Brakes slam on Firstgroup profits as CEO departs

STOCK: Shares spiral on full year results

Firstgroup chief executive Tim O’toole has resigned with immediate effect as the bus-to-train firm swung to a mammoth full year loss.

Shares in the north-east based public transport giant took a double digit nosedive after it was revealed executive chairman Wolfhart Hauser will take the hot seat while the search for a new leader is conducted.

Finance chief Matthew Gregory has been appointed interim chief operating officer.

The company, which has operations across the UK and overseas, booked a £327 million loss in the year to March 31.

The plunge into the red follows a profit of £152.6m in 2017.

Firstgroup was dragged down by a £277m impairment charged linked to the iconic Greyhound coach business which it operates in the US.

The firm said Greyhound had been struggling amid the rising popularity of low-cost airline competition.

“Greyhound’s significant short haul and express growth was more than offset by declines in long haul demand as a result of intensifying competition from the ultra low cost airlines, which are bringing significant additional aircraft capacity into operation while also connecting to a growing number of secondary airports,” the firm said as it issued its annual results yesterday.

“The growth in these businesses represents a meaningful shift in US travel patterns.

“Our ability to mitigate these revenue challenges through further cost efficiencies is limited by ongoing increases in fleet maintenance and driver costs, resulting in a significant reduction in Greyhound’s margin.”

In addition, the firm was hit by an onerous contract provision linked to the Transpennine Express rail franchise.

Revenue across the group increased to £6.4 billion compared to £5.65bn in 2017, and Firstgroup’s preferred measure of adjusted operating profit dropped from £339m to £317m.

Mr Hauser said the immediate focus would be on sorting out Greyhound’s issues.

“The board is examining all appropriate means to mobilise the considerable value inherent in the group,” he said.

“Initial actions from its evaluation are under way, including conducting a full external review of Greyhound’s business model and prospects, which will conclude in the coming months.

“As we do so, we will continue to strengthen the group by using the sustained cash generated after disciplined investment to reduce leverage further and for targeted growth.

“Overall, we see considerable opportunity to deliver shareholder value in a sustainable way while enhancing the services we provide to our customers and communities.”

Mr O’toole said: “Today’s results clear the way for the new approach sought by our chairman and the board,” he said.

“I should like to thank the 100,000 employees who work so hard to deliver for our customers every day. It has been a privilege to work with them.”

Top: Part of the Firstgroup bus fleet. Above: Chief executive Tim O’toole’s resignation was announced alongside the group’s annual results.