Bus and rail giant First Group yesterday pledged to boost profits and turnover in an effort to persuade shareholders to support its current management.
The under-fire transport group held a series of meetings and presentations in London yesterday after an activist investor upped pressure on the board to improve the company’s flagging share price.
Chief executive Tim O’Toole and new chairman John McFarlane promised a return to “double digit” profit growth at its US yellow school bus business as well as its UK bus operations.
Representatives of US hedge fund Sandell Asset Management attended the event at the London Stock Exchange along with other investors and analysts.
The New York-based firm has accused the board of “poor execution” and has called on investors to back their demand that the board sell or spin off its US operations.
Last night, a spokesman for Sandell said the investor group, which owns a 3% stake in First, planned to “digest” the board’s presentation. But others who attended the event, which ran from 10am to 4pm, welcomed the board’s plans for the business.
Martin Brown, an analyst with stockbroker Shore Capital said the presentation was informative and “impressive”.
His comments mark a turnaround after he published a highly critical investment report earlier this month which said the firm “suffered from some poor management decisions since the debt-laden acquisition of Laidlaw”, its US business, in 2007.
Yesterday, Mr Brown said: “Some might still say they want to see further delivery first, but once the dust has settled and people have had time to digest the detail, I would expect more investors to realise the targets are achievable.
“Some of the numbers given for recent growth in commercial passenger volumes in the UK bus business were very impressive.”
Mr Brown added that he did not see evidence of a “groundswell of support” among shareholders for proposals put forward by Sandell.
Mr O’Toole said: “I am confident we are on the right track to increase the resilience of the group and improve returns and growth prospects for the benefit of all our stakeholders. While there remains a significant amount to be done, we are making progress in returning to the strength necessary to drive sustainable, long-term shareholder value.”