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

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

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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

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12 November 2015 FirstGroup half-yearly results 2015/16

FirstGroup plc Half-yearly results

For the six months to 30 September 2015 Thursday 12 November 2015

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12 November 2015 FirstGroup half-yearly results 2015/16

Tim O'Toole Chief Executive

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12 November 2015 FirstGroup half-yearly results 2015/16

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

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12 November 2015 FirstGroup half-yearly results 2015/16

Chris Surch Group Finance Director Financial review

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12 November 2015 FirstGroup half-yearly results 2015/16

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)

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12 November 2015 FirstGroup half-yearly results 2015/16

Financial summary

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£m Sep 2015 Sep 2014 Change Revenue 2,440.9 2,941.1 (17.0)% Adjusted1

  • EBITDA2

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

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12 November 2015 FirstGroup half-yearly results 2015/16

Group bridge

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£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

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12 November 2015 FirstGroup half-yearly results 2015/16

Divisional performance

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Revenue Operating profit1 Operating margin1 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

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12 November 2015 FirstGroup half-yearly results 2015/16

Capital expenditure

▪ Disciplined investment programme continues, focused on ensuring good returns on incremental capital invested ▪ Main investment in passenger carrying fleet and IT to support transformation

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£m Sep 2015 Passenger carrying vehicles (PCV) 134.6 Equipment 6.4 IT including transformation 6.8 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

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12 November 2015 FirstGroup half-yearly results 2015/16

H1 net cash flow (£m)

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£242.4m (£170.1m) (£31.8m) £9.9m (£28.6m) (£12.9m) (£90.7m) (£86.3m) (£168.1m) (£20.3m) (£188.4m) EBITDA Non-Rail capex Rail capex Disposal proceeds Pensions charge in excess of P&L Provisions Working capital /

  • ther

Interest and tax Cash outflow before First Rail franchise outflows First Rail end of franchise outflows Net cash flow

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12 November 2015 FirstGroup half-yearly results 2015/16

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

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£0m £100m £200m £300m £400m £500m 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 £300m bond 2018 £250m bond 2019 £350m bond 2021 £325m bond 2022 £200m bond 2024 Private placement notes Drawings under £800m RCF at 30 Sept 15 Lease finance

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12 November 2015 FirstGroup half-yearly results 2015/16

Tim O'Toole Chief Executive Business review

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12 November 2015 FirstGroup half-yearly results 2015/16

First Student

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Multi-year strategy

  • Double digit medium term margin target
  • Contract portfolio pricing programme to raise returns
  • Cost efficiencies

Progress

  • 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

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 Future

  • 2016/17 to benefit from elimination of the c.$17m operating days impact in

current year

  • 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
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12 November 2015 FirstGroup half-yearly results 2015/16

First Transit

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Multi-year strategy

  • Growth through bidding for further outsourcing opportunities
  • Maintain margin of c.7% and relatively low capital intensity

Progress

  • Revenue decreased by 6.1% reflecting impact of fuel price on shuttle

business in Canadian oil sands

  • Awarded 14 new contracts in the period
  • 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 Future

  • Solid bid pipeline with a broad range of opportunities
  • Options for growth in adjacent geographies and services
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12 November 2015 FirstGroup half-yearly results 2015/16

Greyhound

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Multi-year strategy

  • Fleet upgrade and roll out of point-to-point services
  • Transformation of Greyhound business model
  • 12% margin target

Progress

  • Pricing and yield management systems launched as planned
  • Remainder of programme roll out – as well as upgrades to website, apps,

loyalty programme – on track

  • 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

Future

  • Yield management benefits build over time
  • Addressing Canadian business
  • Build on Mexico launch
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12 November 2015 FirstGroup half-yearly results 2015/16

First Bus

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Multi-year strategy

  • Double digit medium term margin target
  • Restore volume growth and ability to achieve market-based pricing
  • Cost efficiencies

Progress

  • Depot restructuring completed
  • Cost efficiencies of £10m delivered in H1; further savings expected in H2
  • LFL commercial revenue growth +2.2% from volumes and yield, partially
  • ffset by weaker concessionary revenues

Future

  • Expanded cost savings programme offsetting mixed market conditions

experienced across the industry

  • Stronger local authority relationships, customer focus and cost efficiency vital

for future performance of the business

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12 November 2015 FirstGroup half-yearly results 2015/16

First Rail

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Multi-year strategy

  • Passenger volume growth and operational delivery
  • Disciplined approach to franchise bidding opportunities

Progress

  • Continue to deliver robust passenger volume (LFL +3.5%) and revenue

growth (LFL +7.0%), coupled with strong operating performance

  • Working closely with Department for Transport and Network Rail to deliver

Great Western Mainline infrastructure upgrades; launch of GWR

  • Awaiting TPE franchise award decision; East Anglia bid to be submitted in

December Future

  • Two thirds of UK rail network due to be franchised over next five years
  • Bidding approach balances ambitious improvements for passengers and

appropriate returns for shareholders, at an acceptable level of risk

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12 November 2015 FirstGroup half-yearly results 2015/16

Summary

▪ 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

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12 November 2015 FirstGroup half-yearly results 2015/16

FirstGroup plc Half-yearly results

For the six months to 30 September 2015 Thursday 12 November 2015

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12 November 2015 FirstGroup half-yearly results 2015/16

Appendices

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12 November 2015 FirstGroup half-yearly results 2015/16

Financial results

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£m Sep 2015 Sep 2014 Change Revenue 2,440.9 2,941.1 (17.0)% EBITDA1 242.4 253.3 (4.3)% EBITDA margin % 9.9% 8.6% +1.3pp Operating profit2 88.4 103.6 (14.7)% Operating profit margin % 3.6% 3.5% +0.1pp Net finance costs (66.0) (70.3) (6.1)% Profit before tax2 22.4 33.3 (32.7)% Non-GAAP adjustments (29.9) (23.4) n/m (Loss)/profit before tax (7.5) 9.9 n/m Tax 4.4 (2.4) n/m (Loss)/profit after tax (3.1) 7.5 n/m Basic EPS p (0.4)p 0.3p n/m Adjusted EPS p 1.2p 1.8p (33.3)%

1 Adjusted operating profit less capital grant amortisation plus depreciation 2 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

Non-GAAP adjustments

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£m Sep 2015 Sep 2014 Amortisation charges (27.2) (25.8) Gain on disposal of property

  • 26.1

Legal claims (1.0) (12.2) IT licenses

  • (8.7)

First Bus depot sales and closures (1.7) (2.4) Other

  • (0.4)

Other non-GAAP adjusting items (2.7) 2.4 Total non-GAAP adjustments (29.9) (23.4)

▪ Legal claims charge relates to a claim that pre-dates the Laidlaw acquisition ▪ First Bus depot sales and closures in the period relate to

  • perating losses on a legacy

depot closure

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12 November 2015 FirstGroup half-yearly results 2015/16

First Student

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$m Sep 2015 Sep 2014 Change Revenue 1,006.8 1,013.1 (0.6)% Operating profit1 1.4 6.0 (76.7)% Margin % 0.1% 0.6% (0.5)pp $m Revenue Operating profit1 Sep 2014 1,013.1 6.0 Above inflation pricing 7.9 7.9 Weather (9.5) (4.9) Operating days (28.2) (12.0) Driver shortage

  • (7.1)

Management initiatives 2.3 10.4 Inflation / other 40.8 0.8 CAN$ fx (19.6) 0.3 Sep 2015 1,006.8 1.4

1 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

First Transit

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$m Sep 2015 Sep 2014 Change Revenue 645.6 687.7 (6.1)% Operating profit1 46.3 49.3 (6.1)% Margin % 7.2% 7.2%

  • $m

Revenue Operating profit1 Sep 2014 687.7 49.3 Canadian oil sands (18.8) (2.9) Net growth / other (7.1) 1.6 CAN$ fx (16.2) (1.7) Sep 2015 645.6 46.3

1 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

Greyhound

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$m Sep 2015 Sep 2014 Change Revenue 481.6 527.0 (8.6)% Operating profit1 40.2 50.3 (20.1)% Margin % 8.3% 9.5% (1.2)pp $m Revenue Operating profit1 Sep 2014 527.0 50.3 Passenger revenue (30.9) (30.9) Fuel cost savings

  • 9.0

Management actions (incl. mileage)

  • 22.2

Inflation / other

  • (10.8)

CAN$ fx (14.5) 0.4 Sep 2015 481.6 40.2

1 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

First Bus

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£m Sep 2015 Sep 2014 Change Revenue 437.5 449.2 (2.6)% Operating profit1 15.4 16.9 (8.9)% Margin % 3.5% 3.8% (0.3)pp £m Revenue Operating profit1 Sep 2014 449.2 16.9 Passenger revenue growth 3.3 3.3 Cost inflation

  • (10.7)

Tender changes (5.2) (2.0) Management initiatives (1.7) 10.3 Games/other (8.1) (0.2) Restructuring

  • (2.2)

Sep 2015 437.5 15.4

1 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

First Rail

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£m Sep 2015 Sep 2014 Change Revenue 608.9 1,155.6 (47.3)% Operating profit1 32.9 40.0 (17.7)% Margin % 5.4% 3.5% +1.9pp

1 Before amortisation charges and certain other items

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12 November 2015 FirstGroup half-yearly results 2015/16

Return on capital employed (ROCE)

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ROCE As at 31 March 2015 7.8% Changes in First Rail franchise portfolio (0.3)% First Student operating days (0.2)% Foreign exchange 0.1% Change in basis of estimate for First Rail pensions 0.2% Capital employed (including pensions) (0.4)% Tax rate, other (0.1)% As at 30 September 2015 7.1%

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12 November 2015 FirstGroup half-yearly results 2015/16

Total capital expenditure

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Cash Fixed asset additions Sep 2015 Sep 2014 Sep 2015 Sep 2014 First Student 131.8 128.5 108.2 106.5 First Transit 9.2 15.7 7.9 15.3 Greyhound 3.0 35.8 3.7 35.8 First Bus 24.8 41.1 32.1 63.2 First Rail 31.8 35.2 31.3 33.5 Group items 1.3 1.2 1.3 1.2 Total 201.9 257.5 184.5 255.5

▪ In addition during the year we entered into operating leases for new vehicles in First Transit with capital value £1.3m (2014: £nil)

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12 November 2015 FirstGroup half-yearly results 2015/16

First Rail passenger revenue growth

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Six months to Sep 2015 Mar 2015 Sep 2014 Mar 2014 First Capital Connect (FCC) n/a n/a 6.8% 8.1% Great Western Railway (GWR) 6.8% 6.5% 7.0% 4.9% First ScotRail (FSR) n/a 8.1% 4.7% 5.5% First TransPennine Express (FTPE) 6.6% 6.5% 6.2% 5.6% Hull Trains 18.7% 15.2% 9.7% 5.2% Total 7.0% 7.0% 6.5% 6.0%

▪ Continued solid demand across all of our franchises – like-for-like volume growth of 3.5%

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12 November 2015 FirstGroup half-yearly results 2015/16

First Rail franchises, subsidy/premium profile

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First Rail franchise contracts FCC GWR old GWR STA FSR FTPE Start date (month start) Apr 2006 Apr 2006 Oct 2013 Oct 2004 Feb 2004 Expiry date (month end) Mar 2014 Oct 2013

  • Mar 2015

Mar 2015 DfT STA programme (month end) Sep 2014

  • Mar 2019
  • Mar 2016

▪ DfT Single Tender Action (STA) Great Western Railways franchise runs to 1 April 2019 and the DfT has an option to extend by up to one year ▪ DfT STA First TransPennine Express franchise runs to 1 April 2016 and the DfT has an option to extend by up to a further 11 reporting periods to February 2017 First Rail franchise subsidy/(premium) profile, £m FCC GWR old GWR STA FSR FTPE Total FY 2013/14 (254.4) (273.5) (22.0) 506.4 65.7 22.2 HY 2014/15 (69.9)

  • (53.7)

133.0 24.8 34.2 FY 2014/15 (70.2)

  • (100.1)

289.4 43.9 163.0 HY 2015/16 n/a

  • (55.8)

n/a 11.5 (44.3)

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12 November 2015 FirstGroup half-yearly results 2015/16

First Rail ring-fenced cash and bonds

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First Rail bonds, £m Sep 2015 Sep 2014 GWR performance bond 10.0 10.0 GWR season ticket bond 26.0 26.4 FTPE performance bond 10.6 10.6 FTPE season ticket bond 1.1

  • FSR performance bond
  • 25.0

FSR season ticket bond

  • 5.4

FSR maintenance bond

  • 20.7

FCC performance bond

  • 10.0

FCC season ticket bond

  • 58.9

Total 47.7 167.0 ▪ Season ticket bond monies are included within First Rail ring-fenced cash ▪ Performance bonds are non-cash items First Rail ring-fenced cash, £m Sep 2015 Sep 2014 GWR 151.6 116.4 FTPE 45.5 46.7 FSR

  • 73.1

FCC

  • 39.7

Total 197.1 275.9

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12 November 2015 FirstGroup half-yearly results 2015/16

Current diesel hedge position

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Year to 31 March UK North America 2016 2017 2018 2019 2016 2017 2018 2019 Annual volume (barrels'm) 1.9 1.7 1.6 1.5 1.6 1.4 1.4 1.4 % hedged 91% 92% 72% 31% 71% 63% 30% 3% Crude rate ($/barrel) $88.42 $72.97 $65.41 $67.63 $86.43 $73.65 $61.92 $56.66 Diesel rate ($/barrel) $106.18 $87.94 $80.63 $84.01 $114.48 $97.53 $83.78 $78.02 Equivalent cost per litre 41.7p 34.6p 31.7p 33.0p 72.0 61.3 52.7 49.1

▪ Prices include crude and refining cost but exclude delivery margins, duty, taxes and BSOG ▪ Equivalent cost per litre assumes a constant FX rate of $1.60 : £1.00 ▪ North America annual volume excludes c.2.3m barrels provided by customers or protected by contract escalators ▪ The decrease in expected annual volume consumption in 2017 reflects the contractual end date of FTPE rail franchise, with subsequent annual volume reductions resulting from GWR electrification programme works. GWR included to 1 April 2019

First Bus First Rail First Student First Transit Greyhound Total Annual volume (barrels'm) 1.0 0.9 0.8 0.1 0.7 3.5

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12 November 2015 FirstGroup half-yearly results 2015/16

Pensions

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£m Deficit Cash contributions P&L charge1 Sep 2015 Mar 2015 Sep 2014 Sep 2015 Mar 2015 Sep 2014 Sep 2015 Mar 2015 Sep 2014 North America (130.2) (184.8) (154.7) 16.3 16.5 14.4 3.0 7.2 3.5 First Bus (27.2) (53.5) (129.2) 25.7 41.5 25.6 10.4 25.5 12.9 First Rail (0.7) (1.1) (7.4) 13.1 48.5 22.9 13.1 61.5 31.3 Total (158.1) (239.4) (291.3) 55.1 106.5 62.9 26.5 94.2 47.7

▪ Group deficit decreased by £81m principally due to higher net discount rates in the UK and North America

1 Service costs excluding interest for defined benefit schemes

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12 November 2015 FirstGroup half-yearly results 2015/16

Foreign exchange

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30 Sep 2015 31 Mar 2015 30 Sep 2014 Closing rate for the balance sheet US$ $1.52 $1.49 $1.63 Closing rate for the balance sheet CAN$ $2.02 $1.88 $1.81 ▪ Higher US Dollar compared to March balance sheet date: 6 months to 30 Sep 2015 Year to 31 Mar 2015 6 months to 30 Sep 2014 Effective rate US$ earnings $1.52 $1.58 $1.65 Effective rate CAN$ earnings $1.78 $1.83 $1.82 ▪ Lower US Dollar compared to prior year effective rate: ▪ Translation risk relating to US Dollar earnings arising in the US is mitigated by US Dollar denominated costs in the UK, principally UK fuel costs, US Dollar interest and tax costs

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12 November 2015 FirstGroup half-yearly results 2015/16

Net finance costs and taxation

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Net finance costs, £m Sep 2015 Sep 2014 Bonds 42.1 43.0 Bank borrowings 6.3 7.9 Loan notes 0.5 0.5 Senior unsecured loan notes 2.1 2.0 Finance lease interest 4.4 5.5 Notional interest on long term provisions 7.2 7.4 Notional interest on pensions 4.0 4.8 Investment income (0.6) (0.8) Net finance costs 66.0 70.3 Taxation, £m Sep 2015 Sep 2014 Current tax 1.1 2.5 Deferred tax (5.5) (0.1) Tax (credit)/charge (4.4) 2.4 Tax paid 4.4 3.1 Tax rate on adjusted profit before tax 24.1% 22.0%

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12 November 2015 FirstGroup half-yearly results 2015/16

Disclaimer

Certain statements included or incorporated by reference within this presentation may constitute “forward looking statements" in respect of FirstGroup plc's operations, performance, prospects and/or financial condition. Such statements are based on our current expectations and beliefs concerning future events and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. Such statements are also based on numerous assumptions regarding our present and future strategy and the environment in which we operate, which may not transpire. We undertake no obligation to update any forward looking statements contained in this presentation or any other forward looking statements we may make. Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotions in the UK Financial Services and Markets Act 2000. In making this presentation available, FirstGroup plc makes no recommendation to buy, sell or otherwise deal in shares

  • f FirstGroup plc or in any other securities or investments whatsoever and you should neither rely nor act upon, directly
  • r indirectly, any of the information contained in this presentation in respect of any such investment activity.

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