FirstGroup plc 2019 half-yearly results Thursday 14 November 2019 - PowerPoint PPT Presentation

FirstGroup plc 2019 half-yearly results Thursday 14 November 2019 14 November 2019 FirstGroup results for the six months to 30 September 2019

Overview ▪ H1 adjusted trading in line with expectations overall – outlook in line (pre-IFRS 16) − LFL revenue growth throughout Group − Challenging US motor claims environment and Greyhound trading − Cash generation and leverage in line (adjusting for IFRS 16) ▪ Value creation through portfolio rationalisation – progress report − First Bus separation workstreams making progress; pension funding framework developed − Cost actions and clean air funding to drive further First Bus progress before any formal sale process − Greyhound sale progress well advanced − UK rail portfolio strengthened by West Coast; discussions continue with DfT on our other franchises − Intent on realising value for shareholders; actively managing entire portfolio by all appropriate means 14 November 2019 FirstGroup results for the six months to 30 September 2019 2

Financial review for the six months to 30 September 2019 14 November 2019 FirstGroup results for the six months to 30 September 2019 3

̶ ̶ Financial summary Change excluding Change in £m H1 2019 H1 2018 Change IFRS16 impact 2 , CCy 1 in CCy Revenue 3,531.9 3,303.3 +6.9% +4.1% +4.1% Adjusted 3 - EBITDA 434.2 255.1 +70.2% +64.2% (4.4)% - Operating profit 97.7 92.4 +5.7% +2.1% (7.3)% - Margin % 2.8% 2.8% (30)bps - Net finance costs (69.0) (50.4) (36.9)% - Profit before tax 42.0 (31.7)% (35.9)% (19.6)% 28.7 - Effective tax rate % 14.6% 22.5% (790)bps - Attributable profit 24.5 34.9 (29.8)% (34.0)% (19.1)% - EPS p 2.0p 2.9p (31.0)% (35.5)% (19.4)% Rail ring-fenced cash adjusted 1,558.8 1,501.5 +3.8% Net debt pre-IFRS 16 Rail ring-fenced cash adjusted 2.3x 2.2x +0.1x Net debt pre-IFRS 16: EBITDA Adjusted cash (out)/inflow (78.0) 50.6 n/m 1 Change in constant currency ('CCy') is based on retranslating H1 2018 foreign currency amounts at H1 2019 rates 2 Change excluding first time adoption of IFRS 16 (leases) which resulted in a net reduction in Adjusted PBT in the period of £7.3m – see page 5 3 Before other intangible asset amortisation charges and certain other items 14 November 2019 FirstGroup results for the six months to 30 September 2019 4

IFRS 16 (Leases) ▪ From 1 April 2019, £1.1bn of leased assets were recognised as Right Of Use assets on balance sheet − Rail track access payments, leases of <1 year, low values excluded; no retrospective restatement ▪ H1 effect of implementation below; full year effects will broadly follow the seasonality of the Group: H1 2019 H1 2018 £m Under old IAS17 IFRS 16 effect Under IFRS 16 Under old IAS 17 Adjusted EBITDA 252.9 +181.3 434.2 255.1 Operating profit 88.7 +9.0 97.7 92.4 Net finance costs (52.7) (16.3) (69.0) (50.4) PBT 36.0 (7.3) 28.7 42.0 EPS 2.5p (0.5)p 2.9p 2.0p Net debt 1,062.0 +1,022.1 2,084.1 1,047.7 ▪ Group’s key banking covenants are calculated under ‘frozen accounting standards’; on this basis net debt: EBITDA was flat at 1.6x and Rail ring-fenced cash adjusted net debt: EBITDA was 2.3x (H1 2018: 2.2x) ▪ IFRS 16 will have a significant impact on headline credit ratios when a rolling twelve month period of adjusted earnings and EBITDA under the standard is reported ▪ No impact on underlying cash flow; however presentation of cash flow will change 14 November 2019 FirstGroup results for the six months to 30 September 2019 5

IFRS 16 (Leases) – Road and Rail ▪ Approximately 75% of the right of use leases recognised are in the Rail division (principally rolling stock), remainder being leased properties, PCVs and other leased assets in the Road divisions − RoU assets capitalised at 1 April 2019 include £842m in Rail, £103m in First Student, £75m in First Bus and £78m in Greyhound ▪ This is reflected in the relative effect on depreciation and operating costs in the Rail division compared with the rest of the Group: H1 2019 H1 2018 £m Under old IAS17 IFRS 16 effect Under IFRS 16 Under old IAS 17 EBITDA 1 Road divisions 190.7 +39.5 230.2 202.5 First Rail 62.2 +141.8 204.0 52.6 Total Group 252.9 +181.3 434.2 255.1 Adjusted 2 operating profit Road divisions 47.3 +1.5 48.8 63.1 First Rail 41.4 +7.5 48.9 29.3 Total Group 88.7 +9.0 97.7 92.4 ▪ Additional right of use assets will be recognised on mobilisation of the West Coast Partnership. GWR right of use assets reflect the current Direct Award (expires in March 2020) and not any future award 1 Adjusted operating profit less capital grant amortisation plus depreciation 2 Before other intangible asset amortisation charges and certain other items For additional divisional detail on the effects of IFRS 16, see page 32 14 November 2019 FirstGroup results for the six months to 30 September 2019 6

Revenue performance ▪ Group revenue growth +4.1% in CCy, with growth in First Student, First Transit and First Rail ▪ Both First Bus (passenger revenue +1.6%) and Greyhound (revenue +0.7%) delivered growth on a LFL basis, after excluding depot disposals and Canada withdrawal respectively 0.4 3,531.9 99.3 40.0 34.0 90.1 3,393.4 (25.8) (9.4) 3,303.3 H1 2018 Currency H1 2018 First Student First Transit Greyhound First Bus First Rail Group items H1 2019 baseline revenue revenue 14 November 2019 FirstGroup results for the six months to 30 September 2019 7

Adjusted 1 operating profit ▪ First Rail earnings includes settlement of certain GWR claims and higher subsidy receipts ▪ Fewer First Student operating days, worse UK summer weather in First Bus and two adverse legal judgements in First Transit affected the Road divisions’ seasonally smaller first half 9.0 104.7 2.8 97.7 3.3 12.1 92.4 (7.3) 1.2 (11.6) (4.2) operating Currency Impact of H1 2018 baseline First Student First Transit Greyhound Group items operating H1 2018 H1 2019 IFRS 16 First Bus First Rail profit profit 1 Before amortisation charges and certain other items 14 November 2019 FirstGroup results for the six months to 30 September 2019 8

Income statement – continued Reported Change in £m H1 2019 H1 2018 change CCy Adjusted 1 Operating profit 97.7 92.4 +5.7% +2.1% Includes impact Net finance costs (50.4) (36.9)% (69.0) of transition to IFRS 16 Profit before tax 28.7 42.0 (31.7)% (35.9)% Tax (4.2) (9.4) FY 22-23% tax - Effective tax rate % 22.5% (790)bps 14.6% guidance unchanged Non-controlling interests - 2.3 Rail franchise partners (in SWR Attributable profit 24.5 34.9 (29.8)% (34.0)% currently and WCP in future) EPS p 2.0p 2.9p (31.0)% (35.5)% 1 Before amortisation charges and certain other items 14 November 2019 FirstGroup results for the six months to 30 September 2019 9

Non-GAAP adjustments ▪ Amortisation charges lower due to full utilisation of £m H1 2019 H1 2018 old customer contract intangibles Amortisation charges (11.8) (17.6) ▪ Restructuring and reorganisation costs relate to externally facilitated structural change and efficiency programmes to further reduce divisional Greyhound impairment charges (124.4) - cost bases North America insurance reserves (59.3) - ▪ Legacy pension settlement of £4.9m in relation to a pension liability on a business disposed of in Restructuring and reorganisation (15.4) (28.5) 2013 Legacy pension settlement (4.9) - ▪ Greyhound impairment charge and North America TPE provision notional interest unwind - (0.5) self-insurance reserves charge discussed on following pages Other non-GAAP adjusting items (204.0) (29.0) Total non-GAAP adjustments (215.8) (46.6) 14 November 2019 FirstGroup results for the six months to 30 September 2019 10

Greyhound impairment ▪ Greyhound impaired by £124.4m ($153.3m) reflecting updated view of profitability and outlook ▪ Greyhound CGU valuation as at 30 September 2019 £179.2m ($220.2m) ▪ Other Greyhound net assets of £46.5m ($57.2m) are excluded from CGU impairment calculations, including working capital, assets held for sale and right of use assets ▪ Pension deficit (IAS19 basis) £129.2m ($158.8m) ▪ Self-insurance reserve provision £95.6m ($117.5m) ▪ The process for the sale of Greyhound is well advanced; discussions ongoing with bidders ▪ Greyhound £40.5m ($50.8m) EBITDA (pre-IFRS 16) over the past twelve months 14 November 2019 FirstGroup results for the six months to 30 September 2019 11