FirstGroup warns over future as passengers stay off buses

FirstGroup, the Aberdeen-headquartered transport giant, is under pressure to accelerate its restructuring after it warned over its ability to continue as a going concern.

FirstGroup, which is headquartered in Aberdeen, is one of the biggest bus operators in the UK. Picture: John Devlin
FirstGroup, which is headquartered in Aberdeen, is one of the biggest bus operators in the UK. Picture: John Devlin

The firm, which reported hefty full-year losses, has faced plunging passenger numbers on its bus services amid the coronavirus lockdown as commuters work from home and people shop locally.

In its results statement, FirstGroup flagged a “material uncertainty” over its ability to continue as a going concern due to risks around the pandemic, but stressed it had “adequate” resources to carry on operating for the next 12 months.

Shares came under pressure despite the firm, which operates bus services in dozens of towns and cities around the UK, highlighting strong liquidity levels with access to more than £1.4 billion of cash and credit facilities.

Chief executive Matthew Gregory said: “There is no way of predicting with any certainty how the coronavirus pandemic will continue to affect the public transportation sector and the impact it may have on customer trends longer-term.

“However, as leading operators in each of our markets we are strongly positioned for a recovery in passenger demand and for the opportunities that may emerge from this exceptional period.

“Despite the near-term uncertainty, the long-term fundamentals of our businesses remain sound. We are resolutely committed to delivering our strategy to unlock material value for all shareholders through the sale of our North American divisions at the earliest appropriate opportunity,” he added.

AJ Bell investment director Russ Mould said: “All sorts of industries have been supported by the state during these unprecedented times but it’s not a good look to be leaning heavily on government help and this may explain the negative response to full-year results from FirstGroup.

“FirstGroup might be able to get a new loan or raise cash from its shareholders, while external auditors may not always know everything management are doing to shore up liquidity. In addition, the essential nature of the firm’s services should, in theory, see government support maintained.

“Selling the US operations as planned would help, although it will not be an easy task in the current environment.”

FirstGroup saw pre-tax losses widen to £299.6 million for the year to 31 March, taking in the first few days of lockdown, from losses of £97.9m the previous year after booking a raft of charges, including a £21.5m hit for the Covid-19 crisis.

The group, which runs train franchises including South Western Railway and Avanti West Coast, said passenger numbers across its UK and international services plummeted by around 90 per cent in March as countries were placed into lockdowns.

It said ongoing guidance to limit travel and physical distancing measures will continue to have a “significant impact on our service capacity and financial performance”.

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said: “Transport companies were among the hardest hit by the Covid-19 pandemic, with passenger numbers decreasing significantly – FirstGroup’s share price followed, dropping nearly 80 per cent at the crisis’s peak before making a partial recovery.

“The business has undertaken a lot of self-help initiatives to mitigate the effects of Covid-19, raising money from lending schemes and implementing a substantial cost-cutting programme. There is, however, undoubtedly a lot more work to do and today’s results are only a glimpse into the effects the Covid-19 pandemic has had on the business – the year only covers a few weeks of lockdown.

“Nevertheless, FirstGroup has an important role to play in the UK’s economic recovery, providing much-needed local and national travel.”

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