First Group: General Discussion

[overthewater]

What? You want Fred Goodwin?

 

[TheGrandWazoo]

I note that the article reminds us that First Group "have been without a CEO for nearly 6 months" - Ambitious high flyers not exactly queuing up to take on the challenge and turn it around!

Good people will be in roles and these guys will be on minimum 6 months notice and often a year. That will be a consideration too.

 

[bussnapperwm]

What? You want Fred Goodwin?

How about Sir Phillip Green for top dog at First Group?

They'd be under in a week!

 

[TheGrandWazoo]

How about Sir Phillip Green for top dog at First Group?

They'd be under in a week!

Don't know if that's entirely right. The general consensus is that he's a particularly awful individual (various controversies before the more recent BHS and now gagging order stories, such as Safeway and corporate tax avoidance) but he's actually a very, very successful businessman.

 

[overthewater]

For him self.....

 

[TheGrandWazoo]

For him self.....

Er, yeah. His behaviour (in a business context) may well be reprehensible and arguably morally repugnant (depending on anyone's individual morals ).

However, he has successfully developed a business empire and has been successful in making money. Think it would be churlish to say otherwise.

 

[Surreyman]

What? You want Fred Goodwin?

Fred Goodwin would be my dream candidate!

 

[TheGrandWazoo]

Fred Goodwin would be my dream candidate!

Why? How many drivers, fitters etc do you want to put out of a job?

 

[Robertj21a]

Why? How many drivers, fitters etc do you want to put out of a job?

I doubt that it needs to be an issue of sacking drivers or fitters, more a question of getting rid of First Bus operations to someone who can do a much better job than the current shower. It may well be that some operations need to close in due course but that would have probably been inevitable anyway.

 

[overthewater]

Apart from Manchester or Somerset. I cant see where else first would want to shut up shop.

 

[Robertj21a]

Apart from Manchester or Somerset. I cant see where else first would want to shut up shop.

??? - really ?

 

[DragonEast]

Er, yeah. His behaviour (in a business context) may well be reprehensible and arguably morally repugnant (depending on anyone's individual morals ).

However, he has successfully developed a business empire and has been successful in making money. Think it would be churlish to say otherwise.

I now have this image of you in a house full of furnishings from BHS and in clothes from TopShop! Though is that the target FirstBus customer they're after?

 

[TheGrandWazoo]

I now have this image of you in a house full of furnishings from BHS and in clothes from TopShop! Though is that the target FirstBus customer they're after?

No, I wasn’t one of his customers though clearly many people are/have been.

After all, he has amassed a £2bn fortune. Any billionaires on this board wish to advise us how he should have done this?

 

[TheGrandWazoo]

I doubt that it needs to be an issue of sacking drivers or fitters, more a question of getting rid of First Bus operations to someone who can do a much better job than the current shower. It may well be that some operations need to close in due course but that would have probably been inevitable anyway.

First Group clearly needs fundamental change and we’ve discussed this ad nauseum whether it be a U.K./U.S split, future of Greyhound etc.

Just find it odd that people take perverse enjoyment in the travails of any business (unless you’re a vegan who hates a dairy firm, for instance). Usually it’s the workforce who end up worse off and many of us have private pensions to top up the meagre state affair in future years. And that’s not aimed at you Robert.

 

[Robertj21a]

First Group clearly needs fundamental change and we’ve discussed this ad nauseum whether it be a U.K./U.S split, future of Greyhound etc.

Just find it odd that people take perverse enjoyment in the travails of any business (unless you’re a vegan who hates a dairy firm, for instance). Usually it’s the workforce who end up worse off and many of us have private pensions to top up the meagre state affair in future years. And that’s not aimed at you Robert.

Thanks, understood.

I don't see our interest in First Group's problems as being any sort of perverse enjoyment, it's more (for me) watching a real-life example of how things can go disastrously wrong, despite being a major PLC company. Again, I personally find it incredible that other directors didn't stand up and question Moir Lockhead - and I'm also surprised that T O'T did so little to address the truly key issues (difficult as they were/still are). I agree that some of the staff may end up worse off but there are likely to be on-going vacancies for bus drivers, and fitters etc, regardless of what happens to First Group - not ideal, but not a disaster.

 

[TheGrandWazoo]

Thanks, understood.

I don't see our interest in First Group's problems as being any sort of perverse enjoyment, it's more (for me) watching a real-life example of how things can go disastrously wrong, despite being a major PLC company. Again, I personally find it incredible that other directors didn't stand up and question Moir Lockhead - and I'm also surprised that T O'T did so little to address the truly key issues (difficult as they were/still are). I agree that some of the staff may end up worse off but there are likely to be on-going vacancies for bus drivers, and fitters etc, regardless of what happens to First Group - not ideal, but not a disaster.

It is perfectly fair to discuss but some (you and others honourably excluded) do seem to take pleasure. And yes, drivers may get other jobs but will they get the same terms (e.g. pensions?)

As for other directors not standing up to Moir - the stories of his less than conciliatory approach is why so many good people left during his tenure.

The ToT inertia is really an example of not wanting to make wholesale change and incur massive write downs and losses. That may have had a chance had there not been fundamental changes in traveling especially with UK Bus (decline of the high street) and Greyhound (internal flights and new competition) - arguably some of that should have been foreseen. Being wise now, ToT might have been better off incurring some big balance sheet hits early on and putting it squarely at Moir’s door!

 

[overthewater]

??? - really ?

There can't go off trying to flog off parts, If other parts start to look like first wont rid another West lothian could happen.

Thanks, understood.
I don't see our interest in First Group's problems as being any sort of perverse enjoyment, it's more (for me) watching a real-life example of how things can go disastrously wrong, despite being a major PLC company. Again, I personally find it incredible that other directors didn't stand up and question Moir Lockhead - and I'm also surprised that T O'T did so little to address the truly key issues (difficult as they were/still are). I agree that some of the staff may end up worse off but there are likely to be on-going vacancies for bus drivers, and fitters etc, regardless of what happens to First Group - not ideal, but not a disaster.

Exactly

It is perfectly fair to discuss but some (you and others honourably excluded) do seem to take pleasure. And yes, drivers may get other jobs but will they get the same terms (e.g. pensions?)

Yes traveling on awful maintained buses was a pleasure, waiting on buses that were smelly was a pleasure etc, I could tell you a few story for a few years ago. Poor management that just annoyed a lot of us. Driver WILL get other jobs, there is still shortage... but I agree about Pensions but alot of people have been screwed with that.

 

[TheGrandWazoo]

Yes traveling on awful maintained buses was a pleasure, waiting on buses that were smelly was a pleasure etc, I could tell you a few story for a few years ago. Poor management that just annoyed a lot of us. Driver WILL get other jobs, there is still shortage... but I agree about Pensions but alot of people have been screwed with that.

I know - my local firm was First Manchester before I moved to the South West and got First Bristol/Somerset and Avon. Grinding away through the environs of Atherton on some shafted Olympian or, even better, a Dennis Arrow - lovely; then I headed South and witnessed the updating of the Bristol fleet with 12 year old Lance Verdes from West Yorkshire. Mind you, before that I had Arriva Midlands North You wonder what I did wrong

However, whilst drivers will get other jobs, what of their pension arrangements? Do you know what I'm getting at???

As I mentioned above, the rule of Moir was marked with good people leaving First. It was Moir's way or the highway and with financials being hit and the share price climbing (pre Laidlaw) to over £8 from a £1.30 float price, why would the board or investors have intervened? Now we perhaps could see more accurately on the ground and I remember discussions with colleagues who worked in the industry, notably around the Cawlett purchase. That was a hubristic buy if ever there was one, and would never be worth that money.

However, back to the current state of affairs. There are, as Winston mentions, some interesting comments being floated in the media that UK Bus margins are on the climb. Let's see if that's a false dawn or not? I don't see a break up of UK Bus though personally, as I've said before. I can see further depot closures and retrenchment but that is something industry wide anyway. However, a more fundamental break up of the group looks almost inevitable. Whether that's in a geographic (UK/US) or operational (Rail/Bus) manner, we will have to see.

So despite having First Bus as my local provider for the last 15 years (with two different OpCos), I still don't see the pleasure in revelling in the troubles of any business when

• Senior management are probably insulated in their executive gated communities with massive pension pots
• Investors such as Schroders are managing the investment on behalf of pension funds for people with private schemes (like me and you, possibly)
• Staff could be out of jobs - drivers could have jobs but with inferior terms and conditions, and what of other staff (admin, supervisory, etc)

Change is inevitable - will have to see what shape it takes

 

[Journeyman]

I'm also surprised that T O'T did so little to address the truly key issues (difficult as they were/still are).

I don't think it was for lack of trying. I'm an ex-London Underground staff member and I had quite a lot of dealings with Tim O'Toole when he was in charge - he's extremely capable, and his failure to turn First around is a clear indication of just how serious its problems are.

 

[Robertj21a]

I don't think it was for lack of trying. I'm an ex-London Underground staff member and I had quite a lot of dealings with Tim O'Toole when he was in charge - he's extremely capable, and his failure to turn First around is a clear indication of just how serious its problems are.

I agree that he is/should be quite capable. With the benefit of hindsight (and some adverse trading that probably couldn't have been expected) it's probable that he underestimated the sheer scale of the problem and didn't take decisive action when he could have offloaded some parts of the business.

 

[HH]

As for other directors not standing up to Moir - the stories of his less than conciliatory approach is why so many good people left during his tenure.

This is an understatement. I remember asking the head of the bus division why they never sold their old buses, like other groups. The answer was simple, "Moir won't let us". A few months later they'd moved on.

As for TO'T, I don't think he had a clue - couldn't tell a good idea from a bad 'un - and the same applied to people.

 

[richw]

Apart from Manchester or Somerset. I cant see where else first would want to shut up shop.

??? - really ?

U.K. bus as a whole is profitable (even Somerset turned a small profit I read on here a while ago!). US Greyhound and some of uk rail are the big losers!

 

[winston270twm]

U.K. bus as a whole is profitable (even Somerset turned a small profit I read on here a while ago!). US Greyhound and some of uk rail are the big losers!

Greyhound isn't a big loser at all. It is still profitable, however margins have nearly halved in the past 12 months despite increased turnover from 6.2% (2017) down to 3.6% (2018). They could continue to slide as Flixbus expands, but Greyhand still brought in $32.8 Million profit, down from $55.2 a year earlier.

 

[TheGrandWazoo]

Greyhound isn't a big loser at all. It is still profitable, however margins have nearly halved in the past 12 months despite increased turnover from 6.2% (2017) down to 3.6% (2018). They could continue to slide as Flixbus expands, but Greyhand still brought in $32.8 Million profit, down from $55.2 a year earlier.

Think RichW was thinking of the write downs and asset impairments. You’re right, of course, that Greyhound is still profitable but margins are sliding badly. It’s an asset heavy business but is shorn of investment.

UK bus margins increased last year - be interesting to see what happens in two weeks time

 

[Volvodart]

I agree that he is/should be quite capable. With the benefit of hindsight (and some adverse trading that probably couldn't have been expected) it's probable that he underestimated the sheer scale of the problem and didn't take decisive action when he could have offloaded some parts of the business.

There was the guy who came in before Tim who as supposed to be Moir's replacement, but had a quick look and got out as quickly as he could (costing Firstgroup quite a lot of money in the process). I doubt there was a lot of people wanting the job Tim took on.

 

[richw]

Think RichW was thinking of the write downs and asset impairments. You’re right, of course, that Greyhound is still profitable but margins are sliding badly. It’s an asset heavy business but is shorn of investment.

UK bus margins increased last year - be interesting to see what happens in two weeks time

Thanks grand wazoo. It was the write downs I was misunderstanding as losses

 

[winston270twm]

Top Investors in FGP getting frustrated at lack of action / share price decline etc:

Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email found here.
https://www.ft.com/content/bc18a390-e414-11e8-a6e5-792428919cee

Top investor in FirstGroup calls for board to step down James Rasteh says company ‘deserves the best management . . . and it has the worst’ © Bloomberg 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 5 hours ago Print this page 0 A top-10 shareholder in UK transport business FirstGroup has called for the company’s board to step down and said its UK rail arm is “extraordinarily destructive” of capital.James Rasteh, chief investment officer at Coast Capital Management, said the coach and rail business had radically underperformed its closest peer, National Express, and that it “deserves the best management . . . and it has the worst”. Chief executive Tim O’Toole quit in May after a poor set of results with chairman Wolfhart Hauser taking on the role of executive chairman until a successor could be found following a strategic review. The company has yet to give an update on any progress.FirstGroup runs several UK rail franchises, including Great Western Railway and South Western Railway. Passenger growth on its TransPennine Express franchise has fallen below ambitious expectations and a loss of up to £106m is forecast for the rest of the contract until 2023.Mr Rasteh said the average board member’s tenure was four years, a period over which the company’s shares have fallen more than 20 per cent while National Express’s stock has risen 60 per cent. Multiple credible parties would be interested in acquiring all or part of FirstGroup Top-20 shareholder “This show has gone on for way too long,” Mr Rasteh said. “The company has board members who do not have relevant industry experience and have proven themselves to be value-destroyers.”A top-20 shareholder, who did not wish to be named, echoed Mr Rasteh’s criticism, saying that “nothing’s happened” about installing a new chief executive or carrying out a strategic review. “It’s taken a long time for the directors to take decisive action in the past and it seems to be the case now,” the investor said.FirstGroup said it would be reporting half-year results on November 13 when it would update the market on performance and future plans: “The chairman maintains a regular dialogue with our major shareholders across a wide range of topics,” the company said.The second shareholder said FirstGroup had significant assets, including the “exceptionally undervalued” North American school bus business, and that there were “multiple credible parties that would be interested in acquiring all or part of FirstGroup”.The investor pointed to the acquisition in February this year of peer Student Transportation by a Canadian pension fund with an enterprise value of $1bn and said that, at an equivalent value, FirstGroup’s school bus business would be “well through the current share price of the whole group”.More than half of FirstGroup’s £6.4bn revenue last year came from US-based businesses, including school buses and the Greyhound coach line.In May, FirstGroup fought off a takeover bid from US private equity group Apollo Management, which it said was “opportunistic”.FirstGroup lost £327m before tax in the year to March 31 2018, down from a profit of £153m last year.

https://www.ft.com/content/bc18a390-e414-11e8-a6e5-792428919cee

 

[Volvodart]

It sounds like they were the source from the Telegraph articles.

 

[winston270twm]

It sounds like they were the source from the Telegraph articles.

Not sure, the FT article only appeared last night. I don't think there was any comparisions to NX in previous articles. I would think there's a queue of frustrated major shareholders only too keen to speak up at the lack of action/value creation. Half Year results next week, see what they bring....

 

[winston270twm]

GWR profits currently going First Groups way...

The ailing transport operator FirstGroup has reaped £159m in dividends from its Great Western Railway (GWR) franchise over four years, dwarfing its promised payouts to the government.

Newly filed accounts reveal the line running between London, the West Country and Wales earned First a £40m dividend last year, despite a drop in punctuality.

The FTSE 250 company has a controversial contract with the transport department to operate GWR on an uncontested basis. First pledged to pay £68m of premiums to the government between September 2015 and April 2019. The deal is also thought to include a share of profits for the government.

First has run GWR under various guises since it was privatised in 1996 and has held the franchise on a “direct award” basis — without having to compete against rival bids — since 2013. Last year, ministers said the company would continue as the operator until as late as 2024, meaning rivals would not have had the opportunity to bid for the franchise for more than a decade.

Problems with Network Rail’s electrification of the route and new Hitachi trains have dented performance. Ministers extended First’s franchise after deciding a new operator would be unwise amid such turmoil.

First avoided paying more than £800m of premiums to the government when it exercised a break clause to end its GWR franchise early in 2013, but was allowed to continue after franchise problems elsewhere.

The latest £40m dividend came despite the route’s passenger performance score slipping to 85.6% in March from 88.4% a year earlier. It has since fallen to 82.7%.

First has endured a turbulent year, plunging to a £327m loss in May and parting company with boss Tim O’Toole. Results this week are expected to show more tough trading. Profits from GWR have helped make up for weakness in the rest of its rail business.

The share price ended last week at 81p, valuing the company at £982m. First said: “In 2017-18, GWR was the largest of our rail franchises. It follows that GWR was the largest segment of profits in our rail division for that year.”

https://www.thetimes.co.uk/article/firstgroup-nets-40m-from-ailing-rail-line-7807zxhtv