A sore thumb?

Since the end of March, shares in the four listed UK bus operators – FirstGroup, Go-Ahead , Stagecoach and National Express – are down by an average 17 per cent compared with little change in the FTSE All-Share. Understandably, FirstGroup sticks out like a sore thumb - plunging by a third - and the future for its bus division does, indeed, look bleak.

Thats the stark assessment from Investors Chronicle in an in-depth look at investing in the current UK Bus Sector

Ahead of the recent round of trading updates from the sector, there was a real fear that FirstGroup's problems were symptomatic of a wider industry decline Yet trading statements from rival companies suggest FirstGroup's issues are actually rooted in its own business and existed before current chief executive Tim O'Toole took over from 21-year veteran Sir Moir Lockhead 18 months ago. Questions are now being asked, and unfavourable comparisons made, with strong management teams at rivals Stagecoach and Go-Ahead.

The same certainly can't be said for Stagecoach. Britain's most profitable bus company has just said every one of its divisions is "well placed" to at least maintain operating profit in 2013.

Go-Ahead's bus business is also performing well with regional bus revenue up 4 per cent in the three months to March. That growth was matched by the regulated London routes where Go-Ahead is the largest operator. And, crucially, most of its 2,600 regional buses service "more vibrant" urban areas of the south-east.

But FirstGroup's problems aren't just about geography, they're about pricing too, and the company has always been an expensive operator. The backlash from passengers forced O’Toole to admit "the old-time religion (raising prices) definitely doesn't work". The new management team at UK Bus have much to do.

Things might have been different had the exorbitant cost of motoring not forced growing numbers of drivers on to public transport. Rising petrol prices, insurance, road tax and repairs increased the expense of driving to work by 21 per cent last year, according to Green Flag, and fuel costs have risen to a record high. They go up by another 3p a litre in August, which puts dearer bus fares into some kind of perspective

The full article can be read on the link above as it goes into a lot more detail on the current investors market for the bus sector.

In a nutshell Stagecgoach Good, Go Ahead OK, First Group Bad.

First Group have a lot of work to do. They know that and have made a start in some places. Southampton is one area which investors will be watching closely to see if changes being made there are successful and, more importantly, can be replicated in other areas across the country.

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