FirstGroup rises amid stronger trading, US sale news

Shares of Aberdeen-based bus and rail giant FirstGroup plc rose about 5% on Tuesday after it published an AGM trading update showing “stronger than expected” financial performance for the period from April 1 to August 31.

FirstGroup said adjusted operating profit and cash from operations were ahead of its expectations during the period “driven by better revenue recovery and strong cost control.”

The company also gave an update on the potential sale of its North American units FirstTransit and FirstStudent.

FirstGroup has long been under pressure from its activist shareholder Coast Capital Management to sell the North American businesses. Coast Capital has been leading a campaign to vote against the re-election of the FirstGroup board.

At the AGM itself, almost 30% of votes were cast against the re-election of FirstGroup chief executive Matthew Gregory as a director, 19.48% voted against director Steve Gunning, 18.59% voted against director Martha Poulter, and 17.50% against director David Robbie.

After the AGM, FirstGroup chairman David Martin said: “We welcome the support shown by the majority of our shareholders today. 

“I am confident that the board has the necessary mix of skills, experience and knowledge to unlock material value through the sale of our North American businesses, and we are intent on achieving this as expediently as possible and in the best interests of all shareholders.

“As noted in the trading statement issued this morning, the group has delivered a stronger than expected financial performance so far this year, has increased its available liquidity and continues to take all necessary action to protect the business for the longer term.

“The board takes seriously its responsibility to understand the views and perspectives of shareholders, and as part of this ongoing commitment, we engaged widely ahead of this AGM. 

“We are disappointed but aware of the views of certain investors who represent more than 20% of the issued share capital, who voted against resolution 7 today (re-election of chief executive Matthew Gregory). 

“We are committed to continuing a constructive and open dialogue on this and all other matters with our shareholders.”

FirstGroup said in its trading update: “Governments and our customers are extending the funding measures necessary to underpin our critical services in light of ongoing social distancing rules, the delayed start of in-person teaching by many of our school customers in North America and other effects of the coronavirus pandemic …

“The group is now expecting to deliver a small adjusted operating profit for the seasonally weaker first half of the financial year, ahead of our expectations earlier this summer …”

On July 8, FirstGroup 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.

And on September 7, FirstGroup shares soared about 25% following newspaper reports that Brookfield Asset Management, Apollo Global Management and KKR were among the potential bidders for its North American units FirstTransit and FirstStudent.

FirstGroup shares are down about 60% for the past 12 months.

In Tuesday’s trading update, FirstGroup added: “The group is resolutely focused on executing the portfolio rationalisation strategy to unlock material value through the sale of the North American businesses and is encouraged by significant interest from potential buyers.

“The pandemic and its attendant uncertainties have affected the speed at which this process can be concluded but the board is intent on achieving this as expediently as possible and in the best interests of all shareholders.”