FirstGroup Plc (LON: FGP) have seen their shares crash after it was reported that their interim loss was further widened.
FirstGroup alluded to operational problems as the main contributor to this bigger loss, and an impairment on US coach operator Greyhound had contributed further.
Shares of FirstGroup Plc crashed 21.12% across Thursday trading to 101p. 14/11/19 10:39BST.
The FTSE350 (INDEXFTSE: NMXDEN) listed travel operator reported a pretax loss of £187.1 million for the six months to September, from just £4.6 million a year ago
Notably, on an adjusted basis, which strips out exceptional items, pretax profit fell 32% to £28.7 million.
The company further reported a £124.4 million impairment on its US bus operations Greyhound, and faced a reserve charge of £59.3 million for its American insurance business.
FirstGroup said it is “disappointed” with a further deterioration in the US motor claims environment which led to the increase in insurance costs.
The widened loss may worry shareholders of FirstGroup, as rivals such as National Express (LON: NEX) reported strong trading figures across financial 2019.
However, rivals such as Stagecoach (LON: SGC) have seen a tough time of 2019 and have seen slumping profits and board restructures.
FirstGroup at the end of May decided to sell Greyhound, and also announced a plan to spin off First Bus from UK operations. It said on Thursday that it has made a number of “important steps” since then in carrying out this plan.
Revenue for the half was £3.53 billion, 6.9% higher year-on-year and up 4.1% at constant currency.
All sectors delivered growth, FirstGroup said, excluding sales and withdrawals from loss-making routes.
First Rail operates three UK rail businesses which achieved 9.0% revenue growth to £1.33 billion, which may act as a consolation to shareholders.
This sector delivered 4.9% like-for-like passenger revenue growth, but FirstGroup said industry conditions remain “very challenging” due to macroeconomic uncertainty, infrastructure upgrades, and strikes from South West Rail staff.
FirstGroup has held its outlook for financial 2020, with performance on track with board expectations.
“In the first half we continued to execute the clear commercial strategies in each of our divisions to ensure they deliver future progress and growth. In particular, we were pleased to have delivered another strong bid season and two complementary acquisitions in our largest business First Student, as well as the award of the West Coast Partnership to our rail venture with Trenitalia,” said Chief Executive Matthew Gregory.
“We are, however, disappointed with the further deterioration in the US motor claims environment which has required an increase in insurance costs for our North American businesses.”
“As ever, first half trading mainly reflects the highly seasonal nature of the group’s operations, given the timing of the North American school holidays in our First Student business. Based on current trends and underpinned by our activities to reduce the cost base further, we are confident in delivering our trading expectations for the full year,” Gregory continued.