By Scott Wright
FIRSTGROUP has moved to reduce liabilities linked to the sale of its Greyhound coach business in the US last year, while declaring the recovery of UK passenger numbers since the Omicron outbreak has underlined “significant latent demand for travel on our services”.
The Aberdeen-based company has struck a deal with a specialist insurance company that it said de-risks around $147 million of Greyhound’s legacy self-insurance reserves. Greyhound had set aside funds for potential insurance claims, such as personal injuries, but this liability was not taken on when it was sold to FlixMobility, the European bus and rail company, for $172m in October.
FirstGroup has now agreed a deal with Randall & Quilter Investment Holdings, a non-life global speciality insurance company, that indemnifies the group for these liabilities, and any adverse developments on them, up to a maximum of $275m.
The company said the cash cost is “modestly better than budgeted for” in its full-year guidance for 2022, under which it anticipated ending the year with £10m to £20m of adjusted net debt. And it noted the group’s exposure to Greyhound’s legacy self-insurance liabilities have reduced to around $19m of older claims not covered by the risk transfer agreement, or recently settled.
The Greyhound sale marked FirstGroup’s withdrawal from the US, following the previously announced disposals of First Student and First Transit. The company retained certain net liabilities under the Greyhound agreement, including pension, self-insurance and finance leases. But against those liabilities it also retained Greyhound properties, which it is now selling. Yesterday, it announced that it had sold a further three of those properties for around $32m.
Meanwhile, FirstGroup said that passenger numbers in the UK had now improved to 70 per cent of pre-pandemic levels. Shares closed down 2.8p, or 2.8%, at 101.8p.
David Martin, executive chairman of FirstGroup, said: “We now have a focused and simplified group and continue to enhance our financial strength and resilience by proactively managing the legacy assets and liabilities associated with last year’s portfolio rationalisation.
“We are pleased that passengers are returning to travel again following the easing of the Omicron-related restrictions put in place in December. It demonstrates our conviction that there is significant latent demand for travel on our services and we look forward to providing vital connections for our customers as the recovery continues to build. Public transport has a key role to play in the UK’s economic, decarbonisation and levelling up agendas and I remain confident that FirstGroup is very well placed to capture our many opportunities to create long term, sustainable value.”
Overall, First Group expects to record a gain on disposal in its accounts for the current year.
It said it was now ahead of plan in terms of realising the previously guided $155m in net value from the legacy Greyhound assets and liabilities over its 2023 financial and beyond.
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