First Group: General Discussion

[robertclark125]

Someone said once in a newspaper, the Dundee Courier I think, that Firstgroups problem was that it was train operator that also happened to run buses. Now, we can say Stagecoach run both trains and buses, but the key difference was, there was a bit of local autonomy in the bus business that was lacking at First.

Which leads me to ask, was Aberdeen in total control of the rail franchises, such as Great Western, or were they run by local management?

 

[ChrisPJ]

Wasn't that a Moir Lockhead soundbite after winning a couple of rail franchises? Possibly said in jest but it came across as saying, nuts to the buses, we've got some train sets to play with now.

 

[overthewater]

Someone said once in a newspaper, the Dundee Courier I think, that Firstgroups problem was that it was train operator that also happened to run buses. Now, we can say Stagecoach run both trains and buses, but the key difference was, there was a bit of local autonomy in the bus business that was lacking at First.

Which leads me to ask, was Aberdeen in total control of the rail franchises, such as Great Western, or were they run by local management?

Two be fair to Stagecoach, it only really had one company, while the West Coast was a Joint venture. Of course East Midlands have been added yet it hasn't' damaged the local stagecoach bus network,

World in Action Cowboy Country promgramme would say differently, I cant remember much from BBC Frontline Scotland or BBC South coast programmes on the subject.
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Getting back to First, it seems FSE is due 20 E300 from Glasgow, (who are getting 20 NEW E200 big size) It seems Border area is getting some, and the talk is Stirling while get the rest.

 

[317 forever]

Can we assume it is a depot that hasn't received any new vehicles in the last few years?

There aren't many left that haven't seen new vehicles of some sort. The only ones it can really be are in Scotland. Of course there's Yeovil and what about AG?

I think a handful of depots with modern stock could still be sold, with such stock retrieved by First for cascade elsewhere. An example could be Weymouth sold to Go-Ahead, with the Streetlites cascaded elsewhere, such as Hampshire or Somerset.

I do not expect any First stock to 2012 spec to be divested to any other operator for the foreseeable future.

 

[Busaholic]

I thought the leasing in London was a Macquarie Bank thing that Stagecoach just stuck with?

Plymouth is strange; smaller cities than Plymouth manage to support two bus companies, so long as they're sensible and don't try and blow each other out of the water. As you say, Ugobus was the issue.

I'd agree that ex-London buses cause their own problems (I'm still laughing at Arriva Northumbria dressing up 51-plate ex-London B7s as their "innovative" MAX) but capital investment in the marginal depots is only going to make the margin worse.

Plymouth, with its almost non-existent local rail system, probably can support two reasonably-sized bus companies, just so long as one of those doesn't go under the name of First. We shall now see, the competition authorities having turned a blind eye to an apparently stated non-competition agreement between Stagecoach and Go-Ahead.

Brest, in western Brittany, a city comparable to Plymouth in many ways, not least in naval matters, has a modern tram system. Plymouth has never even taken a serious look at one.

 

[cactustwirly]

I think a handful of depots with modern stock could still be sold, with such stock retrieved by First for cascade elsewhere. An example could be Weymouth sold to Go-Ahead, with the Streetlites cascaded elsewhere, such as Hampshire or Somerset.

I do not expect any First stock to 2012 spec to be divested to any other operator for the foreseeable future.

Why would First want to sell Weymouth? I understand it makes a profit, especially in the summer months

 

[overthewater]

We wont get a full details about who made losses until 31 December, What is the official names of some of the English operations?

 

[Surreyman]

We wont get a full details about who made losses until 31 December, What is the official names of some of the English operations?

Overthewater,
Why the 31/12?
Didn't realise First published financial details of subsidiaries.

 

[overthewater]

Overthewater,
Why the 31/12?
Didn't realise First published financial details of subsidiaries.

Thats the last date it can be submitted.
Put it this way, the closer to that date the accounts get submitted, the more likely there contain bad information.

Last year Yorkshire accounts were done a few months before, while FSE submitted them on 29 Dec 2014. Remember Livingston and Muss depots made 25% loss etc.

 

[Volvodart]

Thats the last date it can be submitted.
Put it this way, the closer to that date the accounts get submitted, the more likely there contain bad information.

All the accounts are usually signed off a few days before they are submitted.

 

[WatcherZero]

First group made a pre-tax loss of £7.5m in the first six months of the year like for like last year was a £9.9m profit. Revenue was down £500m or 17%. Besides loss of rail franchises US operations were alao poor.

 

[Surreyman]

First group made a pre-tax loss of £7.5m in the first six months of the year like for like last year was a £9.9m profit. Revenue was down £500m or 17%. Besides loss of rail franchises US operations were alao poor.

April 2015 - September 2015?

 

[Robertj21a]

First group made a pre-tax loss of £7.5m in the first six months of the year like for like last year was a £9.9m profit. Revenue was down £500m or 17%. Besides loss of rail franchises US operations were alao poor.

Is there a source for all that on-line please ?

 

[WatcherZero]

http://www.theguardian.com/business...ney-crisis-says-first-group-boss-network-rail

http://otp.investis.com/generic/regulatory-story.aspx?newsid=592510&cid=858

*Note* their 'adjusted' rather than statutory figures are before £30m of extra debt amortisation, £27.2m on acquiring Mile Square for US bus operation and £1.7m at UK bus outstanding debt on a closed depot, also £1m more than previously made provisions for in a court case involving Laidlaw.

Company debt increased by £185m though they say they expect it to be flat for the full year, £200m of investment made £131.8m at First Student, £9.2m at First Transit, £3m at Greyhound, £24.8m first Bus, £31.8m First Rail, £1.8m corporate.

Liquidity was £800m down from £940m.

First Rail made a profit of £32.9m on revenues of £609m (2014 £40m, £1,155m), like for like passengers revenue up 7% and profit up 3.5%. Forecast to be £15m above expectations due to Government change to Franchise pensions payments

First Bus revenue £437m (£449m), like for like growth 1.3%, profit £15.4m (£16.9m) margin 3.5% (3.8%) restructuring costs £4m, operating costs lowered by £10m, medium term company target is to achieve double digit margins.

Greyhound revenue £312.4m (£314.0m) like for like -6.2% with currency moves, profit £25.8m (£29.9m) margin 8.3% (9.5%), medium term target 12% margins, falling oil prices have reduced customers

First Transit revenue £419.2m (£410m) -6.1%, profit £30.1m (£29.5m) margin 7.2% (7.2%) medium term target 7% margin, downturn in Canadian sands oil extraction expected to continue to hit results

First Student revenue £655.9m (£605m) profit £2m (£4.5m) margin 0.1% (0.6%) Less school days because of timing of holidays however rest of year will also have less school days due to early Easter next year. Have increased prices by an average of 5.3% on those contracts up for renewal, contract retention 86% though they aren't winning as many new contracts as they used to. still targeting £10m of savings next year and are training more drivers to deal with acute driver shortage.

 

[oldman]

First's presentation includes the line:

Depot restructuring completed

 

[Robertj21a]

http://www.theguardian.com/business...ney-crisis-says-first-group-boss-network-rail

http://otp.investis.com/generic/regulatory-story.aspx?newsid=592510&cid=858

*Note* their 'adjusted' rather than statutory figures are before £30m of extra debt amortisation, £27.2m on acquiring Mile Square for US bus operation and £1.7m at UK bus outstanding debt on a closed depot, also £1m more than previously made provisions for in a court case involving Laidlaw.

Company debt increased by £185m though they say they expect it to be flat for the full year, £200m of investment made £131.8m at First Student, £9.2m at First Transit, £3m at Greyhound, £24.8m first Bus, £31.8m First Rail, £1.8m corporate.

Liquidity was £800m down from £940m.

First Rail made a profit of £32.9m on revenues of £609m (2014 £40m, £1,155m), like for like passengers revenue up 7% and profit up 3.5%. Forecast to be £15m above expectations due to Government change to Franchise pensions payments

First Bus revenue £437m (£449m), like for like growth 1.3%, profit £15.4m (£16.9m) margin 3.5% (3.8%) restructuring costs £4m, operating costs lowered by £10m, medium term company target is to achieve double digit margins.

Greyhound revenue £312.4m (£314.0m) like for like -6.2% with currency moves, profit £25.8m (£29.9m) margin 8.3% (9.5%), medium term target 12% margins, falling oil prices have reduced customers

First Transit revenue £419.2m (£410m) -6.1%, profit £30.1m (£29.5m) margin 7.2% (7.2%) medium term target 7% margin, downturn in Canadian sands oil extraction expected to continue to hit results

First Student revenue £655.9m (£605m) profit £2m (£4.5m) margin 0.1% (0.6%) Less school days because of timing of holidays however rest of year will also have less school days due to early Easter next year. Have increased prices by an average of 5.3% on those contracts up for renewal, contract retention 86% though they aren't winning as many new contracts as they used to. still targeting £10m of savings next year and are training more drivers to deal with acute driver shortage.

I wonder how far away a 'medium term target' can actually be ? It's good for UK Bus to have a medium term company target of double digit margins but it seems quite optimistic when you're currently only at 3.5%. To me, the whole report reads rather as being in hope rather than substance.

 

[the101]

I wonder how far away a 'medium term target' can actually be ? It's good for UK Bus to have a medium term company target of double digit margins but it seems quite optimistic when you're currently only at 3.5%. To me, the whole report reads rather as being in hope rather than substance.

I haven't clicked on the links provided but I have seen First's report. As ever, in the bus division cost cutting is mentioned. This is about the fourth or fifth consecutive report where it has been raised. While no business is going to prosper by spending money willy-nilly, the ever-present focus on reducing costs is not healthy if the bus arm in its entirety is to turn around. Quite the opposite, in fact, as there is more than one subsidiary of First which would benefit from some serious investment not only in buses, but things such as effective supervision and monitoring systems.

Bristol has showed that if money is invested, passenger numbers rise; 25% is the mentioned figure for that part of First's empire, which in the grand scheme of things is an astronomical figure. 'Speculate to accumulate' would appear to be the phrase that few people have heard of at Macmillan House.

 

[Robertj21a]

I haven't clicked on the links provided but I have seen First's report. As ever, in the bus division cost cutting is mentioned. This is about the fourth or fifth consecutive report where it has been raised. While no business is going to prosper by spending money willy-nilly, the ever-present focus on reducing costs is not healthy if the bus arm in its entirety is to turn around. Quite the opposite, in fact, as there is more than one subsidiary of First which would benefit from some serious investment not only in buses, but things such as effective supervision and monitoring systems.

Bristol has showed that if money is invested, passenger numbers rise; 25% is the mentioned figure for that part of First's empire, which in the grand scheme of things is an astronomical figure. 'Speculate to accumulate' would appear to be the phrase that few people have heard of at Macmillan House.

Quite agree but Bristol is, to me at least, something of a one-off. Although I get there only infrequently, it always seems to have very significant (private car?) traffic congestion, so there's always going to be more consideration of public transport by commuters and shoppers. To then add in James Freeman, fresh from all his success at Reading, and you have good reason to expect a significant rise in passenger numbers.

I see good progress by some other First operations but there's still too many that aren't really contributing enough (you have one in your area I believe !)

 

[THarris123]

Bristol's increase in passengers is down to the drop in fares and to a small degree the traffic issues. It isn't down to investment - they only started to invest again in 2013 and we still haven't had much since then compared to 2007/8. Only this year has it seen any decent investment.

 

[TheGrandWazoo]

I haven't clicked on the links provided but I have seen First's report. As ever, in the bus division cost cutting is mentioned. This is about the fourth or fifth consecutive report where it has been raised. While no business is going to prosper by spending money willy-nilly, the ever-present focus on reducing costs is not healthy if the bus arm in its entirety is to turn around. Quite the opposite, in fact, as there is more than one subsidiary of First which would benefit from some serious investment not only in buses, but things such as effective supervision and monitoring systems.

Bristol has showed that if money is invested, passenger numbers rise; 25% is the mentioned figure for that part of First's empire, which in the grand scheme of things is an astronomical figure. 'Speculate to accumulate' would appear to be the phrase that few people have heard of at Macmillan House.

The two posters (Robert and TH123) are correct in certain ways. There has been considerable investment in the fleet since 2013 after a hiatus since 2009 (excusing the Airport service). The drivers for this passenger growth have been a realignment of the fare structure but also assisted by focussing on some key corridors and services.

The real money makers for First are Bristol, Leeds and Manchester and perhaps compared to other areas, they still had reasonable age profiles, good territory and critical mass.

Where Moir's regime went wrong was the ever-decreasing circles of operation where services were trimmed and this meant a) an ever greater burden of fixed cost placed onto a smaller base b) lack of a coherent network c) lack of investment so that older vehicles were retained so poorer reliability and poorer experience if one turned up and d) retain older vehicles meant savings on capital spend and depreciation were swallowed up by unreliability, maintenance costs etc and e) attracting competitors. In smaller areas, this erosion meant a weakening until some operations were/are just not viable or that they just can't fund new vehicles because of this historical mismanagement.

It's a long road but the best strategy might be to allocate new vehicles to the strongest divisions and then cascade some newish vehicles elsewhere (in the manner of the recent five Streetlites). It's a broken record but the sins of the father will continue to be visited upon the successor for a while yet

 

[Robertj21a]

The two posters (Robert and TH123) are correct in certain ways. There has been considerable investment in the fleet since 2013 after a hiatus since 2009 (excusing the Airport service). The drivers for this passenger growth have been a realignment of the fare structure but also assisted by focussing on some key corridors and services.

The real money makers for First are Bristol, Leeds and Manchester and perhaps compared to other areas, they still had reasonable age profiles, good territory and critical mass.

Where Moir's regime went wrong was the ever-decreasing circles of operation where services were trimmed and this meant a) an ever greater burden of fixed cost placed onto a smaller base b) lack of a coherent network c) lack of investment so that older vehicles were retained so poorer reliability and poorer experience if one turned up and d) retain older vehicles meant savings on capital spend and depreciation were swallowed up by unreliability, maintenance costs etc and e) attracting competitors. In smaller areas, this erosion meant a weakening until some operations were/are just not viable or that they just can't fund new vehicles because of this historical mismanagement.

It's a long road but the best strategy might be to allocate new vehicles to the strongest divisions and then cascade some newish vehicles elsewhere (in the manner of the recent five Streetlites). It's a broken record but the sins of the father will continue to be visited upon the successor for a while yet

Yes, agreed. I wonder if the shareholders will continue to be happy to put up with the ongoing poor performance.

 

[ChrisPJ]

Share price is actually up a few percent. Takeover or merger target?

 

[Robertj21a]

Share price is actually up a few percent. Takeover or merger target?

Yes, but share price has been at rock bottom for many months now. A few percent on top of an appalling price is still an appalling price !

 

[winston270twm]

I wonder how far away a 'medium term target' can actually be ? It's good for UK Bus to have a medium term company target of double digit margins but it seems quite optimistic when you're currently only at 3.5%. To me, the whole report reads rather as being in hope rather than substance.

I hadn't realised quite how poorly First Student was doing, it forms a major part & should be a big earner for the group. NX are doing well out on the US from School Buses, First seem to be really struggling.

The medium term should really be around now from when the rights issue took place & turnaround plan was first instigated. But it just doesn't seem to be happening & margins are nowhere near double digit & some are even heading in the other direction.

It's also concerning the debt is still growing & liquidity has fallen. I personally First as a group are on very dodgy ground & cannot afford for anything else to go against them.
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First Group profit margins are currently on a par with Rotala Plc @ 3.6%.

Comparing like for like figures with the most recent NX Group / First Group Half Year results, NX are doing much better in US than First & the question has to be why are First Student doing so badly when they are much bigger / economies of scale etc?

NX North America:
Turnover= £363.0 Million
Profit = £39.2 Million
Margin = 10.8%

First Student:
Turnover= £655.9 Million
Profit = £2.0 Million
Margin = 0.3%

First Transit:
Turnover= £419.2 Million
Profit = £30.1 Million
Margin = 7.2%

Greyhound:
Turnover= £312.4 Million
Profit = £25.8 Million
Margin = 8.3%

Also NX UK bus are making more profit on turnover a third of the size of First UK Bus.

NX UK Bus:
Turnover= £141.4 Million
Profit = £17.1 Million
Margin = 12.0%

First UK Bus:
Turnover= £437.5 Million
Profit = £15.4 Million
Margin = 3.5%

If First were earning similar margins to NX at First Student & UK bus, this would instantly add an extra £100 Million profit per half year / £200 Million per full year, this would go someway towards paying down debt & allowing the group to grow. I think these double digit margins estimate needs to be revised to 'long term' aspirations, the figures show little signs of progress towards these objectives.
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Share price is actually up a few percent. Takeover or merger target?

Anyone considering either taking over or merging with First Group would need deep pockets to pull it off.

 

[overthewater]

Anyone considering either taking over or merging with First Group would need deep pockets to pull it off.

I take it then we could see more sell offs and even a take over deal where one of more company join up make a grab of it and split the spoils?

 

[ChrisPJ]

Major error not selling Greyhound off sooner after its acquisition.

Agreed the margins at UK Bus look woeful. If Manchester, Yorkshire etc are supposed to be the good bits, what are the loss making areas still dragging it all down?

 

[overthewater]

Major error not selling Greyhound off sooner after its acquisition.

Agreed the margins at UK Bus look woeful. If Manchester, Yorkshire etc are supposed to be the good bits, what are the loss making areas still dragging it all down?

Your having a laugh with your second statement.

* First Scotland East is for starters, its already been stated by its own management it been unsuccessful in turning around the company and that to the CC.

* Glasgow: Its on the up not there yet, but could do with some Decker.

* Cornwall: I think that been left to get on with it.

* Of course Potteries and East Anglia is questionable.

 

[Robertj21a]

.
I'm sure they'll leave Cornwall alone now that WG has gone, and there's this change in legislation planned.

Potteries looks vulnerable and I'd agree that not all in East Anglia seems very rosy.

 

[TheGrandWazoo]

I take it then we could see more sell offs and even a take over deal where one of more company join up make a grab of it and split the spoils?

I don't think you'll see sell offs as in the past. If there's a sale, you'd have to think it would be something more fundamental.
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I hadn't realised quite how poorly First Student was doing, it forms a major part & should be a big earner for the group. NX are doing well out on the US from School Buses, First seem to be really struggling.

The medium term should really be around now from when the rights issue took place & turnaround plan was first instigated. But it just doesn't seem to be happening & margins are nowhere near double digit & some are even heading in the other direction.

It's also concerning the debt is still growing & liquidity has fallen. I personally First as a group are on very dodgy ground & cannot afford for anything else to go against them.
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First Group profit margins are currently on a par with Rotala Plc @ 3.6%.

Comparing like for like figures with the most recent NX Group / First Group Half Year results, NX are doing much better in US than First & the question has to be why are First Student doing so badly when they are much bigger / economies of scale etc?

NX North America:
Turnover= £363.0 Million
Profit = £39.2 Million
Margin = 10.8%

First Student:
Turnover= £655.9 Million
Profit = £2.0 Million
Margin = 0.3%

First Transit:
Turnover= £419.2 Million
Profit = £30.1 Million
Margin = 7.2%

Greyhound:
Turnover= £312.4 Million
Profit = £25.8 Million
Margin = 8.3%

Also NX UK bus are making more profit on turnover a third of the size of First UK Bus.

NX UK Bus:
Turnover= £141.4 Million
Profit = £17.1 Million
Margin = 12.0%

First UK Bus:
Turnover= £437.5 Million
Profit = £15.4 Million
Margin = 3.5%

If First were earning similar margins to NX at First Student & UK bus, this would instantly add an extra £100 Million profit per half year / £200 Million per full year, this would go someway towards paying down debt & allowing the group to grow. I think these double digit margins estimate needs to be revised to 'long term' aspirations, the figures show little signs of progress towards these objectives.
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Anyone considering either taking over or merging with First Group would need deep pockets to pull it off.

I think the report states that the First Student result is a timing issue in terms of when revenue is received/generated vs the fixed cost base. Note that last year, the half year was 0.7% but the full year margin was 7.8%

 

[winston270twm]

I think the report states that the First Student result is a timing issue in terms of when revenue is received/generated vs the fixed cost base. Note that last year, the half year was 0.7% but the full year margin was 7.8%

TGW,

Thanks for pointing that out regarding revenue collection at First Student, I hadn't clocked that. That explains why I hadn't realised that First Student were doing quite so badly, because they're not over the year.

You are quite right in 2014 Half Year margin was 0.7% full year was 7.5%, there's scope to get it nearer NX's margin of 9.5% - 10%. Most of the US businesses need to add another 2-3% to margins to hit the double digit.

It's just UK Bus & UK Rail that are letting the side down, and of course Group debt either growing / being static by year end.