FirstGroup defends its turnaround strategies

Marion Dakers
FIRSTGROUP, the bus and rail company fending off an activist investor’s break-up calls, has reassured shareholders that its turnaround plans are on course.

The company told investors yesterday that it aims to increase its revenues faster than the broader growth in the economy by bidding for new work and investing in services.

This goal excludes the UK rail division, which was dealt a blow when all franchising competitions were frozen in late 2012. First had been awarded the West Coast Main Line but has been forced to pitch again for the contract.

Delays to its rail deals, as well as debts from the purchase of yellow school bus operator Laidlaw, prompted First to raise £615m in a discounted rights issue last year.

The firm repeated its pledge to hit an overall post-tax return on capital employed of 10 to 12 per cent over the medium term.

First said its Greyhound coach unit “is targeting a margin of approximately 12 per cent” following expansion and changes to its ticketing.

Sandell Asset Management has been urging the company to sell off Greyhound and the rest of its US business to cut its debts and streamline the business.

“Sandell is considering today’s presentation by FirstGroup and looks forward to further constructive dialogue with the company’s board,” the 3.1 per cent shareholder said yesterday following the investor day.

Chief executive Tim O'Toole said: “I am confident we are on the right track to increase the resilience of the group and improve returns and growth prospects for the benefit of all our stakeholders.”