750p after investors banked profits after nearly three months of share price gains.

FirstGroup became one of the world's biggest transport companies when it completed the acquisition last month of Laidlaw, giving it the famous Greyhound brand and 63,000 school buses.

FirstGroup had initially targeted annual synergy benefits of Pounds 33m from the deal, but the group is now looking at benefits of between Pounds 33m and Pounds 47.5m.

It said that now it had full access to Greyhound it would start a strategic review.

The company has promised to increase the annual dividend by 10 per cent each year for at least the next three years and said the second half of the financial year had started well.

First-half revenues rose 3.5 per cent in the UK bus division, which has 23 per cent of the British market, and by 5.6 per cent in the UK rail business.

Revenues from its US businesses, which did not include any contribution from Laidlaw, grew by 4 per cent to Pounds 341m.

Analyst Joe Thomas at Investec said the shares were trading at a multiple of 13.8 for the year to March 2009, which is cheap compared to the sector's current multiple of 14.8.

"This is too cheap given the strong trading performance at the business," he said.