Transport giant FirstGroup has pinned its hopes on Aviva boss John McFarlane to help drive its recovery after ending a six-month search for a successor to outgoing chairman Martin Gilbert.
The Scots-born banking industry veteran, who is overseeing a £400 million cost-cutting drive at Aviva, becomes chairman of the Aberdeen-based bus and rail operator at the start of next month, when Gilbert will retire after a 27-year stint.
Shares in FirstGroup, which axed its final dividend in May and was forced into a deeply discounted £615m cash call to defend its credit rating, rallied 5 per cent or 5.5p to close at 116.6p.
The firm last month reported a first-half loss of £8m, down from £20.6m a year earlier. However, bus revenues in the UK tumbled 14 per cent to £490.7m because of the sale of its operations in London and the previous year’s Olympics-related boost.
McFarlane said: “The group has short-term challenges which we will naturally need to overcome, but I am convinced it has significant opportunity to benefit from its market-leading positions and to deliver sustainable long-term value for shareholders. I look forward to playing a pivotal role in its future.”
Born in Dumfries, McFarlane began his career at Ford’s manufacturing plant in Dagenham and went on to spend ten years as chief executive of Australia & New Zealand Banking Group (ANZ). In 2008, Royal Bank of Scotland appointed him as a non-executive director to help with its recovery in the wake of the financial crisis, and he stepped down from the state-backed lender last year to take the chair at Aviva.
McFarlane joined the insurer’s board in September 2011 and became executive chairman the following year after the departure of previous boss Andrew Moss, who was ousted following a shareholder rebellion over performance and executive pay. He reverted to his non-executive role in January when Mark Wilson came in as chief executive.
Aviva, which employs some 2,500 staff at Bishopbriggs and Perth, revealed plans in April to axe about 2,000 jobs, equivalent to 6 per cent of its global workforce.
Analysts at Shore Capital described McFarlane’s appointment at FirstGroup as “very encouraging” given the recovery at Aviva, which, after stunning the City earlier this year when it slashed its dividend, bounced back recently when it unveiled a rise in worldwide new business.
The broker said: “The swift action and turnaround at Aviva under his executive stewardship is a welcome read across to FirstGroup as it continues to grapple with the previous regime’s legacy of underinvestment.”
First, which plans to invest about £1.6 billion in its bus and rail businesses over the next four years, saw its growth plans derailed last year by the botched bidding process for the West Coast main line franchise.
John Sievwright, the firm’s senior independent director, said Aberdeen Asset Management chief Gilbert – who announced in May that he was planning to retire from First – had been “instrumental in establishing its position as the leading transport operator in the UK and North America”.
Gilbert has led the board since it was founded in 1995, but had been under intense scrutiny over his twin roles at the top of two major listed companies. He is also a non-executive director at BSkyB, which last month held its annual meeting in Edinburgh.