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Investing.com -- Shares in FirstGroup plc rose more than 6% on Tuesday after the U.K. transport operator reported a 9% rise in adjusted operating profit to £222.8 million for the 52 weeks ending March 29, and announced a new £50 million share buyback.
The company reported adjusted earnings per share of 19.4 pence, up 16% from 16.7 pence the prior year, beating analyst expectations.
Adjusted revenue rose to £1.37 billion from £1.28 billion. Statutory revenue totaled £5.07 billion.
A final dividend of 4.8 pence was proposed, bringing the full-year total to 6.5 pence, above the consensus estimate of 6.3 pence.
RBC Capital Markets raised its price target for the stock from 215 pence to 220 pence, citing earnings and balance sheet strength.
Adjusted net debt stood at £86.9 million, below both market consensus of £88 million and company guidance.
Capital investment for the year reached £389.9 million, focused on fleet electrification and acquisitions.
In February, FirstGroup acquired RATP London for £90 million. Now operating as First Bus London, the unit contributed £23.2 million in revenue and £0.6 million in adjusted operating profit.
The group now expects to invest £10 million over two years to cover London Bus losses and capital costs, a reduction from prior estimates of £30 million.
The First Bus division posted an 8.9% adjusted operating margin and profit of £96 million, up from £83.6 million.
Daily passenger journeys averaged 1.13 million. Revenue from adjacent services increased to £270.8 million. The company reported that 20% of its fleet is now electric.
First Rail recorded an adjusted operating profit of £148.8 million, up from £143.3 million. Revenue from open access operations increased to £106.4 million.
Passenger revenue at Hull Trains rose 12%, and Lumo increased 8%. Revenue from additional services grew to £110.7 million.
The company secured track access rights for two new open access routes, London to South Wales and London to Stirling, which are expected to nearly double its open access capacity.
RBC noted that FirstGroup has submitted additional applications that could “more than treble open access capacity,” including a proposed route between London and Hereford.
South Western Railway operations transferred to the Department for Transport in May.
FirstGroup expects to receive £120 million in cash inflows over three years from DfT contracts, with £80 million projected in the first half of fiscal 2026.
FirstGroup said it expects to at least maintain adjusted earnings per share in fiscal 2026. RBC continues to forecast growth, adding, “We remain slightly above this... given scope to lever up to 2x.”