First Group: General Discussion

[Volvodart]

Interesting...

Note they say any launch of the First Bus sale, not the launch.

Strategic update - North American contract businesses

https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1352852&cid=858

Strategic update - North American contract businesses
Released : 16.12.2019

FirstGroup plc
Strategic update – North American contract businesses

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.’

 

[TheGrandWazoo]

Interesting...

Note they say any launch of the First Bus sale, not the launch.

Strategic update - North American contract businesses

https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1352852&cid=858

Think you’re reading too much into that. Given that they haven’t defined the nature of althe divestment or when, hence the choice of words

 

[Volvodart]

Think you’re reading too much into that. Given that they haven’t defined the nature of althe divestment or when, hence the choice of words

As I always say, we shall see who is right! UK rail does not seem to be the basis for a strong business on its own.

 

[TheGrandWazoo]

As I always say, we shall see who is right! UK rail does not seem to be the basis for a strong business on its own.

So you’re saying that the divestment of U.K. Bus is off?

 

[Volvodart]

Maybe until they see what they are doing with the US.

 

[winston270twm]

Maybe until they see what they are doing with the US.

They weren't previously doing anything with the Student & Transit, it's yet another U-turn & more dithering by the BOD. UK bus has already been up for sale for sometime behind closed doors....

 

[Volvodart]

As I say, we shall see who is right. You would have thought Martin would have had his own ideas with what they should be doing at First Bus, it will be interesting if anything else happens in the short term if a sale is not imminent.

 

[oldman]

It's possible that the response to a UK bus sale has been underwhelming so they've had to consider changing tack. The US investors claim that the US business is undervalued compared to its competitors so, if that is true, it may be good business to realise that value. I don't think anyone suggests there is hidden value in UK bus.

At the end of the day there is likely to be a divorce with some money returned to shareholders. Whether the existing PLC is running the US or the UK end makes little difference. The fundamentals of the UK bus industry will stay the same, managing decline.

 

[winston270twm]

As I say, we shall see who is right. You would have thought Martin would have had his own ideas with what they should be doing at First Bus, it will be interesting if anything else happens in the short term if a sale is not imminent.

It just seems like they're bowing down to US activist investor demands.

Martin may have his own ideas, but when the bod have already confirmed to shareholders what their strategy is going to be going forward, it doesn't look good when it's being changed again + First UK Bus sale being put back due to improving margins in the interim (which in reality, is just simply cutting pvr at various operating companies).

 

[TheGrandWazoo]

It's possible that the response to a UK bus sale has been underwhelming so they've had to consider changing tack. The US investors claim that the US business is undervalued compared to its competitors so, if that is true, it may be good business to realise that value. I don't think anyone suggests there is hidden value in UK bus.

At the end of the day there is likely to be a divorce with some money returned to shareholders. Whether the existing PLC is running the US or the UK end makes little difference. The fundamentals of the UK bus industry will stay the same, managing decline.

I've been pretty consistent that the split should be a UK/US one with Greyhound binned off.

Perhaps the US one will remain as First, with the UK business rebranded as, oh I don't know......Badgerline?

 

[richw]

So you’re saying that the divestment of U.K. Bus is off?

Student and Transit is the bit they intended retaining originally, now they’re exploring a possible sale. Ukbus turns a profit, albeit fairly low percentage wise (but higher than Go Ahead who many deem to be doing successfully). The major shareholders didn’t seem to support the original proposal so perhaps there’s a change of direction being reviewed, especially with the new head man coming in since then (whos employment history is the uk bus market, so in theory knows how to maximise that area)

 

[overthewater]

It looks Like UK Bus might live to fight another day, Its the company that never goes anywhere. I think the people at the top believe buyers are asking too little, that we will still be here next xmas..

 

[DragonEast]

It looks Like UK Bus might live to fight another day, Its the company that never goes anywhere. I think the people at the top believe buyers are asking too little, that we will still be here next xmas..

I naively thought that the sale was the inevitable consequence of FG being unable to resource FirstBus properly? What's changed? The time Excel has taken, it's legacy not a new dawn.

Isn't sustainable margin improvement without investment a fantasy? Isn't it just more of the tactic they've tried endlessly over the last decade, and which has evidently fooled no-one in all that time.

What are they playing at? Maybe caught in a pincer movement between disgruntled British shareholders and our friends the activist American shareholders, the Board are just bowing to the inevitable, aka wearing the opposition out from boredom and frustration. In which case we could all be in for a long wait.

PS Just a thought. Weren't enforced service cuts and fare increases the (unsuccessful) path to margin improvement pursued in NBC subsidaries during the 1970s (admittedly with help from some limited investment) and every other failed bus company since?

 

[richw]

naively thought that the sale was the inevitable consequence of FG being unable to resource FirstBus properly? What's changed?

the reasons given were that the American and Uk businesses didn’t go together in simple terms. Seems like one or the other needs to go and they’ve changed direction since the new chairman was appointed. Different views? New sets of eyes? The new chairman or CEO or whatever it’s called I believe to be a UK bus industry person?

 

[TheGrandWazoo]

the reasons given were that the American and Uk businesses didn’t go together in simple terms. Seems like one or the other needs to go and they’ve changed direction since the new chairman was appointed. Different views? New sets of eyes? The new chairman or CEO or whatever it’s called I believe to be a UK bus industry person?

Indeed - it's David Martin, the former CEO of Arriva.

To answer DragonEast's comments - the difference will hopefully be that a UK based transport group, freed of the dead weight of Greyhound and debt, will be able to invest rather than paying off debt and misery.

 

[winston270twm]

the reasons given were that the American and Uk businesses didn’t go together in simple terms. Seems like one or the other needs to go and they’ve changed direction since the new chairman was appointed. Different views? New sets of eyes? The new chairman or CEO or whatever it’s called I believe to be a UK bus industry person?

NX Group don't seem to have a problem having a UK HQ with businesses located in the UK, US, Canada & Spain also incorporating Morocco, Bahrain etc

As we've said before, if First have now done another U-turn and are now intending to retain UK bus, they can't afford to sell off all of their valuable US assets that offer the best future profit growth. Both myself & TGW have suggested a number of times, that First Group should be looking to split and launch an IPO selling only a partial stake of their US assets on the NYSE, whilst still retaining the majority holding (similar to what DB are now doing with Arriva Group). Without Greyhound and the proceeds of a partial IPO, these funds can be used to pay down debt & be pumped back in to the remainder of the group to deliver growth through acquisitions in new & existing markets, raise levels of capital expenditure on new fleet orders & technology to grow existing business organically/maintain margins at First UK Bus without cutting Pvr / hiking fares.

 

[Baxenden Bank]

Annual Bus Use Statistics published today.

https://www.gov.uk/government/collections/bus-statistics

Too depressing to waste much keyboard time commenting thereon. Buses in Stoke-on-Trent, therefore predominantly First Potteries, on the fast slide to oblivion. 11% reduction in passenger numbers in one year, 30% in five years.

 

[overthewater]

Annual Bus Use Statistics published today.

https://www.gov.uk/government/collections/bus-statistics

Too depressing to waste much keyboard time commenting thereon. Buses in Stoke-on-Trent, therefore predominantly First Potteries, on the fast slide to oblivion. 11% reduction in passenger numbers in one year, 30% in five years.

Lets be fair, Stoke is a dump of a town, Plenty of them around... Why take a bus to a town centre filled with nothing..

 

[overthewater]

With the First bus sell off, I think were going to end up with damp squib, with just greyhound getting the chop. Personnel I dont think that will be enough and there should get rid of parts of FIrst Bus. There new team really should use the knowledge it picked up from First Transit to acquire more contracts / franishing work in US / Canada and hopefully EU.

 

[Baxenden Bank]

Lets be fair, Stoke is a dump of a town, Plenty of them around... Why take a bus to a town centre filled with nothing..

There's more to a bus service than getting free-rider wrinklies to the (vacant) shops. I don't have the statistics to hand but there are a few people who still have jobs to get to and another handful that go to school / college / university. Those outside of these groups would, prehaps, like to have a social life, perhaps go out for the day by train and be able to return home after tea-time and still have a bus for the final leg home. Heaven forbid they may like to visit the hospital as a patient or visiting. 30% of households have no car, 44% have just one car.

41% drop in passengers over 9 years. Statistics don't go back beyond 2009/10.

 

[Robertj21a]

There's more to a bus service than getting free-rider wrinklies to the (vacant) shops. I don't have the statistics to hand but there are a few people who still have jobs to get to and another handful that go to school / college / university. Those outside of these groups would, prehaps, like to have a social life, perhaps go out for the day by train and be able to return home after tea-time and still have a bus for the final leg home. Heaven forbid they may like to visit the hospital as a patient or visiting. 30% of households have no car, 44% have just one car.

41% drop in passengers over 9 years. Statistics don't go back beyond 2009/10.

Surprising that the fall in passengers around the Potteries is still so severe. There has been a better management team in place for the last few years, and the appearance of the fleet is markedly improved. It's probably still down to First's bad name (deserved, but from some years ago now), coupled with poor driver/passenger relations (if past comments are still anything to go by). Or is it something else - fares ?

 

[Baxenden Bank]

Surprising that the fall in passengers around the Potteries is still so severe. There has been a better management team in place for the last few years, and the appearance of the fleet is markedly improved. It's probably still down to First's bad name (deserved, but from some years ago now), coupled with poor driver/passenger relations (if past comments are still anything to go by). Or is it something else - fares ?

The figures levelled off for two years, so a catch up this year? As they are only an annual number it is impossible to know how to treat them. The decline could be spread evenly over the year or be sudden as a result of a specific change eg service cuts or price increases. There was a cut in the number of buses on the road over the period. Approximate off-peak requirement of 148 in April 2018 (101 First, 47 others) declining to 145 in January 2019 (with accompanying frequency / route cuts). Further cuts since then to 141 in June 2019 and 138 by September 2019.

The statistics are of dubious benefit anyway. I used to have (many years ago) a direct bus to Chesterton, it now requires three buses. So in revenue terms it stays the same but in passenger numbers terms it's a threefold increase. In revenue per passenger journey terms it's a disaster dropping to one third. Operator costs would probably hardly change.

The five year decline figure quoted measures Mr Eggleton's progress in transforming the business! I was being naughty. In April 2014 there were approx 226 buses required (159 First), the end of a long period of stability. July 2014 saw the implementation of a network review which saw 14 buses taken out of the total. It's been downhill in every measure ever since - buses, drivers, revenue, profits, passengers carried.

I suspect we are now in a vicious cycle of cut/decline/further cut. Or it may be decline/cut/further decline. Which came first is now irrelevant as both chase each other to the inevitable conclusion of elimination: a la Northampton.

 

[WatcherZero]

So you’re saying that the divestment of U.K. Bus is off?

Times writeup of the results said they had tried and failed to divest the UK bus operations and so they had switched tack and were now trying to divest the US operations.

 

[overthewater]

.

 

[Robertj21a]

First asked too much? or Buyer didn't buy.

Nobody sufficiently interested ?

 

[overthewater]

.

 

[Robertj21a]

There will also be someone interested... look at Diamond. However First were able to get rid of MOST of Manchester and that was in the gutter

But nobody is exactly rushing to buy South Yorkshire which, as one of their poorest performers in recent years, is one that First would love to see the back of.

 

[Volvodart]

South Yorkshire would likely require a lot higher write off than Manchester, if Firstgroup could afford it. There is still goodwill in the balance sheet for South Yorkshire and there was not for Manchester, I think because Manchester was acquired earlier and they had to change the treatment of purchased goodwill because of accounting standards or something like that which came in.

 

[Robertj21a]

South Yorkshire would likely require a lot higher write off than Manchester, if Firstgroup could afford it. There is still goodwill in the balance sheet for South Yorkshire and there was not for Manchester, I think because Manchester was acquired earlier and they had to change the treatment of purchased goodwill because of accounting standards or something like that which came in.

Thanks, interesting. It's certainly becoming a basket case of an operation, particularly on the engineering and maintenance side.

 

[Volvodart]

Photos of a new two tone blue Scania Enviro400MMC for First Essex have been posted on Facebook.