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First Group: General Discussion

TheGrandWazoo

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Essex has potential, but like you said, isn’t showing it. There is potential and you can see that with what smaller operators have done eg. Stephensons. The problem is that the council and First don’t promote or provide attractive, or decent public transport. These OpCos along with FSY and Eastern Counties are the ones that the big bosses don’t really care about because of monopoly power. First really need to unlock their potential.

FEC does seem to be better but, and you're right to cite Stephensons, Essex is a place where decent money can be made. I don't know First Essex really but it does seem immune from the good stuff that has been done elsewhere in the group. Why Giles and Co aren't agitating more, I don't know.
 
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TheGrandWazoo

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I thought the plan was to sale First as 4 lots? Surly that would have look good to some buyers?

DB aren't selling and now First aren't selling? Perhaps that's saying something.

Mind you, it does seem to undermine the claims of some who were saying that folks from <insert name of firm here> were measuring Caledonia depot for carpets etc ;)
 

DragonEast

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Coast certainly believe there's more value in the UK ops by keeping them than selling them off on the cheap. As I've said before, there are operations (like First Essex) that seem to have real potential and could do with learning what places like FSW and FWoE have done.
I'll cause yet more apoplexy, but my twitchiness has finally got the better of me. It isn't just (or even mostly) "learning what FWoE or FSW have done". Half of it is the transport investment in the road network and bus priority measures, and the different geography of Cornwall. (One of the reasons I holiday there is to get away to something different from the Essex suburbs). The incompetence of Essex County Council in transport, even exceeded by that of the regional Government transport office at Bedford, over decades, has to be seen to be believed. Even now the consultation A12 growth strategy fails to accommodate existing planned growth; and the A13 is even worse.

I agree that many First ops are now benefiting from strategies developed five years or longer ago (not least including FEC under two previous MDs). Waiting tried our patience, but we could see that one coming. (We even thought that EC had "had it" when chunks of their operations went to private operators who promptly doubled passengers before starting to grow themselves; whilst Essex were fattening). These things don't happen overnight. What were First Essex doing? Expanding, copying London, when with austerity everyone else in the Shires was pulling in their horns. First even gave them the ex-London management, to help the process along. They can't simply go into reverse by a click of the fingers. Indeed another poster really I think hit the nail on the head when they said something is wrong corporately throughout First. A strategy of "do as you please, but watch the bottom line" is, I think, asking for trouble. By the time we realise, it's too late. But back to First Essex; we have, and have had for years, depots struggling to cope day to day, a local management whose strategy to cope with congestion and rising passenger expectations is to pour more and more buses into the mix; and an MD and Board anxious to cut pvr and raise margins. Three levels, three competing agendas. Dysfunctional, is the polite word for it. First Essex can't operate their "network" (for want of a better word). Nobody else could, either (nor I suspect would be stupid enough to try). A bit of trimming round the edges doesn't begin to deal with it. Indeed since that is exactly where the future growth is, it looks like the opposite. But First Essex can't cope with the present. So never mind the future. (Just, in passing, what sort of business strategy is that?) Not that others haven't made the same mistake, too many of them in fact; but they either learned quickly that the Home Counties aren't London (whatever the passengers think it ought to be) or in the case of smaller bethren, went bust and learned the hard way. Perhaps First just never learned at all, or never had to. I'm accused of always being negative, so I suppose we have that to be thankful for. (I think Stagecoach who used to be my local operator called it right, but don't they (almost) always?)

Just for amusement I counted up the number of buses registering for the shrunken Essex on BusTimes. 336. Compare that to neighbouring Shire Operators over a similar area (not the whole of Arriva south east, before anyone makes the comparison, though). It's not a metropolitan area, lovely as it may sound for everyone to have a bus route (well allegedly) within 200m, or to have two (or even three) services to each suburb, or a mimimum inter urban frequency of half-hourly, or more frequent. Look at the buses and they're half empty, or usually more empty. And still on here we call for more commercial buses. Obviously Moir's legacy is alive and well. Surely at some point we should consider matching resources and demand? Occasionally I have had the nightmare that if I worked in First Corporate HQ (it'd never happen fortunately, thanks to mutual hatred) would I allocate new fleet to Essex, either? I think Stagcoach East do compare in fleet size, but mid and south Essex have nothing like Cambridge, or its attraction.

It wasn't so long ago that we had the Colchester operations manager (proudly?) boasting that he had more buses at his depot than they had ever had. I'm sure they can all say the same across the First Essex operations. Is that all there is to it?
 
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overthewater

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DB aren't selling and now First aren't selling? Perhaps that's saying something.

Mind you, it does seem to undermine the claims of some who were saying that folks from <insert name of firm here> were measuring Caledonia depot for carpets etc ;)

That all depends, if First weren't getting the price it wanted and any new buyer where wanting it on the cheap, any sell off would of course break down. I still Believe if First were offered a big sack of gold it would grab it and run leaving the troubles to any new party that wanted them. Of course with First Scotland - Aberdeen and west Lothian would have resulted in <insert name of firm here> wanting a cheaper price, and Glasgow still needs to invest in new buses for LEZ.
 

TheGrandWazoo

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That all depends, if First weren't getting the price it wanted and any new buyer where wanting it on the cheap, any sell off would of course break down. I still Believe if First were offered a big sack of gold it would grab it and run leaving the troubles to any new party that wanted them. Of course with First Scotland - Aberdeen and west Lothian would have resulted in <insert name of firm here> wanting a cheaper price, and Glasgow still needs to invest in new buses for LEZ.

Well, of course - that's a statement of the bleedin' obvious. If Rotala offered £220m for Oldham depot, I'm sure First would sell. If the offered £220k, they won't because of the write down. I mean, anyone can sell tenners for five pounds so of course they won't sell.

In terms of First's Scottish ops, don't see any clues that they are stepping away from the challenges that are there.
 

overthewater

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Who knows, I all know is I hope someone write a book about First group business case from 2011 - 2021. It would dam interesting read how it managed to this far.

Lets hope 2020 bring some further improvements across the broad for most parts of First empire.
 

Jordan Adam

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Well, of course - that's a statement of the bleedin' obvious. If Rotala offered £220m for Oldham depot, I'm sure First would sell. If the offered £220k, they won't because of the write down. I mean, anyone can sell tenners for five pounds so of course they won't sell.

In terms of First's Scottish ops, don't see any clues that they are stepping away from the challenges that are there.

I agree, 6-9 months ago i would've said a sale of the Scottish Ops was a slight possibility, however currently i cannot see it happening anytime soon. If anyone were to make an offer First would be expecting it to be very high, you're talking 10s of millions. They're not going to give the loss making ops away for a nominal sum (which is what i suspect some Local Authorities were hoping for), this again is the reason why i have found a "public buyout" for Aberdeen or Glasgow highly unlikely as soon as the proposals were announced, albeit for practically as long as i can remember Aberdeen City Council have banged on to Aberdeen Journals about their plans to take over bus operation in the city.

Although it may not seem it on the onset the Scottish Ops are doing quite well financially at the moment, Aberdeen has had a tough few years (Oil collapse, strike period etc) but has pulled through with the 2019-20 financial year figures expected to see us back making the profit, they're further expanding with FSE, new tour route in Edinburgh and Glasgow is seeing extensive investment. I think those facts speak for themselves.
 

ChrisPJ

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Does anybody have any insight into whether the assets of firstbus are actually greater than the debts, including the pension liabilitys?
 

winston270twm

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I think 'the markets' sussed out FGP a long time ago. One to always avoid other than to go 'short' from time to time.

Agreed, that's why the shareprice is in the basement.

Essex has potential, but like you said, isn’t showing it. There is potential and you can see that with what smaller operators have done eg. Stephensons. The problem is that the council and First don’t promote or provide attractive, or decent public transport. These OpCos along with FSY and Eastern Counties are the ones that the big bosses don’t really care about because of monopoly power. First really need to unlock their potential.

Don't forget Ensign Bus as well.

I very much doubt First Essex is being offered the investment / resources that even the best management could use to realise even some potential.

I'm also led to believe that what we read in the press surrounding First Glasgow today & UK Bus no longer being for sale, isn't necessarily what's really happening behind the scenes. Time will tell I guess.....
 
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ChrisPJ

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Share price is currently not bad relative to most of last five years. Compared to fifteen years it’s dreadful
 

winston270twm

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Share price is currently not bad relative to most of last five years. Compared to fifteen years it’s dreadful

126p not bad, it's only 41p above it's 2013 Rights Issue price of 85p and still no prospect of management being confident enough to re-instate a dividend.

The vast majority will still be deep in negative territory.
 

winston270twm

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DB aren't selling and now First aren't selling? Perhaps that's saying something.

Mind you, it does seem to undermine the claims of some who were saying that folks from <insert name of firm here> were measuring Caledonia depot for carpets etc ;)

Again, what we read in the press about DB not selling & going for a stock market flotation isn't necessary what potential suitors are being told.

Definitely with you on rail. SWR has been a disaster and lord knows where that will end up. TPE WAS a good franchise but they took far too many risks on it, with always accepting the greatest upside, in order to secure the renewal. Too early with West Coast to say.

I don't think anyone is expecting 20% margins in UK Bus. However, if you compare First to where the other major groups are, then they should be getting 9% not 7.5% but it has been going the right way and they are clearly now screwing things down. One of the routes that FWoE was the Severn Express with Stagecoach gleefully taking it on and now realising that they were losing a small fortune on it. On a macro industry level, I'm hoping that after the years of austerity that we have now seen the worst in the bus industry and that the government will actually support buses more.

BTW, Eastern Counties are getting their new deckers for Excel and that should allow for cascades across the fleet so that Norwich should end up with much less abysmal kit, and the only ancient stuff will be at GY and Lowestoft for the schools and Bernard Matthews stuff. They are also looking to invest in Norwich as part of a large bid for government cash.

Take your point on some other OpCos and clearly Worcester is being raided to enable Leicester to meet its LEZ. However, First are generally getting rid of the worst crud so if we fast forward by 6 months and the B7Ls are gone, and only a few 2002 or older deckers are left for low mileage work, that would be better than I can remember in First.

The point I was trying to illustrate re: the 20% margins, is over the past twenty or so years the highest earners within the industry have seen their margins halve, what's to say in the next 20 years that margin's of 5% will not become the best. UK Bus is generally in a spiral or decline across the country, there are only a few exceptions.

Yes, I've seen that FEC Excel is gaining a new fleet, that's just one corridor and a high mileage one at that, so I expect buses have to be more replaced more frequently than normal routes.

Yes Worcester is being raided of Euro 6 Streetlites for Leicester, whilst it's gaining 52/07/08 plate Citaro's + 59 plate B7RLE's for it's re-launched routes. It's largely happening due to years of under investment in the fleet. I wonder what proportion of First's fleet are Euro 5 & above (as new)

 
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TheGrandWazoo

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The point I was trying to illustrate re: the 20% margins, is over the past twenty or so years the highest earners within the industry have seen their margins halve, what's to say in the next 20 years that margin's of 5% will not become the best. UK Bus is generally in a spiral or decline across the country, there are only a few exceptions.

Yes, I've seen that FEC Excel is gaining a new fleet, that's just one corridor and a high mileage one at that, so I expect buses have to be more replaced more frequently than normal routes.

Yes Worcester is being raided of Euro 6 Streetlites for Leicester, whilst it's gaining 52/07/08 plate Citaro's + 59 plate B7RLE's for it's re-launched routes. It's largely happening due to years of under investment in the fleet. I wonder what proportion of First's fleet are Euro 5 & above (as new)


Indeed but margin erosion is a risk in any geography. Clearly Go Ahead and Rotala believe there’s potential in First’s mismanaged operations and I don’t blame them. GNW are already doing what First should have done and it’s not that capital intensive.

Whilst the Worcester “upgrades” have been using fleet 10/11 years old in the main, on those two routes, they are recording patronage increases. Obviously, they are cutting the off peak service back on the Salt Road north of Bromsgrove but looks the improved train service has really affected that. However, the southern half is showing what you can do with clever marketing and some refurbs.
 

DragonEast

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Agreed, that's why the shareprice is in the basement.



Don't forget Ensign Bus as well.

I very much doubt First Essex is being offered the investment / resources that even the best management could use to realise even some potential.

I'm also led to believe that what we read in the press surrounding First Glasgow today & UK Bus no longer being for sale, isn't necessarily what's really happening behind the scenes. Time will tell I guess.....
Agree that what we hear about is the bit of the iceberg we can see.

Perhaps we should compare the size and concentration of Stephensons and Ensigns (operational) bus bits with those of First Essex. A different animal. As I mentioned in an earlier post when FEC downsized the independents did what Eastern counties couldn't. Or what Eastern Counties could? I think that for both bus companies and humans, to chew and digest our food properly we need to take it in in bite-sized chunks. Even tfl breaks down its contracts into a manageable size.

First Essex chicken and egg: which comes first, the investment or the rationalisation? Currently, neither. I don't see anything changing, either. First have too many other pressing problems. Essex will continue supplying vehicles not taking them. Even looking just locally, how does the investment case stack up for Eastern Counties against Essex? I don't see much making its way south of Dedham. And if I was Steve Wickers I wouldn't want to see Eastern Counties suffering to save Essex, either. I'd want to maximise the overall benefit to First, and that means building on success, not failure.

That's where I hit my problem: I can think of myriad examples of route consolidation and creativity to try and make sure that passengers don't suffer unavoidably, but network-wide simultaneously seems a wholly different kettle of fish. With time and resources we can, I suppose, do anything. Do we have either?
 

buslad1988

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Perhaps we should compare the size and concentration of Stephensons and Ensigns (operational) bus bits with those of First Essex. A different animal. As I mentioned in an earlier post when FEC downsized the independents did what Eastern counties couldn't. Or what Eastern Counties could? I think that for both bus companies and humans, to chew and digest our food properly we need to take it in in bite-sized chunks. Even tfl breaks down its contracts into a manageable size.

Worth noting though the independents who took over where FEC left (Bury St Edmunds and King’s Lynn) have hardly been a roaring success. Norfolk Green/Stagecoach East ditched King’s Lynn and Stephensons appear to have lost interest in Bury with the ‘Breeze’ town network slimmed down run by a mish-mash of enviros.

First were probably right to ditch these places and focus on the larger towns in Norfolk/Suffolk. Guess they’re now trying a similar approach in Essex leaving Clacton etc. although should have been done years ago.

First are clearly keen to keep a grip on Norwich too with 55 brand new and 60+ refurbed/cascaded Buses promised if the government back a joint bid with Norfolk/Norwich councils for new and improved bus priority measures... which also re-inforces Firsts statement last year saying they’d only invest where local authorities are making the necessary improvements.
 

winston270twm

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Indeed but margin erosion is a risk in any geography. Clearly Go Ahead and Rotala believe there’s potential in First’s mismanaged operations and I don’t blame them. GNW are already doing what First should have done and it’s not that capital intensive.

Whilst the Worcester “upgrades” have been using fleet 10/11 years old in the main, on those two routes, they are recording patronage increases. Obviously, they are cutting the off peak service back on the Salt Road north of Bromsgrove but looks the improved train service has really affected that. However, the southern half is showing what you can do with clever marketing and some refurbs.

Go-Ahead are clearly far better managed & run compared with First Group and seem to be expanding nicely in Ireland, Singapore & German Rail etc

I just think First as a Group just needs putting down & put out it's misery. It does not work. I used to be a fan in the early 2000's, but it's just down the pan ever since.

There's two versions to the Salt Road cuts, management say it's because demand has dropped whilst Worcester staff on midlandred.net say it has been cut due to group enforcing Pvr cuts on Opoco's to boost margins, the Worcester 144 (Salt Road) is their largest Pvr route, there's very little else left to cut.
 

tbtc

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Well, of course - that's a statement of the bleedin' obvious. If Rotala offered £220m for Oldham depot, I'm sure First would sell. If the offered £220k, they won't because of the write down. I mean, anyone can sell tenners for five pounds so of course they won't sell.

I think that people keep missing this fact.

It's not (just) about which bits of First are the most profitable, it's about which bits of First could be sold at the best price (relative to the future earnings/value that First can squeeze out of them).

There may be some operations that are returning large sums in profit but it may be difficult for another company to squeeze any more out of them (over and above what First are doing), so - in a buyer's market - the price would only reflect that.

There are probably some operations where the current level of profitability masks the fact that there are a disproportionate number of ten year old buses that will require replacement before too long (or overdue overhaul of depot facilities etc), so they could be returning big money at the moment but there'll be big bills to come in the next few years which will seriously affect future profits.

Put it this way, if I am betting on Tranmere v Manchester United this weekend, I'm not betting on who I think is most likely to win because the markets will already have factored that kind of thing in (e.g. a quid on Manchester United might earn me thirtysomething pence whilst a quid on Tranmere will earn me enough for a round of drinks) - I'm betting on who I think is overpriced/underpriced - e.g. if I think that Tranmere have a twenty percent chance of winning then I'd take odds of 7/1 even though I know that Manchester United are favourites.

Or, for non-sports people - if you give me a million quid then you can have my house - I'll move out today. But if you offer me one million pence for it then I'd turn you down without a thought. Everything has a notional value - the things that you are prepared to sell are the ones where someone else's "value" - not necessarily the things that have the most absolute value or the least absolute value - just the difference between what I think it's worth and what someone else thinks it's worth.

So, which parts of First Group would attract the highest price on the open market relative to the price that First have in mind - that's the key thing here - First will have a price in mind, they'll know expected revenue/ costs/profits over the short/medium term for each OpCo - so the sales will be the ones where an OpCo is more valuable to Stagecoach/ National Express/ Arriva/ Go Ahead/ Rotola (etc) than First's "book" price.
 

EMU303

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You would think with the number of UK cities now pursuing LEZs and policies around restricting car access, that bus companies in general would be seeing opportunities for growth. Yes, shopping footfall has declined but surely some partnerships with councils would yield some growth? I guess these will be the focus areas for the companies going forward.
 

F Great Eastern

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However there has been indications and rumour in the trade in Ireland in recent days that First are now looking to sell off the company due to the difficult trading conditions that lay ahead.

They have come to the conclusion that the loss of stops at Dublin Airport, Brexit impacting cross boarder services, the impact of 24 hour competing Dublin Bus services starting up and the growth of Go-Ahead Ireland as the leading private operator in the state means the outlook for the business is extremely challenging and profitability will be hit in the short term and the value of the company is only going to reduce over the next short while.

On top of all the above issues, Aircoach has another one now.

National Express are to enter the Irish market and are the ones who will take the prime position of Aircoach outside Dublin Airport, having invested in another operator. Looks like National Express will be using the same model as the UK market, licensing the name but subcontracting operations.

They have been granted eight routes by the National Transport Authority, ones marked in bold will cause serious problems for Aircoach, when you consider that they have took Aircoach's prime spot outside terminal and will probably be serving much of the same area.

779 - Citywest to Dublin Airport
780 - Castleknock to Dublin Airport
781 - Tallaght to Dublin Airport
782 - Dublin City to Dublin Airport*
783 - Dublin City to Dublin Airport*
784 - Merrion Square to Dublin Airport*

785 - Fairview to Dublin Airport.
787 - Ballymun to Dublin Airport

The value of the company probably took another hit, hard to see them getting anything much for it now or even making it work by holding onto it. A quick exit at a knockdown price might be their best option, or perhaps selling off certain Dublin Airport routes and keeping the 2 intercity ones? Short term trading conditions are going to be extremely tough and I doubt First have the bottle or money to fight a long battle.

Winston - as our National Express expert, have you heard anything?
 

busguyuk

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Share price is currently not bad relative to most of last five years. Compared to fifteen years it’s dreadful
Are there any US sales proceeding at First? Greyhound was supposedly up for sale, but are there any whispers of progress there? First Transit would be a good saleable asset at the right price, so is there any sale ongoing for that? Then there's First Student which would probably be better sold as separate regional businesses to achieve the highest prices.
 

winston270twm

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On top of all the above issues, Aircoach has another one now.
National Express are to enter the Irish market and are the ones who will take the prime position of Aircoach outside Dublin Airport, having invested in another operator. Looks like National Express will be using the same model as the UK market, licensing the name but subcontracting operations.

They have been granted eight routes by the National Transport Authority, ones marked in bold will cause serious problems for Aircoach, when you consider that they have took Aircoach's prime spot outside terminal and will probably be serving much of the same area.

779 - Citywest to Dublin Airport
780 - Castleknock to Dublin Airport
781 - Tallaght to Dublin Airport
782 - Dublin City to Dublin Airport*
783 - Dublin City to Dublin Airport*
784 - Merrion Square to Dublin Airport*

785 - Fairview to Dublin Airport.
787 - Ballymun to Dublin Airport

The value of the company probably took another hit, hard to see them getting anything much for it now or even making it work by holding onto it. A quick exit at a knockdown price might be their best option, or perhaps selling off certain Dublin Airport routes and keeping the 2 intercity ones? Short term trading conditions are going to be extremely tough and I doubt First have the bottle or money to fight a long battle.

Winston - as our National Express expert, have you heard anything?

Not as regards NX entering the Irish market, but it would make perfect sense.

I understand there are potentially quite a few changes planned within NX Coach this year including taking more route in-house, there is also thought to be a bolt-on addition due to be added around March at last count.

Are there any US sales proceeding at First? Greyhound was supposedly up for sale, but are there any whispers of progress there? First Transit would be a good saleable asset at the right price, so is there any sale ongoing for that? Then there's First Student which would probably be better sold as separate regional businesses to achieve the highest prices.

Nothing! All still just talk to date, as per last year.
 

TheGrandWazoo

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Are there any US sales proceeding at First? Greyhound was supposedly up for sale, but are there any whispers of progress there? First Transit would be a good saleable asset at the right price, so is there any sale ongoing for that? Then there's First Student which would probably be better sold as separate regional businesses to achieve the highest prices.

They released a statement on 16th Dec

"The Board of FirstGroup (‘FirstGroup’ or the ‘Group’) has been clear that its intent is to realise value for shareholders and that it will actively manage the entire portfolio by all appropriate means.

Since his appointment as Chairman four months ago, David Martin has been actively engaged across the entire portfolio, working with management and supported by independent advisors, to review the various strategic options.

Following this review and having further validated whether the monetisation of these businesses would deliver material value enhancement for all shareholders, the Board has appointed advisors to formally explore all options in respect of our North American contract businesses, First Student and First Transit, including a potential disposal.

At our recent half-year results the Group updated on progress including the strengthening of its Rail business with the addition of West Coast Partnership, progressing the sale of Greyhound and the development of a framework for the First Bus pension scheme. We are actively addressing the cost base of First Bus through a comprehensive efficiency programme, the results of which will be substantially more evident in the second half of the year and beyond. Therefore, the Board determined that greater value will be achieved by delivering this margin enhancement prior to any launch of a formal sale process.

In the meantime, we continue to focus on the individual plans for each of our businesses, ensuring that customer commitments, investments, as well as growth and margin improvement plans are delivered.

We will keep the market updated on progress as appropriate."


Commenting, Matthew Gregory, Chief Executive said:

‘We have taken a number of important steps that will enable a rationalisation of the Group’s portfolio. Today’s announcement to formally explore all options to maximise value from our North American businesses reflects the resolute focus of the entire Board on realising value for all shareholders.’
 

Volvodart

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Firstgroup have appointed Rothschild to advise them about the strategic options of a sale of First Student and Transit. Citigroup have said a sale of Greyhound at about half the amount they wrote it down to at 31 March 2019 is expected, but I do not know how they arrived at this figure. This is about £30 million lower than the further provision made in the recent 6 months accounts.
 

overthewater

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So that's it then? First will become a british only bus operation then? I think TGW idea for rebranding it to Badgerline might be worth a good punt.
 
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