Robert Tchenguiz attacks FirstGroup board over strategy

Businessman Robert Tchenguiz has launched a scathing attack on the board of FirstGroup, where he has a 4.7% stake, accusing them of misleading the stock market.

He claimed the results from the train and bus operator, which were released on Thursday, were ambiguous, misleading and confusing “at best” and challenged the “defunct” strategy laid out by the company in May.

Mr Tchenguiz said he has asked chairman David Martin to publicly clarify what FirstGroup’s aims and ambitions are, adding that he believes the comments made Mr Martin are at odds with those said by the chief executive.

He pointed out that “there is a clear disconnect between what the chairman has stated and what the CEO presented”.

In particular, the businessman said Mr Martin has claimed to shareholders that the “clear priority” is through “rationalisation of the current portfolio”, with Mr Tchenguiz believing this would involve selling off FirstGroup’s US businesses.

FirstGroup is in the process of selling its Greyhound coach division in the US, but, at last week’s presentation chief executive Matthew Gregory said the business was focusing on “our core contract businesses in North America” of First Student and First Transit.

Mr Tchenguiz said this is in contradiction to Mr Martin’s claim that the focus is on selling off assets.

He added: “Key shareholders are not aware of what the strategy is – they have publicly on numerous occasions asked for a sale of the US business. Such a step would enable the company’s operations to thrive under different, and more competent, ownership, and would release an important amount of value to investors.

“Clearly, the rationale of a vibrant US business which is being managed in Aberdeen, six time zones away, is not the most effective or efficient management strategy.

“Although FirstGroup has the largest US school bus and transport business, the third largest US competitor has just attracted investment in the billions from major US/Canadian pension funds.

“FirstGroup has no existing US shareholders of any significance although its largest asset is situated in the US. The business is geographically fragmented and not focused.”

The company responded to the criticism, saying the comments from the chief executive and chairman are “consistent” with plans to slim down the portfolio of businesses.

On the remaining US assets, it said: “First Student and First Transit are valuable assets and well positioned in markets with profitable growth.

“The Board has been consistent and clear that the objective is to realise value and therefore were a credible and deliverable offer to be received for these or any other business in the portfolio then, of course, the Board would give that serious consideration.”

Mr Tchenguiz also threatened to call a special shareholder meeting to “remove the volatility created by the ambiguity” – the second time angry investors have asked for one this year.

Earlier this year activist investor Coast Capital forced a similar meeting to vote out half the boardroom, including the chairman and chief executive. It failed, but, then-chairman Wolfhart Hauser – who banned the media from attending the shareholder meeting – stepped down anyway.

He was replaced with Mr Martin in August, who Coast had previously identified as a possible boardroom replacement in its failed coup.

But FirstGroup said another meeting would be a “distraction” that could cause delay to its plans.

It also pointed out that “Based on the most recent regulatory disclosures made to the company Robert Tchenguiz has a direct shareholding of 0.02% of the issued share capital together with additional economic interests from a spread bet (the terms of which have not been disclosed).”

At its results on Thursday, FirstGroup revealed it fell into a £187 million half year loss, following a £124 million writedown on its Greyhound business and a £59 million hit from rising insurance premiums in the US.

Next month bosses have to contend with a series of strikes on its South Western Railway by guards over a long-running row on who should be responsible for operating train doors on the line.

Shares have fallen 17.8% since its peak in September from 137.5p to just 113p on Monday.