FirstGroup falls 23% amid ‘material’ doubts on future

Shares of Aberdeen-based bus and rail giant FirstGroup plc fell about 23% on Wednesday after it published annual results showing a £300 million loss before tax and warning of a “material uncertainty” as to whether it can continue as a going concern.

FirstGroup is trying to sell its considerable North American businesses but it warned investors that “a material uncertainty exists that may cast significant doubt on the group’s and the company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

FirstGroup is concerned about the future of state support schemes and rates of public transport use going forward. Its shares have fallen about 60% in the past year.

Amid the negative news, FirstGroup said a “person closely associated” with its chairman David Martin bought 100,000 shares at 41p per share. The shares fell further to end the day around 38p.

FirstGroup said trading trends prior to the coronavirus pandemic “were broadly similar throughout the year” – with industry cost pressures including labour and insurance costs largely offset by revenue growth in First Student, First Transit and First Bus as well as “management actions.”

It said a more difficult trading environment for Greyhound was offset by a strong financial performance from GWR and the start of West Coast Partnership in First Rail.

However, the impact of the coronavirus crisis in March, traditionally a significant trading period, resulted in average passenger volumes declining 90% by the end of the month “with international lockdowns in place and all North American schools we serve closed.”

FirstGroup stressed it is now “resolutely committed to and engaged in rationalisation of the group’s portfolio through divestment of the North American businesses.”

Revenue rose 8.8% to £7.7 billion and net debt soared from £903.4 million to £3.2 billion. FirstGroup will not pay a dividend.

FirstGroup CEO Matthew Gregory said: “The funding and support we have received from governments and our customers to sustain critical transport services is testament to their importance now and for the future …

“There is no way of predicting with any certainty how the coronavirus pandemic will continue to affect the public transportation sector and the impact it may have on customer trends longer-term.

“However, as leading operators in each of our markets we are strongly positioned for a recovery in passenger demand and for the opportunities that may emerge from this exceptional period …

“Despite the near-term uncertainty, the long-term fundamentals of our businesses remain sound.

“We are resolutely committed to delivering our strategy to unlock material value for all shareholders through the sale of our North American divisions at the earliest appropriate opportunity.

“The importance of public transport to society has never been more clearly demonstrated, and we will continue to take all necessary measures to enable the group to emerge from this unprecedented situation in a robust position.”

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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.