First freezes its dividend due to rail uncertainty

Marion Dakers
THE WEST Coast rail fiasco has prompted transport company FirstGroup to freeze its interim dividend and consider scrapping a planned rise next year.

First, whose winning bid for the franchise was discarded by the government in September, said the resulting uncertainty means it will review its full year dividend in May.

By then, First hopes the Department for Transport (DfT) will have learned more about the “serious flaws” found in the franchising process and set out a timetable to resume the contests.

The FTSE 250-listed company had previously committed to seven per cent annual growth in its investor payout.

“I don’t think the franchising model is completely broken and it is not something that needs months and months of work to fix,” said chief executive Tim O’Toole.

He said the firm is in “active discussions” with the DfT to extend First’s contract to run the Great Western franchise, which is due to expire in April.

First’s bus division has also had a tough six months, with a 2.3 per cent fall in revenues to £572.9m and a 33 per cent fall in operating profits to £39.6m as margins slipped. The division is selling off assets as it tries to adjust to subsidy cuts.

For the group, revenues rose 2.6 per cent to £3.25bn, while operating profits slumped 21 per cent to £128.7m, broadly in line with forecasts.

And pre-tax profits plummeted 93.4 per cent to £8.4m, which the firm blamed on poorly performing derivatives, one-off disposal costs and a favourable pensions charge last year.

Shares in the firm closed 5.1 per cent lower at 194.9p.