FirstGroup focuses on US amid HQ, breakup talk

UPDATE 4 — Shares of Aberdeen-based international bus and rail giant FirstGroup rose on Thursday after it said it will sell its Dallas-based Greyhound bus business and put the group’s emphasis on its First Student and First Transit businesses in North America.

In a major strategic overhaul that some shareholders have been pushing for, FirstGroup CEO Matthew Gregory told reporters the company was moving the emphasis of the group to the United States.

FirstGroup has been under pressure from activist investors including Coast Capital Management, which holds 9.77% of the transport firm, to split the group’s UK and US businesses.

Gregory refused, however, to comment to reporters on whether FirstGroup would consider moving its headquarters to the US or listing there in the longer term.

FirstGroup said it will rationalise its portfolio “with the group’s future emphasis on First Student and First Transit, our core North American contracting businesses, which have the greatest potential to generate sustainable value and growth over time.”

The group also said it is pursuing “structural alternatives to separate our First Bus operations from the group.”

On its First Rail business, FirstGroup said: “… given our reduced expectations for our two most recently awarded franchises, we have concerns with the current balance of risk and reward being offered.

“We await the outcome of the UK government’s review into the structure of the whole rail industry chaired by Keith Williams as it seeks to address these and other industry issues.

“Any future commitments to UK rail will need to have an appropriate balance of potential risks and rewards for our shareholders.”

Gregory said: “Since becoming chief executive in November 2018, I have been focused on setting the group on a clear path to enhance value.

“By executing the portfolio rationalisation plans we are announcing today, our future emphasis will be on First Student and First Transit, our core contracting businesses in North America.

“We see significant potential to generate long term, sustainable value and growth from the solid platforms these businesses provide in the North American mobility services sector.

“We are intent on executing this strategy at pace, having full regard to the regulatory and stakeholder procedures and approvals that will be required.

“In parallel with our portfolio rationalisation plans we will continue to drive forward the clear strategies now established in each of our divisions to ensure they deliver further progress and growth in existing and adjacent markets, underpinned by our plans to enhance our cost base further.

“Our plans will create a more focused portfolio, with leading positions in our core North American contracting markets, and is the most appropriate means for us to deliver enhanced sustainable value for all our stakeholders.”

Gregory added on a conference call: “We have five businesses with limited hard synergies … the time is right to focus on the US.”

The strategy update came as FirstGroup announced results for the year to March 31 that showed revenue rose 11% to £7.12 billion and adjusted profit before tax rose 15% to £226.3 million.

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