FirstGroup plc Half-yearly results For the six months to 30 - PowerPoint PPT Presentation

FirstGroup plc Half-yearly results For the six months to 30 September 2015 Thursday 12 November 2015 12 November 2015 FirstGroup half-yearly results 2015/16

Tim O'Toole Chief Executive 12 November 2015 FirstGroup half-yearly results 2015/16 2

Overview ▪ Overall trading for the Group in line with our expectations, with outperformance in some areas offsetting more challenging market environment in others Continued progress of our transformation not fully reflected in H1 due to rail franchise ▪ portfolio changes and fewer operating days in First Student this year – results more heavily weighted to the second half than usual ▪ As a result of a change in the basis of estimate for First Rail pensions, our expectations for the Group's overall trading performance for the full year are increased by £15m Confident that the transformation plans are driving the improvements in underlying ▪ performance that are central to sustainable cash generation over the medium term Wolfhart Hauser became Chairman on 17 July and Matthew Gregory appointed as CFO ▪ with effect from 1 December 12 November 2015 FirstGroup half-yearly results 2015/16 3

Chris Surch Group Finance Director Financial review 12 November 2015 FirstGroup half-yearly results 2015/16 4

Financial overview ▪ Results more heavily weighted to the second half than usual Adjusted operating profit £88.4m (H1 2014: £103.6m) reflects several factors: ▪ − Changes to First Rail franchise portfolio − Fewer operating days in First Student due to timing of school calendar − Change in the basis of estimate for First Rail pensions reflecting new Direct Awards ▪ Net cash outflow of £168.1m before First Rail end of franchise outflows of £20.3m Expect underlying net cash flow for the full year to be broadly flat ▪ Net debt to EBITDA: 2.59x due to seasonal swings (FY 2015: 2.25x) ▪ ▪ Underlying capital investment £155m (ex-First Rail) 12 November 2015 FirstGroup half-yearly results 2015/16 5

Financial summary £m Sep 2015 Sep 2014 Change Revenue 2,440.9 2,941.1 (17.0)% Adjusted 1 - EBITDA 2 242.4 253.3 (4.3)% - Operating profit 88.4 103.6 (14.7)% - Margin % 3.6% 3.5% +0.1pp - Net finance costs (66.0) (70.3) (6.1)% - Profit before tax 22.4 33.3 (32.7)% - Effective tax rate % 24.1% 22.0% +2.1pp - Attributable profit 14.9 21.6 (31.0)% - EPS p 1.2p 1.8p (33.3)% 1 Before amortisation charges and certain other items 2 Adjusted operating profit less capital grant amortisation plus depreciation 12 November 2015 FirstGroup half-yearly results 2015/16 6

Group bridge £m Revenue Adjusted operating profit Sep 2014 reported 2,941.1 103.6 Changes in First Rail franchise portfolio (586.2) (13.6) First Student operating days (18.3) (7.8) Foreign exchange 85.3 (2.3) Sep 2014 underlying comparator 2,421.9 79.9 Growth 19.0 1.3 Change in basis of estimate for First Rail pensions - 7.2 Sep 2015 reported 2,440.9 88.4 ▪ On a constant currency basis excluding changes in the First Rail portfolio, fewer operating days in First Student and the change in basis of estimate for the First Rail pensions, underlying growth was: − 0.8% for revenue − 1.6% for adjusted operating profit 12 November 2015 FirstGroup half-yearly results 2015/16 7

Divisional performance Revenue Operating profit 1 Operating margin 1 Sep 2015 Sep 2014 Sep 2015 Sep 2014 Sep 2015 Sep 2014 £m First Student 655.9 605.7 2.0 4.5 0.3% 0.7% First Transit 419.2 410.2 30.1 29.5 7.2% 7.2% Greyhound 312.4 314.0 25.8 29.9 8.3% 9.5% First Bus 437.5 449.2 15.4 16.9 3.5% 3.8% First Rail 608.9 1,155.6 32.9 40.0 5.4% 3.5% Group items 7.0 6.4 (17.8) (17.2) Total 2,440.9 2,941.1 88.4 103.6 3.6% 3.5% $m First Student 1,006.8 1,013.1 1.4 6.0 0.1% 0.6% First Transit 645.6 687.7 46.3 49.3 7.2% 7.2% Greyhound 481.6 527.0 40.2 50.3 8.3% 9.5% North America 2,134.0 2,227.8 87.9 105.6 4.1% 4.7% 1 Before amortisation charges and certain other items 12 November 2015 FirstGroup half-yearly results 2015/16 8

Capital expenditure ▪ Disciplined investment programme £m Sep 2015 continues, focused on ensuring good Passenger carrying vehicles (PCV) 134.6 returns on incremental capital invested Equipment 6.4 IT including transformation 6.8 ▪ Main investment in passenger carrying fleet and IT to support transformation Facilities and depot development 6.7 Capital investment excl. First Rail 154.5 First Rail 31.3 Total capital investment 185.8 Net creditor movement 17.4 Funded by operating lease (1.3) Gross cash capex 201.9 12 November 2015 FirstGroup half-yearly results 2015/16 9

12 November 2015 H1 net cash flow (£m) £242.4m EBITDA (£170.1m) Non-Rail capex (£31.8m) Rail capex £9.9m Disposal proceeds (£28.6m) FirstGroup half-yearly results 2015/16 Pensions charge in excess of P&L (£12.9m) Provisions (£90.7m) Working capital / other (£86.3m) (£168.1m) Interest and tax Cash outflow before First Rail franchise outflows (£20.3m) First Rail end of franchise outflows (£188.4m) Net cash flow 10

Financial position ▪ Strong liquidity and stable financing platform to continue transformation − Headroom under committed facilities plus free cash: £801.3m (Mar 2015: £1,023.8m) − Net debt:EBITDA ratio 2.59x (Mar 2015: 2.25x) − Long term facilities in place – average debt maturity 4.8 years (Mar 2015: 5.2 years) − Next bond maturity September 2018, next bank refinancing 2019 ▪ Continuously review opportunities to optimise financing structure and costs £500m £300m bond 2018 £400m £250m bond 2019 £300m £350m bond 2021 £325m bond 2022 £200m £200m bond 2024 £100m Private placement notes £0m FY 15/16 H1 16/17 FY 16/17 H1 17/18 FY 17/18 H1 18/19 FY 18/19 H1 19/20 FY 19/20 H1 20/21 FY 20/21 H1 21/22 FY 21/22 H1 22/23 FY 22/23 H1 23/24 FY 23/24 H1 24/25 Drawings under £800m RCF at 30 Sept 15 Lease finance 12 November 2015 FirstGroup half-yearly results 2015/16 11

Tim O'Toole Chief Executive Business review 12 November 2015 FirstGroup half-yearly results 2015/16 12

First Student  Double digit medium term margin target Multi-year  Contract portfolio pricing programme to raise returns strategy  Cost efficiencies  2015 bid season: 5.3% average price increase and 86% retention – partial benefit in current year, more in 2016/17  Recruitment and retention programmes are mitigating the worsening Progress industry-wide driver shortage challenges in some regions  Further cost savings from driver productivity, fuel efficiency, engineering savings and other applications of consistent best practice  2016/17 to benefit from elimination of the c.$17m operating days impact in current year Future  Continued focus on pricing for new contracts and renewals  Completion of the $50m cost efficiency programme  Confident turnaround will deliver double digit margin target for 2016/17 12 November 2015 FirstGroup half-yearly results 2015/16 13

First Transit  Growth through bidding for further outsourcing opportunities Multi-year  Maintain margin of c.7% and relatively low capital intensity strategy  Revenue decreased by 6.1% reflecting impact of fuel price on shuttle business in Canadian oil sands  Awarded 14 new contracts in the period Progress  Contract retention rate 92%  Margin in line with medium term target  Continued investment to sustain market leadership and cost efficiency – real-time information, predictive analytics, paperless workshops  Solid bid pipeline with a broad range of opportunities Future  Options for growth in adjacent geographies and services 12 November 2015 FirstGroup half-yearly results 2015/16 14

Greyhound  Fleet upgrade and roll out of point-to-point services Multi-year  Transformation of Greyhound business model strategy  12% margin target  Pricing and yield management systems launched as planned  Remainder of programme roll out – as well as upgrades to website, apps, loyalty programme – on track Progress  Passenger demand impact of sharply lower fuel prices continues with LFL revenue decrease of 6.2%; point-to-point services more resilient (-3.1%)  Flexible cost model mitigating margin impact of lower demand  Yield management benefits build over time Future  Addressing Canadian business  Build on Mexico launch 12 November 2015 FirstGroup half-yearly results 2015/16 15

First Bus  Double digit medium term margin target Multi-year  Restore volume growth and ability to achieve market-based pricing strategy  Cost efficiencies  Depot restructuring completed  Cost efficiencies of £10m delivered in H1; further savings expected in H2 Progress  LFL commercial revenue growth +2.2% from volumes and yield, partially offset by weaker concessionary revenues  Expanded cost savings programme offsetting mixed market conditions experienced across the industry Future  Stronger local authority relationships, customer focus and cost efficiency vital for future performance of the business 12 November 2015 FirstGroup half-yearly results 2015/16 16