To stop the spread of novel coronavirus, the UK government has announced a complete lockdown all over Britain which has been impacting the transport facilities in the UK including buses and trains services. The market estimates that this lockdown would lead to a reduction of 27 percent in railway use compared to pre-lockdown levels while the usage of underground tube trains and buses is expected to drop by nearly 40 percent.
The transportation industry has been impacted due to the government imposed lockdown restrictions according to which people need to stay in their homes, subject to certain exceptions. The culture of work from home and online meetings has wiped out the major source of revenue to commutation sector. However, the rail union of the United Kingdom has given hopes of recovery stating that the UK authorities have well-established strategies to normalise the train services in the middle of May 2020.
Amid such situation, the transport operator FirstGroup PLC announced that it had received £300 million under the UK government’s COVID Corporate Financing Facility (CCFF) scheme and has maintained a committed headroom with free cash increased to £800 million. The news sent the FirstGroup’s stock to surge up over 3 percent on 24 April 2020.
In the market release, the company further confirmed that its ‘First Bus’ division is presently operating at about 40 per cent of its normal volume with the industry-wide funding provision agreement with the UK Government in place as declared in the first few days of April 2020. Despite the passenger volumes being ~90 percent down, the company reported that this agreement helps First Bus to run mileage in excess of customer demand. The company further added that under the Emergency Measures Contracts, which was declared on 23 March 2020, its ‘First Rail’ franchises are running its operations. Under this contract, the government has waived each operator’s cost, revenue, and contingent capital risk until the date of 20 September 2020. Moreover, during this time, the operators would be salaried a fixed management fee by the government.
The Chief Executive Officer of the company, Matthew Gregory, stated that the company had taken quick measures to cut the expenses, preserve cash as well as safeguard the financial position of the company. He added that these efforts would enable the company to deliver the continuity of transport services to the key workers of the community, government and customers now and even when the ongoing crisis is over. He further confirmed that the company continues to take necessary steps to make sure that the group must come out from this unfortunate situation with a strong position to deliver the company’s strategic plan.
Let’s take a look at some of the information highlighted in company’s latest market announcement. It includes:
- In the United Kingdom, the company is creating space in bus depots and railway stations for public initiatives such as blood donation banks or food collection points for workers.
- In North America, the company’s segment Greyhound is positioned to access the share of $326 million in the CARES Act emergency funds allotted to US states to help continued intercity transport facilities services.
- The Chief Executive and Chief Financial Officer of the company have agreed to receive 20 per cent reduction in their salaries for the three months.
- The Chairman and non-executive Board directors of the company have also come forward to cut their fee in the same three months.
- The company’s cash involvement to pension schemes with regards to the First Bus business has decreased by over £10 million for the year to 31st March 2021 versus the previous cash position.
- Greyhound is helping medical front volunteers by giving them no cost transport services who are travelling to other cities to provide medical support and services during the ongoing outbreak of novel coronavirus.
As per the announcement dated 3 April 2020, FirstGroup informed that the Department for Transport has offered a new funding of approximately £167 million to prove financial support to the bus operators in England which is considered as one of the pillar of country’s critical infrastructure.
Overview of the FirstGroup Plc
FirstGroup Plc (LON: FGP) is a transportation service provider operating in North America and the United Kingdom. The company deals in five segments, which include First Transit, First Student, Greyhound, First bus, and First Rail. Its First Bus division provides travel services for Aberdeen, Manchester, Swansea, Portsmouth, Southampton, Stoke, Glasgow, Edinburgh, Norwich, York, Sheffield, Leeds, Leicester, Bristol, Ipswich, Colchester, Taunton and many other cities. It is listed on London Stock Exchange and is a constituent of FTSE 250 index, FTSE 350 index, FTSE All-Share index and FTSE All-Share (ex IT) index.
Share Price Performance- FGP
As at 27 April 2020, the stock price of FirstGroup PLC is trading at GBX 62.00, up 1.56 percent or GBX 0.95 from the previous close, as at 2:34 PM GMT. In last 52-weeks, the stock achieved a maximum price of GBX 138.80 on 01 October 2019, whereas the company’s shares posted the lowest price of GBX 25.00 on 17 March 2020 in last one year.
The market capitalisation of the company was recorded at GBP 744.43 million with the shares outstanding and free float of 1.22 billion and 1.20 billion, respectively as at 27 April 2020. The beta of the stock currently stands at 1.92, reflecting higher volatility compared to the benchmark index.