First Manchester

[Winston]

RE: First Manchester

(27/02/2019 08:57)gilesbus1 Wrote:  All of which would need to be paid back as its a loan, it may give them assets to purchase but lets look at FirstGroup and why its in the state its in. A buy like Bolton that is potentially making losses would be a mistake, small fleets one step at a time is the right move and the one this operator has taken up to now, so far its largest acquisition having been GoAheads operations in the West Midlands and then Preston Bus, if Bolton becomes Diamond North West then you might spend £12-20m on the operation then several £million on recasting the network and renewing the fleet leaving very little money for further expansion.

They have a war chest and are looking at Arriva operations in Greater Manchester but obviously the sale of First Manchester has delayed this as it may alter the game of how much the company is worth, say if the new buyer decided to compete head on with Arriva and what they might need to do with Diamond if the new operator competes head on with them also or instead off, so its a waiting game. I also understand that it the past they have expressed interest in Jim Stones as well, and Vision Bus could be another purchase that might give growth with its routes in the Bolton area.

Also as part of a deal with Arriva some cross boundary services operated by St Helens might also be bought as routes like the 360 might better be operated from Atherton as might the longer 34's St Helens - Leigh and maybe services between Wigan and Skelmersdale.

Most businesses expand by using debt to make acquisitions, only the select few use existing cash reserves to mark purchases. The £50 million warchest is purely for buying any businesses, that was the whole point of the article 'to let the other big groups know that they the means to / are keen to make acquisitions should they be looking for an exit. Same as Dean Finch's comments that NX Group may be interested in buying certain parts of First UK Bus.

There is no deal to buy Arriva Manchester, that was all pre 28th July 2017 announcement to the stock market, As it will have been two years this July, I think that's unlikely to ever get off the starting blocks now. As for buying Jim Stones & Vision Bus, why? What are you buying? a large proportion of their work is TfGM tendered routes, why not just bid cheap on next tender round, win a large chunk of their work & do a deal to buy what's left. There's a lot more competitors for tendered work in GM, than here in the WM, get rid of one & another comes along. Aren't there about 18 different operators in the Onebus scheme?

As regards buses, Rotala have bought very little second-hand stuff in the past 12 months, the last being 2 x 66 plate Solo SR's (ex GHA), 2 x 14 Plate Scania Omnilinks (ex Express Motors) & 2 x DF Streetlites (ex Yourbus). Since then it's been brand new buses as follows:

10 x DF/WF Streetlites for Hallmark Heathrow July 2018
5 x Mellor Strata's for Preston Bus July 2018
10 x Mellor Strata's for Diamond WM Oct 2018
17 x DF Streetlites (10.8m) for Diamond WM Jan/Feb 2019
10 x DF Streetlites (9.6m) 4 for Diamond NW & 6 x Diamond WM Jan/Feb 2019
5 x Mellor Strata's to Diamond WM Feb 2019

Still due are as follows:

10 x Mellor Strata's - 5 in April (5 to Diamond WM), 5 in June (un-allocated)
5 x DF Streetlites for Hotel Hoppa

A lot of the new fleet & indeed purchases which will soon be coming to the end of their contracts are now taken out on 7 year operating leases. Rotala will invest in new stock if there's a business case / benefit to Rotala Group, they will not buy new buses for a subsidiary / route if it's unlikely to grow passenger numbers & revenues. Also worth noting, here in the WM everting including to tendered buses will need to be Euro 6 by 2020, also Rotala were offered funding to Euro 6 exhaust upgrades to the existing fleet. They have declined the funding in favour of buying new Euro 6 buses instead. As a result of all the low emission bus funding available to operators, I think you will start to see a shift where Rotala buy new buses in quantity & on 7 year operating leases. I also understand, that TfGM will also be bringing in a similar scheme to WM (i.e. all Euro 6 in the not too distant future), this will also likely affect their Atherton & Eccles Diamond NW fleets.