FirstGroup plc · LSE:FGP
FirstGroup — FY2010 Earnings Presentation
40 slides from FirstGroup's earnings presentation, May 12, 2010
Slide 1: FirstGroup plc Preliminary results for 12 months to 31 March 2010
FirstGroup plc Preliminary results for 12 months to 31 March 2010 Wednesday 12 May 2010 1
Slide 2: Overview
Sir Moir Lockhead Chief Executive Overview 2
Slide 3: Overview 2009/10
Overview 2009/10 • Robust performance in a challenging economic environment • Cost reduction programme successfully implemented – over £200m annual savings • Protected revenue per mile through network management and targeted mileage reductions • Net cash generation ahead of target • Continued progre
Slide 4: Financial review
Jeff Carr Finance Director Financial review 4
Slide 5: Key highlights
Key highlights • Performance in line with expectations • Operating profit of £453.9m impacted by: - Hedged fuel costs up by c.£90m – equivalent to 14.5p impact on EPS (average hedged cost $113 per barrel) - Weather impact in Q4 of £16m • Cost reduction programme delivered £228m this year • Net cash
Slide 6: Financial results
Financial results Mar 10 Mar 09 Change £m £m Revenue 6,319.3 6,187.3 2.1% EBITDA 769.6 772.2 (0.3)% EBITDA % 12.2% 12.5% (0.3)pp Operating Profit1 453.9 497.5 (8.8)% Margin % 7.2% 8.0% (0.8)pp Profit before tax1 264.0 326.4 (19.1)% • EBITDA margin maintained at over 12% 1. Before amortisation charge
Slide 7: Income statement
Income statement Mar 10 Mar 09 Change £m £m Profit before tax1 264.0 326.4 (19.1)% Amortisation charges (34.7) (33.1) Non-recurring items2 (49.7) (93.3) Profit before tax 179.6 200.0 (10.2)% Tax (32.5) (43.0) Profit after tax 147.1 157.0 (6.3)% Proposed final dividend 14.0p 12.7p 10.0% Basic EPS 27.
Slide 8: Profit bridge by division
M ar ch 20 09 £498m No rth Am er ic a £12m Gr ey ho un d £25m UK Bu s £9m UK Ra il £2m Profit bridge by division Gr ou p £4m M ar ch 20 10 8 £454m
Slide 9: Profit bridge by category
Profit bridge by category £228m £90m £498m £71m £454m £54m £57m r y ge * 9 n 10 t he sid 00 t io ion d 20 /o h2 c he ub ss du ch il s ion rc el ce re ar Fu Ma Re Ra lat st M Co Inf • Excellent cost management to mitigate impact of fuel increases and recession • 86% of fuel requirement for 2010/11 he
Slide 10: Management actions
Management actions • Cost reduction plan delivered £228m – ahead of the £200m target savings: Year to March 2010 (£m) UK Bus UK Rail N Am Grey Total Staff related savings 21 37 16 12 86 Operating efficiencies 21 5 11 4 41 Procurement and other 13 54 21 13 101 Total achieved * 55 96 48 29 228 Target
Slide 11: North America First Student
North America First Student Mar 10 Mar 09 Change $m $m Revenue 2,544.7 2,629.5 (3.2)% EBITDA 509.9 535.1 (4.7)% EBITDA % 20.0% 20.3% (0.3)pp Operating Profit 281.1 331.7 (15.3)% Margin % 11.0% 12.6% (1.6)pp • Core revenues broadly flat after adjusting for FX and lower operating days • Ancillary reve
Slide 12: North America First Transit
North America First Transit Mar 10 Mar 09 Change $m $m Revenue 1,160.1 1,109.5 4.6% EBITDA 98.8 74.1 33.3% EBITDA % 8.5% 6.7% 1.8pp Operating Profit 84.4 60.1 40.4% Margin % 7.3% 5.4% 1.9pp • Good revenue growth driven by new contract wins • Strong EBITDA improvement to $98.8m (8.5% margin) • Operat
Slide 13: Greyhound
Greyhound Mar 10 Mar 09 Change $m $m Revenue 963.4 1,114.0 (13.5)% EBITDA 85.3 139.5 (38.9)% EBITDA % 8.9% 12.5% (3.6)pp Operating Profit 39.6 91.7 (56.8)% Margin % 4.1% 8.2% (4.1)pp • Maximised flexible business model – mileage reduced by 11.3% • Average loads reduced slightly to 28.6 (2009: 29.3)
Slide 14: UK Bus
UK Bus Mar 10 Mar 09 Change £m £m Revenue 1,170.6 1,182.0 (1.0)% EBITDA 200.2 205.4 (2.5)% EBITDA % 17.1% 17.4% (0.3)pp Operating Profit 124.6 134.0 (7.0)% Margin % 10.6% 11.3% (0.7)pp • Flexed supply to meet demand – mileage reduced by over 5% • Like-for-like passenger revenues increased by 1.9% •
Slide 15: UK Rail
UK Rail Mar 10 Mar 09 Change £m £m Revenue 2,188.4 2,121.5 3.2% EBITDA 147.6 137.2 7.6% EBITDA % 6.7% 6.5% 0.2pp Operating Profit 92.6 94.2 (1.7)% Margin % 4.2% 4.4% (0.2)pp • Revenue impacted1 by change to CP4 £(59)m – no impact on operating profit • Good progress on cost actions achieved during ye
Slide 16: UK Rail Passenger revenue growth
UK Rail 1 Passenger revenue growth Mar 10 Mar 09 FCC 2.6% 8.6% FGW 1.3% 6.1% FSR 3.2% 7.9% FTPE 5.6% 12.2% Hull Trains (4.4)% 10.2% Total 2.3% 7.7% • Improving like-for-like revenue growth – accelerating to 3.7% in Q4 despite reduction in regulated fares of 0.4%. • Encouraging revenue trends continu
Slide 17: Change in net debt
Change in net debt Net cash inflow £136m £2,503m £770m £86m £2,281m £112m £155m £202m £70m £42m £53m 0 9 DA g L it a l e x es t s he r 1 0 20 IT in P& ap er nd t 20 EB ur > a p c nt id e /o c h ct s c t /I v c h ar tru on in g Ne x Di FX ar M s si k Ta M Re n or Pe W • Cash target for 2010/11 increa
Slide 18: Leverage, financing and liquidity
Leverage, financing and liquidity Mar 081 Mar 09 Mar 10 Average debt maturity 3.5 years 4.6 years 6.3 years Net debt:EBITDA (constant FX rate $2) 2 3.2x 2.7x 2.5x Net debt:EBITDA (actual FX basis) 3.2x 3.2x 3.0x 1 Proforma Laidlaw acquisition 2 Rate at Mar 08 • Plan to improve leverage further • Tar
Slide 19: Summary
Summary • Focused on priorities of cost control and net debt reduction • Cost: all areas being reviewed - Organisation - Overheads - Procurement - Operating efficiencies • Debt reduction: increase cash generation target for 2010/11 to £150m - £136m in 2009/10 - Strong capital discipline - Focus on w
Slide 20: Business Review
Sir Moir Lockhead Chief Executive Business Review 20
Slide 21: North America First Student
North America First Student • Core provision remains resilient – strong contract retention >90% • School budgets impacted by unprecedented pressure on public spending as result of lower tax receipts at state and local level • Margin protection through rigorous cost management – significantly leaner
Slide 22: North America First Transit
North America First Transit • Now generates over $1bn revenues • Strong margin development 7.3% despite impact of recession on Transit Authority budgets • Reduced costs and improved operating efficiencies • Contract retention >90% and new business awards including in New Jersey and Oregon and sizeab
Slide 23: Greyhound
Greyhound • Robust performance in toughest year • Creditable margin performance delivered by management actions on cost and mileage • Revenue per mile trends ahead of prior year • Stronger base with lower fixed costs and significantly improved operating leverage • Focus on service quality - On Time
Slide 24: UK Bus
UK Bus • Steady and resilient performance • Management actions offset impact of recession on trading and higher fuel costs • Strong margin performance maintained through cost control and targeted mileage reduction • Protecting revenue per mile – route by route review • Delivering improved efficienci
Slide 25: UK Rail
UK Rail • Strong performance ahead of expectations • Passenger revenue growth accelerating in Q4 – encouraging trends continue • Operating margin broadly in line with prior year supported by excellent progress on cost reductions • Strong operating performance – PPM over 90% at FGW, FTPE and FSR • FC
Slide 26: Outlook
Outlook • Continued strength from diverse portfolio with market leading positions • Encouraging growth trends in Greyhound and UK Rail; continued stability in UK Bus • Pressure on US public spending expected to remain during 2010/11 • Expect moderate earnings growth • Focused on delivering our key p
Slide 27: Appendices
Appendices Preliminary results for 12 months to 31 March 2010 27
Slide 28: Crude oil hedge position
Crude oil hedge position UK North America “at risk” 2009/10 2010/11 2011/12 2009/10 2010/11 2011/12 Usage (barrels’m) 2.6 2.5 2.5 1.9 1.7 1.7 % Hedged 100% 84% 36% 100% 88% 38% Hedge rate $110.64 $76.24 $86.38 $115.92 $89.40 $100.92 North America “at risk” volumes comprise: 2010/11 Gross usage (barr
Slide 29: Gross debt distribution
Gross debt distribution • 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 - Unsecured bond £300m 8.125% September 201
Slide 30: Net finance costs
Net finance costs Mar 10 Mar 09 £m £m Bonds 85.2 44.9 Bank borrowings 80.3 106.6 Loan notes 1.1 1.2 Finance lease interest 7.6 7.5 Notional interest 17.5 18.8 Investment income (1.8) (7.9) Hedge ineffectiveness on financial derivatives1 (1.0) - Net finance costs 188.9 171.1 USD FX movements increase
Slide 31: Foreign exchange
Foreign exchange • USD weakening reduced translated Sterling debt from 12 months ago Mar 10 Mar 09 Closing rate for the balance sheet $1.49 $1.43 • The effective average rates for translating North America operating profits were: Mar 10 Mar 09 Effective rate on USD earnings $1.57 $1.63 Effective rat
Slide 32: Non-recurring items & amortisation
Non-recurring items & amortisation Mar 10 Mar 09 £m £m North America & Greyhound integration costs 15.5 70.1 North America & Greyhound restructuring costs 15.9 9.9 UK Bus & UK Rail restructuring costs 9.3 12.4 Fuel hedge ineffectiveness 4.8 23.1 Competition Commission costs 3.8 - European bid costs
Slide 33: Cash flow
Cash flow Mar 10 Mar 09 Change £m £m £m EBITDA 769.6 772.2 (2.6) Integration costs/non-recurring items (53.1) (67.6) 14.5 Pension payments > income statement charge (42.1) (50.7) 8.6 Working capital outflow (76.0) (23.7) (52.3) Other non-cash P&L items 6.3 9.5 (3.2) Operational cash flow 604.7 639.7
Slide 34: Taxation
Taxation Mar 10 Mar 09 £m £m Current tax 5.4 7.3 Deferred tax 27.1 20.5 Exceptional deferred tax charge - 15.2 Tax charge 32.5 43.0 Tax rate on adjusted profit before tax 22.4% 25.0% Cash tax rate (based on full year PBT) 0.7% 4.4% 34
Slide 35: Pensions
Pensions • IAS 19 deficit of £169m at start of year now a deficit of £331m at 31 March 2010 • Increased deficit caused by lower discount rate (from 6.75% to 5.60%) • Staggered actuarial valuations help to smooth any cash flow impacts • Actuarial valuations at end of March 2010 for UK Bus scheme and
Slide 36: UK Rail Subsidy / (premium) profile
UK Rail Subsidy / (premium) profile £m FCC FGW FSR FTPE GBRf Total 2008/09 (71.0) 9.7 306.9 119.1 1.5 366.2 2009/10 (90.6) (24.6) 308.1 115.8 2.8 311.5 2010/11 (118.7) (128.0) 314.1 119.4 2.1 188.9 Revenue Support / (profit) share £m FCC FGW FSR FTPE GBRf Total 2008/09 - 46.9 - (10.6) - 36.3 2009/10
Slide 37: UK Rail bonds
UK Rail bonds Mar 10 Mar 09 £m £m FTPE Performance bond 8.8 8.5 GBRf MetroNet bond 0.8 0.8 FSR Performance bond 25.0 25.0 FSR Season ticket bond 4.0 4.0 FSR Maintenance bond 28.6 29.9 FCC Performance bond 21.2 21.2 FCC Season ticket bond 44.0 43.7 FGW Performance bond 46.2 45.2 FGW Season ticket bon
Slide 38: UK Rail Ring-fenced cash
UK Rail Ring-fenced cash Mar 10 Mar 09 £m £m FCC 77.2 61.8 FGW 69.0 29.6 FSR 30.5 33.2 FTPE 57.5 60.2 Total 234.2 184.8 38
Slide 39: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW FSR FTPE Years 4+2+3 7+3 10 8+5 Start date Apr 2006 Apr 2006 Oct 2004 Feb 2004 Expiry date Mar 2012 Mar 2013 Nov 2014 Jan 2012 Performance related Mar 2016 extension period Authority extension Up to Mar Jan 2017 period (at discretion 2015 of the DfT) 39
Slide 40: FirstGroup plc Preliminary results
FirstGroup plc Preliminary results for 12 months to 31 March 2010 Wednesday 12 May 2010 40