FIRSTGROUP has begun the process to sell its First Student and First Transit businesses in North America.
The move comes after it instigated plans to sell its US-based Greyhound business, signalling that the company’s future lies in the UK.
FirstGroup said it has received “significant interest” in the US assets.
The update came as the bus and rail giant said group revenue was up 7.5 per cent in the year to date. It said it has seen “no significant impact” from the coronavirus update but notes that it is “monitoring the situation closely while planning for a range of scenarios including changes to current Government guidance or policy”.
READ MORE: FirstGroup facing fresh pressure to exit North American business
The company, which has come under pressure from an activist investor in the last few days, said it is looking to offload the First Student and First Transit businesses in a statement.
The Aberdeen-based business provided the update on its portfolio strategy and on trading since the end of September 2019.
It said First Student and First Transit are market leaders in the provision of core contracted public transportation services across 40 US states and seven Canadian provinces.
David Martin, FirstGroup chairman, said: “We firmly believe that a sale of these assets is the best way to unlock material value for all FirstGroup shareholders, having completed a detailed review and analysis with advisers appointed by the board to explore all options.”
On Monday, activist investor Coast Capital, which owns a 10 per cent stake in the business, said “unless the board announces a separation”, it will demand a special shareholder meeting for investors “to vote on an immediate de-merger of the North American operations”.
READ MORE: Activist launches fresh bid to break up FirstGroup
FirstGroup, which operates Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast, said in December a sale of its US businesses was under way.
It also updated on the Greyhound bus business in the US, and said the arm has seen trading slip 3.5% in the year-to-date amid a “difficult trading environment”.
Financial highlights for First Student and First Transit as of March 31 2019 include a reported combined revenues of $3.8 billion, of which $2.4bn is attributable to First Student, and reported combined Ebitda for the same period of $558 million of which $465m is attributable to First Student.
There is a wholly-owned fleet of 43,000 revenue-producing vehicles in First Student, servicing more than 1,000 client contracts. Mr Martin added: “Despite near-term uncertainty in the wider markets, there remains a fundamental need for people to travel safely and conveniently for business, education, social or recreational reasons which is essential to sustainable and thriving economies and communities.
“We are resolutely focused on delivering our plans - including the portfolio rationalisation strategy - in the best interests of all shareholders.”
READ MORE: Scottish transport giant has new largest investor
The company added that its UK rail business has seen trading improve following the introduction of new trades and timetable changes for its Great Western Railway line.
First Bus’ like-for-like passenger revenue growth was up 2% in the period with higher revenue per mile from its fare and network optimisation actions adding it is “pleased that there is a growing recognition at all levels of government that the bus has a huge role to play in achieving social and environmental ambitions and improving local economies”.
First Rail’s like-for-like passenger revenue growth was up 3.8% in the period, with the financial performance in each of its rail operations continuing to vary considerably.
In the US, it said: “Greyhound’s trading environment remains challenging, with further reductions in fuel price which typically makes travel by car more cost-competitive, continuing reductions in immigration-related demand in the southern border states and intensifying competition in several markets from both coach and low-cost airline operators.
“Despite further management action including commercial initiatives, mileage reductions and profit on certain property sales, this difficult demand environment continues to drop through to Greyhound’s profitability.
“Negotiations in respect of the Greyhound sale process are ongoing and we will update the market, as appropriate, when they conclude.”
Matthew Gregory, chief executive, said: “Our market leading businesses have attractive long term prospects and during the period we have continued to execute the clear commercial strategies that will capture their potential and create value, underpinned by our comprehensive cost efficiency programmes.
“Notwithstanding the challenging trading environment, we have made good progress towards our objectives to improve services for customers and unlock the inherent value within the group.
"In First Student and First Transit we have well-invested long term contract businesses with excellent customer relationships, strong management teams and opportunities for growth, and we look forward to seeing these characteristics being reflected in the outcome of the formal sale process that is now under way.”
Shares closed up 0.89% at 102.2p.
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