LOW oil prices are continuing to weigh heavily on Aberdeen-based transport company FirstGroup’s North American operations, hitting revenues at coach business Greyhound and reducing demand for shuttle buses on Canadian oil sands sites.

However, updating the stock market on trading yesterday, FirstGroup also hailed revenue growth in its UK bus business in spite of a fall in concessionary travel. And it flagged a strong financial showing by its UK rail division, which takes in the First TransPennine Express and Great Western Railway franchises.

Cheaper fuel prices in North America have been encouraging more people to travel by car, rather than bus.

FirstGroup revealed that revenues in its Greyhound business in the six months to September 30 were likely to have been down by 6.2 per cent on the first half of its prior financial year on a like-for-like basis. It cited a particular impact on “long-haul” coach journeys.

The company said: “In Greyhound, we continue to actively manage our timetables and variable costs to mitigate the adverse impact on passenger demand experienced across the inter-city coach industry since fuel prices fell sharply in October [and] November 2014. We anticipate passenger demand will remain muted if current oil prices are sustained throughout the year.”

FirstGroup meanwhile highlighted “significantly reduced activity” in the Canadian oil sands region, following the plunge in the crude price, and flagged the consequent impact on demand for its shuttle bus services.

It said that First Transit’s first-half revenues were, in US dollar terms, expected to have been down about five per cent.

However, FirstGroup emphasised that overall trading was in line with management expectations, and highlighted continuing progress with its “multi-year” turnaround plan for its UK bus business.

Shares in FirstGroup edged down by 0.75p to 98.25p yesterday.

It said that revenues in its UK bus business in the six months to September were expected to have been up 1.3 per cent on its previous first half on a like-for-like basis.

FirstGroup noted that a two per cent rise in first-half commercial passenger revenues in its UK bus division had been offset partially by ongoing weakness in concessionary travel being experienced across the industry.

A company spokesman cited cheaper fuel prices, local economic conditions and even factors such as roadworks as possible reasons for this fall in journeys by people with passes for free bus travel.

FirstGroup said that it expected first-half revenues in its UK rail division to show a rise of about seven per cent on a like-for-like basis, citing strong growth in passenger volumes.

The company said of its rail business: “Overall financial performance was toward the top of our range of expectations.”

Tim O’Toole, chief executive of FirstGroup, said that the company’s First Student school bus business in North America had concluded this year's bid season with higher average price increases than in the previous year and flagged a “solid” contract retention rate.

He declared that this progress would “continue to enhance the margins and returns in our largest business”.

Mr O’Toole added: “Our ongoing transformation of UK Bus continues to deliver growth in fare-paying passenger revenues and cost efficiencies, despite the recent weakness in concessionary revenues seen across the market.”

FirstGroup was unsuccessful in its bid to retain the ScotRail franchise. Dutch operator Abellio took over the running of ScotRail earlier this year

However, Mr O’Toole said: “For the full year, we expect the progress of our non-rail businesses to largely offset the reduced size of our UK rail franchise portfolio compared with the prior year.”