First Group: General Discussion

[TheGrandWazoo]

The property sales are just Greyhounds, where they move out of downtown sites that are costly to operate and move to less expensive sites more suited to today's operations.

Exactly. Before people get too excited, these are just a rationalisation of the property portfolio. They are "simple" sale and leaseback deals, looking to realise as much value as possible and reduce the cost base (so it gets closer to a Megabus style operation).

Until more property sales and, more importantly, actual divestment of US operations occur then I wouldn't get too excited.

 

[baza585]

Exactly. Before people get too excited, these are just a rationalisation of the property portfolio. They are "simple" sale and leaseback deals, looking to realise as much value as possible and reduce the cost base (so it gets closer to a Megabus style operation).

Until more property sales and, more importantly, actual divestment of US operations occur then I wouldn't get too excited.

True but it does indicate the value that may be locked up in Greyhound.

On the other hand, it does make me question what the management have been doing all these years..........

 

[Volvodart]

People have been saying this for years. Firstgroup may not have done it because the sale of Greyhound was always on the cards and they thought (wrongly) that these would sweeten the deal.

 

[TheGrandWazoo]

People have been saying this for years. Firstgroup may not have done it because the sale of Greyhound was always on the cards and they thought (wrongly) that these would sweeten the deal.

You may be right. They have disposed of the odd property over the years incl one in San Jose that provided a one off benefit. Might be a reflection that rather than using the property to support the sale, they simply divest the property and get away from expensive bricks and mortar to rightsize the business for sale?

 

[overthewater]

However they never wanted to sell US operations did they? That us back to the original question why the old managers like Tim never did this to help cut the loses?

 

[TheGrandWazoo]

However they never wanted to sell US operations did they? That us back to the original question why the old managers like Tim never did this to help cut the loses?

Didn't Souter make an offer that Lockhead turned down (as he wanted more)?

That Greyhound didn't try to become asset light such as Flixbus and Megabus is a very good question but not one that we have an answer to!

 

[Volvodart]

There must be some reason for the increasing numbers of property sales and potential forthcoming sales when it became apparent that Greyhound could not be currently be sold.

 

[winston270twm]

Didn't Souter make an offer that Lockhead turned down (as he wanted more)?

That Greyhound didn't try to become asset light such as Flixbus and Megabus is a very good question but not one that we have an answer to!

Yes, that's correct, Stagecoach offered circa £750 million Iirc. Lockhead foolishly thought it was worth more & only have his eye's on being the biggest UK based Transport Group, this also included making a takeover offer for NX Group with all it's £1.2 Billion debt in June 2009 on top. Luckily, NX rejected the offer.

I expect the actual Greyhound business is now worth very little as a complete entity, however, hiving off & selling some of property portfolio seems to generating some decent amounts of cash. The Los Angeles sale seems to have been very profitable.

 

[TheGrandWazoo]

Yes, that's correct, Stagecoach offered circa £750 million Iirc. Lockhead foolishly thought it was worth more & only have his eye's on being the biggest UK based Transport Group, this also included making a takeover offer for NX Group with all it's £1.2 Billion debt in June 2009 on top. Luckily, NX rejected the offer.

I expect the actual Greyhound business is now worth very little as a complete entity, however, hiving off & selling some of property portfolio seems to generating some decent amounts of cash. The Los Angeles sale seems to have been very profitable.

Arguably, we're seeing a little of this in the UK where NX sold off Liverpool and moved into the bus station to become more asset light, and in some cases, moving to roadside stops as per Megabus.

I suspect that you're right in that the goodwill element of Greyhound is pretty low given the asset impairment that they undertook a couple of years ago, and that the property is where it's at. In fact, the last annual report said so

£186.9m of impairments in the carrying value of the assets, partially offset by property disposals. Following the further impairment and the effects of IFRS 16, Greyhound is carried at a cash generating unit value of £188.7m ($235.2m). The net book value of £(156.3)m ($(194.7)m) is stated after £172.4m ($214.8m) for pensions deficits under IAS 19 and £111.4m ($138.8m) relating to the self-insurance reserve provision. The impairment has been recognised in the results on a pro-rata basis against the assets of the division excluding property. The valuations in excess of book value suggest no impairment to the carrying value of Greyhound’s property

The property disposals in that year realised an $8.3m benefit, mainly from the Richmond, VA site being sold (again looking like a sale and leaseback).

 

[winston270twm]

Arguably, we're seeing a little of this in the UK where NX sold off Liverpool and moved into the bus station to become more asset light, and in some cases, moving to roadside stops as per Megabus.

I suspect that you're right in that the goodwill element of Greyhound is pretty low given the asset impairment that they undertook a couple of years ago, and that the property is where it's at. In fact, the last annual report said so

£186.9m of impairments in the carrying value of the assets, partially offset by property disposals. Following the further impairment and the effects of IFRS 16, Greyhound is carried at a cash generating unit value of £188.7m ($235.2m). The net book value of £(156.3)m ($(194.7)m) is stated after £172.4m ($214.8m) for pensions deficits under IAS 19 and £111.4m ($138.8m) relating to the self-insurance reserve provision. The impairment has been recognised in the results on a pro-rata basis against the assets of the division excluding property. The valuations in excess of book value suggest no impairment to the carrying value of Greyhound’s property

The property disposals in that year realised an $8.3m benefit, mainly from the Richmond, VA site being sold (again looking like a sale and leaseback).

It would be good to see First Group use some of the sale proceeds to not only reduce debt but also strengthen their UK ops though small bolt on acquisitions for when the UK comes out the other side of the pandemic (that's if they're sticking with 'Plan B' & retaining them in lieu of full US disposal). If the US ops are eventually disposed of, whilst it should raise significant cash, the will also see a big drop in profits.

 

[overthewater]

They mist the boat in getting hold of Dundee, would have been prefect for them. I wonder if all these land sales might help reduce the debt thus making in Greyhound look better in the long run, and we might actually not see Greyhound sold off afterall?

 

[winston270twm]

They mist the boat in getting hold of Dundee, would have been prefect for them. I wonder if all these land sales might help reduce the debt thus making in Greyhound look better in the long run, and we might actually not see Greyhound sold off afterall?

Dundee isn't very profitable anymore, NX had already sold off Dock St depot & leased it back

I don't personally see Greyhound attracting much buyer interest, my most likely buyer would have been Flixbus, but they publicly said a while back there weren't interested.

 

[TheGrandWazoo]

They mist the boat in getting hold of Dundee, would have been prefect for them. I wonder if all these land sales might help reduce the debt thus making in Greyhound look better in the long run, and we might actually not see Greyhound sold off afterall?

I doubt if Dundee was remotely on their radar; they have more pressing issues in tackling some of the issues of the past. Quite a number of OpCos have received few if any new vehicles for 5 years and whilst the age profile does appear to be improving (or was before Covid), there is still work to be done. Then, of course, there is the ongoing reduction of debt as @winston270twm cited.

The asset impairment (writing down the value of Greyhound excluding the property) was aimed at enabling the sale of the business. The quotes from https://www.firstgroupplc.com/~/med...ions/press-release/20-07-08-fy20-fgp-rnsa.pdf would support that?

• "Working with management and supported by independent advisers, the Board formally reviewed the various options to maximise value for all shareholders (acknowledging that a sale process for Greyhound was already underway) and formally announced in December 2019 that the Group would explore all options in respect of our North American contract businesses, First Student and First Transit, including a potential disposal"
• "A sale process in respect of Greyhound is ongoing and we will update the market as appropriate."
• "The valuations in excess of book value suggest no impairment to the carrying value of Greyhound’s property."
• "We have assessed the value of Greyhound under a Fair Value Less Cost To Sell (FVLCTS) approach, rather than the IAS36 Value-in-Use method applied to our other trading Divisions and in the prior year. This approach considers the value that a potential Market Participant may ascribe to Greyhound, including recognition of significant unrealised property values in the Greyhound portfolio. "

Greyhound is going, one way or another.

 

[Surreyman]

Oh to be a fly on the Finance Directors wall!
Will they pay down debt? (Interest rates have never been lower, so maybe this isn't a priority)
Invest in the business? (Low emission buses needed)
Fund the DB pension scheme?

 

[chopperman21]

69387 is one of four Volvo B7RLE Wright Eclipse Urban's now active at Slough featuring the new Route 4 orange branding. Unfortunately when the photo was taken the bus was on the Route 7 and not even reaching Heathrow.

 

[Robertj21a]

Oh to be a fly on the Finance Directors wall!
Will they pay down debt? (Interest rates have never been lower, so maybe this isn't a priority)
Invest in the business? (Low emission buses needed)
Fund the DB pension scheme?

Yes, interesting times. Is there any First Op that *must* have extra low emission buses at present?

 

[carlberry]

Yes, interesting times. Is there any First Op that *must* have extra low emission buses at present?

Leicester, Bath (March), Worcester (Service into Birmingham), Leeds??

 

[TheGrandWazoo]

Yes, interesting times. Is there any First Op that *must* have extra low emission buses at present?

@carlberry has mentioned some. I think Leeds is both an LEZ and a new vehicle commitment as part of their partnership agreement

Don't know about the Sheffield CAZ. Most of the others seem to have been sorted through some upgrading of existing fleet or moving stuff around (like the Streetlites from Worcester to Leicester)

Oh to be a fly on the Finance Directors wall!
Will they pay down debt? (Interest rates have never been lower, so maybe this isn't a priority)
Invest in the business? (Low emission buses needed)
Fund the DB pension scheme?

There is a £350m bond due for repayment in April. Apparently £250m will come from a new bridging loan and the remainder from an accordion facility. Think they might wish to reduce the bridging loan as much as possible even with lowish rates.

 

[Volvodart]

Greyhound is going, one way or another.

The thing that is holding up the Greyhound sale is a "legacy issue". I presume it is some type of liability. As they have never announced Greyhound cannot be sold, they must be going to deal with it somehow. It could be time limited, or perhaps the property sales are to enable them do something about it so a sale can go ahead.

 

[Robertj21a]

Leicester, Bath (March), Worcester (Service into Birmingham), Leeds??

Leicester is now sorted and the Worcester buses on their few Birmingham trips should be ok too. Hasn't Leeds dropped their low emission requirements?

 

[AB93]

Leicester, Bath (March), Worcester (Service into Birmingham), Leeds??

York (complex but you have to be in the process of upgrading) and London for Slough.

 

[TheGrandWazoo]

Leicester is now sorted and the Worcester buses on their few Birmingham trips should be ok too. Hasn't Leeds dropped their low emission requirements?

Leeds has dropped the CAZ but there's still only about 200 of the expected 284 new vehicles that were due by end of 2020 now in service as part of the partnership deal.

 

[M803UYA]

York (complex but you have to be in the process of upgrading) and London for Slough.

Leicester is now sorted and the Worcester buses on their few Birmingham trips should be ok too. Hasn't Leeds dropped their low emission requirements?

It would also be possible for First to deregister the services going into those areas, should the cost of complying be identified as a barrier. New vehicles might not generate the desired financial return for those routes given that they're operating refurbished stock on most of those services.

 

[Robertj21a]

It would also be possible for First to deregister the services going into those areas, should the cost of complying be identified as a barrier. New vehicles might not generate the desired financial return for those routes given that they're operating refurbished stock on most of those services.

I thought Worcester's B7RLE 'Salt Road' vehicles for the Birmingham run were upgraded to Euro6 when refurbed ?

 

[baza585]

They mist the boat in getting hold of Dundee, would have been prefect for them. I wonder if all these land sales might help reduce the debt thus making in Greyhound look better in the long run, and we might actually not see Greyhound sold off afterall?

Why on earth would First want xplore Dundee? It was barely profitable pre COVID.

Frankly any purchase of an opco right now is a mammoth act of faith......

 

[winston270twm]

I thought Worcester's B7RLE 'Salt Road' vehicles for the Birmingham run were upgraded to Euro6 when refurbed ?

I think you're right or they've been upgraded since refurb in preparation

 

[507021]

Is anyone aware of what Olive Grove will be receiving to release the final B9s earmarked for Doncaster, please?

 

[TheGrandWazoo]

I think you're right or they've been upgraded since refurb in preparation

I think the refurb was done first and the retrofit to Euro VI is more recent.

 

[winston270twm]

Scandinavian fund EQT join race for First Group's US businesses​

Edward Thicknesse

First Group is selling a number of its US assets, including the Greyhound bus network. (Getty Images)
A Scandinavian fund has joined the bidding for transport operator First Group’s US assets, which are valued at £2.5bn.

Sky News reported that EQT Infrastructure made a $3.7bn bid for the First Transit and First Student in the days leading up to Christmas.

The fund, which is run by one of Scandinavia’s most powerful equity firms, joins a small number of bidders circling the assets.
Other interested parties are believed to include New York giant KKR and Apollo Global Management.
City AM has contacted First Group and EQT for comment.

The US assets were first put up for sale by First Group in March after a long-running campaign by investors.

Shareholders including Coast Capital had been urging the London-listed firm to spin off the businesses for over a year.
Chief executive Matthew Gregory said last month that First was “in discussions with a number of credible potential buyers who have a long-term perspective”.

Shares in the firm rose 8.5 per cent this morning on the back of the news, but remain markedly down on last year.

Looks as though a sale of First Student / Transit is getting closer:

Scandinavian fund EQT join race for First Group's US businesses : CityAM

 

[cnjb8]

First Bus reaches 1,000 Euro VI retrofit milestone - routeone

1,000 mid-life vehicles in the First Bus fleet have received retrofit work to achieve Euro VI emissions compliance, the group has announced.

www.route-one.net

1000 buses have been retrofited to Euro 6 emissions at First, it being a bus at Oldham.
The following divisions have:

• 231 at West Yorkshire
• 221 at West of England
• 165 at South Yorkshire
• 118 at Hampshire & Dorset incl. Berkshire
• 84 at Midlands
• 65 at York
• 46 at Glasgow
• 33 at Manchester
• 30 at Essex
• 7 at Scotland East

204 buses are being retrofitted by First in Scotland.
Notable exceptions are Cymru and Eastern Counties, are there any emission zones planned for Swansea or Norwich?