Firstgroup Plc · LSE:FGP
Firstgroup — FY2009 Earnings Presentation
53 slides from Firstgroup's earnings presentation, May 13, 2009
Slide 1: FirstGroup plc Preliminary results
FirstGroup plc Preliminary results for 12 months to 31 March 2009 Wednesday 13 May 2009 1
Slide 2: Sir Moir Lockhead, Chief Executive
Sir Moir Lockhead Chief Executive 2
Slide 3: Overview
Overview • Strong performance from resilient, balanced portfolio of operations • Results in line with expectations despite weaker economic backdrop • Unique strengths of Group – 50% of revenues contract backed plus significant revenue support in UK Rail • Implemented £200m cost reduction programme •
Slide 4: Nick Chevis, Finance Director
Nick Chevis Finance Director 4
Slide 5: Highlights
Highlights Year to 31 March 2009 • Record Group results • Successfully implemented refinancing strategy – financing to 2012 now in place • Implementation of £200m cost reduction programme • Achieved synergy extraction $150m per annum in North America • First Student margin increased by 1.3% to 12.6%
Slide 6: Financial Highlights
Financial Highlights Year to 31 March 2009 Revenue £6,187.3m Up 31% EBITDA2 £772.2m Up 38% Operating profit1 £497.5m Up 38% Operating margin1 8.0% Up 0.4% Profit before tax1 £326.4m Up 31% Net debt £2,503.5m3 Up 16% Adjusted basic EPS1 48.6p Up 19% Dividend per share 18.75p Up 10% EBITDA2: interest
Slide 7: Divisional analysis
Divisional analysis Year to 31 March 2009 Revenue EBITA 19.1% 25.3% 41.9% UK Bus 26.9% Student Student UK Bus Transit/ Services UK Rail Transit/ Grey- hound 10.6% UK Rail Grey- Services hound 7.5% 34.3% 18.9% 10.4% 9.7% Note: The revenue chart excludes Group items of £17.3m; Note: The EBITA chart ex
Slide 8: UK Bus results 2008/09
UK Bus results 2008/09 • Strong performance • Operating margin up to 11.3% • Like for like passenger revenues increased by 7.4%; volume growth c.2% • London revenue up 4.4% on a like for like basis • Focus on service quality and operational performance • Cost control focus reducing headcount and ove
Slide 9: UK Bus resilient attributes
UK Bus resilient attributes • 46% of revenues contracted or Government backed (TfL London bus operations and concessionary fares scheme) • London operations c.20% of revenues – no passenger revenue risk • Modern fleet at half life • Economic slowdown eases labour market pressures – labour costs c.60
Slide 10: UK Rail results 2008/09
UK Rail results 2008/09 • Like for like passenger revenue growth of 7.7% and volume growth across all our TOCs • Operating profit of £94.2m (2008: £120.0m) reflecting the impact of the weakening economy, in particular on our TOCs serving London • Revenue support and share mechanisms in all TOCs duri
Slide 11: UK Rail – Passenger revenue growth
UK Rail – Passenger revenue growth1 Year to 31 March 2009 2009 2008 First Great Western 6.1% 9.6% First Capital Connect 8.6% 13.5% First TransPennine Express 12.2% 13.2% First ScotRail 7.9% 8.3% Hull Trains 10.2% 11.9% Total 7.7% 10.8% 1Adjusted for weather (snow) in FGW & FCC, Thameslink Phase Zero
Slide 12: UK Rail resilient attributes
UK Rail resilient attributes • Contractual revenue support mitigates exposure to impact of economy on passenger revenues • 1% movement in revenue impacts EBIT by c.£5m (due to revenue support and profit share mechanisms in place across all our TOCs) • Outgoing franchisee has no residual risks with l
Slide 13: FirstGroup America
FirstGroup America Year to 31 March 2009 $m Student Transit/ G'hound Total Services Revenue 2,629.5 1,109.5 1,114.0 4,853.0 EBITDA 535.1 74.1 139.5 748.7 EBITDA % 20.3% 6.7% 12.5% 15.4% Depreciation 203.4 14.0 47.8 265.2 EBIT 331.7 60.1 91.7 483.5 EBIT % 12.6% 5.4% 8.2% 10.0% 13
Slide 14: Sir Moir Lockhead, Chief Executive
Sir Moir Lockhead Chief Executive 14
Slide 15: North America Student and Transit
North America Student and Transit • Visible revenue stream – contract backed • Synergies achieved $150m per annum • Further cost reductions implemented >$110m (£75m) • First Student: – Margin improvement up 1.3% to 12.6% – Strong contract retention >90% – Net new business c.1,000 buses • First Trans
Slide 16: First Student resilient attributes
First Student resilient attributes • No exposure to passenger volumes • US and Canada: government mandate for schools to provide transportation • Contract length typically 3-5 years • Low concentration risk – c.1,500 contracts and no reliance on significant size contract • Strong contract retention
Slide 17: US and Canada School bus market overview
US and Canada School bus market overview • There are 533,164 Estimated US and Canadian school bus market value = ~ $22bn school buses in USA $7.7bn $14.9bn and Canada 100% • The entire market for student transportation 80% All other Outsourced Providers is worth approx $22bn (~5,000 companies) 60% •
Slide 18: US and Canada School bus market overview
US and Canada School bus market overview • Market for school Buses transportation resilient 600,000 533,164 492,465 despite the economy 500,000 • Contracted portion of 400,000 340,265 the market has grown 300,000 335,278 from 31.9% to 36.2% 200,000 from 2003 to 2008 100,000 192,899 157,187 • Trend e
Slide 19: Greyhound
Greyhound • 9.7% of total Group EBIT • Like for like revenue reduction of 1.6% affected by marked deterioration in the US economy in H2 • EBIT of $92m in 2008/09, up by 5.6% • Mileage reduced by 7.6% in US, c.3.5% in Canada – actions have protected revenue per mile • Further revenue and cost initiat
Slide 20: Greyhound resilient attributes
Greyhound resilient attributes • Low cost mode of transport • Diverse stable customer base • Broad geographic spread - only national intercity operator and extensive network • Highly flexible business model capable of rapidly matching supply with demand • Further cost base reductions following on fr
Slide 21: Nick Chevis, Finance Director
Nick Chevis Finance Director 21
Slide 22: Management actions and cost reduction plans
Management actions and cost reduction plans • £200m cost reduction plan announced in March 2009 – £70m UK Rail – £55m UK Bus – £75m North America (including £33m at Greyhound) • Operating efficiencies and procurement initiatives • 3,500 headcount reduction - already started through recruitment freez
Slide 23: Non-recurring costs
Non-recurring costs Total Group non-recurring costs of £119m • North America synergy and integration costs of $136m (£70m); annual benefits of $150m • Cost reduction programme to deliver £200m savings in 2009/10; restructuring costs £22.3m in 2008/09 • Fuel hedge ineffectiveness – £23.1m charge to t
Slide 24: Cash flow
Cash flow Year to 31 March 2009 Net cash inflow = £51.1m £67.6m £50.7m £93.9m £14.2m £8.9m £126.9m EBITDA = £772.2m £358.9m Dividends (inc min divs) Interest Net cash inflow Net capex Restructuring / integration Tax Pensions Working capital / other 24
Slide 25: Debt refinancing
Debt refinancing • $2,250m acquisition term loan prepaid by April 2009 • $2,531m of new funding achieved – May 2008-April 2009 – 2 medium term unsecured bilateral loans $450m completed May 2008 – Equity placing raised £236m ($450m) completed May 2008 – 10 year £300m unsecured bond swapped into $530m
Slide 26: Liquidity and leverage
Liquidity and leverage • Strong liquidity resources – committed facility headroom £583m at 31 March 2009 • Next main refinancing : revolver facilities with core banks due Feb 2012 • Average debt maturity increased: – March 2008 : 3.5 years – March 2009 : 4.6 years – April 2009 : 6.0 years • Net debt
Slide 27: Tax/Pensions
Tax/Pensions Tax • Low cash tax rate set to continue • Effective tax rate 25.0% (2008: 23.4%) Pensions • IAS 19 surplus of £89m at start of year now a pre-tax deficit of £169m at 31 March 2009 • Staggered actuarial valuations help to smooth any cash flow adjustments • Rail accounts for approx 1/3rd
Slide 28: Crude oil hedge position
Crude oil hedge position UK North America “at risk” 2008/09 2009/10 2010/11 2008/09 2009/10 2010/11 Usage (barrels’m) 2.7 2.6 2.6 2.4 2.0 2.0 % Hedged 100% 100% 63% 100% 100% 58% Hedge rate $75.73 $110.64 $77.05 $83.76 $115.92 $94.42 Fuel costs represent less than 10% of Group revenues North America
Slide 29: Foreign exchange
Foreign exchange • EPS broadly neutral to FX fluctuations • US EBIT substantially “hedged” by UK fuel and interest costs in US Dollars • US Dollar strengthening increases translated Sterling debt and EBITDA 31 Mar 30 Sep 31 Mar 2009 2008 2008 Effective rate on US earnings: $1.63 $1.94 $2.01 Closing
Slide 30: Financial summary
Financial summary • Record results • Significant cost reduction initiatives implemented across all divisions • North America integration complete; $150m synergies extracted; strong order book in contracted businesses • Greyhound flexibility of business model mitigating lower passenger journeys • UK
Slide 31: Sir Moir Lockhead, Chief Executive
Sir Moir Lockhead Chief Executive 31
Slide 32: Summary
Summary • Excellent results • Strength of Group in robust, diverse revenue streams • Management actions will ensure continued strong operating and trading performance • Focus on cash generation and debt reduction • Dividend up 10% • Overall Group continues to trade well and in line with expectations
Slide 33: FirstGroup plc Preliminary results
FirstGroup plc Preliminary results for 12 months to 31 March 2009 Wednesday 13 May 2009 33
Slide 34: Appendices
Appendices Preliminary results for the 12 months to 31 March 2009 34
Slide 35: Profit and Loss Account (1)
Profit and Loss Account (1) Year to 31 March 2009 2009 2008 £m £m Group revenue 6,187.3 4,707.6 Group operating profit1 497.5 360.1 Interest (171.1) (111.1) Pre-exceptional pre-tax profit1 326.4 249.0 Amortisation charges (33.1) (18.9) Bid costs/other non-recurring items2 (93.3) (78.2) Profit before
Slide 36: Profit and Loss Account (2)
Profit and Loss Account (2) Year to 31 March 2009 2009 2008 £m £m Profit before tax 200.0 151.9 Tax (43.0) (18.6) Profit after tax 157.0 133.3 Minority interests (13.7) (12.9) Profit for the period 143.3 120.4 Adjusted EPS1 48.6p 40.9p Adjusted cash EPS 106.3p 86.8p Adjusted EBITDA £772.2m £560.8m 1
Slide 37: Divisional analysis
Divisional analysis Year to 31 March 2009 Revenue Op profit1 Margin Margin £m £m 08/09 07/08 % % UK Bus 1,182.0 134.0 11.3 11.0 UK Rail 2,121.5 94.2 4.4 6.2 N America 2,224.1 246.1 11.1 9.5 Greyhound 642.4 48.5 7.5 3.1 Other2 17.3 (25.3) TOTAL 6,187.3 497.5 8.0 7.6 1. Before amortisation charges, no
Slide 38: H1/FY split
H1/FY split H1 H1 FY FY 2008/09 2007/08 Variance 2008/09 2007/08 Variance £m £m £m £m £m £m Revenue UK Bus 578.6 540.1 38.5 1,182.0 1,104.9 77.1 UK Rail 960.6 863.6 97.0 2,121.5 1,937.0 184.5 North America 1,221.9 358.5 863.4 2,866.5 1,651.1 1,215.4 Group items 7.4 6.7 0.7 17.3 14.6 2.7 2,768.5 1,76
Slide 39: UK Bus revenue
UK Bus revenue 2009 2008 £m £m Change Passenger revenue 823.2 770.3 6.9% Other revenue 358.8 334.6 7.2% 1,182.0 1,104.9 7.0% 39
Slide 40: Cash flow
Cash flow Year to 31 March 2009 £m £m EBITDA 772.2 Integration costs/non-recurring items (67.6) Pension payments > income statement charge (50.7) Working capital outflow (23.7) Other 9.5 Operational cash flow 639.7 Investment in the business Capex and acquisitions (273.3) Net impact of new finance l
Slide 41: Non-recurring items and amortisation charges
Non-recurring items and amortisation charges 2009 2008 £m £m North American integration costs 70.1 55.5 Fuel hedge ineffectiveness 23.1 - UK Rail restructuring costs 10.3 16.8 North American restructuring costs 9.9 - UK Bus restructuring costs 2.1 - European bid costs 3.5 3.7 UK Rail bid costs - 3.5
Slide 42: North American integration costs
North American integration costs 2009 2008 £m £m Redundancy and staff related costs 17.3 11.5 IT costs 15.3 5.6 Legal and professional costs 14.8 16.5 Greyhound - 1.9 Safety expenses 9.0 3.0 Rebranding costs 3.1 2.2 Relocation of offices 2.9 5.0 Provision for excess buses - 5.4 Other integration cos
Slide 43: North America Synergies
North America Synergies Annual run rate 30 September 2008 $m Corporate head office 30 Student overheads 30 Transit overheads 15 Procurement 35 Insurance 12 Branch consolidation 11 Other 17 150 43
Slide 44: Gross debt distribution as at April 2009
Gross debt distribution as at April 2009 • Main debt instruments : — $1,500m unsecured acquisition revolver facility February 2012 — £505m unsecured revolver facility February 2012 — $813m unsecured bilateral term loans May 2011-2013 — Unsecured bond £300m 6.875% April 2013 (now eligible for the BOE
Slide 45: Interest charge
Interest charge Year to 31 March 2009 2009 2008 £m £m Bond and bank borrowings 151.6 107.3 Loan notes 1.1 1.5 Finance lease interest 7.5 5.9 Notional interest 18.8 11.3 Investment income (7.9) (14.9) Net finance cost 171.1 111.1 45
Slide 46: Taxation
Taxation Year to 31 March 2009 2009 2008 £m £m Current tax 7.3 9.4 Deferred tax 1 35.7 9.2 43.0 18.6 Effective tax rate - % 25.0 23.4 Cash tax rate - % 4.4 4.4 1 Including non-recurring charge of £15.2m 46 (2008 - credit of £8.6m)
Slide 47: Cash Capital Expenditure
Cash Capital Expenditure Year to 31 March 2009 2009 £m UK Bus 115.2 UK Rail 53.2 North America 180.8 Greyhound 4.0 Group items 5.7 358.9 Note: Above capex figures are cash spend inc acquisitions and net of property disposal proceeds of £37.1m 47
Slide 48: Share capital
Share capital (excluding treasury shares) Million Opening 436.6 Average 474.8 Closing 480.8 48
Slide 49: UK Rail bonds
UK Rail bonds 2009 2008 Rail Bonds £m £m FTPE Performance Bond 8.5 5.7 GBR Performance Bond - 0.5 GBR MetroNet Bond 0.8 0.8 FSR Performance Bond 25.0 25.0 FSR Season Ticket Bond 4.0 3.5 FSR Maintenance Bond 29.9 36.9 FCC Performance Bond 21.2 10.0 FCC Season Ticket Bond 43.7 34.6 FGW Performance Bon
Slide 50: UK Rail subsidy profile
UK Rail subsidy profile FGW FTPE FSR GBRf FCC TOTAL £m £m £m £m £m £m 2008/9 9.7 119.1 306.9 1.5 (70.2) 367.0 2009/10 (27.0) 116.3 307.2 2.2 (95.1) 303.6 50
Slide 51: UK Rail Ring-Fenced Cash
UK Rail Ring-Fenced Cash 2009 2008 £m £m First TransPennine Express 60.2 42.2 First ScotRail 33.2 23.5 First Greater Western 29.6 36.9 First Capital Connect 61.8 53.2 GBRf - 0.5 Total Rail Ring Fenced Cash 184.8 156.3 51
Slide 52: Appendix: Rail franchise contracts
Appendix 1 : Rail franchise contracts First Great First Capital First First ScotRail Western Connect TransPennine Express Years 7+3 4+2+3 8+5 10 Start date April 2006 April 2006 Feb 2004 Oct 2004 Expiry date Mar 2013 Mar 2010 Jan 2012 Nov 2014 Performance related Mar 2016 Mar 2012 extension period A
Slide 53: FirstGroup plc Preliminary results
FirstGroup plc Preliminary results for 12 months to 31 March 2009 Wednesday 13 May 2009 53