First Group outlines plan to cut 3,500 jobs
Financial Times: March 19 2009
By Gill Plimmer and Fiona Harvey
First Group has announced plans to cut 3,500 jobs – representing 3 per cent of its cost base – over the next year in one of the most drastic responses yet by a bus and rail group to the economic downturn.
The shares jumped almost 21 per cent, or 43¼p, to 252½p on the statement, which said a £200m savings programme and increases in ticket revenue would help the company achieve its financial targets in 2009-10.
FirstGroup, which has 140,000 employees, said the job cuts would be split evenly between the US and the UK. About a third of the 1,750 jobs to be axed in Britain will be in rail, with two-thirds in the bus division.
Any further job losses are likely to meet with opposition from the unions.
Staff on the company’s First Capital Connect franchise, which runs the Thameslink service between Brighton and Bedford, voted in favour of strike action this week after the company refused to rule out compulsory redundancies. The company is about a third of the way through the cost-reduction programme, with a recruitment freeze on some jobs in place for the past six months.
The company said its British bus and rail divisions would both achieve like-for-like revenue growth of more than 7 per cent in the year to the end of March, while its US Greyhound bus operation would deliver an increase in full-year profit despite falling demand. The company reduced mileage and cut costs at Greyhound earlier in the year.
Revenue growth fell at its four rail franchises – First Great Western, ScotRail, Transpennine and First Capital Connect – with London services the worst hit.
The First Great Western and First Capital franchises are heavily dependent on commuter traffic and FirstGroup admitted the downturn had dented growth at those businesses.
But any slowdown in passenger numbers will be mitigated by hefty revenue support from the Department for Transport.
First Great Western receives revenue support of 80 per cent from the DFT and the First Capital Connect franchise is set to receive a similar amount from April 1.
“Overall it’s a statement that reads pretty well,” said Gert Zonneveld at Panmure Gordon. “The cost-cutting measures are positive and even if there is a slowdown in the rail part of the business the Department for Transport will be bearing the brunt of the pain.”