The Telegraph: Possible First Group Break Up?

[LNW-GW Joint]

+1
Anyone who thinks the DfT are going to go back and say 'Sorry Mr Souter, we got it wrong and would love Stagecoach come back and run the south western' is living in some alternative reality. Even if it made sense financially, it would be politically toxic for this minority government.

As I understand it, assuming the franchise is viable, First would have to do a deal with Stagecoach (or whoever), and then the DfT would get to agree to the "change of control".
They could put conditions on that, particularly financial (bonds etc), or refuse to allow it altogether (and re-bid the franchise).
If allowed, the new owner usually has to put up some passenger benefits - typically more stock or cheaper fares.

However, DfT won't want to re-bid South Western, they have too much on with the other franchise bids in progress.
Much better if First sells on to MTR or another third party.
Several other passport holders are keen to get a slice of the action (eg JR East/Mitsui).

 

[hwl]

If Stagecoach buy South Western Railway, they could reinstate the South West Trains trading name and maybe even reprieve the class 707s they ordered.

No and no. Times have changed so get used to it.

There are now rules for brand retention so SWR is staying.
The contract has been signed for the 701s so the penalties for cancelling a small part of it won't be worth contemplating.

Lots of the problem is uneven growth so a timetable rehash a la Southern Metro in May is needed to get reliability back as there is no lee way at the moment.

DfT realised where the profitability was in SWR and have now taken a good slice of it which is why SWT walked away from the direct award it was a lot less profitable than before.

 

[hwl]

Several other passport holders are keen to get a slice of the action (eg JR East/Mitsui).

I'm not sure they want all of the action though! I think they are happy with a slice (especially Mitsui as they are just there for financing reasons)

 

[dorsetdesiro]

Even in the surreal if unlikely event of Stagecoach getting the SW franchise back, the SWR name would remain as the SWT name would not be returning that apparently the DfT now sets the TOC name regardless which operator is running it.

Just picture this, add "ERN" to Stagecoach's South West Trains logo and swap "TRAINS" with "RAILWAY" and keep the SWT livery as so many of the fleet still have it. The same can be done with EMT if Stagecoach retains it but are required to rename to EMR.

If SWR returning into Stagecoach hands would be disastrous politically for the DfT & Transport Secretary, then it says it all about their poor decision making and misconduct.

Then maybe just maybe the SW franchise terms shouldn't have been rewritten & left alone and Stagecoach's concerns were listened to instead of giving it to another operator, unfamiliar with the network, saying yes to everything then now are finding themselves in a huge mess and seeking to renegotiate.

It would be a humiliating climbdown to admit the previous favourable terms that SWT had were likely better, as personally that period up to 2017 I was mostly satisfied also found trains to be definitely more on time before. Stagecoach obviously aren't perfect but I'd rather SWR to be run by an operator which has 20 year experience instead of one that has none and kowtowing everything to the DfT.

They shouldn't be trusted to write & set terms for franchises while not really understanding that network's limitations like the the weaker power supply on South Western stopping SWR from running extra trains, the upset the aborted timetable caused with some stations planned to have services reduced and pushing DOO-ready capability risking uncertainty of guards' jobs thus the long term strike action. Making unreasonable demands also not dealing robustly with NR's ineffectiveness, no wonder SWR is screwed.

 

[cactustwirly]

Even in the surreal if unlikely event of Stagecoach getting the SW franchise back, the SWR name would remain as the SWT name would not be returning that apparently the DfT now sets the TOC name regardless which operator is running it.

Just picture this, add "ERN" to Stagecoach's South West Trains logo and swap "TRAINS" with "RAILWAY" and keep the SWT livery as so many of the fleet still have it. The same can be done with EMT if Stagecoach retains it but are required to rename to EMR.

If SWR returning into Stagecoach hands would be disastrous politically for the DfT & Transport Secretary, then it says it all about their poor decision making and misconduct.

Then maybe just maybe the SW franchise terms shouldn't have been rewritten & left alone and Stagecoach's concerns were listened to instead of giving it to another operator, unfamiliar with the network, saying yes to everything then now are finding themselves in a huge mess and seeking to renegotiate.

It would be a humiliating climbdown to admit the previous favourable terms that SWT had were likely better, as personally that period up to 2017 I was mostly satisfied also found trains to be definitely more on time before. Stagecoach obviously aren't perfect but I'd rather SWR to be run by an operator which has 20 year experience instead of one that has none and kowtowing everything to the DfT.

They shouldn't be trusted to write & set terms for franchises while not really understanding that network's limitations like the the weaker power supply on South Western stopping SWR from running extra trains, the upset the aborted timetable caused with some stations planned to have services reduced and pushing DOO-ready capability risking uncertainty of guards' jobs thus the long term strike action. Making unreasonable demands also not dealing robustly with NR's ineffectiveness, no wonder SWR is screwed.

What makes you think Stagecoach would do a better job?
They cocked up the ECML, their operation of EMT is mediocre.
It isn't as if First are inexperienced, they have been operating GWR for 20 years, and a more competent operator IMO.
Remember it was the DfT that signed off the timetable, and caused the RMT dispute.
Then you have NRs underinvestment in the signalling.
But I forgot ''Stagecoach" is a magic wand...

 

[Robertj21a]

What makes you think Stagecoach would do a better job?
They cocked up the ECML, their operation of EMT is mediocre.
It isn't as if First are inexperienced, they have been operating GWR for 20 years, and a more competent operator IMO.
Remember it was the DfT that signed off the timetable, and caused the RMT dispute.
Then you have NRs underinvestment in the signalling.
But I forgot ''Stagecoach" is a magic wand...

To me, Stagecoach comes over as a significantly more professional, and generally capable, operator than First - whether train or bus. I can't agree about EMT, it always seems well run to me.

 

[dorsetdesiro]

What makes you think Stagecoach would do a better job?
They cocked up the ECML, their operation of EMT is mediocre.
It isn't as if First are inexperienced, they have been operating GWR for 20 years, and a more competent operator IMO.
Remember it was the DfT that signed off the timetable, and caused the RMT dispute.
Then you have NRs underinvestment in the signalling.
But I forgot ''Stagecoach" is a magic wand...

First Great Western were brilliant at handling the GW franchise for them to rebrand into GWR in a bid to cover up their past woes, they weren't called Worst Late Western for nothing.

I accept Stagecoach are not the best as many operators aren't, they may be perceived not managing VTEC and EMT well however they were a lot better with South Western.

Some operators perhaps are more suitable to a particular network as Stagecoach with SW, Arriva seem to run Chiltern better than Northern and Govia was surprisingly well received on London Midland unlike the shambles that is GTR.

 

[Robertj21a]

First Great Western were brilliant at handling the GW franchise for them to rebrand into GWR in a bid to cover up their past woes, they weren't called Worst Late Western for nothing.

I accept Stagecoach are not the best as many operators aren't, they may be perceived not managing VTEC and EMT well however they were a lot better with South Western.

Some operators perhaps are more suitable to a particular network as Stagecoach with SW, Arriva seem to run Chiltern better than Northern and Govia was surprisingly well received on London Midland unlike the shambles that is GTR.

The Overground also seems to be run well by Arriva.

 

[bnm]

First Great Western were brilliant at handling the GW franchise for them to rebrand into GWR in a bid to cover up their past woes, they weren't called Worst Late Western for nothing

Goes Wrong Regularly now.

 

[cjmillsnun]

What makes you think Stagecoach would do a better job?
They cocked up the ECML, their operation of EMT is mediocre.
It isn't as if First are inexperienced, they have been operating GWR for 20 years, and a more competent operator IMO.
Remember it was the DfT that signed off the timetable, and caused the RMT dispute.
Then you have NRs underinvestment in the signalling.
But I forgot ''Stagecoach" is a magic wand...

Very simple. SWT was well run, had good relations with the trade unions (after the initial faux pas), had a timetable that on the whole worked, had clean well maintained fleets which regularly won golden spanners and operated with Network Rail.

However.

First/MTR's initial problems were more to do with Network Rail than themselves.

 

[ScotGG]

Are SWR as poor as Southeastern within London at not making the most of inner London and suburban off-peak rail?

There's areas with rapid growth in SE London with stations in great locations but trains are not as well used as say the tube in similar parts of London north of the Thames due to a number of factors

1) Poor evening and weekend frequency
2) lack of station staff and safety
3) lack of promotion and higher fares than TfL-only travel

For Southeastern (and less so Southern) these are massive open goals to improving passenger numbers away from peak times.

Clearly tube like levels of frequency are not possible but 30 minute gaps in busy areas is not ideal. And stations with 5 million users a year being unstaffed every night is not great.

 

[whhistle]

I don't understand why many posts have jumped on Stagecoach "buying back" SWT.
IF First break up, surely MTR will grab the other shares, or find someone else... highly unlikely Stagecoach.

A friend who works for their Bus division has been saying First want to get rid of that lot before rail.

 

[Robertj21a]

I don't understand why many posts have jumped on Stagecoach "buying back" SWT.
IF First break up, surely MTR will grab the other shares, or find someone else... highly unlikely Stagecoach.

A friend who works for their Bus division has been saying First want to get rid of that lot before rail.

There's little of real value in much of the UK Bus business. It's effectively all been up for sale for ages, with few seriously interested. Unlike the railways, it's quite easy for a competitor to register routes over those already being run by First. Consequently, the need to buy the whole operation is much less attractive.

 

[Journeyman]

There's little of real value in much of the UK Bus business. It's effectively all been up for sale for ages, with few seriously interested. Unlike the railways, it's quite easy for a competitor to register routes over those already being run by First. Consequently, the need to buy the whole operation is much less attractive.

Absolutely - my local First subsidiary has shrunk quite a lot in recent years, and if anyone wants to muscle in, a few well-placed competitive incursions will bring them down very quickly.

 

[3141]

There's little of real value in much of the UK Bus business. It's effectively all been up for sale for ages, with few seriously interested. Unlike the railways, it's quite easy for a competitor to register routes over those already being run by First. Consequently, the need to buy the whole operation is much less attractive.

There was an interesting example in North Devon a few years ago. First proposed to sell its services to Stagecoach. The Competition Commission announced it would investigate the deal, as it would reduce competition in the area. Stagecoach withdrew its offer. First shut down its operations. Stagecoach began operating some, though I think not all, of First's former routes. The only result of the Competition Commission's intervention was that Stagecoach got the routes at no cost.

But it's also interesting to observe that whereas First ran down its operations in the South West - in Cornwall, North Devon, Somerset - it is now re-establishing itself in at least two of those areas, with a more enterprising approach.

 

[700007]

https://www.telegraph.co.uk/business/2018/10/27/firstgroup-urged-break-business/

A follow up from The Telegraph about First Group breaking up First.

'The Telegraph said' :
"FirstGroup, the South Western Railway operator, is facing demands to fast-track the break-up of its global transport empire. Leading investors have called on Wolfhart Hauser, the executive chairman, to take action."

Unfortunately I am on the wrong side of the pay wall at the moment to see the rest of the article. But this appears to be on a global scale too, not just nationally?

 

[Robertj21a]

https://www.telegraph.co.uk/business/2018/10/27/firstgroup-urged-break-business/

A follow up from The Telegraph about First Group breaking up First.

'The Telegraph said' :
"FirstGroup, the South Western Railway operator, is facing demands to fast-track the break-up of its global transport empire. Leading investors have called on Wolfhart Hauser, the executive chairman, to take action."

Unfortunately I am on the wrong side of the pay wall at the moment to see the rest of the article. But this appears to be on a global scale too, not just nationally?

It has never been just related to First Group in this country, many of their issues are 'over the pond'.

See the other thread of 'First Group survival' (on the Buses section) for other comments.

 

[theironroad]

I cant remember if there was a thread about First Group's renegotiation of the SWR franchise with the DfT. If so, I cant find it at moment.

Has there been any movement on the renegotiation or announcements about new terms and deadlines etc?

 

[Robertj21a]

I cant remember if there was a thread about First Group's renegotiation of the SWR franchise with the DfT. If so, I cant find it at moment.

Has there been any movement on the renegotiation or announcements about new terms and deadlines etc?

First Group 6-monthly results tomorrow may say something.

 

[theironroad]

First Group 6-monthly results tomorrow may say something.

Ah, ok thanks.

I did see a news snippet today that gwr had contributed a £40m profit towards first group .

 

[whhistle]

Hopefully Stagecoach buy back the South Western. The new bunch have been terrible!

It's only just started really.
I mean, people screamed that XP was terrible, but now some are still saying how wonderful it is.
People didn't like Windows 7 when it first came out, but now some are still saying how wonderful it is.
People don't like Windows 10. Give it 5/6 years and it'll be just like the others.

The first 2/3 years of a franchise can't really be counted on for a measure of performance.

 

[dk1]

Share price up over 10% in early trading

 

[LNW-GW Joint]

From the First Group Half Year Results:
https://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/press-release/pr-13-11-2018.pdf
No sign of break-up or sale here.
Rail not doing too badly, considering the bad press. Revenue up, profit down (halved from 4.6% to 2.4%).
GWR is propping up the others.
TPE has just made life harder by deferring the introduction of Nova 3.

There's also an interesting chart in the presentation pack (p37), which shows the size of the various bonds that First Group has signed up to for its 3 franchises.
This represents the extent to which First Group is at risk if things go wrong.
It totals £334m, of which £201m is down to TPE.
It also says that £56m of "parent company support" has already been drawn down to support the rail franchises.

First Rail like-for-like passenger revenue growth was 5.5% for our portfolio excluding SWR (which was only part of the division for four weeks of the prior period). Industry conditions remain very challenging with macroeconomic uncertainty, infrastructure upgrade works across our networks and the industrial action in SWR all affecting our franchise performance levels. Like-for-like passenger volumes decreased by 1.9% in the period, reflecting the transfer of certain of GWR's Thames Valley flows to Transport for London in May 2018. Recent volume trends also reflect changing work patterns resulting in a shift away from season tickets towards pay-as-you-go tickets, an effect which is exaggerated by the way these journeys are recorded in industry volume statistics. Divisional revenues increased to £1,224.2m (H1 2017: £677.4m), with a full period of operation for our SWR franchise and the planned transition of GWR from premium to subsidy in period due to the cost of new rolling stock. Adjusted operating profit was £29.3m (H1 2017: £31.1m), with the margin reducing as expected, to 2.4% (H1 2017: 4.6%).

Divisional profitability was driven by GWR, where customers are seeing more capacity and services as a result of the introduction of new trains. Although electrification works by Network Rail have proved to be slower than originally planned which has led to issues with training drivers for the new trains, we are now introducing Hitachi Intercity Express Trains across the network. We also continue to work with our industry partners to reflect the impact of these delays in the level of our franchise commitments and model. Our rail franchises cover a period during which there is significant change (major infrastructure work, electrification and resignalling, and introduction of new trains). These changes require careful planning, management and negotiation with industry partners, in particular where delays can impact the delivery of franchise assumptions. Failure to manage these risks adequately could result in financial and reputational impacts to the Group. After the period end we have also begun the process of transferring the operational aspects of Heathrow Express to GWR, as previously announced.

SWR performance levels remain challenging, reflecting infrastructure issues that began before we took over the franchise. An independent review chaired by Sir Michael Holden has set out a blueprint for Network Rail and SWR to return service to levels that our customers expect. As part of these plans, we are investing £5m in performance improvements and next year the first of our £895m new suburban fleet will arrive. We are also introducing more convenient ticketing options such as flexible and auto-renewing season tickets. Our SWR customers have also faced considerable disruption to their journeys due to RMT’s ongoing industrial action, which we view as completely unnecessary since no employees will lose their job. In fact we have guaranteed that a guard with safety critical competencies will be rostered on every train, and, given our plans envisage running more services, SWR will want more guards in future not fewer. SWR are focused on delivering a resolution of the industrial dispute in the interests of our passengers.

TPE delivered growth and financial results in line with our revised expectations. Our plans to increase capacity on the network by more than 80% and create a true intercity railway for the North continue with new trains to be introduced in the next few months. Franchise performance at TPE was significantly affected by the timetable changes in May, as challenges experienced by other operators in the region had a knock-on effect on TPE’s punctuality statistics.
Meanwhile our open access operator Hull Trains is performing in line with our expectations despite some challenges due to fleet unavailability. New trains are due to be brought into the fleet next year.

In July, a national rail industry decision was announced to defer this winter’s timetable changes for several train operators, including GWR, SWR and TPE. This deferral is a significant and an unforeseen change, which means we cannot deliver some additional services and other passenger benefits as originally scheduled. In accordance with current franchise agreements, we are engaged in discussions with the DfT to work through potential commercial and contractual amendments, a process that is ongoing. The SWR franchise agreement includes a mechanism to share the Central London Employment (CLE) revenue risk with the DFT. There is uncertainty regarding the outcomes of this mechanism over the remaining franchise term, which has the potential to significantly impact the profitability of the franchise. We are reviewing the effectiveness of this mechanism and whether it is functioning as originally intended by both parties.

As a result of ongoing industry conditions and the tough operational environment our portfolio is experiencing, we continue to expect a smaller year-on-year adjusted operating profit contribution from Rail.

 

[daikilo]

From what I have read, CAF told TPE that they had a problem with a system which would delay formal delivery. I don't know if it is linked to the issue/s on the Caley sleepers.