FirstGroup spells out strategy to key investors to fend off pressure

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FIRSTGROUP’S chief executive Tim O’Toole yesterday spelled out its strategy to institutional investors amid continuing pressure from an activist investor to sell off its US division.

Ahead of a series of meeting with investors and analysts, O’Toole said he was confident the business was on the right track to “increase the resilience of the group and improve returns and growth prospects for the benefit of all our stakeholders”.

US hedge fund Sandell Asset Management, which owns 3.1 per cent of FirstGroup, wrote to chairman John McFarlane last week to pressure the board to consider its plans, which include floating off the yellow school bus division and selling Greyhound.

In yesterday’s statement, FirstGroup said it aims to increase group revenue, excluding its UK rail business, at a faster rate and to improve margins at its First Student and UK bus units to double digit levels. It is targetting an overall post-tax return on capital employed of 10-12 per cent over the medium term.

FirstGroup last week said that trading in the final three months of last year had been in line with expectations, with sales accelerating at its UK bus business and UK rail minister Stephen Hammond announcing it had made the shortlist of bidders for the East Coast mainline franchise.

However, trading at its US 
yellow school bus operation was hit by the heavy snow that hit much of North America, while the subdued economy put 
pressure on the “value-­focused consumers” that make up much of its customer base.

Shares in FirstGroup closed down 2.4p at 135.4p.