First Group: General Discussion

[TheGrandWazoo]

Surprised this hasn't been mentioned yet on this thread

http://www.bbc.co.uk/news/uk-england-29489170

 

[winston270twm]

Surprised this hasn't been mentioned yet on this thread

http://www.bbc.co.uk/news/uk-england-29489170

Isn't FGW only on a management contract?


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http://www.heraldscotland.com/busin...e-on-firstgroup-to-restart-dividends.25506181

 

[DunsBus]

Abellio set to be named tomorrow as the new franchise operator of Scotrail:

http://www.scotsman.com/news/transport/first-lose-scotrail-franchise-to-dutch-firm-abellio-1-3565659

 

[Blindtraveler]

Make or break for there Scottish Bus opps now then!

 

[TheGrandWazoo]

Make or break for there Scottish Bus opps now then!

Or the freedom to do what they want?

 

[overthewater]

Or the freedom to do what they want?

Which can only be a good thing, but the Musselburgh depot is not out of the woods yet.

 

[GaryMcEwan]

I think they will wait until they lose Scotrail before deciding what to do with the Bus side of things, unless the likes of FSE really needs overhauling beforehand...

 

[WatcherZero]

...

That didnt take long

Suppose winding up of Scotrail would give them a few million to play with as they would get their deposit back.

 

[TheGrandWazoo]

I think they will wait until they lose Scotrail before deciding what to do with the Bus side of things, unless the likes of FSE really needs overhauling beforehand...

Don't need to wait at all. Announced today, changes in six months- they can now focus on their Scottish bus ops

 

[Robertj21a]

Don't need to wait at all. Announced today, changes in six months- they can now focus on their Scottish bus ops

Or Greyhound, across the pond.

 

[TheGrandWazoo]

Or Greyhound, across the pond.

I was looking at only the Scottish perspective

 

[winston270twm]

...

That didnt take long

Suppose winding up of Scotrail would give them a few million to play with as they would get their deposit back.

I think you're also forgetting the loss of any profit from Scotrail and more importantly cashflow.

First Group's rail portfolio has shrunk quite a bit of late.

The markets didn't see the loss of Scotrail like that, FGP shares were down nearly 8% earlier this morning

 

[smtglasgow]

I think the Scotrail decision can only be good for First’s Scottish bus ops. Aberdeen will carry on as it is – it seems to have turned a corner in the last few years and better fares, improved frequencies and new vehicles seem to have boosted ridership. With Glasgow, there is the chance to change some of the less profitable services. I’d expect the Airdrie service to be changed and some reductions in evening and Sunday services on Glasgow-Lanarkshire routes. There is also the possibility that they might compete more aggressively with rail on corridors like Glasgow-Vale of Leven or Lanarkshire. Glasgow ‘seems’ to be doing OK now, so maybe the impact will be minimal.

FSE is a different matter and this might be a test of how much First has really changed. East Lothian and Livingston are the obvious basketcases, but Falkirk and Stirling were also held back by the rail franchise commitments. The East Lothian services are probably making a profit, but the cost of two depots for a tiny pvr must be resulting in a hefty overall loss. Maybe the only option is to pull out. Livingston needs (another) complete overhaul, and the ending of the controls might give an opportunity for a completely fresh network - although the design of the town’s roads is a big hurdle in itself. With Stirling and Falkirk there might be an opportunity to relaunch the X37/X39 as proper inter-urban express routes and I’d expect some trimming of evening and Sunday services. We might not get huge improvements, but if the losses can be stemmed FSE could justify more investment.

The real risk from this would be if the loss of revenue to Firstgroup as a whole jeopardises the continuing investment in new vehicles.

 

[Volvodart]

National Express bid the highest price, but Abellio won on service improvements with Firstgroup third.

http://www.telegraph.co.uk/finance/newsbysector/transport/11148264/Why-has-FirstGroup-hit-the-buffers-yet-again.html

 

[Busaholic]

First the WCML fiasco, then loss of FCC, now Scotrail. Whatever Tim O'Toole gets involved in seems to turn to dust yet he gets very little flak compared to others from Nat Ex, Stagecoach,etc. Why is that?

 

[winston270twm]

I think the Scotrail decision can only be good for First’s Scottish bus ops. Aberdeen will carry on as it is – it seems to have turned a corner in the last few years and better fares, improved frequencies and new vehicles seem to have boosted ridership. With Glasgow, there is the chance to change some of the less profitable services. I’d expect the Airdrie service to be changed and some reductions in evening and Sunday services on Glasgow-Lanarkshire routes. There is also the possibility that they might compete more aggressively with rail on corridors like Glasgow-Vale of Leven or Lanarkshire. Glasgow ‘seems’ to be doing OK now, so maybe the impact will be minimal.

FSE is a different matter and this might be a test of how much First has really changed. East Lothian and Livingston are the obvious basketcases, but Falkirk and Stirling were also held back by the rail franchise commitments. The East Lothian services are probably making a profit, but the cost of two depots for a tiny pvr must be resulting in a hefty overall loss. Maybe the only option is to pull out. Livingston needs (another) complete overhaul, and the ending of the controls might give an opportunity for a completely fresh network - although the design of the town’s roads is a big hurdle in itself. With Stirling and Falkirk there might be an opportunity to relaunch the X37/X39 as proper inter-urban express routes and I’d expect some trimming of evening and Sunday services. We might not get huge improvements, but if the losses can be stemmed FSE could justify more investment.

The real risk from this would be if the loss of revenue to Firstgroup as a whole jeopardises the continuing investment in new vehicles.

First Group might now have the opportunity to boost profits at its Scottish bus division with restrictions lifted, but the loss of revenue/cash flow will dwarf any improvements in Scottish bus. There were suggestions after the failure to gain the Thameslink franchise that if First Group lost another one, it may need to go cap in hand to the City to raise further funds to pay down debts or even make a big disposal to raise cash. It will be worth watching the press over the weekend following analysts having completed the number crunching.....
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National Express bid the highest price, but Abellio won on service improvements with Firstgroup third.

http://www.telegraph.co.uk/finance/newsbysector/transport/11148264/Why-has-FirstGroup-hit-the-buffers-yet-again.html

Thanks for that, I knew NX wanted Scotrail & would bid aggressively, especially with hiring Mary Grant. Had they won it the additional revenue/cash flow would have helped them to pay down their debt quicker & potentially allow acquisitions to re-start.

 

[TheGrandWazoo]

First the WCML fiasco, then loss of FCC, now Scotrail. Whatever Tim O'Toole gets involved in seems to turn to dust yet he gets very little flak compared to others from Nat Ex, Stagecoach,etc. Why is that?

A number of reasons. First WCML was not his fault. Everyone knows that it was DaFT who fundamentally cocked it up.

Similarly, FCC was part of a wider franchise and that was always going to be difficult to retain.

However, the main thing is that there is a recognition that he's had to go into an organisation and put right the underlying faults that came from the Lockhead era.
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I think you're also forgetting the loss of any profit from Scotrail and more importantly cashflow.

First Group's rail portfolio has shrunk quite a bit of late.

The markets didn't see the loss of Scotrail like that, FGP shares were down nearly 8% earlier this morning

The shares have rallied. Less than 3% down.

The extension of FGW is arguably more important, but the pressure to win ECML will be intense. As we discussed earlier, this was an expected loss.

 

[winston270twm]

The shares have rallied. Less than 3% down.

The extension of FGW is arguably more important, but the pressure to win ECML will be intense. As we discussed earlier, this was an expected loss.

Yes they have since pulled back, but they could still fall further over the coming days when the true extent of the loss of Scotrail is known, The Motley Fool is forecasting that the loss of Scotrail will wipe £13 Million of profit from next years figures, then is there also the more important loss of cashflow, which may affect First Group paying down its debts as much as previously planned. Scotrail is currently lumped as part of First Group Rail division, its not yet know what the Scotrail franchise was worth.

If First fail to win ECML I think they'll be forced to raise new cash to pay down debt or may have to make a sizeable disposal

 

[TheGrandWazoo]

Yes they have since pulled back, but they could still fall further over the coming days when the true extent of the loss of Scotrail is known, The Motley Fool is forecasting that the loss of Scotrail will wipe £13 Million of profit from next years figures, then is there also the more important loss of cashflow, which may affect First Group paying down its debts as much as previously planned. Scotrail is currently lumped as part of First Group Rail division, its not yet know what the Scotrail franchise was worth.

If First fail to win ECML I think they'll be forced to raise new cash to pay down debt or may have to make a sizeable disposal

The ScotRail franchise turned over £380m, whereas FGW is >£900m. I don't see the share price changing that much over the next few days. The shock has hit, and if an FGW announcement for a five year extension comes, then the price will broadly flatten out.

They'll be going all out for EC, that'll be for certain.
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The main share dealing firms seem sanguine about it....

"Firstgroup’s share price was dented on Wednesday by the transport group’s failure to secure the Scotrail franchise for next year, though analysts mostly retained their positive stance on the stock despite the negative news.

Investec kept a ‘buy’ rating but placed its 151p target price for the shares under review, highlighting ‘another disappointing day’ for the company.

‘Life never seems to get any easier at Firstgroup,’ the broker said.

Investec said that the financial impact of the contract loss would not be too large – a working capital outflow of £70m is to be taken in the second half – ‘but this does not help sentiment’.

Similarly, analysts at Liberum said they had a 3p per share value priced into their forecasts for the option value of the contract bid, so the loss was ‘not a material impact’.

The broker reiterated its ‘buy’ recommendation and 155p target price for Firstgroup’s shares, but admitted that the Scotrail loss would be ‘negative for sentiment’.

JPMorgan Cazenove also repeated its ‘overweight’ position on the stock with a 156p target, while Panmure Gordon restated its ‘hold’ rating and 140p target."

 

[winston270twm]

The ScotRail franchise turned over £380m, whereas FGW is >£900m. I don't see the share price changing that much over the next few days. The shock has hit, and if an FGW announcement for a five year extension comes, then the price will broadly flatten out.

They'll be going all out for EC, that'll be for certain.
--- old post above --- --- new post below ---
The main share dealing firms seem sanguine about it....

"Firstgroup’s share price was dented on Wednesday by the transport group’s failure to secure the Scotrail franchise for next year, though analysts mostly retained their positive stance on the stock despite the negative news.

Investec kept a ‘buy’ rating but placed its 151p target price for the shares under review, highlighting ‘another disappointing day’ for the company.

‘Life never seems to get any easier at Firstgroup,’ the broker said.

Investec said that the financial impact of the contract loss would not be too large – a working capital outflow of £70m is to be taken in the second half – ‘but this does not help sentiment’.

Similarly, analysts at Liberum said they had a 3p per share value priced into their forecasts for the option value of the contract bid, so the loss was ‘not a material impact’.

The broker reiterated its ‘buy’ recommendation and 155p target price for Firstgroup’s shares, but admitted that the Scotrail loss would be ‘negative for sentiment’.

JPMorgan Cazenove also repeated its ‘overweight’ position on the stock with a 156p target, while Panmure Gordon restated its ‘hold’ rating and 140p target."

Don't be so sure, yes it's got through the initial shock this morning & has bounced back, but it currently looks to be heading back south again. (-3.5% down now). Although brokers remain fairly positive, as they say already weak sentiment towards First Group has been further weakened, it may well drift back lower yet over the next few weeks. There's unlikely to be any positive news to change sentiment and FGP's shareprice has been in a downward trend since 31st March when it peaked at 145.9p. There is still no prospect of a dividend being re-instated and the stock markets itself is pulling back, any higher risk/low sentiment stocks will be marked down more than better performing stocks if markets continue their current slide.

There's no reason to really buy First Group for at present other than as a recovery play, but that is some way off yet, so no rush.

 

[TheGrandWazoo]

Don't be so sure, yes it's got through the initial shock this morning & has bounced back, but it currently looks to be heading back south again. (-3.5% down now). Although brokers remain fairly positive, as they say already weak sentiment towards First Group has been further weakened, it may well drift back lower yet over the next few weeks. There's unlikely to be any positive news to change sentiment and FGP's shareprice has been in a downward trend since 31st March when it peaked at 145.9p. There is still no prospect of a dividend being re-instated and the stock markets itself is pulling back, any higher risk/low sentiment stocks will be marked down more than better performing stocks if markets continue their current slide.

There's no reason to really buy First Group for at present other than as a recovery play, but that is some way off yet, so no rush.

That is why a 5 yr extension to FGW is so important.

Also, the margin on the UK bus business is also pivotal. See that increase and the share price should also maintain. However, I fully agree that they can't have too much more bad news, especially out of the US.

I might add that over the same period, Stagecoach's share price is down by c.8% over the last 6 months, though Go Ahead is galloping ahead!!

 

[winston270twm]

That is why a 5 yr extension to FGW is so important.

Also, the margin on the UK bus business is also pivotal. See that increase and the share price should also maintain. However, I fully agree that they can't have too much more bad news, especially out of the US.

I might add that over the same period, Stagecoach's share price is down by c.8% over the last 6 months, though Go Ahead is galloping ahead!!

FGW is important, the biggest thing that would have shown confidence in their turnaround plan would have been to re-instate a dividend, but they didn't, not even a small token one. FGP is back to 5% down circa 110p. If the price continues to fall much further you may get the usual boost from takeover / private equity buyout speculation.

But when they are failing to retain/win rail franchises, any margin improvement elsewhere will just get cancelled out by the loss of profit/turnover in the rail division next year Thameslink (FCC), Scotrail etc. So they are still no further forward with overall group profits. To take a leap forward, FGP need all divisions to grow, not two grow, one shrink.

NX group have been in the same boat as well, they have improved margins in US school bus, UK Bus & Coach & Spain has stabilized, but the rail division has shrunk since it failed to retain Greater Anglia, missed out on Cross Rail and now Scotrail. Yes they've won two rail franchises in Germany, but they don't commence until the end of Dec 2015. NX are focused on generating cash to reduce debt levels, which they appear to be succesfully doing, but I believe winning Scotrail would have accelerated the progress of the group.

I agree the majority of UK transport groups have fallen over the past few months, only Go-Ahead bucking the trend due to its Thameslink win.

 

[robertclark125]

Here's a little thought for you, given there is not a lot of bus overlap; a Natex - First merger?

 

[TheGrandWazoo]

Here's a little thought for you, given there is not a lot of bus overlap; a Natex - First merger?

We've heard this one before....

Why would two overly indebted firms seek to merge, given that there is little overlap and therefore the ability to drive out synergy benefits is limited? I think the markets would also take a dim view about management distraction when they're each trying to bail out their respective businesses.

 

[winston270twm]

Here's a little thought for you, given there is not a lot of bus overlap; a Natex - First merger?

First Group were the first suiter to NX Group back in June 2009 with an all share merger proposal, back when NX were struggling under a massive debt mountain/ECML fiasco etc. There's little overlap in the UK bus or coach, but they would have problems in the USA with being No 1 & No 2 in Student.

If that were to ever happen, I'd like to see Dean Finch take over control of the combined business, the only question would be is there total combined debts? may not be such a big issue with a bigger business.

First Group Circa £1.303 Billion debt
NX Group circa £729 Million debt
Total = £2.032 Billion Debt (combined)

 

[WatcherZero]

I think you're also forgetting the loss of any profit from Scotrail and more importantly cashflow.

First Group's rail portfolio has shrunk quite a bit of late.

The markets didn't see the loss of Scotrail like that, FGP shares were down nearly 8% earlier this morning

I mean capital for reinvestment in whatever they choose as their next focus.

 

[winston270twm]

Surprised this hasn't been mentioned yet on this thread

http://www.bbc.co.uk/news/uk-england-29489170

FGP have confirmed that the Dft intends to negotiate a 3.5 year contract extension on FGW, the other 1.5 years is at the discretion of the Dft.

 

[Strathclyder]

I had to do a double take when I saw a Enviro 300 on the 81 (Duntocher - Clydebank) yesterday. Is there a shortage of Darts & Solos in the Glasgow fleet? I ask this because there was also a Wright Eclipse on the same route on the same day.

 

[GaryMcEwan]

I had to do a double take when I saw a Enviro 300 on the 81 (Duntocher - Clydebank) yesterday. Is there a shortage of Darts & Solos in the Glasgow fleet? I ask this because there was also a Wright Eclipse on the same route on the same day.

Well its a Scotstoun route so it was bound to happen at some point. The Marshall Darts seem to be on the M3 a lot of the time, and the 54 and 05 plated Solo's on the 94...

 

[TheGrandWazoo]

FGP have confirmed that the Dft intends to negotiate a 3.5 year contract extension on FGW, the other 1.5 years is at the discretion of the Dft.

BBC says now it's 3.5 yrs with a year option

http://m.bbc.co.uk/news/uk-29565156