Discussions with potential buyers underway
A $160-million write-down on Greyhound’s valuation and a $76.5-million infusion to its North American self-insurance reserve pushed Scottish owner FirstGroup PLC to a $152.4-million loss for the first half of its fiscal year.
According to its financial disclosure report, FirstGroup, which owns other bus and rail operations, recorded $4.5 billion in revenue for the six-month period that ended September 30, up 6.9 percent from a year ago. FirstGroup reported a $59.7-million profit last year for the same period.
Before the write-down, Greyhound earned a $16.5-million adjusted operating profit for the two quarters. Its profit was $12.9 million for the same period in 2018.
However, FirstGroup stated in its financial report, “In light of the profitability of Greyhound relative to our internal budget in recent months, we have revised our short term and medium term financial forecasts for the division. The revised forecasts have led to an impairment of ($160 million) to the carrying value of the net assets of Greyhound.
“As announced in May, we are running a formal sale process for Greyhound which is now well advanced and we are engaged in ongoing discussions with bidders.”
As for the additional North American financial blow, FirstGroup explained, “We are disappointed with the further deterioration in the U.S. motor claims environment which has required an increase in insurance costs for our North American businesses.”
On its own, Greyhound earned $422 million in the first half, down from $455.4 million from the same period the previous year. Greyhound attributed that drop to its Canadian operations, “reflecting our decision to withdraw from significant parts of that business.”
The financial report offered FirstGroup’s views on the North American market:
“In the U.S., long haul journeys outperformed short haul in the period with increased competition in the North East during the second quarter; point-to-point Greyhound Express like-for-like revenue decreased by 1.3% in the period, while like-for-like revenue for the division as a whole was +0.7%.
“First quarter like-for-like revenue growth was higher, as the U.S. experienced substantial growth in immigration at the Southern U.S. border. In the second quarter, immigration-related demand in the southern states slowed to a five-year low. Recent reductions in the price of fuel have also had an impact on passenger demand for our coach services.”
Greyhound noted that lower fuel costs encourage travel by personal automobile.
The statement said Greyhound plans to reduce its “planned mileage in the second half by approximately five percent… We have stepped up our tactical commercial initiatives to deliver overall revenue per mile growth by optimising pricing and capacity allocation across our different markets.
“We have also undertaken a number of maintenance, procurement and operational initiatives in the period which are expected to deliver recurring savings in the second half and beyond. Meanwhile our disciplined fleet investment plan continues to improve customer perceptions, raise punctuality and reduce our maintenance costs.”
FirstGroup, of Aberdeen, Scotland, acquired Greyhound in 2007 for $3.7 billion. The carrier handles 17 million passengers annually with 1,600 buses and 6,000 employees. It serves 4,000 destinations and travels more than five billion passenger miles a year.
Scottish business media have reported that FirstGroup is under pressure from its largest shareholder to improve its results. FirstGroup also has announced plans to sell First Bus, which operates in the United Kingdom.
The company’s other properties include First Student, a U.S. school bus contractor that operates 42,500 buses and is twice the size of its closest competitor. First Student reported adjusted operating profits of $26.7 million on revenues of $1.1 billion for the half-year.
Subsidiary First Transit holds 330 contracts to deliver private transportation services at 310 locations in the U.S. and Canada as well as locations in Puerto Rico, Panama and India. FirstGroup also operates five rail lines in the UK.
