A couple of weeks ago I speculated on the future of FirstGroup, after an unsolicited takeover bid from American equity firm Apollo, and subsequent scathing criticism of the company’s performance from one of its shareholders, West Face Capital.
Now, CEO Tim O’Toole has departed, after disastrous trading results for the year to 31 March that saw the company plunge to a £327m pre-tax loss compared with a profit of £152.6m the previous year.
Interim Executive Chairman, Wolfhart Hauser, now says he is willing to consider bids for part or all of the company.
This is beginning to feel like the beginning of the end for one of the UK’s largest public transport operators.
I’m no sentimentalist, and I won’t be especially put out one way or the other if FirstGroup disappears from our streets. However, its bus operations don’t appear to be the problem.
The company’s difficulties relate to its Greyhound operations in the US, where there has been a £277m write-down of the value of the business, and with a provision for an expected loss of over £100m on its TransPennine rail franchise.
Its UK bus operations may come out of all of this unscathed, although it’s not impossible that somebody will buy the whole company, warts and all, and then the First Group brand will presumably vanish.
For the public, all that is required is that services carry on as now, and the issue of who actually owns the business is of lesser importance, if not an irrelevance.
I would imagine the person most upset by all of this is Moir Lockhead who, five years or so after he stood aside from the business, is now witnessing its slow demise.
Moir Lockhead took great pride in the business that he helped to grow and develop, although some of his business decisions did raise the occasional eyebrow, and seemed to be motivated more by keeping his rivals out of local markets than by any genuine business rationale.
Whatever now happens, all of this is a salutary reminder that running big businesses is not easy and I know that I could not do it – which perhaps makes my role as an armchair commentator and critic a bit rich.
However, I don’t have a great deal of sympathy for Tim O’Toole.
He has doubtless been paid very handsomely these past five years, and he has held many other well-paid senior executive positions before this. I suspect he has a tidy nest egg off which to live.
The reality is that the business underperformed on his watch, and his departure was therefore a just reward. I hope that doesn’t sound too harsh.
But it’s tough at the top. Executives on high salaries must deliver or expect to be cast aside when they don’t.
