UK-based public transport operator FirstGroup has released its financial results for the fiscal year ending March 2025, presenting a strong set of numbers. With rising profits, improved cash flow, and a new share buyback program, the company has drawn market attention and raised questions about the long-term prospects of traditional transport firms in a sustainability-driven world.

The equity market responded quickly. RBC Capital Markets raised its target price on FirstGroup shares from 215p to 220p, citing the company’s operational resilience, capital discipline, and growth through strategic investments.

Profits Climb and Forecasts Improve

FirstGroup reported an adjusted operating profit of £222.8 million, up nearly 9% from the previous year. Adjusted earnings per share (EPS) increased from 16.7p to 19.4p – a rise of 16%, exceeding analysts’ expectations.

Group revenue totaled £1.37 billion, a 7% increase year-over-year. Including one-off items, total income reached £5.07 billion. Management attributed the growth to recovering passenger demand and the company’s electrification strategy, with electric buses now comprising 20% of the active fleet.

Dividend, Capital Structure, and Share Buyback

The company declared a full-year dividend of 6.5p per share, ahead of consensus estimates. Additionally, it announced a £50 million share buyback program, in line with its capital return strategy designed to optimize equity structure and deliver shareholder value.

Adjusted net debt dropped to £86.9 million, a significant decrease that reflects strong financial stability and provides the company with flexibility for future investments and operational initiatives.

Segment Performance: First Bus and First Rail

The First Bus division, which operates bus services across the UK, delivered an adjusted operating profit of £96 million – up 15% year-on-year. The division benefited from an increase in ridership, operational improvements, and the electrification of part of its fleet.

Serving over one million passengers daily, First Bus deployed digital ticketing platforms and dynamic pricing models while leveraging public subsidies for low-emission transit. These efforts improved cost efficiency and passenger experience, contributing to overall profitability.

First Rail, which includes government and open-access rail lines, reported an adjusted operating profit of £148.8 million. Revenues from its open-access operations – which function without government subsidies – reached £106.4 million, highlighting the potential for scalable, profitable rail services.

The company plans to triple capacity in this segment and is exploring new routes from London to South Wales and other regional cities, pending regulatory approval.

Operating Margins, Efficiency, and Macroeconomic Context

One of the standout elements in FirstGroup’s annual report is the improvement in operating margins, especially within the bus division. Operating margin for First Bus rose to 9.1%, compared to 8.1% the previous year – a notable gain in light of inflationary pressures on wages, fuel, and maintenance costs.

Management addressed cost increases through government-backed contracts, geographic route optimization, and by phasing out underperforming lines. The shift to digital systems has further improved turnaround times, reduced operational errors, and enhanced customer satisfaction – all contributing to financial efficiency.

At the macro level, the company is navigating a relatively high-interest-rate environment in the UK, which can increase financing costs. Nevertheless, its low net debt and strong liquidity position allow it to remain competitive compared to sector peers. FirstGroup’s adjusted net debt-to-EBITDA ratio remains below 1.0, placing it in the low-risk category for institutional ratings.

Strategic Acquisitions and Government Support

In the most recent quarter, FirstGroup completed the acquisition of RATP London for £92 million. The acquisition has already contributed to both revenue and operating profit, with expectations of further synergy benefits in the coming years.

The company also anticipates receiving government payments totaling approximately £120 million under existing contracts, with £80 million expected in the first half of the upcoming fiscal year. These payments provide a stable revenue source amid a changing regulatory landscape.

Investor Relations and Reporting Transparency

FirstGroup emphasizes transparency with capital markets, offering cautious guidance, consistent dividend policies, and clear financial segmentation. In the past year, it has hosted investor days and released detailed ESG reports, aligning its corporate strategy with the expectations of institutional investors.

The share buyback program is not only a means of capital return but also serves to enhance EPS in the short to medium term. This approach could appeal to long-term funds seeking value in stable, cash-generating companies with disciplined governance.

Looking Ahead: FirstGroup’s Investment Profile

The latest figures reflect ongoing growth in revenue and profitability, backed by strong financial discipline and forward-looking capital allocation. The combination of dividends, share repurchases, and green transport investments may be of interest to investors focusing on sustainability and infrastructure.

Still, FirstGroup operates in a highly regulated and competitive environment. Future projects, particularly in open-access rail, require regulatory approval and may not yield immediate returns. Market dynamics, government policies, and innovation from smaller entrants remain factors that could affect performance.

From a financial perspective, FirstGroup presents characteristics that merit further analysis for investors seeking exposure to the UK public transport sector – especially given the global trend toward decarbonization and urban mobility investment.