New chief takes the wheel at bus provider First Group as losses increase
Rail and bus provider First Group has named Matthew Gregory as its new chief executive, as losses before tax increased to £4.6m.
The former finance chief and interim chief operating officer steps into the job six months after boss Tim O’Toole left the company when it posted a £327m loss for the financial year.
Shares grew nine per cent on the news to 87p, after plummeting from a high of 117p in May.
The figures
Shares in First Group jumped 10.5 per cent this morning as the company showed a 19.2 per cent increase in revenue to £3.3bn in the six months ending October.
Losses before tax more than doubled to £4.6m from £1.9m, while the company slightly decreased its net debt to £1.05bn during the period.
Why it’s interesting
Chief executive Tom O’Toole left under a cloud in May, with a £153m profit in the 2017 financial year plummeting to a £327m loss in 2018.
But O’Toole’s resignation came as good news for Gregory, who was allowed to shine by taking over as interim chief operating officer (COO) after the boss left.
“Since his appointment as interim COO in May, Matthew has demonstrated the combination of strong leadership skills and strategic decisiveness, which has allowed us to make progress in a number of key areas,” said Wolfhart Hauser, First Group’s chairman.
“Having conducted a thorough selection process, which considered external and internal candidates, the Board unanimously concluded that Matthew is the right person to take on the role of chief executive.”
The former finance chief, who joined the business in late 2015, started his career with Rank Group and EY before serving as finance director at plastics manufacturer Essentra.
First Group has seemingly moved away from potential plans to sell its North American Greyhound buses, deciding instead to improve the business and pull out of Western Canada.
In its UK rail division, which includes Great Western and the Trans Pennine Express, revenues rocketed 81 per cent to £1.2bn, but adjusted operating profit fell 5.8 per cent to £29.3m.
What First Group said
Incoming chief executive Matthew Gregory said: “We have made good progress in the first half delivering on our plans to strengthen the group, generating sustained cash flow to further reduce leverage and deploy to targeted growth.
Together with other revenue and cost actions this helped First Bus to achieve strong margin improvement in the period. Meanwhile our First Rail operations continued to focus on improving services for our passengers while maintaining overall profitability in a more challenging industry environment during the period.
We completed our review of Greyhound and have launched a plan to optimise our smallest business for the challenges it is facing. Having recently addressed our loss-making activities in Western Canada, these further actions will assist in improving Greyhound's performance going forward.”
What analysts said
John Moore, senior investment manager at Brewin Dolphin, said: “In 2014, FirstGroup ceased paying dividends in order to reduce debt and refocus the business. However, shareholders have yet to see the benefits of this action in terms of positive return.
“Today’s results highlight that, at best, the immediate position remains mixed – group revenues are up and debt has been reduced, but the company saw a statutory loss before tax of £4.6 million, which was more than double the same period last year.
“In theory, First Group has potential; but, given past performance, you would forgive investors for taking it with a pinch of salt.”