FirstGroup Boosts Leeds Fleet by 55 Vehicles with £5.3M Tetley's Coaches Acquisition

Shares of FirstGroup (LON: FGP) jumped about 3% following the announcement that the UK transport operator has snapped up Tetley's Coaches, a Leeds-based bus and coach company.

This deal adds 55 vehicles to FirstGroup's existing fleet and includes a sizeable depot strategically located in central Leeds, right next to one of FirstGroup's current bus facilities. Tetley's, with reported earnings before interest and taxes (EBIT) of £1.4 million on revenues totaling £5.3 million for the year ending March 2024, runs a mix of school, university, workplace shuttle, and private hire contracts across Leeds and West Yorkshire.

One interesting point is that a good chunk of Tetley's contracts have recently been extended, which should bring a bit more predictability to the business. Also, Ian Tetley, the company's managing director, will stick around to help with the transition into FirstGroup's operations.

In recent years, FirstGroup has been beefing up its UK bus services through acquisitions that analysts see as margin-accretive, often buying at valuations below both their internal assessments and the broader market's implied multiples. This acquisition fits clearly into that pattern. It's not just about bigger size; it's about diversifying revenue streams without betting heavily on complex cost-saving synergies.

While the shares responded positively today, it's worth watching how FirstGroup continues to juggle organic growth and these smaller acquisitions, especially as competition and regulatory pressures remain stiff in the UK transport sector. With Tetley's Coaches in the fold, FirstGroup's Leeds presence certainly looks more solid, but the real test will be how seamlessly it integrates the new assets and maintains contract renewals going forward.