FirstGroup sinks as CEO disembarks

Until recently, Italian politics barely got a mention outside of small circles in the City, now it could spell the end of the euro experiment. To look at the markets, you’d think the problem had been resolved, and this could indeed be something about nothing if the two anti-establishment parties play ball and avoid another divisive election. However, as with all political crises, and especially in a politically volatile debt-ridden state like Italy, they can rumble on, and this is one to add to the list of banana skins for this bull market. Focus will switch briefly back to tomorrow’s US nonfarm payrolls, but few expect any major surprises, and certainly none capable of upsetting current interest rate expectations.


Just weeks after rejecting two bids from Apollo Global Management, FirstGroup (FGP) chief executive Tim O’Toole has paid the price for failing to revive the business in his eight years at the top. The share price is less than half what it was when he joined, and management wants a ‘new approach’.

Grim annual results were the final nail in the coffin. Strip out the positive effect of the South Western Railway franchise and an extra trading week at its roads division and operating profit fell 10% on revenue up just 1%. Worries about margins at its core First Student business have been justified, and whoever takes over will have their hands full making a go of the rail operations.

Source: interactive investor        Past performance is not a guide to future performance

A sale of the Greyhound coach business looks increasingly likely after another woeful performance. The threat posed by low-cost airlines is serious, and FirstGroup has done all it can to reverse its decline. Something drastic is needed here, and FirstGroup is short of ideas.

With no chance of a resumption of dividend payments anytime soon, FirstGroup shares offer little of interest to long-suffering shareholders. The new CEO will have their work cut out convincing them otherwise.

FTSE reshuffle

There are no surprises as the quarterly FTSE (UKX) reshuffle confirms M&S (MKS) keeps its place among the blue chips, for now, and Ocado’s promotion after nailing a potentially game-changing deal in the US. The demotion of Woodford Patient Capital trust (WPCT) from the FTSE 250 (MCX) is no shock after a truly awful run of results from the manager’s portfolio picks. The trust is down over 38% from peak to trough, and buying even at these low levels requires a leap of faith.

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