First Group: General Discussion

[winston270twm]

Ok, so what now for First group?

That's the big question & why the shares dropped to £1 again on opening/release of news that ECML had gone to Vrigin/Stagecoach ('The Guardian' needs a new source of inside info....)

First Group now face significantly reduced turnover, reduced cash flow and group profits will take a hit due to a smaller Rail Division. The market also wants them to re-instate a dividend to show confidence..... They've not got to extract increased profit from Student & UK bus just to get back to where group profits were.....

I think they have to re-consider a big disposal to pay down debt possibly 'Greyhound' again, but again that would also reduce group profits by circa £50 million........

 

[TheGrandWazoo]

That's the big question & why the shares dropped to £1 again on opening/release of news that ECML had gone to Vrigin/Stagecoach ('The Guardian' needs a new source of inside info....)

First Group now face significantly reduced turnover, reduced cash flow and group profits will take a hit due to a smaller Rail Division. The market also wants them to re-instate a dividend to show confidence..... They've not got to extract increased profit from Student & UK bus just to get back to where group profits were.....

I think they have to re-consider a big disposal to pay down debt possibly 'Greyhound' again, but again that would also reduce group profits by circa £50 million........

Fair summary (though a bit surprised the share price did drop as you'd have thought that had been reflected by the drop when the rumour about Keolis surfaced). And yes, your Guardian mention made me chuckle I thought the same!

First Student is a problem, and the markets will need to see that business recover. Talk of bad weather can only be accepted for so long - that business has to start showing its turned the corner.

Greyhound is a possible but as you rightly say, selling anything of any worth also means a further drop in profits

 

[smtglasgow]

For those with a better understanding of the markets, could First Group’s low share price make them a target for a hostile takeover? Or more receptive to a merger opportunity? Or is the debt mountain too much for any outside suitor? Presumably any takeover would need someone with deep pockets, but some of the outlay could be recouped through breaking up the business. The squeeze on revenue is going to cause a lot of problems, even if they manage to keep going as they are (which I guess is the most likely outcome).

 

[winston270twm]

Fair summary (though a bit surprised the share price did drop as you'd have thought that had been reflected by the drop when the rumour about Keolis surfaced). And yes, your Guardian mention made me chuckle I thought the same!

First Student is a problem, and the markets will need to see that business recover. Talk of bad weather can only be accepted for so long - that business has to start showing its turned the corner.

Greyhound is a possible but as you rightly say, selling anything of any worth also means a further drop in profits

The price drop is down to market makers, mark the price down to £1 on open/on news of ECML going to Stagecoach/Virgin, take at people's stop loss buy shares cheap, then you'll notice the shareprice ended up back where it started within an hour. Nice mornings work...

Tim O'Toole must be under more pressure than he's letting on 'i.e. we wont be forced in to desperate rail bids' etc I think he's stuck between a rock & a hard place.... I guess it depends if they can trade their way out of debt through significant profit increases at UK Bus, Student & how long they expect it to take and increase cash generation to pay down debt.

They can't go cap in hand to the market, the shareprice will be crucified..... interesting times ahead me thinks....

Are any Rail franchises of any significance due for re-let during 2015?
--- old post above --- --- new post below ---

For those with a better understanding of the markets, could First Group’s low share price make them a target for a hostile takeover? Or more receptive to a merger opportunity? Or is the debt mountain too much for any outside suitor? Presumably any takeover would need someone with deep pockets, but some of the outlay could be recouped through breaking up the business. The squeeze on revenue is going to cause a lot of problems, even if they manage to keep going as they are (which I guess is the most likely outcome).

Potentially, First Group could be acquired by a private equity group, who could either take it private or choose to break the group up sell off chunks to other transport groups, pay off the debt & bank the rest.

Or I do wonder whether a paper merger between First Group & NX Group could be a viable option once again i.e. merger of equals. Dean Finch knows his way around First Group

 

[Robertj21a]

A hostile takeover must be getting more likely now given the apparent inability to move the business forward sufficiently quickly. Shareholders must be getting fed up by now.

 

[winston270twm]

A hostile takeover must be getting more likely now given the apparent inability to move the business forward sufficiently quickly. Shareholders must be getting fed up by now.

I agree, First Group aren't really making things happen quickly enough.

There's only really NX in the UK that could merge with First without attracting much Oft interest.

Other than that, could RAPT Dev or Ned Railways (Abellio's parent) afford First Group and its debt?

 

[Robertj21a]

I agree, First Group aren't really making things happen quickly enough.

There's only really NX in the UK that could merge with First without attracting much Oft interest.

Other than that, could RAPT Dev or Ned Railways (Abellio's parent) afford First Group and its debt?

Would have thought it more likely to be a shareholder group just intent on realising capital, through splitting the company up and selling off the better bits.

 

[winston270twm]

Would have thought it more likely to be a shareholder group just intent on realising capital, through splitting the company up and selling off the better bits.

After all of Sandell's public outbursts even with only a 3% stake, they have been reducing their stake recently & appear to have given up fighting.

First Group are now in the same predicament as NX Group were in 2009 i.e. the business is more valuable broken up & sold off, as opposed to remaining as a group.

 

[overthewater]

After all of Sandell's public outbursts even with only a 3% stake, they have been reducing their stake recently & appear to have given up fighting.

First Group are now in the same predicament as NX Group were in 2009 i.e. the business is more valuable broken up & sold off, as opposed to remaining as a group.

So how did NX Group turn around its operations with out a sell off?

 

[Robertj21a]

After all of Sandell's public outbursts even with only a 3% stake, they have been reducing their stake recently & appear to have given up fighting.

First Group are now in the same predicament as NX Group were in 2009 i.e. the business is more valuable broken up & sold off, as opposed to remaining as a group.

Despite the efforts of Tim O'T and Giles etc, the First Group brand has become tainted. It's associated with having massive debts, failure to succeed in the rail franchising and an apparent inability to move forward fast enough.

I wonder if Greyhound could find a worthwhile buyer this time round ?

 

[winston270twm]

Despite the efforts of Tim O'T and Giles etc, the First Group brand has become tainted. It's associated with having massive debts, failure to succeed in the rail franchising and an apparent inability to move forward fast enough.

I wonder if Greyhound could find a worthwhile buyer this time round ?

If I had to make the call of which asset to sell off, I would go Greyhound & keep the biggest subsidiaries i.e. UK bus, Student & Transit intact. The problem for First Group is it wiping another £50 Million off group profits and UK bus & Student are turning around quickly enough to fill that size void.

I personally would love to see NX Group buy it, it would fit perfectly with NX coaches & ALSA, just not sure Dean Finch is prepared to do nay big acquisitions until their debt levels have been reduced substantially.

 

[Deerfold]

('The Guardian' needs a new source of inside info....)

The Guardian said there were reports that Keolis/Eurostar had got it - there were, they were in the Express. They appear to the only paper to claim they had any insider info - all the rest of the papers only reported that there had been reports which had affected share prices.

 

[winston270twm]

The Guardian said there were reports that Keolis/Eurostar had got it - there were, they were in the Express. They appear to the only paper to claim they had any insider info - all the rest of the papers only reported that there had been reports which had affected share prices.

I think I owe 'The Guardian' an apology. Well spotted, it was the link to 'The Express' that I originally posted as having the inside info......

 

[F Great Eastern]

Some better news is conditions are improving in the Aircoach business in Ireland.

After losing around 1.5m in the accounts to April 2012, the losses doubled in the last accounts (to April 2013) thanks to the company investing in two ambitious new intercity non stop routes, which commenced in mid 2012 which cost a lot of money in marketing and suchlike which was reflected in the huge lost to April 2013.

They converted their Cork commuter service to non stop between the two cities and went from 6 times daily to 18 times daily almost overnight in each direction and started an all new Belfast to Dublin non stop route running 22 times daily in each direction, and as you can imagine, the Belfast route in particular was carrying a lot of thin air around.

The Cork route doubled it's passengers between early 2013 and early 2014, and about 20% of coaches now need reliefs normally hired in, even at 18 times daily, especially at weekends. When big matches or concerts are on it can need even more reliefs. The company moved away from it's promotional flat rate of €9 if booked online, which it was performing well at, in favour of online fares ranging from €10 to €14, with a certain number of seats at each price point. Since the service is so popular, yields must have improved with this with minimal impact on passenger numbers and the service is now considered highly successful and still cheaper than the competition who have been obliterated.

The Belfast route, after a very slow start is also now performing well. After only carrying a handful of passengers for the first few months of it's life in 2012 and improving slowly in 2013, this year it's really took off, to the degree that the route will shortly be upgraded from 44 seat to 53 seat vehicles due to capacity reasons and passengers being turned away on peak services The odd relief, although rare and nowhere near as widespread as on Cork, is also sometimes used.

It's important to say that the Belfast Route isn't at the level of the Cork route, and has much tougher competition that is doing better number wise than Aircoach, but compared to 12 months ago the service and the financial performance must have come on leaps and bounds. They have also introduced the tiered online fare systems for this route, but have not increased the cheapest tier like they did by €1 on the Cork route. I should think it's now either passed the break even point or just about on it, from being what I'd guess was quite heavily loss making at the start.

They have also closed one of the city centre routes and merged the stops into another existing route which served the South Fringed of the County of Dublin, although whilst this may have reduced costs, it's believed that it's had a negative impact on the service that the stops have been inserted into which may have involved losing a small amount of custom. However it has reduced costs by a good amount, probably a fair bit more than the custom they have lost from doing it.

Also a further 6, fuel efficent Plaxton Panther 3 coaches have been delivered to lower operational costs - See photos below
https://www.flickr.com/photos/vc105-theroseofdonegal/

 

[overthewater]

Wonderful news. Lets hope First continues to expand the operations. Mind you its a shame the coaches have Voith gears boxes

 

[F Great Eastern]

The choice of fully auto gearboxes in the last six delivered is because they will be more suited to the shorter (70 mins) more frequent stopping (15 stop) routes.

The 10 Panthers delivered earlier in the year have semi-auto as they are non stop, 3.5 hour runs that are more suited to that kind of gearbox.

They've had issues with past fleet purchases/leases with semi-auto gearboxes causing issues years down the line when exposed to high levels of shorter distance frequently stopping services.

There are lots of changes happening at the moment with allocations, since they are withdrawing six Belfast based 2004, 44 seat Setra vehicles shortly and sending up 6 2008 53 seat Jonckheeres, to get NI Plates, but there are complex paperwork and regulatory issues with that, since the Belfast route is run jointly by an NI based Aircoach company (First Northern Ireland) and an ROI based (Last Passive, main Aircoach) one.

It also means that NI registered vehicles can only operate on services that start or finish in NI (which is only the Belfast route) and they cannot operate on services wholly in the ROI (4) and there would be similar restrictions on drivers. However if a vehicle is garaged in NI full time, it must have an NI plate. I'm also not sure if NI drivers are allowed to drive ROI registered vehicles or ROI drivers can drive NI registered vehicles.

 

[Robertj21a]

Ireland, and some parts of First's UK Bus network, are clearly doing much better of late, the trouble is that much more is needed.

What's the size of the fleet in Ireland nowadays ?

 

[90sWereBetter]

It's quite interesting that here in Ipswich, it seems First and Ipswich Buses are fighting to see who can be the better bus operator. First have improved markedly in the last year, especially with their refurb programme and getting rid of the awful Scania single deckers they had (they only have two left in service at the time of posting this), whilst IB has always seemed to be a decent operator in my view

Yet, 20 miles down the road in Colchester, it seems First and Network Colchester are fighting to see who can be the worst operator. I have never seen so many tatty, filthy buses in one place. Most of First's stock is life-expired S and T reg Scanias, those awful hard-seat dealer stock Scanias from the early 2000s, a bunch of assorted Volvo B7RLEs, and a few B7TL deckers cascaded from Norwich. Some of the older single deckers have been cascaded from Ipswich because of the refurb programme, and they're still running around with IPSWICH fleetnames on the side months after transfer. As for Network Colchester, pretty much none of their buses have a fleetname, and it's a motley bunch of Darts, B10BLEs, and a few ex-London deckers.

It's such a shame, because TGM did a great job of turning the Network Colchester operation around until they sold out to Arriva a few years ago. There were investments in new buses, and pretty much all of them have been cascaded away.

I think First are marginally the better operator, mainly due to the 70/71/71A routes between Colchester and Chelmsford, which actually have well-presented buses. I don't think Colchester depot runs those routes, which may be a reason why they're better...

 

[Robertj21a]

It's quite interesting that here in Ipswich, it seems First and Ipswich Buses are fighting to see who can be the better bus operator. First have improved markedly in the last year, especially with their refurb programme and getting rid of the awful Scania single deckers they had (they only have two left in service at the time of posting this), whilst IB has always seemed to be a decent operator in my view

Yet, 20 miles down the road in Colchester, it seems First and Network Colchester are fighting to see who can be the worst operator. I have never seen so many tatty, filthy buses in one place. Most of First's stock is life-expired S and T reg Scanias, those awful hard-seat dealer stock Scanias from the early 2000s, a bunch of assorted Volvo B7RLEs, and a few B7TL deckers cascaded from Norwich. Some of the older single deckers have been cascaded from Ipswich because of the refurb programme, and they're still running around with IPSWICH fleetnames on the side months after transfer. As for Network Colchester, pretty much none of their buses have a fleetname, and it's a motley bunch of Darts, B10BLEs, and a few ex-London deckers.

It's such a shame, because TGM did a great job of turning the Network Colchester operation around until they sold out to Arriva a few years ago. There were investments in new buses, and pretty much all of them have been cascaded away.

I think First are marginally the better operator, mainly due to the 70/71/71A routes between Colchester and Chelmsford, which actually have well-presented buses. I don't think Colchester depot runs those routes, which may be a reason why they're better...

But the TGM operation in Colchester was always part of the overall Arriva group anyway.

 

[TheGrandWazoo]

But the TGM operation in Colchester was always part of the overall Arriva group anyway.

Not quite. Arriva Colchester was sold to TGM. Then a few years later, they bought the TGM Group and so it re-entered Arriva ownership.

 

[Robertj21a]

Not quite. Arriva Colchester was sold to TGM. Then a few years later, they bought the TGM Group and so it re-entered Arriva ownership.

Fair enough, TGM has had an on/off relationship with Midland Fox/British Bus and now Arriva for a long time - of course both Stephen Telling and Julian Peddle have also tended to maintain close contact with Arriva throughout.

 

[F Great Eastern]

Ireland, and some parts of First's UK Bus network, are clearly doing much better of late, the trouble is that much more is needed.

What's the size of the fleet in Ireland nowadays ?

Currently 65, but that figure is inflated by the fact that six new coaches arrived last week and some of the 2004 Setras due to return off lease still have a few weeks left to run on their leases.

Current fleet is (with links to examples)

Coaches
12x 2004 Setra TopClass S415HD 44 Seater
1x 2005 Setra ComfortClass S315GT-HD 49 Seater with toilet
4x 2006 Scania K340EB Caetano Levante 49 Seater with toilet
10x 2008 Volvo B12BT Jonckheere SHV Tri Axle 53 seater.
9x 2009 Volvo B12BT Joncheere SHV Tri Axle 53 seater.
10x 2014 Volvo B11R Plaxton Panther 3 49 Seater with toilet
6x 2014 Volvo B11R Plaxton Panther 3 53 seater.

Buses
1x 2002 Mercedes O530 Citaro Rigid
1x 2006 Volvo B7RLE Wright Eclipse (Dual Doored)
9x 2008 Mercedes O530G Citaro Artic
2x 2009 Mercedes O530G Citaro Artic

In the last 12 months, 8x 2004 Setra 415s, and 2x 2006 Plaxton Panthers left the fleet, and were replaced by the first batch of 10 2014 Panthers listed above. Three 2004 Scania Centuries also departed due to a closure of a under performing route.

 

[WatcherZero]

The Guardian said there were reports that Keolis/Eurostar had got it - there were, they were in the Express. They appear to the only paper to claim they had any insider info - all the rest of the papers only reported that there had been reports which had affected share prices.

Indeed and the 'source' for the Express was the RMT who issued several critiques in the run up to and then on the morning of the award issued a press release condemning 'foreign nationalised' SNCF winning, only to quickly pull it when it wasn't SNCF who won it.

 

[Deerfold]

Indeed and the 'source' for the Express was the RMT who issued several critiques in the run up to and then on the morning of the award issued a press release condemning 'foreign nationalised' SNCF winning, only to quickly pull it when it wasn't SNCF who won it.

Was it? The Express claimed it was "Sources close to the process".

I'd be surprised if that covered the RMT.

http://www.express.co.uk/finance/city/539116/East-Coast-Mainline-Privatised-French-bidder

 

[F Great Eastern]

Aircoach Fleet now down to 62, 3 Setra's withdrawn in the last few days.

 

[overthewater]

At the other side of the First empire, nothing seems to be moving forward as fast as Cornwall. At this moment of time, alot of rumours are popping in connection with First, and Lothian Country buses in relation to East Lothian. LCB could be heading for Dunbar and North Berwick by March.

Saying that Lothian are use 52 plate deckers on the Haddington route:
https://www.flickr.com/photos/cuthbus/15309801223/ Yet First are also using 52 plate deckers for the Haddington route:

Thankful new buses at Livingston and Larbart have helped cut the fuel bill, alas It does not look good for this years accounts. Hopeful the accounts up to April 2014 will appear within the next two weeks.

 

[TheGrandWazoo]

Was it? The Express claimed it was "Sources close to the process".

I'd be surprised if that covered the RMT.

http://www.express.co.uk/finance/city/539116/East-Coast-Mainline-Privatised-French-bidder

Of course the Express will claim the sources are excellent....and I would trust all the UK tabloids implicitly

 

[Deerfold]

Of course the Express will claim the sources are excellent....and I would trust all the UK tabloids implicitly

WatcherZero claimed to know the source was the RMT. I'm wondering how they knew that as the Express hasn't admitted that.

 

[WatcherZero]

Because the RMT was running around incorrectly telling everyone SNCF had won and the only one to pick it up as an 'inside source' was a tabloid not a broadsheet. Either the RMT had a mistaken source and the paper had a second source with the same mistake or they were the same source. Ockham's Razor.

This is more worrying and illustrates the extent of Firsts problems. Last year the First Group made a pre-tax profit of £21m. First Scotrail contributed a profit of £26m.

http://www.heraldscotland.com/busin...irstgroup-hails-its-scottish-legacy.114087767

 

[TheGrandWazoo]

Because the RMT was running around incorrectly telling everyone SNCF had won and the only one to pick it up as an 'inside source' was a tabloid not a broadsheet. Either the RMT had a mistaken source and the paper had a second source with the same mistake or they were the same source. Ockham's Razor.

This is more worrying and illustrates the extent of Firsts problems. Last year the First Group made a pre-tax profit of £21m. First Scotrail contributed a profit of £26m.

http://www.heraldscotland.com/busin...irstgroup-hails-its-scottish-legacy.114087767

I think you need to re-read the article AND check the financial results. First made more than £21m