First Group shares sink as losses widen after Greyhound charge
First Group’s share price sank today as it fell to a £187m half-year loss as transport charges hobbled the firm while doubts weigh over the future of its West Coast Rail franchise.
Read more: CMA flags competition concerns on 21 West Coast Rail franchise routes
The figures
The transport giant fell to a loss before tax of £187.1m in the six months to the end of September, up from a £4.6m loss a year ago.
That came despite a seven per cent annual rise in revenue to £3.53bn.
But net debt doubled, growing 99 per cent to £2.08bn as new accounting standards forced the company to recognise rail rolling stock assets for the first time.
Investors made a loss per share of 14.3p, compared to a loss of just 0.6p this time last year.
Why it’s interesting
First Group profits were hobbled by a Greyhound impairment charge of £124.4m after record low US immigration numbers hit the coach business in the second quarter.
The company’s share price led fallers on the FTSE All Share in early trading, dropping almost 15 per cent to 110.5p.
The company said a process to sell off the division as part of a restructuring process is now “well advanced”. Greyhound saw like-for-like sales rise just 0.7 per cent year on year. First Group will focus on First Student, a school transport division, and First Transit, instead this year.
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Meanwhile First Group booked a £59.3m charge for its US insurance arm, relating to higher costs due to adverse payouts on motor insurance claims.
Wider restructuring costs hit First Group to the tune of £15.4m.
First Group won the West Coast Rail franchise in a joint venture with Trenitalia in August after Virgin lost the franchise after two decades.
But the UK’s competition watchdog warned it will seek remedies from First Group to offset competition concerns on 21 routes.
What First Group said
CEO Matthew Gregory said:
In the first half we continued to execute the clear commercial strategies in each of our divisions to ensure they deliver future progress and growth. In particular, we were pleased to have delivered another strong bid season and two complementary acquisitions in our largest business First Student, as well as the award of the West Coast Partnership to our rail venture with Trenitalia.
We are, however, disappointed with the further deterioration in the US motor claims environment which has required an increase in insurance costs for our North American businesses. Based on current trends and underpinned by our activities to reduce the cost base further, we are confident in delivering our trading expectations for the full year.
We are focused on rationalising our portfolio and are progressing through the detailed work to prepare for separation. We have taken a number of important steps since our announcement in May including the sale process for Greyhound, future UK Bus pension scheme funding and the strengthening of our Rail portfolio.
Main image credit: Alex Wong/Newsmakers