US investor savages First Group break-up

FirST Group’s plans to break up its rail and bus business and focus on North America have been branded ‘woefully inadequate’ by its biggest shareholder.

The Aberdeen-based transport group, which has been under intense fire from activist US investor Coast Capital, said it will sell its Greyhound coach line in the US and spin off its UK bus arm, First Bus.

it is also considering leaving the UK rail market, where it runs lines including the Trans- Pennine Express and Great Western railway.

First Group’s boss Matthew Gregory said it would see out existing contracts but the future of the rail business depended on government strategy. it announced the shake-up alongside annual results that showed its losses narrowed to £98m in the year to the end of March, from £327m the year before. The plans will see the focus of First Group’s business placed on its two bus divisions in North America, where it runs public transport and is the biggest operator of the famous yellow school buses. These two units – First Transit and First Student – already make up almost two-thirds of its profits and are based on contracts with other companies rather than attracting customers, making them a more reliable source of income. First Group announced the break-up following months of pressure from Coast, which is its biggest shareholder with a near-10pc stake.

Coast wants to remove six of the board’s 11 directors and install seven it has chosen, as well as get the firm to ditch UK rail and focus on its North America operations.

But far from seeing it as a victory, Coast’s investment chief James rasteh told the Mail the shake-up is ‘woefully inadequate’.

rasteh said: ‘it’s absolutely not a victory for us, this is far from a victory.

‘i think that an exit from rail was desperately needed but i think that the only good thing at this point would be new appointments and a board that can deliver the turnaround potential in the UK and US. A fire sale of assets at an inopportune time will lead to value destruction.’ rasteh said the company was making a mistake by spinning off First Bus, which it described as an ‘important asset with good turnaround potential’.

Gregory said the company would have broken up the business even without Coast’s activist pressure and that it had been reviewing ‘ways to unlock value’ since last year.

He said there were no plans to change its UK listing to one in North America or move its headquarters, but indicated this could be reviewed in future.

First Group’s profit fell after it was hit by a slew of charges – including a £102m writedown in the value of its troubled South Western railway franchise – despite revenues rising by 11.4pc to £7.1bn.