FirstGroup shares up amid support for regional buses

Shares of Aberdeen-based bus and rail giant FirstGroup plc rose 5% on Thursday after it welcomed further funding from the UK’s Department for Transport (DfT) to support additional vital services by regional bus operators in England during the ongoing coronavirus pandemic.

“The new COVID-19 Bus Service Support Grant Restart programme builds on the support arrangements previously announced on 3 April and which were due to expire in June,” said FirstGroup.

“Regional bus operators in England have initially been allocated £254m in additional funding by DfT under the programme which will allow us to increase bus service capacity in support of our communities as Government guidance on travel restrictions begins to ease.

“The funding amount will be kept under review to ensure that increased services can be sustained while ensuring there is enough space for passengers to observe social distancing guidelines.

“The programme, which runs for an initial twelve week period backdated to 12 May, is designed to support the industry while social distancing guidelines require buses to run substantially below their potential capacity.

“Bus operators will be able to claim funding support for the difference between their revenue from passenger and other non-tendered contractual sources and the costs of operating the services.

“Recoverable costs under the programme include all reasonable operational costs as well as depreciation, pension funding and debt finance costs reasonably allocated to English local bus services.

“Operators will be responsible for agreeing with local authorities the level of service to provide in each area to meet local demand for bus services as the lockdown restrictions ease.”

The new programme builds on previous commitments from the DfT and the Scottish and Welsh Governments to continue to — either themselves or by directing local authorities to — fund the Bus Service Operators Grant, concessionary fares and contracts for tendered services at levels prior to the pandemic.

“Discussions are taking place with both the Scottish and Welsh governments to secure the additional funding necessary to support increases in bus service capacity through the recovery period,” added FirstGroup.

FirstGroup CEO Matthew Gregory said: “This new funding will enable us to provide additional bus services that will deliver a progressive increase in capacity across our networks, while maintaining the necessary distancing in line with government and public health authority guidance.

“Our bus services perform a unique and essential role in sustaining local economies and communities, and in delivering real improvements to air quality and congestion.

“As restrictions are gradually eased we will be ready to respond quickly to resume services that will reconnect people and re-open communities …”

FirstGroup also gave an update on its liquidity position, saying: “As at 26 May 2020, the Group’s undrawn committed headroom and free cash was stable at £770m.

“For the first month of the current financial year, cash generated by operations in our road divisions and for the group as a whole was positive and ahead of our projections at the outset of the month.

“On 4 May S&P Global Ratings affirmed its long-term issuer credit rating on the group at BBB- whilst revising the outlook to negative from stable, in line with Fitch Ratings’ position.”