Friday 31 May 2019

Success? Suicide? Sell-off?

Yesterday First Group made their planned end of year announcement. Company accounts are something of a mystery to mere mortals, fbb included, but there were shock-horror headlines on-line yesterday. When fbb studied economics at Northampton Grammar School, he was instructed to understand what a company's balance sheet meant.

He tried. (did get grade "B" at A level?!).

The important thing to remember is that any business exists for one purpose only and, in the case of First, that is NOT to run buses and NOT to run trains. The company exists to earn money for its shareholders who, after all, have coughed up the dosh (through their holding of shares) to pay for the business.

So we begin with the "highlights" on the First Bus web site.
Don't panic Cap'n Mainwaring?
It's doing better now so it might be a good time to try to sell it. The key phrase is at the end of the above quote which translates to ... "a separated company will be better for the shareholders". Does than mean that First Bus has been badly tun in the recent past? The jury is out. Certainly the Fearnley regime has brought improvements but, for reasons that are unclear, there are still basket cases amongst the various bus operating companies.
Everyone knows that First should never have bought American Greyhound in the first place and the operation has been a real pain in the gearbox since.
"Activist" shareholders have been demanding change, so should they be pleased with improving figures?
But losing 98 million quid cannot, surely, be good. But what's this?
333 million profit sounds well-good. But it isn't. Operating profit is what is left when you take in all the fares etc. and pay all the bills. But if you owe banks oodles of money, that profit vanishes in interest charges. OK, it's not quite as simple as that, but one of  Fearnley's tasks when he took over the poisoned chalice was to reduce debt.

So he sold the London business. And he is continuing to sell parts of the business that lose money and are thus adding to the debt "mountain". (Although nobody really understands why the company cannot make a profit in a big city like Manchester!)

And, assuming the bus business is hived off (somehow?), how is First going to improve its business in the future.
So the aim is to develop the American business and quietly lose the "challenging" markets in the UK. Some wonder how long it will be before the American markets become "challenging!

No surprise that "rail" in under review. The franchising system is no longer fit for purpose as almost everybody agrees; but First will make a decision when the "Williams" review is published. Don't hold you breath. And First, like every other franchisee, bid too much for their rail businesses.
The chairman (Matthew Gregory - above) was at pains to suggest that this shocker was not as a result of the mini shareholders "revolt" (as yet unsuccessful) ...
... but we ignoramuses will raise an eyebrow or three at the idea that you grow the US business by selling off a big chunk of it.

Greyhound was as American as Thanksgiving in the past:-
Greyhound is now the only operator of scheduled intercity coaches in North America, carrying around 17 million passengers a year and serving some 2,400 destinations.

FirstGroup invested in expanding and modernising the Greyhound fleet and terminals as well as marketing, but this has not proved enough to give it the returns shareholders expect.
“The issues at Greyhound have revolved around the impact of low cost airlines coming into some of our markets and (the) relatively low oil price over the year, which in the U.S. means more people get into their cars,” FirstGroup Chief Executive Matthew Gregory told reporters on a call.

And who will buy Greyhound if it is "under-performing". The phrase in company-speak "argot" is that it will be a "fire sale" implying "damaged goods", i.e. the Greyhound business "burnt" by continuing losses.

But, remember that all this is for the shareholders' benefit. The share price shot up by a whopping 13% in response to these announcements; the implication being that the people who matter like what they are hearing.
But what about First's other, less financially committed "stakeholders".

Aware of the angst that these revelations will generate in local authorities (will the bus services collapse?), amongst user groups (will the bus services collapse?) and in the hallowed portals of  government (DaFT - will the bus services collapse?), chairman Gregory has written to all political leaders in First's operating areas.

fbb expurgates and annotates (but is on a course of treatment!)

I am writing to let you know about some significant plans for the future of FirstGroup and our operations which we have announced this morning along with our annual results, which include pursuing strategic options, through a sale or another means, to separate First Bus from the Group. I appreciate this is significant news.

You bet!

Our Board regularly reviews our strategic approach to ensure we are best able to deliver excellent service to our customers; good value to taxpayers and those with whom we contract; and growth for our investors.

Mainly the latter!

In light of recent performance improvements, we believe the most appropriate means to achieve this is through the rationalisation of our portfolio.

We believe now is the right time to pursue alternative options, ensuring the continued progression of the business and the best future for our employees and customers.

First bit, progression of the business, yes: future for employees and customers, not so sure.

Whilst this process unfolds, we will continue to operate our services as usual, including those in your area. We will, of course, be working with our employees in First Bus and their representatives to explain the detail of this plan and what it means for them.

Lets hope that "the lads and lasses" don't jump ship!

I am very proud of our achievements in First Bus.  Although there have been challenges along the way, the hard work and commitment of our employees has ensured that these businesses are now well placed to capitalise on the many exciting opportunities in the future.

Our plan for First Bus will ensure a clear focus in the future on providing bus services, building on the strong foundations we have put in place over many years, which will deliver in the future for customers and stakeholders.

He couldn't really say anything else, could he?

But we all need to remember that it is the people here ...
... that matter. The people here ...
... are not quite so important!

Final question. Is the "commercial" bus industry model really, really the best for (a) the passengers, (b) modal shift from the all devouring motor car and (c) for our health and the environment? 

Answers on a postcard to to whoever is crackpot enough to be elected as a next party leader (of any colour). (Please note: in this country we elect Members of Parliament; we do NOT, and NEVER have done, elect "the next Prime Minister.)

Whoops - Crunch
Thankfully no one was seriously hurt, just a few very minor scratches. Stagecoach service 2 (evenings and Sundays) runs via Norther General Hospital grounds.
The route is via the main entrance then up the hill ...
... to a turning circle outside the clock tower, the original part of the now vastly expanded complex.

Unfortunately the driver got a bit muxt ip in the dark and turned left one nibble to soon ...
... to turn via the Chesterman building (BLUE on the site map above). Sadly the "porte cochère" ...
... was not designed for double decks.
The "coming together" was inevitable ...
... costly and embarrassing for all involved!

The correct turn at the tower is not so encumbered!
Let us hope that First Group doesn't metaphorically lose its top deck by making a corporate wrong turn with its strategy announced yesterday. Big leaps are inherently more risky that tiny careful steps.

 The second Chesterfield blog will appear tomorrow 


  1. So . . . . let's summarise:

    ArrivaBus is up for sale by the German government.
    FirstBus is up for sale, as may also be FirstRail.
    StagecoachRail has been forced out of rail franchising by the dead hand of the UK Government (via the Treasury and pension funding).
    Virgin Trains ditto (which will probably please the Daft mandarins after the shenanigans over 140MPH signalling and the 2012 franchising disaster).

    The DafT department refuses to adequately fund OAP travel, such that smaller bus companies cannot afford to continue in business.
    Local Authorities are unable to fulfill their obligations under law (Transport Act 1985 and as subsequently amended) to fund socially necessary bus services (more small and medium bus companies fail).

    Off to Hell in a Handbasket, anyone?
    (Not that any buses or trains will take us there!!).

    Maybe Prime Minister Corbyn will get his way (of nationalisation of buses and trains) by default.

    Still . . . . I don't suppose it'll really matter . . . .

  2. It makes the Edinburgh situation even more interesting.

    First is effectively saying, we want out, come and compete against us. What happened when they made similar noises about Plymouth? Why.... both Stagecoach and Go-Ahead unsurprisingly took it as an invitation to go head to head on First's best routes. It'll happen again...