FirstGroup PLC on Wednesday said passenger demand was stronger than anticipated during its first half and annual operating profit could be up to £20 million higher than expected as a result.

The Aberdeen, Scotland-based transport company said increased leisure travel during summer caused demand for its First Rail open access operations to be stronger than previously expected.

Meanwhile in the First Bus division, FirstGroup said trading was slightly ahead of expectations throughout the half year that ended September 30, despite ongoing inflation. This was due to ‘productivity improvements resulting from the management actions we have taken to transform the business’, as well as to high passenger volumes.

FirstGroup also said that First Bus will terminate participation in its two Local Government Pension Funds on October 31 and enrol affected employees into the First Bus Retirement Savings Plan instead. The termination is expected to save the division around £1 million in the current financial year, with an approximate £2 million to £3 million annualised cost saving and a net cash inflow of up to £15 million from the settlement of pension obligations.

Consequently, FirstGroup expects to reach an adjusted net cash position of £20 million to £30 million by March 31 next year, assuming that it completes its ongoing £115 million share buyback.

FirstGroup also expects the First Rail division’s adjusted operating profit to be between £12 million and £15 million ahead of expectations.

Group adjusted operating profit, meanwhile, should be around £14 million to £20 million higher than anticipated, with adjusted attributable profit around £7 million to £10 million higher.

In the financial year that ended March 25, adjusted operating profit was £161.0 million for FirstGroup and £124.8 million for the First Rail division, while adjusted attributable profit was £82.1 million.

FirstGroup shares were up 4.0% at 152.40 pence each in London on Wednesday.

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