FirstGroup Tumbles as Floods, Cheap Gasoline Weigh on Bus Travelby
U.K. deluge reduces trips to town-centers as people stay home
Falling oil price makes car competitive with Greyhound in U.S.
FirstGroup Plc shares fell the most in 2 1/2 years Thursday after the company said operating profit will miss targets after floods in northern Britain deterred people from using its buses and trains and cheaper gasoline caused former U.S. customers to go by car.
The stock slumped almost 10.6 percent, its biggest decline since May 20, 2013, before trading 10 percent lower at 91.70 pence as of 2:57 p.m. in London.
The First Bus unit was hit by a drop in shopping visits in the third quarter ended Dec. 31, with sales flat amid “exceptionally wet weather and flooding” in the run up to Christmas, FirstGroup said. Passenger demand in the rail business also slowed on the downpours, combined with a reduction in train travel in the wake of November’s terrorist attacks in Paris.
In North America, revenue from the company’s Greyhound bus operations fell 5.2 percent in the quarter as lower fuel prices prompted more people to drive, while the same trend in crude led to reduced demand for shuttle services in the Canadian oil sands region as production was reined in.
While the school-bus unit has benefited from improving pricing, “acute driver shortages” prompted by a stronger economy have pushed up costs in markets including Chicago, the Aberdeen, Scotland-based company said.
FirstGroup said its operating profit forecast for the year to March 31 has been “slightly lowered,” without providing figures. Nomura analyst James Hollins said in a note he expects the consensus for full-year earnings before interest and tax to drop by 3 to 4 percent to between 296 million pounds and 298 million pounds ($423 million-$426 million).