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FirstGroup hit by UK bus figures; FTSE fades
by Max Julius on Mar 29, 2012 at 09:16
Shares in FirstGroup (FGP.L) slumped on Thursday after the transport operator reported that UK bus margins were likely to be significantly lower this year, while Britain’s FTSE 100 softened amid ongoing concerns about global growth.
FirstGroup tanked 49p, or 17%, to hit a three-year low of 240p. In a statement, the Aberdeen-based firm said trading in the year to March had been in line with expectations and that it remained on course to achieve earnings targets. It also confirmed its plans to increase its dividend by 7% next year.
But the company also reported considerably lower growth rates emerging in Scotland and the north of England, where a significant portion of its urban operations are concentrated and about 60% of its UK bus passenger revenue is generated.
It warned that in light of a further deterioration in economic conditions, the FTSE 250 firm does not expect revenue growth and cost efficiencies to be sufficient to offset the impact of reduced subsidies and funding for the industry and increased fuel costs.
Edward Stanford, analyst at Oriel Securities, said that notwithstanding the dividend plans and signs of improvement in the United States, investors would probably focus on FirstGroup’s likely inability to reduce debt further and need to restore margins in its UK and US bus divisions. ‘It is likely that some radical action will be required in our view,’ he said.
Eurozone bailout fund talks
Meanwhile, the UK index of blue-chip shares eased 0.12%, or seven points, to 5,802 and the All Share index dropped 0.14%, or five points, to 3,081. See the FTSE’s performance and the index’s top winners and losers.
The falls came in the wake of weaker-than-expected data on US durable goods, and ahead of reports on jobless claims and economic growth in the world’s biggest economy. They also came one day before eurozone finance ministers were set to decide on whether to build up their new rescue fund to its full €500 billion (£419 billion) capacity faster than originally planned.
‘Even in case that one day the fund will be big enough to be able to help Spain and Italy this does not mean that private investors are suddenly going to invest in the peripheral countries again,’ warned Lutz Karpowitz, strategist at Commerzbank.
‘They would probably expect the countries to receive support should the need arise but they cannot be certain that they would not suffer losses (just think of Greece).’
Other stock markets in Europe also weakened: Germany’s DAX index slipped 0.15% to 6,988, France's CAC 40 index lost 0.08% to 3,427, and the FTSEurofirst 300 index of top European shares was 0.09% to 1,071.
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