* Underlying first-half profit up 44 percent on acquisitions
* Second half started well, trading as expected
* Bus businesses benefited from oil price spike
(Adds more detail, analyst comment, background)
By Dan Lalor
LONDON, Nov 5 (Reuters) - British bus and train operator Firstgroup (FGP.L) said its second half had started well with trading in line with expectations, as acquisitions helped it post a 44 percent rise in underlying first-half profit.
Chief Executive Moir Lockhead told reporters the spike in oil prices over the summer had driven people from their cars, helping its Greyhound coach business in the United States and producing “signs of modal shift towards the bus” in Britain.
FirstGroup became one of the world’s biggest transport companies in October 2007 when it completed the $2.8 billion acquisition of Laidlaw, giving it the iconic Greyhound brand and 63,000 school buses out of about 450,000 in the United States.
Helped by that acquisition, FirstGroup made a pretax profit before amortisation and exceptional items of 107.1 million pounds ($169 million) in the six months to end-September, on revenue up 57 percent to 2.77 billion pounds.
The interim dividend was raised 10 percent to 6.05 pence.
At 0845 GMT, FirstGroup shares, which had outperformed other London-listed travel and leisure sector companies .FTASX5750 by 7 percent over the past 12 months, were up 0.7 percent at 448.25 pence to value the business at 2.16 billion pounds.
Cazenove analysts, who rate FirstGroup stock an “outperform”, said it had delivered “a solid set of first-half results in line with our expectations and demonstrating strong growth.
“FirstGroup remains our favoured pick in the sector given its low exposure to rail activities, which we view as the most economically sensitive aspect of public transport activities”.
FirstGroup repeated that 100 percent of its British units’ 2008/09 exposure to oil prices is hedged at $76 per barrel, while its North American operations are 100 percent-hedged at $84 per barrel. The respective figures for 2009/10 are $111 per barrel and $116.
Lockhead said that, as fuel accounted for less than 10 percent of group costs, those hedges — above current market prices — would not materially impact group performance.
He also said that while FirstGroup “is not wholly immune to macroeconomic developments”, it was beneficial that around 50 percent of group revenues are “secured under medium-term contracts with government agencies and other large organisations in Britain and North America”.
Lockhead said the company’s First Capital Connect rail franchise for London-bound commuters had not yet been noticeably affected by the economic downturn.
FirstGroup also operates the First Great Western, First ScotRail and First TransPennine Express rail franchises.
editing by John Stonestreet