Scottish transport giant FirstGroup on track as plans outlined to hand back £500 million

Scottish transport giant FirstGroup has outlined its plans to return £500 million to investors after confirming that current trading remains on track.

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

Since the end of its financial year, the Department for Transport (DfT) has formally approved the management and performance-based fees to First Rail's contracted rail operations for the year to the end of March, which were in line with the amounts accrued. The DfT has extended the current GWR and West Coast Partnership (incorporating Avanti) agreements by six months to June and October 2022 respectively.

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The DfT has also recently published prior information notices which indicated that the West Coast Partnership's national rail contract which will follow the current agreement could last up to ten years to October 2032, and that GWR's could last up to six years to June 2028.

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

FirstGroup is also behind the new Lumo east coast open access rail service, which is set to roll out next month.

Passenger mileage in the group’s non-core US Greyhound operation has been just over half of pre-pandemic levels in recent weeks, supported in part by further awards under federal schemes including the American Rescue Plan.

First also confirmed that chief executive Matthew Gregory and non-executive directors Martha Poulter and Steve Gunning would be stepping down from the board at the end of the annual general meeting.

The changes were revealed in July with chairman David Martin – a former chief executive of rival transport group Arriva – becoming First’s interim executive chairman.

Aberdeen-headquartered First announced the completion of the First Student and First Transit disposals earlier this summer and the increase to £500m in the amount intended to be returned to shareholders.

It is now pushing ahead with a tender offer as the “optimal” way to return the cash. Qualifying shareholders will be invited to tender some or all of their shares in the group at a price per share that will be announced at the time of launch.

If the full amount is not returned to shareholders by way of the tender offer, First intends to return any remaining surplus cash in a second phase.

Martin said: "Trading is in line with our expectations year to date, and we continue to support our passengers and other stakeholders as travel patterns evolve.

“While we complete the search for a new chief executive, my focus is on ensuring we continue to drive value from our strong positions in UK bus and rail, progress our plans to resolve our non-core Greyhound operation and complete the return of value to our shareholders following the sale of the North American contract businesses.

"With a well-capitalised balance sheet and an operating model that will support an attractive dividend for shareholders commencing in 2022, I am confident that FirstGroup is well-placed to deliver sustainable value creation as a focused UK public transport leader."

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