Firstgroup shares plunge five per cent following £142m pension charge
Transport giant Firstgroup’s shares fell five per cent this morning despite offering shareholders a higher dividend, as a one-off £142m from its pension plans hit profits.
Half-year adjusted operating profit came in at £100.6m, a 52.2 per cent increase on the prior year, while adjusted earnings per share rose to 8.1p from 4.6p amid strong demand for bus and rail.
But this good news could not offset a £142m pensions settlement charge from pulling out of two local government pension funds, resulting in an overall pre-tax loss of £68.4m.
Total revenues increased to £504.9m, up from £427.7m, despite a £19m reduction in Covid-related government grant funding. The pension hit tempered what was otherwise a strong performance, with the group offering shareholders an increased dividend of 1.5p share, up from 0.9p in 2023.
Firstgroup, who ran the now nationalised Transpennine Express service, has enjoyed a bullish performance this year, with rail demand creeping back to pre-pandemic levels. Its share price is up 80 per cent, in stark contrast to bruised rival Mobico Group.
Chief Executive Officer Graham Sutherland said: “I am pleased to report another set of very strong results for the first half of our 2024 financial year.”
“We are a resilient and profitable business which is well-positioned to create long-term, value-accretive growth. Leveraging our leading positions in bus and rail, supported by our strong balance sheet enables us to continue to play a critical role in supporting governments’ economic, societal and environmental goals.”
Passenger journeys on Firstrail jumped to 123.4m, up from 114.6m the prior year and driven by strong leisure volumes during the summer months.
Firstbus carried nearly 1.1m passengers a day, helping to offset the impact of rail strikes as disrupted travellers opt for alternative means to reach their destinations.
The outlook for fiscal 2024 remained unchanged, with analysts anticipating a rock-solid performance following a near-perfect year. They expect a £13m jump in underlying profit to £95m and £4.7bn in sales for the full year to March 2024, while investors are licking their lips at a 4.5p dividend – 18 per cent higher.
The operator ripped past forecasts in March and pipped them again in June, after company officials reaffirmed market expectations for the fiscal 2024 year.
Challenges do remain though. A general election fast approaches and Labour is backing re-nationalising British rail, a policy which threatens the Firstgroup’s three core franchises.
But the future looks bright as of today, bolstered in particular by last week’s announcement of a $124m (£99.5m) tie-up with Hitachi, to lease up to 1,000 electric buses.
Firstgroup said it was on track to have more than 600 electric buses, over 600 charger heads, and four fully electric depots in England by March 2024