First Group: General Discussion

[winston270twm]

https://www.telegraph.co.uk/business/2019/05/18/activist-steps-attack-call-firstgroup-sliced-two/

Coast to hand Chinese the keys to West Coast, Britain's most profitable train franchise

An activist hedge fund is poised to step up its attack on FirstGroup, issuing a set of radical demands that include slicing the company in two and ordering the transport giant to quit Britain’s railways.

Coast Capital Management, the company’s biggest shareholder, will ratchet up pressure this week with the publication of a five-point turnaround plan in a bid to wrest control of the boardroom and FirstGroup’s strategy.

The company’s exit from the railways could have serious consequences for domestic ownership, leaving just one major UK operator, and effectively handing control of the west coast mainline to the Chinese state.

“We believe that the company needs to exit the rail business because it’s a dark hole for capital,” said James Rasteh, Coast’s chief investment officer.

The plans, entitled “Restoring FirstGroup” and seen by The Sunday Telegraph, will be published by Coast tomorrow. They call for the UK and US arms to be separated, the pension scheme to be overhauled, assets to be sold and a dividend reintroduction.

Last week Coast requisitioned an extraordinary general meeting to remove six directors and replace them with seven new board members, including Steve Norris, the former transport minister; David Martin, the ex-boss of Arriva; and Bob Stefanowski, the US corporate heavyweight who is the former chairman of private equity giant 3i.

Mr Norris, put forward to replace current chairman Wolfhart Hauser, told The Telegraph that FirstGroup had become a “zombie business”. He said that the first question he would ask of management would be: “Tell me why I wouldn’t get out of UK rail.” The ex-Tory MP also blasted FirstGroup’s bid to run the west coast main line, on which some High Speed 2 services are scheduled to run, as “absurd”.


If the operator were to walk away from the current tendering process, a consortium led by state-owned Guangshen Railway Company would be the only remaining bidder.

FirstGroup operates the largest network of student transportation in North America. It also runs municipal bus services in the US as well as the troubled Greyhound coach chain.

A geographical separation could generate up to £3bn of capital, which could be used to reinvest, pay down debt, plug a troublesome pension deficit and restart paying dividends, Coast claims.

FirstGroup said last November that a burgeoning pension deficit hampers efforts to sell off some assets. Coast has hired consultancy XPS Pensions to assess matters. It believes that a change in pension investment policy and a £100m injection would be sufficient to “neutralise” the deficit.

The prospect of FirstGroup exiting the railways will further complicate a crisis facing Chris Grayling, the Transport Secretary. National Express, once one of the biggest train operators, quit in January 2017 to concentrate on bus services. Stagecoach and Sir Richard Branson’s Virgin Trains were effectively kicked off the railways last month after bids to run franchises were deemed “non-compliant”.

This leaves Go-Ahead, the troubled owner of the Govia Thameslink network, as the only remaining major UK-listed company. Coast’s five-point plan will be critical to convincing investors to back its motion at an extraordinary general meeting. One shareholder said that on “face value” the board overhaul seemed helpful. “But until we see the [strategic] details it’s hard to say”.


Damian Brewer, of broker RBC Capital Markets, said there is now a “50/50 chance break-up could happen”.

FirstGroup declined to comment on Coast’s proposals. Last Monday, a spokesman said: “The board are focused on delivering shareholder value and are confident that the company has the right team with the right experience and plans in place to do so.”

 

[TheGrandWazoo]

https://www.telegraph.co.uk/business/2019/05/18/activist-steps-attack-call-firstgroup-sliced-two/

So Winston, when I said on Tuesday....

They could just split the US ops from U.K. and float it off (demerge) as an IPO. Even within that, they could (as Winston has argued) sell Greyhound off separately either with its properties or without.

Given the mess Grayling is in, could be the time to renegotiate or exit UK Rail too.

...wasn’t that far off. The pensions bit is interesting.

 

[winston270twm]

So Winston, when I said on Tuesday....

...wasn’t that far off. The pensions bit is interesting.

Nope, you must be getting your inspiration from me....

Calm before the storm me thinks. CC are digging in & cranking up the pressure.

 

[TheGrandWazoo]

Nope, you must be getting your inspiration from me....

Calm before the storm me thinks. CC are digging in & cranking up the pressure.

Undoubtedly, they have a strategy with the increased shareholding, Rasteh making highly personal attacks, “Shagger” Norris (as he was known) also entering the fray, the website going live.

Standard activist investor stuff and they have just started.

 

[Surreyman]

Undoubtedly, they have a strategy with the increased shareholding, Rasteh making highly personal attacks, “Shagger” Norris (as he was known) also entering the fray, the website going live.

Standard activist investor stuff and they have just started.

Fingers crossed and hoping!
Probably come to nothing, still at least it will pile further pressure on the board.

 

[winston270twm]

Undoubtedly, they have a strategy with the increased shareholding, Rasteh making highly personal attacks, “Shagger” Norris (as he was known) also entering the fray, the website going live.

Standard activist investor stuff and they have just started.

I'd love to be a fly on the wall in FGP's boardroom. Looks like the landscape of UK based transport groups could be changing this year with Arriva sale & potential First Group breakup / divestments etc.

 

[TheGrandWazoo]

I'd love to be a fly on the wall in FGP's boardroom. Looks like the landscape of UK based transport groups could be changing this year with Arriva sale & potential First Group breakup / divestments etc.

You're right - this is also one of the issues that CC are neglecting to address. If someone is looking to buy lumps of a transport group, Arriva may prove to be more attractive in many ways? Hence why I suggested that an IPO for the US bit (and flogging off Greyhound and cashing in on the property) might have to be the way to split the group.

 

[overthewater]

Could the sods lump the UK operations with the debt?

 

[winston270twm]

You're right - this is also one of the issues that CC are neglecting to address. If someone is looking to buy lumps of a transport group, Arriva may prove to be more attractive in many ways? Hence why I suggested that an IPO for the US bit (and flogging off Greyhound and cashing in on the property) might have to be the way to split the group.

FGP could really do with retaining say 70-75% & only selling 25-30% stake in a US IPO. It may be the most valuable part of the group, but it is also where the bulk of the profit for comes from.

Even without a large chunk of debt, the UK bus op will take a long time to turnaround, if at all.

 

[Robertj21a]

Could the sods lump the UK operations with the debt?

I would have thought that new owners of any company can do whatever they like (subject to the law, and shareholder approval if/where necessary).

 

[DragonEast]

So perhaps we know where First Group are coming from, they're betting the farm on the Government and the Mayors to get rail and the local transport policy respectively, right. I suppose an optimist could take the view that we've been trying for long enough, so eventually they must get something right on a sort of law of averages, surely??? Or perhaps putting it another way, saving the skin of a politician is a good idea which will bring its own, long term, rewards. I'm not a gambling man but I wouldn't bet on it.

As for Coast Capital, they don't believe any of it. Join the club.

I suspect that leisure (and perhaps even commuter) travel is going the same way as casual dining/selling clobber/DiY etc. from something on which you just can't lose money to something on which you have to work hard to make it. First just aren't prepared for this climate change. Certainly, and frankly rather unexpectedly, one of the biggest changes I've found since retirement is NOT traveling for the sake of it. Increasingly I look for an excuse not to, and perhaps it wouldn't take many of us to have a disproportionate impact? (Of course it may well be different across the waters).

Some of First's US business seem to have a dominant position in the market. How do they stay in that position? I'm not sure I would see anything of First UK in a dominant position, in any regional market; and I'm not sure there's a national one in public transport the way we've set it up. I wouldn't consider them League, rather on the verge of relegation, if not already lower division. They haven't got the resources to buy their way higher. The old Badgerline bits of the south-west seem their best prospect and most coherent, as perhaps they always were; but sorry I don't see it as the UK's powerhouse (present or budding) nor FSW and FGW as streets ahead of everyone else.

As for the longer term future of First, does anyone have any ideas? Or, I suppose, care less? Apart from anything to get short-term dividend growth, what else is there?

 

[winston270twm]

First Groups Full Year results due to be announced Thurs 30th May:

FirstGroup braced for huge writedown
John Collingridge


May 26 2019, 12:01am, The Sunday Times

• Asia
• Transport

FirstGroup franchises include the Great Western Railway and the TransPennine ExpressGETTY IMAGES

Besieged transport giant FirstGroup is expected to write off millions of pounds on its South Western Railway franchise as it struggles with sluggish growth.

Investors are braced for the bus and rail operator to slash the value of the franchise, which carries millions of passengers on routes between southwest England and London.

It will be a new blow for the heavily indebted group, which is under attack from an activist investor, the US hedge fund Coast Capital

FirstGroup won the franchise in March 2017, when its joint venture with Hong Kong operator MTR dislodged the incumbent, Stagecoach. It pledged to pay the government £2.7bn over the seven-year term and pump £1.2bn into new trains and extra services.

However, the franchise has been dogged by industrial action and problems with track upgrading. It has also been hit by changing commuter patterns.

Revenues have been well short of First’s assumptions. As a result, City sources expect the value of the franchise to be written down in the annual results on Thursday. First has tried, unsuccessfully, to renegotiate the deal with the government. It and MTR have about £90m of capital at risk, analysts say.

Last year, First wrote off £106m on the TransPennine Express franchise. Its debt pile was last reported to be more than £1bn.

Coast Capital, which holds a 10% stake, has requisitioned a vote to oust First’s chief executive, chairman and four other non-executives. It wants the company, which declined to comment, to quit UK rail. The shares ended last week at 110p, valuing the business at £1.3bn.

https://www.thetimes.co.uk/article/firstgroup-braced-for-huge-writedown-jxg77ql5j

FirstGroup told to ditch 'incremental steps' or face 'severe backlash' amid growing investor support for US activist

FirstGroup has been urged to retrench from the railways by its largest shareholder Credit: David Cheskin/PA

26 May 2019 • 7:00am


Under siege rail and bus operator FirstGroup must take more concrete steps towards a break-up or face widespread support for a boardroom coup, rebel investors have warned.

Shareholders are expecting boss Matthew Gregory to announce a series of drastic changes alongside its annual results on Thursday. FirstGroup rejected a takeover approach from private equity firm Apollo this time last year, a decision that angered many investors and, alongside the announcement of heavy losses, led to the exit of Tim O’Toole.

Coast Capital Management, which owns almost a 10th of FirstGroup shares, has launched a campaign to replace half of the board and carve the company in two. It has requisitioned an extraordinary general meeting (EGM) to force through the changes.

Another of FirstGroup’s biggest investors told The Sunday Telegraph: “If you look at the shareholder register, patience is wearing thin … The lack of decisiveness of action is palpable.” The investor said they expect more than “incremental steps” to be unveiled this week. “If nothing is forthcoming, Coast Capital might find their EGM better supported than they might think.”

FirstGroup owns the Greyhound coach network in the US Credit: Peter Titmuss / Alamy,/ Peter Titmuss / Alamy,
FirstGroup is the biggest operator of student buses in North America. It also owns the Greyhound coach network and has a substantial network of municipal services. The company claims its hefty pension deficit hampers meaningful M&A. “They want to solve the UK thinking it would unlock the US assets,” said the investor. “The activists have tried to unlock the situation using the different door.”

“If you can get one strategic move done, that might unlock other things.”

Speculation persists that loss-making Greyhound, which has been on the market for some time, may be jettisoned or mothballed. The sale of its bus depots could generate valuable cash, sources said. A separate shareholder said: “I’m minded to agree that they need to reveal some radical changes.”

The company said it is “open to all means of mobilising that value in the best interests of all shareholders … The board is confident they have the right team and plans in place to do so.”

https://www.telegraph.co.uk/busines...ditch-incremental-steps-face-severe-backlash/

FirstGroup’s uncomfortable rail journey isn’t over yet

Gwyn Topham
As it prepares to announce annual results, the transport group is resisting pressure from its biggest investor to quit the sector


A TransPennine Express train at Leeds station. FirstGroup operates the service and has written down its value. Photograph: Christopher Thomond


With shareholders like these, who needs enemies? FirstGroup’s biggest investor, Coast Capital, has pulled no punches in assessing the board of the Aberdeen-based transport firm.

The great five-year turnaround plan has “failed to deliver on every single metric ... They have destroyed extraordinary amounts of capital in the rail business with impunity. They have let down their customers, shareholders and staff.” Yes, they let the school down, they let themselves down, and most of all, they let the share price down.

First’s value has been deflating like a saggy balloon since the beginning of the decade: a whole other era when its great rival, National Express, was still in the process of getting booted off the railways. That disgrace has subsequently proved to be the Brummie bus-burghers’ great stroke of fortune, the share price inexorably rising as Britain’s trains did their utmost to make National Express coaches look like reliable, luxury travel.



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South Western Railway, majority owned by FirstGroup. Photograph: Victoria Jones/PA
FirstGroup, meanwhile, saw the lucrative west coast mainline contract snatched away via government bungling in 2012. It finally landed a biggie, South Western, just in time to see the bottom fall out of the London commuter market, and has written down the value of TransPennine after optimistic bidding. Suckled, however, by the Department for Transport’s generous direct awards on Great Western Railway, FirstGroup still has designs on the next west coast franchise. That includes running the first HS2 trains – playing a part in a glorious, high-speed future, or shackled to a white elephant heading over a cliff, depending on how the Conservative leadership election pans out.

Before its annual results on Thursday, Coast has demanded that First exit UK rail and leave HS2 to the Chinese. Like National Express, First has always creamed bigger profits from the buses it runs, and it is also mining gold from its big yellow American school buses – although First’s bet on Greyhound has produced laggardly returns.

The activist investor is still pressing for an emergency meeting to oust much of First’s board, with its axe aimed squarely at the chief executive, Matthew Gregory – only in the job since November – and chairman Wolfhart Hauser. In their place, Coast has dug up a proposed magnificent seven led by the former Tory transport minister Steve Norris and ex-Arriva chief executive David Martin.

Like a First bus, exciting times are either just around the corner, or possibly stuck in traffic some miles back. The Save FirstGroup website, although created by Coast, has more the feel of a First rail passenger: spitting fury in slightly hysterical italics and capital letters, wondering at the sheer money shelled out and just how this particular journey to nowhere could have taken so long already.

Coast is right to question absurd rail franchise bid costs, and the dubious rewards. But the legal action launched by Stagecoach to stay in the rail game last week suggests an exit could be premature. Stagecoach and First both grew from management buyouts at Scottish bus firms, hoovering up cash when governments were determined to make transport privatisation profitable for the players. With a full review in progress, and Chris Grayling at the DfT wheel, there’s every chance that rail can carry First on its bumpy ride for a while yet.

https://www.theguardian.com/busines...il-franchise-investor-pressure-annual-results

 

[Robertj21a]

First Groups Full Year results due to be announced Thurs 30th May:


https://www.thetimes.co.uk/article/firstgroup-braced-for-huge-writedown-jxg77ql5j



https://www.telegraph.co.uk/busines...ditch-incremental-steps-face-severe-backlash/



https://www.theguardian.com/busines...il-franchise-investor-pressure-annual-results

Thursday should be interesting !!

 

[winston270twm]

Thursday should be interesting !!

Hmmmm… especially if there's the big write downs in the FY results as forecast. The pressure is on the BOD to keep their jobs!

 

[winston270twm]

What's the betting First Groups BOD are suddenly confident enough on the groups outlook to re-start paying a dividend come Thurs.... ??

 

[winston270twm]

Any predictions for FGP FY results in the morning?

FirstGroup walks tightrope as activist investor pushes for split UK rail operator under mounting pressure over Greyhound and US school bus business Those calling for a separation of the UK and US businesses say FirstGroup’s share price is being weighed down by the less profitable rail business © FT montage; Bloomberg; Dreamstime Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Save to myFT Josh Spero, Transport Correspondent 7 hours ago Print this page 0 The Greyhound buses that criss-cross the US and the yellow school buses that ferry American children to school are recognisable across the world. Few outside Britain, however, are likely to have heard of South Western Railway and Great Western Railway. What unites them is their owner: FirstGroup, a FTSE 250 company. The logic of the UK company owning them all has been questioned by some shareholders ever since FirstGroup’s $3.6bn acquisition of Laidlaw in 2007 brought it Greyhound and a bigger presence in the US school bus business.The argument that investors would benefit from splitting the UK and US businesses has been taken up belligerently in recent months by Coast Capital Management, a US activist investor with an almost 10 per cent stake in FirstGroup. Earlier this month the fund, which is based in New York, said it would seek to remove six of FirstGroup’s 11 board directors and install seven of its own.Having a vocal activist on FirstGroup’s shareholder register increases the pressure on Matthew Gregory, who has led the transport group since November, to lay out the case for holding the company together when its full-year results are published on Thursday.Gerald Khoo, an analyst at Liberum, said Coast’s campaign had “upped the pressure” on Mr Gregory to produce a “meaningful response” over its strategy. “While the problems and challenges faced by FirstGroup significantly predate Matthew Gregory’s tenure at the firm, let alone as CEO, shareholder patience is starting to run out.”Analysts expect FirstGroup to report a 10 per cent rise in revenue to £7.1bn for the year to the end of March 2019, while earnings before interest, tax, depreciation and amortisation are forecast to increase 2.9 per cent to £711m.The case for separating the businesses, say its advocates, is that FirstGroup’s share price is depressed by the less profitable UK rail businesses and fails to reflect the strength of First Student, its US school bus business. First Student, the biggest provider of school transportation in the US with a fleet of 42,000 buses, had an operating margin of 8.8 per cent in the 12 months to the end of March 2018. UK rail, by contrast, had one of 2.9 per cent.The more recent travails of the UK rail business include delays stemming from infrastructure work at London Waterloo, the UK’s busiest station, and predicting losses of as much as £106m over the remaining life of its Transpennine Express contract.Nandeep Bamrah of West Face Capital, a Canadian asset management group and FirstGroup shareholder, said First Student had “significant potential” but this was not reflected in FirstGroup’s share price. “The status quo is not sustainable,” he said.The company’s shares have fallen almost 80 per cent since the Laidlaw acquisition and are at levels last seen in the late 1990s. Recommended Lex FirstGroup/Greyhound: engineering works Meanwhile, James Rasteh, Coast’s chief investment officer, said Greyhound’s property portfolio is worth far more than FirstGroup’s share price currently reflects. Any cultural resonance Greyhound buses may have has proved no defence against competition from low-cost airlines. A review of the business last year saw a decision to pull out of western Canada, as well as sell property in Chicago in January for $38m. Another in Denver went up for sale last month. However, the company decided to maintain Greyhound’s national network across the US.FirstGroup has been robust in rebutting the criticism Coast has levelled at the UK company’s board while also defending is strategy. Wolfhart Hauser, FirstGroup’s chairman, pointed this month to at least a third of directors having “specific transportation and travel industry” experience. In a statement responding to Coast, FirstGroup said it was “focused on delivering shareholder value and are confident that the company has the right team with the right experience and plans in place to do so.”Among those who Coast is seeking to install on FirstGroup’s board via an extraordinary general meeting are Steven Norris, former UK transport minister; Bob Stefanowski, former chief financial officer of UBS’s investment bank in London; and Elizabeth Filkin, the former parliamentary standards commissioner.The chairman’s backing of the current board has failed to convince some shareholders. Bram Cornelisse of Farringdon Capital Management said FirstGroup’s response to Coast “annoys me as a shareholder because the share price of FirstGroup is not any different from where it was 20 years ago”. Coast is not the first activist investor to attempt to undo the 2007 Laidlaw deal. In 2014, Sandell Asset Management, which then had a 3.1 per cent stake, called for FirstGroup to offload the US businesses and instead focus on bolstering its UK rail business and a balance sheet weighed down by the Laidlaw purchase.By contrast, Mr Rasteh, who worked at activist fund Jana Partners when it took a stake in UK caterer Compass Group more than a decade ago, has been sceptical of the prospects of the rail business. Jana persuaded Compass to dispose of some assets by winning over some of the group’s shareholders. Coast will need to do the same if it is to achieve any success at FirstGroup. If Coast fails, its own investors will want an explanation.“The position I take is ‘is it likely someone can run this bus business worse?’ The answer must be yes — but then the chance of that being the case is quite small,” said Mr Cornelisse.

https://www.ft.com/content/98f4db76-788a-11e9-bbad-7c18c0ea0201

Activist investor hits out at First Group over results meeting ban

First runs three rail franchises in the UK

An activist investor in First Group is furious that it has not been allowed to attend the transport company's full-year results meeting tomorrow.

First Group is locked in a boardroom battle with US hedge fund Coast Capital, which owns a 9.7 per cent stake in the firm and is its largest shareholder.

Coast has demanded a radical overhaul of the company’s structures, including that it split its UK assets from its US assets and withdraw from Britain’s “destructive” rail industry in a bid to return to profit.

Read more: US investor tells First Group: Get out of Britain's railways

It is also seeking to remove six of the 11 current directors and replace them with seven of its nominees. Those it is targeting include chief executive Matthew Gregory and chairman Wolfhart Hauser.


In an email sent by First Group to Coast, seen by City A.M., an employee states that “in the current circumstances, the company does not consider it appropriate for you to attend our results meeting in person”.

The company says it has previously offered to arrange a meeting with Coast following the results, as is “consistent with what we do for the company’s other large shareholders”.

Coast founding partner James Rasteh said the group’s refusal to invite it to the results meeting attended by other shareholders amounted to a “total breach of corporate governance”.

“In my quarter-of-a-century investor experience I’ve never seen anything like this,” he told City A.M.

A spokesperson for First said: “We have already offered Coast Capital a meeting, as we do with all our major investors, and in keeping with our attempts to engage constructively with them over the past year. Coast Capital’s position is clear, as they have requisitioned a separate shareholder meeting on their proposals which seek to take control of the board of First Group by removing six of the current directors and appointing seven of their own nominees. In the meantime we intend to release our full year results and update on progress and strategy in the usual way.”

First is one of the largest bus operators in the UK and also runs services in the US, where it serves 43 states.

In the UK, it runs three rail franchises – Great Western Railway, South Western Railway (SWR) and TransPennine Express – and is bidding for the West Coast Partnership franchise, which is due to be awarded in the summer.

First has endured a torrid year after its former boss Tim O’Toole stood down last May after the firm posted a £327m annual loss.

Read more: US investor fires opening shot in battle for control of Firstgroup

The company’s last trading statement in January showed that its bus operations in the UK overcame a drop in passenger volumes, but its rail growth slowed because of strikes taking place on SWR.

Russ Mould, investment director at AJ Bell, said: “First’s shares are up 40 per cent from their December lows, but at 111p trade miles below their 2007 all-time high of more than 800p, which may explain why Coast feels FirstGroup is ripe for a shake-up.”

http://www.cityam.com/278315/activist-investor-hits-out-first-group-over-results-meeting

 

[Volvodart]

STRATEGY UPDATE

FirstGroup today announces plans to rationalise our portfolio with the Group’s future emphasis on First Student and First Transit, our core North American contracting businesses, which have the greatest potential to generate sustainable value and growth over time
Accordingly, a process to sell Greyhound has commenced and we are pursuing structural alternatives to separate our First Bus operations from the Group


https://otp.tools.investis.com/clie.../regulatory-story.aspx?cid=858&newsid=1271427

Strategy update
Released : 30.05.2019

FIRSTGROUP PLC

STRATEGY UPDATE

FirstGroup today announces plans to rationalise our portfolio with the Group’s future emphasis on First Student and First Transit, our core North American contracting businesses, which have the greatest potential to generate sustainable value and growth over time
Accordingly, a process to sell Greyhound has commenced and we are pursuing structural alternatives to separate our First Bus operations from the Group
We have an existing portfolio of rail franchises in the UK which we will operate in accordance with their terms
We will secure best value for shareholders by executing these plans with pace, having regard for the regulatory procedures and stakeholder consultations, including pensions, that will be required
Portfolio rationalisation plans

FirstGroup has a portfolio of five market leading public transportation businesses in the UK and North America. The Board regularly reviews all appropriate means to mobilise the considerable value inherent in the Group, recognising that there are certain constraints and friction costs to overcome in the case of some potential options, and will continue to do so. In light of the performance improvements we have achieved through our divisional strategies, and the changes in the wider environment, we believe that the most appropriate means to deliver enhanced sustainable value is through the rationalisation of the portfolio being announced today.

Our North American contract businesses

In future our core market will be North America, and centred on First Student and First Transit, our market leading contract-based businesses, which together generated 60% of the Group’s operating profits in 2019. They share increasingly similar attributes and opportunities to grow and create value, and between them we have established a strong and profitable platform in North American mobility services.

We have improved First Student’s margins substantially to 9.5% in 2019 through a combination of our rigorous returns-based contract bidding strategy and sustained cost and process efficiencies. We are confident that our largest business is now restored to a position of generating sustainable growth, cash and returns from its multi-year contract portfolio, which remains by far the largest in the North American home-to-school bus market. Looking ahead, First Student is targeting development of complementary transportation and mobility technologies and services, entry into adjacent markets as well as organic and M&A-led growth in the home-to-school market.

First Transit has delivered long term growth as North American transit markets continue to outsource, and has built a diversified transit management contract portfolio that generates attractive returns and cash flow given the relatively modest capital requirements. We are targeting further long term growth from First Transit’s core markets, particularly in shuttle and in vehicle services, and have already established our credentials in a number of attractive adjacent markets – such as commuter rail and bus rapid transit (BRT). First Transit is at the front end of the Group in capturing opportunities in Mobility as a Service (MaaS) and Shared Autonomous Vehicles (SAV). Our business is in a strong position to generate value as transit management markets continue to evolve, as we leverage our partnerships with ridesharing and other Transportation Network Companies to remain at the forefront of innovation.

First Student and First Transit are increasingly overlapping in terms of the technologies and management skillsets required to thrive in response to the market opportunities in front of them. As we drive our core contracting businesses forward we will ensure that our management and functional structures are positioned to capitalise further on the platform we have built in the emerging North American mobility services market.

Separation plans

First Bus is one of the largest operators in the UK with a fifth of the market outside of London. We have improved our offering by investing in our fleet and transforming our networks, payments systems and passenger information services to improve simplicity and convenience for customers. We have significantly improved cost efficiency in the division, through investment in operations and maintenance systems and by rationalising our footprint via network changes, depot sales and closures. As a result, First Bus margins have improved to 7.5% in 2019 and it is now on a much stronger footing as a business. First Bus has limited synergies with our other operations and, having set the business on the path to increased profitability, we believe now is the right time to pursue structural alternatives to continue this progression and deliver value to shareholders while managing the division’s longer term liabilities.

Greyhound is the only operator of scheduled intercity coaches in North America, with a unique nationwide network and an iconic brand. We have invested in Greyhound to implement airline-style yield management and real-time pricing, up-to-date booking and ticketing options and improved customer communications channels. We have also reduced Greyhound’s footprint in Western Canada and continue to release value by optimising its property portfolio. Greyhound has limited synergies with our other, predominantly contract-based, North American businesses and we believe that value for shareholders can best be delivered by seeking new owners that will further support the continued development of this business. As such a formal sale process for Greyhound is underway.

As part of our portfolio rationalisation plans to separate Greyhound and First Bus from the Group, we will evaluate our capital structure and capital allocation policy as we move forwards, to ensure it is optimal for supporting future growth and shareholder returns while still maintaining an appropriate balance sheet.

First Rail

We have a portfolio of separately managed rail franchise businesses in the UK which we will operate in accordance with their contractual terms. First Rail’s goal remains to add value through our operational expertise and strong industry relationships. Our UK rail franchise portfolio has generated £330.9m in adjusted profit with net cash and dividends to the Group over the last five years. However, given our reduced expectations for our two most recently awarded franchises, we have concerns with the current balance of risk and reward being offered. We await the outcome of the UK government’s review into the structure of the whole rail industry chaired by Keith Williams 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.

Commenting, Chief Executive Matthew Gregory said:

“Since becoming Chief Executive in November 2018, I have been focused on setting the Group on a clear path to enhance value. By executing the portfolio rationalisation plans we are announcing today, our future emphasis will be on First Student and First Transit, our core contracting businesses in North America. We see significant potential to generate long term, sustainable value and growth from the solid platforms these businesses provide in the North American mobility services sector. We are intent on executing this strategy at pace, having full regard to the regulatory and stakeholder procedures and approvals that will be required.

“In parallel with our portfolio rationalisation plans we will continue to drive forward the clear strategies now established in each of our divisions to ensure they deliver further progress and growth in existing and adjacent markets, underpinned by our plans to enhance our cost base further.

“Our plans will create a more focused portfolio, with leading positions in our core North American contracting markets, and is the most appropriate means for us to deliver enhanced sustainable value for all our stakeholders.”

 

[Volvodart]

FIRSTGROUP PLC
RESULTS FOR THE YEAR TO 31 MARCH 2019

FirstGroup plc, a leading provider of transport services in the UK and North America, today reports growth in revenue, adjusted operating profit and adjusted EPS, and announces portfolio rationalisation plans

Results overview

Underlying Group revenue +5.7%, underlying1 adjusted2 operating profit +10.5%; adjusted2 EPS +15.2%3
Adjusted operating profit ahead of our expectations at £332.9m, led by growth and margin expansion in First Student and First Bus
Net cash inflow of £197.3m, above expectations due to the phasing of certain First Rail cash inflows
Due to a number of uncertainties, FirstGroup’s share of future losses on SWR franchise of £102.1m recognised while negotiations continue with the Department for Transport; statutory operating profit of £9.8m also adversely impacted by a North America self-insurance charge of £94.8m
Plans announced to rationalise the portfolio with the Group’s future emphasis on First Student and First Transit, our core North American contracting businesses

https://otp.tools.investis.com/clie.../regulatory-story.aspx?cid=858&newsid=1271437

Results include £16.2m loss on disposal and asset impairments of FirstBus assets in Manchester.

Obviously the Times must have a tip off about the write off for South Western Rail.

 

[F Great Eastern]

So it looks like First will go from being a British company with American interests to a purely American one.

 

[TheGrandWazoo]

So it looks like First will go from being a British company with American interests to a purely American one.

Looks like that - a sale of First Bus allied to a likely retrenchment from U.K. Rail. Perhaps new names like.... Laidlaw and Badgerline?

 

[Volvodart]

If Coast are confident of the plans they say they have for First UK Bus, they may be interested in taking it on. They say they have people to take over the management of First Bus.

 

[TheGrandWazoo]

If Coast are confident of the plans they say they have for First UK Bus, they may be interested in taking it on. They say they have people to take over the management of First Bus.

I somehow doubt it. They are corporate raiders and the value for them is breaking up the group. Interesting to see CC’s response as First are basically doing what CC advocated

 

[Surreyman]

Letting my euphoria die down a bit, I note that the wording of the statement talks about 'structural Re-organization' and 'Separation of Greyhound & UK Bus from the group'.
As per current speculation about Arriva, I am sure that First would like to sell UK Bus as a single going concern to one buyer, whether that is realistic I don't know?
I am sure that Go Ahead, Stagecoach & Rotala have long since 'sized up' the bits of UK Bus that they would be interested in (And that the CMA would allow them to acquire).
Repeating a well worn theme, Pension liabilities are going to be the big issue in any possible sales of all or parts of UK Bus.

 

[F Great Eastern]

Go-Ahead will most likely take First Aircoach in Ireland, unless their old owner wants them back (hopefully not as Dublin Coach is not something to aspire to in my view)

 

[Volvodart]

Not according to Coast who say their pension experts have looked at things and a payment of I think £75 million would significantly improve things.

 

[TheGrandWazoo]

Letting my euphoria die down a bit, I note that the wording of the statement talks about 'structural Re-organization' and 'Separation of Greyhound & UK Bus from the group'.
As per current speculation about Arriva, I am sure that First would like to sell UK Bus as a single going concern to one buyer, whether that is realistic I don't know?
I am sure that Go Ahead, Stagecoach & Rotala have long since 'sized up' the bits of UK Bus that they would be interested in (And that the CMA would allow them to acquire).
Repeating a well worn theme, Pension liabilities are going to be the big issue in any possible sales of all or parts of UK Bus.

I really struggle to understand “euphoria” about a firm? The wording is very much about a sale of U.K. Bus as a whole and is very similar to Arriva.

People will doubtless go into speculation mode “Oh I could see X wanting to buy Y OpCo” but First want to do this quickly and not be left with a load of weaker assets having sold the best bits. Hence whilst a sale to an existing transport group COULD happen, I suspect a sale to a financial group or an IPO may be more likely.

 

[winston270twm]

Looks like that - a sale of First Bus allied to a likely retrenchment from U.K. Rail. Perhaps new names like.... Laidlaw and Badgerline?

It seems we finally have action!

It says 'separation' of First Bus, not 'sale' like when referring to Greyhound.

 

[Surreyman]

I really struggle to understand “euphoria” about a firm? The wording is very much about a sale of U.K. Bus as a whole and is very similar to Arriva.

People will doubtless go into speculation mode “Oh I could see X wanting to buy Y OpCo” but First want to do this quickly and not be left with a load of weaker assets having sold the best bits. Hence whilst a sale to an existing transport group COULD happen, I suspect a sale to a financial group or an IPO may be more likely.

I seem to recall, that in recent years, the 'public' have expressed great sentiments about companies i.e Woolworths and many others, sentiment can be negative as well as positive, i.e recent statements by Andy Burnham on 'taking back' Arrivas Northern Rail franchise.

 

[TheGrandWazoo]

It seems we finally have action!

It says 'separation' of First Bus, not 'sale' like when referring to Greyhound.

On First Bus site “Today we announced that we will be pursuing strategic options, through a sale or other means, to separate First Bus from FirstGroup.” - sale outright or an IPO?

 

[TheGrandWazoo]

I seem to recall, that in recent years, the 'public' have expressed great sentiments about companies i.e Woolworths and many others, sentiment can be negative as well as positive, i.e recent statements by Andy Burnham on 'taking back' Arrivas Northern Rail franchise.

Yes but where affects us. Most of us had a Woolies and have cherished memories and it’s demise affected most people. You live in Surrey.

Just find it odd that a strong emotion like hate or euphoria is experienced vicariously.