Shares in North-East bus and rail operator FirstGroup plunged 30% on Monday as year-end profits tumbled by more than 86%.
The ScotRail owner, which employs around 120,000 people worldwide, said pre-tax earnings fell to £37.2 million during the 12 months to the end of March, despite a 3% rise in revenues to £6.9 billion.
Investors baulked at the transport firm’s decision to suspend all dividends until the end of the new financial year, wiping more than £300m off the company’s value.
Executives also unveiled plans to raise more than £600m via a discount share issue.
In the announcement, which was brought forward following weekend speculation, chief executive Tim O’Toole said First had a “fundamentally attractive portfolio of businesses” and had seen a “resilient” trading performance.
But he acknowledged there was work to be done, particularly in the group’s First Student and UK Bus arms, with the new capital used to help fund major investment.
“We plan to invest around £1.6bn across our five divisions over the next four years to underpin growth and return our businesses to our target levels of profitability,” he said.
“Through these actions, combined with our scale and expertise, we are positioning the business for improved growth and returning it to a profile of consistent growth returns and cash generation.”
The new rights issue a three-for-two offer is expected to raise gross proceeds of around £615m, at 85p per share. It represents a 62% discount on the stock’s Friday closing price.
Proceeds will be used to “continue investment in the business” and to reduce the group’s £2bn debt pile after acquisitions in America.
Specific targets include increasing revenues and stretching margins in key business areas, maintaining its investment rating, and re-establishing a “progressive dividend policy”.
The results showed how exceptional charges totalling more than £135m had hit operating profits, thanks to losses on and provisions made for disposals, onerous contracts and legal claims.
First’s American schoolbus division is undergoing a restructure, with bosses confident $100m a year can be cut from its cost burden.
The UK Bus business is also undergoing a transformation, as assets are sold off and the company seeks to provide local services “more efficiently”.
Despite the firm’s “frustration” over last year’s West Coast mainline fiasco during which First was granted permission to operate the intercity route before the cancellation of the botched bidding process by the Department for Transport it says it is ready to bid for more deals.
Its UK Rail arm, which includes ScotRail, saw revenues slow up.
The period’s 7.4% increase was a behind last year’s 8.4% uplift, but brought total income into the division to £2.795bn.
Underlying operating profits fell to £63.2m from £110.5m last year, despite a rise in passenger receipts and subsidies.
First also said chairman and Aberdeen Asset Management chief executive Martin Gilbert would stand down after 27 years as soon as a replacement could be found.
“As chairman and founder his vision and drive have led the transformation of the group and under his stewardship the business has grown to become one of the world’s leading transport operators,” Mr O’Toole said.
Stocks closed at 155.6p on Monday, their lowest level since April 2000 and well below 2008’s high point of 813.37p.