First Group: General Discussion

[the101]

First has managed a turn around of a sort in the Potteries in that it is now making a bit of money rather than a loss, but it has taken a lot of merciless cuts to the cost base to achieve that and the operation there is a shadow of what it was. I would imagine that that will be repeated in other areas in the future.

As for Weymouth, I said it a few months ago and it is still true. The drivers there are on a kamikaze mission that will see them all on the dole and the depot closed at some point.

 

[robertclark125]

SMTGlasgow mentions the Highlands, and it's always worth remembering, when it started out, Stagecoach was running long distance coach services, and then interurban services, in some rural areas. Yes, it ran city services in Perth, but Perth is not as big a city as say Newcastle Upon Tyne.

During the SBG and NBC privatisations, Stagecoach went for firms with a largely interurban base, which weren't the main operators in some major cities. Yes, Bluebird is based in Aberdeen, but it was GRT that was the main operator there. It wasn't until 1993, when Stagecoach bought Grimsby Cleethorpes Transport, that it went for a mainly urban operation.

Badgerline was also a mainly interurban group. I say mainly, as it did buy City Line later, and until the merger with GRT was doing well with City Line. But it had a basis in interurban networks, like stagecoach.

Once Firstbus was created, we saw more and more of the local decisions being made in Aberdeen. But we also saw I think something else; the idea that urban area demands and expectations can be applied in a rural setting. That can't be the case. As Stagecoach has proved, with its recent purchase of 30 Mercedes Sprinter minibuses for Kent, the rural approach needs different ways and means from the urban approach.

And as I've already mentioned, Stagecoach has a corporate plan, but allows local management to apply it in the style best suited to their area.

 

[Baxenden Bank]

The new accounts for trading up to April 2016 should be out any time now, so keep your eyes peeled

Last year, the accounts for the year ending 31 March 2015, were published (on Companies House website), on 15 December, so less than month to number crunching time.

Presumably the latest six month figures are for April to September 2016? So the next set of published accounts will pre-date the latest six months announcements.

As I understand it, via indirect but reliable sources, First in the Potteries drifted in and out of profit this year, so I don't know what to expect from the accounts. I do know, having wrestled with the new VOSA / TC website today, is that there is a raft of changes to most services on 8 January 2017. The problem, as always with First, is that customers 1) have no idea of these changes yet, and 2) whether they are merely tweaking the 0550 by 2 minutes, or slashing services to operate between 0900 and 1500 only on a hourly frequency!

Another Black Friday offer is approaching (next Friday) with the promise of some kind of deal. Dare I buy an annual ticket and be shafted again like this year when the evening services were withdrawn three months after I had bought my ticket?
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Potteries will be an interesting one to watch. They've had new management, closed a depot, cut the fleet, and had another attempt at improving the route network. If all that hasn't made it sufficiently profitable then they might as well give up.

Improving is an interesting word to use. In my book, improvements consist of more buses, more routes, higher frequencies and longer periods of operation i.e. running after 1830 in a city of 350,000 people!

 

[DD12]

Loads of good and interesting new posts above - Thanks Everyone !

 

[F Great Eastern]

Someone mentioned First Northern Ireland accounts.

You really can't take into account those accounts in isolation without the ROI accounts, the NI subsidiary is basically paid a fee by the ROI operating company to operate the service and to house vehicles and employ Belfast based staff. All of the tickets bought online (which is how most customers buy tickts) are booked in the ROI operating companies account, as well as all of the tickets bought in Euro.

The only revenue the NI operation sees is tickets bought with Sterling as far as I know(which would only be 50% of the walk up tickets for the Belfast-Dublin service) to avoid currency conversion, and the fee paid by the ROI company to the NI company to run the service for it, basically it exists to employ staff based in NI and to operate vehicles based in NI.

The operating structure has to be this way since Belfast - Dublin is an international route and to hire NI staff they need an NI operating company and to operate a depot there they need an NI operators license and to gain insurance for their drivers and vehicles they need it to. It is effectively a subcontracting of some Dublin - Belfast services from First Aircoach to First Northern Ireland trading as Aircoach.

This also means that NI based vehicles cannot legally operate services fully in the ROI and probably restricts (but I don't know for sure) ROI drivers to only driving ROI coaches and NI drivers only driving NI coaches.

The main Aircoach business made a profit of €3m or so last year but you really have to minus the loss of FNI from that to get a more true result and also I believe that First made some "investment" into the company last year which may well have pushed the profit higher than normal, many people were surprised that the ROI company was so profitable last year as it sounded way too high so next years accounts will be interesting.

 

[Robertj21a]

Last year, the accounts for the year ending 31 March 2015, were published (on Companies House website), on 15 December, so less than month to number crunching time.

Presumably the latest six month figures are for April to September 2016? So the next set of published accounts will pre-date the latest six months announcements.

As I understand it, via indirect but reliable sources, First in the Potteries drifted in and out of profit this year, so I don't know what to expect from the accounts. I do know, having wrestled with the new VOSA / TC website today, is that there is a raft of changes to most services on 8 January 2017. The problem, as always with First, is that customers 1) have no idea of these changes yet, and 2) whether they are merely tweaking the 0550 by 2 minutes, or slashing services to operate between 0900 and 1500 only on a hourly frequency!

Another Black Friday offer is approaching (next Friday) with the promise of some kind of deal. Dare I buy an annual ticket and be shafted again like this year when the evening services were withdrawn three months after I had bought my ticket?
--- old post above --- --- new post below ---


Improving is an interesting word to use. In my book, improvements consist of more buses, more routes, higher frequencies and longer periods of operation i.e. running after 1830 in a city of 350,000 people!

I agree, but my 'improving' could also be if they achieve a greater physical coverage across the area, more convenient for more people etc [I don't know if that's the case, and I somehow doubt it, but it could certainly be classed as an improvement, if they did it !]

 

[winston270twm]

I agree, but my 'improving' could also be if they achieve a greater physical coverage across the area, more convenient for more people etc [I don't know if that's the case, and I somehow doubt it, but it could certainly be classed as an improvement, if they did it !]

Not in the case of First Potteries, routes have been slashed, as has the size of the fleet size & network coverage. Largely to the benefit of D&G who have taken over a large proportion of former First routes in some form or another.

 

[TheGrandWazoo]

'May be able to good dividends' is all based if's, buts & may be's. The share price is only approx 30% above the 85p rights issue price from 3 years ago. I suspect that most people that have been invested in First Group for sometime and took part in the rights issue are still nursing losses & have had no dividends since.

With Stagecoach shares currently around £2 mark, they yield 5.8% dividend & a much better prospect.

Hey, you may be right. However, the question posed was why aren't people pushing for a break up. Well, that might be the reason, rightly or wrongly.

There are better results in the near term with Stagecoach and others. That's undeniable but people are either a) looking at the positive longer term potential or b) they're already bought in and to exit early would incur substantial losses so best to hang in, which is what you were saying.

I have a shocking record in backing firms so I have no idea as to the actual likelihood of First's future performance!!!

 

[DragonEast]

I suspect if any of us actually got out and tried to use their buses, instead of aping First management by just pouring over their accounts, we might have a better idea of what is wrong with First. May be the full Croydon Tram accident report when it emerges might help us to see what we can't?

 

[Robertj21a]

Hey, you may be right. However, the question posed was why aren't people pushing for a break up. Well, that might be the reason, rightly or wrongly.

There are better results in the near term with Stagecoach and others. That's undeniable but people are either a) looking at the positive longer term potential or b) they're already bought in and to exit early would incur substantial losses so best to hang in, which is what you were saying.

I have a shocking record in backing firms so I have no idea as to the actual likelihood of First's future performance!!!

I always feel that we're only tinkering around at the edges when we get interested in what parts of First Bus UK could get 'trimmed'. It's still actually only a drop in the ocean when you look at the size of the overall Group debts.

 

[TheGrandWazoo]

I always feel that we're only tinkering around at the edges when we get interested in what parts of First Bus UK could get 'trimmed'. It's still actually only a drop in the ocean when you look at the size of the overall Group debts.

Indeed. I tend to agree with Winston in saying that the surgery perhaps needed to be more aggressive earlier. However, hindsight is 20/20 and the problem is that you're involved in a fire sale and the bits that people want are also the bits that make the money to be able to pay down the debt. No point in having a sugar rush of short term cash and then be worse off in the long run.

They are paying the debt down though I am surprised that the benefit from such areas as a now (we think) profitable FSW, removal of the gangrenous bits (such as Plymouth and East Lothian), an improvement in Potteries etc isn't reflected more in the results.

That said, the problems of revenue growth stalling are now industry wide NOT JUST FIRST. However, the other firms were in a better position to start off with.

 

[Robertj21a]

As others have suggested previously, the answer probably lies 'over the pond', but it needs something pretty dramatic over there.

A complete sell-off of the entire First Bus in the UK would obviously help a lot, but how feasible would that be in practice ?

 

[overthewater]

The problem is, if UK bus is sold off shareholders will be asking why wasn't that done in the first place. Also You have to ask who could buy such a big asset in one go? Nat Express has burnt its fingers before.

I do get the feeling it started with Greyhound, and I think it will end with greyhound.

 

[WatcherZero]

I think a significant part of that is them admitting falling volumes are pushing up costs faster than falling fuel prices. I.e the more operations they trim the less there is to spread the fixed costs over. The more they shrink the less competitive they become leading to more loss making operations being jettisoned. A vicious death spiral.

 

[Robertj21a]

I think a significant part of that is them admitting falling volumes are pushing up costs faster than falling fuel prices. I.e the more operations they trim the less there is to spread the fixed costs over. The more they shrink the less competitive they become leading to more loss making operations being jettisoned. A vicious death spiral.

Yes, a death spiral even under Lockhead, before many other problems came along. The likes of Tim/Giles can attempt a whole range of remedies but now, after rather a lot of years already, it may well be getting to that critical point where a truly major event is inevitable.

 

[THarris123]

Yes, a death spiral even under Lockhead, before many other problems came along. The likes of Tim/Giles can attempt a whole range of remedies but now, after rather a lot of years already, it may well be getting to that critical point where a truly major event is inevitable.

The most likely event being Tim thrown out. I can't see some big sell off of First bus, but I'm fairly sure the shareholders are getting fed up with the exec now. He quite simply hasn't turned it around, although they have managed to maintain the profit, so obviously the cost savings have worked to a certain degree.

 

[overthewater]

If Tim is given the boot... what could some else actually do?

 

[Baxenden Bank]

I suspect if any of us actually got out and tried to use their buses, instead of aping First management by just pouring over their accounts, we might have a better idea of what is wrong with First. May be the full Croydon Tram accident report when it emerges might help us to see what we can't?

I can't use the bus if they don't provide one. Perhaps First should actually get out and try to provide an attractive service, instead of moaning about congestion, council failure, insufficient ENCTS re-imbursement, fuel duty rebate cuts. I don't see Tesco blaming their customers for their reduced profits and other problems.
--- old post above --- --- new post below ---

I think a significant part of that is them admitting falling volumes are pushing up costs faster than falling fuel prices. I.e the more operations they trim the less there is to spread the fixed costs over. The more they shrink the less competitive they become leading to more loss making operations being jettisoned. A vicious death spiral.

When First Potteries cut a route by 33% (21 and 23 - 20 minutes to 30 minutes frequency) they lost more than 33% of their passengers, perhaps the opposite would be true. Increase the service by 33% and gain more than 33% additional passengers? Not going to happen in a business fighting a fire. A low frequency is simply not attractive. If I can time my journeys to tie in with the bus times, fine I can cope with a bus every 30 or even 60 minutes. But if I have no control over my time - such as arriving on another service, train arrivals, fixed work times not flexitime, etc. then having to sit around for 30 minutes for the next bus is not attractive.

 

[Robertj21a]

If Tim is given the boot... what could some else actually do?

Split the whole group up.

 

[Woody38]

the problem with buses is they do not go where u want to go, take my home town of Stafford they built a new shopping centre at the end of the town but the buses still go to the old part even though most of the shops have gone from there. Also the bus prices are not cheap, anti social behaviour, a downs lad had his phone stolen on a bus in the West Midlands only the other day, If a few people are going together sometimesi it is cheaper to go in a taxi.
Stagecoach are bringing in smart payment for useing its buses haven't heard of first doing anything

 

[ooo]

If a few people are going together sometimesi it is cheaper to go in a taxi.

A number of First companies now offer group tickets which often offer excellent value.

 

[BBC]

A number of First companies now offer group tickets which often offer excellent value.

£8 for 5 adults for a day in Bristol !

 

[ooo]

£8 for 5 adults for a day in Bristol !

That's even less than a short trip single when bought on the bus if there's 5 adults!

 

[the101]

All of the five groups are committed to contactless ticketing, by which I mean touch on, touch off style rather than just using a contactless card as a replacement for cash. The back office system will calculate the fare/cap. The problem is that the timeframe is highly unambitious and wholesale adoption remains years away. Simple replacement of cash with a CPC will come much sooner in some instances, as has already been revealed by Stagecoach, Transdev and whoever else.

 

[BBC]

That's even less than a short trip single when bought on the bus if there's 5 adults!

Forgot to add that its only after 9:30am from monday to friday (any time of the day sat/sun)

 

[winston270twm]

Split the whole group up.

Another option maybe to merge which another large transport group either UK based (a merger with NX was once mooted prior to Lockhead going), Dean Finch has done an excellent job turning around NX Groups fortunes & knows First Group pretty well with 10+ years experience at senior level. Or try & get a European Transport Group interested that doesn't have a very big presence within the UK or USA.

First Group has a large number of its UK bus ops in former PTE areas / Urban areas with higher frequency routes, some should be performing far better than they are under current management.

 

[TheGrandWazoo]

Hang on.... Surely if it were so simple then they'd sort out UK Bus. They'd need look no further than this board for a load of experts rather than employ noted industry figures like Paul Matthews, James Freeman, Alex Carter or indeed, Giles himself.

Fact is that the industry is going through a very tough time at the moment. You can see that by the number of largish firms that are going out of business. It is tough out there - reducing footfall on high streets, massive increases in traffic congestion, fuel price volatility, reduced local authority spending and in many areas of the North, a stagnation in people's incomes.

You can see this with Stagecoach and Arriva too, closing depots and rationalising services. The curious aspect is that First West Yorkshire is perhaps the best performer (a former PTE operation) whereas Manchester and South Yorkshire have not returned great figures. There may be some impact on Manchester with the Metrolink out to Oldham and Rochdale but the underlying reason why these aren't doing better is peculiar. Remember that they have cut their fares as well to stimulate growth too.

 

[Robertj21a]

Hang on.... Surely if it were so simple then they'd sort out UK Bus. They'd need look no further than this board for a load of experts rather than employ noted industry figures like Paul Matthews, James Freeman, Alex Carter or indeed, Giles himself.

Fact is that the industry is going through a very tough time at the moment. You can see that by the number of largish firms that are going out of business. It is tough out there - reducing footfall on high streets, massive increases in traffic congestion, fuel price volatility, reduced local authority spending and in many areas of the North, a stagnation in people's incomes.

You can see this with Stagecoach and Arriva too, closing depots and rationalising services. The curious aspect is that First West Yorkshire is perhaps the best performer (a former PTE operation) whereas Manchester and South Yorkshire have not returned great figures. There may be some impact on Manchester with the Metrolink out to Oldham and Rochdale but the underlying reason why these aren't doing better is peculiar. Remember that they have cut their fares as well to stimulate growth too.

I still feel that anything related to UK Bus is little more than tinkering around at the edges - any improvement in finances will help but, surely, the big problem isn't within the UK ?

 

[winston270twm]

Hang on.... Surely if it were so simple then they'd sort out UK Bus. They'd need look no further than this board for a load of experts rather than employ noted industry figures like Paul Matthews, James Freeman, Alex Carter or indeed, Giles himself.

Fact is that the industry is going through a very tough time at the moment. You can see that by the number of largish firms that are going out of business. It is tough out there - reducing footfall on high streets, massive increases in traffic congestion, fuel price volatility, reduced local authority spending and in many areas of the North, a stagnation in people's incomes.

You can see this with Stagecoach and Arriva too, closing depots and rationalising services. The curious aspect is that First West Yorkshire is perhaps the best performer (a former PTE operation) whereas Manchester and South Yorkshire have not returned great figures. There may be some impact on Manchester with the Metrolink out to Oldham and Rochdale but the underlying reason why these aren't doing better is peculiar. Remember that they have cut their fares as well to stimulate growth too.

Yes First Group now employees the likes of James Freeman, Alex Carter, Paul Matthews etc, but ultimately they are small cogs in a big wheel. Like you say Giles Fearnley is higly respected industry professional, but Giles had never previosuly managed an operation the size of First UK Bus, James Freeman has never had to contend with competiton on any scale whilst at Reading Buses and also who's owners we prepared to invest heavily year on year. At First, Freeman will now be competing with other large First subsidiaries for limited new resources, whilst Bristol & Bath have had decent intakes of new buses, it's still the existing fleet that is letting the group down with threadbare / faded seats, buses are getting repainted in Olympia, but many of their interiors go untouched, this occurs across manor of the UK Bus subsidaires.

Whilst having the above highly regarded industry professionals, it largely depends how much freedom / creativity First Group HQ is giving them to grow their prospective ops.

Arriva just seem to be managing decline particualrly in the Midlands, there aren't many Arriva Op's where they are actively investing & looking to grow. Stagecoach are the most innovate and aren't afriad to bring new things to the bus industry.

As Robertj21a says, First Group need to do something on scale to bring down that debt pile, otherwise their hands will be tied / they'll be a weaker footing for years to come.

 

[TheGrandWazoo]

Yes First Group now employees the likes of James Freeman, Alex Carter, Paul Matthews etc, but ultimately they are small cogs in a big wheel. Like you say Giles Fearnley is higly respected industry professional, but Giles had never previosuly managed an operation the size of First UK Bus, James Freeman has never had to contend with competiton on any scale whilst at Reading Buses and also who's owners we prepared to invest heavily year on year. At First, Freeman will now be competing with other large First subsidiaries for limited new resources, whilst Bristol & Bath have had decent intakes of new buses, it's still the existing fleet that is letting the group down with threadbare / faded seats, buses are getting repaint in Olympia, but many of their interiors go untouched, this occurs across manor of the UK Bus subsidaires.

Arriva just seem to be managing decline particualrly in the Midlands, there aren't many Arriva Op's where they are actively investing & looking to grow. Stagecoach are the most innovate and aren't afriad to bring new things to the bus industry.

As Robertj21a says, First Group need to do something on scale to bring down that debt pile, otherwise their hands will be tied / they'll be a weaker footing for years to come.

I think you do an injustice to James Freeman - this is a man who took Provincial from a small, vulnerable isolated operator and competed very effectively with Stagecoach/Transit Holdings and Southampton Citybus/SBL and did so whilst amassing various Mk1 Nationals, new minibuses and latterly Darts. He is a very able busman (and no, he isn't a friend or relative ) I would say the same of many of the people that are in senior positions.

We are seeing all of the big groups drawing their horns in, whether that's Stagecoach in Fife/Somerset/Wales or Arriva in the Midlands. There are inescapable facts - note how Stagecoach (who I admire greatly) recorded a 0.8% decrease in passengers. Reduced local authority expenditure on supported services is one issue. Then you have the reduction in ENCTS remuneration - Somerset is one place where it is 40% of the single fare hence why Stagecoach have eventually vacated. Arriva recorded a drop of 1.7%. It isn't easy out there. Then you have traffic congestion which is really affecting bus operations across the country whether that be Arriva on Merseyside or First in Bristol - do you add more vehicles into your fleet for no more revenue just to maintain headways or do you maintain the fleet and widen the headways?

I do recognise some of the underlying issues that still persist from the bad old days. The average age of the First fleet and its general condition compares poorly with other groups. In Bristol, some of the 1999 B7TLs are being upgraded to meet PSVAR when ordinarily they'd be on their way. That is a cause for concern. Yes, Stagecoach are innovative with things like the SW Falcon. You look at that, or the X5, and then compare it to the Swansea Shuttle - yes, agree the gap is huge in that respect.

Likewise, there should be a number of upsides; FSW should be better given that Plymouth has gone, a full year of no WGL plus the future prospect of a stronger Somerset business. Bristol should be benefitting from more passengers. They've pulled out of Hereford (very marginal) and Bracknell (competition) and managed to release themselves from the straitjacket in Scotland, plus the benefits from the South Yorkshire partnership. Therefore, why this is not reflected more is a concern, I grant you. Are the plusses there being counteracted by the general depression in the North especially in retail footfall and overall economic activity? Is a depressed Aberdeen outweighing a more buoyant Portsmouth? Don't know.

The need to be tougher on costs (and that is an area where Stagecoach lead the way) is clear and that means more depot closures (a couple do spring to mind), centralisation and service rationalisation whilst still trying to encourage patronage. The debt pile is coming down (over 6%) and note that their Fitch ratings (BBB) are the same as Stagecoach.

For those reasons, that's why I don't think you see the clamour on this thread reflected in the markets. The institutional investors are sitting this out for a while, probably because they think they're in deep enough to have to do so. However, have this conversation in a years' time and you might see that change.

One business that I know well had a similar experience and suspended the dividend for 5 years. The Chief Exec got the push and a plan was enacted whereby there was an exiting of various non-core and loss making operations, some walked away from and others sold. The dividend has now been reinstated. It does take time but you're right in that patience will run thin. However, not seen anything from the investors to show that is the case at the moment (excluding that carpet bagger from a few years back)