Martin Gilbert runs out of steam at FirstGroup, alighting from his position as shares at the transport operator plunge 30%
Martin Gilbert leapt from the cab of train and bus operator FirstGroup as it unveiled plunging profits and a rights issue that sent its shares down by more than 30 per cent.
FirstGroup revealed plans to raise £615million by issuing new shares and froze its dividend until at least the end of the next financial year.
The dismal set of results was accompanied by the resignation of chairman Gilbert, also the chief executive of Aberdeen Asset Management.
Hitting the buffers: Chairman Martin Gilbert quit after profits at the transport company plungedGilbert, who is a non-executive at BSkyB, is said to have been the target of criticism from some investors who felt he was doing too many jobs at once.
The news saw the market value of the company fall by £329million. The rights issue is designed to cut a burdensome £2billion debt pile racked up through the acquisition of US bus group Laidlaw in 2007.
The deal gave FirstGroup (down 68.2p to 155.6p) its Greyhound coaches, along with a fast-growing school bus operation.
More... New chief at Co-op Euan Sutherland pleas for calm over troubled bank FirstGroup's chairman 'not to blame' but he resigns over £600m cash call Could you earn cashback on your train tickets?But the £1.9billion purchase was completed at the top of the market, before the financial crisis devastated asset values and depressed consumer demand.
Gilbert, best known in the City for steering Aberdeen Asset Management back into the FTSE 100 index after it was hit by the split capital investment trust scandal, will step aside once a new chairman is found and the rights issue is completed.
FirstGroup saw its underlying profit fall 36.5 per cent to £172.4million but earnings fell even further, down 86.7 per cent to £37.2million, when including a string of one-off items.
The largest of these was a £52million charge due to a change in the way the firm accounts for contracts in its US First Student business.
Despite the dire profit figures, chief executive Tim O’Toole said the group’s performance was ‘resilient’, with revenues up 3.3 per cent to £6.9billion.
Gilbert highlighted the rigours of an ‘exceptionally challenging’ year, partly due to economic weakness in Europe and North America, but also because of the West Coast rail franchise debacle in the UK.
The fiasco saw FirstGroup initially awarded the franchise before a legal challenge by Sir Richard Branson’s Virgin Rail overturned the decision. Gilbert said directors were ‘frustrated that our employees and our shareholders had to endure this extraordinary series of events’.
Shareholders did not get a final dividend and will not receive an interim payout in the current financial year.
But FirstGroup said it hoped to resume payouts, albeit at a lower level of £50million, with a final dividend at the end of 2014.