Group benefits from UK and US government financial support schemes

Greyhound is expected to be a significant beneficiary of the US government’s CARES Act

 
FirstGroup has revealed that it has strengthened its cash position to more than £800m after being awarded £300m through the UK government’s Covid Corporate Financing Facility.

In an update to the City this morning, the group also disclosed that US subsidiary Greyhound, the express intercity bus operator, is also expected to be a recipient of funding from the US government’s CARES Act. A total of $326m in emergency support to US states has been allocated towards maintaining intercity bus services.

Given Greyhound’s dominant position in this market, FirstGroup says the operator, whose revenues have fallen by around 80% since the start of the coronavirus outbreak, is expected to be a major recipient of this funding.

The group has also revealed that its UK bus operations are currently operating a level of service equivalent to approximately 40% of normal capacity. Passenger volumes are approximately 90% lower but support from the UKL government, means the group continues to operate a substantial network to support the needs of key workers.

All of the group’s rail franchises are now operating under the Emergency Measures Agreements announced on March 23. Under this the government has waived each operator’s revenue, cost and contingent capital risk until at least September 20, with operators paid a fixed management fee until then. The Hull Trains open access business has also suspended operations for an initial eight week period.

Meanwhile, FirstGroup says that as a result of the coronavirus pandemic, it continues to take “proactive steps” to prioritise cashflow.

“In doing so, our objective is to protect the group for the long term, while ensuring we maintain critical services now and remain well positioned to raise capacity rapidly when appropriate,” FirstGroup said.

“Previously announced cost control measures are now embedded, with a substantial proportion of our total workforce in North America and the UK on furlough with the assistance of various government schemes, and significant reductions in all non-essential operating and capital expenditures.

“In certain areas it has been necessary to reduce headcount, particularly where customers have chosen not to support employee retention by maintaining some level of contractual payments during this time. The group is also utilising the tax payment holidays and other emergency measures announced by governments to assist companies in managing their costs during this time.”

Chief executive Matthew Gregory and Ryan Mangold, the chief financial officer, have volunteered to take a 20% reduction in salaries for an initial period of three months. Chairman David Martin and the other non-executive board directors, have volunteered a corresponding reduction in their fees for the same initial period. In addition a wider group of senior employees across the group have made voluntary salary reductions and deferrals for the same period.

Gregory said that FirstGroup had seen colleagues from within each of its five divisions across North America and the UK tragically lose their lives as a result of coronavirus.

“Their families, friends and co-workers have our heartfelt condolences and support, and the thoughts of everyone at FirstGroup are with all those affected by the global pandemic,” he said.

“I am extremely proud of our people who are working hard to support our communities during this time of crisis, both by maintaining critical transport services and by providing support in their communities to the most vulnerable.

He said FirstGroup has taken “taken rapid action” to manage costs, preserve cash and protect the group’s financial position.

Gregory continued: “The support we have received from governments and our customers is testament to the importance of the services we provide. The long-term fundamentals of our businesses remain sound, and we will continue to take all necessary measures to ensure that the group emerges from this unprecedented situation in the most robust position possible to deliver our strategic plans.”