FirstGroup warns on profit after flooding, driver shortages

LONDON (Reuters) - British transport company FirstGroup (FGP.L) warned on Thursday that its annual profit would come in lower than it expected citing wet weather and flooding in Britain and driver shortages in the United States.

The owner of Greyhound buses in the United States and operator of rail and bus services in parts of Britain said the outlook for operating profit for the year to March 31 had been "slightly lowered" by third-quarter trading.

Results were hurt by wet weather and flooding in Britain in December, FirstGroup said.

In the United States, a shortage of drivers due to a tightening labour market pushed up costs in its division that operates yellow school buses.

FirstGroup shares were down 5.4 percent to 96.9 pence in early trade.

The company said despite a tough market this winter, a longer-term plan to improve its cash flow and reduce debt remained on track.

"While these issues have slightly moderated our trading performance in the period they are not of a magnitude to materially affect our multi-year transformation plans," Chief Executive Tim O'Toole said.

Shore Capital analysts said they expected to trim their forecast for FirstGroup's 2016 earnings per share by 3 percent to 9.5 pence as a result of the warning, but were encouraged by the 2017 outlook.

"Management continue to believe they will hit the 2017 full-year margin targets and in our opinion the Group now stands on the verge of the inflection point in margins and most importantly free cashflow generation," they said.

(Reporting by Sarah Young; editing by Paul Sandle and Jason Neely)