US Edition FirstGroup
405½p +0.3
Questor says BUY
Its UK rail operations, which include First Capital Connect and First Great Western, saw passenger numbers rise – with like-for-like passenger revenue up 4.4pc. Its UK bus operations are mainly regional services and like-for-like sales rose 1.3pc, with growth accelerating in the second quarter.
Like-for-like sales at its Greyhound bus service were up 1.9pc. During the period, FirstGroup relaunched the greyhound.com website and internet sales now account for a quarter of all ticket sales in the US, up from 14pc in 2007.
In the six months to September, pre-tax profits rose to £82m from £28.6m last year, but when one-offs and other items are stripped out adjusted pre-tax profits rose 14.3pc to £77.7m.
The company expects to table "moderate" earnings growth in the full year.
Net debt fell by 7.7pc over the half year to £2.2bn and FirstGroup said it would continue to cut debt and raise its dividend.
The interim dividend was raised by 7.1pc to 7.12p and the group reaffirmed its target to increase its dividend each year by 7pc. The interim dividend will be paid on February 2 and full-year expectations are almost twice covered by earnings.
The shares are trading on a March 2011 earnings multiple of 9.7 times falling to 8.7 next year. The prospective yield this year is 5.4pc, rising to 5.8pc in 2012. The shares were recommended on May 14 last year at 356p and they are now 14pc ahead compared with a FTSE 100 up 32pc.
Buy for the yield.