Bus giant FirstGroup 'more resilient and flexible' following restructure but road ahead remains bumpy

The bus giant recently sealed a deal to sell its US Greyhound Lines business to Germany’s FlixMobility more than two years after putting the operation up for sale.

Investors welcomed the deal worth $172 million (£125m) with the European coach and rail group. It came as part of Aberdeen-headquartered FirstGroup’s move to focus on its UK transport business, having already offloaded its US school and public service bus operations First Student and First Transit.

Releasing the group’s first-half results, executive chairman David Martin said: “We have delivered on our commitment to unlock value. By divesting our North American operations, we have strengthened our financial position, refocused on our market-leading public transport operations in the UK, and returned £500m in value to our shareholders.

Aberdeen-headquartered FirstGroup operates one of the biggest bus fleets in the UK. Picture: John Devlin

“With a well-capitalised balance sheet and an operating model that supports our intention to begin regular dividends to shareholders within the next 12 months, FirstGroup is now a more resilient and flexible business.

“I am confident that we are well-placed to create long term, sustainable value from the opportunities ahead, underpinned by the UK policy backdrop which places public transport at the centre of the economic recovery, decarbonisation and levelling up agendas.”

But the firm said some doubts remain about how quickly it can recover following new restrictions imposed to try and combat the Omicron variant, with passenger numbers on its buses slipping in recent weeks.

The company said passenger volumes at its First Bus operations were 71 per cent of its 2019 levels on average in recent weeks, marking a slowdown in the rate of improvement, with pandemic-related restrictions varying by UK region.

FirstGroup said it would maintain its 2022 estimates due to the evolving situation despite good performance in the half year to September 25.

While total adjusted operating profit in the six-month period was higher than the lockdown-hit 2020, earnings from continuing operations were down 3.9 per cent to £51.8m.

The group confirmed that it plans to start paying dividends again within the next 12 months.

In September, FirstGroup, which is behind the new Lumo east coast open access rail service connecting Edinburgh and London, outlined its plans to return £500m to investors after confirming that current trading remained on track.

In a trading update released to coincide with its annual shareholder meeting, the firm said bus passenger volumes had reached 65 per cent of pre-pandemic levels on average in recent weeks. It expected this to increase further as the autumn terms for schools and then universities get fully underway.

The group has been in the activist investor firing line in recent years, with chief executive Matthew Gregory departing recently after less than three years in the post and in the wake of demands for his resignation from the group's biggest shareholder.

New York-based hedge fund Coast Capital made a call in July for Gregory, and two non-executive directors, to step down after it said the multi-billion-pound sale of First Student and First Transit in the US was too cheap and poorly timed at the peak of pandemic disruption.

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