There will no doubt be plenty of gloating on social media about the fate of FirstGroup and its former CEO (p12). But those quick to chide should remember that even at a smaller level – FirstBus in the UK – it provides employment for 17,000 people and runs around one-fifth of provincial services.
And, its employees are often shareholders as, indirectly, is anyone with a pension or similar investment.
Get down to the root problem and that is its debt pile. Although half of the £2bn mountain it was five years ago, it has meant no dividends for shareholders, a cap on investment and little financial wriggle room.
FirstBus has also been tossed on the economic winds of change, thanks to its exposure in northern cities where the economy struggles.
Yet these issues are not unique to FirstGroup.
We continue to report about coach and bus operators who have gone out of business and the underlying issues are often the same: A heavy burden of finance against margins that are too small to provide sufficient ‘financial headroom’.
It only needs a series of small changes, such as no increase in contract rates, competition from cheaper rivals, or an insurance premium increase for these factor to fatally combine.
It’s easy for business advisors to say ‘trim your business size’ or ‘ditch low-profit work’ but the medicine can be bitter. Yet those who have downsized and reduced their debt, will tell you that they are better for it.
