14th Nov 2019 08:38
(Alliance News) - Bus and train company FirstGroup PLC on Thursday reported a significantly wider interim loss due to an impairment on US coach operator Greyhound because of deteriorating results.
Shares were 9.2% lower on Thursday morning in London at 117.40 pence each, making it the worst FTSE 250 performer.
Aberdeen-based FirstGroup posted a pretax loss of GBP187.1 million for the six months to September, from just GBP4.6 million the prior year. On an adjusted basis, which strips out exceptional items, pretax profit fell 32% to GBP28.7 million.
The company booked a GBP124.4 million impairment on its Greyhound bus operations in the US, as well as a reserve charge of GBP59.3 million for its North American self-insurance business.
FirstGroup said it is "disappointed" with a further deterioration in the US motor claims environment which led to the increase in insurance costs.
FirstGroup at the end of May decided to sell Greyhound, and also announced a plan to spin of First Bus from UK operations. It said Thursday it has made a number of "important steps" since then in carrying out this plan.
The company said the impairment was due to Greyhound's financial performance in recent months relative to budget, due to a decline in immigration on the southern US border and increased competition.
Revenue for the half was GBP3.53 billion, 6.9% higher year-on-year and up 4.1% at constant currency. All units delivered growth, FirstGroup said, excluding sales and withdrawals from loss-making routes.
Looking segmentally, the core Road division delivered 6.2% revenue growth to GBP2.21 billion. This includes First Student, which operates yellow bus school routes in the US, First Transit, Greyhound, and First Bus.
First Student's results are heavily second-half weighted, FirstGroup noted, due to the North American school calendar, but it had a strong bidding season over the summer.
First Transit won new contracts and delivered organic growth, while FirstGroup said though the environment for First Bus is improving, weakening UK retail footfall is hindering operations.
First Rail, which operates three UK rail franchises, achieved 9.0% revenue growth to GBP1.33 billion.
This unit delivered 4.9% like-for-like passenger revenue growth, but FirstGroup said industry conditions remain "very challenging" due to macroeconomic uncertainty, infrastructure upgrades, and strikes from South West Rail staff.
FirstGroup has held its outlook for financial 2020, with performance on track with board expectations.
"In the first half we continued to execute the clear commercial strategies in each of our divisions to ensure they deliver future progress and growth. In particular, we were pleased to have delivered another strong bid season and two complementary acquisitions in our largest business First Student, as well as the award of the West Coast Partnership to our rail venture with Trenitalia," said Chief Executive Matthew Gregory.
"We are, however, disappointed with the further deterioration in the US motor claims environment which has required an increase in insurance costs for our North American businesses."
"As ever, first half trading mainly reflects the highly seasonal nature of the group's operations, given the timing of the North American school holidays in our First Student business. Based on current trends and underpinned by our activities to reduce the cost base further, we are confident in delivering our trading expectations for the full year," Gregory continued.
By George Collard; [email protected]
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