FirstGroup is mulling over options to spin off its UK bus operations and also selling its iconic Greyhound coach business as part of a major restructuring.
The Aberdeen-based transport giant revealed its structural shake-up plans alongside annual results yesterday, with both the strategy update and a significant narrowing of losses boosting the group’s shares by 13% in early trading.
Amid pressure from its biggest shareholder –Coast Capital – for a radical change of direction, FirstGroup also raised doubts over its future as a train operator in the UK.
It said it would continue to manage its rail franchises “in accordance with their contractual terms”.
But it added: “Any future commitments to UK rail will need to have an appropriate balance of potential risks and rewards for our shareholders.”
A “root and branch” review of Britain’s rail services is currently being undertaken in a UK Government-commissioned review led by Keith Williams, a former chief executive of British Airways.
FirstGroup’s UK bus operations transport about 1.6 million passengers a day in 40 of Britain’s largest towns and cities. The company’s global headquarters in King Street, Aberdeen, are also the nerve centre of its First Bus operation in the Granite City.
Announcing its spin-off plans, the group said: “First Bus is one of the largest operators in the UK with a fifth of the market outside of London.
“We have improved our offering by investing in our fleet and transforming our networks, payments systems and passenger information services to improve simplicity and convenience for customers. We have significantly improved cost efficiency in the division, through investment in operations and maintenance systems and by rationalising our footprint via network changes, depot sales and closures.
“As a result, First Bus margins have improved to 7.5% in 2019 and it is now on a much stronger footing as a business. Having set the business on the path to increased profitability, we believe now is the right time to pursue structural alternatives to continue this progression and deliver value to shareholders.” FirstGroup’s break-up plans, including the sale of the Greyhound business that was acquired by the company in a £1.9 billion deal in 2007, are part of a move to focus more on the North American businesses – the First Student school bus division and First Transit, which account for nearly two-thirds of annual earnings. Chief executive Matthew Gregory said: “We are intent on executing this strategy at pace, having full regard to the regulatory and stakeholder procedures and approvals that will be required. Our plans will create a more focused portfolio, with leading positions in our core North American contracting markets.”