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 2017 Thursday 1 June 2017 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017

Tim O'Toole Chief Executive 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 2

Overview ▪ Significant improvement in operating results and substantial cash generation delivered as planned ▪ Maintained our consistent and disciplined approach to bidding for future business throughout the Group ▪ Continuing to invest in technology to drive growth by simplifying our services for customers, while deepening our understanding of their needs ▪ Results demonstrate progress made in repositioning FirstGroup to create sustainable value, commensurate with our market positions and scale ▪ Stable platform allows us to take advantage of our opportunities, despite the mixed trading environment in our markets 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 3

Matthew Gregory Chief Financial Officer Financial review 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 4

Financial overview ▪ Revenue £5,653.3m (2016: £5,218.1m), +8.3% driven mainly by currency ▪ Adjusted operating profit £339.0m (2016: £300.7m) reflects several factors: − 250bps improvement in First Student margin − Rebased First Rail margin under new contracts − Significant currency effects, with favourable translation of North American profits offset by higher costs for fuel in UK ▪ Adjusted EPS +20.4% ▪ Net cash inflow improved by £111.2m to £147.2m ▪ Net debt to EBITDA reduced to 1.9x (2016: 2.3x) ▪ At constant exchange rates, Group ROCE increased by 60bps to 7.3% 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 5

Financial summary Change in Mar 2016 Change £m Mar 2017 constant currency 1 Revenue 5,653.3 5,218.1 +8.3% (0.5)% Adjusted 2 - Operating profit 339.0 300.7 +12.7% +2.3% - Margin % 6.0% 5.8% +20bps +20bps - Net finance costs (132.0) (132.4) (0.3)% - Profit before tax 207.0 168.3 +23.0% - Effective tax rate % 26.0% 23.0% +300bps - Attributable profit 149.4 123.5 +21.0% - EPS p 12.4p 10.3p +20.4% Net debt 3 1,289.9 1,410.2 (8.5)% (11.2)% 1 Change in constant currency throughout this document is based on retranslating FY 2016 foreign currency amounts at FY 2017 rates 2 Before amortisation charges and certain other items 3 Net debt is stated excluding accrued bond interest 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 6

Revenue performance Change ▪ Mar 2017 Growth in First Transit and First Rail (like-for-like), with £m revenue (constant fx) First Student flat First Student 1,780.3 (0.4)% First Transit 1,042.0 +4.4% ▪ Decreases in Greyhound and First Bus Greyhound 684.7 (2.0)% First Bus 861.7 (1.4)% ▪ First Rail reported revenue affected by TPE remapping First Rail 1,268.8 (3.0)% and end of subsidy Group items 15.8 Total 5,653.3 (0.5)% ▪ Significant benefit from currency translation Reported total +8.3% 44.1 463.3 5,681.4 0.4 5,653.3 (13.8) (12.0) (7.2) (39.6) 5,218.1 Mar 2016 Currency Mar 2016 Student First Transit Greyhound First Bus First Rail Group items Mar 2017 currency constant revenue revenue First 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 7

Operating performance FY 2017 Margin change ▪ Mar 2017 Group margin +20bps in constant currency £m operating profit 1 margin 1 (constant fx) First Student 171.1 9.6% +250bps ▪ Significant improvement in First Student margin; First Transit 73.3 7.0% +10bps Rail margin rebased under new contracts Greyhound 42.6 6.2% +30bps First Bus 37.0 4.3% (170)bps ▪ Challenging market conditions and higher UK First Rail 53.8 4.2% (140)bps fuel costs affecting both UK businesses Group items (38.8) Total 339.0 6.0% +20bps Reported total +20bps 1.1 4.3 43.5 (15.8) 339.0 331.4 30.7 (19.1) (6.4) 300.7 Figures include fx impact on UK fuel costs of: - First Bus £(11.5)m - First Rail £(8.3)m Mar 2016 operating Currency Mar 2016 First Student First Transit Greyhound Group items Mar 2017 operating currency constant First Bus First Rail profit profit 1 Before amortisation charges and certain other items 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 8

Income statement – continued £m Mar 2017 Mar 2016 Change Adjusted 1 Operating profit 339.0 300.7 +12.7% Broadly flat, Net finance costs (132.0) (132.4) principally bonds Profit before tax 207.0 168.3 +23.0% Tax (53.8) (38.7) P&L tax rate to - Effective tax rate % 26.0% 23.0% +300bps increase further Non-controlling interests (3.8) (6.1) Rail minority Attributable profit 123.5 +21.0% 149.4 EPS p 12.4p 10.3p +20.4% 1 Before amortisation charges and certain other items 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 9

Net cash flow (£m) 686.6 Operating cash flow / cash conversion 1 : Mar 2017: £301.1m / 89% Mar 2016: £192.0m / 64% 43.0 6.4 301.1 (323.9) (30.6) (80.4) (37.6) 147.2 (116.3) First Rail capex Disposal proceeds other provisions EBITDA Working capital / Operating cash flow Pensions charge in excess of P&L Interest and tax Net cash inflow Insurance and Road divisions capex other Cash capex (404.3) 1 Operating cash flow divided by Group adjusted operating profit 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 10

Financial position ▪ Strong liquidity and stable financing position with net debt of £1,289.9m − Headroom under committed facilities plus free cash: £941.1m (Mar 2016: £940.2m) − Net debt: EBITDA ratio 1.9x (Mar 2016: 2.3x) − Long term facilities in place – average maturity 3.6 years (Mar 2016: 4.4 years) − Ratings from Standard & Poor's and Fitch currently BBB- and stable outlook − Bank debt amended and extended in March; next bank refinancing July 2021 − $50m private placement notes repaid Oct 2016 − Next bond maturity Sep 2018 ▪ Expect cash interest to remain broadly unchanged until bonds start to mature ▪ Pension deficit £358.5m (Mar 2016: £270.9m) due to lower real discount rates 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 11

Guidance ▪ Mixed trading environment with opportunities for steady progress in the North American divisions but continued economic uncertainty in the UK ▪ Further progress expected from the Road divisions, with First Rail margin reducing; continued free cash generation expected after disciplined investment to support our customers’ and communities’ needs ▪ Road divisions cash capex broadly flat in 2018; expect increased Rail capex in 2018 and 2019 (mainly funded through franchise agreements) ▪ Interest costs broadly flat until bonds come due ▪ P&L tax rate to continue increase over time (US earnings) ▪ Inclusion of South Western rail franchise from August 2017 − 70/30 partnership with MTR – minority accounted − Estimated £90m working capital inflow ▪ Year to March 2018 will be a 53 week year for Road divisions 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 12

Tim O'Toole Chief Executive Business review 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 13

First Student ▪ Significant margin improvement despite ongoing driver shortages ▪ Benefiting from our market leadership position and unique scale − Cost efficiency: best practice sharing and standardised processes, First Transit management of maintenance − Pricing strategy: smaller but higher returning contract portfolio − Technology: Focus GPS, safety, real-time bus location information for customers ▪ Looking ahead − Bid strategy continues; contract retention increasing, moderating pricing given portfolio turnover delivered over last three years − Potential for bolt-on M&A, organic growth 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 14

First Transit ▪ Team returned the business to growth and maintained margin in the year ▪ Making the most of our transit management expertise and track record − Continuous bid discipline and rigorous execution − Sustained, attractive margins given modest capital employed − Flexible approach to market opportunities – oil sands, Panama, India ▪ Looking ahead − Continue to enhance efficiency and offer compelling value to customer − Market growth: commuter rail (leveraging UK rail expertise), private fleet maintenance, international − Ridesharing and technology partnerships 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 15

Greyhound ▪ Passenger volumes down for year but evidence of stability in second half ▪ Increasing ability to take advantage of unique nationwide network and iconic brand − Flexible cost base, responsive to passenger demand patterns − Real-time pricing, yield management, online and mobile – Greyhound setting our pace in customer communications − Point-to-point product continues to outperform the market ▪ Looking ahead − Further enhancing customer experience online, in terminal, on board, and post-trip to build loyalty and reach new demographics − Mexico expansion 1 June 2017 FirstGroup full year results for the twelve months to 31 March 2017 16