Agree about Potteries. Opportunity for a Company to start with a blank page to perhaps design/revise current routes to meet revised travel habits in Stoke. PMT was an institution in Stoke but that was until 30 years ago. Stoke has endured hard times but you should be able to run a decent profitable network. It may not resemble the past, but it could be it's future. Time for a change
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First Group: General Discussion
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Robertj21a
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The attraction of Potteries to a totally fresh operator is, quite simply, that it wouldn't then be First !. It's the poor service, drivers and general attitude of the First operations at Potteries that has contributed to where they are today - any brand new operator could benefit from selling themselves as 'We got rid of First' !!
Alexbus12
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There's rumours always circulating, but one is that by having the electric equipment based at that depot, it puts Arriva in a good position when either First hand the contract in early, or it's taken away from them.
DragonEast
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With something the size of Essex - over £50m income completely wiped out by the operating costs; I'll certainly be interested to see who has the magic wand to completely restructure the operation AND replace the fleet! It needs a bit more than tinkering a la First, surely? First obviously decided they couldn't keep on kicking the can down the road, and I'm not sure that anyone else wants to either. Most OpCo's have good bits or are improving and can potentially be cross subsidised. I'm not sure around Essex that anything is performing that well or that anyone has deep enough pockets, but we shall see. It'd be the easiest thing in the world to reduce the income and still end up lumbered with the excessive costs.
I did wonder in my wilder imaginings whether we should revert to pre-1968 with our love of going backwards; and put Home Counties buses under the control of TfL (with the road network; integrated transport, anyone?) whilst we're in the mood for changing democratic structures!
And save First (and Arriva) the bother.
TheGrandWazoo
Veteran Member
The cost of charging equipment is now much lower and can be relocated. It’s all inherently portable, much more than (for instance) a CNG fuelling system.
Baxenden Bank
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Same lacklustre middle management and operational staff though, whoever buys it!
Management buyout with a MD that has reduced the PVR from around 160 to around 94 in five years! Plus massive reductions in network coverage and evening / Sunday services.
Operational staff happy to create a 90 minute gap in service by running consecutive buses private from Hanley to terminus when only a few minutes late, no thought to run one out private and one out in service (and return private instead) to mop up the frustrated customers.
A strong laxative is required to clear things out, not a buyout.
TheGrandWazoo
Veteran Member
It feels more like a sale than an MBO. Perhaps a Rotala purchase - that would cheer you up!
Baxenden Bank
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I have no experience of Rotala, other than through this forum, where they seem to be rather loathed across the piece!
All that would cheer me up, bus-service wise, would be some kind of evening service so that I can have a social life. Even just a couple of buses up to 2100, Thursday/Friday/Saturday would be a significant improvement. However I regard that as extremely unlikely to ever happen. Current management seem wholly incapable of providing a different 'offer' on different nights (except strangely on the 32 on Saturdays). Any resources which came the way of the council would be immediately soaked up by the operators to support the current level of service rather than any enhancements.
I am reduced to generally taking the bus once per week (that's one bus, not a return). Walk to town, buy any essentials from the high street discounters, a couple of pints with the afternoon drinkers then back home before curfew kicks in at 1835 (last bus, not an electronic tag!).
If they want my money, they will have to provide me with a decent service.
Robertj21a
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A new operator (not a MBO) with a strong management team could quickly remove those middle managers and poor operational staff. It's not impossible, but it needs good people, and they're hardly likely to see Potteries as a career progression !
It's only by trimming back the services and pvr (about to reduce further I believe) that Potteries is just about keeping its head above water. I would guess that the only real alternative was to follow the approach taken at Northampton.
Robertj21a
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Catch 22. There's too little demand for evening services - which would, inevitably, just add extra costs.
Baxenden Bank
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Headline profit last year £10k. Stripping out the exceptionals, up to £1.9m profit from £17m turnover. Must go and see the bank manager tomorrow! It is the group problems, including pension deficits, which is destroying the business.
The PVR doesn't seem to change this time (but I haven't fully looked at it yet). Off-peak it's a three bus reduction, down to circa 91. The schedules become even more of a joke. 10 minutes to get from Cheadle Butlers Hill to Cheadle Nat-West bank - very attractive I don't think. 2 hours 40 minutes for the round trip on the 101. Lets see just how slowly we can drive the buses to kill off the remaining demand.
Anthony ross
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I don’t know why but I reckon Worcester will go to rotala
TheGrandWazoo
Veteran Member
I've said before that the Potteries has been fundamentally mismanaged in the past. How that translates into day to day operation these days is something that you'll know better. However, it's not helped by apathetic local authorities and a stagnant retail market.
What does the £1.9m of exceptionals relate to? How do you solve the pensions issue?
They aren't having buses and drivers sitting around for fun. If the journey times are extended that must be how long they think is necessary to run the service reliably. Passengers (and the traffic commissioner) would be very unhappy otherwise. It isn't fun when your bus sits for five minutes with the doors open at a random stop with no passengers (as seems to happen every time I use a particular route in Lancashire), but running on time is key to any transport operation.
freetoview33
Established Member
It's a good question about the pensions issue. I guess the idea is get rid of the loss makers then use any profit to pay down the deficit.
Or they could do it the sneaky way and hive off everything then leave 1 small operation with the deficit and let that go bankrupt.
bussnapperwm
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I don't think the competition authorities will allow it
I don't see why they shouldn't. The two companies don't really compete except for tenders, and Worcestershire was all First before they sold off the other bits to Rotala.
bussnapperwm
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Worcestershire had on road competition from Rotala in Worcestershire on a number of routes in redditch prior to the takeover of Kiddy and Redditch (IIRC that sale also got the competition authorities investigating)
Rotala will end up having all but a handful of routes in the entire county, plus will see prices in the tender network increase.
Personally I think NX would be a better fit for Worcester as they have experience in turning around loss making and barely profitable operations (see Merry Hill Minibuses as an example). Rotala will reduce service satisfaction and driver resignations will increase (see Bolton and Kidderminster as a example). Plus I don't want more Rotala on my doorstep (I have to see their Tividale streetlites and Kiddy random bus generator every day)
TheGrandWazoo
Veteran Member
You're absolutely right. Stagecoach took on the old GTL business in Liverpool and Brian Souter famously travelled incognito to see what he'd acquired and witnessed drivers' fiddling fares etc. Safe to say that the management team was updated (as was the fleet) and it's a much different beast these days.
We all know that the Potteries business didn't receive the TLC it needed for years; investment was minimal even before the Laidlaw deal. However, I don't think it's a pot of gold for anyone, just waiting for a slew of frequency improvements and additional evening services. Places like Tunstall and Burslem are, to be frank, on the bones of their a**e in terms of the high street footfall. The local authorities have been complicit in this by promoting out of town development. First have undoubtedly cocked things up and there are probably areas where they could and should have done better but for the most part, the problems in the area are a challenge for anyone.
As has been mentioned, there was a very modest profit but that is masked by the exceptionals. Of those, part is the hangover from Newcastle depot closing (and they're still on the hook for the sale and leaseback???) and part is the writing off of the ticket machine asset value when Ticketer was introduced. There's a profitable business in there for someone.
winston270twm
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I just can't seen all these proposed MBO acquisitions of parts of First UK bus lasting that long as independents, it wasn't the expected outcome. I would also beg to question why the likes of Bristol isn't attracting higher offers prices from the big groups like Go-Ahead or NX?? Unless it's because Kernow & Buses of Somerset would could with the package. Yes the local management teams know the businesses best, but the current climate doesn't favour smaller businesses / only large groups.
Another option once separated from First, could be that some of these MBO teams could look to join forces to create a bigger group to give them scale, which could also involved a merger / reverse takeover involving Rotala to provide greater scale / finance facilities.
TheGrandWazoo
Veteran Member
It does go against the general principles of business and the laws of duopoly (see mid 90s management degree teaching), not withstanding the constraints of the CMA.
However, we've seen the rise of Rotala and the demise of First and that of Arriva. We have a big 5 but in truth, two are up for sale, Stagecoach have limited ability to expand and whilst NatEx is often touted (and have been since 2012), they have tended to look elsewhere for growth opportunities.
In addition, we don't know what First value Bristol (or any of the other OpCos) at, what offers they received from suitors, and whether MBO's provide the best value? Appreciate that East Yorkshire sold up (but it was something of a curious case in many ways) but we see Rotala and Wellglade continuing. Also, we have a generation of bus managers who have been brought up within the entrepreneurial, deregulated world so not beyond the realms of possibility to see a management team like FSW's instituting some sort of MBO/ESOP.
markymark2000
On Moderation
Bigger companies may have put in offers but they have to keep these quiet due to stock market rules or because generally nothing is announced until it's confirmed. MBOs the word can get out quicker and First don't have to be wary about other groups shareholders.
Another tactic which could be being used is to try and increase the amount they earn for these areas by saying they have had MBO offers and then waiting for other companies to put in very high to avoid it going to management buy out. Kind of 'if you don't buy us, it will just become an independant' and no one wants more competition, lets be honest.
As for MBOs remaining independents, there are normally clauses in the contract which states you can't resell the business until after a certain amount of time. When that time is up, they may well be taken over by bigger groups but there doesn't seem to be much buying out of independants at the moment. That will be a case of long term wait and see.
winston270twm
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I'm just surprised at the number of potential MBO's, even the latest rumours surround Worcester are now MBO instead of NX.
Even Rotala know they need to be bigger to keep pace with the changing transport market going forward, i.e. continued budget cuts / falling passenger numbers / congestion & Euro 6 / clean air zones springing up left right & centre. that's why they're setting aggressive turnover targets of £300 million within 5 years. We all know there are independents that would like to sell out, but cannot get the asking price they desire, plus the number of potential operations for sale from the big groups is at it's highest level for some time. Unfortunately for First, it's a buyers market.....
Stagecoach is merely constrained by it's existing market share, but they may be ways around that using Souter Investments as a acquisition vehicle, Brain doesn't own a controlling stake in Stagecoach, he only owns 15%. Threadneedle Asset Management Ltd own more at 18% and are also now First Groups largest shareholder as well.
Regarding NX UK expansion, they have made acquisitions with in coaching in recent years i.e. Kings Ferry / Clarkes & Stewarts/Woods, plus very recently taken on 400 break vans with the ATG ops including Ring & Ride, so they are looking at UK expansion if terms are right. I still wouldn't rule them out for Glasgow & FWY
markymark2000
On Moderation
Like who? I can't see any independents who want out of the industry.
What it doesn’t say in that article (which has no reputable sources quoted) is whether the MBOs are clubbing together to make a bigger MBO consortium or all going it alone in their respective areas
TheGrandWazoo
Veteran Member
To be fair to Winston, I know of a couple that I'm reputably informed have been looking. No names, no packdrill
TheGrandWazoo
Veteran Member
It is a buyers market so perhaps that IS why an MBO may seem more attractive?
Stagecoach is constrained by its market share. Exactly what I was getting at. Now, if Brian Souter fancies setting up Highwayman Group (I think that was his original venture back in 1980?) then so be it but it still isn't Stagecoach.
I think we're both right in that NatEx have indeed made bolt on coach acquisitions and the ATG ops as well as Europe. The margins and the balance of risk and reward have been demonstrated. However, we've had a few years of potential sales in First, and whilst some have been mooted, none have yet to clear that hurdle. That's not to say that anything can be ruled out or in but it may answer why MBOs are being viewed as more desirable. Take RichWs point too - who's to say that we might not see a grouping of MBOs viz FWOE/Cymru as an example?
So you're saying that we might be seeing a lot of management buyouts from very large, country wide, organisations, possibly over a number of years. After a couple of years the stronger/earlier ones may start consolidating into bigger and bigger groups (some may chose transport names and some may chose animal names (hopefully ones the government isnt trying to kill off this time) and again, over time, some of these may get big enough to start taking an interest in other forms of transport or floating on the stock exchange.
I'm sure I've heard something like this before however, what could possibly go wrong!!
There has been a fairly steady flow of sales in recent years and others that have just given up. I suspect most of those would have sold up if there was any actual market. For most independants now if there inst a company like Reading locally that wants to expand (and is able to) your options are going to be fairly small. If you're a fair size your local big group company is unlikely to want to bother (given the CMA issues) and if you're small they're not going to offer a lot for a couple of bus routes. If you can find another group company that actually wants to expand it'll still be a case that the depot space is likely to be worth more than the rest of the assets and you might get more for the depot space as housing anyway and just giving up.
Jordan Adam
Established Member
To name one locally to myself... NW Nicoll Of Laurencekirk!