FIRSTGROUP has decided to reduce liabilities related to the sale of its Greyhound coach business in the United States last year, while saying the recovery in UK passenger numbers since the Omicron outbreak has underlined “a significant latent demand for travel on our services”.
The Aberdeen-based company has reached an agreement with a specialist insurance company which it says reduces the risk of around $147 million from the self-insurance reserves inherited from Greyhound. Greyhound had set aside funds for possible insurance claims, such as personal injury, but that liability was not met when it was sold to FlixMobility, the European bus and rail company. , for $172 million in October.
FirstGroup has now entered into an agreement with Randall & Quilter Investment Holdings, a global specialty non-life insurance company, which indemnifies the group for these liabilities and any adverse developments relating to them, up to a maximum of $275 million.
The company said the cash cost is “slightly better than expected” in its full-year 2022 guidance, which said it expected to end the year with £10-20m of adjusted net debt. And he noted that the group’s exposure to self-insurance liabilities inherited from Greyhound has been reduced to approximately $19 million of older claims not covered by the risk transfer agreement, or recently settled.
The sale of Greyhound marked FirstGroup’s exit from the United States, following previously announced divestments of First Student and First Transit. The company retained certain net liabilities under the Greyhound agreement, including pension, self-insurance and finance leases. But against those liabilities, he also held on to Greyhound properties, which he is now selling. Yesterday he announced that he had sold three more of these properties for around $32 million.
Meanwhile, FirstGroup said UK passenger numbers have now improved to 70% of pre-pandemic levels. The shares closed down 2.8p, or 2.8%, at 101.8p.
David Martin, Executive Chairman of FirstGroup, said: “We now have a focused and streamlined group and continue to build our financial strength and resilience by proactively managing the legacy assets and liabilities associated with the year’s portfolio rationalization. last.
“We are delighted that passengers are starting to travel again following the easing of Omicron-related restrictions put in place in December. This demonstrates our belief that there is significant latent demand for travel on our services and we look forward to providing connections. vital to our customers as the recovery continues to unfold. Public transport has a key role to play in the UK’s economic, decarbonisation and leveling programs and I remain convinced that FirstGroup is very well placed to seize our many opportunities for long-term sustainable value creation.
Overall, First Group expects to record a disposal gain in its accounts for the current year.
He said he is now ahead of his plan in terms of realizing the previously guided $155 million net worth of Greyhound’s legacy assets and liabilities on his 2023 finances and beyond.