Bus and train operator FirstGroup today announced a £615 million fundraising and cancelled its dividend after plans to turn around the business were derailed by the West Coast mainline fiasco.
The company, which is planning to pour £1.6 billion into a four-year investment programme and tackle debts of nearly £2 billion, told shareholders they would have to wait another year before seeing any pay-out.
It also announced that Martin Gilbert was stepping down as chairman after being on the board since 1995.
The Aberdeen-based company, which operates First Great Western, First Capital Connect and First ScotRail, has been hit by the botched bidding process surrounding the West Coast mainline.
After initially winning the bid, a review found flaws in the process, causing the takeover of the franchise from Virgin to be put on hold as well as delaying decisions on three other rail operations it already holds.
Mr Gilbert, also chief executive of Aberdeen Asset Management and a non-executive director at BSkyB, said the company was "frustrated" that employees and shareholders had to endure the "extraordinary series of events" surrounding the franchise fiasco.
Underlying pre-tax operating profits for the group - which also has interests in US student and Greyhound buses as well as the UK bus network - fell in line with expectations from £271.4 million to £172.4 million.
FirstGroup announced that it was raising £615 million through the sale of discounted shares and that no dividend would be paid for the full-year or for the next half-year interim period, with the payment expected to return for the full year to 2014. Shares fell 16% today.
It is investing in IT programmes across its businesses as well as expansion in the US, including cross-border bus services to Mexico.
Chief executive Tim O'Toole said: "This is a decisive moment for the company."
He said that, with an experienced UK rail bid team, FirstGroup was in a "strong position for the re-commencement of franchising" and that it would remain a "major player" in the industry.
Today's results showed like-for-like revenues from the railways were up 7.4% to £2.8 billion, less than last year's 8.4% increase. Takings from UK buses fell from £1.2 billion to £1.1 billion - blamed on a fall in Government subsidy.
FirstGroup said its ability to obtain credit needed for financing, insurance and pension costs had been under threat.
"The prolonged economic weakness and impact of Government austerity have weighed on our recent cash generation and, coupled with the delays to the UK rail franchising programme, meant that we were unlikely to continue to support investment grade credit rating in the near term."
It said the rights issue would support the credit rating as well as remove "the constraints of our current balance sheet".
Net debt for 2012/13 was £1.98 billion, up from £1.84 billion in the previous financial year.
Mr O'Toole said: "We have clear plans in place for all of our divisions, and while there remains significant work to be done, our confidence continues to grow as a result of the progress to date."
FirstGroup said that the fall in underlying operating profits at its UK bus arm from £134.4 million to £90.7 million had come in spite of rising passenger revenues, 1.4% up on last year.
This was "principally down to a fall in Government funding available to the industry as well as external cost pressures, particularly fuel and pension costs".
The division has been undergoing a strategy to "fix and restore sustainable growth", including the disposal of 14 bus depots across the country for nearly £100 million.
Eight of the depots are going in London, after FirstGroup decided to "focus our business" on the deregulated market outside of the capital.
On the trains, First Capital Connect recorded a fall in punctuality to 88.3%, largely due to bad weather, while flooding was blamed for worse performance at First Great Western.
Underlying operating profits in the rail division overall were down from £110.5 million to £63.2 million. The fall reflected a three-year extension to the TransPennine Express franchise "at operating margins closer to the industry average".
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