March 11, 2020 / 7:37 AM / 18 days ago

UPDATE 2-FirstGroup to sell North American units, not seeing much coronavirus impact

* Firm to sell First Student and First Transit in North America

* Flags interest from buyers, sale to complete in H2

* Not seeing significant impact from coronavirus

* Shares up 3.8% (Adds CEO comments, share price)

By Sarah Young

LONDON, March 11 (Reuters) - British transport company FirstGroup is planning to sell two North American-based bus units, increasing its focus on the UK, where it said it has not yet seen a significant impact from coronavirus on demand for travel.

The group said on Wednesday that a formal sale process for the North American units - First Student, which runs yellow school bus services, and First Transit, a bus contract business - was underway, and had seen notable interest from potential buyers.

Coronavirus is so far not significantly impacting FirstGroup’s business, it said. The illness has spread rapidly, prompting demand for air travel to plunge, but more local travel had so far been less affected, its chief executive said.

“We’re not seeing widespread impact as yet, but this is very fast developing. We’re doing a lot of work monitoring,” CEO Matthew Gregory said in an interview.

Aberdeen-headquartered FirstGroup operates four train contracts in Britain, including services to Bristol in the south west, and commuter services to the south of London, plus bus services in smaller UK cities and surrounding areas.

“I think it’s fair to say we are seeing some reductions in some of our advanced purchases,” he said, when asked about the small impact the company is seeing. “I think we’re probably seeing a little bit on the business travel piece.”

DIVESTMENTS

The plan to divest the two North American units, which in its last full year saw combined annual revenues of $3.8 billion and accounted for 60% of group operating profit, follows pressure from major shareholder Coast Capital Management.

It has called for the sale over the last six months, saying there were no synergies between the company’s UK and North American operations.

FirstGroup is already in the process of trying to sell its Greyhound bus business in the United States, which will leave it fully focused on the UK.

Shares in FirstGroup had climbed 3.8% at 0829 GMT, boosted by confirmation of the sale.

The CEO said he expected the sale to be completed in the second half of this year, and hinted of higher returns for shareholders from the proceeds once the company had addressed debt and pension issues.

“All shareholders can expect us to be working on maximising the returns to them,” Gregory said.

For its full year to March 2020, the company said it was on track to meet its expectations for operating profit despite its problematic South Western Railway contract, which has been plagued by strike and infrastructure issues.

Britain said in January that the SWR contract was not financially sustainable in the long term and it was considering whether to nationalise it. However, Gregory said the group was hopeful of “resetting” the terms of the contract. (Reporting by Sarah Young; Editing by Paul Sandle and Jan Harvey)

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