Train Graphic
Great Western Passengers' Forum Great Western Coffee Shop - [home] and [about]
Read about the forum [here]. Register and contribute [here] - it's free.
Random Image
Train Running @GWR Twitter Acronyms/Abbreviations Station Comparator Rail News GWR co. site Site Style 1 2 3 4 Chat on off
August 15, 2018, 03:52:17 pm *
Welcome, Guest. Please login or register.

Login with username, password and session length
Forgotten your username or password? - get a reminder
Most liked recent subjects
[148] IETs into passenger service from 16 Oct 2017 and subsequent pe...
[92] Merging of TransWilts CRP board posts into this and other boar...
[49] Shortage of rolling stock since September 2017 - ongoing probl...
[42] TransWilts Community Rail Partnership
[41] 5 into 10 goes once
[12] A fitting tribute to a worthy winner of Le Tour
News: A forum for passengers ... with input from rail professionals welcomed too
 
   Home   Help Search Login Register  
Pages: [1]
  Print  
Author Topic: From A Financial Forum  (Read 500 times)
martyjon
Hero Member
*****
Posts: 984


View Profile
« on: March 16, 2018, 03:52:10 pm »

From a financial forum which I peruse and I think refers to an article in a recent edition of The Times.

http://www.iii.co.uk/investment/detail?display=discussion&code=cotn:FGP.L&it=le

The text of which I've cut and pasted below and the First Group share price as I write is 81.20p.


In my opinion the article is pretty shallow. The article cites high debt levels, a lack of dividend for 5 years and poor trading.

Let's look at these in turn. High debt levels, absolutely the company has too much debt and has struggled to turn profitability into cash. This is always a red flag for me, as with Carillion profits on paper can easily vanish with some write downs. The company has though promised this year that the business will move to be significantly cash generative. Let's see. Equally important is that the company was saddled with really high interest rates on their bonds, mainly over 8%. These are being refinanced down to under 5% which should have a very positive impact on cashflow and eventually help with debt reduction.

The lack of dividend is often cited as a reason for the low share price and failure of the companies turnaround strategy (more on that in a minute). I disagree, the company has too much debt and needs to refinance the debt at lower levels. A dividend in my opinion shouldn't be an option until the debt refinance is complete, as without that process going smoothly (and the early indications are encouraging as one refinance is almost complete) the whole future of the company is in jeopardy. They could declare a dividend to sweeten investors, but really don't think it is the right thing to do. They need to rearrange the debt, have a few years of generating cash, show that trading is stable and then review if any excess can be paid to shareholders.

Now we come onto trading. Let's be very clear management have not met their own targets when the rights issue was announced. They back then spoke of double digit margins. They haven't achieved this at all. The business is diverse with low margins. They seemingly have built in next to no allowance in their budget for any unusual events and therefore year after year profits are impacted by any small event. They need to change this to have a good forecast of lost days due to unforseen events and report on whether events were above or below this rather than blaming any poor performance on a few days of snow.

I would add that in addition I am personally surprised that the Directors are still achieving bonus targets as the KPI's they are achieving seem to have not created any value for shareholders.

However with all this said, I still think the Times article was lazy, a case of kick somebody when they are down. Yes the company in many ways is a huge disappointment and I could spend all days picking holes in it. The company though trades at around p/e of 9. i.e. the market has already priced in the fact that this company has a history of under performance. I am not saying it will, but if the company could sell off Greyhound and demonstrates that it is generating serious cash and paying down debt then this one could really fly. The trouble is there is no reason to have any confidence in this company being able to achieve what it says it will. Not sure it's a sell though, its a p/e of 9. For me it's a speculative stock, one that may disappoint for a lifetime or may someday come good. Not sure which it will be but on current valuation could be worth a try.
« Last Edit: March 16, 2018, 04:41:15 pm by martyjon » Logged
ChrisB
Hero Member
*****
Posts: 9538


View Profile Email
« Reply #1 on: March 16, 2018, 04:23:09 pm »

I'm a tad surprised the discussions don't major on the earnings from bus/train sectors. The trading statement/updates generally do, so its not that the info isn't out there.

Bus seems to generate more profit than trains not surprisingly. Both GWRs current problems & the loss of franchises recently bears that out. I'' not sure its the right tie therefore to be selling of Greyhound? But if they can't refinance, they may find themselves in trouble eventually. I think they're a hold at the moment
Logged
Do you have something you would like to add to this thread, or would you like to raise a new question at the Coffee Shop? Please [register] (it is free) if you have not done so before, or login (at the top of this page) if you already have an account - we would love to read what you have to say!

You can find out more about how this forum works [here] - that will link you to a copy of the forum agreement that you can read before you join, and tell you very much more about how we operate. We are an independent forum, provided and run by customers of Great Western Railway, for customers of Great Western Railway and we welcome railway professionals as members too, in either a personal or official capacity. Views expressed in posts are not necessarily the views of the operators of the forum.

As well as posting messages onto existing threads, and starting new subjects, members can communicate with each other through personal messages if they wish. And once members have made a certain number of posts, they will automatically be admitted to the "frequent posters club", where subjects not-for-public-domain are discussed; anything from the occasional rant to meetups we may be having ...

 
Pages: [1]
  Print  
 
Jump to:  

Powered by MySQL Powered by PHP Powered by SMF 1.1.2 | SMF © 2006-2007, Simple Machines LLC Valid XHTML 1.0! Valid CSS!
This forum is provided by a customer of Great Western Railway (formerly First Great Western), and the views expressed are those of the individual posters concerned. Visit www.gwr.com for the official Great Western Railway website. Please contact the administrators of this site if you feel that the content provided by one of our posters contravenes our posting rules (email link). Forum hosted by Well House Consultants