Company in the news: FirstGroup

FirstGroup's fortunes aren't likely to improve anytime soon, says Phil Oakley. Investors can find better bets elsewhere.

FirstGroup (LSE: FGP)has had a year to forget. Its aggressive pitch for the West Coast rail franchise backfired and led to a £600m cash call to shareholders. In return they have seen their dividend payments scrapped and the value of their investment sink.

Activist shareholder Sandell reckons that FirstGroup should sell its Greyhound long-distance bus business in the US, list its school bus division and pay down debt. It says this would boost shares to 199p from around 118p now.

The management disagrees. Any potential bidders will probably be put off by £1.4bn of debt and a £220m hole in its pension fund. Can FirstGroup turn itself around?

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At the moment too much of its profit continues to be eaten up by interest payments. Rivals Stagecoach (LSE: SGC) and National Express (LSE: NEX) still look like better homes for your money.

Verdict: avoid

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.