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FGP Firstgroup Plc

170.70
-1.80 (-1.04%)
24 Apr 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Firstgroup Plc LSE:FGP London Ordinary Share GB0003452173 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.80 -1.04% 170.70 171.40 171.60 176.70 170.80 176.70 681,428 16:35:29
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Local And Suburban Transit 4.92B 87.1M 0.1313 13.05 1.14B

FirstGroup PLC Notice of GM

04/06/2019 11:59am

UK Regulatory


 
TIDMFGP 
 
FIRSTGROUP PLC 
                           NOTICE OF GENERAL MEETING 
 
On 17 May 2019, the Board of FirstGroup plc ('FirstGroup', the 'Group', or the 
'Company') received a requisition notice from State Street Nominees Limited 
(acting as custodian for a company managed by Coast Capital), a shareholder 
holding around 10% of the Company's shares, requisitioning a general meeting to 
consider resolutions to remove six of the current Directors and replace them 
with seven of Coast Capital's own nominees. 
 
Accordingly, in compliance with Listing Rule 9.6.1R, the Company will today 
submit a copy of the documents listed below to the UK Listing Authority and 
they will shortly be available for inspection via the National Storage 
Mechanism at http://www.morningstar.co.uk/uk/NSM. These documents will also be 
despatched or otherwise made available to shareholders today. 
 
  * Notice of General Meeting to be held at 2.00 p.m. on 25 June 2019 at De 
    Vere Grand Connaught Rooms, 61-65 Great Queen Street, Holborn, London, WC2B 
    5DA (the 'Notice'); and 
  * Form of Proxy and Notice of Availability. 
 
As required under the Disclosure Guidance and Transparency Rule ('DGTR') 6.3.5R 
(3), the Notice will also be available shortly on the Company's website at 
http://www.firstgroupplc.com/general-meeting. 
 
As explained in the Notice, the Directors strongly believe that the Coast 
Capital Resolutions are not in the best interests of the Company, its 
shareholders as a whole or its wider stakeholders and recommend unanimously 
that FirstGroup shareholders vote against all of the Coast Capital resolutions. 
 
The Notice includes a letter to shareholders from FirstGroup Chairman, Wolfhart 
Hauser, which includes the following information. 
 
As previously planned, on 30 May 2019, FirstGroup set out a clear strategic 
direction alongside its results for the financial year to 31 March 2019. The 
Board believes that this strategy will deliver best value for the shareholders 
of the Company. 
 
FirstGroup: 
 
  * has the right strategy to take the business forward 
  * has the right Board and the right team to execute it at pace 
  * has a diverse, independent Board 
  * has renewed the Board with the right experience for FirstGroup's future 
  * will, alongside delivering our strategy, continue to provide safe, 
    sustainable and environmentally friendly travel solutions for the people 
    and communities we serve 
 
Coast Capital: 
 
  * proposes to take control of the Board with the removal of six current 
    Directors and the appointment of seven non-independent directors 
  * proposes to appoint directors whose experience is not current and is not 
    aligned to FirstGroup's business nor its future growth 
  * has put forward plans that are inconsistent, demonstrate a lack of 
    understanding of FirstGroup and are rooted in the past 
  * has put forward irresponsible plans that would leave the Group with higher 
    debt 
  * has put forward plans that are not in the best interests of shareholders as 
    a whole or our wider stakeholders 
 
The right strategy to take FirstGroup forward 
 
On 30 May 2019, after seven months in the role, FirstGroup Chief Executive 
Matthew Gregory announced a clear path forward for the business, which the 
Board is confident will deliver enhanced sustainable value for shareholders, 
having regard to our responsibilities to our wider stakeholders: 
 
  * We plan to rationalise our portfolio with FirstGroup's future emphasis on 
    First Student and First Transit, our core North American contracting 
    businesses, which have the greatest potential to generate sustainable value 
    and growth over time 
  * These businesses are already leaders in their markets and share 
    increasingly similar characteristics and growth opportunities. Together 
    First Student and First Transit generated over 60% of the Group's operating 
    profits in 2018/19 and are already a solid, profitable platform for growth 
    in the North American mobility services sector. By focusing on our 
    customers' needs and leveraging the latest technology, efficiency and 
    safety practices as well as partnerships, we see significant potential for 
    long term sustainable value and growth from the businesses 
  * Accordingly, a formal process to sell Greyhound has commenced and we will 
    pursue structural alternatives to separate First Bus from the Group 
  * We have an existing portfolio of rail franchises in the UK which we will 
    operate in accordance with their contractual terms. Any future commitments 
    to UK rail will need to have an appropriate balance of potential risks and 
    rewards for our shareholders 
 
A copy of our strategy update is included in Appendix 3 to the circular, which 
is available on the Company's website at http://www.firstgroupplc.com/ 
general-meeting. An audio file of Matthew explaining this strategy in more 
detail is available at https://www.firstgroupplc.com/results-centre. 
 
The Board firmly believes that this is the right strategy to deliver the best 
value to all shareholders, having regard to our responsibilities to our wider 
stakeholders. It follows a full and comprehensive review over the past year of 
all appropriate means to mobilise the considerable value inherent in the Group, 
in a process which recognised the friction costs, regulatory procedures and 
stakeholder consultations which require careful consideration in the case of 
some potential options. The best team to navigate these complex issues is the 
current management team of the Company, which has deep experience of the 
Company and the industry in which it operates and takes all of its 
responsibilities with the utmost seriousness. In parallel with the portfolio 
rationalisation plans we will continue to drive forward the clear strategies 
now established in each of our divisions to ensure they deliver further 
progress and growth in the Company's existing and adjacent markets, underpinned 
by plans to enhance our cost base further. 
 
FirstGroup has the right team to execute at pace 
 
Matthew Gregory was appointed as Chief Executive in November 2018 after a 
thorough external and internal search was conducted. Matthew's experience 
includes 24 years of financial, commercial and operational experience all 
within UK-listed PLCs with extensive international operations. This sector 
experience includes public transportation, manufacturing and distribution, 
including the largest component distribution division of Essentra plc, where he 
had a track record of tripling revenue, quadrupling profit and increasing 
margins by over 500 bps through disciplined commercial and operational 
management. Matthew also has a wealth of North American and other international 
experience. His deep operational understanding of FirstGroup gained since his 
appointment as Chief Financial Officer in 2015 and his drive to unlock 
shareholder value makes him exactly the right person to implement the Board's 
strategic plans. 
 
Under Matthew's leadership, in 2018/2019 FirstGroup has delivered: 
 
  * Underlying revenue growth of +5.7%, adjusted operating profit growth of 
    10.5% and EPS growth of 15.2% 
  * Adjusted operating profit ahead of expectations at GBP332.9m, led by growth 
    and margin expansion in First Student and First Bus 
  * A withdrawal by Greyhound from its loss-making activities in Western Canada 
    and the formulation of plans for improved operational and financial 
    performance that started to show progress in the second half of 2018/19 
 
This operational performance provides the foundation for the clear strategic 
direction for the business that is summarised above and detailed in our 
announcement of 30 May 2019 (which is included in Appendix 3 to the circular), 
and evidences our management team's drive and focus, under Matthew's 
leadership, to deliver value for shareholders. The Board has also bolstered the 
management team with the appointment of Ryan Mangold as Chief Financial Officer 
in May 2019 after a thorough process. Ryan was selected to bring further depth 
and capability in the areas required to deliver the Company's strategic plans. 
 
Replacing this team with one that has no working knowledge of FirstGroup and 
very limited experience of the fast changing and dynamic markets in which the 
Group operates, in particular the North American transport contracting markets 
which form the core of the Group, would dramatically reduce the ability of the 
Company to execute these critical strategic changes. 
 
FirstGroup has a diverse and independent Board that has been renewed with the 
right experience for FirstGroup's future 
 
  * This Board has a clear majority (64%) of independent non-executive 
    Directors 
  * This Board has the right blend of skills and experience 
  * This Board meets all UK Corporate Governance requirements 
 
The Board is focused on delivering shareholder value and is confident that the 
Company has the right Board with the right experience and plans in place to do 
so. 
 
The composition of the current Board (and Board committees) is fully compliant 
with the UK Corporate Governance Code, including the requirements on 
independence and length of tenure. This is reflected in the strong support that 
shareholders showed for members of the Board who stood for re-election at the 
2018 Annual General Meeting, who received an average vote FOR of 96.84%. 
 
All but one of the current Directors has been appointed within the last five 
years, and six members of the Board have been appointed within the last two 
years. The average tenure of the FirstGroup Non-Executive Directors is three 
years compared to the average tenure of four years for a typical UK-listed 
public company. 
 
The Board has continued to be renewed with the recent appointments of 
Independent Non-Executive Directors Steve Gunning and Julia Steyn as well as 
Ryan Mangold as Chief Financial Officer, all in 2019, following objective and 
rigorous selection processes. 
 
The composition of the current Board has the right balance of skills as it 
looks to a future which will continue to be defined by the profound impact of 
technology on the development of mobility services, as evidenced by the 
emergence of ride sharing and autonomous vehicles. 
 
A majority of the Board have experience in the transport and travel sectors. 
This includes Wolfhart Hauser, Matthew Gregory, Warwick Brady, Jimmy 
Groombridge, Steve Gunning, Martha Poulter, David Robbie and Julia Steyn. 
 
The independent Directors have been carefully chosen to support the Company's 
management team with the developments in our strategic direction, bringing 
experience from across multiple industries, including adjacent industries 
competing increasingly with public transportation, such as technology, 
airlines, consumer brands, urban mobility and big data management. For example, 
Julia Steyn, who was appointed on 2 May 2019, brings extensive knowledge of the 
US transport industry. Together with the existing US government contracting 
experience of the Directors (including Matthew Gregory and Jim Winestock), this 
skillset will be invaluable as the Company focuses on First Student and First 
Transit, our market leading North American contracting businesses, and builds 
on the strong and profitable platform we have established in North American 
mobility services. 
 
In addition, a majority of the Board, including in particular Wolfhart Hauser, 
Matthew Gregory, Warwick Brady, Steve Gunning, Ryan Mangold, Martha Poulter, 
David Robbie, Julia Steyn and Imelda Walsh, have extensive corporate finance, M 
&A or legal experience. This experience and skillset will be key to overseeing 
the execution of our portfolio rationalisation plan and securing best value for 
shareholders. 
 
Your Board also has extensive and detailed experience in dealing with complex 
UK pension schemes, including the management, funding and strengthening of such 
pension schemes. 
 
In summary, your diverse, independent Board has the extensive experience, 
skills and expertise for FirstGroup's future and delivering shareholder value: 
 
  * Transportation/travel 
  * Strategy 
  * Turnaround 
  * Technology 
  * Governance 
  * Pensions 
  * Safety 
  * Operations 
  * HR/employee engagement 
  * Finance/M&A 
 
In addition, the Board has various current and complementary experience and 
skills in areas such as audit, data management, information technology, legal, 
logistics and marketing and brand management. 
 
Full details of the current Board's experience and their specific skillsets are 
set out in the Directors' biographies in Appendix 1 to the circular. 
 
Who is Coast Capital? 
 
Coast Capital, founded in September 2017, is a small New York based hedge fund, 
self-styled as an activist investor. Based on its many interactions with Coast 
Capital to date and its claims and proposals, the Board believes that Coast 
Capital is an opportunistic, self-interested player that is only focused on 
short-term gains. 
 
Coast Capital purports to be a significant long-term shareholder in FirstGroup. 
However, despite various claims made by Coast Capital, the Company was first 
formally notified of Coast Capital's shareholding only as recently as 12 April 
2018 at which point it notified a holding of 1.57 per cent. of the Company's 
issued share capital. 
 
Coast Capital is a fund with no track record or experience running any business 
similar to FirstGroup, and it has made a number of scatter-gun, inconsistent 
and unusual claims and proposals to the Company over the past 12 months. For 
example, in a letter to the Company in June 2018, Coast Capital suggested that 
the Company consider appointing four individuals to the Board, yet none of 
those individuals are being nominated by Coast Capital in this requisition. 
 
A number of Coast Capital's other proposals are set out in a letter that your 
Chairman sent to Coast Capital in November 2018 (a copy of which is included in 
Appendix 2 to the circular), patiently and politely addressing a number of the 
proposals as being either transactions that simply reflect a lack of 
understanding of FirstGroup or are skewed to benefit only Coast Capital and not 
all shareholders. For example, Coast Capital has recently publicly referred to 
the Company's "proposed firesale of otherwise good assets", yet, as recently as 
last October, Coast Capital wanted exclusivity from FirstGroup for Coast 
Capital to purchase Greyhound at a purchase price which was much lower than 
Coast Capital's stated valuation of the business. Coast Capital also proposed 
that Coast Capital purchase a 'minority but controlling' stake in our First 
Student business. 
 
Coast Capital's claims contain numerous factual inaccuracies and 
misunderstandings. This is notwithstanding the availability of information 
clearly set out in our public disclosures and numerous communications from the 
Company to Coast Capital in which we have given detailed, and clear, 
explanations of various matters that Coast Capital has requested. Despite this, 
Coast Capital's recent public statements show that Coast Capital continues to 
repeatedly misunderstand, or chooses to misunderstand or misinterpret, a number 
of basic points relating to FirstGroup and the markets in which it operates. 
For example, notwithstanding our clear explanations, Coast Capital's recent 
statements show a fundamental misunderstanding of the valuation of UK pension 
schemes on various accounting and actuarial bases and, as noted below, Coast 
Capital has repeatedly failed to appreciate the capital expenditure profile and 
cash generative capability of the Rail division. 
 
Certain other claims made by Coast Capital have been withdrawn by Coast Capital 
after the Company reminded it of its legal obligations. 
 
Coast Capital proposes to take control of the Board with the removal of six 
current Directors and the appointment of seven of its own non-independent 
nominees 
 
Coast Capital is seeking to appoint its own nominees to the Board in a manner 
which circumvents established corporate governance best practice and the 
rigorous and transparent procedures followed by the Company. In particular, the 
Board is opposed to appointing any director who may favour one particular 
shareholder over and above the interests of shareholders as a whole. If the 
Coast Capital Resolutions are passed, only three directors out of a board of 12 
members (25%) would be independent non-executive directors. 
 
Furthermore, Coast Capital has stated that it and its nominees have already 
found a new, unnamed, CEO, who they would appoint if the Coast Capital 
Resolutions are passed. This is a further abuse of good corporate governance 
practice and due process. 
 
Through its proposals, Coast Capital is seeking to take control of your Board 
and the Company. Your independent Directors firmly believe that this is wholly 
inappropriate and not in the best interests of shareholders as a whole, or our 
wider stakeholders. 
 
Coast Capital proposes to appoint directors whose experience is not aligned to 
FirstGroup's business or future growth 
 
The Board has concerns about the lack of recent experience and the past company 
involvement of a number of the directors proposed by Coast Capital. For 
example, in nominating Steve Norris as a director, Coast Capital has 
highlighted his experience as a non-executive director of Capital CityBus, a 
small privately-owned local bus operator in London which was sold in 1998, more 
than 20 years ago, as evidence of his suitability to run our First Bus 
division. First Bus has a fleet of around 5,700 buses and 16,500 employees. 
Therefore the scale of Capital CityBus's operations would be equivalent to less 
than 10% of the current operations of our First Bus division. Mr Norris was 
also chairman of Jarvis plc, a large public company in the rail engineering 
sector, for the six years before it went into administration, resulting in 
pension schemes being placed into the Pension Protection Fund. This experience 
has been omitted from the biographies published by Coast Capital. 
 
Moreover, the proposed directors have limited recent experience in the segments 
within which FirstGroup operates and no experience in the North American 
transport contracting market, which will be our core business going forward. 
 
Further, Coast Capital is proposing to: 
 
  * INCREASE the size of the Board 
  * REDUCE the diversity of the Board. 
 
FirstGroup has been focused on renewing the Board to include individuals with 
skills relevant for the future direction of the Group. Coast Capital seems more 
focused on rekindling the past than preparing for the future. 
 
Coast Capital has put forward plans that are inconsistent, demonstrate a lack 
of understanding of FirstGroup and the transport sector today and would leave 
the Group with higher debt 
 
As noted above, Coast Capital has made a number of scatter-gun, inconsistent 
and unusual proposals to the Company over the past 12 months. 
 
The latest plans put forward by Coast Capital are either based on financial 
engineering with no clear benefit to shareholders, such as its suggested sale 
and leaseback approach, or are vague assertions, based on old information and 
lacking in detail. Coast Capital's proposal to reduce the Company's pension 
obligations, or to "exit rail in full" without due regard to the contractual 
nature of the business, nor the employees or wider stakeholders within the 
business, are alarmingly naïve. These plans continue to demonstrate Coast 
Capital's lack of understanding of the Group and our businesses, 
notwithstanding the patient engagement that the Company's officers and Board 
members have undertaken with Coast Capital. 
 
We have respectfully and constructively engaged with Coast Capital for over a 
year. Throughout, we have shown an open mind and a willingness to consider new 
ideas and proposals; but only those that are in the best interests of all 
shareholders, having regard to our wider stakeholders. We address a number of 
Coast Capital's plans below: 
 
Financial engineering with no clear benefit to shareholders: 
 
  * A substantial sale and lease back of property would be irresponsible. It 
    would increase the financial leverage of the Group at a time when the IFRS 
    accounting rules have only recently changed to require this to be reflected 
    as indebtedness. Furthermore, it would limit the strategic flexibility of 
    the Group to respond to changes in market conditions and does not pay due 
    regard to the operational nature of a number of these assets which are 
    inherent in the value of the business. 
  * Initiating a share buyback programme funded through a loan from investors 
    procured by Coast Capital would also irresponsibly increase financial 
    leverage at a time of economic uncertainty and would reduce the Group's 
    strategic flexibility to unlock value for shareholders. This appears to be 
    at the same time as Coast Capital would propose to reduce gross debt by up 
    to GBP1 billion, but with no clear explanation of how to achieve this. This 
    inconsistency is a matter of significant concern. 
  * Introduction of a dividend at a time when the portfolio is undergoing 
    transformational change would not be in the best interests of all 
    shareholders. We believe that the more focused Group, as envisaged by our 
    portfolio rationalisation plans, will be well placed to sustain a dividend 
    in future and this will be considered by the Board at the appropriate time. 
 
Taken together, these short term financial engineering strategies would 
increase the leverage of the Company to a point that the Board believes is 
reckless and imprudent. This would risk a downgrade of the Company's credit 
rating, which would have adverse impacts on the Company, including increased 
financing costs. 
 
Naïve and vague assertions with no specific details around execution: 
 
  * The Company and the Trustees of the Group's pension plans regularly review 
    the plans' funding requirements, ensuring flexibility and efficiency for 
    the business while protecting the retirement security of thousands of 
    current and former employees. Coast Capital's proposal to "solve" the plan 
    funding with an upfront payment of GBP75m and changes to investment strategy 
    shows a fundamental misunderstanding of our pension plans and the role of 
    the Trustees under UK legislation. 
  * It remains unclear from Coast Capital's plan why a gross debt reduction of 
    up to GBP1 billion is appropriate and Coast Capital has provided no specific 
    details as to how this would be achieved. It would also apparently be 
    achieved alongside the commencement of a share buyback programme and the 
    introduction of a dividend, which demonstrates alarming inconsistencies in 
    Coast Capital's thinking. 
  * Coast Capital's demand to exit FirstGroup's Rail business pays no regard to 
    the contractual nature of these arrangements, the dynamic nature of the 
    current environment nor to our customers, employees and wider stakeholders 
    within this business. 
  * Coast Capital continues to show a fundamental lack of understanding of the 
    capital expenditure profile of the Rail division, where cash capital 
    expenditure is typically matched by franchise receipts, capital grants or 
    other funding from third parties. Our UK Rail franchise portfolio has 
    generated GBP330.9m in adjusted profit with net cash and dividends paid to 
    the Group over the last five years. 
 
In summary the Board believes it has the right strategy and the right team to 
deliver the best value to shareholders and that Coast Capital does not 
 
The Board firmly believes that, based on the progress and momentum that has 
been built through the operational progress in the last 12 months, the clear 
strategic direction set out in the Company's announcement of 30 May 2019 will 
deliver best value to shareholders, and that the best team to execute these 
complex strategic transactions is the current management team. This is a team 
that has deep experience of the Company and the industry in which it operates, 
and is supported by a diverse, renewed and independent Board with the right 
skills and experience to support the Company's future direction. Replacing this 
team with one which has demonstrably outdated knowledge of FirstGroup's market 
places, and no experience in the increasingly valuable area of North American 
mobility services, would dramatically reduce the ability of the Company to 
execute these critical strategic changes. 
 
Contacts at FirstGroup: 
Faisal Tabbah, Head of Investor Relations 
Stuart Butchers, Group Head of Media 
Silvana Glibota-Vigo, Deputy Company Secretary 
Tel: +44 (0) 20 7725 3354 
 
Contacts at Brunswick PR: 
Andrew Porter / Alison Lea, Tel: +44 (0) 20 7404 5959 
 
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 
6 Annex 1R: 3.1. 
 
FirstGroup plc (LSE: FGP.L) is a leading provider of transport services in the 
UK and North America. With GBP7.1 billion in revenue and around 100,000 
employees, we transported 2.2 billion passengers last year. Whether for 
business, education, health, social or recreation - we get our customers where 
they want to be, when they want to be there. We create solutions that reduce 
complexity, making travel smoother and life easier. 
 
We provide easy and convenient mobility, improving quality of life by 
connecting people and communities. 
 
Each of our five divisions is a leader in its field: In North America, First 
Student is the largest provider of home-to-school student transportation with a 
fleet of 42,500 yellow school buses, First Transit is one of the largest 
providers of outsourced transit management and contracting services, while 
Greyhound is the only nationwide operator of scheduled intercity coaches. In 
the UK, First Bus is one of Britain's largest bus companies with 1.6 million 
passengers a day, and First Rail is one of the country's largest and most 
experienced rail operators, carrying 345 million passengers last year. 
 
Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on 
Twitter. 
 
 
 
END 
 

(END) Dow Jones Newswires

June 04, 2019 06:59 ET (10:59 GMT)

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