The Aberdeen-based transport giant FirstGroup said it higher fuel costs and cut backs in public spending dragged its profits down.

The bus & rail operator said that its pre-tax profits slipped from 326.4 million pounds to 264 million pounds during the year to March 31 as it faced increased fuel costs of 90 million pounds.

Company's profits at the North American contract business slipped from 246 million pounds to 234 million pounds. Profit margins in First Student tumbled from 12.6 per cent to settle at 11 per cent.

Profits at the UK rail division tumbled from 94.2 million pounds to settle at 92.6 million pounds.

However, the company managed to save more than 200 million pounds and said it expected to swing back to profits growth in the running financial year. Debt declined from 2.5 billion pounds to 2.3 billion pounds. The total dividend received a hike of 10 per cent to 20.65 pence.

FirstGroup operates around 60,000 yellow school buses in the North America, which makes it the largest provider of the student transport in the area.

Shares in FirstGroup gained 12 pence to 384 pence yesterday.