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First Group: General Discussion

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winston270twm

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First Group have made a small acquisition in Canada for First Student:
CINCINNATI — First Student, North America's leader in student transportation, today announced the acquisition of CG Pearson Bus Lines, an Ontario-based provider of school and charter transportation services.

“We’re experiencing tremendous growth in Ontario, where we’ll add more than 400 buses to our fleet for the 2018-2019 school year. This is a logical step for us because it builds on our positive growth trajectory,” said First Student President Dennis R. Maple. “We’ll continue to search for opportunities to leverage our resources, insight and expertise to benefit school districts, students and families across North America."

The deal extends First Student’s operations in Ontario, where it currently has almost 40 locations. It’s anticipated that more than 200,000 Ontario students will receive safe and reliable transportation from First Student each day in the 2018-2019 school year.

CG Pearson was founded in 1947 and grew to almost 60 routes and 70 buses. Its primary customers were Windsor-Essex School Transportation Services (WESTS) and Chatham-Kent and Lambton Administrative School Services (CLASS), both current customers of First Student.

In aggregate, these consortiums provide transportation for six school boards. Each board starts school the first week in September.

“Our family has had the privilege to work in the local Chatham-Kent and Windsor-Essex regions for three generations. We would like to personally thank the wonderful customers and staff who have become like our family,” said CG Pearson Vice President Ryan Pearson. “We are excited to know that First Student will help our extended family into the next chapter and wish the best to everyone.”

First Student’s commitment to invest heavily in driver training, safety and technology allows it to deliver a ride that’s twice as safe as the industry average.

The acquisition is the second in as many years for First Student. Last year, First Student acquired Falcon Transportation, a 94-bus operation in Chicago.

“First Student and CG Pearson have a shared belief that great transportation partnerships are built on the foundation of understanding, commitment, service performance and trust,” said Maple. “We welcome CG Pearson employees to the First Student team.”

http://www.firstgroupplc.com/news-and-media/latest-news/2018/01-08-18a.aspx
 

overthewater

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So its overseas investments are doing better than the UK? Where did the money come for this?
 

DragonEast

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How it happens is anyone's guess but I think First's woes may give us an opportunity to reconfigure Britain's public transport in a more sensible way. It almost couldn't be configured worse than it is at the moment. It too often meets the needs of the past more than the needs of the present, and economic woes just highlight the problem.Yes I know about the TC and the CC, the museum curators, but we just have to work around them like every other obstacle.

For instance in the East the X30 and Xcel routes would actually sit better with NatEx as they compliment their network and they have the necessary expertise which the busmen of First don't. Isn't the same true of Berkshire's RailAir and even the Heathrow services? Things don't have to stay together. And depot reconfiguration should be across the networks. So in some cases might First keep (and sell the vacant depots, which in many cases are ideal housing sites, which is where the money is to be made, not in running local buses), and pass on the services? Depots and services don't have to be kept together just because they have in past history. Less depots, more outstations. Yes individual operators have done so, but we need to do so across the present operational boundaries. Or costs, as First have found too often, will get out of control. If anything is the UK Bus problem, that is it. I appreciate too that running buses is a thankless task, not least because of our national "can't be ars3d" attitude to being told to do anything. That's why the sadly so rare good management (or government for that matter) is so important.

If First have an issue it seems to me to be that they have been too slow to change. What has actually changed under First's stewardship? Not much it seems to me, except the odd depot closure, withdrawals and sales of units, and a bit of lipstick here and there. Instead the effort should have been on reconfiguring the mess that they inherited. It's now just a slightly smaller mess, instead of sorting it out. Others have made a better (although by no means perfect) job of it; and it shows. Change in modern business is the name of the game, not consistency. I don't by the way mean changing the reporting structure or just tweaking the timetables, or even tracking and contactless. That's administration, not management (though First can be bad enough at that, too). Cosmetics. Though, like the lip gloss or nail varnish, an endless talking point.

What ever was First's vision for the future of UK Bus? I never could work it out. A occasional bit of hot air about the means, but nothing about their destination. Too often like their buses (and their passengers), stuck and going no-where.

Yes buses need to watch the accounts as with any other business; but because something makes sense in accounting terms doesn't make it sensible in business terms. We Brits don't ever seem to understand the difference.
 

overthewater

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Worcester in trouble again, but its is just spin by the council and the paper?

http://www.worcesternews.co.uk/news...ning-bus-services-in-city-revealed/?ref=fbshr

Councillors claim the proposals will turn Worcester into a 'bus-free city' if they are allowed to go ahead.

First Bus intends to make changes to 24 bus services in Worcestershire, with at least 10 evening and late night services in Worcester being scrapped under the plans.

County councillor Paul Denham, who represents Worcester's Rainbow Hill ward, said: "If this goes ahead bus transport will become a daytime offer, there will be nothing in the evenings.

"They [First Bus] are saying they can't make enough money out of them [evening services] as usage in the evening is not as much as in the day.

"We need to restore some of the subsidies that were making to the bus service.

"Millions have been cut from the bus budget since 2010."

Cllr Denham, also the Labour Party's local spokesman for highways and transport, said the cuts would particularly affect elderly and vulnerable people, who could be left housebound by the changes.

He added that they would also impact patients and NHS workers who rely on buses to get to Worcestershire Royal Hospital at night.

City councillor Richard Udall added: "Worcester is going to become a bus-free city at night.

"I say the county council needs to plug the gap. The service has been decimated."

Cllr Udall said some of his constituents in Dines Green are employed in the night-time economy and use buses to get to and from work in the city centre.

Sarah East, head of operations at First Worcester, said the company is making minor adjustments to most of its services in the city.

She added that the firm told the county council about the proposed changes on July 6 and is still awaiting a decision as to whether the council will provide support.

County councillor Alan Amos, cabinet member for Worcestershire's roads, said: "We'll work with First Bus to ensure they are fully aware of residents' needs in the urban and rural areas of the county."

The following Worcester services will be affected by the cuts: 30, 31, 31A, 31U, 32, 33, 35, 37, 38, X38, 43, X43, 44, X44, 51, 52, 53, 54, 332, 333, 363, 373 and X50.

The 365 Malvern to Upton service will also be hit.

The cuts are due to be introduced from September 17.
 

Volvodart

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Worcester in trouble again, but its is just spin by the council and the paper?

https://www.firstgroup.com/worceste...planned-changes/changes-services-17-september

Changes to services from 17 September
17 Sep 2018 All Areas
There are changes planned to First Worcester services from 17 September.

Sarah East, Head of operations at First Worcester said;” We are making some minor adjustments to most of our services within our city network and have undertaken an in-depth review of our services running to county locations.

“We are also now almost 11 months into the trials we implemented on some of our routes, such as the 44 Malvern and Pershore corridors and have been evaluating the uptake and performance of these services to determine long term sustainability of our network”

“We provided Worcestershire County Council with details of our proposed changes that could affect some of our county services on July 6th and are awaiting a decision as to whether they will be providing support to retain some of the proposals.

Route 30: City Centre – Dines Green

The Friday & Saturday departures from Crowngate Bus Station at 2115, 2215 & 2315 (with return trips from Dines Green at 2125, 2225 & 2325) are withdrawn.

The 0745 departure from Crowngate Bus Station on Saturdays (with return from Dines Green at 0756) is withdrawn.

Routes 31/31A/31U: City Centre – University/Henwick Park

All buses on these routes will now operate as route 31A. Buses will operate up to every 20 minutes, Monday-Saturday daytime and up to every 30 minutes Sunday daytime. The same timetable will operate ‘year round’ so there will be no need to check for different university term/university holiday timetables.

Early morning and evening journeys are withdrawn.

On Monday-Fridays, the first departure from Crowngate Bus Station is 0710 (returning to Worcester at 0721 from Henwick Park and 0726 from the University. The last departure from Crowngate Bus Station is 1835 (returning to Worcester at 1847 from Henwick Park and 1852 from the University)
On Saturdays, the first departure from Crowngate Bus Station is 0800 (returning to Worcester at 0811 from Henwick Park and 0816 from the University. The last departure from Crowngate Bus Station is 1735 (returning to Worcester at 1749 from Henwick Park and 1755 from the University)
Route 32: City Centre – St. Peter’s – Baynhall

There are some minor timetable changes but buses will continue to operate to St Peter’s up to every 15 minutes, Monday-Saturday daytime and to Baynhall up to every 30 minutes.

Most journeys that previously showed route numbers 52, 53, 54, 332 & 333 will now operate as route 32.

Route 33: City Centre – Blackpole – Warndon

The following Monday-Saturday departures are withdrawn:

0602 & 0637 from Warndon to City Centre
1840 & 1925 from City Centre (& return trips at 1856 & 1941 from Blackpole)
Route 35: City Centre – Blackpole – Warndon

The 2140, 2240 & 2340 Friday and Saturday only departures from Crowngate Bus Station (& return trips from Blackpole at 2154, 2254 & 2354

Route 37: City Centre – Bevere

On Monday-Fridays, the 0635 trip from Northwick (0640 from Bevere), the 1750 from Crowngate Bus Station (1815 from Bevere) and the 1820 from Crowngate Bus Station to Bevere are withdrawn.

Routes 38/X38: City Centre – Ronkswood – Hospital

On Monday-Saturdays, the departures at 1920 & 1955 Crowngate Bus Station and 1938 & 2013 from the hospital are merged into a single departure at 1945 from Crowngate Bus Station and 2003 from the hospital;. The Friday & Saturday only departures at 2245 from Crowngate Bus Station & 2303 from the hospital are withdrawn

Full details of all changes will be published as soon as possible.
 

TheGrandWazoo

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Worcester in trouble again, but its is just spin by the council and the paper?

http://www.worcesternews.co.uk/news...ning-bus-services-in-city-revealed/?ref=fbshr

Worcester in trouble again.... Bit overdramatic?

The reality is that the council withdrew funding across the county in 2014 and have precipitated a massive reduction in passengers -http://www.worcesterbusforum.org.uk/2018/07/big-fall-in-bus-passenger-numbers/ . The journeys affected by these changes were, I believe, kept on commercially by First and generally comprise Fri and Sat evening services.

Worth remembering that in Kidderminster (albeit a smaller place), there is virtually nothing after 1830, the Diamond fleet all tucked up whilst still light outside!
 

winston270twm

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Rivals circle FirstGroup's assets amid break-up rumours
Rivals of transport giant FirstGroup are circling the struggling bus and rail operator amid hopes that a break-up is on the cards.

Senior insiders have told The Sunday Telegraph that FirstGroup has held talks with state-backed Italian train titan Trenitalia over a sale of its UK rail arm.

It comes just days after Dean Finch, the National Express boss, admitted to an interest in some of FirstGroup’s UK bus operations.

Meanwhile, the company has appointed a crack squad of consultants to assess options for US bus subsidiary Greyhound.

Wolfhart Hauser took over as executive chairman in May after under-fire chief executive Tim O’Toole quit amid full-year losses of £327m.
https://www.telegraph.co.uk/busines...cle-firstgroups-assets-amid-break-up-rumours/
 

oldman

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Unless there's more in the rest of the article, this doesn't amount to much. Finch's vague remark about maybe being interested in bits of UK Bus has turned into an 'admission' - a great journalistic word, like he's been forced to confess something he would prefer to have kept secret. Good to know it's a 'crack squad' of consultants looking into Greyhound, I was afraid they'd go to Poundland.
 

winston270twm

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Unless there's more in the rest of the article, this doesn't amount to much. Finch's vague remark about maybe being interested in bits of UK Bus has turned into an 'admission' - a great journalistic word, like he's been forced to confess something he would prefer to have kept secret. Good to know it's a 'crack squad' of consultants looking into Greyhound, I was afraid they'd go to Poundland.

The Greyhound 'crack squad' are 11 years too late.

Remainder of the article below:

A top-10 investor said: “I am pleased that Wolfhart has a twinkle in his eye and is getting stuck in to an executive-type role.

He wants all the businesses to be run separately and nothing is ruled out … This isn’t empire building, this is how you extract value for shareholders.”

FirstStudent and FirstTransit are widely considered the company’s most valuable divisions. The former is the largest school bus operator in the US.

FirstGroup’s stock market valuation is just over £1bn. Another large investor said other recent deals in the sector suggested the two divisions were worth more than that, “even if you assume UK rail and bus are worthless”.

FirstGroup and Trenitalia declined to comment.
 

TheGrandWazoo

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Thought this was interesting too from Julian Peddle
https://www.transportxtra.com/publi...ales-should-be-key-to-first-s-turnaround-plan

“I frequently find myself at odds with the usual financial analysts when results are reported as often what I think is good news they think as bad news, and vice versa. In this case my initial look at the numbers led me to think that at last some real progress had been made, albeit eight years after the real cause of the problem had left the company. For First was the creation of one man, Moir Lockhead, who wanted to be the world’s biggest transport provider, and nearly succeeded by creating an overly-centralised and disjointed monolith over two continents, weighed down by £2bn of debt. This was clearly unsustainable and was obvious to everyone, except the First board, at the time of the purchase of US firm Laidlaw in 2009. Even the low margin US school bus business, where the only real growth in margin would be achieved by cutting costs, had £1bn of goodwill allocated to it. This is the legacy that Tim O’Toole and his team had to resolve, which has overshadowed everything that has happened subsequently.

In this year’s results were three positive items. Net debt was down by 20 per cent; other debt has been refinanced at much lower rates; and UK bus margins have finally started to increase. In addition, the board has finally realised that Greyhound is doomed in its current format by writing off the goodwill on acquisition. But clearly much more has to change.

First has been living in cloud cuckoo land ever since it paid £1.9bn for Laidlaw, well over the odds. The Americans clearly saw Moir Lockhead coming.

When O’Toole and his team took over in 2010 their strategy appeared to be to try to improve margins in the US and UK bus businesses, and win more rail franchises. All logical, but whilst some underperforming operations were disposed of, nothing really moved the needle. So in 2013 there was the rescue rights issue that halved debt, but it was really more of the same and the needle still did not move. On the basis that it should be obvious after three years that a plan is succeeding or failing, the alarm button should have been pressed in 2016. But First’s board sat on their hands.

Throughout this period there were numerous good housekeeping measures, and the quality of the UK bus offering improved considerably from the Lockhead years. But the financial performance did not improve, although net asset value has doubled over the past five years. In UK Bus some operations such as Bristol began to sparkle in terms of passenger numbers, and fare cuts in Manchester also boosted passenger numbers. But in both cases the benefits to the bottom line would be five years down the road, which was not helpful to First’s weak balance sheet. The downside was that the increase in rail passenger numbers slowed, contract prices in the US continued to be competitive, and UK Bus was hit by rising costs and falling passenger numbers due to events outside its control, such as congestion and internet shopping.

In spring 2018 along comes the indicative bid from US private equity giant Apollo Management, which was rejected by the First board. This is rumoured to have been around the level of £1.10 per share. Who knows if Apollo was ever serious, as it never came back with a real bid. But this, coupled with write-off of the carrying value of Greyhound and losses at TransPennine Express has now left First in crisis mode.

What to do next? The first thing to look at is First’s board with three executive and five non-executive directors, now of course minus Tim O’Toole. It’s time to clear out anyone who has been there for more than two years. The financial meltdown seems to have come as a bit of a shock; in fact, reading the various press releases a scene of panic seems to have set in. The chairman and two of the non-executives list one of their strengths as “strategy”. Really? So you have a chairman on £600,000 and four non execs on £60,000 each who did not see this coming and clearly don’t know what to do next. There is a statement in the 2018 results that the board will decide its future strategy and then appoint a new CEO. So the new CEO has no hand in future strategy?

First needs a CEO who actually understands transport. How about David Martin, formerly of Arriva, or Keith Ludeman, formerly of Go-Ahead? Or get both, that would certainly drive some progress.

Where to take the businesses? In the US, First Student and Transit seem to have relatively stable businesses and margins and these must remain the core of the company. Greyhound is in trouble as the long-distance market has changed, and it is time for FirstGroup to get out. Flixbus or other competitors might like to buy bits, and the city centre terminals either have value as redevelopment sites or as income-generating terminals for other operators. In either case they need selling off to cut debt.

In the UK the bus business has good and bad parts, some of which may have some goodwill value. It will be interesting to see how much goodwill Go-Ahead will pay for their next acquisition; that will be a pointer to value. Action needs to be taken with the poor performers. Has the South West operation a future? Perhaps it could be sold to a management buy-out. Go-Ahead might find the Southampton operations attractive. And what about the isolated operations in Weymouth, Slough and Worcester? Larger operations such as Essex and Glasgow need to be made to pay or hived off to others (Ipswich to Go-Ahead?).

Unfortunately, there are two real problem areas. In Greater Manchester my suggestion would be to say to Transport for Greater Manchester, ‘you can have it to run, and simply pay us an asset utilisation fee or alternatively we will progressively shut it down’, and South Yorkshire, where in my view the only option would be to sell to Stagecoach, if it was interested. In both cases there would be all kinds of regulatory and financial issues but I think everyone needs to understand that unless there is a pragmatic way forward then both conurbations could end up with significantly fewer bus services.

On UK rail, Great Western is a management contract so low risk, and TransPennine Express is clearly a millstone, so surely this should be handed back to the DfT. All available brainpower should be concentrated on the South Western Railway to salvage as much as possible there. Given the risk to the balance sheet, First should not bid for any more rail franchises, particularly the West Coast Partnership where the risk, and presumably bidding costs, will be even higher than normal as HS2 is involved.

I must emphasise that I have no inside knowledge and all of this article is based on an outsider’s view based on published information. The hurdles that First faces are high but not insurmountable, and it is constrained by its debt and pension liabilities. But unless firm action is taken by a rejuvenated and competent board very soon, the financial position will only get worse.

The next AGM should be very interesting”

Not certain I agree with everything but a lot of shrewd stuff there
 

Surreyman

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Intelligent and insightful article by Julian Peddle.
Interesting comments about UK Bus.
J.P talks about UK Bus as having "Good & Bad parts" - In slightly tongue in cheek mode, I have often wondered if UK bus (Like some Banks) could be divided into 'Good Bus Plc' & 'Bad Bus Plc'?
I will let others speculate on where the various Bus subsidiaries should be allocated!!
 

overthewater

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Nice piece by Julian Peddle, which could have come from some of the members on here :D

At least with bad banks you have something to underwrite them, with Bad parts of UK bus what would underpin it? I would end up over a cliff within 18months. I doubt there is much goodwill left since were years late on this subject, If First can shift some of the bad parts to other companies ie just paying cost price for the assest, I would take the money and run. Since it get bad areas off its books and it wouldn't have deal with pay off etc.
 

Dentonian

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Intelligent and insightful article by Julian Peddle.
Interesting comments about UK Bus.
J.P talks about UK Bus as having "Good & Bad parts" - In slightly tongue in cheek mode, I have often wondered if UK bus (Like some Banks) could be divided into 'Good Bus Plc' & 'Bad Bus Plc'?
I will let others speculate on where the various Bus subsidiaries should be allocated!!
Except as he knows full well even the new Bus services Act specifically outlaws local authorities eg TFGM owning and running buses. Also, the CMA would never allow Stagecoach buying FSY.
 
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I'm speaking for First Essex, as it is the area I'm most familiar with.

Steve Wickers seems to have been drafted in to work through the (many) inefficiencies that First Essex has. North Essex (Chelmsford, Colchester areas) has already seen a lot of changes. South Essex (Basildon, Hadleigh) not so much, but I think a lot of changes will be made to the way South Essex operates over the next couple of years.

All of this will reduce costs, which seems to be the millstone around First Essex. Their turnover seems healthy at £50 million plus and is likely to increase with a large number of housing developments in Essex.

First Essex has been left to run itself largely until this year and some extent last year, which has allowed wastage to creep in as the market has changed. With someone to identify the problems (and I agree, there are many problems to be resolved at the moment, such as reliability, staffing and vehicle quality), First Essex could make a valuable contribution to it's current or any future owner.
 

overthewater

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Except as he knows full well even the new Bus services Act specifically outlaws local authorities eg TFGM owning and running buses. Also, the CMA would never allow Stagecoach buying FSY.

How does all those council owned company stay in business?
 

Volvodart

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If First can shift some of the bad parts to other companies ie just paying cost price for the assest, I would take the money and run. Since it get bad areas off its books and it wouldn't have deal with pay off etc.

There is still £98 million of goodwill on UK Bus. We have no way of knowing where this will be from.
 

TheGrandWazoo

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Except as he knows full well even the new Bus services Act specifically outlaws local authorities eg TFGM owning and running buses. Also, the CMA would never allow Stagecoach buying FSY.

I think that’s part of his point. That FGM would operate in a different manner to that and that the CMA would need to change their outlook or you’ll have a similar but larger scale Barnstable situation where instead of a sale, they pull out and it’s a worse situation anyway.
 

Volvodart

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They would have needed profits from elsewhere to cover the losses, or they would have been in the situation they are today a lot earlier.
 

Cesarcollie

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They would have needed profits from elsewhere to cover the losses, or they would have been in the situation they are today a lot earlier.

Yes - except goodwill is not a cash item. So although their profits would take a one-off hit, they would have a more profitable, leaner core going forward (with less capex required), and cash position would be neutral or better (since even if they only got asset value,subject to any finance, it would bring in cash). And importantly management would be more focussed.
 

TheGrandWazoo

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Yes - except goodwill is not a cash item. So although their profits would take a one-off hit, they would have a more profitable, leaner core going forward (with less capex required), and cash position would be neutral or better (since even if they only got asset value,subject to any finance, it would bring in cash). And importantly management would be more focussed.

True and they have had some one off hits in areas such as Northampton and Plymouth (and possibly some other sales or exits).

Guess the argument is whether they should have sold off more in 2013 but the prevailing view would be that most were good businesses but stifled by underinvestment and that they would trade better. That they didn’t foresee how things would go is one of the key criticisms.
 

winston270twm

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True and they have had some one off hits in areas such as Northampton and Plymouth (and possibly some other sales or exits).

Guess the argument is whether they should have sold off more in 2013 but the prevailing view would be that most were good businesses but stifled by underinvestment and that they would trade better. That they didn’t foresee how things would go is one of the key criticisms.

The big mistake First Group made under both Lockhead & Tim O'toole was retaining Greyhound (which always was non-core), and not selling it at a time whilst it still had good value/made decent profit margins and use the funds to pay down debt & re-invest in to the ailing UK Bus Division. Had they done this, they may have been able to avoid the rights issue which has also damaged the groups value. They are not looking to sell Greyhound when it's struggle against competition, profits are failing and we've yet to see any impact of competition from the latest new entrant Flixbus, if anyone is prepared to take Greyhound in full or part off their hands, valuations / offers will reflect this. Whilst Julian Peddle is a long standing industry professional and raises some good points, you need to remember that he's never been involved with any of the big bus groups, all his assets are small / low margin bus operations i.e. Select Bus Services, D&G, Midland Classic, Centrebus etc and has links with Arriva and has often purchased operations they are disposing.

I don't think FGP should have sold off London or Wigan in 2013, both were profitable ops with London being a good source of midlife buses for the poorer performing ops in the provinces. The problem for First is investors patience has run out, they want value extracting from the group assets, even under a revised turnaround plan it could still take years.....
 

Dentonian

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I don't think FGP should have sold off London or Wigan in 2013, both were profitable ops with London being a good source of midlife buses for the poorer performing ops in the provinces. The problem for First is investors patience has run out, they want value extracting from the group assets, even under a revised turnaround plan it could still take years.....

As a matter of (now, historic) interest, what was the thinking behind First buying Finglands from EYMS give their general financial standing? And at the risk of drifting off-topic, who else bid? Obviously, Stagecoach couldn't buy it, but from comments made locally at the time, Arriva must have bid.
 

Alexbus12

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The big mistake First Group made under both Lockhead & Tim O'toole was retaining Greyhound (which always was non-core), and not selling it at a time whilst it still had good value/made decent profit margins and use the funds to pay down debt & re-invest in to the ailing UK Bus Division. Had they done this, they may have been able to avoid the rights issue which has also damaged the groups value. They are not looking to sell Greyhound when it's struggle against competition, profits are failing and we've yet to see any impact of competition from the latest new entrant Flixbus, if anyone is prepared to take Greyhound in full or part off their hands, valuations / offers will reflect this. Whilst Julian Peddle is a long standing industry professional and raises some good points, you need to remember that he's never been involved with any of the big bus groups, all his assets are small / low margin bus operations i.e. Select Bus Services, D&G, Midland Classic, Centrebus etc and has links with Arriva and has often purchased operations they are disposing.

I don't think FGP should have sold off London or Wigan in 2013, both were profitable ops with London being a good source of midlife buses for the poorer performing ops in the provinces. The problem for First is investors patience has run out, they want value extracting from the group assets, even under a revised turnaround plan it could still take years.....

I wouldn't say Wigan was that profitable if at all. I heard that the Monday morning 135 trips took more cash than the whole Wigan operation on a monday under First Manchester
 

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