RBC Capital Markets today reaffirms its underperform investment rating on FirstGroup PLC (LON:FGP) and raised its price target to 125p (from 90p).

StockMarketWire.com
FirstGroup saw a significant improvement in operating results in the year to the end of March with substantial cash generation delivered as planned.

Group revenue rose by 8.3% to £5,653.3m and adjusted operating profit was up 12.7% at £339.0m, driven by First Student and First Transit and favourable currency translation.

Adjusted pre-tax profits were up 23% at £207.0m.

In constant currency, group revenue was down 0.5% and adjusted operating profits were up 2.3%.

Statutory operating profit increased by 15.1% and statutory EPS increased by 24.0%, with gains on disposal of a Greyhound property largely offset by reorganisation and restructuring costs and pre-tax profits were up 34.4% at £152.6m.

Chief Executive Tim O'Toole said: "We report our results today against the backdrop of the derailment of a tram operated by one of our subsidiaries on behalf of Transport for London in Croydon on 9 November 2016, a tragedy that has shocked and saddened us all.

"We are profoundly sorry that such an incident could take place aboard a service we operate.

"We are focused on understanding the exact cause of this incident and will continue to provide our full support to the ongoing investigations.

"Our thoughts remain with the families and friends grieving for the seven people who lost their lives, and those who were injured and affected by this terrible event.

"We are encouraged by this year's improved financial results, with our largest division First Student delivering a significant margin improvement despite continued driver recruitment challenges, while our First Bus and First Rail operations have faced more challenging market conditions this year.

"Through rigorous focus on sustainable operational and capital efficiencies, we were also able to generate substantially improved net cash inflow of £147m.

"In the year we have maintained our consistent and disciplined approach to bidding for future business throughout the Group, with the recent award of the South Western rail franchise being a good example of our focus on the service quality improvements our customers and communities tell us they want.

"Meanwhile, we continue to increase our use of technology across the Group to make it easier for passengers to use our services, and to deepen our understanding of our customers evolving needs. "Looking ahead, our financial objectives are to make further progress while maintaining our focus on cash generation, despite the mixed trading environment in our markets.

"Overall this year's results demonstrate the progress we have made in repositioning FirstGroup to deliver for our customers while creating value for our shareholders, commensurate with our leading market positions and scale."

Taken a bit of a slapping in early deals, down 6.5%.

Canaccord comment today:
"Full year results for the year to 31 March 2017 were better than expected, primarily due to better performances in North America. Net cash inflow was £147m (£36m before franchise outflows). The share price has risen strongly in recent months, up 22% since it announced the South Western rail franchise win on 25 March and supported by a stronger dollar. The company, however, continues to carry a significant debt burden and cash inflows are expected to be held back by the need for ongoing pension payments in excess of P&L charges (£38m in 2017 and could rise going forward). With a dividend reinstatement likely for 2018 and beyond, the ability to make bolt-on acquisitions in North America in order to supplement contract losses appears relatively restricted if the company aims to reduce debt levels materially.

Profit expectations for UK Bus, Transit and Greyhound remain sluggish in the near term and First Student profit growth is likely to decelerate as margins approach 10% and the ability to achieve further contract price increases diminishes (First Student accounted for 44% of group operating profit in 2017). UK Rail should clearly benefit from the SWT franchise win, although underlying market conditions in UK rail remain challenging. The shares are trading at a prospective P/E of 11.6x, a 24% premium to its 5 year historical average."

Liberum Capital today reaffirms its buy investment rating on FirstGroup PLC (LON:FGP) and raised its price target to 165p (from 150p).

StockMarketWire.com
Firstgroup reported revenue growth across most its divisions but Greyhound like-for-like revenues declined weighed by airline competition.

The company said all three of its North American divisions encountered extremely challenging weather conditions in January, and added that its outlook for adjusted EPS fell.

The company also said that its bond refinancing was underway with $275m raised in US private placement market, and added that it expects its September 2018 bond to be redeemed before financial year end which could bring approximately £14m in interest savings from next year.

The company reported revenue growth in its First Student division while Greyhound and First Transit came under pressure during the period.

First Student's revenue rise 0.3% in the period amid price increases introduced during last summer' bid season, but this was partially offset by the school days cancelled due to the severe snowstorms in early January.

First Transit's revenue fell 0.1% in the period following further reductions in service volumes in the Canadian oil sands region.

Greyhound's like-for-like revenue declined by 2.8% in the period, as strong growth in the shorter point-to-point markets was more than offset by intensifying challenges in the larger long-haul segment amid low-cost airline competition

First Bus delivered like-for-like passenger revenue growth of 1.4% with like-for-like passenger volumes rising 0.1% in the period.

First Rail's like-for-like passenger revenue growth was 3.2% in the period.

The group said it expects US tax changes to reduce its effective tax rate to mid-20's percentage.

FirstGroup Chief Executive Tim O'Toole said: 'We reached an important milestone in the period with our long-dated bond portfolio beginning to mature, allowing us to significantly reduce our interest burden by starting to refinance and rebalance the Group's debt.'

'We are pleased by the support shown in the credit market for our improved financial profile and disciplined strategy.'

'In the period First Bus has made encouraging margin progress as we benefit from our cost efficiency actions and revenue growth, while our First Rail franchise portfolio continues to generate value for the group despite infrastructure challenges'

'First Student's momentum continues to be tempered by the strength of the US employment market, with no easing of the driver shortages experienced in recent years, while First Transit has taken a number of actions to help restore margins in the second half as planned. Although Greyhound's point-to-point business continues to grow, this was more than offset by significant reductions in long-haul volumes in the period.'

StockMarketWire.com
Shares of rail and bus operator FirstGroup slumped on Tuesday after buyout firm Apollo said it would not make an improved bid after its advances were rejected last month.

FirstGroup revealed last month it had rejected an offer from Apollo, which it claimed 'fundamentally undervalues' the company.

Jefferies comment:
"We thought the combination of already high group debt, pension liabilities, two new rail franchises (SWR and TPE) won on full growth assumptions and the shrink-to-grow strategy nearing completion at Student (the group’s growth driver for many years) would all challenge a bid for FGP. The UK political dimension too would also have raised the risks. Additionally, we feel UK Rail needs to sit within larger groups to absorb downside scenarios should these contracts prove to develop into liabilities rather than the asset hoped for at bid. This would have frustrated any break-up scenarios worked through, alongside the long dated nature of the group’s debt. Splitting up FGP into US and UK holdings, for example, would leave rail sitting alongside a weak bus unit (how to allocate debt to that?) and unless a larger group could be found as a trade buyer (we think unlikely), it's not obvious to us that this represents an attractive standalone proposition.
Investors may hope that the experience of the Apollo interest will drive new impetus for change at FirstGroup. However, after years of current management struggling to turn this group around, it’s difficult to see what more they (or indeed others) can do. FirstGroup’s problems, in our view, stem all the way back to its pursuit of scale at the expense of its core (under-investment in UK Bus) culminating in the Laidlaw acquisition (2007) which has ultimately burdened it with too much debt. Market conditions have not been kind to it (its diversified exposures have seen headwinds roll through different parts of the group at different points). Perhaps, like Student, margin opportunities in both UK bus and Greyhound could be more aggressively pursued though shrink-to-grow-strategies, but there’s implication for scale there and FGP must remain mindful of its debt levels. Our sense remains that the recovery prospect at FGP is likely to remain a slow burn long term scenario, and reducing net debt should be the priority for cash generation (rather than dividend hopes that seem to have formed in some segments of the market)."

StockMarketWire.com
FirstGroup said Thursday that CEO Tim O'Toole resigned from his position as CEO as the company revealed its annual results showing adjusted profit before tax fell 4.8% to £197m for the year to the end of March despite a 13.2% jump in revenue.

Adjusted operating profit fell 10.4% excluding SWR and 53rd week.

The firm blamed the poor performance on Greyhound long haul challenges, severe weather effects on both sides of the Atlantic in the final quarter and ongoing US driver shortages. This was partially offset by good performances in UK divisions, the company said.

Greyhound like-for-like revenue fell 0.7%, as 7.7% growth in express (short haul) growth was insufficient to offset long haul demand challenges from intensifying airline competition, which saw the adjusted margin fall to 3.6%

'In the year, our largest division First Student was broadly stable and First Bus took an encouraging step forward in its margin improvement plans,' the company said.

'This was offset by the cost challenges experienced by First Transit in the first half and by Greyhounds inability to overcome the structural shift taking place in its long haul markets, as ultra low cost airlines significantly increase capacity and extend into new markets.'

The company reported a statutory loss before tax of £326.9m for the year compared with a profit of £152.6m last year, reflecting £277.3m Greyhound goodwill and other asset impairments, £106.3m TPE onerous contract provision and other adjusting items.

The company also said it expected an overall improvement in road margins and returns, would be offset by a smaller contribution from the First Rail portfolio, resulting in broadly stable group earnings in constant currency.

Deutsche Bank today reaffirms its hold investment rating on FirstGroup PLC (LON:FGP) and cut its price target to 83p (from 90p).

Liberum Capital today reaffirms its buy investment rating on FirstGroup PLC (LON:FGP) and cut its price target to 110p (from 125p).

Possible interest of FGP being aquired:
https://www.bloomberg.com/news/articles/2018-09-06/firstgroup-is-said-to-draw-private-equity-interest-including-cvc

StockMarketWire.com
Transport services company FirstGroup said Tuesday it had appointed Matthew Gregory as Chief Executive after but warned that rail profits would moderate.

The company maintained its full year outlook, and continued to expect broadly stable group operating earnings in constant currency for the full year, with improvement in the road divisions and a smaller rail contribution.

For the six months to 30 September, adjusted profit before tax rose 37.7% to £42m and revenues rose 19.2% to 3.30bn.

The uptick in revenue was supported by strong performance in First Rail, which saw like-for-like passenger revenue 5.5%, with solid financial contribution driven by First Greater Western (GWR) despite ongoing infrastructure issues.

First rail revenues grew 80.7% to £1.22bn during the first half of the year.

The statutory loss before tax widened to £4.6m from £1.9m a year earlier, reflecting restructuring and reorganisation costs from withdrawal of Greyhound services in Western Canada, the company said.

Challenges in Greyhound's long haul journeys continued, though the company stressed its commitment to turning around Greyhound's financial performance, targeting at least mid-single digit margins for the division in the medium term.

'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. First Student's bid season success will see our largest business return to growth as planned, while maintaining our disciplined approach to pricing, said Chief Executive Matthew Gregory.

'In September, First Bus completed the rollout of contactless payment across the UK on schedule, becoming the first of the UK's principal bus operators to do so. 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.'