Questions are being asked about First’s decision to sell its Wigan depot as part of its mission to raise £100m by selling off peripheral bus operations

Pictured above in August 2011 are FirstGroup’s Dave Alexander and Beverley Bell, the north western traffic commissioner, at the official opening of First’s new £6m bus depot for Wigan. Just 15 months later, the depot, together with around 120 vehicles and 300 employees, is being sold to Stagecoach in a £12m deal.

The sale is part of First’s mission to raise £100m through the disposal of “geographic orphans” in its UK bus portfolio. Combined with the £14m sale of the group’s Northumberland Park depot in Tottenham, London, earlier this year (PT035), First has now raised £26m from disposals.

However, questions have been asked about the commercial logic behind the sale of a business which returns an operating profit of £1.5m on turnover of £13.2m – a healthy 11.3% operating margin.

Gerald Khoo, transport analyst at Espírito Santo Investment Bank, said: “This deal raises the risk that management is selling relatively good businesses in order to generate some momentum in its disposal programme.

“We consider the most important objective of the disposal programme to be to reduce the number of under-performing units management needs to focus on, thereby improving the average margins… of the remaining businesses and increasing the chances of turnaround initiatives succeeding.

“In our view, the disposal of the Wigan bus unit does not seem to advance this goal.”

However, a spokesman for First told Passenger Transport: “The Wigan business is not core to our operations in Greater Manchester, which are based mainly to the north and east of the city. In addition it would not provide us with attractive, sustainable growth prospects without significant investment
in the near term.”

 

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