FirstGroup’s leader Tim O’Toole has said the transport giant is back on the rail map after the bruising loss of ScotRail and other franchises, while rival Stagecoach’s complaints about ‘open access’ to the prize east coast route are “unjustified” as they “should have known” to expect competition.
Mr O’Toole, who last year admitted being stung by the loss of Scotrail and lamented the lack of transparency in the winning bid from Abellio, said the group’s retention of the cross-Border Trans-Pennine Express franchise and its winning of ‘open access’ on the east coast line in the future gave it a “solid basis, when a couple of years ago people were wondering whether we were going out of rail”.
On the claim by Stagecoach chief executive Martin Griffiths that open access competition was not in the interests of passengers or taxpayers, Mr O’Toole said: “When we bid for the east coast, we did it on the understanding that an open access operator could come in against us, our bid reflected that, everybody should have understood this was on the horizon and should have known this would happen. Other people will speak for themselves but it is unjustified.”
Mr O’Toole was unveiling steady full-year results which sparked a six per cent rise in the shares. The debt-laden group maintained its operating profit despite losing a huge chunk of its rail revenues and promised a “significant improvement” in cash generation this year. But Mr O’Toole admitted that shareholders will have to wait at least another year for payouts to restart.
The dividend disappeared three years ago when FirstGroup, under former chairman Martin Gilbert, founder of neighbouring Aberdeen Asset Management, tapped shareholders for £615million to help pay down its £1.2bn of debt.
Mr O’Toole said the board would be faced in a year’s time with a decision on how to use surplus cash, at a time when part of its debt was due for repayment. “The board will have a judgement to make at that time based on the state of the business.”
The US-born former London Underground chief said the group was now in the last year of the transformation programme launched in 2014, and was still facing “challenging conditions” in many of its businesses. The UK bus market, after years of continuous growth, had been dampened by weakness in the high street. “The continuing problem of congestion in our city centres really seems to be a negative for bus travel.” He said the group’s Aberdeen operations had been hit by the business slowdown, but Glasgow was benefiting from investment in the new Caledonian depot.
Rail growth was also subdued, Mr O’Toole said, while in the US the group's biggest business First Student had been hampered by chronic driver shortages and the Greyhound coach arm was still battling cheaper motoring costs, with the oil price still below its level a year ago.
“It has been a grind at times,” Mr O’Toole said. “We have to adapt as the world around us changes, you come up with these plans all the time, then reality intrudes. But we have taken this company and re-established it and put it into a sustainable position so it can generate free cash flow.”
Pre-tax profit was up 2.7per cent at £168.3million, with operating profit down one per cent at £300.7m. Earnings per share climbed 5.1 per cent to 10.3p.
Shares rose 6.2p to 109.3p.