Amid a "challenging" environment, FirstGroup plc announced that its First Student school bus business under-performed in the fourth quarter and that the foreseeable future will require additional cost-cutting measures.

"With school boards continuing to face significant budget pressure," FirstGroup said in a statement as it updated the company's trading, the impact of severe weather throughout much of the country last month contributed to the "disappointing" results for the largest school bus contractor in North America. The company's profit margins shrunk to 8 percent due to cost increases as contract labor costs increased and school boards have made school bus route changes to reduce their overall transportation costs.

The outlook for next school year was also dim as FirstGroup said it anticipates that the financial pressure will continue. So the company said it will continue to cut operational costs "to prioritise further cost savings and efficiencies to partially offset these pressures." First Student deferred comments to its parent company based in Aberdeen, Scotland. At this writing, a message was left with a FirstGroup spokeswoman for comment on how increased fuel prices were affecting the school bus business.

However, First Student said that its contract retention rate was encouraging. Meanwhile, despite the company's stock being down 14 percent so far this year, FirstGroup said its complete portfolio was still expected to meet earnings targets.