ABERDEEN, Scotland – FirstGroup, the corporate parent of Greyhound Lines, First Student and First Transit, has reported significantly improved financial results for fiscal 2017.
The Aberdeen-based passenger transportation giant said total revenue for the 12 months ended March 31 climbed 8.3 percent to $7.2 billion from $6.65 billion in fiscal 2016.
The company’s operating profit climbed to $432 million in fiscal 2017, up 12.7 percent from fiscal 2016 operating earnings of $383.3 million.
FirstGroup’s operating margin in fiscal 2017 was 6 percent versus 5.8 percent the year before.
Adjusted fiscal 2017 earnings per share rose 20.4 percent, but FirstGroup threw cold water on the idea of reinstituting a company dividend at its annual meeting later this month.
A major factor driving the improved fiscal 2017 operating results was a strong profit performance by First Student, the U.S. school bus operation that is FirstGroup’s largest subsidiary.
Despite essentially flat revenue of $2.32 billion in fiscal 2017, First Student produce an operating profit of $222 million, up from $165 million in fiscal 2016. First Student’s operating margin jumped to 9.6 percent from 7.1 percent in fiscal 2016.
FirstGroup said the sharp improvement in earnings at First Student follows “successful execution of our pricing, cost efficiency and recruitment plans, despite ongoing driver shortage challenges.”
Three years ago, First Student initiated a program designed to improve contract portfolio pricing and operational efficiency.
The pricing strategy focused “only on retaining or bidding for contracts at prices that reflect an appropriate return on the capital we invest. We achieved an average price increase on ‘at-risk’ contracts of 7.3 percent, an increase of 200 basis points on the prior year which in part reflected the driver cost inflation challenges we and the rest of the industry are experiencing.
“About one third of our bus portfolio was due for renewal in the 2016 bid season, and we retained 80 percent of ‘at-risk’ buses in line with our budget, or 93 percent across our total portfolio,” said FirstGroup.
“Pricing across the market continues to be firmer, though some smaller local operators continue to bid aggressively to retain business, and school boards remain focused on strong execution and value for money. We continue to see modest net organic growth or conversions from in-house to private provision,” the company added.
More than 75 percent of First Student’s overall bus fleet of 44,000 at the end of the year operated under contracts awarded during the past three years, which reflects the company strategy of operating a smaller but higher-returning bus fleet.
At First Transit, revenue rose to $1.36 billion from $1.3 billion in fiscal 2016, while operating profit increased to $95.2 million in fiscal 2017 from $90.6 million the year before.
First Transit’s operating margin was unchanged at 7 percent.
“As expected, contract awards and organic growth in the . . . division was partially offset by lower shuttle bus demand in the Canadian oil sands region compared with the prior year,” FirstGroup said.
Capital spending at both First Student and First Transit dropped in fiscal 2017.
The outlook for FirstGroup in fiscal 2018 is mixed, with the North American operations expected to show “steady progress,” but the United Kingdom units suffering from the economic uncertainty in Great Britain.
