First Group: General Discussion

[Volvodart]

It has already been said that 650 of their buses are affected. Of these, I think further up this thread it mentions 350 new buses.

 

[Surreyman]

Can anyone on this forum supply aprox' facts/figures for how many of FIRST Glasgow bus operations are unaffected by this - i.e routes that do not enter the City centre area now defined as a low emission zone?
Seems to me that the authorities have bent over backwards to accomodate Firsts ageing fleet, I suppose this is probably the only practical way they can do this.
I wonder: -
1. Not all of the (First)fleet will need to be Euro 6 as not all routes go into the centre(As per my question above).
2. To keep capital expenditure to a minimum, can they swop older Glasgow vehicles with 'nearly new' Euro 6 buses from other operating companies?

With the Buchanan St Bus Station access exemption, 'Out of Town' operators have got off likely and yet Stagecoach, Parks, McGills etc are much better placed to be Euro 6 compliant?

 

[KGGXXXY]

Nothing stopping you creating one

Overthewater: You are right, I have created threads before, just wanted to see what the appetite for one would be and if one was created would it be used. Will create one although I don't have the privileges to move posts to it.

 

[InspectorBloke]

West Face Capital clearly want changes to be made.

https://www.telegraph.co.uk/business/2018/05/14/firstgroup-attack-activist-demands-sale/

FirstGroup 
under attack as activist demands sale

FirstGroup is responsible for bus services across the UKCREDIT: PA

14 MAY 2018 • 9:40PM
Transport giant FirstGroup is facing a mounting activist campaign to put itself up for sale in the wake of a failed takeover bid from American private equity firm Apollo.

The attack comes in a four-page letter from top shareholder West Face Capital that was sent to chairman Wolfhart Hauser on Friday, the latest assault on a major UK company from an activist investor.

The letter, seen by The Daily Telegraph, lambasts FirstGroup’s board for failing to address “chronic” underperformance, saying inaction paved the way for Apollo’s “opportunistic” bids.

It calls on the transport operator, which is responsible for Greyhound bus operations in America and bus services across the UK, to form a board subcommittee to undertake a full strategic review and identify the best way to boost shareholder value.


It should consider: a full sale of the £1.2bn company; a break-up; or the spin-off of FirstGroup’s North American operations, West Face argues. It holds a 2.5pc stake worth around £32m at the current share price, ranking it among the top 15 shareholders.

“It is time to acknowledge that the execution of its strategy has failed and that an alternative path must be taken,” West Face says. “Events over the past few weeks have only strengthened our view that decisive action is overdue.

“A comprehensive strategic review must be undertaken immediately to address chronic underperformance and unacceptably low valuation.”

FirstGroup, in response, said: “The board is open to all means of enhancing long-term value and welcomes the views of shareholders. The board believes there is considerable value in the scale and expertise of each of our businesses."

Under chief executive Tim O’Toole, who took charge in November 2010, FirstGroup shareholders have endured a nightmare. The shares collapsed five years ago after investors were whacked with a three-for-two rights issue to raise £615m. The dividend was also scrapped. The stock has never recovered and sits almost 70pc lower since Mr O’Toole’s appointment, at just 108p,

In a damning assessment of his stewardship, West Face claims he has steadfastly refused to act while taking home nearly £9m in pay.

It is time to acknowledge that the execution of its strategy has failed and that an alternative path must be takenWest Face in a letter to chairman Wolfhart Hauser
The Canadian fund says it is the fourth time in less than a year that it has outlined proposals to improve performance but every time the board has rejected them “without a compelling explanation”. On the first occasion, which was in July last year, Mr O’Toole dismissed calls for a strategic review arguing that his current strategy was already delivering “improved growth, better operational performance, more consistent returns”.

“The reality, however, is that Mr O’Toole has failed, and FirstGroup has underperformed relative to competitors,” the letter claims.

Apollo made two bids, but the board refused to disclose the price, then walked away last week, sending FirstGroup’s shares plunging 10pc.

West Face claims that a third of shareholders believe the company is undervalued and has demanded that a subcommittee is formed ahead of FirstGroup’s annual general meeting on July 17.

West Face declined to comment.

Meanwhile, the Government is expected to scrap the East Coast rail franchise imminently, with reports in The Financial Times this evening suggesting the London to Edinburgh line could be run by its current operators Stagecoach and Virgin under a “not-for-profit” deal with the Government.

The Government admitted last autumn that the franchise was unsustainable.

The Department for Transport declined to comment.

 

[TheGrandWazoo]

West Face Capital clearly want changes to be made.

https://www.telegraph.co.uk/business/2018/05/14/firstgroup-attack-activist-demands-sale/

Thought that was a more likely outcome than a bid from a private equity outfit. The well of goodwill being exhausted after 6 years. Two weeks or so til full year results - gonna be interesting.

 

[Strathclyder]

I think one was transferred in from Overtown to cover for the Enviro300 that was involved in the recent accident.

That would be 44527 (SN62 AYV). Was on loan to Overtown from Caledonia (it's intended depot) initially; now on loan to Dumbarton to cover for the aforementioned E300 (SN62 AKG/67740) that was involved in the serious R.T.A on the Clydeside Expressway on April 29th. 527 has been noted on The One and it's variants several times since moving over. It'll be staying over there for the foreseeable future, given the seriousness of 740's accident.

 

[Strathclyder]

Remember there is now a First glasgow thread

Perfectly aware of it and will post all related matters there in future; was just clearing up the matter here first (no pun intended). Wouldn't be much cop if I did it in a separate thread, no matter how relevant said thread is lol

 

[90sWereBetter]

West Face Capital clearly want changes to be made.

https://www.telegraph.co.uk/business/2018/05/14/firstgroup-attack-activist-demands-sale/

Ah, I see the vulture capitalists are being their usual gracious selves.

 

[Robertj21a]

Ah, I see the vulture capitalists are being their usual gracious selves.

The trouble is that just about everything said is accurate.

 

[winston270twm]

Ah, I see the vulture capitalists are being their usual gracious selves.

FGP's board has had it coming a long time..... investors put faith and supported their turnaround plan 6 years ago and have still seen no returns on their investments, either in the form of dividends being re-instated or share price driven higher. There is still no prospect of profits growth in their problem businesses, it is excuse after excuse, patience has run out.....

 

[TheGrandWazoo]

FGP's board has had it coming a long time..... investors put faith and supported their turnaround plan 6 years ago and have still seen no returns on their investments, either in the form of dividends being re-instated or share price driven higher. There is still no prospect of profits growth in their problem businesses, it is excuse after excuse, patience has run out.....

As ever, a fair and rational comment. The more considered individuals on here knew that the sins of the past would need time to be addressed. We all knew that there were some fundamental issues that the turnaround plan needed to address, and that there have been some genuine reasons and challenges (not merely excuses) along the way.

However, as I said about three weeks ago (before Apollo walked away), I thought that a tipping point had been reached.

Would the major institutional shareholders back a heavily conditional approach that undervalued the firm? No, and hence why Apollo walked and why it’s (IMHO) unlikely that someone will attempt to do the same.

However, Winston is right that patience has run out (as I said, the well of goodwill has been exhausted) and that something fundamental needs to happen. No dividend and no likelihood of one appearing = shareholder anger and that is what we are seeing now.

 

[winston270twm]

As ever, a fair and rational comment. The more considered individuals on here knew that the sins of the past would need time to be addressed. We all knew that there were some fundamental issues that the turnaround plan needed to address, and that there have been some genuine reasons and challenges (not merely excuses) along the way.

However, as I said about three weeks ago (before Apollo walked away), I thought that a tipping point had been reached.

Would the major institutional shareholders back a heavily conditional approach that undervalued the firm? No, and hence why Apollo walked and why it’s (IMHO) unlikely that someone will attempt to do the same.

However, Winston is right that patience has run out (as I said, the well of goodwill has been exhausted) and that something fundamental needs to happen. No dividend and no likelihood of one appearing = shareholder anger and that is what we are seeing now.

TGW, totally agree.

I think things could get interesting over the next few months, looking at FGP's response to the above article, the board seem intent on keeping FGP as a group. I suspect O'Toole will fall on his sword, I don't think he can bounce back from this. I also think FGP should seriously consider hacking off First Group US & Canadian ops and partly float on NYSE, FGP retain majority stake & benefits from cash injection to invest in the rest of the group through increased capital expenditure, bolt-on acquisitions and investing in new overseas markets that require low capital outlay. I also think FGP should ditch UK Rail, risks now outweigh the rewards.

 

[Robertj21a]

TGW, totally agree.

I think things could get interesting over the next few months, looking at FGP's response to the above article, the board seem intent on keeping FGP as a group. I suspect O'Toole will fall on his sword, I don't think he can bounce back from this. I also think FGP should seriously consider hacking off First Group US & Canadian ops and partly float on NYSE, FGP retain majority stake & benefits from cash injection to invest in the rest of the group through increased capital expenditure, bolt-on acquisitions and investing in new overseas markets that require low capital outlay. I also think FGP should ditch UK Rail, risks now outweigh the rewards.

Quite agree. I wonder if there will be a vote of no confidence in ToT ?

 

[TheGrandWazoo]

TGW, totally agree.

I think things could get interesting over the next few months, looking at FGP's response to the above article, the board seem intent on keeping FGP as a group. I suspect O'Toole will fall on his sword, I don't think he can bounce back from this. I also think FGP should seriously consider hacking off First Group US & Canadian ops and partly float on NYSE, FGP retain majority stake & benefits from cash injection to invest in the rest of the group through increased capital expenditure, bolt-on acquisitions and investing in new overseas markets that require low capital outlay. I also think FGP should ditch UK Rail, risks now outweigh the rewards.

A trans Atlantic split would seem to be the most logical and in the manner you mention.

I’m a little more sanguine about UK Rail. The SWR is a challenge though there are exclusions and mitigations within the contract. GWR makes good money at the moment, ably assisted by NR’s inability to meet deadlines on electrifying lines.

It is perhaps TPE where there are some really ambitious targets.

 

[winston270twm]

Quite agree. I wonder if there will be a vote of no confidence in ToT ?

I suspect he would resign before it got that far.

 

[Robertj21a]

I suspect he would resign before it got that far.

I would hope so but he does seem to be a rather stubborn individual at times, whose actions to date are of a person still in denial. I know he has to be determined, thick-skinned and fairly forceful to be heading up a major PLC, but the impression I get is of somebody who feels he can continue to set his own timetable regardless of pressure from others.

 

[Volvodart]

He could not really have that long left anyway because of his age.

 

[TheGrandWazoo]

I would hope so but he does seem to be a rather stubborn individual at times, whose actions to date are of a person still in denial. I know he has to be determined, thick-skinned and fairly forceful to be heading up a major PLC, but the impression I get is of somebody who feels he can continue to set his own timetable regardless of pressure from others.

He apparently offered to resign in 2012/3 when the need for a rights issue became apparent.

 

[Volvodart]

I think the chairman went instead of him.

 

[TheGrandWazoo]

I think the chairman went instead of him.

Indeed, that was the case.

 

[Robertj21a]

Indeed, that was the case.

Ah, yes, I recall that now.
I never thought I'd say it but the ToT era hasn't really been what I had expected. Unkindly, some might say FGP hasn't progressed much post- Blockhead other to avoid making even more disastrous acquisitions. He's got away with a lot because the industry as a whole has been suffering but, even allowing for that, I feel that the shareholders have been incredibly patient
So far.

 

[winston270twm]

Has anyone seen the NX Group trading statement this morning? NX have managed to achieve the highest rate increases for years in their existing US School Bus portfolio of contracts, I wonder if First will be able to do something similar?

We have prioritised disciplined pricing in the school bus bid season. With the season nearly complete we have seen one of the highest rate increases of recent years: 6.2% for contracts renewed or renegotiated, or 3.6% across our whole portfolio. We expect these rates to exceed wage growth in 2018.

For anyone interested:
https://www.nationalexpressgroup.co...national-express-group-plc-1q-trading-update/

 

[Surreyman]

Has anyone seen the NX Group trading statement this morning? NX have managed to achieve the highest rate increases for years in their existing US School Bus portfolio of contracts, I wonder if First will be able to do something similar?

We have prioritised disciplined pricing in the school bus bid season. With the season nearly complete we have seen one of the highest rate increases of recent years: 6.2% for contracts renewed or renegotiated, or 3.6% across our whole portfolio. We expect these rates to exceed wage growth in 2018.

For anyone interested:
https://www.nationalexpressgroup.co...national-express-group-plc-1q-trading-update/

NX UK Bus are uniquely placed to acquire any of FirstBus Uk Bus operations, no real competition issues, the only area the MMC might frown on is the Worcester - Birmingham corridor.
Of course NX might not be interested in any Firstbus Ops!

 

[overthewater]

There no point sacking Tim, he actually said he would go in 2013 remember? I thnk the whole lot need to be thrown out...

https://www.theguardian.com/business/2013/may/26/firstgroup-chief-tim-otoole-offer-quit-debt

FirstGroup's chief executive, Tim O'Toole, will this week visit its biggest institutional investors to secure backing for the troubled transport operator's £615m rights issue, as it emerged that he offered to quit instead of the chairman.

Martin Gilbert announced his resignation last week after the group concluded it could no longer continue struggling with its £2bn debt. Sources close to the company said O'Toole had, in a private conversation, told the chairman he would also consider his position, but Gilbert said he should carry on.

O'Toole will steer First through a £1.6bn programme of investment over the next four years – primarily in renewing its ageing bus fleet. After the west coast mainline fiasco, in which it missed out on the lucrative railway linking Britain's biggest cities, it would be natural to blame rail for its troubles. But the malady that has forced the firm's rights issue was incubated in the mode of transport it knew best: the bus.

The company, which bills itself the "world's largest public transport operator in private hands", began with a small municipally owned bus company in a far corner of Scotland. Formed from a management buyout under privatisation and a merger with south-west England's Badgerline, the new FirstGroup plc was little more than a decade later striking a deal that would make it the biggest player in key US markets – but at a cost that it is finally having to address.

Borrowing billions, First acquired US transport firm Laidlaw in 2007, and now provided 40% of school bus services across the States. But the takeover did not go to plan: attempts to reduce the debt to a manageable sum by hiving off the newly acquired Greyhound coach service to another buyer fell through. The school runs on a 54,000-strong fleet of the yellow buses did not generate the anticipated profits, and First's share price fell while the group's debt burden made the ensuing bumps in the road ever harder to absorb.

The services it runs in about 40 towns and cities in Britain also began to run into trouble. Passengers were deserting deteriorating, clumsily managed services, with routes slashed and fares pushed up, to the point that there were campaigns and protests against the operator in cities such as Bristol. Changes in government grants and support for concessions exacerbated problems in a bus business that had been generally regarded as a safe cash cow, leading to a profits warning last year.

These headwinds and growing questions over the group's debt partly explain why First bid so keenly for the west coast mainline – a bid so high that rival Sir Richard Branson, the Virgin boss, branded it "insanity", though O'Toole has consistently defended it since. Instead of securing the bandage of a lucrative rail franchise, First licked its wounds as the government paused the entire rail franchising programme, a delay that diminished options beyond the long-resisted rights issue – one being considered even when US railwayman O'Toole joined the board four years ago.

What First now describes as an "albatross" was debt that peaked at £2.6bn after the acquisition of Laidlaw. While the debt was being eroded – partly through selling assets – fears that rating agencies would downgrade First's creditworthiness to junk status, piling on financing costs, forced the group's hand.

Douglas McNeill, a director at investment firm Charles Stanley, said: "Pressing on without a rights issue wasn't doomed to failure, but it was risky: when you have a lot of debt you need everything to go well. You're vulnerable to events.

"Had they done it earlier when the share price was higher it would have been less painful, less dilutive for shareholders."

Those shareholders include at least 8,000 FirstGroup staff who have been part of a long-term share buying scheme, and would likewise have seen their nest eggs slashed by a third last week as the share price nose-dived for the second time in seven months. The RMT union said: "Low-paid guards and platform staff have been propping up the share price with a scheme that might see them losing all their money – and now potentially their jobs because of the chaos at the company." First dismissed the union's claims that the schemes had been closed or that jobs were at risk.

The one man who did lose his job, Gilbert, was a director of First running buses in Aberdeen when Sir Alex Ferguson was still managing the local football club, and has overseen a similar transformation in the scope and scale of the business as Fergie at Manchester United. Analysts believe one sacrificial lamb will be enough to appease shareholders, and O'Toole will have some breathing space.

A First spokesman insisted the rights issue, which should be ratified by shareholders on 10 June, is "good news: we can pay down debt, this is a licence to invest and grow, even if the share graph over 24 hours looks terrible – it's what analysts were expecting". McNeill concurs: on First's prospects, he is "optimistic – for the first time in a while".

 

[DragonEast]

I don't think there is either a magic wand or a superman (or even superwoman) to sort out FirstBus.

They demonstrate (but did it really need proving yet again?) that you can't run a business just as a financial exercise. If the Board don't care, the management won't either, it becomes optional for the local management; and the staff and the passengers think why should they care, either? Good question.

Care is more than a spreadsheet for anyone who doesn't yet get it.

 

[F Great Eastern]

Thing is though there are some people in First who are going through the motions and see it as a job to earn money and little more and couldn't really care about the services and the publics view of them and their needs, many of them have never even used the services in the operating company more than a handful of times in years in the job, so when that is the case what hope do you have.

There is one operating company that has incorrect timetables up at their stops for years that haven't been updated and nobody cares. People are moaning about it every week for years but nothing is done, if someone can't go and put a piece of paper in a housing that they have access to to replace an old timetable no matter how many times they are badgered, then that says a lot.

Then again there are managers who do have the drive, attention to detail and the passion to provide great services and actually want to get it all right, which are suffering from a chronic lack of investment due to the fact that their good performance, both operational and financially, is having to subsidize the operations that are performing badly.

Realistically there is a need to clear some deadwood and to shake things up a bit and it's become clear that despite the fact there have been some positive changes since Moir left, there have been nowhere near enough and more radical change is needed.

Even the good managers will lose their motivation soon and some have already done so, there's only so much of seeing good operational and financial returns on your performance being slung out of your operating company to prop up a failing one, whilst being told to make cuts yourself because of it that you can take.

That's why a split may not necessarily be a bad thing. It will allow the strong parts of the group to thrive and to have their profits reinvested to keep them performing well whereas at the moment they're seeing vast pots of cash going elsewhere to the point that it makes them vulnerable to competitors.

 

[Robertj21a]

As many have said before, a split would be a good thing - indeed, it's been a good thing for quite some time now but ToT seems unable to hear.

 

[F Great Eastern]

If they leave it too long there will be little left to split.

The well performing businesses will regress due to a lack of investment from having their funding transferred to poorly performing operations and after a while some of these operations will also become poorly performing as competitors can afford to reinvest profits in operations that make them.

 

[DragonEast]

But don't all companies suffer with some demotivated or lazy staff? The point with FirstBus is that they don't appear to do anything about it. That's what's the difference. After all this time it looks like they can't. Or won't. The mystery is why? The only thing stopping them is themselves.

I suspect the attitude of "just going through the motions" isn't just tolerated, but is virtually encouraged. And that message comes, whether intentionally or not, from the top where "playing the system" is tolerated, even encouraged. They seem rather like Billy Bunter who just ate everything and always bit off more than he could chew. Size is everything. It isn't.

 

[F Great Eastern]

Of course all companies do, but it's about culture at the end of the day isn't it?

I've worked in some companies where it simply wasn't tolerated and that high standards were expected across the board and if they were not people were held to account and ultimately wouldn't be in their job for very long unless they addressed them sooner rather than later. It is the job of senior management to make sure that everyone is pulling their weight in the individual operating companies and doing the basics as well as doing the more important and bigger things.

For example, as I said before, there's one operating company who has year old timetables at their stops, it's the same at Aircoach in Dublin. There are timetables 4-5 years old at their stops. There are stops that have been moved that still have trueform stops in places they haven't served for ages that I saw people waiting at as the timetable is still up showing a service evern 15 mins - only for taxi drivers to take huge swaves of passengers who then give very negative online reviews of the services online.

It's just crying out for fresh blood in places. Some of the longer serving and more experienced managers are the worst who see it simply as a job and couldn't care less about the passenger experiences or the nuts and bolts of a service such as passenger information, customer service and making sure their timetables are up to date. So many people in First think running a bus company is just about operating buses and everything else is optional and doesn't need to be worried about..

First just seem to have a lot of people with a lot of experience but very few with any passion about the job or attention to detail.