Gilbert to step down at FirstGroup

MARTIN Gilbert is expected to announce his retirement as chairman of transport operator FirstGroup this week when the company might also unveil plans to raise up to £600 million and a sharp cut in its dividend.

John Lawson, an analyst at Investec Securities, said: “This could be quite a crucial day for shareholders.”

Goldman Sachs and JP Morgan are believed to be working on a big fund raising to help pay down a £2 billion debt pile.

The company held its interim dividend and there is talk of the final payout being similarly held or even halved.

Lawson added that the bus and train company was a “difficult stock to call at present”.

FirstGroup is Britain’s biggest bus operator with around 8,000 vehicles in 40 locations across the UK, carrying 2.5 million passengers a day.

The economic downturn has weighed heavily on its fortunes, particularly in the north of England and Scotland, while higher fuel costs and lower UK government subsidies have had an impact.

The company also operates around a quarter of Britain’s rail lines through franchises such as First Great Western and First ScotRail, while it operates 70,000 school and transit buses in North America.

Its rail future was plunged into uncertainty after its appointment to take over the west coast franchise was cancelled due to a flawed bidding process.

Pre-tax profits at FirstGroup, which last year announced a £160 million investment in buying buses, are expected to be well down on last year’s £271.4m, with Investec forecasting £170m, despite a predicted rise in revenues. Revenues on its buses rose by 2.4 per cent in its final quarter to 31 March, up from third quarter growth of 2.1 per cent.

It also revealed the sale of eight bus depots in London for £80m, part of plans to offset tough conditions and build “sustainable” passenger and revenue growth. However, the company said fourth quarter UK rail revenues were up only 5.9 per cent, a slowdown on the 8.1 per cent underlying growth in its third quarter.