First to consider disposing of some operations

[Dale]

I know that First has already disposed of the local operations at Kings Lynn but this is the first time that I've seen a 'broader' statement from Tim O'Toole.
 
<http://www.transportxtra.com/magazines/local_transport_today/business_briefing/?ID=28814>

Anyone want Northampton.........

 
 
Dale
 
 

[J621BVG]

I imagine that if First do start hiving off operations, large parts of Western and Southern National (or whatever they're called nowadays) will be sold off, rather than cut into oblivion like Wirst did under Lockhead...

[SURREYMAN]

This has to be the best news I have heard all year! (Just so you know where I stand, I don't like FirstBus one little bit, so any cut back in their operations has to be a good thing as far as I am concerned).
Rant over, on a more serious note, the parts of their bus operations which were highlighted as loss-making in year 2009/2010 were as follows:
1. East Scotland - the area outside & around Edinburgh.
2. Glasgow No2 - this is the outer area that was acquired from former SBG operators, lots of competition from Independents.
3. Midland Red - Hereford, Kidderminster, Redditch and Worcester, - competition in the last 2 areas.
4. Northampton. (Not sure why, Stagecoach have overlaps but don't go 'head to head'  I suspect costs exceed the revenue on what is a fairly small operation) Anyone care to comment?
5. Devon & Cornwall. I suspect this is top of the exit list.
 Chester was also listed, this was when First and Arriva where going head to head, now operated 'jointly'
That info is a year old so the picture may have changed.
It's unlikely the other 'big-boys' (Arriva, Stagecoach/GoAhead) would want to/be allowed to acquire any ex First Ops, so it would be down to the smaller groups or Independents.

[David Goddard]

First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result.
First scaled back their fleet soon after, yet some of the oldest vehicles keep coming back.
They really do appear the poor relation, with First's N reg Darts alongside TT's 10 plate Solos and E200s in the bus station.
With so few routes left in the town, Bracknell would be a good candidate to divest.

[Danny]

First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result.
First scaled back their fleet soon after, yet some of the oldest vehicles keep coming back.
They really do appear the poor relation, with First's N reg Darts alongside TT's 10 plate Solos and E200s in the bus station.
With so few routes left in the town, Bracknell would be a good candidate to divest.

"First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result."

Erm, didn't they loose the tender to Thames Travel, rather than "give up".

Where would the highly successful Green Line service run from if Bracknell closed? The 191 could probably be run by Slough (if it isn't already), but there's still the 190 into Reading, which has seen service improvements recently, and the 194 to Camberley.

[Danny]

(Just so you know where I stand, I don't like FirstBus one little bit, so any cut back in their operations has to be a good thing as far as I am concerned).

Why, they do have good operations? They're not all bad.

OK, so you might not like some of the stuff Sir Moir got up to - but the whole thing is there's a new chief executive looking to change things around!! I think it's a bit harsh to sweep them under the carpet entirely.

[chopper]

Don't forget that First in Bracknell also operate the Reading - Heathrow Airlink service.

Any guesses as to who might want to take it on?

[Danny]

Don't forget that First in Bracknell also operate the Reading - Heathrow Airlink service.

Any guesses as to who might want to take it on?

Well, First Berkshire & The Thames Valley operate it, from an outstation in Reading (Reading Buses' depot), so it would presumably be OK.

[SURREYMAN]

First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result.
First scaled back their fleet soon after, yet some of the oldest vehicles keep coming back.
They really do appear the poor relation, with First's N reg Darts alongside TT's 10 plate Solos and E200s in the bus station.
With so few routes left in the town, Bracknell would be a good candidate to divest.

David,
Agree with all that you say, although what I left out of my stats on the least profitable First companies, was that in 2009/10, the Bracknell/Slough operation was one of the most profitable! - Could be creative accounting, maybe Green Line/Heathrow link are big money spinners, maybe they are good at keeping costs low - certainly not keen on repainting ex London D/deck!
I am familiar with both Slough and Bracknell and wouldn't have thought either are ideal bus territory.

[SURREYMAN]

Quote from the Financial times, comment on Firsts recent statement.


"Problems unloading non-core businesses have slowed FirstGroup’s drive to reduce debts, with the public transport group blaming the weak economy and buyers’ nervousness over regulatory approval.
The operator of UK rail franchises and buses, and coaches and other transit services in the US, said net cash would reach just £100m-£115m for the year to March 31, compared with previous predictions of up to £150m, due to fewer disposals this year than planned.
More

With no moves by the group to cut the dividend or reduce investment, analysts bumped up their predictions for year-end balance sheet leverage. Paul Hickman at Peel Hunt forecast net debt at 2.4 times earnings – only slightly below last year’s 2.5 times, in spite of the group targeting “further improvement in 2011/12”.
FirstGroup said the changes would not affect its policy, launched in 2010, of raising the dividend pay-out by 7 per cent a year for three years. But, said Mr Hickman, “a company committed to strengthening its balance sheet maybe shouldn’t be making a commitment to keep hitting the balance sheet for increased dividend payments every year.”
Other analysts were surprised that disposals of businesses – as opposed to land sales in the US previously flagged by the company – were proving key to it reaching debt-reduction targets.
A spokeswoman for FirstGroup said all the targeted disposals were within the UK bus division, and that the difficult economy meant the multiples being offered had fallen, while recent advice to the Office of Fair Trading from the Competition Commission to look carefully at bus deals had signalled to bidders that they need to seriously consider competition issues, thus delaying transactions.
She added: “These were always opportunistic disposals. We don’t need to get rid of anything. We can just wait.”

[J621BVG]

I'm surprised First hasn't put Northampton out of it's misery yet. I could see Centrebus, Rotala and other small groups working quite well there.

[Hamster]

I can't see them selling off Northampton, it would be far easier to make the existing staff redundant or transferring them somewhere else and pulling out the few good buses NH still has, flogging the depot site to some greedy property developer and putting the whole thing to rest.

I can't see any of the small groups wanting in on whats left, a few urban routes on a network where Stagecoach is pretty much now in control and some contract guff they could pick up on retendering anyway. Don't forget NCC is not in a good way and bus subsidy there isn't going to be increasing anytime soon. With the exception of Centrebus, most of these smaller groups only exist where they can flood the market picking up contracted routes at silly prices. In Northampton the key thing to have is a network of routes, and flexible network tickets. No group is mad enough to come in on the Stagecoach patch, and just running 1-2 routes isn't going to win over enough trade. Northampton Transport has long battled with UCOC, and both have had competitive attacks in the past on each others routes with little real gain. Stagecoach now realising its far easier to just put on a quality service at reasonable fares whilst First run round in careless circles. I mean how many times has Northampton had new buses, then seen them taken away and replaced with cast offs?  How many times has it been moved from one admin area to another in the hope some miricle might change it?

[Hamster]

"First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result."

Erm, didn't they loose the tender to Thames Travel, rather than "give up".

Where would the highly successful Green Line service run from if Bracknell closed? The 191 could probably be run by Slough (if it isn't already), but there's still the 190 into Reading, which has seen service improvements recently, and the 194 to Camberley.
[/quote]

They lost them regardless, and Thames Travel as I gather were not that keen on winning it, so they stuck in high tender price given that they had to recruit drivers, and establish a new base in the town. First have ditched no end of contracted work in the UK in the last couple of years, for the stupid reason of wanting to thin the fleet of old buses. Instead of putting in sensible bids with new vehicles they just chucked the work in and ran away. Now they realise they've thinned out the PVR so much that the depot overheads carried on the remaining good routes are starting to make previously good routes look really poor, they can't get the contract work back because smaller rivals have come in and taken it all. In Bristol Rotala Connect and a few others have taken huge amounts of work from First. The slash and burn quick win on the balance sheet so loved by Moir is not a long term recipe for growth and now they are paying the price for that.

[SURREYMAN]

 It appears a situation is arising where First would like to sell/exit but no-one wants to/will be allowed to buy, the Stagecoach/Arriva/Go-Ahead/Nat-Exp large groups are;-

1. Not going to be interested in an operation that First admits isn't very profitable/Loss making.
2. Would not be allowed to buy if adjacent to one of their existing companies.
3. First probably wouldn't want to sell to Stagecoach or Arriva anyway.

The independents (if they can even raise the capital to buy from reluctant banks); -
A. Probably don't want to take on staff 'TUPE'd' on big company terms and conditions.
B. Would be wary of taking on an ex First area because the big groups might start competing directly (Northampton is an example already mentioned)
C. Might face an Oft/C.C enquiry i.e McGills taking over Arriva Scotland.

Faced with some small operations which may be only just covering their costs, First might be tempted to just close the operation down i.e Bury St Edmunds.

[Dale]

I quite agree with much of what 'Surreyman' and 'Hamster' have said. Just simply closing down Northampton as a 'lost cause' might be the best solution for First, particularly given the increased focus by the likes of the CC/OFT etc.

There's probably not much chance of anyone paying good money to buy something that only amounts to about 4 routes and has Stagecoach on their shoulder. Similarly, there's no point in Stagecoach buying it as they'll have CC/OFT problems. At least if First give 56 days notice then 'others' (presumably Stagecoach) can quickly register replacement services - and the public will end up with a better overall service anyway. The drivers won't get TUPE'd but new services will need many of those drivers.

I had thought that Arriva would have built on the MKCB operation and gradually infiltrated Northampton but their increased activity has quickly fallen away.

Dale

It appears a situation is arising where First would like to sell/exit but no-one wants to/will be allowed to buy, the Stagecoach/Arriva/Go-Ahead/Nat-Exp large groups are;-

1. Not going to be interested in an operation that First admits isn't very profitable/Loss making.
2. Would not be allowed to buy if adjacent to one of their existing companies.
3. First probably wouldn't want to sell to Stagecoach or Arriva anyway.

The independents (if they can even raise the capital to buy from reluctant banks); -
A. Probably don't want to take on staff 'TUPE'd' on big company terms and conditions.
B. Would be wary of taking on an ex First area because the big groups might start competing directly (Northampton is an example already mentioned)
C. Might face an Oft/C.C enquiry i.e McGills taking over Arriva Scotland.

Faced with some small operations which may be only just covering their costs, First might be tempted to just close the operation down i.e Bury St Edmunds.

[Mutly]

 When arriva operated in Northampton after buying MKM, there was rumours around that First were in talks with Arriva to take over the remaining services. however as soon as the Germans took over Arriva, they pulled out of Northamption almost immediately.

 Of the remaining services, if they were to taken on by anybody other than Stagecoach, i would suggest that Centrebus may possibly be a candidate, but thats only speculation 

[Hamster]

The thing was MKCB entered Northampton at a time when Stagecoach wasnt looking for contracted work, and that allowed MKCB to get in and do a cheap and cheerful job. However Arriva's operation is more costly and they've ended up losing contracts to smaller local operators.

When it comes to contracts, you big operators find it difficult to win small scale routes, when you are paying a driver £9-£10 an hour, have pensions etc to fund, a group profit margin to achieve and depot overheads to cover. You'll never be able to undercut smaller operators who use drivers desperate for work, get paid £7.50 an hour and have no pension contributions etc, thats why such operators have got a foothold in most towns around the country. The larger independents often get to a critical size where it becomes too much for one person and then they start adding to their overheads with supervisors etc, and before long they too can't compete with small independents.

The disadvantage placed on smaller operators at the moment is the 20% BSOG cut for those with non ITSO ticket machines, and rising fuel costs + the need to get drivers through the CPC qualification somehow. This might give the big groups a chance to get back some lost ground.

That

[Danny]

"First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result."

Erm, didn't they loose the tender to Thames Travel, rather than "give up".

Where would the highly successful Green Line service run from if Bracknell closed? The 191 could probably be run by Slough (if it isn't already), but there's still the 190 into Reading, which has seen service improvements recently, and the 194 to Camberley.

They lost them regardless, and Thames Travel as I gather were not that keen on winning it, so they stuck in high tender price given that they had to recruit drivers, and establish a new base in the town. First have ditched no end of contracted work in the UK in the last couple of years, for the stupid reason of wanting to thin the fleet of old buses. Instead of putting in sensible bids with new vehicles they just chucked the work in and ran away. Now they realise they've thinned out the PVR so much that the depot overheads carried on the remaining good routes are starting to make previously good routes look really poor, they can't get the contract work back because smaller rivals have come in and taken it all. In Bristol Rotala Connect and a few others have taken huge amounts of work from First. The slash and burn quick win on the balance sheet so loved by Moir is not a long term recipe for growth and now they are paying the price for that.

"They lost them regardless" True - but there is a major difference to putting a bid in and wanting to retain the work, but not winning; and not wanting the win the work at all, and not putting a bid in. You can't just say two things with the same end result are the same overall - they're completely different scenarios.


"and Thames Travel as I gather were not that keen on winning it, so they stuck in high tender price given that they had to recruit drivers, and establish a new base in the town." - This makes no sense whatsoever. Why on earth would a company put a bid in if they 'were not that keen on winning it'? You only bid for something if you want to win it.

Bidding for something but hoping that you don't actually win would be ridiculous - why would you even bid?

[SURREYMAN]

"First halved their services in Bracknell last summer, with some sources saying that they were eventually going to pull out altogether.
The services they gave up were taken over by Thames Travel who brought in ten new vehicles as a result."

Erm, didn't they loose the tender to Thames Travel, rather than "give up".

Where would the highly successful Green Line service run from if Bracknell closed? The 191 could probably be run by Slough (if it isn't already), but there's still the 190 into Reading, which has seen service improvements recently, and the 194 to Camberley.

They lost them regardless, and Thames Travel as I gather were not that keen on winning it, so they stuck in high tender price given that they had to recruit drivers, and establish a new base in the town. First have ditched no end of contracted work in the UK in the last couple of years, for the stupid reason of wanting to thin the fleet of old buses. Instead of putting in sensible bids with new vehicles they just chucked the work in and ran away. Now they realise they've thinned out the PVR so much that the depot overheads carried on the remaining good routes are starting to make previously good routes look really poor, they can't get the contract work back because smaller rivals have come in and taken it all. In Bristol Rotala Connect and a few others have taken huge amounts of work from First. The slash and burn quick win on the balance sheet so loved by Moir is not a long term recipe for growth and now they are paying the price for that.

"They lost them regardless" True - but there is a major difference to putting a bid in and wanting to retain the work, but not winning; and not wanting the win the work at all, and not putting a bid in. You can't just say two things with the same end result are the same overall - they're completely different scenarios.


"and Thames Travel as I gather were not that keen on winning it, so they stuck in high tender price given that they had to recruit drivers, and establish a new base in the town." - This makes no sense whatsoever. Why on earth would a company put a bid in if they 'were not that keen on winning it'? You only bid for something if you want to win it.

Bidding for something but hoping that you don't actually win would be ridiculous - why would you even bid?

I follow your logic but there is another dimension; If you don't want to win the tendered work because the returns are very low, you are on to a 'Win Win' by putting in a very overpriced bid, result - most likely a competitor wins the unwanted work, or in the event few bids are received and yours is accepted as 'best value' (note not necessarily best price) you gain the contracts on profitable terms.
First Group have recently talked of maintaining a 7% margin for shareholders and their frustration at not being able to easily sell (underperforming) UK bus Companies.
Its interesting that First in Berkshire (Bracknell & Slough) were one of the 2 most profitable units of Firstbus in 2009/10, yet Bracknell has never historically been a great performer going back to pre Alder Valley days.
I could speculate (I have no detailed knowledge) that the unit may have very low costs and concentrates on higher margin commercial operations.
I remember talking to the Ops manager of a bus/coach company some years ago and he said the key to making money was finding the optimum size of operation, too small and you can't carry the fixed costs, too large and you need more staff/resources etc.

[Dale]

To be honest the idea of First in Berkshire being so profitable sounds a bit unlikely - I'm not questioning your statement, just how First themselves (I presume ?) managed to concoct such a set of figures!

True, they aren't too big, or too small, but they do have higher than usual pay rates I believe and it can't be cheap for a whole host of things in that 'M4 corridor'. I'm guessing that there are some subtle accounting games going on to achieve such a result.

On the other hand, I can't think of much of First's empire (outside London) that would be obviously profitable - possibly Glasgow and Manchester (although they probably fall down for being *too* big). It's probably somewhere 'boring' like Potteries.

[Danny]

I follow your logic but there is another dimension; If you don't want to win the tendered work because the returns are very low, you are on to a 'Win Win' by putting in a very overpriced bid, result - most likely a competitor wins the unwanted work, or in the event few bids are received and yours is accepted as 'best value' (note not necessarily best price) you gain the contracts on profitable terms.
First Group have recently talked of maintaining a 7% margin for shareholders and their frustration at not being able to easily sell (underperforming) UK bus Companies.

Hmmm, I see what you mean, but they should always be bidding on the basis they can get a profit out of it anyway.

Personally, I see the investment in new vehicles and the setting up of a new base to show a long term commitment to expand the business.

[dwarfer1979]

To be honest the idea of First in Berkshire being so profitable sounds a bit unlikely - I'm not questioning your statement, just how First themselves (I presume ?) managed to concoct such a set of figures!

True, they aren't too big, or too small, but they do have higher than usual pay rates I believe and it can't be cheap for a whole host of things in that 'M4 corridor'. I'm guessing that there are some subtle accounting games going on to achieve such a result.

Not really that surprising when you actually look at the work they do, a lot of intensive higher frequency work overlaid with contracts and high-quality coaching work all with very high loadings across the day, and you can't compare current Bracknell to old Bracknell as so much development has occurred that pre-NBC Bracknell is a completely different animal (much of Bracknell was built in the 60's & 70's) much like places like Stevenage.  Slough is traditionally good bus territory with the added bonus of Heathrow Airport and there are good loadings on those routes whilst the remaining services out of Bracknell load well (most are double-decked) with the town services loading well - all aided by a reasonably modern fleet, the only weaker corridor in terms of provision is that between Bracknell & Windsor.  On top of this is Rail-Air (high-fares, busy and frequent) and the Greenline which sees traffic heading to multiple points on the route all-day, well loaded double-deckers on most journeys and from an operator view good fares with a variable peak pricing policy.  Plus all the big groups are reporting better profitability and growth on their southern operations (assuming they are concentrated on core corridors as Berkshire is) than in the north where numbers are still falling and operations struggling.

Down the road Stagecoach have been for a number of years reporting passenger growth in Aldershot that rivalled more illustrious places such as Cambridge so the money is there to be had.  The wages may be slightly higher than other places (but not as much as you would think) but the fares certainly are higher and always have been so the margins are the same or better, when I went to University the adult fare from Huddersfield to Leeds (a journey of over an hour) was half the price of the child fare I bought to go into town (a journey of around 10-mins) and the return fare I would now pay in Leicester to get from home to the city centre (actually the local day-ticket) is 30% lower than the same fare from my parents to one of the local towns (a similar distance and also the local day ticket).  There may be room for improvement over First in Berkshire but I can see it being one of the best performers in the First empire, and not just through default of the others being really bad (I will admit it did surprise me when I saw that report as well but once you actually look at what they have left it does make sense).

[Dale]

Excellent insight, Andrew, clearly I'm still thinking of 'old' Berkshire rather than what has now risen from near-ashes.....

 

Regards,   Dale

[Julia_Hayward]

Back to the subject of First's disposals... I understand from the London Bus yahoo group that Northumberland Park garage of First Capital is to be sold to Go-Ahead with effect from the end of March.

[ECBusman]

Back to the subject of First's disposals... I understand from the London Bus yahoo group that Northumberland Park garage of First Capital is to be sold to Go-Ahead with effect from the end of March.

Yeah, I also heard of that news aswell.

[Dale]

I wonder if GoAhead would like some operations in Northampton ?

 

Dale

[SURREYMAN]

Looks like First are wanting to dispose of even more UK Bus 'units'.
Unsurprisingly, nothing specified, seems they are only on course to make a return of 8% (not sure if thats just bus operations)plus they have a mountain of debt they want to pay down.
What could be interesting is the hint that they may seek to dispose of 'units' (note, they are careful not to say companies or depots), which are not necessarily loss making but do not fit in with long term strategy.
They may have to 'package up' bus operations to make them saleable i.e mix in loss makers with profitable operations.
First East Scotland around Edinburgh is a loss maker.
How about first Eastern Counties to Go-Ahead?
Best news I have heard in a long time!

[ECBusman]

Apparently, Cornwall's the next one to be sold and, apparently also, there's 2 bidders in the line to take it from First.

[Steves]

Apparently, Cornwall's the next one to be sold and, apparently also, there's 2 bidders in the line to take it from First.

Interesting as First have just won (back) a significant number of routes from Western Greyhound.

Bidders I suggest would be Western Greyhound and Go-Ahead to expand the Plymouth operation.  Either of those bids could be referred as they reduce competition.  Stagecoach seem to have a cosy relationship with Western Greyhound (inter-available tickets etc).

[Danny]

Apparently, Cornwall's the next one to be sold and, apparently also, there's 2 bidders in the line to take it from First.

Interesting as First have just won (back) a significant number of routes from Western Greyhound.

Bidders I suggest would be Western Greyhound and Go-Ahead to expand the Plymouth operation.  Either of those bids could be referred as they reduce competition.  Stagecoach seem to have a cosy relationship with Western Greyhound (inter-available tickets etc).

Having won all those tenders presumably makes the business worth more.