With shareholders like these, who needs enemies? FirstGroup’s biggest investor, Coast Capital, has pulled no punches in assessing the board of the Aberdeen-based transport firm.
The great five-year turnaround plan has “failed to deliver on every single metric ... They have destroyed extraordinary amounts of capital in the rail business with impunity. They have let down their customers, shareholders and staff.” Yes, they let the school down, they let themselves down, and most of all, they let the share price down.
First’s value has been deflating like a saggy balloon since the beginning of the decade: a whole other era when its great rival, National Express, was still in the process of getting booted off the railways. That disgrace has subsequently proved to be the Brummie bus-burghers’ great stroke of fortune, the share price inexorably rising as Britain’s trains did their utmost to make National Express coaches look like reliable, luxury travel.
FirstGroup, meanwhile, saw the lucrative west coast mainline contract snatched away via government bungling in 2012. It finally landed a biggie, South Western, just in time to see the bottom fall out of the London commuter market, and has written down the value of TransPennine after optimistic bidding. Suckled, however, by the Department for Transport’s generous direct awards on Great Western Railway, FirstGroup still has designs on the next west coast franchise. That includes running the first HS2 trains – playing a part in a glorious, high-speed future, or shackled to a white elephant heading over a cliff, depending on how the Conservative leadership election pans out.
Before its annual results on Thursday, Coast has demanded that First exit UK rail and leave HS2 to the Chinese. Like National Express, First has always creamed bigger profits from the buses it runs, and it is also mining gold from its big yellow American school buses – although First’s bet on Greyhound has produced laggardly returns.
The activist investor is still pressing for an emergency meeting to oust much of First’s board, with its axe aimed squarely at the chief executive, Matthew Gregory – only in the job since November – and chairman Wolfhart Hauser. In their place, Coast has dug up a proposed magnificent seven led by the former Tory transport minister Steve Norris and ex-Arriva chief executive David Martin.
Like a First bus, exciting times are either just around the corner, or possibly stuck in traffic some miles back. The Save FirstGroup website, although created by Coast, has more the feel of a First rail passenger: spitting fury in slightly hysterical italics and capital letters, wondering at the sheer money shelled out and just how this particular journey to nowhere could have taken so long already.
Coast is right to question absurd rail franchise bid costs, and the dubious rewards. But the legal action launched by Stagecoach to stay in the rail game last week suggests an exit could be premature. Stagecoach and First both grew from management buyouts at Scottish bus firms, hoovering up cash when governments were determined to make transport privatisation profitable for the players. With a full review in progress, and Chris Grayling at the DfT wheel, there’s every chance that rail can carry First on its bumpy ride for a while yet.