FirstGroup (LSE:FGP) told investors it has agreed to sell bus depots and fleet assets to the West Yorkshire Combined Authority for £109 million, as the region transitions to franchised bus services.
The deal covers five freehold depots and their fixed assets, plus a fleet of 251 diesel vehicles and 79 electric vehicles, with the depot sales already completed and fleet sales to follow as three franchise tranches go live in May 2027, January 2028 and October 2028.
The stock market-listed transport operator expects a post-tax disposal gain of about £30 million from the completed depot sales, which will be treated as an adjusting item against group adjusted operating profit and adjusted earnings per share for the 2027 financial year, alongside cash inflows of roughly £55 million in that period.
Proceeds from the fleet sales will generate further adjusting items in FY2028 and FY2029, with the eventual total depending on how many contracts FirstGroup wins under the remaining two franchise tranches.
Around 130 buses will be redeployed elsewhere in the group once the five depots pass to franchising, deferring some capital spending and working capital needs for a further £10 million cash benefit over the next two years.
FirstGroup will also electrify the Bradford and Huddersfield depots at the combined authority's cost ahead of franchising, covering design, tendering and project management; the Bramley depot has already been partially electrified.
Alongside the asset sale, FirstGroup noted it has won two of the first three franchise contracts under WYCA's programme, covering Bramley and Huddersfield, where it already operates.
The contracts start in May 2027 after a mobilisation period, run for a five-year core term with an option to extend by two years, and are expected to generate combined annual revenues of about £40 million, with WYCA retaining revenue risk and setting service levels while FirstGroup delivers the services.
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The Bramley contract will run a mixed diesel and electric fleet across the Leeds area, with FirstGroup retaining ownership of the diesel fleet, valued at about £9 million, before transferring it to a successor operator at an agreed residual value; the Huddersfield contract will run an all-electric fleet owned by WYCA and leased to the operator at a peppercorn rate.
"We look forward to drawing on our scale, expertise and strong operational track record to deliver high-quality, sustainable bus services in partnership with the West Yorkshire Combined Authority," said chief executive Graham Sutherland.
