First Group: General Discussion

[Robertj21a]

What are the most profitable operations in the UK at present? I can't envisage them looking to flog the Scottish operations unless they're haemorrhaging money left right and centre.

Extracting just the key *Operating Profit* for the last full Accounts gives:-

West Yorkshire £11.762m
Glasgow No 1+2 £10.311m
Bristol £4.090m
Cymru £4.034m
Leicester £2.166m
Aberdeen £1.897m

Some operations had been hit badly by the need to improve the Pension Fund.

 

[TheGrandWazoo]

Extracting just the key *Operating Profit* for the last full Accounts gives:-

West Yorkshire £11.762m
Glasgow No 1+2 £10.311m
Bristol £4.090m
Cymru £4.034m
Leicester £2.166m
Aberdeen £1.897m

Some operations had been hit badly by the need to improve the Pension Fund.

Seem to recall that the CFO (?) picked out Essex, Manchester and Scotland East as being particularly sickly children!

 

[winston270twm]

Interestingly, West Face Capital, who had been pushing for something to be done, appear to have recently sold over half their shareholding. They.must have thought it was at a good price to get out, or have given up on the board doing the right thing.

No they aren't, they're doing the opposite and have been adding to their stake since the Apollo announcement. Their stake has gone up from 2.26% to 2.38% by the latest purchase 25/4/18:
http://otp.investis.com/clients/uk/first_group/rns/regulatory-story.aspx?cid=858&newsid=1003062
http://otp.investis.com/clients/uk/first_group/rns/regulatory-story.aspx?cid=858&newsid=1002102
http://otp.investis.com/clients/uk/first_group/rns/regulatory-story.aspx?cid=858&newsid=999503

The last 'Holding(s) in company' for West Face Capital Inc stated they had a 5% stake (2.11.17), at some point between then & prior to Apollo bid they reduced their stake to just above 2% (Cannot find any notification though).
http://otp.investis.com/clients/uk/first_group/rns/regulatory-story.aspx?cid=858&newsid=946978

​

 

[overthewater]

However, I hope we don't see the usual descent into "oh, I could see X buying Y" type of stuff based on the flimsiest of logic!

UK bus will be down market for any new owners. Much bigger fries to cook

Anyways since the borders have been thrown out Scotland East should be have decent now.

 

[Robertj21a]

Seem to recall that the CFO (?) picked out Essex, Manchester and Scotland East as being particularly sickly children!

For Operating Profit, Manchester, South Yorkshire, West of England, Midland Bluebird and South West were the big loss makers in the last Accounts.

 

[ivanhoe]

Seem to recall that the CFO (?) picked out Essex, Manchester and Scotland East as being particularly sickly children!

Seriously Grand Wazoo, if you can’t do well in Greater Manchester, there’s got got to be some Management Issues there. Whilst I realise they face competition from Stagecoach and Tram operations and indeed traffic problems, there’s got to be some profitability out there for a well run operation. Do First have any future there?, in your honest opinion.

 

[overthewater]

For Operating Profit, Manchester, South Yorkshire, West of England, Midland Bluebird and South West were the big loss makers in the last Accounts.

Where there not linked to the pension?

 

[Robertj21a]

Where there not linked to the pension?

The Pension Fund problems have affected many First operations this time around. It will be interesting to see 'cleaner' Accounts next year so that better comparisons can be made.

 

[winston270twm]

Tend to agree with you. The bid from Apollo will have doubtless generated much discussion in other institutional shareholders and may well have forced First's hand to "do something".

I worked for a business that had a similar rise and fall to First, and the surgery to put it right was far more brutal than First's (though avoiding a rights issue). Results are out in months' time - interesting times for a lot of people.

However, I hope we don't see the usual descent into "oh, I could see X buying Y" type of stuff based on the flimsiest of logic!

The only possible way out of the current scenario for FGP that I can think of is; With the US operation being the most profitable & valuable, could it be split from First Group Plc and partially floated on the New York Stock Exchange, i.e. First Group Plc sell a minority stake 20-30% in the US division to raise much need capital for investment / growth & debt reduction, but still retain the majority shareholding as it's parent company. In later years they could always look to buy back shares / increase their stake in the future.

 

[Robertj21a]

The only possible way out of the current scenario for FGP that I can think of is; With the US operation being the most profitable & valuable, could it be split from First Group Plc and partially floated on the New York Stock Exchange, i.e. First Group Plc sell a minority stake 20-30% in the US division to raise much need capital for investment / growth & debt reduction, but still retain the majority shareholding as it's parent company. In later years they could always look to buy back shares / increase their stake in the future.

I'm gradually coming round to the idea that Apollo should come back with an improved offer, get sufficient backing from the shareholders, and let them get on with the break up/sales. It's all dragged on for too long and there still seems to be no real long term solutions coming from FGP.

 

[TheGrandWazoo]

Where there not linked to the pension?

West of England (not Bristol) put £5m against pensions but it actually lost £6.4m in trading. However, find that really difficult to believe so there's probably something in the trading that isn't immediately apparent.

Manchester and South Yorkshire did post substantial losses but this was because of the one off costs associated with closing three depots. Manchester's pension liabilities actually improved in during 2016/7! FSW improved from (£4.1m) to (£1.6m) over the previous year and liabilities increased on pensions - no mention of any monies put in against that. Meanwhile, Midland Bluebird's liabilities have also increased and no mention of anything put in to offset that.

Seriously Grand Wazoo, if you can’t do well in Greater Manchester, there’s got got to be some Management Issues there. Whilst I realise they face competition from Stagecoach and Tram operations and indeed traffic problems, there’s got to be some profitability out there for a well run operation. Do First have any future there?, in your honest opinion.

Clearly, the Manchester business has been poorly managed over time. I don't think anyone can deny that, and certainly can't even use the Laidlaw purchase etc as an excuse. They bought a very elderly operation, but then failed to really make the continued investment so that you had an initial splurge in 1996-9, and then a drought until shamed into investment in 2005-8 and then another trough (which is the Laidlaw effect) until 2012.

However, you can also understand why Greater Manchester isn't the pot of gold that it perhaps once was. Firstly, you have the trams that have substantially altered travel patterns; the idea that an extra 10m journeys are being made and they're all from previous car users defies credibility. Also, you only have to look at some of the places that First operate in GM to understand that they are operating in some pretty deprived areas. Before anyone says "surely, that means more bus use as poor people won't want cars", that is a fallacy. If people don't have jobs or money, they don't travel and the impact of welfare cuts has hit companies in the poorest areas and in the list of the top 20 are Manchester, Salford and Rochdale. Bolton has over 1 in 4 shops empty.

First Greater Manchester is almost First Group in miniature. A historic lack of investment and poor management decisions in the past, effectively hamstringing the business and leaving it woefully exposed as the business world changes.

 

[TheGrandWazoo]

I'm gradually coming round to the idea that Apollo should come back with an improved offer, get sufficient backing from the shareholders, and let them get on with the break up/sales. It's all dragged on for too long and there still seems to be no real long term solutions coming from FGP.

Depends from which standpoint you're talking?

As a shareholder, that may be the best way of going. However, I might not be so impressed if I was an employee, supplier or even customer. Apollo have a record of doing what's best for Apollo.

Taking on Winston's sage words, it could be that the US ops are spun off with a separate listing and allow a more focused approach on the UK, with the funds generated helping to pay down debt etc.

 

[Robertj21a]

Depends from which standpoint you're talking?

As a shareholder, that may be the best way of going. However, I might not be so impressed if I was an employee, supplier or even customer. Apollo have a record of doing what's best for Apollo.

Taking on Winston's sage words, it could be that the US ops are spun off with a separate listing and allow a more focused approach on the UK, with the funds generated helping to pay down debt etc.

I might have agreed with that not so long ago but if FGP are to head down that route then I hope that Tim O'Toole gets out there and clearly outlines a realistic strategy (for once). There doesn't appear to now be the confidence in TOT and GF that there was in the earlier days.

 

[InspectorBloke]

First are making further changes in Essex after the network revisions a few months ago. A consultation has been started on the closure of Clacton Depot and Braintree Outstation, with work and some staff moving to Colchester and Chelmsford respectively. Unfortunately, it does look like some roles will be made redundant.

Depots are also being consulted on employment condition changes.

 

[Jordan Adam]

Extracting just the key *Operating Profit* for the last full Accounts gives:-

West Yorkshire £11.762m
Glasgow No 1+2 £10.311m
Bristol £4.090m
Cymru £4.034m
Leicester £2.166m
Aberdeen £1.897m

Some operations had been hit badly by the need to improve the Pension Fund.

As has been mentioned already the 2016/17 period was a "down" period for First Aberdeen so that figure is not the standard. Just thought i'd make that clear

 

[Robertj21a]

As has been mentioned already the 2016/17 period was a "down" period for First Aberdeen so that figure is not the standard. Just thought i'd make that clear

Aberdeen's Operating Profit for the previous year was £3.672m.

 

[Jordan Adam]

Aberdeen's Operating Profit for the previous year was £3.672m.

Indeed, which is more the norm for First Aberdeen.

 

[overthewater]

First are making further changes in Essex after the network revisions a few months ago. A consultation has been started on the closure of Clacton Depot and Braintree Outstation, with work and some staff moving to Colchester and Chelmsford respectively. Unfortunately, it does look like some roles will be made redundant.

Depots are also being consulted on employment condition changes.

1st post ... If this is true, then First would last really last long in Clacton, expect the 74 and 76. I can see Go ahead the rest of the network and streamlining the operations in the area. Might at last get Go Ahead Anglia back in to better footing.

Depends from which standpoint you're talking?

As a shareholder, that may be the best way of going. However, I might not be so impressed if I was an employee, supplier or even customer. Apollo have a record of doing what's best for Apollo.

Taking on Winston's sage words, it could be that the US ops are spun off with a separate listing and allow a more focused approach on the UK, with the funds generated helping to pay down debt etc.

Ah yes.. the better the devil you know.... If what winston say happens then you have to ask why wasn't this done ages ago. But again Apollo are not in this for the long term are there? there want to try and do a 1984 disney and break it up and sell off the parts to the highest bidder and make loads of money, its someone else problem. If was in First it wouldn't be Apollo I would be concerned about its whats coming after.

I might have agreed with that not so long ago but if FGP are to head down that route then I hope that Tim O'Toole gets out there and clearly outlines a realistic strategy (for once). There doesn't appear to now be the confidence in TOT and GF that there was in the earlier days.

There should have just given to uncle brian instead of GF

 

[TheGrandWazoo]

1st post ... If this is true, then First would last really last long in Clacton, expect the 74 and 76. I can see Go ahead the rest of the network and streamlining the operations in the area. Might at last get Go Ahead Anglia back in to better footing.

It may be that some of the other stuff can be interworked with the Colchester routes. However, it is well known that Clacton is one of the poorest parts of the South East; been a few years since I visited but it is truly depressed. Been surprised that it can barely sustain one depot/operator let alone two.

Ah yes.. the better the devil you know.... If what winston say happens then you have to ask why wasn't this done ages ago. But again Apollo are not in this for the long term are there? there want to try and do a 1984 disney and break it up and sell off the parts to the highest bidder and make loads of money, its someone else problem. If was in First it wouldn't be Apollo I would be concerned about its whats coming after.

Why wasn't it done sooner? Well, there was perhaps the belief that such surgery wasn't required? You don't take massive balance sheet hits if you could avoid it, would you?

As for "If was in First it wouldn't be Apollo I would be concerned about its whats coming after." - can you elaborate on exactly what you mean?

 

[InspectorBloke]

1st post ... If this is true, then First would last really last long in Clacton, expect the 74 and 76. I can see Go ahead the rest of the network and streamlining the operations in the area. Might at last get Go Ahead Anglia back in to better footing.

If the closure of Clacton depot mirrors the closure of Braintree depot back in 2015, I would expect any non core routes will be cancelled, leaving them for other operators to pick up.

I wouldn't be surprised if the efficiency of the south Essex depots (Basildon and Hadleigh) are scrutinised in the near future.

 

[Robertj21a]

If the closure of Clacton depot mirrors the closure of Braintree depot back in 2015, I would expect any non core routes will be cancelled, leaving them for other operators to pick up.

I wouldn't be surprised if the efficiency of the south Essex depots (Basildon and Hadleigh) are scrutinised in the near future.

First Essex ran up an Operating Loss of £340k in the last Accounts.

 

[overthewater]

As for "If was in First it wouldn't be Apollo I would be concerned about its whats coming after." - can you elaborate on exactly what you mean?

Apollo will flog off the operations, so the new owner can do the dirty work. Apollo will say we did nothing, and there won't. IF there get their hands on First, nothing major will happen but flog every last asset.

 

[winston270twm]

Apollo will flog off the operations, so the new owner can do the dirty work. Apollo will say we did nothing, and there won't. IF there get their hands on First, nothing major will happen but flog every last asset.

Not necessarily all, if I was Apollo, I'd seriously consider retaining the US / Canadian divisions, as they already generate decent profit margins with the prospect of increasing those further under different ownership. I would definitely drop UK Rail, bid costs are far too high and competition for rail franchises pushes bids to unrealistic levels, the risk / reward ratio goes isn't in the operators favour, profit margins are too thin. I suspect the majority or even all of UK Bus would be put up for sale.

 

[Mwanesh]

The problem with most First operations apart from Yorkshire ,Bristol ,Essex ,Southampton and South Wales is nearly all are isolated and dont have a comprehensive network.I can see another Devon or Northampton happening.The MMC will look into any sell off and rules out most of the big groups apart from National Express as pointed earlier.In most areas there is a big group operation against them.

 

[overthewater]

So this does open up the questions, how will Apollo pay of the debts if its just retains US / Canadian divisions and flogs everything else off? I doubt there could dump alot of the debt onto UKBus?
I doubt UK bus would be sold as one operation, I dont believe Go Ahead, Nat Express, Transdev or Rotala could or would take it all on. Why would a new player turn up to grab the lots with the well know troubles.

It would now be a complete mind field as the TGW points out it really would be pure speculations, on who would buy what and where etc.

I know where I would put my money on when it comes to Nat Express...

 

[Jordan Adam]

The problem with most First operations apart from Yorkshire ,Bristol ,Essex ,Southampton and South Wales is nearly all are isolated and dont have a comprehensive network.I can see another Devon or Northampton happening.The MMC will look into any sell off and rules out most of the big groups apart from National Express as pointed earlier.In most areas there is a big group operation against them.

I wouldn't regard Glasgow or Scotland East as being isolated and not having a comprehensive network.

 

[InspectorBloke]

http://www.route-one.net/articles/Bus_routes/First_hits_2m_contactless_payments/c

April 27 2018
By Mel Holley
First hits 2m contactless payments
First has issued 2m tickets using contactless payments, just eight months after installing the first wave of new machines from Ticketer.

West Yorkshire has seen the biggest increase in contactless uptake among its large urban markets. Aberdeen is now approaching 30% of on-bus payments as contactless, while Hampshire and Cornwall are also seeing large increases, with up to 25% just five months after going live with Ticketer.

First now has 4,000 Ticketer machines in operation
Since installing Ticketer ETMs, First has been using the reporting facility to check contactless rates.

First now has 4,000 Ticketer machines in operation, with contactless on 70% of its fleet. Ticketer will complete rolling out contactless across the remainder of the business within the next two months.

First Bus MD Giles Fearnley says: “We are committed to investing in new technology and payment options.

“The introduction of contactless payments alongside our success with mobile ticketing is pivotal, as we continue to make bus travel a convenient, simple and attractive experience for our customers.

“The use of m-tickets is exceeding our expectations and continues to grow daily, and we are seeing a trend for customers adopting contactless payments across the UK with the same enthusiasm.”

First made the switch to Ticketer contactless machines in order to make buying a bus ticket as easy as possible. The Ticketer ETMs accept all forms of payment, including smartcards, m-tickets and contactless.

The Ticketer machines not only mean that customers do not need to worry about having the right change for their bus fare, but boarding times are also reduced, thereby speeding up bus journey times.

The new ticketing machines have gone down well with drivers, who have found them to be very easy to use, with one driver claiming that he had ‘never come across such a fast and user friendly machine’.

Passengers have also been sharing their positive experiences with the new contactless Ticketer system on social media with comments such as ‘it’s the future’

Power sockets are springing up in buses around Essex with a view to install the new Ticketer machines over the 19th-20th May. According to the article, all of UK Bus will have contactless and I assume, Ticketers within the next couple of months.

 

[winston270twm]

So this does open up the questions, how will Apollo pay of the debts if its just retains US / Canadian divisions and flogs everything else off? I doubt there could dump alot of the debt onto UKBus?
I doubt UK bus would be sold as one operation, I dont believe Go Ahead, Nat Express, Transdev or Rotala could or would take it all on. Why would a new player turn up to grab the lots with the well know troubles.

It would now be a complete mind field as the TGW points out it really would be pure speculations, on who would buy what and where etc.

I know where I would put my money on when it comes to Nat Express...

I think you've answered your own question there, pay off / significantly reduce First Groups by selling off the parts is doesn't want. The US division is local to Apollo and already generates decent margins as is. The only op that would need some work / investment is Greyhound, to compete more effectively with the impending arrival of Flixbus.

Part of the lack of comprehensive route networks within is First UK Bus is of it's own doing a result of the constant cuts and the slow downward spiral.

 

[BestWestern]

I wouldn't regard Glasgow or Scotland East as being isolated and not having a comprehensive network.

Nor 'Solent' - Portsmouth, Fareham & Gosport (right next door to the quoted example of Southampton). There is both a comprehensive network and a near monopoly.

 

[overthewater]

I think you've answered your own question there, pay off / significantly reduce First Groups by selling off the parts is doesn't want. The US division is local to Apollo and already generates decent margins as is. The only op that would need some work / investment is Greyhound, to compete more effectively with the impending arrival of Flixbus.

Part of the lack of comprehensive route networks within is First UK Bus is of it's own doing a result of the constant cuts and the slow downward spiral.

How much could UK bus make? either as single company or chopping everything up? Aircoach, im not sure the rails contracts can be transferred? Then there open market East Coast trains, could that make some money?