FirstGroup freezes dividend and says it may sue over West Coast

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FirstGroup has frozen its dividend in response to the West Coast Main Line franchise fiasco, and refused to rule out taking legal action against the Department for Transport.

"We remain committed to maintaining our leading position in the rail market," its chief executive, Tim O'Toole, said. "We will consider the full-year dividend in May 2013, by when I hope we will have an appreciation of the franchising system and the whole industry is back on track." FirstGroup had previously said it planned to increase its dividends by 7 per cent a year.

Freezing the first-half payout will save it only £3m but is the clearest indicator yet of the damage it believes could come from the franchise reversal, which saw it stripped of the West Coast line award when the DfT bowed to the incumbent, Virgin Trains, and said the process had been flawed.

FirstGroup saw a 42 per cent fall in underlying pre-tax profits to £48.7m in the first half.