FirstGroup plc Full year results For the twelve months to 31 March - PowerPoint PPT Presentation

FirstGroup plc Full year results For the twelve months to 31 March 2016 Tuesday 14 June 2016 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016

Tim O'Toole Chief Executive 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 2

Overview ▪ Solid progress made in the year for future growth and higher returns ▪ Operating profit maintained despite smaller rail portfolio and challenging trading environment in some businesses ▪ Contract portfolio enhanced with TransPennine Express rail award and other wins across the Group ▪ Continued disciplined bidding and cost efficiencies, as well as lower fuel costs and additional First Student operating days expected to result in strong progress for the Group in the year ahead ▪ Significantly increased cash generation expected in 2016/17 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 3

Matthew Gregory Chief Financial Officer Financial review 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 4

Financial overview ▪ Adjusted operating profit £300.7m (2015: £303.6m) 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 ▪ Net cash inflow of £36.0m before First Rail end of franchise outflows of £20.8m, ahead of expectations ▪ Net debt to EBITDA flat at 2.3x (2015: 2.3x) ▪ Consistent level of capital investment, excluding First Rail, at £348m (2015: £349m) ▪ Adjusted EPS +5.1% ▪ ROCE 7.2% (2015: 7.4% at constant exchange rates). After adjusting for the impact of the items above, ROCE increased by 60 basis points 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 5

Financial summary Mar 2015 Change £m Mar 2016 - Underlying 1 revenue 5,218.1 5,232.3 (0.3)% Adjusted 2 - Revenue 5,218.1 6,050.7 (13.8)% - EBITDA 3 615.9 624.4 (1.4)% - Operating profit 300.7 303.6 (1.0)% - Margin % 5.8% 5.0% +80bps - Net finance costs (132.4) (139.7) (5.2)% - Profit before tax 168.3 163.9 +2.7% - Effective tax rate % 23.0% 22.0% +100bps - Attributable profit 123.5 117.5 +5.1% - EPS p 10.3p 9.8p +5.1% 1 In constant currency and adjusted for changes in First Rail franchise portfolio 2 Before amortisation charges and certain other items 3 Adjusted operating profit less capital grant amortisation plus depreciation 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 6

Divisional performance Mar 2016 operating profit 1 Mar 2016 revenue Change Change Change in Margin 1 £m (Constant £m (Constant margin 1 FX) FX) First Student 1,553.5 +0.3% 112.6 (5.5)% 7.1% (40)bps First Transit 864.8 (2.1)% 60.1 (3.2)% 7.0% (10)bps Greyhound 605.1 (4.8)% 35.5 (21.5)% 6.0% (90)bps First Bus 870.9 (2.8)% 52.0 +11.6% 6.0% +20bps First Rail 1,308.4 (40.7)% 72.9 +6.7% 5.6% +220bps Group items 15.4 (32.4) Total 5,218.1 (15.6)% 300.7 (0.7)% 5.8% +80bps (13.8)% (1.0)% Total at actual FX 1 In local currency before amortisation charges and certain other items 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 7

Income statement – continued £m Mar 2016 Mar 2015 Change Adjusted 1 Operating profit 300.7 303.6 (1.0)% Broadly flat, Net finance costs (132.4) (139.7) (5.2)% principally bonds Profit before tax 168.3 163.9 +2.7% P&L tax rate to Tax (38.7) (36.1) +7.2% increase further - Effective tax rate % 23.0% 22.0% +100bps No TPE minority Non-controlling interests (6.1) (10.3) (40.8)% on new franchise Attributable profit 117.5 +5.1% 123.5 EPS p 10.3p 9.8p +5.1% 1 Before amortisation charges and certain other items 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 8

Financial position ▪ Strong liquidity and stable financing position with net debt of £1,410m − Headroom under committed facilities plus free cash: £940.2m (Mar 2015: £1,023.8m) − Net debt:EBITDA ratio 2.3x (Mar 2015: 2.3x) − Long term facilities in place – average maturity 4.4 years (Mar 2015: 5.2 years) − Ratings from Standard & Poors' and Fitch currently BBB- and stable outlook − $50m private placement notes to be repaid Oct 2016 − Next bond maturity Sept 2018, next bank refinancing 2019 ▪ Expect cash interest to remain broadly unchanged until bonds start to mature ▪ Continuously review opportunities to optimise financing structure and costs 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 9

Capital expenditure ▪ Disciplined reinvestment in passenger £m Mar 2016 carrying fleet and IT upgrade Passenger carrying vehicles (PCV) 282.7 programmes continued during the year IT including transformation 28.9 ▪ Capital investment at 1.2x depreciation Facilities and depot development 18.2 (excl. First Rail) Equipment 18.1 Capital investment excl. First Rail 347.9 ▪ Going forward, capital allocation decisions focused increasingly on First Rail 65.4 maintenance of existing asset portfolio Total capital investment 413.3 and selected growth opportunities with Net creditor movement (6.8) good returns on incremental capital Funded by operating lease (1.3) ▪ Expect capital investment (excl. First Gross cash capex 405.2 Rail) to decrease in 2016/17 − First Rail capex mainly funded through franchise agreements ▪ ROCE continues to improve over time 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 10

Net cash flow (£m) 615.9 Operating cash flow / cash conversion 1 : Mar 2016: £192.0m / 64% Mar 2015: £176.1m / 58% 19.5 (347.1) 192.0 (18.6) (58.1) (19.6) (33.6) (20.8) 36.0 15.2 (122.4) EBITDA Non-Rail capex First Rail capex Disposal proceeds Provisions Working capital / Operating cash flow Pensions charge in excess of P&L Interest and tax Cash outflow before First franchise outflows Net cash flow First Rail end of Rail franchise outflows other Gross cash capex (405.2) 1 Operating cash flow divided by Group adjusted operating profit 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 11

Financial summary ▪ Operating profit maintained despite smaller rail portfolio and challenging trading environment in some businesses ▪ Net cash inflow for the year (before end of rail franchise outflows) ahead of expectations at £36.0m ▪ Continued disciplined bidding and cost efficiencies, as well as lower fuel costs and additional First Student operating days expected to result in strong progress for the Group in the year ahead ▪ Continued capital discipline ▪ Significantly increased cash generation expected in 2016/17 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 12

Tim O'Toole Chief Executive Business review 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 13

First Student  Contract portfolio pricing programme to raise returns Multi-year  Cost efficiencies strategy  Double digit medium term margin target  2015 bid season: 5.3% average price increase and 86% retention  $14m cost efficiencies achieved from driver productivity, fuel efficiency, engineering savings and other applications of consistent best practice 2015/16  Earnings improvement held back by worsening industry-wide driver shortage challenges in some regions  Recently realigned regional and central services structures (130 positions eliminated) to generate savings in year ahead  Driver cost challenges being incorporated into 2016 bid pricing  Further cost efficiency actions underway Year  Benefit from elimination of the c.$17m operating days impact in ahead 2015/16 and lower fuel costs  Despite driver shortage headwinds, significant margin progress expected in 2016/17, to at least 9% 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 14

First Transit  Growth through bidding for further outsourcing opportunities Multi-year  Maintain margin of c.7% and relatively low capital intensity strategy  Extensive scale and management expertise rewarded with 18 new contracts and 90% retention rate  Now operating almost 350 contracts across fixed route, paratransit, vehicle maintenance and shuttle segments 2015/16  Investing to sustain competitive advantage and cost efficiency – real-time information, predictive analytics, paperless workshops  Significant decline in Canadian oil sands activity as a result of oil price  Bid pipeline strengthening with a broad range of growth opportunities  Continue to explore options in adjacent services and new geographies  Continued challenges in Canadian oil sands region due to low levels of Year activity ahead  Aim to maintain attractive margins given modest capital requirements  First Student to leverage First Transit Vehicle Maintenance Services engineering expertise 14 June 2016 FirstGroup full year results for the twelve months to 31 March 2016 15