Bus gi­ant’s woes shat­ter hopes of rapid UK re­cov­ery

‘There will be no quick thaw af­ter the deep freeze we plunged into in March’

The Daily Telegraph - Business - - Business - Ben Mar­low

Roll up, roll up, it’s the re­turn of the FirstGroup mag­i­cal mys­tery tour. First stop: obliv­ion. If there is any­one out there still har­bour­ing il­lu­sions about a V-shaped re­cov­ery, feast your eyes on the wreck served up by the UK’s big­gest trans­port op­er­a­tor, an an­nounce­ment that came with ev­ery in­vestor’s favourite bit of news: a go­ing con­cern warning.

Cue a scram­ble for the emer­gency ex­its as share­hold­ers won­dered how long it would be be­fore the FirstGroup bus was forced off the road in­def­i­nitely.

The stam­pede wiped more than a fifth off the shares.

Un­like many com­pa­nies, FirstGroup didn’t come into the cri­sis in good shape. Its re­sults for the year to the end of March lay bare an out­fit al­ready hurtling back­wards. The cri­sis could sim­ply tip it over the edge.

Pre-tax losses tre­bled to £300m; there was another £141.3m of costs as­so­ci­ated with in­sur­ing its yel­low school buses and shut­tle buses, to add to a £94m pro­vi­sion the pre­vi­ous year; £16m of re­struc­tur­ing charges on top of £58.2m last time around; a gi­ant £186.9m im­pair­ment charge on its Grey­hound arm; and £21m of coro­n­avirus-re­lated costs, tak­ing one-off charges to more than £400m. The div­i­dend has been scrapped too.

But even that is an­cient his­tory. The con­cern now is whether a com­pany that trans­ports 1.6m pas­sen­gers on its buses ev­ery day and runs four ma­jor train fran­chises in­clud­ing the South Western ser­vice into Lon­don, not to men­tion a fleet of more than 40,000 Amer­i­can school buses, can re­cover from the pan­demic.

A warning that there is “ma­te­rial un­cer­tainty” over its abil­ity to con­tinue as a go­ing con­cern sug­gests it is touch and go, de­spite tap­ping the gov­ern­ment coro­n­avirus loan scheme for £300m, shar­ing in a £400m bus sec­tor bailout, and sit­ting on £850m of un­drawn liq­uid­ity as of the end of June.

Coro­n­avirus has dev­as­tated bus and train travel and it is quickly be­com­ing ap­par­ent that there will be no magic overnight re­cov­ery sim­ply be­cause lock­down has ended. Pas­sen­ger vol­umes at FirstGroup plunged be­tween 80pc and 90pc but are still down 75pc.

De­spite all the costly safety mea­sures that com­pa­nies have rushed to put in place in a des­per­ate at­tempt to en­tice peo­ple back out of their homes, there is a pal­pa­ble sense of trep­i­da­tion, if not fear.

The high street is quiet, the much-an­tic­i­pated great Bri­tish pub crawl turned out to be more of a civilised gath­er­ing at the lo­cal with ev­ery­one tucked up in bed be­fore last or­ders, and some stops on the Lon­don Un­der­ground are still eerily empty.

From a med­i­cal per­spec­tive, per­haps we should be re­as­sured, but eco­nom­i­cally, it threat­ens dis­as­ter.

There will be no quick thaw af­ter the deep freeze that this Gov­ern­ment plunged the coun­try into in March. It’s go­ing to take many months, pos­si­bly years. Pre­pare then for the dreaded “new nor­mal”.

Com­pa­nies that were al­ready on a knife edge will need fur­ther sup­port as boss Matthew Gre­gory is only too happy to ac­knowl­edge, clearly in the hope of twist­ing the Chan­cel­lor’s arm for another bailout.

FirstGroup adds that it has “ad­e­quate re­sources” to keep op­er­at­ing for the next year, but its long-term fu­ture de­pends on sev­eral fac­tors – in­clud­ing whether pas­sen­ger num­bers re­cover and whether gov­ern­ments keep pro­vid­ing sup­port.

Still, at least newish chair­man David Martin hasn’t given up yet.

“This is one of the most in­ter­est­ing mo­ments for buses … and pub­lic trans­port,” he says. That’s one way of de­scrib­ing it.

Boohoo shouldn’t jump the gun

Amaz­ing how a free fall­ing share price can fo­cus minds, es­pe­cially when so much of the founder’s wealth, as well as man­age­ment bonuses, is tied up in it.

Af­ter a third day of heavy falls, leav­ing Boohoo’s shares nearly half where they were at the start of the week, the com­pany has come out fight­ing fol­low­ing ac­cu­sa­tions of labour ex­ploita­tion in Le­ices­ter’s cloth­ing sweatshops.

The ap­point­ment of Alison Le­vitt, a heavy­hit­ting QC that worked on the Jimmy Sav­ile case, and a pledge to un­der­take a full in­ves­ti­ga­tion, is a bold state­ment that shows, on the sur­face at least, that Boohoo is tak­ing the claims se­ri­ously.

But the com­pany should avoid the temp­ta­tion to pre­judge the out­come of her in­ves­ti­ga­tion. High­light­ing “in­ac­cu­ra­cies” in week­end news­pa­per re­ports sounds like an at­tempt to play down the is­sue.

As for its fail­ure to find any ex­am­ples of peo­ple be­ing paid £3.50 an hour, per­haps man­age­ment could en­list the help of cam­paign group Labour Be­hind the La­bel. It points out that “nu­mer­ous me­dia re­ports have de­tailed il­le­gal prac­tices at Le­ices­ter-based gar­ment fac­to­ries linked to big brands” and “wages of £2 to £3 an hour have been re­ported as com­mon­place in Le­ices­ter fac­to­ries sup­ply­ing Boohoo and other e-re­tail­ers”.

It could also turn to MPs on the en­vi­ron­men­tal au­dit com­mit­tee who heard ev­i­dence that not only is un­der­pay­ment of the min­i­mum wage “wide­spread” in Le­ices­ter’s cloth­ing fac­to­ries, but that “man­u­fac­tur­ers are un­der pres­sure from re­tail­ers to pro­duce gar­ments at un­re­al­is­ti­cally low prices”.

Per­haps Boohoo was look­ing in the wrong places. Still, at least the The Na­tional Crime Agency is now in­ves­ti­gat­ing.

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