November 13, 2018 / 9:34 AM / a month ago

UPDATE 1-FirstGroup shares rally on CEO appointment, recovery in bus division

(Adds background, shares)

LONDON, Nov 13 (Reuters) - Shares in Britain’s FirstGroup surged on Tuesday after the transport group appointed of Finance Director Matthew Gregory as CEO and reported first-half results boosted by strong demand for bus travel across the United States and Britain.

Forced to go without a dividend for the last five years after a rights issue in 2013, FirstGroup investors welcomed signs of improvement at a company at a company which ferries millions of passengers across America in school and Greyhound buses.

Its shares jumped up to 12 percent in early trading.

The group said on Tuesday it had enjoyed a strong bid season in its U.S. First Student division, both retaining contracts and winning new ones to run additional services, while margins at its U.S. Transit unit stabilised.

Having put its intercity Greyhound bus up for review earlier this year, it set out an improvement plan, including the recent withdrawal from Western Canada.

Its rail business remained difficult, however.

“Although conditions in our markets remain challenging, our performance to date underpins the confidence we have in our unchanged outlook for the full year,” Gregory said.

The group also announced that Gregory, CFO since 2015 and chief operating officer since May this year, would become chief executive with immediate effect.

First-half profit before tax was up 38 percent at 42 million pounds ($54.18 million), in line with its forecasts and it kept its full-year outlook for broadly stable operating earnings in constant currency, and broadly stable free cash generation.

“We (see) positives in the UK Bus and First Student performances, and the confirmation of Matthew Gregory as CEO, but disappointment that the strategic review at Greyhound has concluded that further organic turnaround measures are the preferred option, along with a further deterioration in trading there,” Liberum said in a note to clients.

The group said it would not pay an interim dividend but would continue to review the appropriate timing for restarting payments.

$1 = 0.7752 pounds Reporting by Kate Holton, editing by James Davey and Louise Heavens

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