TRANSPORT company FirstGroup yesterday suffered a huge 42.6% shareholder vote against its directors' remuneration report – but enjoyed a £100m addition to its stock market worth on a strong trading statement.
The protest vote on directors’ pay appeared to result primarily from a conditional “golden handcuffs” share award made to the Scottish-headquartered bus and rail company’s chief executive, Tim O’Toole, in January.
This award of 214,826 shares, valued at £753,180 at last night’s closing price, will vest on November 1, 2013 if Mr O’Toole is still employed by the company and has not given notice of his resignation at that date. Crucially, there are no performance conditions attached to the award.
Many institutional investors have a policy of opposing awards of shares to directors where vesting of these is not dependent on performance.
A FirstGroup spokesman, while noting that investors owning 57.4% of the shares voted at the company’s annual meeting in Aberdeen had been in favour of the remuneration report, said: “We are disappointed with the result of the proxy voting in respect of the remuneration report.
“The remuneration committee consults with the group’s largest shareholders on relevant matters relating to the attraction, retention and remuneration of senior executives, and will continue to do so in the future.”
Shares in FirstGroup surged 6.3% yesterday on news of an 8.5% year-on-year rise in UK Rail revenues in the last quarter, and faster growth at its North American Greyhound coach business.
The City was also reassured by more positive noises from FirstGroup about its First Student school bus business in the US.
FirstGroup’s stock market worth rose from £1.59bn to £1.69bn yesterday, as the shares rose by 20.8p to 350.6p.
The 8.5% like-for-like, year-on-year passenger revenue growth reported by FirstGroup for its UK Rail business for the April 1 to June 30 period exceeded the 6.2% average rise in fares implemented by the company in this business in January.
This signalled meaningful growth in passenger volumes, which FirstGroup believes could have resulted partly from a shift by people from cars to trains at a time of sky-high petrol prices.
TransPennine Express enjoyed slightly faster growth than the average for FirstGroup’s UKRail business, while the company’s ScotRail franchise was slightly adrift of the 8.5% revenue growth figure. However, the various parts of the rail division were not far apart in terms of percentage revenue increases.
FirstGroup said its Greyhound operation, which runs about 2100 vehicles in the US and Canada, achieved year-on-year growth in revenues of 3.7% on a like-for-like basis in the April-to-June quarter. This marked an acceleration from year-on-year growth of 1.6% in the preceding quarter.
FirstGroup reported it had made “good progress” during the quarter in implementing its “recovery plan” to address the performance of First Student, which it previously reported had been hit by pressure on state and municipal finances in the US.
While reiterating that it anticipated continuing pressure on profit margins in the first half of the current financial year at First Student, FirstGroup highlighted the fact that its retention levels in the current contract bidding season had returned to “more normal levels”. It also noted it had secured new contracts where school boards have moved from running the bus services in-house to putting them out to a private sector operator.
FirstGroup said its First Transit division in North America continued to “perform well”. It highlighted new contracts to operate bus services at the universities of Yale and Kennesaw, and further new business at Fort McMurray in Alberta in Canada.
Meanwhile, FirstGroup reported “continued steady progress” in its UK bus division, “against a tough regional economic backdrop”.
FirstGroup reported passenger revenue in its UK bus division in the April to June period was up 0.7% on the same period of the prior year on a like-for-like basis.
Mr O’Toole said: “We are encouraged by improving trends in UK Rail and Greyhound and the continued steady performance in UK Bus and First Transit.
“In First Student we are implementing our detailed plan to recover performance and strengthen the operating model to enable the business to harness its potential.”
He declared FirstGroup was targeting a net cash inflow of £150m in 2011/12.
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