First Group: General Discussion

[Dentonian]

They have Oldham, Bolton, Manchester (Queens Road) and Rusholme.Of those, the latter is (I think) leased and appreciably smaller.

They are in the process of cutting some services like the 575 so more about trimming the network, I suspect.

Yes, that's my thinking. Its not just about profit per se, as there is an on going staffing issue. Ex-Bury drivers have apparently left in droves which might explain why Bolton and Queens are taking the "hits"...........this time. One piece of good news is that the two parties have finally agreed to Arbitration with the on going dispute at Rusholme, meaning tomorrow's (at least) Strike has been suspended.

 

[winston270twm]

They could - depends very much on what happens in May. How close to expected profits and likelihood of a dividend will be pivotal questions.

I’d missed that too. Perhaps the markets are beginning to lose patience?

Interestingly, given what we were discussing about bonds the other week...

They are redeeming the £300m bond (8.125%) in favour of two bonds totalling £275m (yes, paying a chunk down!).

New percentage is a weighted average of 4.25% so saving FGP a tidy £14m p.a.

TGW - one thing I've picked up since you posted the transcript link;

The bond FGP are paying off 6 months early is for £300million, the new US bonds they have taken out are for $275million (i.e. £197 million), that suggests FGP are intending to pay down their debt pile by £103 million from existing cash reserves. That's a bit more like it!

I wonder if the US credit markets were offering more favourable interest rate terms than UK?

 

[TheGrandWazoo]

First Manchester's cancellation of Bolton services 571/2 & 575 hasn't gone down very well with the locals:
http://www.theboltonnews.co.uk/news...ued_by_new_operator_after_First_cancellation/
http://www.theboltonnews.co.uk/news...__572__and_575_bus_routes_cancelled_by_First/

Excuse my cynicism but local rags love this sort of thing. Surprised that they haven't got the obligatory shot of some miserable looking pensioners at a stop.....

Yes, that's my thinking. Its not just about profit per se, as there is an on going staffing issue. Ex-Bury drivers have apparently left in droves which might explain why Bolton and Queens are taking the "hits"...........this time. One piece of good news is that the two parties have finally agreed to Arbitration with the on going dispute at Rusholme, meaning tomorrow's (at least) Strike has been suspended.

Not surprised that Bury drivers have been leaving when their home to work costs may well have increased. It invariably happens with any depot closure, depending where the drivers live.

 

[TheGrandWazoo]

TGW - one thing I've picked up since you posted the transcript link;

The bond FGP are paying off 6 months early is for £300million, the new US bonds they have taken out are for $275million (i.e. £197 million), that suggests FGP are intending to pay down their debt pile by £103 million from existing cash reserves. That's a bit more like it!

I wonder if the US credit markets were offering more favourable interest rate terms than UK?

Well spotted and thanks for putting right my error. Serves me right for typing/looking on an iphone and not spotting it was USD not Sterling.

Overthewater will surely be very happy with that.

Beginning to wonder whether I should have a punt on some more FGP shares........

 

[Robertj21a]

Would any of Queens Road, Oldham or Bolton seem particularly vulnerable - poor profitability/expensive premises etc ?

I guess the Transdevs and Rotalas of the world might show some interest.

 

[TheGrandWazoo]

Would any of Queens Road, Oldham or Bolton seem particularly vulnerable - poor profitability/expensive premises etc ?

I guess the Transdevs and Rotalas of the world might show some interest.

Of the depots, Bolton is a modern, largely open air concern (very similar to Leicester) after they cashed in on the prime location of the old depot. Queens Road and Oldham are large old municipal depots - QS is a former tram depot.

Not certain whether Transdev or Rotala would want them though. They probably can grow organically as First retreat and who knows what sort of IR issues and complications they may encounter or incur with their existing local ops.

Some interesting nuggets from the transcript are the growth in fare paying passengers on UK Bus and the North/South split in the UK - the latter I have alluded to on several occasions. The growth is definitely in the South of the country - as reflected in house increases!

 

[overthewater]

http://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/reports-and-presentations/Transcript/180221 FGP trading update transcript.pdf

And please, try not to leap to conclusions. It is a defined Q&A from someone and for people not wanting to discuss minutiae

Just to ask where is the web page that for that link? Im sure First group website has seen minor changes, which means Ive lost track of the main holding page.

Overthewater will surely be very happy with that.
Beginning to wonder whether I should have a punt on some more FGP shares........

Yes, because in the long run this will help first group redirect its profits maybe to shareholder but hopeful back within the company.

If I had some spare pennies I might bet the car on the first group shares going up.

 

[TheGrandWazoo]

Just to ask where is the web page that for that link? Im sure First group website has seen minor changes, which means Ive lost track of the main holding page.



Yes, because in the long run this will help first group redirect its profits maybe to shareholder but hopeful back within the company.

If I had some spare pennies I might bet the car on the first group shares going up.

Quick links for investors

Reports and presentations

 

[overthewater]

Thank you.

 

[Dentonian]

Of the depots, Bolton is a modern, largely open air concern (very similar to Leicester) after they cashed in on the prime location of the old depot. Queens Road and Oldham are large old municipal depots - QS is a former tram depot.

Not certain whether Transdev or Rotala would want them though. They probably can grow organically as First retreat and who knows what sort of IR issues and complications they may encounter or incur with their existing local ops.

Some interesting nuggets from the transcript are the growth in fare paying passengers on UK Bus and the North/South split in the UK - the latter I have alluded to on several occasions. The growth is definitely in the South of the country - as reflected in house increases!

Bolton and Oldham were traditionally the most profitable of the depots inherited by First/GMN, but the locals will tell you First have neglected Bolton from day one. The other thing to remember with Bolton is that Arriva are still there and may feel that First's continuing decline has given them a new lease of life. Arriva Bolton's problem seems to have been over reliance on school tenders in recent years, leaving a relatively small commercial network. Rotala (through SLT) have been the company to step in to the breach when the big(ger) rivals have retrenched. Oldham is slightly different in that it is the First HQ and has not seen any challenge to their from other commercial Operators. Like Bury, though, there were long standing rumours about depot closure/relocation due to probable redevelopment. Again though, these plans seem to have been put on hold with major tenants pulling out of new retail schemes. Funilly enough, its happened in Rochdale as well - both planned developments being near recently built Metrolink Stations. Perhaps the northern economy continues to stagnate because people can't afford (or just don't want) to buy new clothes for the Emporer.
Actually, recent reports state that Manchester remains an exception to the North/South Economic divide. Trouble is, its very much the city of Manchester (and then only the centre and south thereof) and not the region as a whole. This suggests Queens Road might be eyed up for long-term redevelopment but for housing. Coincidentally, there is a report on the MEN website today stating that of all the housing developments in Manchester at the moment, none is "affordable".

 

[winston270twm]

Well spotted and thanks for putting right my error. Serves me right for typing/looking on an iphone and not spotting it was USD not Sterling.

Overthewater will surely be very happy with that.

Beginning to wonder whether I should have a punt on some more FGP shares........

Not so sure on that move, I think it will be a long time before they ever break post rights issue highs. FGP have been in a downward trend since June 2017, after the latest Trading Statement, they've now fallen off a cliff!

There's safer Transport Groups that pay very good dividends such as Stagecoach & Go-Ahead Group, plus Centrica is looking good at current levels & has a turnaround plan.

 

[overthewater]

But surely since First has made a real effort to pay off some debt and sort out its pension pots etc this could lead to a bit more confidence in the company and help give it a better credit rating?

 

[winston270twm]

But surely since First has made a real effort to pay off some debt and sort out its pension pots etc this could lead to a bit more confidence in the company and help give it a better credit rating?

You've seen what the market thought of FGP's moves to pay down debt & top up pensions to reduce deficits, the shares are down to below rights issue price, as that news came with yet another profits warning. Until FGP start to deliver sustained profits growth, it seems the market has little confidence they will deliver. There are now obviously concerns regarding their recent rail franchise wins and how high FGP have bid to win them/passenger growth targets required for those to be profitable.

 

[Robertj21a]

But surely since First has made a real effort to pay off some debt and sort out its pension pots etc this could lead to a bit more confidence in the company and help give it a better credit rating?

I would guess that there's very little confidence in FGP, they just have so many problems and few options to improve the situation. All the time that the share price is so very low, and no dividend can be paid, I can't see why anyone would want to buy their shares. However, it's a good opportunity for someone to buy up a major holding in order to pressure the Board to change course, split it up or whatever.

 

[Volvodart]

They have been hinting they are paying a dividend this year, but not so directly that they cannot change their mind.

 

[smtglasgow]

Don’t know enough about the US operations to comment on them, but I suspect First’s fate may well rest with the success or otherwise of the SWT and TPE rail franchises. TPE in particular seems to based on some heroic assumptions on revenue growth, the smooth introduction of new stock and Network Rail’s ability to get the infrastructure right. Stagecoach were strong enough to take a hit on East Coast; could First withstand something similar?

Bus-wise, a lot depends on the ‘legacy’ PTE operations in the North. If they can stem the losses in Manchester and South Yorkshire and remain strong in West Yorkshire, they might pull through. But that looks like a big ask – clearly things have gone badly wrong in Manchester and the partnerships in Sheffield, Doncaster etc have yet to deliver the expected results (for the bus companies AND the passengers). Some kind of franchising looks inevitable right across the northern cities as it remains one of the few ways in which the metro mayors can make a mark – probably not good news for the incumbent with most to lose?

Scotland still makes money, and you’d expect the losses at Midland Bluebird to reduce/disappear in this years accounts, but the Scottish Government is finally making noises about re-regulation. I’ve been expecting a Simplicity Mark 2 from First in Glasgow for a while now to bring in some more stealth cuts, but they got mauled over this year’s fares increases so perhaps they think it prudent to keep a low profile for a while.

So the only positives are the operations in the south – except they appear to be retrenching in Berkshire and Southampton, they’ve admitted that Essex looks bad and Weymouth looks a bit shaky too! Kernow is getting serious investment (which is great to see), but the operation is still loss-making – presumably the gamble here is that Cornwall Council will remain pro-bus. So basically Bristol, Portsmouth and Wales – good operations in themselves, no doubt, but enough to save First Group?

 

[Robertj21a]

Don’t know enough about the US operations to comment on them, but I suspect First’s fate may well rest with the success or otherwise of the SWT and TPE rail franchises. TPE in particular seems to based on some heroic assumptions on revenue growth, the smooth introduction of new stock and Network Rail’s ability to get the infrastructure right. Stagecoach were strong enough to take a hit on East Coast; could First withstand something similar?

Bus-wise, a lot depends on the ‘legacy’ PTE operations in the North. If they can stem the losses in Manchester and South Yorkshire and remain strong in West Yorkshire, they might pull through. But that looks like a big ask – clearly things have gone badly wrong in Manchester and the partnerships in Sheffield, Doncaster etc have yet to deliver the expected results (for the bus companies AND the passengers). Some kind of franchising looks inevitable right across the northern cities as it remains one of the few ways in which the metro mayors can make a mark – probably not good news for the incumbent with most to lose?

Scotland still makes money, and you’d expect the losses at Midland Bluebird to reduce/disappear in this years accounts, but the Scottish Government is finally making noises about re-regulation. I’ve been expecting a Simplicity Mark 2 from First in Glasgow for a while now to bring in some more stealth cuts, but they got mauled over this year’s fares increases so perhaps they think it prudent to keep a low profile for a while.

So the only positives are the operations in the south – except they appear to be retrenching in Berkshire and Southampton, they’ve admitted that Essex looks bad and Weymouth looks a bit shaky too! Kernow is getting serious investment (which is great to see), but the operation is still loss-making – presumably the gamble here is that Cornwall Council will remain pro-bus. So basically Bristol, Portsmouth and Wales – good operations in themselves, no doubt, but enough to save First Group?

Cornwall could still fall out of favour if the revenue doesn't add up once all the new stock is taken into account.
The 3 Midland operations still managed to show an operating profit in the last Accounts.

 

[tbtc]

Bus-wise, a lot depends on the ‘legacy’ PTE operations in the North. If they can stem the losses in Manchester and South Yorkshire and remain strong in West Yorkshire, they might pull through

That reminds me - I meant to update this thread to say that Sheffield (Olive Grove) is getting a dozen or so of the 2012 "Olympic" Geminis from Leeds (now that Leeds is getting its pretty new Streetdecks).

These will replace a chunk of the 2002 "Commonwealth" B7Ls in the Olive Grove fleet and be the first double deckers into the fleet since the 2014 "Commonwealth" E400s.

Essentially, our only hope of getting new buses relies on the UK winning major sporting events (and First being given the contract to provide buses for it)!

 

[TheGrandWazoo]

That reminds me - I meant to update this thread to say that Sheffield (Olive Grove) is getting a dozen or so of the 2012 "Olympic" Geminis from Leeds (now that Leeds is getting its pretty new Streetdecks).

These will replace a chunk of the 2002 "Commonwealth" B7Ls in the Olive Grove fleet and be the first double deckers into the fleet since the 2014 "Commonwealth" E400s.

Essentially, our only hope of getting new buses relies on the UK winning major sporting events (and First being given the contract to provide buses for it)!

Not here in Bristol - we have a gratifying number of new deckers!

The reality is that there is a north/south split, and this is evident in the big groups.

The Manchester and South Yorkshire operations are distorted by the closure costs of depots. West Yorkshire seems to have risen above it (though reduced profits) and what Dentonian says is true. Look at the major city centres (Sheffield, Manchester) and they are buoyant. However, the other towns in those areas (e.g. Oldham, Bolton, Rotherham) are frankly on their a**e in terms of economic and shopping activity. Interestingly, and yes there has been a lot of surgery, but Potteries is back in profit and that also suffers from similar challenges on a macro-economic (i.e. away from buses) level.

Southampton seems to be anomalous but that may be a reflection on GSC having the Unibus services to underpin an overall business, and allowing them to focus on undermining First via canny registrations.

Other interesting snippets is that First are growing their patronage on like for like services especially with fare paying passengers.

 

[Volvodart]

Kernow is getting serious investment (which is great to see), but the operation is still loss-making – presumably the gamble here is that Cornwall Council will remain pro-bus. So basically Bristol, Portsmouth and Wales – good operations in themselves, no doubt, but enough to save First Group?

Someone asked at the conference call about profits or losses, and they said all operations were making a "contribution", whatever that means.

 

[Robertj21a]

Someone asked at the conference call about profits or losses, and they said all operations were making a "contribution", whatever that means.

Presumably, they are all bringing in some income (disregarding the costs incurred !)

 

[ivanhoe]

Would Members of the Forum attribute First Groups demise to the expansion of the business in North America? Although the American Operations are profitable, the debt that the acquisition created has put great strains on the Balance Sheet. Would a streamlined First Group, devoid of North America fair better? It appears to be lacking direction with the tail(Debt) wagging the Dog!

 

[Volvodart]

The big mistake was not getting rid of Greyhound, as they originally had planned to do when it was acquired, which would have got debt down to a more manageable amount.

 

[overthewater]

why didn't there sell if off?

 

[TheGrandWazoo]

Presumably, they are all bringing in some income (disregarding the costs incurred !)

It may be that they are all making a profit according to the flash P&Ls but once you factor in changes to pensions valuations and central recharges back to group, then some will not.

The big mistake was not getting rid of Greyhound, as they originally had planned to do when it was acquired, which would have got debt down to a more manageable amount.

why didn't there sell if off?

It is well documented that Stagecoach did approach First about a purchase. IIRC, Souter wanted to pay £750m, whilst Moir wanted £1bn.

However, that ship has now sailed. When asked about it, Stagecoach’s FD, Ross Paterson, said there were no longer “the same compelling reasons” to buy Greyhound after they had successfully set up Megabus there.

 

[TheGrandWazoo]

Would Members of the Forum attribute First Groups demise to the expansion of the business in North America? Although the American Operations are profitable, the debt that the acquisition created has put great strains on the Balance Sheet. Would a streamlined First Group, devoid of North America fair better? It appears to be lacking direction with the tail(Debt) wagging the Dog!

Again, this has been discussed at length on this forum. The purchase of Laidlaw was financed via a load of debt taken on at very high levels (>8%) - financial institutions were able to demand this level as First were desperate to do the deal. This constricted the ability to invest in the cash cow that was UK Bus - evident by the extent of new vehicle deliveries during 2007-12 and the hacking back of certain operations.

In fact, this article really does tell you most of what you need to know (and it does confirm my recollections on the Greyhound non sale!) http://www.telegraph.co.uk/finance/...as-been-haunted-by-a-deal-agreed-in-2007.html

 

[winston270twm]

So the only positives are the operations in the south – except they appear to be retrenching in Berkshire and Southampton, they’ve admitted that Essex looks bad and Weymouth looks a bit shaky too! Kernow is getting serious investment (which is great to see), but the operation is still loss-making – presumably the gamble here is that Cornwall Council will remain pro-bus. So basically Bristol, Portsmouth and Wales – good operations in themselves, no doubt, but enough to save First Group?

The Southern Division's of First's UK Bus Ops aren't large enough to prop up the under performing Northern UK Bus opoco's.

 

[winston270twm]

They have been hinting they are paying a dividend this year, but not so directly that they cannot change their mind.

They would be better not paying a dividend until UK Bus has returned to profit growth, instead re-investing any available funds to strengthen UK bus profits by investing in new vehicles for key corridors where growth can be achieved, making bolt-on acquisitions to remove competitors or even consider expanding in new markets that require low start-up costs.

 

[Volvodart]

It is just a minimal dividend that they are thinking about.

 

[overthewater]

It was a blessing for Stagecoach since Megabus usa network is done rather well. Was there anyone else wanting to bid for Greyhound?

Great piece from the Telegraph... That where it went wrong.

One problem is that, once it acquired Laidlaw, FirstGroup put in its own management team to negotiate with the local authorities that let the US school bus contracts, sacking staff with good contacts. Two things then coincided, industry figures say. Rather than roll over contracts to the incumbent operator, the authorities put them out to tender. Moreover, with the credit crunch beginning to bite, they also cut their contract price. The upshot was that FirstGroup had to rebid contracts for less. Margins collapsed.

Mind you even if first never brought the above, It still wouldn't have solved basket case like FSE, Northampton or Somerset, or other parts of UK bus because of the current UK climate?