First Group: General Discussion

[overthewater]

Well if they still can't get the share price much above the 100-110p range then I guess they'll need to find something significant before too long. There's only so long that shareholders will wait.

It has two options ethier get rid of UK Bus OR greyhound.

 

[winston270twm]

It has two options ethier get rid of UK Bus OR greyhound.

There's no way First Group will sell off UK Bus, even though I personally believe it would be much more profitable under different ownership.

It seems First Group have started selling off unwanted Greyhound property, the article below suggests there may be more that could be sold to raise cash:

https://www.theguardian.com/busines...roup-cashes-in-on-unwanted-greyhound-terminal

First Group need to have a long hard look at their stratagy for UK bus particularly, it's clearly not working. As with previous trading reports there are always a load of excuses why further progress hasn't been achieved. No sign of a dividend being re-instated anytime soon or a significant rise in shareprice for long suffering shareholders either.

 

[overthewater]

There's no way First Group will sell off UK Bus, even though I personally believe it would be much more profitable under different ownership.

It seems First Group have started selling off unwanted Greyhound property, the article below suggests there may be more that could be sold to raise cash:

https://www.theguardian.com/busines...roup-cashes-in-on-unwanted-greyhound-terminal

First Group need to have a long hard look at their stratagy for UK bus particularly, it's clearly not working. As with previous trading reports there are always a load of excuses why further progress hasn't been achieved. No sign of a dividend being re-instated anytime soon or a significant rise in shareprice for long suffering shareholders either.

One has to wonder where passenger are going to get picked up or dropped off, I dare say on the side of the street.

The problem is First has been dealing with a alot of demons over the past five years, ( that beyound a joke) but unfortunately for them there is a new set of problem which to be fair is effecting other companies aswell.

With the new economic world, less people are shopping in town centres, and there been major shifts to retail park and online. Also the opportunities to use bus service to work are not great either. Many operates have failed to keep pace with the rapidly changing world, partly I believe because of there make many major changes to the networks it could hack of the so called fresh air passengers..

 

[Robertj21a]

There's no way First Group will sell off UK Bus, even though I personally believe it would be much more profitable under different ownership.

It seems First Group have started selling off unwanted Greyhound property, the article below suggests there may be more that could be sold to raise cash:

https://www.theguardian.com/busines...roup-cashes-in-on-unwanted-greyhound-terminal

First Group need to have a long hard look at their stratagy for UK bus particularly, it's clearly not working. As with previous trading reports there are always a load of excuses why further progress hasn't been achieved. No sign of a dividend being re-instated anytime soon or a significant rise in shareprice for long suffering shareholders either.

Can anyone recall which First Bus (UK) operations were profitable/loss making. Was it on here that somebody posted up a list of them ? - something rings a bell about Manchester (and Sheffield ?) not making the profits that I would have expected.
I tend to agree that, after some years now, their strategy really doesn't seem to be working. I wonder what bits might tempt a sizeable bid - without the competition issues giving problems.

 

[TheGrandWazoo]

Firstly many thanks to Baxenden Bank for the figures.
Have re-arranged to list by turnover.
Turnover Costs Profit Percentage
First West Yorkshire Lt £ 132,040 £ 117,403 £ 14,637 11.09%
First Manchester Ltd £ 89,935 £ 89,190 £ 745 0.83%
First Glasgow no1 Ltd £ 85,112 £ 78,057 £ 7,055 8.29%
First South Yorkshire Ltd £ 66,135 £ 68,960 -£ 2,825 -4.27% Loss
First Essex Buses Ltd £ 51,828 £ 49,194 £ 2,634 5.08%
First Bristol Ltd £ 50,459 £ 44,726 £ 5,733 11.36%
First Hampshire & Dorset £ 43,360 £ 40,049 £ 3,311 7.64%
First Glasgow no2 Ltd £ 42,679 £ 37,864 £ 4,815 11.28%
First Cymru Buses Ltd £ 38,127 £ 34,621 £ 3,506 9.20%
First Somerset & Avon £ 33,699 £ 35,012 -£ 1,313 -3.90% Loss
First Eastern Counties £ 33,697 £ 33,081 £ 616 1.83%
First South West Ltd £ 30,632 £ 39,477 -£ 8,845 -28.88% Loss
First Aberdeen Ltd £ 30,624 £ 26,396 £ 4,228 13.81%
Midland Bluebird Ltd £ 29,901 £ 29,697 £ 204 0.68%
First Potteries Ltd £ 20,645 £ 21,752 -£ 1,107 -5.36% Loss
First Beeline Buses Ltd £ 19,892 £ 18,406 £ 1,486 7.47%
Leicester Citybus Ltd £ 16,177 £ 13,789 £ 2,388 14.76%
First York Ltd £14,495 £15,655 -£ 1,160 -8.00% Loss
First Scotland East Ltd £ 13,366 £ 15,050 -£ 1,684 -12.60%Loss First Midland Red Buses £ 10,655 £ 10,170 £ 485 4.55%


First Northern Ireland Ltd £ 3,202 £ 3,768 -£ 566 -17.68% Loss


First Games Transport £ 8,063 £ 6,732 £ 1,331 16.51%


I assume the Dublin operation is excluded.
Is the First Northern Ireland operation just Coaches?

5 operations making 10% or more.
6 operations making between 5 & 10%
3 operations making between 0.5 & 5%
6 operations making a loss.
Depot closures have taken place during the course of these accounts, so the position is probably healthier than these figures suggest.
Like others I am surprised at South Yorkshire & York being amongst the loss makers & Manchester making only 0.83%.

Those figures.

Think they're still looking at paying the debt down (-6%)

 

[Robertj21a]

Many thanks, GW - exactly those very figures. For some reason I'd thought I might have seen them elsewhere.

 

[overthewater]

Where do those figures come from? When did there get postage? I'm lead to believe BOTH First Scotland East operations are now in the black. The Streetlite with the 14mpg fuel has saved alot of money.

Looking at that list, its only which are the problems, but all of them have been given major overhauls.

First Somerset & Avon £ 33,699 £ 35,012 -£ 1,313 -3.90% Loss
First South West Ltd £ 30,632 £ 39,477 -£ 8,845 -28.88% Loss
First Potteries Ltd £ 20,645 £ 21,752 -£ 1,107 -5.36% Loss
First York Ltd £14,495 £15,655 -£ 1,160 -8.00% Loss
First Scotland East Ltd £ 13,366 £ 15,050 -£ 1,684 -12.60% Loss

 

[TheGrandWazoo]

Where do those figures come from? When did there get postage? I'm lead to believe BOTH First Scotland East operations are now in the black. The Streetlite with the 14mpg fuel has saved alot of money.

Looking at that list, its only which are the problems, but all of them have been given major overhauls.

Those were posted earlier this year on this thread - year ending March 2015

Without wishing to guess (but by definition, I am ) but FSW was probably clearing the decks with Plymouth and I'd imagine that Kernow and Somerset are trading profitably

 

[winston270twm]

Where do those figures come from? When did there get postage? I'm lead to believe BOTH First Scotland East operations are now in the black. The Streetlite with the 14mpg fuel has saved alot of money.

Looking at that list, its only which are the problems, but all of them have been given major overhauls.

Those figures are based on the latest accounts posted on companies house.

You would expect Manchester, Sheffield & York to be making more profit / a profit at least.

I doubt that the figures have changed that dratiscally, otherwise the Half Year report for UK bus would have painted a better picture
--- old post above --- --- new post below ---

Those figures.

Think they're still looking at paying the debt down (-6%)

It's going to take a lot of -6% to get that lot down.

 

[TheGrandWazoo]

Those figures are based on the latest accounts posted on companies house.

You would expect Manchester, Sheffield & York to be making more profit / a profit at least.

I doubt that figures hae changed that dratiscally, otherwise the Half Year report for UK bus would have painted a better picture

Indeed, there are probably some weakening elsewhere or some of the one off benefits that assisted some firms no longer feature

 

[winston270twm]

Indeed, there are probably some weakening elsewhere or some of the one off benefits that assisted some firms no longer feature

If you look at the half year figures for UK Bus (6 months 30th Sept 2016):

Turnover was £426.1 Million 2016 (£437.5 Million 2015)
Operating Profit was £13.5 Million 2016 (£15.4 Million 2015)
Operating Margin was 3.2% 2016 (3.5% 2015)

Performance in the half year has actually deteriorated, the 14mpg they're getting from the Streetlites has made zip all difference.....

 

[overthewater]

The new accounts for trading up to April 2016 should be out any time now, so keep your eyes peeled

 

[winston270twm]

The new accounts for trading up to April 2016 should be out any time now, so keep your eyes peeled

Looking at just West Yorkshire & Manchester, they're accounts to March 2016 are due by 31st Dec, may still be a few more weeks yet.

Overall nothing has changed as confirmed by the Half Year results

 

[Robertj21a]

Those were posted earlier this year on this thread - year ending March 2015

Without wishing to guess (but by definition, I am ) but FSW was probably clearing the decks with Plymouth and I'd imagine that Kernow and Somerset are trading profitably

Potteries will be an interesting one to watch. They've had new management, closed a depot, cut the fleet, and had another attempt at improving the route network. If all that hasn't made it sufficiently profitable then they might as well give up.

 

[oldman]

An unhappy quote from First's analysts' presentation:

Because we do not expect conditions to change in the medium term, we are looking to accelerate cost savings through further changes in our network, to ensure the best parts of our portfolio have the resources to grow over the long term. In other words, we have to trim further some of our less promising operations in order to provide better returns.

Quite downbeat as these presentations go. Or, as one analyst put it:

On UK Bus, obviously, it sounds as if the footprint's going to be revisited.

 

[winston270twm]

An unhappy quote from First's analysts' presentation:

Quite downbeat as these presentations go. Or, as one analyst put it:

On the plus side, it will create opportunities for other operators to pick up the work cut by First UK Bus, Stagecoach seem to be doing well which what they acquired from First Group, D&G are expanding picking up numerous routes ex First Potteries

First Groups CFO's comments:

As we discussed at the year end, the UK bus market continues to be a challenge, but the higher
input costs add pressure here. So taking you through the bridge slowly, last year's half year margin
was 3.5%, but adding back the cost of depot closures, the true margin was 4.5%. Whilst we have
seen fuel cost savings and the impact of further cost saving measures, this was not sufficient to
outweigh the impact of volume decline and inflation. That said, if the impact of FX on fuel was excluded
from this half's performance, margins would have been 4.2%, only 30 basis points down on comparable
numbers from last year.

At the full year results, we told you we thought we could take margins forward, even with the volume
declines. But what could be an £11m hit over the year from FX costs, will undermine our
ability to do that. As you'd expect us to do, we are redoubling our efforts to mitigate the revenue
and volume shortfalls, and are looking to accelerate action to take further costs out of the business.
Previously, we've spoken about the need to balance margin improvement with the desire not to
lose the opportunity for operational gearing on the upside. However, we and the management
teamare committed to further action as well as each operating company being challenged to
provide detailed cost reduction plans. Now, as you'd expect, any cost reduction plan could come
with one off costs, which we'll assess on their own merits as we progress through these plans.

 

[smtglasgow]

First will be only too aware that their operations are skewed towards the north and that these areas have barely recovered from the last recession and are in no state to face the headwinds from Brexit. Add in the steep decline in town centre footfall, and there is little to be optimistic about. In most areas First have done good work in making the day/weekly tickets more attractive, but pulling in new punters requires serious investment in vehicles and publicity – look at what can be done with something like the Mendip Explorer, but consider the cost of vehicles, refurbishment and branding.

Can’t really comment on the Potteries but as an outsider, the number of network revisions and service reductions can only be turning people away. First have some good operations - Bristol, Leicester and West Yorkshire are clearly doing well – but something has obviously gone wrong in Manchester and South Yorkshire. Also, I suspect Glasgow’s numbers may be less impressive this year – just remembered that the last set of accounts would have included the Commonwealth Games ‘bonus’. The Dorset dispute will presumably hit the numbers as well – can’t see First pulling out of Weymouth (unless they get offer they can’t refuse), but they may have to scale back.

All a bit disappointing and it looks that we’re going to see reductions on the poorer performing routes across all the op-cos. If I was a shareholder I’d be asking searching questions about why Stagecoach and Go-Ahead seem to be more nimble and able to produce much better margins (and dividends!)

 

[overthewater]

I want to say yes to that fact Stagecoach and Go- Ahead are more nimble, but there still pockets of both companies in the toilet right now.

Remember the accounts can appear any time now and 31 dec, Last year many had already been put out by this time.

 

[winston270twm]

The other issue First face, is the more they cut their network back the less attractive the day / week / month tickets are & therefore it is a double edge sword.

Arriva seem to be contracting in some areas particularly Midlands, Stagecoach & Go-Ahead still seem to be doing pretty well in the UK despite the same headwinds that First are facing, Go-Ahead are still increasing bus division profits. Stagecoach also has a large proportion of its UK Bus fleet based up North.

NX also seem to have bounced back strongly & are doing well across all divisions i.e. US school bus & Transit / UK Bus & Coach / Alsa, along with new overseas expansion.

 

[Robertj21a]

If I was a shareholder I’d be asking searching questions about why Stagecoach and Go-Ahead seem to be more nimble and able to produce much better margins (and dividends!)

I think shareholders have been asking those very same questions for a good number of years by now !

 

[robertclark125]

I think it's still Moir Lockheads legacy hasn't quite been shaken off. Stagecoach and Go Ahead allow some more freedom for their management at the subsidiaries, than what First done under Lockhead. Stagecoach had national ideas, but which local management were allowed to adapt for their own areas, as they knew the patch.

The other thing is, stagecoach were willing to take risks, and learn from the things that didn't go well, and try and adapt them. I'm thinking of, for instance, the Yellow Taxibus initiative. It lasted two years, and whilst it wasn't a great success, Stagecoach said at the time of the ending, they had learnt things from it, which they would try to use in other initiatives.

Perhaps most significantly, in doing so, Stagecoach also said that it was going to consult with Fife COuncil on how the yellow taxibus went, and the lessons learnt. There is the go flexi network, currently run by Moffat And Williamson, who won the tender from a taxi company. Stagecoach East Scotland route 94/A also has a flexi on demand section.

I think that it's where First needs to adaot; take risks, do it for a couple of years, and also learn lessons. Most importantly, share the details with local authorities, who may well appreciate that they're trying.

 

[smtglasgow]

Agree that Stagecoach are doing well in the north of England and Scotland, but they’ve also acted quickly to cut costs by closing depots. AFAIK, they’ve done this without impacting in services.

I spend quite a lot of time in Inverness and even here, in some of the most unpromising bus territory in the UK, Stagecoach are still turning in a £2m profit (Highland Country Buses) in an operation that has traditionally struggled. What must be really galling for First managers is watching the queues in Glasgow’s Buchanan Bus Station for Stagecoach’s Glasgow-Cumbernauld services – routes abandoned by First and now justifying brand new Enviro 400MMCs.

Which sort of leads to the question of management. Is First badly run? Tim O’Toole was highly thought of at TfL and Giles Fearnley has a good reputation, but its over 6 years since Lockhead retired, so there can’t be much mileage left in blaming the old order. Individual op-cos have good managers, so is it the culture? Is the centre too controlling?

As others have said, can’t see First selling UK Bus, but constant retrenchment can’t be the answer either.

 

[Robertj21a]

First have acquired a reputation for, occasionally, coming up with a bright idea - and then losing interest fairly quickly. As has been mentioned, they don't seem to allow their local managers to do much on their own initiative (no doubt worried about cost implications !) and, of course, they are still burdened by massive debt.

Many people rightly identified that the First Group supertanker, post-Lockhead, would be a difficult one to get turned round. That bit has certainly proved to be true. Even so, I'm a little surprised that the two, highly experienced, guys at the top of the tree are still only just about keeping the Group's head above water, with a share price that refuses to budge from a depressingly low level.

 

[TheGrandWazoo]

The other issue First face, is the more they cut their network back the less attractive the day / week / month tickets are & therefore it is a double edge sword.

Arriva seem to be contracting in some areas particularly Midlands, Stagecoach & Go-Ahead still seem to be doing pretty well in the UK despite the same headwinds that First are facing, Go-Ahead are still increasing bus division profits. Stagecoach also has a large proportion of its UK Bus fleet based up North.

NX also seem to have bounced back strongly & are doing well across all divisions i.e. US school bus & Transit / UK Bus & Coach / Alsa, along with new overseas expansion.

Got to remember that Go Ahead are benefitting from being in two of the most pro-bus and affluent cities in the South in Brighton and Oxford. They're doing ok in the North East (but not spectacularly) and they have been drawing their horns both in the East (depot closures, high NBV fleet being moved) and in the South (property disposals, withdrawing from lower margin business).

As regards Stagecoach, I think they're a well run business. Some interesting points from their annual report:

While the operating profit for the year ended 30 April 2016 of £137.3m fell short of the target we set at the start of the financial year, the UK Bus (regional operations) Division remains a strong business. Operating margin was over 13% and the business continues to generate a double-digit percentage annual rate of return on capital.

Revenue and operating profit in the year was adversely affected by a number of factors including lower underlying demand; the effects of severe weather in late 2015 and early 2016 particularly in Cumbria, Scotland and Greater Manchester; and severe road congestion especially in Manchester. In our view, the lower underlying demand partly reflects a deterioration in provincial high streets coupled with a rise in online shopping and we continue to review and adjust our bus networks to respond to that trend.

Revenue fell year-on-year reflecting the above factors as well as contract and tender losses. The year-on-year reduction in operating profit reflects the revenue decline in the year with savings in fuel costs being insufficient to offset inflation in other costs, particularly staff costs.

Overall like-for-like revenue fell 0.5% and estimated passenger journeys on an equivalent basis fell 0.8%. After normalising on a pro rata basis for the extra leap day year in 2016, the equivalent revenue and journey declines were 0.7% and 1.0% respectively.

Clearly, the entire industry is grappling with these issues and these aren't particular to First. The issue is that First was approaching these from a position of weakness (no point in going over that old ground from 10 years ago). Also highlights that whatever savings people are getting from fuel costs (from reduced purchase rate to MPGs) is being more than outweighed by the additional costs. However, without those savings, things would be much worse!

 

[winston270twm]

I spend quite a lot of time in Inverness and even here, in some of the most unpromising bus territory in the UK, Stagecoach are still turning in a £2m profit (Highland Country Buses) in an operation that has traditionally struggled. What must be really galling for First managers is watching the queues in Glasgow’s Buchanan Bus Station for Stagecoach’s Glasgow-Cumbernauld services – routes abandoned by First and now justifying brand new Enviro 400MMCs.

That is exactly my point, how come Stagecoach can do it in poor bus territory with the same head winds as every one else, yet First can't and they present they stock market with yet more excuses and the prospect of further cuts to the First network / footprint.

Giles Fearnley does have a good reputation within the bus industry, but he's repution was earn't at Blazefield with a much smaller fleet, he's never been involved with a group the size of First Group. I'm surprised there hasn't been calls from major investors for Tim O'Toole to step down, he's had 6 years and First Group still aren't really any further forward.

 

[Robertj21a]

That is exactly my point, how come Stagecoach can do it in poor bus territory with the same head winds as every one else, yet First can't and they present they stock market with yet more excuses and the prospect of further cuts to the First network / footprint.

Giles Fearnley does have a good reputation within the bus industry, but he's repution was earn't at Blazefield with a much smaller fleet, he's never been involved with a group the size of First Group. I'm surprised there hasn't been calls from major investors for Tim O'Toole to step down, he's had 6 years and First Group still aren't really any further forward.

I'm surprised that those big corporate shareholders haven't repeated their earlier call for the group to be split up.

 

[TheGrandWazoo]

I'm surprised that those big corporate shareholders haven't repeated their earlier call for the group to be split up.

Because, as Motley Fool points out, there may be the ability to deliver some very good dividends in the future.

Of the major brokers, not many are saying "sell"

 

[Robertj21a]

Because, as Motley Fool points out, there may be the ability to deliver some very good dividends in the future.

Of the major brokers, not many are saying "sell"

Oh yes, I agree with all of that. It doesn't alter the fact that the group could be more profitable if split up into constituent parts.

 

[TheGrandWazoo]

Oh yes, I agree with all of that. It doesn't alter the fact that the group could be more profitable if split up into constituent parts.

Yes, it MIGHT be but then again, you asked why the institutional shareholders aren't agitating for a break up. That may be the reason

 

[winston270twm]

Because, as Motley Fool points out, there may be the ability to deliver some very good dividends in the future.

Of the major brokers, not many are saying "sell"

'May be able to good dividends' is all based if's, buts & may be's. The share price is only approx 30% above the 85p rights issue price from 3 years ago. I suspect that most people that have been invested in First Group for sometime and took part in the rights issue are still nursing losses & have had no dividends since.

With Stagecoach shares currently around £2 mark, they yield 5.8% dividend & a much better prospect.