FirstGroup bosses upbeat but analysts say ‘it ain’t fixed yet’

By ERIKKA ASKELAND
Published on 26/07/2012 00:00

ANALYSTS yesterday warned that FirstGroup still faced problems even as the bus and rail giant assured investors over its recent trading.

Shares in the Aberdeen-based group rose 3.7 per cent to 212.9p, as chief executive Tim O’Toole said trading during the first quarter of the financial year was “in line with our expectations”.

However, one analyst predicted the firm could have to raise £500 million from investors next year in an effort to trim debt.

Douglas McNeill at Charles Stanley Securities said he believed First’s low share price, down more than 40 per cent in the past year, was due to it having “priced in a rights issue”. He estimated that would need to be in the region of £500m in order to deal with the firm’s burden of debt and to “catch up” on recent underinvestment.

O’Toole said 2012-13 would be a “year of transition” but reaffirmed the board’s commitment to its current policy of dividend growth of 7 per cent at least until the end of 2013.

Chairman Martin Gilbert survived a small protest vote at the annual meeting, with just under 9 per cent of shareholders voting against his re-election following concerns that the chief executive of Aberdeen Asset Management was “overstretched” with big City roles.

There was speculation that the board has signalled to shareholders it has already recruited Gilbert’s successor – current non-executive director Brian Wallace, a former finance director of betting firm Ladbrokes and hotels group Hilton, who joined the board of First last month after the group’s second profit warning in 18 months.

McNeill added: “There’s a vogue for chairmen who used to be finance directors. So we note with interest the recent appointment to the board of Wallace.”