Shares in travel company FirstGroup (FGP) plunged by almost a fifth after a big hit to the value of its North American bus business Greyhound led the firm to report a major loss.
A household name in the US and Canada, Greyhound has struggled in recent times amid competition for its longer-distance routes from low-cost airlines.
In its half-year results for the six months to 30 September, FirstGroup took an impairment charge of £124.4m on the value of the business which it said reflected the ‘decline in immigration-related flows on the Southern US border states in the second quarter and increased competition on some routes.’
Passenger demand for Greyhound was also affected by recent reductions in the fuel price in the US, the firm added.
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Coupled with something of an insurance crisis at Greyhound - which has cost the firm £59.3m - as well as £15.4m more in restructuring and reorganisation costs, FirstGroup swung to a £118.1m operating loss compared to a £46.3m operating profit in the same period the previous year.
Its overall statutory pre-tax loss stood at £187.1m, ballooning from £4.6m in the first half of its last financial year.
That led the company’s share price to plummet 19% to 105p, with investors also disappointed that the Greyhound business had not been sold yet.
Chairman David Martin said talks over the sale of Greyhound were ‘ongoing’, adding that negotiations were ‘well advanced’, but the statement clearly fell short of investor expectations.
On an adjusted basis FirstGroup’s results looked better, with adjusted operating profit up 5.7% to £97.7m, while total revenue also ticked 6.9% higher to £3.53bn.
The adjusted figures strip out the Greyhound writedown, insurance, restructuring and reorganising costs, as well as a legacy pension settlement and £11.8m in intangible asset amortisation charges.
FirstGroup’s board has therefore maintained its full year guidance, but investors seem to be taking the adjusted results with a large dose of salt.
