First Group: General Discussion

[winston270twm]

Not sure if previously reported, but First York have won the York Park & Ride contract for a further 7 years from 2018 with a new fleet of Electric / Euro 6 diesel buses:

http://www.firstgroupplc.com/news-and-media/latest-news/2017/15-06-17a.aspx

 

[Robertj21a]

I've just been sent this, courtesy of Passenger Transport:-

http://www.passengertransport.co.uk/2017/06/profit-plunge-threatens-first-bus-investment

 

[winston270twm]

I've just been sent this, courtesy of Passenger Transport:-

http://www.passengertransport.co.uk/2017/06/profit-plunge-threatens-first-bus-investment

The future certainly doesn't seem bright for First UK Bus, the last thing they want to do is consider slashing new investment, that's what got them in a mess last time. I like how O'Toole blamed a long list of reasons why revenue was still falling at UK bus (it didn't even fall £10 million) whilst profits fell by £15 million excl restructuring costs, I'd also question why First UK Bus costs are higher than any other transport groups???

The main driver of profit growth at First Group seems to have come from favourable exchange rates / fuel hedging, as these will only benefit the group short term, that must by why they're still not choosing to re-instate any dividend to shareholders.

 

[TheGrandWazoo]

The future certainly doesn't seem bright for First UK Bus, the last thing they want to do is consider slashing new investment, that's what got them in a mess last time. I like how O'Toole blamed a long list of reasons why revenue was still falling at UK bus (it didn't even fall £10 million) whilst profits fell by £15 million excl restructuring costs, I'd also question why First UK Bus costs are higher than any other transport groups???

The main driver of profit growth at First Group seems to have come from favourable exchange rates / fuel hedging, as these will only benefit the group short term, that must by why they're still not choosing to re-instate any dividend to shareholders.

It does state within the annual report (Giles's section) that of the £15m reverse, £11.5m was because of the drop in sterling and the impact on fuel purchasing.

Very pointedly picked out that the South, West and Wales were performing well - by definition, highlights where things aren't so good!

 

[Volvodart]

The future certainly doesn't seem bright for First UK Bus, the last thing they want to do is consider slashing new investment, that's what got them in a mess last time.

They have not even met the average fleet age they were proposing with the rights issue money, even after all the new fleet required to meet DDA.

 

[winston270twm]

It does state within the annual report (Giles's section) that of the £15m reverse, £11.5m was because of the drop in sterling and the impact on fuel purchasing.

Very pointedly picked out that the South, West and Wales were performing well - by definition, highlights where things aren't so good!

I must admit, I haven't read the report in detail. Why would the drop in Sterling impact UK bus profits? They trade in Sterling, hence why the American Businesses are producing greater profits due to the Dollar/Sterling exchange rate. Also, fuel hedging at rock bottom Crude prices should really be kicking in now or very soon.

Maybe First need to consider off loading the likes of Manchester / South Yorkshire / Potteries & Worcester where profits are well below industry average & newer buses could be casaded from those op's in to those being retained long term.

 

[winston270twm]

They have not even met the average fleet age they were proposing with the rights issue money, even after all the new fleet required to meet DDA.

Exactly, and by slashing investment or pumping it all in to the currently profitable op's, they're going to end up in exactly the same situation as last time.

 

[smtglasgow]

So depressing that First have ended up like this. I’ve had to use their services more than usual over the last few days as the car is in the garage, and my main thought is that they are mismanaging a fundamentally good business. Glasgow ticks every box for where you would want to run a bus service, but outside of the peaks, when the buses struggle to cope, you have shabby old vehicles running around half empty. The lack of investment is striking – I still think of the 06 plates buses as new as I’ve been conditioned into thinking that 12 year old buses on trunk services is somehow OK. There is nothing to tempt a prospective passenger – fares, branding or promotion. If I relied on First in areas like Glasgow or Manchester, I think I’d be furious about their inability to adapt. Running buses is probably harder than it’s ever been in the deregulated environment, but First seem incapable of doing anything to lure passengers/adapt services

 

[TheGrandWazoo]

I must admit, I haven't read the report in detail. Why would the drop in Sterling impact UK bus profits? They trade in Sterling, hence why the American Businesses are producing greater profits due to the Dollar/Sterling exchange rate. Also, fuel hedging at rock bottom Crude prices should really be kicking in now or very soon.

Maybe First need to consider off loading the likes of Manchester / South Yorkshire / Potteries & Worcester where profits are well below industry average & newer buses could be casaded from those op's in to those being retained long term.

The currency issue is good for translating the US revenues into the UK on a group basis. Going the other way in purchasing fuel in dollars is the problem. Don't know what proportion of their spend they actually hedge though.

As always, getting rid of operations is a tricky area because of the asset write downs to get rid of them.

 

[winston270twm]

The currency issue is good for translating the US revenues into the UK on a group basis. Going the other way in purchasing fuel in dollars is the problem. Don't know what proportion of their spend they actually hedge though.

As always, getting rid of operations is a tricky area because of the asset write downs to get rid of them.

Surely First Group would be purchasing fuel for UK Bus in Sterling from a UK supplier, and US supplier for the US & Canada in Dollars.

Something drastic needs to change, the UK Bus turnaround plan just isn't happening, even though Stagecoach / Go-Ahead / NX Group / Arriva are all finding the market tough, they still generate far superior profits to First UK Bus.

 

[TheGrandWazoo]

Surely First Group would be purchasing fuel for UK Bus in Sterling from a UK supplier, and US supplier for the US & Canada in Dollars.

Something drastic needs to change, the UK Bus turnaround plan just isn't happening, even though Stagecoach / Go-Ahead / NX Group / Arriva are all finding the market tough, they still generate far superior profits to First UK Bus.

The fuel market is traded in dollars so even buying through a UK supplier is impacted by the changes in the exchange rate as the UK supplier is buying it in dollars.

Why First have these issues in the North any more than the other big players is a fair question.

 

[overthewater]

I dare say there were purchasing fuel in different currency to save money. I agree its now five years later and YES there has been complete overhaul in the oil tanker but it just feels like its going no where fast.

They have not even met the average fleet age they were proposing with the rights issue money, even after all the new fleet required to meet DDA.

Is that one linked to have the fleet last 17 year old ?

So depressing that First have ended up like this. I’ve had to use their services more than usual over the last few days as the car is in the garage, and my main thought is that they are mismanaging a fundamentally good business. Glasgow ticks every box for where you would want to run a bus service, but outside of the peaks, when the buses struggle to cope, you have shabby old vehicles running around half empty. The lack of investment is striking – I still think of the 06 plates buses as new as I’ve been conditioned into thinking that 12 year old buses on trunk services is somehow OK. There is nothing to tempt a prospective passenger – fares, branding or promotion. If I relied on First in areas like Glasgow or Manchester, I think I’d be furious about their inability to adapt. Running buses is probably harder than it’s ever been in the deregulated environment, but First seem incapable of doing anything to lure passengers/adapt services

Problem with Glasgow is, it has one of the largest urban rail networks in the UK, which FIRST used to control and oversaw a major increase in it use, while its bus usages went down. Add in Subway, Stagecoach and Mcgills, you can see where trouble starts. Even with the three new shopping motorway centre plenty of buses serve these areas, but First are playing catch up.

Manchester: will its the trams must be doing some damage.

First has three options:

A: Sell off or closed certain parts, but it seems the area we thought were biggest trouble spots are not. Its the likes of Manchester and Yorkshire.

B: Cut investment and push up the fleet to 18-19 years old. ( its seems it already going that way) Place like Glasgow are really pushing it, with certain fleet being used, Some routes are using 17-20 year old deckers and 17-18 year single deckers, there not back end routes either.

C: Reduce profits margins and just keep on spending money on 380 New buses each year to keep the fleet with 17 old buses.

 

[Blackpudding]

Message deleted

 

[Robertj21a]

Despite a number of references to Glasgow, I'm sure the last Accounts had the 2 Glasgow operations about the most profitable in the UK, after West Yorkshire.

Of the bigger operations it seems more like Manchester and South Yorkshire that are key problem areas for First (Potteries always has been).

 

[Volvodart]

They had been saying the north was bad last year, but that did not tie in with the individual company accounts and where the large losses were mainly incurred.

 

[overthewater]

Is it possible we are seing another Wigan Depot? Makes money but the fleet age is rather poor? It strange, FSE, buses of somerset and Potteries have all turned coners are seem to be doing much much better.

It should be noted it wasn't FIG No1 that make the money its was FiG No2 which made the money, and that side controls a good number of the routes heading into Glasgow, like No18 , 240 and 267 are the only routes in certain parts of the city.

Which areas are making the big losses? I should say Yorkshire but there made some effort to sort that?

 

[Robertj21a]

We've had much of this debate about Glasgow profitability before - see below (from February). Even if the fleet strength of the two operations is quite different, the key point is that First made c£11m profit there. That puts them in about 2nd place I think (after WYorks)

Are we looking at the same Accounts ?

First Glasgow 1 showed Operating Profits c£6m
First Glasgow 2 showed Operating Profits c£5m

That's pretty good going for First !

 

[F Great Eastern]

Ironic that a few years ago the Irish operations in Aircoach were supposed to be favourite for the sell off-, now they are the ones with the best margins!

 

[overthewater]

Like I said the fleet in FiG No1 is dreadful and are using near age limit buses, is if newer buses were drafted in would the profits be as high?

Also in Passenger this week, O'Tool would resisit any new shareholder pressure to break up the company.

 

[BradK2017]

Is it possible we are seing another Wigan Depot? Makes money but the fleet age is rather poor? It strange, FSE, buses of somerset and Potteries have all turned coners are seem to be doing much much better.

It should be noted it wasn't FIG No1 that make the money its was FiG No2 which made the money, and that side controls a good number of the routes heading into Glasgow, like No18 , 240 and 267 are the only routes in certain parts of the city.

Which areas are making the big losses? I should say Yorkshire but there made some effort to sort that?

BIB - Yorkshire seems to be a little of an odd situation for First (infact the North in general is!) as both Manchester & South Yorkshire seem to be struggling, yet slap bang in the middle of them is West Yorkshire, what was the most profitable UK operation for First.

Another issue is what operations would they be able to sell easily? both Manchester & SY might be tricky as Stagecoach would not be able to purchase them, Rotala or Arriva might go for Manchester. Glasgow,again might bring up issues for anyone trying to buy it, as both Mcgills & Stagecoach operate against first on a fair few corridors. Potteries seems to be possibly the only area i can think of that's left they could sell without too many issues & at an okay price (modern-ish fleet that is currently sized around 100 or so)

 

[winston270twm]

Also in Passenger this week, O'Tool would resisit any new shareholder pressure to break up the company.

Never mind shareholder pressure to break up the group, I'm just surprised there hasn't been more shareholder pressure to find a new captin to navigate the 'First Group Supertanker' away for Somali waters in to safer ones....

4 years on from the Rights Issue, still no dividend, shareprice hasn't really recovered much and Tim O'toole still has a list of excuses as long as your arm....

 

[Robertj21a]

Like I said the fleet in FiG No1 is dreadful and are using near age limit buses, is if newer buses were drafted in would the profits be as high?

Also in Passenger this week, O'Tool would resisit any new shareholder pressure to break up the company.

I'm still not really sure of the point you keep trying to make. The age profile of the Glasgow fleet(s) is hardly likely to be the key issue keeping Tim O'Toole awake at night all the time that he actually has a significantly profitable operation up there. I think any sleepless nights will be related to Manchester, South Yorkshire, Potteries - and that massive debt mountain.

 

[overthewater]

I'm still not really sure of the point you keep trying to make. The age profile of the Glasgow fleet(s) is hardly likely to be the key issue keeping Tim O'Toole awake at night all the time that he actually has a significantly profitable operation up there. I think any sleepless nights will be related to Manchester, South Yorkshire, Potteries - and that massive debt mountain.

My point is this; You say FIG makes lots of money, but im asking is that because its fleet is much older and has cheaper book value.

If he cared that much about the massive debt he would have either sold off some to put a dent in or merged with another company to combat it.

The chance of First selling off Manchester, South Yorkshire is very unlikely especial who would want them.

 

[90sWereBetter]

Personally I don't really understand this obsession with new kit. If older buses can still do the job well, then it's a no brainer, as long as they're kept in good nick. Stagecoach ran a load of old Olympians until recently, and still have a number of old Tridents and MANs in service.

In fairness the Glasgow fleet looks pretty shabby, but most of the Y-reg Tridents have been treated to a repaint and look perfectly acceptable for another year or two of work. Hopefully the rest of the fleet can get treated, there's still a decent amount of life left in the 53-reg Tridents and 54-reg Geminis from my experiences Thursday this week.

 

[overthewater]

Personally I don't really understand this obsession with new kit. If older buses can still do the job well, then it's a no brainer, as long as they're kept in good nick.

In fairness the Glasgow fleet looks pretty shabby, but most of the Y-reg Tridents have been treated to a repaint and look perfectly acceptable for another year or two of work.

Have you been inside them Also how many Toilet boxes single deckers are still in service? Alas most of these older buses have never been done up, expect for repaints. The only exception was the lot that come up in Autumn 2012 - 02 plate Alx400. If first still did this then maybe it would be alright but no.

What has happened to First policy of refurbishing mid life buses?

 

[THarris123]

Despite a number of references to Glasgow, I'm sure the last Accounts had the 2 Glasgow operations about the most profitable in the UK, after West Yorkshire.

Of the bigger operations it seems more like Manchester and South Yorkshire that are key problem areas for First (Potteries always has been).

Let us not forget Bristol and Somerset and Avon which dropped in profit quite a bit.

At a guess, i'd say that Manchester might have a better profit with two depots closed, however if not, maybe they'll have to sell it.

As for South Yorkshire, I'm not sure what impact the Sheffield agreement and the closure of Rotherham has had on the profit, but if profits haven't improved, then that division maybe another sell off.

Buses of Somerset I'm sure is on the "in the red" list and if something isn't turned around there soon, we might see it being sold. Considering they've dropped the First brand in that area, it might be quite a good seller, maybe good for Go Ahead?

The one in West of England which I think we will see being sold is Bath. Weston should turn around (in theory) since Crosvilles demise, Wells is very profitable now and if Bristol get Metrobus, we could see the profitability there improve, especially with the undertakings being dropped.

I don't think Scotland is an issue and I think Midlands have been turned around (luckily).

Hampshire seems to be improving and the east seems ok.

The only one I'm a little puzzled on is Kernow. It is undoubtedly doing better and is profitable, but it is out on a limb and they've nearly dropped the First brand so might also be a good seller.

 

[Robertj21a]

My point is this; You say FIG makes lots of money, but im asking is that because its fleet is much older and has cheaper book value.

If he cared that much about the massive debt he would have either sold off some to put a dent in or merged with another company to combat it.

The chance of First selling off Manchester, South Yorkshire is very unlikely especial who would want them.

Obviously, as I'm not privy to the detailed costings etc at First Glasgow, I haven't a clue as to whether the older fleet is helping profitability. You can easily argue that it may be helping costs, but some of those older buses may also be very heavy on fuel and parts, when compared to newer, lighter, fuel-efficient models.

To me, and I'm sure Tim O'T and Giles, all that matters is that it brings in significant profits- which they struggle to achieve in many other areas.

 

[Volvodart]

Obviously, as I'm not privy to the detailed costings etc at First Glasgow, I haven't a clue as to whether the older fleet is helping profitability.

Aberdeen used to have an old fleet. They spent money on new buses and refurbishments and other things. It has not hindered profitability there, as they seem to have made more each year they have had investment.

 

[winston270twm]

If he cared that much about the massive debt he would have either sold off some to put a dent in or merged with another company to combat it.

The chance of First selling off Manchester, South Yorkshire is very unlikely especial who would want them.

O'tool would first need to find a company willing to merge, one that's prepared to take on First Group's debt & poor performing UK Bus business. Options within UK transport groups are very limited, there's really only NX Group due to having a smaller UK bus business and the Mkt Cap's of the two groups are only £376 million apart, FGP now being the larger. NX Group Chief Exec Dean Finch also knows First Group's business well, but he has typically been quite cautious on how he's expanded NX Group & turned around its fortunes, I don't think even he would take the risk. He's striving for quality not quantity....

Again, if Manchester & South Yorkshire came on the market, NX Group would be interested, as the types of op's they are share a lot of characteristics with NXWM and tick a lot of boxes for them, the poor performance of those op's would obviously have to be reflected in the price. Another option would be Go-Ahead.

 

[Volvodart]

If any of the areas were to go for franchising, would they be worth buying?