TRANSPORT giant FirstGroup today said winter snow chaos had delivered a £16 million blow to operating profits.

The blizzards impacted the firm’s rail and bus networks in the UK as well as operations in the US, where it runs school buses and the iconic Greyhound coaches.

First said its underlying performance was in line with management hopes for the year to March 31 despite the disruption and a "challenging" trading environment.

The City had been expecting operating profits of around £450 million from First this year.

The main impact of the snow fell on its US school bus business, where many operating days were cancelled as schools closed because of the weather.

Its UK rail arm - including First Great Western and First Capital Connect franchises - was least affected as the firm receives compensation payments from Network Rail when it cannot gain access to the network.

Higher volumes in a gradually recovering economy gave the division a stronger than expected final quarter with passenger revenue growth of 3.2%, well ahead of the 1.7% seen in the three months to December.

Government revenue support for the FGW and FCC franchise is also providing "significant insulation" from the recession.

The Department for Transport makes up 80% of any shortfall when revenues are more than 6% below the levels forecast when First originally bid for the deals.

First is also the UK’s biggest bus operator carrying around three million passengers a day in major cities including Aberdeen, Glasgow, Manchester and Bristol.

The firm’s bus division saw "steady" trading in the final quarter, with annual revenue growth of 1.8% at the upper end of its forecasts.

In the US, where First runs the famed yellow school buses, profits will be below expectations due to the days lost to snow and pressure on school board budgets.

First expects the squeeze to continue into the next financial year.

It said: "The global economic outlook remains uncertain and in particular we expect to see continued pressure on public spending budgets in North America."

The group has pushed through a £200 million cost-cutting drive to offset the impact of recession as well as a £100 million hike in its fuel costs.