Change of driver as Firstgroup racks up big annual loss
● Result dragged down by Greyhound woes but group says outlook more stable
Shares in Firstgroup, the Aberdeen-headquartered transport giant, reversed yesterday after its chief executive quit following heavy losses.
Tim O’toole resigned with immediate effect as it emerged that the bus and rail operator had suffered a £327 million loss in the year to the end of March, compared with a profit of £152.6m a year earlier.
The group, which is behind Great Western Railway, was dragged down by a £277m impairment charged linked to America’s Greyhound bus service, which it also operates.
Revenue increased to £6.4 billion compared to £5.65bn while Firstgroup’s preferred measure of adjusted operating profit dropped from £339m to £317m.
O’toole said that the “time is right” to step aside. Executive chairman Wolfhart Hauser will take the hot seat while a new boss is found, with finance chief Matthew Grestruggling gory to be appointed interim chief operating officer.
Earlier this year, the firm saw private equity suitor Apollo Management walk away from making a bid. Its approach – for an undisclosed amount – was rejected by Firstgroup, which said it “fundamentally undervalues the company and is opportunistic in nature”.
The departing chief executive said: “The time is right for me to step aside. Today’s results clear the way for the new approach sought by our chairman and the board.”
Hauser added: “On behalf of the board I would like to thank Tim for his distinguished leadership of the company since 2010.
“During that time the group has reinvested in its businesses, restored free cash generation and substantially strengthened its balance sheet.
“The group is now a more stable and resilient enterprise, with a growing ability to capitalise on its leading positions in diverse transport markets.”
The firm admitted that the Greyhound business has been amid the popularity of low-cost airline competition.
It told investors: “Greyhound’s significant short haul and express growth was more than offset by declines in long-haul demand as a result of intensifying competition from the ultra low cost airlines, which are bringing significant additional aircraft capacity into operation while also connecting to a growing numberofsecondaryairports.
“The growth in these businesses represents a meaningful shift in US travel patterns. Our ability to mitigate these revenue challenges through further cost efficiencies is limited by ongoing increases in fleet maintenance and driver costs, resulting in a significant reduction in Greyhound’s margin.”
In addition, First was stung by an onerous contract provision linked to the Transpennine Express rail franchise.
Gregory said: “Looking forward, we expect group adjusted earnings to be broadly stable, with opportunities to improve the margins, returns and cash generated from our road divisions.”