It’s easy for City veterans to get misty-eyed over FirstGroup. A star in Margaret Thatcher’s privatisation firmament, it was among the first companies to take over council bus routes, before leading the pack on winning rail franchises.
But the Department for Transport’s move to load unbearable long-term risks onto rail franchise operators, coupled with reduced local authority spending on buses, has hurt everyone in the sector.
First has not dealt with the challenge well. While better firms screwed down overheads and pulled out of UK trains, First has been flatfooted. It now has lower bus margins than some peers and still throws good money after bad in rail.
Rich though its history may be, its future looks poor.
Coast Capital invested a few years back, first trying in vain to advise the board, and now pushing to change it. Its advice makes sense: First should clean up and sell its £3.5 billion US school bus operations over the next nine months, paying down debt and plugging the pension deficit. It should stop bidding for rail contracts and focus on turning around its core UK bus business.
First’s board has come up with an alternative. Sell the UK bus business, possibly in bits, sell Greyhound in the US but retain the remaining school bus operations there, making them the company’s core focus — despite First having no US bus experts on the board. It is continuing bidding for rail franchises.
It’s a plan, but too late and too woolly; the product of a board that watched as National Express beat its share price by 40% since 2017.
Many shareholders voted to kick out directors today. They were right to do so. This once great business deserves better.
