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| FirstGroup plans £600m rights issue as profit plunges | FirstGroup plans £600m rights issue as profit plunges |
| (about 1 hour later) | |
| Transport company FirstGroup has announced a £615m rights issue in a bid to reduce its debt after its full-year profit dropped by over a third. | Transport company FirstGroup has announced a £615m rights issue in a bid to reduce its debt after its full-year profit dropped by over a third. |
| The firm, which has extensive rail and bus operations in the UK as well as a bus business in the US, said pre-tax profit had fallen 36.5% to £172.4m. | The firm, which has extensive rail and bus operations in the UK as well as a bus business in the US, said pre-tax profit had fallen 36.5% to £172.4m. |
| FirstGroup also said Martin Gilbert, who has chaired the firm for 27 years, would be standing down. | FirstGroup also said Martin Gilbert, who has chaired the firm for 27 years, would be standing down. |
| Mr Gilbert said the firm had faced "considerable" external headwinds. | Mr Gilbert said the firm had faced "considerable" external headwinds. |
| The firm said net debt had risen 7.7% to stand at £1.98bn at the end of March, putting its investment-grade credit rating in jeopardy. | The firm said net debt had risen 7.7% to stand at £1.98bn at the end of March, putting its investment-grade credit rating in jeopardy. |
| However, the firm said that the proceeds from the rights issue, which will give investors who already hold shares in the company the right to buy additional shares at a discount of 62%, would enable it to reduce this debt and target a return to profitability. | However, the firm said that the proceeds from the rights issue, which will give investors who already hold shares in the company the right to buy additional shares at a discount of 62%, would enable it to reduce this debt and target a return to profitability. |
| It plans to invest £1.6bn across its five divisions over the next four years. | It plans to invest £1.6bn across its five divisions over the next four years. |
| The capital-raising is still subject to shareholder approval. | The capital-raising is still subject to shareholder approval. |
| "The £615m rights issue will finally put an end to years' of investor concern about the strength of the balance sheet," said Edward Stanford, analyst at Oriel Securities. | |
| Mr Stanford said there was now "significant scope" for recovery within the group. | |
| FirstGroup, which lost out on a lucrative West Coast Main Line rail franchise last year after the Department for Transport made mistakes in the bidding process, also said it would not pay a final dividend for 2013 to investors, or an interim dividend in 2014. | |
| It said it would restart final dividend payments in 2014 "subject to performance in line with business expectations". | |
| Shares in the group fell 16% in early trading to 188p, their lowest level for three months. |