FirstGroup share price rises amid rationalisation plans

FirstGroup’s share price (LON:FGP) has jumped in London this Thursday as the company unveiled plans to break itself up. The update came as the company posted its full-year results this morning.

As of 09:50 BST, FirstGroup’s share price had added 4.17 percent to 115.00p, outperforming the FTSE 250 index which currently stands 0.38 percent higher at 19,017.79 points. The company’s shares have added a little more than four percent to their value over the past year, as compared with more than an eight-percent drop in the Footsie.

FirstGroup unveils shake-up

FirstGroup updated investors on its full-year performance this morning, posting adjusted operating profit ahead of expectations at £332.9 million, led by growth and margin expansion in its First Student and First Bus businesses. Underlying revenue meanwhile came in 5.7 percent higher.

Going forward, the company unveiled plans to rationalise its portfolio, focusing on its core American businesses First Student and First Transit.

“Although our UK rail franchise portfolio has generated £330.9 million in adjusted profit with net cash and dividends to the Group over the last five years, we have concerns with the current balance of risk and reward being offered,” FirstGroup’s chief executive Matthew Gregory commented, adding that its Greyhound brand faced challenging market conditions.

The update comes amid the company’s boardroom battle with US hedge fund Coast Capital which holds a 9.7-percent stake in FirstGroup. City A.M. reports that the investor has demanded a radical overhaul of the company’s structures, including that it split its UK assets from its US assets and withdraw from Britain’s ‘destructive’ rail industry in a bid to return to profit.

Gregory told the BBC, however, told the BBC that the review of the business had been under way before the pressure from the activist.

“We’ve been looking at our business for the last year,” he pointed out.

Analysts on mid-cap company

The nine analysts offering 12-month targets for the FirstGroup share price for the Financial Times have a median target of 110.00p, with a high estimate of 160.00p and a low estimate of 90.00p. As of May 24, the consensus forecast amongst eight polled investment analysts covering FirstGroup plc advises that the company will outperform the market.