INDEBTED transport operator FirstGroup today announced that it is raising £615m through a discounted rights issue, in the wake of full-year results that showed a 87 per cent drop in pre-tax profits.
The FTSE 250-listed company, which operates a number of rail, bus and coach services including First Capital Connect, also announced that chairman Martin Gilbert would be stepping down.
The firm posted pre-tax profits of £37.2m, compared to £279.9m the previous year. Net debt rose to almost £2bn, up 7.7 per cent.
FirstGroup will not be paying a final dividend out, as it attempts to ease its balance sheet and avoid a rating downgrade.
City A.M.'s David Hellier commented on Friday that FirstGroup could be the next company to raise money through a rights issue, following Thomas Cook's deal last week.
Today, FirstGroup chief executive Tim O'Toole said: “The proposed £615m capital raising transaction…will remove the constraints from our balance sheet and enhance our ability to invest in our businesses going forward.
“We plan to invest around £1.6bn across our five divisions over the next four years to underpin growth and return our businesses to our target levels of profitability.
“Through these actions, combined with our scale and expertise, we are positioning the business for improved growth and returning it to a profile of consistent returns and cash generation.”