FirstGroup profits improve as passengers get back on board: dividend returns

FirstGroup, the Scottish transport heavyweight that last week rejected a £1.2 billion takeover proposal, has reported an increase in profits amid cost savings and a post-pandemic recovery in passenger numbers.

The Aberdeen-headquartered bus and rail operator said adjusted operating profits rose to £226.8 million for the year to March 26, compared with £220.2m in the previous year.

It said profit from continuing operations - which accounted for the sale of its US Greyhound coach business - surpassed its expectations for the year. Total revenues fell to £5.58 billion, from £6.84bn a year earlier, due to disposals.

Revenues on continuing operations grew as the group saw an increase in bus passenger numbers following pandemic disruption, while it also witnessed growth in rail.

The year-end results come just days after the company rejected a takeover proposal from an American serial suitor, Miami-based I Squared Capital Advisors, for being too low.

FirstGroup said the board believed the 118p-a-share upfront cash part of the unsolicited takeover approach “significantly undervalued FirstGroup’s continuing operations and its future prospects”. It added that the additional 45.6p-a-share part of the offer, which was based on some conditions, “does not provide shareholders with sufficient certainty”.

The bus and rail giant revealed late last month that it had received a new offer from I Squared, after a series of “unsolicited” and “conditional” proposals which had all previously been rejected.

In its full-year results statement, FirstGroup said current trading was “in line with our expectations” and that it expects to make progress over the current year despite uncertainty in the economic backdrop. It added that it will benefit from a further £5m in cost savings over the year.

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

Executive chairman David Martin told investors: “We have delivered on our commitments this year to refocus the business, de-risk the balance sheet and unlock value for shareholders.

“As a cash generative business with a strong balance sheet, FirstGroup is well placed to invest in the services our passengers want, to sustain our path to a zero-emission bus fleet, and to actively consider additional value creation opportunities to leverage our market leading public transport expertise.

“The board’s confidence in the prospects for the group is reflected in the decision to commence dividend payments.”

The group proposed a final dividend of 1.1p per share resulting in a total dividend payout amounting to some £8.1m.

Chief executive Graham Sutherland added: “The transformed group has momentum and we expect to make significant further progress in the year to March 2023.

“With leading positions in bus and rail, a strong balance sheet and a clear purpose, FirstGroup has many opportunities ahead to deliver sustainable shareholder value creation while delivering the vital services that are key to achieving society’s sustainability and economic goals.”

The group also announced the agreement of a national rail contract with the Department for Transport for its Great Western Railway train operating company. The new agreement will commence on June 26, when GWR’s current deal ends.

The new three-year franchise agreement has an extension option for up to three further years, to June 2028.