FirstGroup performed a reverse manoeuvre yesterday with all the dignity of one of its double-decker buses making a three-point turn.

Having crowed last October that strong cashflows in Laidlaw meant that it no longer needed to raise additional equity to fund its $3.4 billion (£1.7 billion) US purchase, FirstGroup has evidently had second thoughts. Yesterday the FTSE 100 transport group hit shareholders with a £236 million placing at 540p.

That backtracking did little to enhance management credibility — already dented by February’s censure of the group by the Government for twice breaching the terms of the First Great Western (FGW) franchise, a service recently voted the worst in Britain. However, what really rankled was the performance of First’s shares in the interim. Having eschewed issuing paper in October when its stock sat at 692p, the company is now doing so at a price 22 per cent lower — meaning that the effect of the fundraising is considerably more dilutive. In short, it is selling a quarter as many shares more than it might otherwise have done.

Of course, the world has changed since last autumn, and First’s £2.2 billion debt burden is looked on less favourably than before. So, in triggering an upgrade in its Standard & Poor’s credit outlook from “negative” to “stable” and keeping its BBB- rating, yesterday’s fundraising served its primary purpose.

Conversely, tougher times in America also mean that First has opted to retain Greyhound, Laidlaw’s most consumer-exposed business, rather than accept a knockdown price. The sweetener is that First has raised its forecast synergies from the acquisition from $100 million to $150 million.

Further, a strengthened balance sheet should enable the company to pursue opportunistic acquisitions in a still-fragmented American school bus market.

Otherwise, there was nothing in yesterday’s full-year numbers to disconcert. Profits from UK buses rose 18 per cent, helped by improved operating performances and reliability that lifted margins to 11 per cent. In rail, revenues were up by the forecast 6.2 per cent, with no sign of a feared slowdown in passenger volume growth. FGW aside, First’s other three franchises have achieved punctuality of more than 90 per cent. Most important, management has maintained its confident outlook, and its commitment to a further increase in its annual dividend of 10 per cent.

Laidlaw’s long-term attractions remain, as does the relative resilience of public transport operators in a downturn. However, at 561½p, or an average sector rating of 11 times current-year earnings, and with investor sentiment impaired, First can be no more than a hold.

Land Securities

When a property company writes £1.3 billion off the value of its holdings, alarm bells might ordinarily ring. But the near-9 per cent hit that Land Securities took yesterday on its portfolio compares favourably with the 14 per cent decline in the value of all UK shops and offices over the same period.

Exactly a year ago, Francis Salway, chief executive, called the top of the commercial property market and acted fast. The company sold £1.6 billion of assets at a 5 per cent gain to their March 2007 valuations. Last year 1.6 million sq ft of development in London was completed, of which 94 per cent is now let. Over the next two years 275,000 sq ft of London buildings will be completed and 20 per cent is already let. With gearing comfortable at 40 per cent and £630 million of cash at hand, Mr Salway can afford to wait for buying opportunities to emerge and for the right time to pursue the planned break-up into separate London, retail and Trillium outsourcing divisions.

Demerger costs have already accrued, but Trillium continues to make a solid return on capital — of nearly 10 per cent. Earnings per share rose by 16 per cent, and the full-year dividend is up 21 per cent. At £14.67, the shares are at a 25 per cent discount to net asset value, reflecting fears of more writedowns. But with a solid 4.4 per cent yield and steady rental income underpinning cashflow, the shares are a hold.

Dimension Data

Once again, it is hard to find fault with figures from the South African computer services provider. First-half numbers beat forecasts at every level, with revenues up 16.3 per cent in constant currency terms and four of its five regions - the exception being Australia - showing double-digit growth. More encouraging, the increase in higher-margin service revenues continues to outstrip that from product sales, such that operating margins ticked up from 3.1 per cent to 3.9 per cent. That puts Dimension Data on track to meet its medium-term target of 5 per cent.

There were other comforts. Given that 20 per of its sales are drawn from financial services, there were concerns that it would suffer a slowdown in spending. In contrast, that business has grown in absolute terms over the past six months - DiData has picked up work from Morgan Stanley, among others - so that it now speaks for 25 per cent. It is also reasonable to assume that any disruption from the proposed merger of the rival Hewlett-Packard with EDS could enable it to win market share.

But DiData's emerging markets exposure also means that, at 52p, or 17 times 2008 earnings, it trades at nearly twice the rating of its peers - steep, given that reselling remains 60 per cent of sales. Tempus advised “take profits” at 61p in November. On the assumption that its two biggest markets, financials and telecoms, must slow, there should be no rush to buy back in. Avoid.

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