FirstGroup cancels dividend as Chairman falls on sword

Train and bus operator FirstGroup cancelled its final dividend as it restructured its balance sheet and refinanced after a year in which operating profits halved.

In results announced two days earlier than scheduled, Martin Gilbert announced his resignation as Chairman, 27 years after he first oversaw its initial start-up phase.

He was succumbing to pressure from investors who believed as chief executive of Aberdeen Asset Management and board member at BSkyB he had overextended himself in this role.

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The group's results for the year to March 31st showed operating profit down 54.1% to £205.7m, but underlying profit before tax down a lesser 36.5% to £172.4m on earnings ahead 3.3% to £6.9bn.

The final dividend and the next interim dividend have been cancelled and a new progressive policy declared as the group looked to make inroads into its rising debt pile, up from £1.8bn to £2.0bn over the year.

A capital raising of around £615m was proposed that, said Chief Executive Tim O'Toole, would remove the constraints of the current balance sheet and enable the business to continue to invest inwardly.

He said the plan was to pour £1.6bn across FirstGroup's five divisions over the next four years "to underpin growth and return our businesses to our target levels of profitability".

Underlying operating profit fell due to reductions in UK Bus profits as a result of reduced government support for the industry and external cost pressures, while lower UK Rail profits reflected the entering of a new franchise extension period for First TransPennine Express.

There was a net cash outflow for the year of £74.4m, compared to a 2012 inflow of £119.2m, although the sale of eight London bus depots occurred just after the financial year would have otherwise meant a broadly neutral year.

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