FirstGroup falls 20% amid Greyhound immigration hit

UPDATE 3 — Shares of Aberdeen-based transport giant FirstGroup fell about 20% on Thursday after it reported an increased first-half loss amid a £124 million charge on the Greyhound bus business it is attempting to sell.

FirstGroup said the loss includes charges for the Greyhound impairment and for North American self-insurance.

On Greyhound, FirstGroup said: “Operating profit has been below budget in recent months.

“This principally reflects the decline in immigration-related flows on the Southern US border states in the second quarter and increased competition on some routes.

“In light of this, we have revised our short term and medium term financial forecasts for the Greyhound division.

“The revised value in use forecasts indicate an impairment to the carrying value of Greyhound of £124.4m.”

FirstGroup reported a statutory loss before tax of £187.1 million for the six months ended September 30, compared with a loss of £4.6 million a year earlier. 

Adjusted pretax profit for the first half fell 31.7% to £28.7 million.

FirstGroup first-half revenue rose to £3.5 billion from £3.3 billion a year earlier.

FirstGroup chief executive Matthew Gregory told journalists: “We have had a huge amount of interest in the (Greyhound sale) process …” and added the group was holding detailed discussions with “a couple” of interested parties. 

Liberum analyst Gerald Khoo wrote: “Management continues to talk about progress in the portfolio rationalization process but, absent actual disposals and with more substantial exceptional charges, we expect scepticism to prevail.”

FirstGroup is also exploring options for separating its UK bus division.

CEO Gregory added: “In the first half we continued to execute the clear commercial strategies in each of our divisions to ensure they deliver future progress and growth.

“In particular, we were pleased to have delivered another strong bid season and two complementary acquisitions in our largest business First Student, as well as the award of the West Coast Partnership to our rail venture with Trenitalia.

“We are, however, disappointed with the further deterioration in the US motor claims environment which has required an increase in insurance costs for our North American businesses.

“As ever, first half trading mainly reflects the highly seasonal nature of the group’s operations, given the timing of the North American school holidays in our First Student business.

“Based on current trends and underpinned by our activities to reduce the cost base further, we are confident in delivering our trading expectations for the full year.

“We are focused on rationalising our portfolio and are progressing through the detailed work to prepare for separation.

“We have taken a number of important steps since our announcement in May including the sale process for Greyhound, future UK Bus pension scheme funding and the strengthening of our Rail portfolio.

“We are intent on realising value for shareholders and will actively manage our entire portfolio by all appropriate means.

“We look forward to reporting on further progress in the second half.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.