FirstGroup in £100m loss; agrees rail franchise change

Shares of Aberdeen-based bus and rail giant FirstGroup plc fell about 4% on Thursday after it said its reported revenue fell £430.3 million to £3.1 billion in the six months to September 30, 2020.

FirstGroup said it made a statutory first-half loss before tax of £100.1 million, an improvement on the £187.1 million loss in the first half of the previous year.

The Aberdeen company said reduced passenger activity was “offset by government procurement of services to enable socially distanced travel, and strong revenue recoveries from North American contract customers.”

FirstGroup also said it reached an agreement with the UK Government over the termination of two rail franchises.

The company said the Department for Transport (DfT) has accepted that no payment is required in return for scrapping Avanti West Coast’s contract as the brand was “performing well prior to the pandemic.”

However, a contribution of £33.2 million is required from FirstGroup to end South Western Railway’s (SWR) franchise deal.

FirstGroup is now negotiating with the UK Government over the terms of directly-awarded management contracts for Avanti West Coast and SWR.

These would see it continue to run services when Emergency Recovery Measures Agreements (Ermas) expire for SWR in March 2021 and Avanti West Coast in March 2022.

FirstGroup CEO Matthew Gregory said of the first-half results: “Whilst the outlook remains uncertain due to the pandemic, we performed ahead of our expectations in the first half, have taken prudent action to reinforce the balance sheet and are confident in the resilience of the group …

“We continue to progress our plans to rationalise the portfolio as the best means to unlock material value for all shareholders.

“With respect to the divestment of our North American contract businesses, we are in discussions with a number of credible potential buyers who have a long term perspective, which the company and our advisers are exploring and evaluating.”

On the franchise agreements, Gregory said: “We welcome this agreement, which marks a further evolution of the contractual framework for our SWR and Avanti train operating companies, both in the context of providing resilient services throughout the coronavirus pandemic and also a more sustainable long-term approach.

“These new directly awarded management contracts will focus on passengers and operational performance, with a more appropriate balance of risk and reward.

“We look forward to working constructively with the DfT to make this a reality, and to use our expertise and understanding of the needs of our customers to deliver improvements that we know passengers want.

“We have acted flexibly to ensure continuity of service while implementing social distancing, as well as enhanced cleaning protocols and innovative technology to improve the customer experience.

“Passengers and employees alike can be confident that our trains are safe.

“We are now operating around 90% of the rail services we were prior to the pandemic.

“We will continue to bring all our experience to bear alongside Government and industry partners to deliver the next phase of recovery of the rail network.”