First Group Won't Abandon UK?

LNW-GW Joint · 30 May 2019

They have made a provision of £102.1 million for losses at SWR (70% share, the remainder lies with MTR).
Generally uncertain forecast for rail revenues, unsure of revenue growth even with new capacity.

Greyhound is to be sold, Bus UK is being separated out as a standalone business.
First will be more cautious with rail franchises as they see the risks outweighing the benefits.
It begs the question as to whether it would accept a new contract (eg West Coast Partnership) on the terms it has bid.
Meanwhile, it all depends on the outcome of the Williams review.
Full details and financial results here: https://www.firstgroupplc.com/investors/results-centre.aspx

“Although our UK rail franchise portfolio has generated £330.9m5 in adjusted profit with net cash and dividends to the Group over the last five years, we have concerns with the current balance of risk and reward being offered. We await the outcome of the Williams review as it seeks to address these and other industry issues. Any future commitments to UK rail will need to have an appropriate balance of potential risks and rewards for our shareholders

RailUK Forums

Japan0913 · 30 May 2019

If FirstGroup was disgusted with the British railway system,
Even if they win WestCoastPartnership, they may leave it all to Trenitalia and withdraw completely.

tiptoptaff · 30 May 2019

But they aren't, and won't be.

Brissle Girl · 30 May 2019

tiptoptaff said:
But they aren't, and won't be.

If you read the statement, it very clearly (in as much as these things are clear) states that they don't like the current risk/reward structure, and unless it changes post Williams review they are unlikely to participate in future tenders.
Which is not surprising given SWR has burned their fingers and they see other recent franchises similarly affected.

You could argue that the price they offer should simply be lower to rebalance the risk/reward. But the point is that other factors are out of their control, such as NR infrastructure, trends in commuting, general economic changes in passenger growth, pension risk, etc and that the current franchises don't have an appropriate mechanism to reflect these as the franchise evolves.

tiptoptaff · 30 May 2019

I read the (internal) email this morning. They will not be ready to let go of the GWR side any time soon. Too much been put in to it for that.

Brissle Girl · 30 May 2019

Isn't that just another Direct Award though, rather than a full blown tender for a long term?

tiptoptaff · 30 May 2019

At the moment, but they've taken the hit and dealt with the disruption of the prolonged upgrade. They want to see the benefits.

HH · 30 May 2019

They are getting rid of Greyhound and UK Bus (good luck with those) and obviously sending a message on rail.

Fact is that most of the bidding groups are nervous with the amount of risk they are being asked to cover, much of it over which they have little control. I note that the DfT policy on this is in direct contravention to the recommendations in the Brown Report.

Bletchleyite · 30 May 2019

HH said:
They are getting rid of Greyhound and UK Bus (good luck with those) and obviously sending a message on rail.

Fact is that most of the bidding groups are nervous with the amount of risk they are being asked to cover, much of it over which they have little control. I note that the DfT policy on this is in direct contravention to the recommendations in the Brown Report.

It reads to me that they're basically abandoning the UK - the bit on UK Rail says essentially that they won't return the keys or breach franchise terms, but that they may not stick around much longer.

A very interesting (effective) end to a business born out of a Scottish bus company!

F Great Eastern · 30 May 2019

The way I read that about UK rail is essentially then putting the DFT on warning that something has to change. The UK Government is not exactly in the best state at the moment and the last thing they need is another crisis, so I think that First are using this as leverage here.

It is going to be rather weird however that in the future we could be looking at a Scottish company whose core asset is running yellow school buses in the United States of America whilst having virtually zero presence in the UK!

jagardner1984 · 31 May 2019

I wonder if this is as much a message to other bidders than to DfT. we know Stagecoach are pisses off. We know First are struggling. Numerous recent examples

Perhaps there is an element of “if we all say this is sh*t, DfT will have to change course. They don’t really risk renationalisation which would be politically untenable for a Tory government, so by working indirectly together they can effectively force DfT to change.

talltim · 31 May 2019

I don’t get the impression that the pushy investment company care about the DfT, they just see rail in the U.K. as far too risky for the low return on investment.
By their nature they are looking for a quick return on their investment in shares, which for a transport company like First, which at best can only make slow and steady profit, can only come with major restructuring to raise share prices (and damn any other consequences)

Robertj21a · 31 May 2019

talltim said:
I don’t get the impression that the pushy investment company care about the DfT, they just see rail in the U.K. as far too risky for the low return on investment.
By their nature they are looking for a quick return on their investment in shares, which for a transport company like First, which at best can only make slow and steady profit, can only come with major restructuring to raise share prices (and damn any other consequences)

The key problem being that, as a PLC, First Group should be rewarding share holders with a dividend. The fact that they are still in a financial mess is why the 'vultures' are now circling.

Jorge Da Silva · 31 May 2019

Apparently first group has pulled out of west Coast Partnership franchise.

https://www.thetimes.co.uk/article/chinese-may-profit-as-bidders-back-out-of-hs2-running-8rc9pzx2j

When George Osborne was running the Treasury, his love-in with the People’s Republic led some to suggest that in a perfect world he wanted the Chinese to fund, build and operate the £55 billion HS2 line between London, Birmingham and the North.

After the latest intervention by a train operator in the unfolding crisis on the railways, at least part of that could come true. First Group appeared to declare itself a non-runner to operate HS2 because of “concerns with the current balance of risk and reward” being offered in train franchises being tendered by the Department for Transport.

This is after another bidder, the consortium of Virgin Trains, Stagecoach and SNCF, became so disenchanted that it is taking Chris Grayling, the transport secretary, to judicial review. That leaves just one bidder — a consortium of MTR of Hong Kong and the Guangshen Railway Company.

With National Express having already taken its leave and Stagecoach, Arriva and now First Group expressing unwillingness to bid, it appears that only state-backed foreign rail operators, such as the Chinese or the Dutch Abellio, are prepared to operate British trains. The situation is supposed to come to a head with the findings of a review by Keith Williams, Royal Mail chairman, to be published in the autumn. That will be the 12th report on the privatised railways in their 22-year existence. Many believe it is destined for a space with the other 11 on a dusty shelf in the Department for Transport.

whhistle · 31 May 2019

Brissle Girl said:
If you read the statement, it very clearly states that they don't like the current risk/reward structure, and they are unlikely to participate in future tenders.

Yet they want to start a new London - Edinburgh open access operation?
Doesn't look like they want out of railways, although I expect them to only bid for the long distance ones rather than local lines in the future.

pdeaves · 31 May 2019

"First Group appeared to declare itself a non-runner to operate HS2 because of “concerns with the current balance of risk and reward” being offered in train franchises being tendered". Does this mean 'pulled out' or has someone read in too much? Surely the statement about risk/reward merely means that First is being more cautious, not giving up.

F Great Eastern · 31 May 2019

Seems a case of someone adding 2+2 and coming up with 5 to me.

Brissle Girl · 31 May 2019

whhistle said:
Yet they want to start a new London - Edinburgh open access operation?
Doesn't look like they want out of railways, although I expect them to only bid for the long distance ones rather than local lines in the future.

Open access doesn’t have all the pitfalls current franchises would appear to have. Although a few trains a day to Edinburgh is not going to generate the volume of income/profit to keep the rail division afloat in isolation.

hiall · 1 Jun 2019

There are a good few leaving scotrail drivers leaving to join first FTE as the business looks to expand its operations. After this I am wondering now if this move is A good one and will their jobs be in a precarious position......

Robertj21a · 1 Jun 2019

Brissle Girl said:
Open access doesn’t have all the pitfalls current franchises would appear to have. Although a few trains a day to Edinburgh is not going to generate the volume of income/profit to keep the rail division afloat in isolation.

.....and just maintaining a small rail presence in the UK when/if they don't have any other rail operations at all would seem a strangely odd thing to do (but this is First Group we're talking about).

LNW-GW Joint · 1 Jun 2019

The front line staff haven't anything to worry about.
If First fail or back out of a franchise, somebody else or DfT will take over.
The service will still need to be delivered.
They show no signs of throwing in the towel on existing franchises anyway.

coppercapped · 2 Jun 2019

Robertj21a said:
.....and just maintaining a small rail presence in the UK when/if they don't have any other rail operations at all would seem a strangely odd thing to do (but this is First Group we're talking about).

First Group also owns Hull Trains so together with the Edinburgh operation the two companies would be of a size that is viable. What is more both the Hull and the Edinburgh operators use the same main line - it would not be geographically separated - and could share many overheads.

Such a solution would allow First Group to maintain a foothold in the UK railway scene. Of course it may wish to divest itself of the operation - as a going concern I suspect it could well find a taker or could be the subject of a management buyout.

Japan0913 · 3 Jun 2019

Arriva takes franchise leak claim to court
https://twitter.com/railnews/status/1135499257794813954
https://www.railnews.co.uk/news/201...im.html?utm_source=dlvr.it&utm_medium=twitter

These recent articles are rivals' attempts to aggravate the FirstGroup's position just before the WestCoast Partnership's June winners are announced?

LOL The Irony · 3 Jun 2019

Japan0913 said:
These recent articles are rivals' attempts to aggravate the FirstGroup's position just before the WestCoast Partnership's June winners are announced?

No, It's because of the DfT leak of Stagecoach's EM bid to Abellio.

gimmea50anyday · 3 Jun 2019

hiall said:
There are a good few leaving scotrail drivers leaving to join first FTE as the business looks to expand its operations. After this I am wondering now if this move is A good one and will their jobs be in a precarious position......

Funnily enough, a number of Newcastle based TPE drivers have jumped ship to LNER, while a number of T&W Metro drivers have joined TPE.

coppercapped said:
First Group also owns Hull Trains so together with the Edinburgh operation the two companies would be of a size that is viable. What is more both the Hull and the Edinburgh operators use the same main line - it would not be geographically separated - and could share many overheads.

They do this already in that HT's control is staffed by TPE at Ashburys ROC while payroll is managed by GWR in Bristol. Wether the control aspects move to York ROC when the Edinburgh OA service starts or if first lose TPE I cannot comment on although logically it would make sense...

Personally I think merging hull with GC and First Edinburgh would make financial sense, with a common pool of trains and associated resources. Train paths could be shared which has been mentioned before along with cost savings by pooling services such as cleaning, servicing etc...

Japan0913 · 19 Jun 2019

Activist investor misses the bus for FirstGroup board nomination
Coast Capital wanted David Martin to stand for election, but his paperwork was not received before the deadline.
June 19 2019 © Belfast Telegraph
https://www.belfasttelegraph.co.uk/...for-firstgroup-board-nomination-38234022.html

An activist investor in rail and bus business FirstGroup has failed to file the correct paperwork as part of an attempt to force out six directors, including the chief executive.

Coast Capital, which has a 9.7% stake in First, had demanded a special meeting of shareholders for June 25 to vote seven hand-picked candidates on to the board.

But one nominee – David Martin, former chief executive of transport firm Arriva – failed to submit a so-called “consent” letter showing that he agrees to stand for the board position.

A source close to FirstGroup said: “Despite having since May 10, and despite the six other consent letters being received, there has been no letter of consent from Mr Martin.

“We can only assume there never was a letter and he does not want to be considered, but that is a matter for Mr Martin and Coast.”

Coast previously said that it wants FirstGroup to split its US and UK business and remove itself from Britain’s rail industry, where it operates Great Western Railway, South Western Railway (SWR) and TransPennine Express.

But FirstGroup has claimed Coast is “rooted in the past” and simply wants to “seize control of a UK-listed plc without paying a premium”.

One of Coast’s star turns, whom activists have lined up as the next chairman, is 74-year-old former Tory transport minister Steve Norris.

Since Coast first launched its assault, FirstGroup has decided to sell its US Greyhound bus business and is looking to separate its UK bus group, although bosses insisted the decision is nothing to with the activist pressure.

FirstGroup said: “The company has not received any such confirmation from one of the Coast nominees, Mr David Martin, of his willingness to be appointed as a director of the company.

“Accordingly, that Coast nominee, Mr Martin, is not eligible to be appointed as a director of the company at the general meeting.”

Will the issue of First Group be settled in Coast Capital's solo play?

Astradyne · 19 Jun 2019

As I understand it David Martin is part of one of the parties looking to take over Arriva ... get his old job back! Assume that is where he is funnelling his efforts.

KashmireHawker · 25 Jun 2019

Today is the EGM at 2:30pm; all the suggestions are it’s going to be a tight vote.

And if the incumbents win, First will probs tomorrow/Thursday be awarded the West Coast Partnership as a result.

Robertj21a · 25 Jun 2019

If so, that could yet be the final nail in the First coffin.

LNW-GW Joint · 25 Jun 2019

First Group directors have seen off the challenge from Coast Capital, according to the BBC.
So maybe we are all set for the WCP franchise award (assuming First are happy to sign a contract).

PS But the chairman resigned after the meeting...
Doesn't sound like a happy ship.

First Group Won't Abandon UK?

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