Firstgroup Plc · LSE:FGP
Firstgroup — FY2013 Earnings Presentation
44 slides from Firstgroup's earnings presentation, May 20, 2013
Slide 1: FirstGroup plc Returning to strength
FirstGroup plc Returning to strength Proposed rights issue and full year results for the year to 31 March 2013 Monday 20 May 2013
Slide 2: Tim O’Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: Overview – returning to strength
Overview – returning to strength • Solid current performance • Completed asset sales • Fully underwritten c.£615m rights issue to remove balance sheet constraints • £1.6bn capital programme over four years to drive growth, margins and returns 3
Slide 4: Chris Surch – Financial review
Chris Surch Group Finance Director Financial review 4
Slide 5: Financial overview
Financial overview • Overall trading for the Group in line with our expectations – Underlying operating profit £335.4m – Underlying EPS 26.9p • Transformation plan on course – £400m underlying investment in the business • c.£100m1 proceeds from disposal of selected UK Bus assets • Cash flow flat1 •
Slide 6: Financial summary
Financial summary Mar 13 Mar 12 Underlying operations Change £m £m Revenue 6,900.9 6,678.7 3.3% Operating Profit1 335.4 428.5 (21.7)% Margin % 4.9% 6.4% (1.5)pp £m Revenue Operating • Revenue up 4.5% excluding the extra Profit1 week of trading last year Mar 12 6,679 429 • Operating profit reflects e
Slide 7: First Student
First Student Mar 13 Mar 12 Change $m $m Revenue 2,378.6 2,497.9 (4.8)% Operating Profit 174.9 169.5 3.2% Margin % 7.4% 6.8% 0.6pp $m Operating Profit • Underlying revenues reduced by 2.8% Mar 12 169.5 • Excluding the impact of Hurricane Sandy operating margin c.8% Extra week (9.0) • Continued focus
Slide 8: First Transit
First Transit Mar 13 Mar 12 Change $m $m Revenue 1,286.8 1,242.6 3.6% Operating Profit 77.7 89.1 (12.8)% Margin % 6.0% 7.2% (1.2)pp $m Operating Profit • Strong underlying revenues (adjusted for the disposal of First Mar 12 89.1 Support Services) increased by 7.7% Extra week (1.2) • Underlying opera
Slide 9: Greyhound
Greyhound Mar 13 Mar 12 Change $m $m Revenue 1,022.0 1,049.3 (2.6)% Operating Profit 81.5 81.0 0.6% Margin % 8.0% 7.7% 0.3pp $m Operating Profit • Despite revenue being impacted by weak economic conditions in H2, Mar 12 81.0 margins improved Extra week (1.6) • Like-for-like revenue growth of 1.1%: H
Slide 10: UK Bus
UK Bus Mar 13 Mar 12 Change £m £m Revenue 1,128.2 1,157.2 (2.5)% Operating Profit 90.7 134.4 (32.5)% Margin % 8.0% 11.6% (3.6)pp £m Operating Profit • Like-for-like passenger revenue growth of 2.4% (North 2.8%, South 1.9%) Mar 12 134.4 • Anticipated reduction in operating Extra week (3.3) profit due
Slide 11: UK Rail
UK Rail Mar 13 Mar 12 Change £m £m Revenue 2,795.1 2,506.1 11.5% Operating Profit 63.2 110.5 (42.8)% Margin % 2.3% 4.4% (2.1)pp • Operating margin lower due to FTPE franchise extension • Continued strong demand with like-for-like passenger revenue growth of 7.4% • Underlying passenger volume growth
Slide 12: Exceptional items
Exceptional items Mar 13 £m Disposals – mainly asset write downs 32.4 Onerous contracts / impairments 17.6 Claims for old legal issues 19.0 UK Rail bid costs 6.0 Total 75.0 12
Slide 13: 2012/13 cash flow
2012/13 cash flow £667m £338m £144m £54m (£74m) £125m £94m £61m £22m £11m Interest & tax Provisions Exceptionals/other Cash capex EBITDA Dividends Pensions Disposals Working capital Net cash outflow • Excludes London Bus disposal proceeds of c.£80m expected in H1 2013/14 13
Slide 14: Capital structure
Capital structure • Net Debt/EBITDA ratio 3.0x (2012: 2.5x) – London disposals proceeds expected in H1 2013/14 • Strong liquidity and covenant headroom under committed facilities – Liquidity £1,215m (2012: £796m), Revolving Credit Facility EBITDA headroom £126m. £300m bond repaid in April 2013 • Ave
Slide 15: Proposed rights issue
Proposed rights issue • Removes the constraints of the Group's current balance sheet and provides a sustainable capital structure going forward • Reinforces the Group’s objective to remain investment grade1, including reaching an FFO-to-Debt ratio of 25% by March 2015 • Underpins the Group's transfo
Slide 16: Summary of rights issue terms
Summary of rights issue terms • Gross funds to be raised c.£615m • Rights issue terms 3 new for every 2 existing • Closing price on 17 May 2013 223.8p • Issue price 85p • Theoretical ex-rights price (TERP) 140.5p • Theoretical nil paid price (TNPP) 55.5p • Discount to TERP c.39.5% • Subject to share
Slide 17: Medium term financial objectives
Medium term financial objectives • Operational returns: Earn returns in excess of cost of capital through the cycle – Group revenue (ex Rail) to grow faster than the economies we serve – Improving margins to double digits in First Student and UK Bus – Post-tax ROCE of 10-12% target • Capital structu
Slide 18: Dividend policy
Dividend policy • Intention is to target appropriate and sustainable dividend pay-out, closely aligned to business performance • 2012/13 and 2013/14: – no final dividend in respect of the year to 31 March 2013 – no interim dividend in respect of the year to 31 March 2014 – final dividend for the yea
Slide 19: Summary
Summary • 2012/13 trading – in line with expectations • Results demonstrate transformation plan progress • Short term caution, with confidence in medium term objectives • Balance sheet constraints to be removed Appropriate capital structure to deliver transformation 19
Slide 20: Tim O’Toole – Business review
Tim O’Toole Chief Executive Business review 20
Slide 21: First Student
First Student • Recovery plan on track, progress from a more efficient operating model and uniform best practices • Focus on contract retention and driving improving returns – Client satisfaction scores highest for four years – Innovative and environmentally friendly technology development continues
Slide 22: First Transit
First Transit • Diverse and extensive mix of 340 contracts throughout North America • Strong growth underpinned by contract wins • First Support Services sold for US$10.2m, increased focus on our core segments • Now the largest provider of shuttle bus services at airports and for universities • Shut
Slide 23: Greyhound
Greyhound • Continuing to transform operating model, enabling margin expansion despite economic headwinds • Investing in technology, yield management and network modernisation • Growth of successful new products – including Greyhound Express, BoltBus, Crucero Direct, YO! Bus • Further vehicles purch
Slide 24: UK Bus
UK Bus • Early positive results from programme to restore performance and increase revenue and patronage • New management team implementing strategy to fix and restore sustainable growth to the division – Repositioning and rebalancing the portfolio; c.£100m disposal programme achieved1 – Network red
Slide 25: UK Rail
UK Rail • Continued strong performance, franchise extensions currently being negotiated and positioned for recommencement of re-franchising process • Focus on operating performance across existing franchises, while delivering major infrastructure and capacity upgrades with industry partners • In dis
Slide 26: Well positioned for future growth
Well positioned for future growth The Group has established a diverse portfolio of assets in a sector which is: • a key enabler of economic growth Market leader in Diverse business model UK and North America • essential to strong, vibrant and sustainable local economies • driven by growing urbanisat
Slide 27: FirstGroup plc Returning to strength – Q&A
FirstGroup plc Returning to strength Proposed rights issue and full year results for the year to 31 March 2013 Q&A
Slide 28: Appendices
Appendices Full year results for the 12 months to 31 March 2013 28
Slide 29: Post-rights issue EPS, number of shares, bonus factor
Post-rights issue EPS, number of shares, bonus factor Bonus-adjusted underlying 2012/13 EPS1 Illustrative bonus-adjusted March 2013/14 EPS1 Expected no. of shares from 1 April 2013 to 25 Underlying EPS for year to 31 March 2013 (a) 26.9p 482m June 2013 (e) Expected no. of shares from 1 April 2013 to
Slide 30: Divisional composition
Divisional composition Revenue (£m) Operating Profit (£m) Operating Margin (%) Mar 131 Mar 12 Mar 131 Mar 12 Mar 131 Mar 12 Student 1,503.1 1,567.2 109.9 107.1 7.3% 6.8% Transit 814.6 778.6 49.1 55.8 6.0% 7.2% Greyhound 647.1 657.2 52.0 50.6 8.0% 7.7% UK Bus 1,128.2 1,157.2 90.7 134.4 8.0% 11.6% UK
Slide 31: First Transit – like-for-like revenue growth
First Transit – like-for-like revenue growth Mar 13 Mar 12 Growth $m $m Total revenue 1,286.8 1,242.6 3.6% FSS (91.7) (113.2) Extra week impact - (19.6) Core revenue 1,195.1 1,109.8 7.7% • US Dollar revenues excluding the extra week and adjusted for the disposal of First Support Services (FSS) incre
Slide 32: UK Rail passenger revenue growth
UK Rail Passenger revenue growth Mar 13 Mar 12 FCC 7.2% 9.3% FGW 7.7% 8.0% FSR 6.1% 7.4% FTPE 8.5% 10.2% Hull Trains 6.3% 1.1% Total 7.4% 8.4% • Continued solid demand across all of our franchises – journey volumes increased by 3.6% 32
Slide 33: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW FSR FTPE Start date Apr 2006 Apr 2006 Oct 2004 Feb 2004 Expiry date Mar 2014 Oct 2013 Mar 2015 Mar 2015 Extension period - - May 2015 Oct 2015 DfT RFP programme Sep 2014 July 2016 - Feb 2016 • Transport Scotland agreed in Dec 2012 to extend its existing FSR franch
Slide 34: UK Rail bonds
UK Rail bonds Mar 13 Mar 12 £m £m FTPE Performance bond 10.6 10.6 FSR Performance bond 25.0 25.0 FSR Season ticket bond 5.2 5.0 FSR Maintenance bond 20.7 20.7 FCC Performance bond 22.6 19.0 FCC Season ticket bond 43.6 56.1 FGW Performance bond 63.4 56.1 FGW Season ticket bond 20.4 25.8 Total 211.5 2
Slide 35: Diesel hedge position – after Bus disposals
Diesel hedge position – after Bus disposals UK North America 2012/13 2013/14 2014/15 2012/13 2013/14 2014/15 Annual volume (barrels’m) 2.4 1.9 1.4 1.6 1.6 1.6 % Hedged 90% 85% 33% 69% 69% 37% Crude rate ($/barrel) $102.27 $104.75 $99.25 $93.58 $93.38 $89.41 Diesel rate ($/barrel) $123.73 $127.02 $11
Slide 36: Capital expenditure
Capital expenditure Cash Fixed asset additions Mar 13 Mar 12 Mar 13 Mar 12 £m £m £m £m First Student 127.7 115.6 150.8 135.6 First Transit1 18.0 31.9 18.0 29.7 Greyhound 51.3 44.1 51.3 44.2 UK Bus1 72.4 33.6 81.4 45.1 UK Rail 66.1 63.4 63.9 64.5 Group items 2.6 5.0 4.7 4.4 Total 338.1 293.6 370.1 32
Slide 37: Capital investment
Capital investment Mar 13 Mar 12 £m £m First Student 150.8 135.6 First Transit 30.5 29.7 Greyhound 51.3 44.2 UK Bus 103.0 88.5 UK Rail 63.9 64.5 Other 4.8 4.4 Total 404.3 366.9 • Underlying total equivalent investment increase of £37.4m or 10% in the year principally reflecting new buses in First St
Slide 38: Pensions
Pensions • Group deficit decreased by £20m to £248m principally due to better actual returns on assets partly offset by lower discount rates and higher inflation rates • New IAS 19 rules will apply from 2013/14 onwards. Estimated to reduce operating profit in the current year by £60m – These are non
Slide 39: IAS 19 changes
IAS 19 changes • On adoption of the revised standard the Group will show interest on pensions in the finance cost line. The table below illustrates the estimated impact on FY 2013 & FY 2014: FY 2013 FY 2014 £m £m UK Bus (37) (32) UK Rail (25) (25) Greyhound 2 - Impact on operating profit (60) (57) I
Slide 40: Pensions
Pensions Deficit Cash Contributions Income Statement Charge £m 2013 2012 2011 2013 2012 2011 2013 2012 2011 North America (210.2) (215.2) (158.4) 28.4 21.6 11.3 7.5 7.2 7.4 UK Bus (24.7) (27.4) (30.1) 49.1 54.3 34.7 (12.3) (9.5) (1.9) UK Rail (12.9) (25.3) (54.7) 42.4 41.1 38.6 30.7 32.2 35.6 Total
Slide 41: Liquidity resources and debt repayment profile
Liquidity resources and debt repayment profile £m 1,250 Liquidit y H e a dro o m Liquidity resources at March 2013 of £1,215m £ 3 0 0 m B o nd 2 0 13 comprised free cash balances of £394m and 1,000 committed liquidity headroom of £821m. £ 3 0 0 m B o nd 2 0 18 Committed liquidity headroom is mainly
Slide 42: Taxation
Taxation Mar 13 Mar 12 £m £m Current tax 10.6 (5.3) Deferred tax (21.2) 55.4 Tax (credit)/charge on continuing operations (10.6) 50.1 Tax paid 6.3 17.7 Tax rate on underlying profit before tax 20.1% 20.1% 42
Slide 43: FFO-to-Debt is a key metric for our credit rating
FFO-to-Debt is a key metric for our credit rating Credit agency FirstGroup adjustments: £228m EBITDA: (operating leases, tax on FFO: £439m £667m pensions, rail adjustments1, cash interest and tax) FirstGroup estimate of S&P’s FFO-to- Debt calculation, as 15.9% at 31 March 2013 Credit agency adjustme
Slide 44: Disclaimer
Disclaimer This document has been prepared by FirstGroup plc (the "Company") solely for use at a presentation (the "Presentation") of its financial results for the year to 31 March 2013 and in advance of a possible offer of ordinary shares (the "Shares") of the Company (the "Offer”). For purposes of