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 2014 Wednesday 5 November 2014

Tim O’Toole Chief Executive 2

Overview • Trading for the Group in line with our expectations – Encouraging progress with First Student turnaround – Good performances in First Transit and UK Rail – Core Greyhound customers and some local UK Bus markets not seeing benefit from improving macroeconomic trends • Results more weighted to H2 than usual this year • Negotiating FGW and FTPE direct awards with DfT • Multi-year transformation programme on track; confident our plans will deliver sustainable improvements in shareholder value 3

Chris Surch Group Finance Director Financial review 4

Key highlights • Adjusted operating profit £103.6m up 2.4% • Adjusted EPS 1.8p up 63.6% • Net cash outflow of £91.0m (H1 2013: £103.0m outflow) – Expect full year outflow to be approx. £100m • Underlying capital investment £222m (ex-UK Rail) • Net debt to EBITDA: 2.5x due to seasonal swings (FY 2014: 2.2x) • ROCE 7.8% (H1 2013: 7.9%) 5

Financial summary Sep 2014 Sep 2013 restated 1 Change Revenue £2,941.1m £3,300.7m (10.9)% Adjusted 2 - EBITDA 3 £253.3m £260.5m (2.8)% - Operating profit £103.6m £101.2m +2.4% - Margin % 3.5% 3.1% +0.4pp - Interest £(70.3)m £(81.6)m (13.8)% - Profit before tax £33.3m £19.6m +69.9% - Attributable profit £21.6m £10.3m +109.7% - EPS 4 1.8p 1.1p +63.6% 1. Restated for the reclassification of UK Rail bid costs and property profits or losses 2. Before amortisation charges, ineffectiveness on financial derivatives and certain other items 3. Adjusted operating profit less capital grant amortisation plus depreciation 4. Change in EPS is less than for profit attributable to ordinary shareholders due to the increased weighted average number of shares in issue following the rights issue completed in H1 2013 6

Group revenue bridge £m Revenue Change H1 2013 3,300.7 (10.9)% UK Rail revenue support (192.7) UK Rail reduction in First ScotRail subsidy (98.2) UK Bus operations sold or closed in prior period (56.0) Foreign exchange (122.4) H1 2013 comparator 2,831.4 +3.9% Growth / other 109.7 H1 2014 2,941.1 7

Divisional performance Operating Profit 1 (£m) Operating Margin 1 (%) Revenue (£m) Sep 14 Sep 13 Sep 14 Sep 13 2 Sep 14 Sep 13 2 Student 605.7 666.4 4.5 10.4 0.7% 1.6% Transit 410.2 408.7 29.5 31.4 7.2% 7.7% Greyhound 314.0 333.7 29.9 32.1 9.5% 9.6% UK Bus 449.2 490.7 16.9 15.9 3.8% 3.2% UK Rail 1,155.6 1,395.2 40.0 25.8 3.5% 1.8% Group items 6.4 6.0 (17.2) (14.4) Total 2,941.1 3,300.7 103.6 101.2 3.5% 3.1% 1. Before amortisation charges, ineffectiveness on financial derivatives and certain other items 2. Restated for the reclassification of UK Rail bid costs and property profits or losses 8

Non-trading items Sep 14 Sep 13 £m £m Amortisation charges (25.8) (25.9) Gain on disposal of property 26.1 - Legal claims (12.2) - IT licences (8.7) - UK Bus depot sales and closures (2.4) 15.3 Ineffectiveness on financial derivatives - (17.0) Other (0.4) - Other non-GAAP adjusting items 2.4 (1.7) Total non-GAAP adjustments (23.4) (27.6) • Gain on disposal of property was realised on sale of Greyhound garage in Miami. £31.6m cash proceeds of this disposal were received during the period • Legal claims charge relates to two separate claims that pre-date the Laidlaw acquisition • IT licences have been written off as the related project objectives will now be achieved through a less costly and more appropriate alternative 9

Net cash flow £253.3m £43.9m (£15.2m) (£268.5m) (£7.5m) (£12.4m) - - (£91.0m) (£84.6m) EBITDA Capital expenditure Property disposal proceeds Pensions Provisions Working capital / other Interest and tax Net cash flow • Full year net cash outflow is expected to be approximately £100m including £70m outflow for FCC in H2 10

Financial position • Strong liquidity and stable financing platform to drive forward transformation – Long term facilities in place – next refinancing 2019 – Average debt maturity 5.7 years (2013: 6.5 years) – Liquidity – headroom under committed facilities plus free cash: £943m (2013: £1,003m) – Mid-year net debt: EBITDA ratio 2.5x (FY 2014: 2.2x) £500m £400m £300m £200m £100m £0m FY 14/15 H1 15/16 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 Lease finance Drawings under £800m RCF at 30 Sept 14 Private placement notes £200m bond 2024 £325m bond 2022 £350m bond 2021 £250m bond 2019 £300m bond 2018 11

Tim O’Toole Chief Executive Business review 12

First Student • Successful contract portfolio pricing programme this year – Average price increases of c.4.5% on contracts up for re-bid this season (approx. one-third of bus fleet) – timing of school year means benefit will be seen in H2 – 90% contract retention – customer recognition of our overall value proposition • Reduced proportion of low margin contracts from 36% to c.28% this year – multi-year programme to build on this improvement • Cost growth still running slightly ahead of inflation; on track to deliver approx. $20m this year of the $50m cost savings programme 13

First Transit • Outsourcing and demographic trends continue to create opportunities to grow our diverse contract portfolio, with modest capital requirements • Growth profile this year driven by timing of available opportunities and two larger contracts rolling off in H2 – Profitable contract wins continued; several start up towards end of current financial year – H1 revenue growth of 9.0% expected to moderate to c.4% for full year • Expect to maintain margin of c.7% this year, in line with medium term target 14

Greyhound • Greyhound Express delivered profitable like-for-like growth of 5.8% • Core Greyhound customers not yet benefiting from improving economy • Programme underway to equip traditional Greyhound with the tools to reduce dependence on the macroeconomic cycle – Good progress with technology rollout in the period – Improved CRM capability (web, mobile, loyalty) – Key systems upgrades for real-time pricing and yield management in place over next 12 months • Continue to utilise more flexible cost model to protect margin 15

US consumer sentiment by income band Change over last twelve months: 105 Top third: 11.4% up Middle third: 2.4% up 95 Bottom third: 0.6% up 85 Index value 75 65 55 45 2008 2009 2010 2011 2012 2013 2014 Bottom third Middle third Top third Source: University of Michigan Consumer Survey: Index of consumer sentiment within income terciles (three month moving averages) 16

UK Bus • Actions taken with fares, networks and local partnerships are delivering good volume growth – 2.1% LFL volume growth in H1; principally commercial passengers – Pace of economic recovery continues to vary across our local markets • 2.1% LFL revenue growth – no net price inflation across portfolio in H1 – Will begin to benefit in H2 from disciplined price increases to cover cost inflation, in line with peers – mainly from December/January • Continued disciplined operations programme – £6m of savings in H1 – Targeting double the amount in further efficiencies in H2 17

UK Rail • Robust revenue and passenger volume growth coupled with strong operating performance • Negotiating with DfT for First Great Western direct award to at least March 2019 • Shortlisted for TransPennine Express from February 2016; negotiating direct award up to that time • Submitted InterCity East Coast bid in June 2014; result expected shortly • Franchise competitions: remain ambitious but disciplined in bidding, in order to secure business at acceptable economic levels 18

Summary • Trading in the period in line with our expectations • Results more weighted to H2 than usual this year • Strong liquidity and stable financing platform to progress transformation • Focused on achieving our medium term financial targets • Confident our plans will deliver sustainable improvements in shareholder value 19

FirstGroup plc Half-yearly results for the six months to 30 September 2014

Appendices 21

First Student Sep 14 Sep 13 1 Change $m $m Revenue 1,013.1 1,029.7 (1.6)% Operating profit 6.0 17.3 (65.3)% Margin % 0.6% 1.7% (1.1)pp Operating $m Revenue profit Sep 13 1 1,029.7 17.3 Net growth / op days / other (20.4) (16.0) Exit of loss making contracts (21.6) - Inflation 18.7 (7.0) Mgmt initiatives 5.0 6.1 Weather 11.8 6.2 CAN$ fx (10.1) (0.6) Sep 14 1,013.1 6.0 1. Restated for the reclassification of property profits or losses 22

First Transit Sep 14 Sep 13 Change $m $m Revenue 687.7 630.8 9.0% Operating profit 49.3 48.6 1.4% Margin % 7.2% 7.7% (0.5)pp Operating $m Revenue Profit Sep 13 630.8 48.6 Net growth 64.1 2.5 CAN$ fx / Other (7.2) (1.8) Sep 14 687.7 49.3 23