FirstGroup is in trouble - but it might be worth a punt

Shares in FirstGroup have tumbled since the company issued a profit warning. But it might just be a buy for the brave, says Phil Oakley.

The market has fallen out with transport company FirstGroup (FGP).

A profit warning at the end of last month has shattered the confidence of many investors. With lots of debt, a weak UK bus division and the prospect of losing some or all of its rail franchises, the market seems to have made its mind up: FirstGroup's juicy dividend is not sustainable. A big cut is on the cards.

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First Student105.85.5128.3100.328
First Transit58.427.257.231.226
Greyhound45.130.540.214.625.6
UK Bus152.859.4148.893.455.4
UK Rail11655.7108.760.348.4
Central costs-28.8-15.3-26.5-13.5-13
Operating profit449.3163456.7286.3170.4
Finance Income20.81.91.20.7
Finance costs-169.7-79.3-184-90.4-93.6
Pre-tax profit281.684.5274.6197.177.5
Tax-59.5-18.8-60-40.7-19.3
Tax rate21.1%22.2%21.8%20.6%24.9%
Profit for the period222.165.7214.6156.458.2
Minority Interests-21-11.9-17.2-9.1-8.1
Profit for shareholders201.153.8197.4147.350.1
eps (p)41.7411.241.230.710.5
dps (p)22.627.6222.12157.12
Dividend cover1.85Row 17 - Cell 2 Row 17 - Cell 3 Row 17 - Cell 4 Row 17 - Cell 5
Interest cover2.7Row 18 - Cell 2 Row 18 - Cell 3 Row 18 - Cell 4 Row 18 - Cell 5
Interest cover (ex-rail)2Row 19 - Cell 2 Row 19 - Cell 3 Row 19 - Cell 4 Row 19 - Cell 5
Dividend cover (ex-rail)1.2Row 20 - Cell 2 Row 20 - Cell 3 Row 20 - Cell 4 Row 20 - Cell 5

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.