FirstGroup’s Share Price Plunges in London as Profit Drops

on May 20, 2013

The world’s largest listed rail operator by revenue, FirstGroup Plc (LON:FGP), released its preliminary full-year results on Monday, May 20, which showed a drop in profit. The company also announced the departure of chairman Martin Gilbert as well as a rights issue. FirstGroup’s share price plunged more than 15 percent at early trading in London on May 20.

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**FirstGroup’s Profit Declines**
FirstGroup’s underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) were £667 million for the year ended March 31, 2013, 10.2 percent down from the previous year. Operating profit was 21.7 percent down at £335.4 million, as compared with £428.5 million a year earlier. The company said in a statement its revenue was £6.9 billion, up 3.3 percent from £6.7 billion reported a year ago.

Basic earnings per share slumped 32.7 percent to 26.9p in the reported period from 40p a year earlier. No final dividend is being proposed. An interim dividend of 7.62p was paid on February 7.
Following the release of the preliminary results, FirstGroup’s share price shed more than 15 percent in early London trading on May 20, and was 15.10 percent down at 190.01p as of 08:18 BST.

**Chairman to Step Down**
FirstGroup said in a statement that chairman Martin Gilbert had announced his intention to step down, once the company had found a successor. As the Financial Times reported on May 19, the announcement was expected, since Gilbert had been under pressure from investors with the company struggling to pay down £2 billion net debt. The FT quoted an unnamed source close to the company as saying that “there does need to be some blood on the carpet”.

The FT also quoted a top 20 shareholder in the company as saying that the group needed “a chairman that can concentrate more of his or her energy on FirstGroup”. In addition to being a FirstGroup chairman, Gilbert is also chief executive of the FTSE 100 fund manager Aberdeen Asset Management (LON:ADN).
!m[Rail Operator’s Chairman to Step Down ](/uploads/story/2359/thumbs/pic1_inline.png)

**Rights Issue**
Among the highlights of FirstGroup’s announcement is a proposal for a rights issue. “The proposed c. £615 million capital raising transaction we are announcing separately today will remove the constraints from our balance sheet and enhance our ability to invest in our businesses going forward,” FirstGroup’s CEO Tim O’Toole said in the company statement. “We plan to invest around £1.6 billion across our five divisions over the next four years to underpin growth and return our businesses to our target levels of profitability.”
**FirstGroup’s share price was 17.55 percent down at 184.51p as of 8:52 BST on 20 May 2013.**


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