FirstGroup losses jump after booking charge on for-sale Greyhound business

(Reuters) - Losses at Britain's FirstGroup FGP.L rose after it booked a 124 million pound ($159 million) charge on the Greyhound bus business it is trying to sell, as the U.S. intercity service struggles with problems including a drop in immigration-related demand.

FILE PHOTO: Recent arrivals from Mexico wait to board a greyhound bus in San Ysidro, California, United States, October 14, 2016. REUTERS/Mike Blake/File Photo

Aberdeen-based FirstGroup, which runs bus and train services mostly in the U.S. and UK, put Greyhound up for sale earlier this year, partly due to growing competition from low-cost airlines. It said on Thursday that it was in talks with bidders for the business.

Shares in the company - which in the U.S. will focus on its core contracting business, including the First Student school bus service - fell 19% to their lowest level since July.

Greyhound faces a multitude of other issues, including immigration-related demand at the Southern U.S. border slowing to a five-year low in the second quarter as President Donald Trump tightened border controls, and lower fuel prices prompting people to use their cars instead of its coach services.

A revision to the short- and medium-term forecast for Greyhound led to the 124 million pound charge, FirstGroup said, but the company maintained its annual group forecast.

“We have had a huge amount of interest in the (sale) process, Chief Executive Officer Matthew Gregory said on a call with journalists, adding that it was holding detailed discussions with “a couple” of interested parties.

“Management continues to talk about progress in the portfolio rationalization process but, absent actual disposals and with more substantial exceptional charges, we expect scepticism to prevail” Gerald Khoo, an analyst at Liberum said in a note.

FirstGroup, which is also looking at options to separate its UK bus division, booked an additional 60 million pound charge related to insurance costs and more than 15 million pounds of restructuring costs.

It posted a pretax loss of 187.1 million pounds ($239 million) for the six months ended Sept. 30, compared with a loss of 4.6 million pounds a year earlier.

Adjusted pretax profit for the first half dropped 31.7% to 28.7 million pounds, chiefly due to the adoption of a new reporting standard, it said.

FirstGroup, which is set to take over the UK’s West Coast rail franchise that links London, Manchester and Glasgow next month, said it raised its 2019-20 outlook to reflect a part-year contribution from the new business, but the adoption of the new reporting standard would offset the benefit.

Reporting by Yadarisa Shabong and Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and Kirsten Donovan