This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/may/20/firstgroup-shares-plunge-rights-issue

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
FirstGroup shares plunge after rights issue and sharp fall in profits FirstGroup shares plunge after rights issue and sharp fall in profits
(4 months later)
FirstGroup, the train and bus operator, has turned to shareholders for £615m, scrapped a final dividend and parted company with its chairman in an effort to reduce its debts and avoid a credit rating downgrade.FirstGroup, the train and bus operator, has turned to shareholders for £615m, scrapped a final dividend and parted company with its chairman in an effort to reduce its debts and avoid a credit rating downgrade.
The shares fell 30% after the cash call was announced alongside a sharp fall in full-year profits at the company which employs 120,000 people.The shares fell 30% after the cash call was announced alongside a sharp fall in full-year profits at the company which employs 120,000 people.
It is struggling with almost £2bn of debt largely as a result of its acquisition of the US bus company Laidlaw in 2007.It is struggling with almost £2bn of debt largely as a result of its acquisition of the US bus company Laidlaw in 2007.
But it came under further pressure last year when the government announced in August that it had won a lucrative contract to run the west coast main line rail franchise between London and Scotland, only to scrap the decision in October citing flaws in the bidding process.But it came under further pressure last year when the government announced in August that it had won a lucrative contract to run the west coast main line rail franchise between London and Scotland, only to scrap the decision in October citing flaws in the bidding process.
Once the cash call is complete, chairman Martin Gilbert will be stepping down after leading the business for 27 years. He is also chief executive of Aberdeen Asset Management and is thought to have been under pressure from investors.Once the cash call is complete, chairman Martin Gilbert will be stepping down after leading the business for 27 years. He is also chief executive of Aberdeen Asset Management and is thought to have been under pressure from investors.
Gilbert said the fundraising would "not only strengthen the group and support its continued growth but also underpin the ability to remain a dividend-paying stock as well as supporting our investment grade rating".Gilbert said the fundraising would "not only strengthen the group and support its continued growth but also underpin the ability to remain a dividend-paying stock as well as supporting our investment grade rating".
Tim O'Toole, FirstGroup's chief executive, said the proceeds from the rights issue would provide the flexibility and capital confidence to work on the creation of long-term value for shareholders.Tim O'Toole, FirstGroup's chief executive, said the proceeds from the rights issue would provide the flexibility and capital confidence to work on the creation of long-term value for shareholders.
Joe Spooner, an analyst at Jefferies, said: "On first read, FirstGroup's announced £615m rights issue looks due to defensive rather than positive reasons. We believe it should help to shore up the group's investment grade and help avoid the ramifications of potential downgrade.Joe Spooner, an analyst at Jefferies, said: "On first read, FirstGroup's announced £615m rights issue looks due to defensive rather than positive reasons. We believe it should help to shore up the group's investment grade and help avoid the ramifications of potential downgrade.
"The disappointment for us is that nothing materially new appears to be being articulated about the prospects or plans for the group's businesses.""The disappointment for us is that nothing materially new appears to be being articulated about the prospects or plans for the group's businesses."
Pre-tax profit at FirstGroup plunged 87% to £37m in the year to the end of March, while revenue rose 3.3% to just under £7bn. The group said a weak economic backdrop in the UK and North America continued to weigh down on its passenger revenue business, as did the impact of reduced UK government subsidies for the bus industry.Pre-tax profit at FirstGroup plunged 87% to £37m in the year to the end of March, while revenue rose 3.3% to just under £7bn. The group said a weak economic backdrop in the UK and North America continued to weigh down on its passenger revenue business, as did the impact of reduced UK government subsidies for the bus industry.
It is not paying a final dividend, after paying 16.05p a share a year earlier, nor will it pay out an interim dividend in the current financial year ending March 2014. The shares closed at 155.6p.It is not paying a final dividend, after paying 16.05p a share a year earlier, nor will it pay out an interim dividend in the current financial year ending March 2014. The shares closed at 155.6p.
Payments would resume with a final dividend in the current financial year, if results were in line with expectations, the company said.Payments would resume with a final dividend in the current financial year, if results were in line with expectations, the company said.
O'Toole said FirstGroup planned to invest around £1.6bn across its five division over the next four years "to underpin growth and return our businesses to our target levels of profitability".O'Toole said FirstGroup planned to invest around £1.6bn across its five division over the next four years "to underpin growth and return our businesses to our target levels of profitability".
Gilbert meanwhile said it had been an exceptionally challenging period for FirstGroup's rail business following the cancellation of the west coast franchise competition.Gilbert meanwhile said it had been an exceptionally challenging period for FirstGroup's rail business following the cancellation of the west coast franchise competition.
"Notwithstanding the public statements from the Department for Transport that we were not at fault, having followed due process and submitted a strong bid in strict accordance with their terms, we were frustrated that our employees and our shareholders had to endure this extraordinary series of events," he said."Notwithstanding the public statements from the Department for Transport that we were not at fault, having followed due process and submitted a strong bid in strict accordance with their terms, we were frustrated that our employees and our shareholders had to endure this extraordinary series of events," he said.
The group said it was focusing on the operating performance of its existing rail franchises and was in discussions with the government to extend contracts on its First Great Western and First Capital Connect franchises.The group said it was focusing on the operating performance of its existing rail franchises and was in discussions with the government to extend contracts on its First Great Western and First Capital Connect franchises.
It said it remained committed to retaining a leading position in the UK rail market, "where we can utilise our vast bidding and operational experience to deliver for customers and taxpayers and provide an economic return for shareholders".It said it remained committed to retaining a leading position in the UK rail market, "where we can utilise our vast bidding and operational experience to deliver for customers and taxpayers and provide an economic return for shareholders".
Our editors' picks for the day's top news and commentary delivered to your inbox each morning.