By Kristy Dorsey

Matthew Gregory is surrendering the helm at FirstGroup after the transport giant’s largest shareholder renewed calls for the chief executive’s resignation.

In an announcement alongside the release of its financial results for the year to the end of March, FirstGroup said Mr Gregory will not seek re-election at the company’s annual meeting on September 13. Chairman David Martin will take over as interim executive chairman until a permanent chief executive is appointed.

The news comes just days after Aberdeen-based FirstGroup completed the controversial sale of its US school and public transport operations, a transaction that prompted US-based Coast Capital to call on Monday for the resignations of Mr Gregory and non-executive directors Warwick Brady and Julia Steyn. The activist hedge fund, which owns about 14 per cent of FirstGroup’s issued shares, said Mr Gregory “should be replaced by a CEO industry competency, as soon as possible”.

New York-based Coast Capital has long been a critic of FirstGroup’s management, and has previously agitated for Mr Gregory’s removal. In May, the hedge fund led a rebellion against the £3.3 billion sale of the US businesses, First Student and First Transit, to Scandinavian fund EQT Infrastructure on the basis that these “crown jewel assets” were being sold at “less than book value”.

READ MORE: FirstGroup in £135m sweetener to woo disgruntled shareholders

Announcing last week that the deal had been completed, FirstGroup declared an extra £135 million pay-out to shareholders in an apparent bid to smooth ruffled feathers. That took the total amount of cash to be returned to investors to £500m, or approximately 41p per share.

Mr Gregory, 51, was previously chief executive of Arriva before joining FirstGroup in 2015 as chief financial officer. He stepped up to the role of chief executive in 2018.

Speaking about his departure yesterday, Mr Martin praised Mr Gregory as having been “instrumental” in rationalising the group’s portfolio of businesses, culminating in last week’s sale of First Student and First Transit. He also credited the outgoing chief executive for delivering margin improvements in the US and UK bus operations, as well as First Rail’s successful Avanti West Coast bid.

“He leaves FirstGroup a more focused, resilient and flexible organisation, well-positioned to benefit from the many opportunities ahead," Mr Martin added.

READ MORE: Aberdeen bus giant welcomes fresh cash from DfT

Mr Gregory said it has been an “honour and a privilege” to lead FirstGroup, having met its strategic objectives and “protected our financial stability”.

“Having delivered on the substantial portfolio rationalisation strategy and with FirstGroup now positioned to emerge from the pandemic as a resilient and robust business, I have decided the time is right for me to move on to new opportunities,” he said, adding: “In this landmark year the group has more than risen to its challenges.”

FirstGroup returned to the black during the 12 months to March, posting a pre-tax profit of £115.5m against the previous year’s loss of £299.6m. The figures were boosted by a £71.1m profit from the sale in December of three major properties by its inter-city Greyhound coach business in the US, which was not part of the disposal to EQT.

Greyhound volumes “improved modestly” since the start of the year, with the business now operating at just over half its pre-pandemic mileage. FirstGroup said Greyhound remains a non-core business and sale discussions are “ongoing” as it looks to complete its exit from the US to focus on its UK operations.

Along with other regional UK operators, First Bus effectively provided its assets and expertise to operate a government-funded bus system during the financial year on “a broadly cash break-even basis” to keep essential services running during the pandemic. Similarly, First Rail has been supported by emergency measures put in place by London and the devolved governments.

Shares in FirstGroup closed 0.15p lower yesterday at 84.25p.