Bus and train operator FirstGroup has reported an increase in profits amid cost reductions and a recovery in passenger numbers.
It came in an update a week after the company rejected a £1.2 billion takeover proposal from an American serial suitor, Miami-based I Squared Capital Advisors, for being too low.
Business was so positive that recently appointed chief executive Graham Sutherland said FirstGroup could become a buyer again and consider acquisition opportunities to drive further growth.
Strong position to consolidate the market
“The disposals have put us in a strong position and we are really pleased with how we have grown organically over the past year,” he told the PA news agency.
“There are also a number of growth opportunities available for the business – the sector still remains quite fragmented.
“We think there is an opportunity for more inorganic growth and consolidation, and are in a cash position to act if the right opportunity arises.”
FirstGroup announced last July it had completed the sale of North American businesses First Student and First Transit.
The two businesses were acquired by Swedish private equity company EQT Infrastructure in a deal worth £3.3bn.
In October, FirstGroup said it had sold Greyhound – the iconic coach business connecting cities across North America – drawing its ownership to a close after 14 years.
Too cheap takeover offer rejected – for now
The company’s annual results statement comes five days after it turned down a takeover proposal, saying the 118p-a-share upfront cash part of the unsolicited takeover approach from I Squared Capital “significantly undervalued FirstGroup’s continuing operations and its future prospects”.
There is significant takeover interest across the sector, with rival Go-Ahead accepting a £650 million takeover offer on Monday evening.
FirstGroup’s private equity suitor has a few weeks yet – until 5pm on June 23 – to make another bid under City takover rules or walk away.
Executive chairman David Martin said: “We have delivered on our commitments this year to refocus the business, de-risk the balance sheet and unlock value for shareholders.
“As a cash generative business with a strong balance sheet, FirstGroup is well placed to invest in the services our passengers want, to sustain our path to a zero-emission bus fleet, and to actively consider additional value creation opportunities to leverage our market leading public transport expertise.
“The board’s confidence in the prospects for the group is reflected in the decision to commence dividend payments.”
Trading in line with expectations
FirstGroup said profit from continuing operations – which accounted for the sale of its US Greyhound coach business – surpassed its expectations for the year.
Meanwhile, revenues on continuing operations grew as it saw an increase in bus passenger numbers following pandemic disruption, while it also witnessed growth in rail.
The Aberdeen-headquartered company said current trading is “in line with our expectations” and that it expects to make progress over the current year despite uncertainty in the economic backdrop.
It added that it will benefit from a further £5 million in cost savings over the year.
In its final results, the First said its bus passenger volume has reached 76% of the equivalent 2019 period pre-pandemic.
Meanwhile, rail was “trading ahead of plan” as a result of “strong leisure demand”.
FirstGroup told shareholders on Tuesday morning that adjusted operating profits rose to £226.8 million for the year to March 26, compared with £220.2 million in the previous year.
Meanwhile, total revenues declined to £5.58 billion for the year, from £6.84 billion a year earlier, due to disposals.
Shares in FirstGroup closed 1.4% higher to 134.7p on Tuesday afternoon.
