Firstgroup Plc · LSE:FGP
Firstgroup — FY2015 Earnings Presentation
44 slides from Firstgroup's earnings presentation, Jun 10, 2015
Slide 1: Full year results for the 12 months to 31 March 2015
First FirstGroup pic Full year results For the 12 months to 31 March 2015 Wednesday 10 June 2015
Slide 2: Tim O'Toole, Chief Executive
First 7% Tim O’Toole Chief Executive WD @ OO) @ 10 June 2015 FirstGroup 2015 full year results
Slide 3: Overview
Overview First 7p Overall trading for the year in line with our expectations — Momentum in our turnaround actions in First Student and UK Bus — Cash flow (before UK Rail end of franchise outflows) ahead of our expectations First Great Western and First TransPennine Express rail contracts secured = W
Slide 4: Financial review
First 7% Chris Surch Group Finance Director WD @ OO) @ Financial review 10 June 2015, FirstGroup 2015 full year results
Slide 5: Financial overview
Financial overview First 7p « Adjusted operating profit £303.6m up 13.3% — First Student and UK Bus margins improved by 1.0pp — First Transit and UK Rail ahead of our initial expectations — Greyhound actively managed cost base to mitigate contraction in passenger demand from cheaper fuel = Adjusted
Slide 6: Financial summary
Financial summary First Mar 2015 Mar 2014 Change ) 6,050.7 6,717.4 (9.9)% ue) = Revenue Adjusted! - EBITDA? 624.4 579.8 +7.7% - Operating profit 303.6 268.0 +13.3% - Margin % 5.0% 4.0% +1.0pp - Net finance costs (139.7) (156.1) (10.5)% - Profit before tax 163.9 111.9 +46.5% - Attributable profit 117
Slide 7: Group revenue bridge
Group revenue bridge First £m Revenue Mar 2014 reported 6,717.4 UK Rail revenue support (237.0) UK Rail reduction in First ScotRail subsidy (217.1) UK Rail end of FCC franchise (330.0) UK Bus operations sold or closed in the prior year (56.5) Foreign exchange (66.2) Mar 2014 underlying comparator 5,
Slide 8: Divisional performance
Divisional performance First Operating profit! Operating margin’ Mar 2015 | Mar 2014 Mar 2015 | Mar2014 | Mar 2015 | Mar 2014 m First Student 1,478.8 1,467.4 114.9 93.5 7.8% 6.4% First Transit 844.8 811.9 59.7 60.3 7.1% 74% Greyhound 609.6 624.6 417 46.4 6.8% 7A% UK Bus 896.1 930.2 51.8 44.4 5.8% 4.
Slide 9: Net cash flow
First 7% Net cash flow (£m) 624.4 47.5 39.4 27.2) 0g7 (12.3) (75.0) (364.9) (124.4) (68.5) (107.9) MO| USO JON SMO|JJNO ASIYOURL) $0 pus |IEY YN SMOJJINO SIYOUBL. [ey YIN aJ0}8q MojJU! USED Xe] PUP 1S8J9]U| Jauyo / feuded Buoy SUOISIADLd FirstGroup 2015 full year results Wd JO SS80Xa Ul afjeyo SUOIS
Slide 10: Capital expenditure
Capital expenditure First Cp ae Naw = Disciplined investment programme continues, based on ensuring good returns | Passenger carrying vehicles (PCV) | carrying vehicles (PCV) 285.8 on incremental capital invested Equipment 138.3 IT including transformation 18.4 " Focus on passenger carrying fleet an
Slide 11: Financial position
Financial position First 7% "Strong liquidity and stable financing platform to continue transformation — Headroom under committed facilities plus free cash: £1,023.8m (2014: £988.5m) Net debt:EBITDA ratio 2.25x (2014: 2.25x) Long term facilities in place — average debt maturity 5.2 years (2014: 6.1
Slide 12: Medium term financial objectives
Medium term financial objectives First Cp "Operational returns: earn returns in excess of cost of capital through cycle — Group revenue (ex-UK Rail) to grow faster than the economies we serve — Improving margins to double digits in First Student and UK Bus, and to 12% in Greyhound — 10-12% post-tax
Slide 13: Medium term cash generation considerations
Medium term cash generation considerations First 7% Transformation plans expected to drive significant EBITDA growth Cash interest broadly unchanged until bond portfolio starts to mature Capital expenditure:depreciation ratio typically 1.2x (ex-UK Rail) on a steady state basis — UK Rail capex funded
Slide 14: Business review
First 7% Tim O’Toole Chief Executive @OOOe Business review 10 June 2015, FirstGroup 2015 full year results 14
Slide 15: Our multi-year transformation strategy
Our multi-year transformation strategy First 1p | -_ First Student First Transit Contract portfolio pricing programme to raise returns Cost efficiencies = Double digit medium term margin target = Growth through bidding for further outsourcing opportunities = Maintain margin and relatively low capita
Slide 16: First Student
First Student First 7% OOOO, 10 June 2015 Multi-year strategy Double digit medium term margin target = Contract portfolio pricing programme to raise returns Cost efficiencies Progress 2014 bid season: 4.5% average price increases and 90% retention Reduced proportion of low margin contracts from 36%
Slide 17: First Transit
First Transit First 7% WD @ OO) @ 10 June 2015 Multi-year strategy Growth through bidding for further outsourcing opportunities Maintain margin of c.7% and relatively low capital intensity Progress Revenue +5.5%, including higher than forecast organic growth Awarded 20 contracts in the year, though
Slide 18: Greyhound
Greyhound First 7% Multi-year strategy Continue fleet upgrade and roll out of point-to-point services Transformation of Greyhound business model: yield management and real-time pricing, customer relationship management, online and mobile retail channels, more efficient field and back office systems
Slide 19: UK Bus
First 7% WD @® OO) @ 10 June 2015 Multi-year strategy Double digit medium term margin target = Restore volume growth and ability to achieve market-based pricing Cost efficiencies Progress Improved fares, networks and timetables now in place, with local managers empowered to adapt them as needed Pass
Slide 20: UK Rail
UK Rail First 7% Passenger volume growth and operational delivery Disciplined approach to franchise bidding opportunities Multi-year strategy = Continue to deliver robust passenger volume (LFL +4.2%) and revenue growth G) (LFL +6.7%), coupled with strong operating performance S Progress Secured Firs
Slide 21: Summary
Summary First 7% Overall trading for the year in line with our expectations «Year ahead: further strong progress in non-rail businesses led by First Student and UK Bus transformations to largely offset substantially lower UK Rail earnings programme is making progress = Focused on meeting our medium
Slide 22: Full year results for the 12 months to 31 March 2015
First FirstGroup pic Full year results For the 12 months to 31 March 2015 Wednesday 10 June 2015
Slide 23: Appendices
First 7% Appendices WD @ OO) @ 10 June 2015 FirstGroup 2015 full year results
Slide 24: Financial results
Financial results First (5 £m Revenue EBITDA' EBITDA margin % Operating profit? Operating profit margin % Net finance costs Profit before tax2 Non-GAAP adjustments Profit before tax Tax Profit after tax Basic EPS p Adjusted EPS p Mar 2015 Mar 2014 Change ) 6,050.7 6,717.4 (9.9)% 624.4 579.8 +7.7% 10
Slide 25: Non-trading items
Non-trading items First 7p £m Amortisation charges Gain on disposal of property Legal claims IT licenses UK Bus depot sales and closures Ineffectiveness on financial derivatives UK Rail First Great Western provision Other Other non-GAAP adjusting items Total non-GAAP adjustments 10 June 2015 (54.3)
Slide 26: First Student
First Student First 2,368.6 2,339.3 +1.3% Operating profit! 177.3 152.8 +16.0% 7.5% 6.5% +1,0pp Mar 2014 2,339.3 152.8 Exit from loss maki cts (27.6) - Above inflation pri 13.3 13.3 22.6 18.4 - 6.7) 6.7 18.5 43.7 (16.3) (29.4) (3.7) Mar 2015 2,368.6 177.3 | Before amortisation charges, ineffectivene
Slide 27: First Transit
First Transit First 7p Revenue sid 1,362.1 1,290.5 +5.5% 0) g profit! 96.1 95.7 +0.4% 7.1% 7.4% (0.3)pp S m Revenue Operating profit! Se) sm | overue | Operating Mar 2014 1,290.5 95.7 Net growth 86.0 16 = CANS fx (14.4) (1.2) Mar 2015 1,362.1 96.1 1 Before amortisation charges, ineffectiveness on fi
Slide 28: Greyhound
Greyhound First ) 986.0 990.6 (0.5)% 68.5 73.2 (6.49% 6.9% 7.4% (0.5)p0 Mar 2014 990.6 13.2 Passenger revenue 55 55 Product improvement - (7.0) Increased marketing - (5.5) Weather 47 47 Cost inflation - (19.1) (0.8) 15.4 CAN$ fx (14.0) 1.3 Mar 2015 986.0 68.5 | Before amortisation charges, ineffecti
Slide 29: UK Bus
UK Bus First 896.1 930.2 (3.7)% 61.8 44.4 +16.7% 5.8% 4.8% +1,0pp Mar 2014 930.2 44.4 (56.5) ; Mar 2014 adjusted 873.7 44.4 23.3 16.2 - (16.6) - (2.9) - (3.0) - 14.9 (0.9) 0.6 - (1.8) Mar 2015 896.1 51.8 | Before amortisation charges, ineffectiveness on financial derivatives and certain other items
Slide 30: UK Rail
UK Rail First 7% Revenue sid 2,207.1 2,870.1 (23.1)% = 1 Before amortisation charges, ineffectiveness on financial derivatives and certain other items 10 June 2015 FirstGroup 2015 full year results 30
Slide 31: Capital expenditure
Capital expenditure First Fixed asset additions Mar 2015 Mar 2014 Mar 2015 Mar 2014 First Student 174.9 130.8 170.4 169.1 First Transit 21.6 18.1 21.1 17.7 Greyhound 49.8 45.8 50.9 45.8 UK Bus 104.1 67.4 93.9 774 UK Rail 75.0 68.5 76.1 69.4 Group items BS 3.9 BS 1.6 Total 428.9 334.5 415.9 381.0 ue)
Slide 32: Total capital investment
Total capital investment First m Mar 2015 Mar 2014 First Student 170.4 194.3 First Transit 30.3 37.2 Greyhound 50.9 60.5 UK Bus 93.9 101.7 UK Rail 76.1 69.4 Other 35) 1.6 Total 425.1 464.7 Total additions of £415.9m (2014: £381.0m) plus operating leases with capital value £9.2m (2014: £83.7m) During
Slide 33: UK Rail passenger revenue growth
UK Rail passenger revenue growth First Mar 2015 Mar 2014 First Capital Connect (FCC)! 6.8% 7.7% First Great Western (FGW) 6.7% 4.7% First ScotRail (FSR) 6.5% 5.8% First TransPennine Express (FTPE) 6.4% 5.9% Hull Trains 12.8% 6.4% Total 6.7% 5.9% Continued solid demand across all of our franchises —
Slide 34: UK Rail franchise contracts
UK Rail franchise contracts First Cp SE Apr 2006 Apr 2006 Oct 2013 Oct 2004 Feb 2004 Mar 2014 Oct 2013 = Mar 2015 Mar 2015 Sep 2014 - Mar 2019 - Mar 2016 = DfT Single Tender Action (STA) First Great Western franchise runs to March 2019 and the DfT has an option to extend by up to one year = DfT STA
Slide 35: UK Rail bonds
UK Rail bonds First Mar 2015 Mar 2014 FTPE performance bond 10.6 10.6 FTPE season ticket bond 11 FSR performance bond 25.0 25.0 FSR season ticket bond - 5.4 FSR maintenance bond - 20.7 FCC performance bond - 10.0 FCC season ticket bond - 58.9 FGW performance bond 10.0 10.0 FGW season ticket bond 21.
Slide 36: UK Rail ring-fenced cash
UK Rail ring-fenced cash First Cp : 88.7 FSR 4.3 100.3 42.9 51.2 Total 196.0 360.9 10 June 2015 FirstGroup 2015 full year results 36
Slide 37: UK Rail subsidy/(premium) profile
UK Rail subsidy/(premium) profile First Cp aos | 2/13 (228.2) (435.3) 447.2 57.0 (159.3) 2013/14 (254.4) (273.5) (22.0) 506.4 65.7 22.2 2014/15 (70.2) - (100.1) 289.4 43.9 163.0 2015/16 - - (90.9) - 23.7 (67.2) = FGW and FCC franchise payment decrease reflects the direct award profile and CP5 profil
Slide 38: UK Rail revenue support
UK Rail revenue support First Cp Revenue support 80% 59.6 OO, Revenue support 80% - 177.4 Total = 237.0 = FCC and FGW did not receive revenue support in the year = FSR was eligible for revenue support but traded above target revenue 10 June 2015 FirstGroup 2015 full year results 38
Slide 39: Current diesel hedge position
Current diesel hedge position — including FGW direct award First ST “es Annual volume (barrels’m) 1.7 1.7 1.5 1.5 93% 91% 42% 13% 81% 71% 43% 14% Crude rate ($/barrel) $101.21 $88.50 $85.71 $74.04 $89.68 $86.43 $79.56 $65.43 Diesel rate ($/barrel) $122.41 $106.29 $101.69 $90.08 $118.25 $114.48 $104.
Slide 40: Pensions
Pensions First 1D 2 Cash contributions P&L charge! m 2015 2014 2013 2015 2014 2013 2015 2014 2013 (184.8) (152.4) (210.2) 165 200 285 7.2 69 49 (63.5) (94.2) (247) 415 473 490 255 241 25.0 UK Rail (1.1) (141) (129) 485 483 424 615 569 557 Total (239.4) (260.7) (247.8) 1065 1156 119.9 94.2 87.9 85.6
Slide 41: Net finance costs
Net finance costs First Mar 2015 Mar 2014 £m fm 0.9 (.n Adjusted net finance costs 139.7 156.1 Net finance costs 140.0 173.7 ' Included within other non-GAAP adjustments; 2014 charge principally comprises a charge of £16.5m for US Dollar interest rate swaps which are no longer required as the underl
Slide 42: Foreign exchange
Foreign exchange First Lower US Dollar compared to prior year balance sheet rate: Closing rate for the balance sheet US$ $1.49 $1.66 Closing rate for the balance sheet CAN$ $1.88 $1.84 Lower US Dollar compared to prior year effective rate: [| Year to 31 March 2015 Year to 31 March 2014 Effective rat
Slide 43: Taxation
Taxation First ZL Mar 2015 Mar 2014 5.8) Current tax 177 Deferred tax 2.6 (11.0) Tax charge/(credit) 20.3 (5.7) Tax rate on adjusted profit before tax 22.0% 20.0% 10 June 2015 FirstGroup 2015 full year results 43
Slide 44: Disclaimer
Disclaimer First 7p Certain statements included or incorporated by reference within this presentation may constitute “forward looking statements" in respect of FirstGroup plc's operations, performance, prospects and/or financial condition. Such statements are based on our current expectations and be