FirstGroup plc · LSE:FGP
FirstGroup — FY2019 Earnings Presentation
51 slides from FirstGroup's earnings presentation, May 30, 2019
Slide 1: FirstGroup plc 2019 full year results and strategy update
FirstGroup plc 2019 full year results and strategy update Thursday 30 May 2019 30 May 2019 FirstGroup results for the year to 31 March 2019
Slide 2: Overview
Overview ▪ Clear divisional strategies delivering better business performance: − First Student: revenue/fleet growth while maintaining pricing discipline and margin progression − First Transit: winning additional business in core markets and capturing opportunities in Mobility as a Service (MaaS) an
Slide 3: Financial review for the year to 31 March 2019
Financial review for the year to 31 March 2019 30 May 2019 FirstGroup results for the year to 31 March 2019 3
Slide 4: Financial summary
Financial summary SWR- and 53rd Change in £m Mar 2019 Mar 2018 Change week-adjusted CCy1 change, in CCy2 Revenue 7,126.9 6,398.4 +11.4% +11.0% +5.7% Adjusted3 - EBITDA 670.3 690.6 (2.9)% (3.6)% - Operating profit 332.9 317.0 +5.0% +4.0% +10.5% - Margin % 4.7% 5.0% (30)bps (30)bps +20bps - Net financ
Slide 5: Revenue performance
Revenue performance ▪ Group revenue growth +5.7% in CCy excluding SWR and 53rd week 425.1 7,126.9 ▪ Road divisions growth +2.0% on same basis, led by First Student ▪ Rail LFL passenger growth of 5.8% supplemented by transition of GWR from premium to subsidy and full year of SWR 272.8 1.1 6,701.8 94.
Slide 6: Adjusted operating profit
Adjusted1 operating profit ▪ Road divisions’ operating profit +3.6% in CCy excluding 53rd week, with growth and margin progress in First Student and First Bus more than offsetting Transit and Greyhound ▪ GWR main contributor to Rail adjusted profit increase ▪ Change in Group items largely due to £7m
Slide 7: Income statement – continued
Income statement – continued Reported Change in £m Mar 2019 Mar 2018 change CCy Adjusted1 Operating profit 332.9 317.0 +5.0% +4.0% Bond refinancing, Net finance costs (106.6) (120.0) (11.2)% lower net debt Profit before tax 226.3 197.0 +14.9% +13.1% Tax (50.9) (44.2) Tax guidance - Effective tax rat
Slide 8: Non-GAAP adjustments
Non-GAAP adjustments Mar Mar ▪ Amortisation lower due to full utilisation of old £m 2019 2018 customer contract intangibles Amortisation charges (29.9) (70.9) ▪ Restructuring/reorganisation costs mainly relate to SWR onerous contract provision (145.9) - Greyhound withdrawal from Western Canada. Net
Slide 9: North America insurance reserves
North America insurance reserves ▪ North America continues to deliver legal judgments increasingly in favour of plaintiffs and punitive in certain regions ▪ Increasingly complex and judgmental area; reserve levels recommended by our actuarial advisors ▪ Adverse settlements, developments on a number
Slide 10: SWR onerous contract provision
SWR onerous contract provision ▪ SWR is a critical part of the national infrastructure: − Services from London Waterloo to destinations throughout south-west London and southern England − Franchise Train Operating Company owned 70:30 by FirstGroup and MTR – all costs, risks and rewards shared accord
Slide 11: Group cash flow (£m)
Group cash flow (£m) 542.9 Includes £88m of working capital inflows and net capital receipts, which will unwind in future years 172.5 366.1 (47.8) 193.6 199.6 197.3 (320.0) (88.8) (25.5) (3.8) (29.9) (2.3) Rail operating cash Acquisitions Road EBITDA Road cash capex Road insurance and Exceptionals O
Slide 12: Financial position
Financial position ▪ Strong liquidity, stable financing position: net debt £903.4m (2018: £1,070.3m) ▪ Headroom under committed facilities plus free cash: £520.6m (2018: £766.4m) ▪ Net debt: EBITDA 1.3x (2018: 1.5x), or 2.1x adjusted for Rail ring-fenced cash (2018: 2.1x) ▪ £800m bank facility amend
Slide 13: 2019/20 guidance
2019/20 guidance ▪ Expect to deliver revenue growth and financial progress in the Road divisions in 2019/20, offset by Rail’s particularly strong adjusted profit contribution in 2018/19 moderating to more normal levels − Overall expect adjusted earnings to be broadly in line with our expectations ▪
Slide 14: Portfolio strategy update and divisional reviews
Portfolio strategy update and divisional reviews 30 May 2019 FirstGroup results for the year to 31 March 2019 14
Slide 15: Strategy overview
Strategy overview ▪ Board executed thorough strategic review to ensure FirstGroup Business composition captures and creates value for shareholders: Student − Five market-leading public transportation businesses 46% − Limited synergies, particularly North America vs UK − Recognition of constraints an
Slide 16: Portfolio rationalisation principles
Portfolio rationalisation principles ▪ Focused on securing best value for shareholders – executing portfolio rationalisation plans with pace and discipline ▪ Full understanding of the regulatory procedures and stakeholder consultations including pensions which will be required to execute the plans r
Slide 17: First Student performance
First Student performance ▪ Delivered growth in revenue, fleet count and market share as forecast − Our returns-based bidding strategy has now cycled through most of the portfolio (a process which had resulted in lower retention rates in past few years) − Strong bid season last summer with excellent
Slide 18: First Student platform
First Student platform ▪ Restored to a position of generating sustainable growth and returns from our multi-year contract portfolio, share shift and conversion ▪ Targeting development of complementary transportation technologies and services, entry into adjacent markets and organic and M&A-led growt
Slide 19: First Transit performance
First Transit performance ▪ Solid year for contract retention (89% of ‘at risk’ contracts) and new business wins offset the completion of high margin Canadian oil sands contracts at the end of last year ▪ More than 20 contracts won in core areas such as shuttle, fixed route and paratransit, as well
Slide 20: First Transit platform
First Transit platform ▪ Well-established profitable platform to capture further long term growth in core markets, and deliver profitable growth in attractive adjacent markets ▪ Winning MaaS and SAV opportunities and leveraging our partnerships with Transportation Network Companies (TNCs) and other
Slide 21: Greyhound
Greyhound ▪ Challenging market place with low-cost airline competition and low oil prices ▪ Plans in place to improve profitability following the business review last summer − Airline-style revenue management system is delivering increased yields − Commercial team led by new Chief Commercial Officer
Slide 22: First Bus performance
First Bus performance ▪ LFL revenue growth of 1.6% through improved customer offering and network management − Contactless and digital implementation continues to transform services for passengers and our efficiency as a business ▪ Fleet investments and local authority partnerships (supported by cle
Slide 23: First Bus platform
First Bus platform ▪ Having set First Bus on the path to increased profitability, now is right time to pursue structural alternatives to continue its progression and deliver value to shareholders, while managing the division’s longer term liabilities responsibly ▪ First Bus is one of the largest bus
Slide 24: First Rail
First Rail ▪ Franchise performance for passengers affected by May 2018 timetable issues, infrastructure challenges, and strike action in case of SWR − Worked hard with industry partners to improve service performance in 2019 ▪ LFL passenger revenue growth +5.8%, passenger volumes +2.0% ▪ Engaged in
Slide 25: Portfolio rationalisation plan to unlock value
Portfolio rationalisation plan to unlock value 26% 15% 9% 12% 38% Revenue 46% 14% 3% 18% 19% Adj op profit Focus on First Student and First Transit, our core contract businesses in North America Process to sell Greyhound has commenced Pursue structural alternatives to separate First Bus operations C
Slide 26: Going forward
Going forward ▪ Delivered strong revenue, adjusted profit and adjusted EPS growth this year ▪ Clear divisional strategies, outlined in November, have momentum ▪ Our portfolio rationalisation plans are the most appropriate means to deliver enhanced sustainable value for shareholders having regard to
Slide 27: FirstGroup plc 2019 full year results and strategy update
FirstGroup plc 2019 full year results and strategy update Thursday 30 May 2019 30 May 2019 FirstGroup results for the year to 31 March 2019
Slide 28: Appendices
Appendices 30 May 2019 FirstGroup results for the year to 31 March 2019 28
Slide 29: Financial results
Financial results £m Mar 2019 Mar 2018 Change Revenue 7,126.9 6,398.4 +11.4% EBITDA1 670.3 690.6 (2.9)% EBITDA margin % 9.4% 10.8% (140)bps Operating profit2 332.9 317.0 +5.0% Operating profit margin % 4.7% 5.0% (30)bps Net finance costs (106.6) (120.0) (11.2)% Profit before tax2 226.3 197.0 +14.9%
Slide 30: Divisional performance
Divisional performance Change Change Change Revenue Operating profit2 Operating margin2 ex SWR / ex SWR / ex SWR / 53rd week, 53rd week, 53rd week, Mar 2019 Mar 2018 Mar 2019 Mar 2018 Mar 2019 Mar 2018 in CCy1 in CCy1 in CCy1 £m First Student 1,845.9 1,771.1 +5.4% 173.5 156.5 +13.5% 9.4% 8.8% +70bps
Slide 31: First Student
First Student $m Mar 2019 Mar 2018 Change in CCy1 Revenue 2,424.9 2,350.6 +3.4% Operating profit2 230.0 210.4 +9.1% Margin % 9.5% 9.0% +50bps $m Revenue Operating profit2 Mar 2018 2,350.6 210.4 53rd week / Operating days (30.5) (1.2) Mar 2018 (52 Week) 2,320.1 209.2 Weather 4.3 4.2 Pricing above inf
Slide 32: First Transit
First Transit $m Mar 2019 Mar 2018 Change in CCy1 Revenue 1,411.4 1,420.4 (0.4)% Operating profit2 67.7 77.8 (12.7)% Margin % 4.8% 5.5% (70)bps $m Revenue Operating profit2 Mar 2018 1,420.4 77.8 53rd week (26.7) (2.6) Mar 2018 (52 week) 1,393.7 75.2 Growth / new business / pricing (11.2) 1.6 Pay abo
Slide 33: Greyhound
Greyhound $m Mar 2019 Mar 2018 Change in CCy1 Revenue 846.7 912.7 (7.0)% Operating profit2 14.2 32.8 (54.8)% Margin % 1.7% 3.6% (180)bps $m Revenue Operating profit2 Mar 2018 912.7 32.8 53rd week (17.8) (3.1) Mar 2018 (52 week) 894.9 29.7 Revenue 0.8 0.8 Cost inflation - (19.2) Canada – shutdown imp
Slide 34: First Bus
First Bus £m Mar 2019 Mar 2018 Change in CCy1 Revenue 876.1 879.4 (0.4)% Operating profit2 65.8 50.2 +31.1% Margin % 7.5% 5.7% +180bps £m Revenue Operating profit2 Mar 2018 879.4 50.2 53rd week (14.8) (0.4) Mar 2018 (52 weeks) 864.6 49.8 L4L Pax revenue growth 12.2 12.2 Cost inflation - (23.9) Manag
Slide 35: First Rail
First Rail £m Mar 2019 Mar 2018 Change Revenue 2,666.7 1,968.8 +35.4% Operating profit1 72.3 57.8 +25.1% Margin % 2.7% 2.9% (20)bps Like-for-like passenger revenue, year to Mar 2019 Mar 2018 Great Western Railway (GWR) 5.1% 2.7% South Western Railway (SWR) 6.0% n/a TransPennine Express (TPE) 8.0% 10
Slide 36: Rail cash flow 2018/19
Rail cash flow 2018/19 ▪ Rail is cash generative, with profit after tax equating to dividends available for the Group, albeit with some phasing of the funds flows ▪ First Rail “capital expenditure” is typically matched by franchise receipts, capital grants or other funding from third parties, agreed
Slide 37: Rail cash flow – last five years
Rail cash flow – last five years Net Rail cash inflow £m Ring-fenced cash £m Cash from trading Opening ring-fenced cash 361 Rail operating profit 331 Working capital 129 Depreciation 375 Net capital receipts 47 Third party grant amortisation (90) PCS/AFC (SWR £49m, TPE £32m) 81 Franchise payment cap
Slide 38: Greyhound Canada non-recurring costs
Greyhound Canada non-recurring costs ▪ Restructuring/reorganisation costs predominantly relating to Greyhound's withdrawal from Western Canada. Net cash cost of £4.8m in the year ▪ Group estimates that disposal proceeds from surplus properties in Western Canada will exceed the cash costs of restruct
Slide 39: Current diesel hedge position
Current diesel hedge position UK North America Year to 31 March 2019/20 2020/21 2021/22 2019/20 2020/21 2021/22 Annual volume (barrels 'm) 1.7m 1.1m 1.1m 1.3m 1.3m 1.3m % hedged 84% 45% 21% 52% 22% 11% Crude rate ($/barrel) $65.37 $65.43 $69.50 $61.90 $66.02 $71.13 Diesel rate ($/barrel) $77.77 $78.
Slide 40: Foreign exchange
Foreign exchange ▪ Lower US Dollar compared to March balance sheet date: 31 Mar 2019 31 Mar 2018 Closing rate for the balance sheet US$ $1.30 $1.40 Closing rate for the balance sheet CAN$ $1.74 $1.81 ▪ Lower US Dollar compared to prior period effective rate: Year to Year to 31 Mar 2019 31 Mar 2018 E
Slide 41: Net finance costs and taxation
Net finance costs and taxation Net finance costs, £m Mar 2019 Mar 2018 Bonds 59.9 84.3 Bank borrowings 14.0 8.8 Loan notes 1.1 1.1 Senior unsecured loan notes 8.9 1.3 Finance lease interest 2.7 4.6 Notional interest on long term provisions 14.6 11.0 Notional interest on pensions 8.1 10.2 Investment
Slide 42: EBITDA by division
EBITDA by division Revenue EBITDA1 EBITDA margin1 Mar 2019 Mar 2018 Mar 2019 Mar 2018 Mar 2019 Mar 2018 £m First Student 1,845.9 1,771.1 352.3 335.2 19.1% 18.9% First Transit 1,075.8 1,072.7 71.4 79.8 6.6% 7.4% Greyhound 645.1 690.2 38.6 58.8 6.0% 8.5% First Bus 876.1 879.4 119.7 116.3 13.7% 13.2% G
Slide 43: Capital expenditure
Capital expenditure Mar Mar ▪ Disciplined investments principally in £m 2019 2018 vehicle fleet continues Passenger carrying vehicles (PCV) 408.2 249.1 ▪ Road cash capital expenditure in line IT including transformation & software 10.6 28.5 with expectations Equipment 25.4 18.9 ▪ Fleet investment pr
Slide 44: Total capital expenditure and acquisitions
Total capital expenditure and acquisitions Fixed asset/Software additions Cash (including acquisitions) £m Mar 2019 Mar 2018 Mar 2019 Mar 2018 First Student1 232.3 186.0 257.8 205.1 First Transit 32.2 19.0 27.3 28.5 Greyhound 31.7 46.6 28.0 44.4 First Bus 25.1 42.8 17.9 20.9 First Rail 110.2 126.2 1
Slide 45: IFRS 16 (Leases) implementation
IFRS 16 (Leases) implementation ▪ From 1 April 2019, most leases currently classified as operating leases will be recognised as Right Of Use assets on the balance sheet, with a corresponding increase in lease liabilities and net debt. Prior periods not retrospectively restated ▪ Rail track access pa
Slide 46: First Rail commitments and bonds
First Rail commitments and bonds SWR 31 March 2019, £m GWR TPE Total 70% share First Rail commitments Parent company support (PCS) incl AFC total commitment A 30.0 178.8 82.2 291.0 - Of which, unbonded commitment (non-cash) B 30.0 94.4 51.6 176.0 - Of which, PCS bond (non-cash) C - 84.4 30.6 115.0 P
Slide 47: Defined Benefit (DB) pensions
Defined Benefit (DB) pensions Accounting position as at Cash March 2019 contributions £m Accounting Assets Liabilities Rail offsets FY 2019 deficit First Bus scheme 1,236.0 (1,445.0) - (209.0) 20.6 Group scheme 161.1 (134.5) - 26.6 5.0 First Bus LGPS schemes 1,296.3 (1,253.6)* - 42.7 17.5 UK (ex-Rai
Slide 48: Pensions
Pensions Deficit Cash contributions P&L charge1 £m Mar Mar Mar Mar Mar Mar Mar Mar Mar 2019 2018 2017 2019 2018 2017 2019 2018 2017 North America (164.4) (162.7) (216.7) 27.2 17.6 14.0 11.1 10.3 9.9 First Bus (139.7) (108.4) (139.8) 43.1 62.4 50.0 34.8 21.5 16.7 First Rail (3.1) (2.6) (2.0) 38.6 31.
Slide 49: Financial position
Financial position £450m £400m £350m £300m £350m £200m £325m £250m 8.75% 6.875% 5.25% £200m Apr 2021 Sept 2024 £150m Nov 2022 bond1 bond £100m bond £50m £0m FY 21/22 FY 19/20 FY 20/21 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 H1 19/20 H1 20/21 H1 21/22 H1 22/23 H1 23/24 H1 24/25 H1 25/26
Slide 50: ROCE
ROCE Group Road divisions ROCE ROCE As at 31 March 2018 9.5% 6.6% Foreign exchange (0.6)% (0.3)% ROCE at constant currency 8.9% 6.3% Rail division trading 0.8% - SWR contract provision 0.5% - Road divisions trading 0.2% 0.2% North America insurance provision 0.3% 0.2% 53rd week (0.3)% (0.3)% Tax rat
Slide 51: Disclaimer
Disclaimer 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 beliefs con