FirstGroup lifts profit guidance as boss sees off investor revolt

The Aberdeen-based bus and rail company has, along with other major transport providers, relied heavily on UK and Scottish government funding to maintain services for key workers throughout the pandemic. Passenger numbers plummeted from the end of March as people began working at home and lockdown conditions were imposed.

The operator, which is seeking a buyer for its US school bus, transit and inter-city coach businesses, warned in July of a “material uncertainty” over its ability to continue as a going concern, amid ongoing uncertainty around the pandemic and visibility on the economic recovery. That came as it booked an operating loss of £152.7 million for the year to March 31.

However, FirstGroup said yesterday that its performance between April 1 and August 31 had been stronger than forecast, highlighting that adjusted operating profit and cash from operations had exceeded expectations. This was helped by better revenue recovery and strong cost control, the company said in an AGM statement.

FirstGroup is now expecting to make a “small adjusted operating profit for the seasonally weaker first half of the financial year”.

Despite the improved outlook, some shareholders signalled their dissatisfaction with the chief executive. Mr Gregory, who has regularly faced questions over the group’s strategy from US activist investor Coast Capital, saw nearly 30 per cent of the voted shares go against a resolution to re-elect him as a director at the AGM.

In the UK, the company said there had been an “encouraging acceleration in the rate of patronage recovery” across its First Bus operation in recent weeks. It noted that passenger numbers had by last week recovered to more than 50% of pre-coronavirus levels, having plunged to as low as 10% of the pre-Covid rate as the pandemic took root. Mileage operated by the division has returned to nearly 90% of pre-pandemic levels.

FirstGroup noted that funding from government and customers has allowed it to maintain services amid continuing social distancing measures.

Last month, the Department for Transport (DfT) injected a further £256m to help bus and tram operators ramp up services before the return of schools and universities this month. It took to around £700m the investment it has made in services down south since the pandemic erupted.

Prior to the latest DfT funding, the Scottish Government stepped in to provide a further £63m to help operators maintain services in Scotland between August 17 and November 8, on top of the £46.7m that had been provided since June 22.

In UK rail, FirstGoup said while passenger numbers on First Rail had “increased modestly” over the summer, they remain at around 30% of the level they were at before the pandemic, on average. It was recently awarded a deal to run the Great Western Railway, its largest rail franchise, until at least June 26, 2021 under the Emergency Measures Agreement.

FirstGroup said it had been “encouraged by significant interest from potential buyers” for its North American businesses, though conceded that uncertainties arising from the pandemic had “affected the speed at which this process can be concluded”.

First Student, which provides transport for schoolchildren, had, by last week, 45% of its fleet back in operation, the company said, adding that school districts continue to review their plans “in light of dynamic local conditions”. Some schools have begun the year with a combination of “in-person and online teaching”, with others still teaching online only.

FirstTransit, which provides services to colleges and state transportation departments, has been less affected by the pandemic, and is now operating at around 67% of its pre-coronavirus services.

Revenue at Greyhound, the inter-city coach business, has improved and is now at around 35% to 40% of pre-pandemic levels.

Shares closed up 1.38p at 42.28p.