FirstGroup: We won't be forced into any 'desperate' rail bidsTransport company dispells any suggestion it will have to raise more cash if it fails to win the East Coast Main Line rail bidding competition
Tim O'Toole, FirstGroup's chief executive, has faced a tumultuous time since the company's ^615m deeply discounted rights issue last yearFirstGroup's chief executive, Tim O^Toole, has insisted the transport company won^t be forced into making any ^desperate^ bids for
UK▸ rail contracts, despite coming away empty-handed from four franchise competitions so far this year.
All eyes are on the bidding competition for the prestigious East Coast Main Line, the winner of which is due to be announced by the Department for Transport this month.
Some analysts have suggested FirstGroup^s balance sheet will be put under ^further stress^ if it fails to win the contract to operate London-to-Scotland East Coast services, having already lost out on so many rail bids this year.
FirstGroup was passed over for a new contract to run ScotRail services north of the Border which was awarded to Abellio, the UK arm of the Dutch state railway.
It also lost out to Go-Ahead Group and Keolis in the battle for the giant ^Thameslink Southern Great Northern^ commuter franchise in London and the South of England, while it will no longer run Caledonian Sleeper services from April.
FirstGroup had also been short-listed in the competition for the Essex Thameside franchise but National Express has retained control of the services between London and the Essex Coast.
Mr O^Toole, who led FirstGroup^s ^615m rights issue last year, insisted that the transport heavyweight would not have to raise additional cash, even if it is unsuccessful in the East Coast franchise competition.
FirstGroup is not going to depart from a ^disciplined approach^ to rail bids, he argued. ^That^s always the concern isn^t it? That we will get desperate and put in some uneconomic bid just so we can say: 'Oh, well, look we won one.^ I^m saying, look, we are in the business of restoring shareholder values so we can^t go there.^
FirstGroup was accused in 2012 of putting in a bid for the West Coast Main Line franchise that would have resulted in ^almost certain bankruptcy^ when it was named the preferred bidder for the contract over Sir Richard Branson^s Virgin Trains - an accusation Mr O^Toole has always flatly denied. The West Coast competition was subsequently scrapped in the face of a legal challenge by Virgin.
Despite reassuring over FirstGroup^s disciplined approach to rail bids, Mr O^Toole appeared to question his rivals^ approach to franchise competitions, saying the contracts awarded so far this year were at ^economic levels that were unacceptable to us^.
FirstGroup, which last year suspended its dividend and has been under pressure from activist investor Sandell Asset Management, insisted that its turnaround plan is ^on track^ as it posted a 10.9pc fall in first-half revenues to ^2.9bn.
The bus and rail operator, which is seeking to turnaround its UK bus and American yellow school bus units, blamed one-off factors for the slide, such as the end of revenue support for its First Great Western and First Capital Connect rail franchises.
The group also said revenues from a year earlier included income from several UK bus operations that have since been sold or closed. Excluding these factors, it said revenue increased by 3.9pc. Pre-tax profit rose to ^9.9m in the six months to September 30 from an ^8m loss at the same point a year ago.
In a nod to Sandell, which has been pushing for a strategy change, FirstGroup^s outgoing chairman John McFarlane said the company^s board had reviewed strategic alternatives ^but nothing compelling has become evident^.
