RMT appalled at bus and rail giant FirstGroup plans

TRANSPORT UNION RMT today expressed its disgust and dismay at revelations that rail and bus owner FirstGroup is taking steps to maximise pay outs to shareholders and will also profit from the Coronavirus pandemic.

It was announced today that FirstGroup is set to benefit from millions in taxpayers’ cash to prop up its bus business on top of being bailed out by the government on its rail operations, including a new direct award contract for the Great Western Route.

FirstGroup shares were up by 3.86% on the back of today’s announcement.

Whilst even the big four high street banks have said that they will not be paying dividends this year, extraordinary comments by FirstGroup bosses at a recent “Investors’ conference call” indicate that the company remains laser-focused on paying out to shareholders, despite the current health pandemic.

The call, which was held on 11th March, the day that the 8th British citizen died of Coronavirus and 460 cases were confirmed, included discussion of how the pandemic would affect the company.

FirstGroup Chair David Martin told investors that,

“At the moment, in my experience, this is one of the most exciting times, with potentially real deliverables there and money standing behind it.”

“We are all in violent agreement, is the only thing I can say. Everybody is on the same page in the one direction of maximising shareholder value and providing the ability to create substantial returns to shareholders in the short term, or within the second half of this year. That's our plan of action, we’re extremely robust about it, and we're looking forward to moving forward.”

RMT General Secretary Mick Cash said,

“FirstGroup executives are crowing over shareholders’ payouts for this year, all ultimately courtesy of the tax payer.

“This is appalling stuff even by the standards of the privatised rail and bus industry. In the midst of the worst crisis this country has faced since the Second World War even the banks are saying they won’t pay dividends.

“While rail and bus workers are putting their lives on the line to keep Britain moving FirstGroup are looking to line their pockets. Transport workers and the public will be disgusted and dismayed. This kind of behaviour shames Britain and makes the case for a new, publicly owned transport system even stronger.

“In the meantime, First Group should do the decent thing and immediately rescind their decision to pay out dividends this year.”

Ends.

Editors notes

First Group operates 20% of regional bus routes in the UK and also operates the West Coast, South Western, Transpennine Express and Great Western rail franchises. It also operates the Hull Trains open access route where staff have recently been placed on the Government job retention scheme.

First Group shares today
https://www.sharecast.com/news/news-and-announcements/firstgroup-and-goahead-shares-rise-on-dft-support-for-bus-services--7414322.html

For more information see RMT report below

FirstGroup – Dividends at all costs?
On 23 March it was announced that a number of big publicly listed companies were suspending dividend payments because of the impact of the Coronavirus. This included the transport companies Go-Ahead and Stagecoach. On 30 March, the big four banks Barclays, Lloyds, HSBC and RBS also reported that they were suspending dividends.

Yet FirstGroup, who run the West Coast, South Western, Great Western and Transpennine Express rail franchises, and is one of the UK’s largest bus operators have made no similar announcement, despite an anticipated Government funded bailout of the bus industry in response to declining passenger numbers during the Coronavirus crisis.

In fact, their most recent conference call, on 11 March, strikes a very different note. By this date, the UK was already seeing increasing numbers of Coronavirus cases and had already witnessed a number of deaths from the virus.

FirstGroup – shielded from risk by the taxpayer
Asked by analysts what the impact of Covid-19 will be on their business, CEO Matthew Gregory reassured them that the impact would be softened in part because the British public protects them from the risk of falling revenue from passenger numbers dropping:

“It is worth noting though that we do have a different profile to other operators. For example, we’re not entirely dependent on direct fare-paying passengers for all of our revenue. We do have a broad geographic spread across 40 states in the USA and many regions in the UK. We've got more than 1,000 contracted customers in the US. We know that some shutdown days can be made up in our largest business, Student, but we don't know how this plays out in the event of a widespread shutdown. And, for example, in Transit, we are seeing some university campuses dictating closure in April after spring break. And also in the UK, we do have some level of revenue protection in some of our rail contracts.”

‘Exciting times’ for FirstGroup
FirstGroup Chairman David Martin was even more upbeat about FirstGroup’s prospects, noting that FirstGroup had won the West Coast franchise, which has more revenue protection for FirstGroup in it, was optimistic about a new Direct Award for Great Western (which the government has since given it) and was optimistic about South Western becoming a management contract, which would also bring more security for the company. He said First’s bus business as being ‘far stronger than I’ve ever seen before’.

He described these as ‘exciting times’:

David Martin (FirstGroup Chairman) “At the moment, in my experience, this is one of the most exciting times, with potentially real deliverables there and money standing behind it – both in pursuit of the sustainability agenda but also maybe the intention of replacing routes: not from the Beeching cuts but from local authorities who effectively are not prepared and cannot afford to actually support the social services in their networks, that really has driven the reduction in patronage. For the first time in my 30 years, I actually believe it's actually going to happen, and society needs it, environmentally we need it and we've got a business here that could actually deliver. To come back to your direct question, Gerald: as you know I came in in September last year right after the announcement of the successful winning of the Avanti franchise. Everybody understands and knows that at the moment rail is a complete mystery and a mess, but it's not that much of a mess for FirstGroup. We've actually got Avanti, it's delivering, I'm quite happy with the contract there, I think there's a basis there to go forward with. We have Open Access, we have Hull Trains – which delivers more profit, that's for sure, than South Western Railway will – and we have a new Open Access on the East Coast, which is quite exciting actually and that will come into play I think at the back end of next year. So, suddenly we’re starting to get a picture here… And of course, we are discussing a direct award of Great Western and maybe a switch to a management contract in South Western. So, we could find ourselves with a rail business that’s actually pretty robust and will actually generate cash to give us that robustness going forward, alongside a UK bus business in an environment within the political agenda which is far stronger than I've ever seen before and it’s a UK bus business that has seriously underperformed for years.

‘Substantial returns to shareholders within the second half of this year’
Martin was also bullish about dividend payments, reassuring investors that FirstGoup is laser-focused on shareholder value this year.
“We are all in violent agreement, is the only thing I can say. Everybody is on the same page in the one direction of maximising shareholder value and providing the ability to create substantial returns to shareholders in the short term, or within the second half of this year. That's our plan of action, we’re extremely robust about it, and we're looking forward to moving forward.”

Read the full transcript here:
https://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/reports-and-presentations/Transcript/winter-trading-q320-transcript.pdf