FirstGroup, the UK’s largest bus company and operator of rail franchises including Avanti West Coast and Great Western Railway, has admitted it may not be able to continue trading because of the impact of the coronavirus on its business.
The company said on Tuesday there was “a material uncertainty” that may cast significant doubt on its continuing ability to operate, as it reported losses of just under £300m for the year to the end of March.
FirstGroup’s chief executive, Matthew Gregory, said: “Despite the near-term uncertainty, the long-term fundamentals of our businesses remain sound.”
However, FirstGroup was the biggest faller in the FTSE 250 on Tuesday in early trading, with shares down about 16% by midday in London. The company’s share price has declined by more than two-thirds since February.
Since the coronavirus lockdown began in March, passenger numbers have plunged across its rail and bus divisions, which are now relying on state support to continue, and FirstGroup has not yet been able to sell off its troubled US bus operations as planned.
The transport operator said that while emergency subsidies had kept its operations viable, there was “material uncertainty as to the continuation of these measures” and “no way to predict” how coronavirus would leave its passenger transport services.
It warned that should the crisis persist, there were doubts over “the extent to which governments and customers will continue to have the ability to provide fiscal and contractual support”, and the cumulative risks meant that “a material uncertainty exists that may cast significant doubt on the group’s and the company’s ability to continue as a going concern”.
FirstGroup retains an £850m cash buffer to help it weather the uncertainty, including a £300m loan from the Bank of England’s Covid-19 corporate financing facility.
The firm said its Great Western and new Avanti West Coast franchises had performed strongly last year – if not the TransPennine and SouthWestern services, whose collapse had been widely anticipated before franchises were suspended in March.
The reported £294.6m losses came despite a 9% leap in revenue in the 12 months to March 2020, before the start of the pandemic, with writedowns due to issues with insurance in North America and losses on its Greyhound intercity coach service in the US.
First said March was “traditionally a strong trading period for the group”, but passenger numbers across all operations were down 90% by the end of that month, with North American schools served by its First Student service closed due to the pandemic.
First still aims to offload all its US bus operations but has yet to find a buyer, having finally put them up for sale in March just as the impact of coronavirus was becoming apparent.
Gregory said: “The funding and support we have received from governments and our customers to sustain critical transport services is testament to their importance now and for the future.
“There is no way of predicting with any certainty how the coronavirus pandemic will continue to affect the public transportation sector and the impact it may have on customer trends longer-term. However, as leading operators in each of our markets we are strongly positioned for a recovery in passenger demand and for the opportunities that may emerge from this exceptional period.”
Gregory said the group remained “resolutely committed” to selling off its North American divisions at the earliest opportunity, which include also First Transit, its scheduled urban bus division.
Some City analysts said they still backed the group despite disappointing results and significant challenges ahead. Gerald Khoo, of Liberum, said that the coronavirus impact had come earlier than anticipated and “the results fall well short of expectations”.
Khoo added: “Support from governments and customers has been crucial to allowing the group to remain cash generative. We expect this support to continue, but any wavering of such support is a key risk. We still see clear value, but the challenges are understandably more prominent.”