FirstGroup faces fresh rail battle

LONDON commuter trains and buses operator FirstGroup has warned that after a year of struggling with the effects on the rail network of the Hatfield crash, it faces the threat of economic downturn and its effects on the capital's employment market.

The operator of the Great Western and Great Eastern franchises said despite carrying fewer passengers in the six months to the end of September, profits from the trains rose by more than 10% to £29.5m. It attributes this to the regulatory regime which hits Railtrack in the pocket for any disruption.

FirstGroup's revenues dropped to £364m but it said it had agreed an extra £17m in compensation from Railtrack - signed just before the operator went into administration last month - for maintenance disruptions.

Chief executive Moir Lockhead said the railways were returning to normal after the post-Hatfield delays, but declined to comment on passenger growth prospects. 'We'll have to see over the next few months what is happening in the economy and the London employment market,' he added.

FirstGroup posted flat underlying operating profits of £85m after fuel costs helped take £3.9m off UK bus profits, down to £43.5m. Its US school bus business, insulated from the downturn in the US economy, returned profits up 7% at £17.8m.

The interim dividend is lifted by 10% to 3.3p a share despite a £20m fall in pre-tax profits to £36.6m. Last year's figures were inflated by the sale of its stake in Bristol Airport.