Firstgroup Plc · LSE:FGP
Firstgroup — H1 2017 Earnings Presentation
41 slides from Firstgroup's earnings presentation, Nov 15, 2016
Slide 1: FirstGroup plc Half-yearly results
FirstGroup plc Half-yearly results For the six months to 30 September 2016 Tuesday 15 November 2016 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016
Slide 2: Tim O'Toole, Chief Executive
Tim O'Toole Chief Executive 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 2
Slide 3: Overview
Overview ▪ Providing assistance to those affected by the Tramlink incident on 9 November, and full support to the ongoing investigation ▪ Overall trading as outlined at the start of the year continued during the first half ▪ Encouraging performances by our North American business were partially offs
Slide 4: Matthew Gregory, Chief Financial Officer: Financial review
Matthew Gregory Chief Financial Officer Financial review 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 4
Slide 5: Financial overview
Financial overview ▪ Adjusted operating profit £89.0m (H1 2015: £88.4m) reflects several factors: − Significant improvement in First Student performance − Rebased First Rail margin under new contracts − Significant currency effects in H1 with favourable translation of North American profits offset b
Slide 6: Currency exposure
Currency exposure ▪ More than two thirds of FY16 profits from North American divisions UK ▪ Due to First Student seasonality, favourable currency 42% translation offset by higher UK fuel costs in H1 FY16 revenue ▪ Expect FY17 net benefit given H2-weighted profile of North First Student, if recent ra
Slide 7: Financial summary
Financial summary Change in £m Sep 2016 Sep 2015 Change constant currency1 Revenue 2,564.7 2,440.9 +5.1% (1.0)% Adjusted2 - EBITDA 251.7 242.4 +3.8% - Operating profit 89.0 88.4 +0.7% (1.7)% - Margin % 3.5% 3.6% (10)bps Flat - Net finance costs (67.1) (66.0) +1.7% - Profit before tax 21.9 22.4 (2.2)
Slide 8: Revenue performance
Revenue performance ▪ Growth in First Student, First Transit and First Rail (like- Sep 2016 £m Change revenue (constant fx) for-like) First Student 719.5 +0.2% First Transit 482.5 +3.2% ▪ Decreases in Greyhound and First Bus Greyhound 333.4 (4.6)% First Bus 426.1 (2.9)% ▪ First Rail reported revenue
Slide 9: Operating performance
Operating performance ▪ Significant improvement in First Student margin; Sep 2016 £m H1 2016 Margin change operating profit1 margin1 (constant fx) Rail margin rebased under new contracts First Student 14.0 1.9% +250bps First Transit 30.0 6.2% (90)bps ▪ Group margin flat in constant currency Greyhoun
Slide 10: Capital expenditure
Capital expenditure £m Sep 2016 ▪ Disciplined reinvestment in passenger carrying fleet and IT upgrade Passenger carrying vehicles (PCV) 119.7 programmes continued during the IT including transformation 11.3 period Equipment 4.1 ▪ Expect cash capital investment at Facilities and depot development 3.4
Slide 11: Net cash flow
Net cash flow (£m) 251.7 Operating cash flow / cash conversion1: Sep 2016: £43.1m / +48% Sep 2015: £(53.2)m / (60)% 29.1 (178.0) 43.1 (19.8) (28.5) (11.4) (26.1) (81.3) (64.3) Non-Rail capex other provisions First Rail capex Disposal proceeds Working capital / EBITDA Interest and tax Pensions charge
Slide 12: Financial position
Financial position ▪ Strong liquidity and stable financing position with seasonally higher net debt of £1,491.5m − Headroom under committed facilities plus free cash: £824.8m (Mar 2016: £940.2m) − Net debt: EBITDA ratio 2.4x (Sep 2015: 2.6x) − Long term facilities in place – average maturity 3.9 yea
Slide 13: Financial summary
Financial summary ▪ Operating profit maintained despite Rail margin rebasing under new contracts, mixed impact of fx and challenging trading environment in some businesses ▪ Seasonal net cash outflow of £64.3m is an improvement of £103.8m compared with prior period ▪ Trading in H1 consistent with ex
Slide 14: Tim O'Toole, Chief Executive: Business review
Tim O'Toole Chief Executive Business review 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 14
Slide 15: First Student
First Student ▪ Robust 2016 bid season – continued progress toward a smaller but higher returning contract portfolio − 7.3% average price increases, 200bps higher than previous season − 80% retention rate, in line with budget ▪ US employment market continues to tighten but better positioned to respo
Slide 16: First Transit
First Transit ▪ Contract awards and organic growth partially offset by lower shuttle activity in Canadian oil sands ▪ Margin affected by business mix and ongoing cost environment in the period ▪ Awarded 12 new contracts and 97% contract retention rate in the period − Includes important wins for futu
Slide 17: Greyhound
Greyhound ▪ Average at-pump fuel prices c.15% lower through H1, resulting in adverse passenger demand; LFL passenger revenue decrease of 3.9% − Greyhound Express LFL revenue decrease of 0.2% benefitted from strength of our point-to-point offering ▪ Targeted mileage reductions and other cost control
Slide 18: First Bus
First Bus ▪ Lower high street footfall and congestion issues continue to affect demand across the industry – LFL passenger revenue decreased by 1.3% in H1 ▪ Resulting margin pressure intensified by impact from US dollar-denominated fuel, and not fully offset by cost efficiencies ▪ Aiming to maximise
Slide 19: First Rail
First Rail ▪ LFL passenger revenue increased by 0.7% − Slowdown in growth seen across the industry exacerbated by the magnitude of the infrastructure upgrades on GWR − TPE revenue performance better than industry average in the period ▪ Margin rebased towards industry norms, as previously indicated
Slide 20: Summary
Summary ▪ Overall trading as outlined at the start of the year continued during the first half ▪ Encouraging performances by our North American business were partially offset by more challenging trading conditions in the UK ▪ Continue to expect the Group to make good progress with our strategic obje
Slide 21: FirstGroup plc Half-yearly results
FirstGroup plc Half-yearly results For the six months to 30 September 2016 Tuesday 15 November 2016 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016
Slide 22: Appendices
Appendices 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 22
Slide 23: Financial results
Financial results £m Sep 2016 Sep 2015 Change Revenue 2,564.7 2,440.9 +5.1% EBITDA1 251.7 242.4 +3.8% EBITDA margin % 9.8% 9.9% (10)bps Operating profit2 89.0 88.4 +0.7% Operating profit margin % 3.5% 3.6% (10)bps Net finance costs (67.1) (66.0) +1.7% Profit before tax2 21.9 22.4 (2.2)% Non-GAAP adj
Slide 24: Non-GAAP adjustments
Non-GAAP adjustments £m Sep 2016 Sep 2015 ▪ During the period the sale of a Greyhound terminal in Amortisation charges (28.5) (27.2) San Jose, California was completed which resulted Gain on disposal of property 21.6 - in a gain on sale of £21.6m Restructuring and reorganisation costs (4.2) - Ineffe
Slide 25: Divisional performance
Divisional performance Revenue Operating profit1 Operating margin1 Sep 2016 Sep 2015 Sep 2016 Sep 2015 Sep 2016 Sep 2015 £m First Student 719.5 655.9 14.0 2.0 1.9% 0.3% First Transit 482.5 419.2 30.0 30.1 6.2% 7.2% Greyhound 333.4 312.4 25.8 25.8 7.7% 8.3% First Bus 426.1 437.5 13.5 15.4 3.2% 3.5% F
Slide 26: First Student
First Student $m Sep 2016 Sep 2015 Change Revenue 1,004.5 1,006.8 (0.2)% Operating profit1 26.2 1.4 n/m Margin % 2.6% 0.1% +250 bps $m Revenue Operating profit1 Sep 2015 1,006.8 1.4 Above inflation pricing 11.6 11.6 Net growth (35.8) (3.8) Management initiatives - 13.2 Fuel rate (3.0) 8.4 Driver pay
Slide 27: First Transit
First Transit $m Sep 2016 Sep 2015 Change Revenue 663.6 645.6 2.8% Operating profit1 41.4 46.3 (10.6)% Margin % 6.2% 7.2% (100) bps $m Revenue Operating profit1 Sep 2015 645.6 46.3 Growth / new business 10.9 0.8 Oil sands, inflation, CAN $ fx, 7.1 (5.7) other Sep 2016 663.6 41.4 1 Before amortisatio
Slide 28: Greyhound
Greyhound $m Sep 2016 Sep 2015 Change Revenue 457.5 481.6 (5.0)% Operating profit1 34.3 40.2 (14.7)% Margin % 7.5% 8.3% (80) bps $m Revenue Operating profit1 Sep 2015 481.6 40.2 Revenue (22.5) (22.5) Fuel cost savings - rate - 5.9 Management initiatives / cost 0.1 10.5 inflation / other CAN$ fx (1.7
Slide 29: First Bus
First Bus £m Sep 2016 Sep 2015 Change Revenue 426.1 437.5 (2.6)% Operating profit1 13.5 15.4 (12.3)% Margin % 3.2% 3.5% (30) bps £m Revenue Operating profit1 Sep 2015 437.5 15.4 Depot closures (4.1) 4.0 Subtotal 433.4 19.4 Passenger revenue (3.3) (3.3) Cost inflation - (7.2) Management initiatives (
Slide 30: First Rail
First Rail £m Sep 2016 Sep 2015 Change Revenue 595.8 608.9 (2.2)% Operating profit1 22.1 32.9 (32.8)% Margin % 3.7% 5.4% (170) bps 1 Before amortisation charges and certain other items 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 30
Slide 31: Foreign exchange
Foreign exchange Sep 2015 Translation UK fuel Non- £m Sep 2015 constant Sep 2016 impact impact currency currency Revenue 2,440.9 +149.1 2,590.0 - (25.3) 2,564.7 - North American divisions 1,387.5 +147.8 1,535.3 - +0.1 1,535.4 - UK divisions 1,046.4 +1.3 1,047.7 - (25.8) 1,021.9 - Group items 7.0 - 7
Slide 32: First Rail passenger revenue growth
First Rail passenger revenue growth Six months to Sep 2016 Mar 2016 Sep 2015 Mar 2015 Great Western Railway (GWR) (0.1)% 5.4% 6.8% 6.5% TransPennine Express (TPE) 2.0% 5.5% 6.6% 6.5% Hull Trains 6.0% 13.5% 18.7% 15.2% First ScotRail (FSR) n/a n/a n/a 8.1% Total 0.7% 5.6% 7.0% 7.0% ▪ Like-for-like vo
Slide 33: First Rail ring-fenced cash and bonds
First Rail ring-fenced cash and bonds First Rail ring-fenced cash, £m Sep 2016 Sep 2015 GWR 194.6 151.6 TPE 33.4 45.5 Total 228.0 197.1 First Rail bonds, £m Sep 2016 Sep 2015 GWR performance bond 10.0 10.0 GWR season ticket bond 28.8 26.0 TPE performance bond (old franchise) 4.4 10.6 TPE season tick
Slide 34: Return on capital employed (ROCE)
Return on capital employed (ROCE) ROCE As at 30 September 2015 7.1% Foreign exchange (100)bps ROCE at constant currency 6.1% Trading +30bps Balance sheet – including pensions +70bps As at 30 September 2016 7.1% 15 November 2016 FirstGroup half-yearly results for the six months to 30 September 2016 3
Slide 35: Total capital expenditure
Total capital expenditure Cash Fixed asset additions Sep 2016 Sep 2015 Sep 2016 Sep 2015 First Student 97.2 131.8 84.2 108.2 First Transit 6.9 9.2 5.6 7.9 Greyhound 14.9 3.0 6.8 3.7 First Bus 58.7 24.8 33.6 32.1 First Rail 28.5 31.8 22.8 31.3 Group items 0.3 1.3 0.3 1.3 Total 206.5 201.9 153.3 184.5
Slide 36: Current diesel hedge position
Current diesel hedge position UK North America Year to 31 March 2016/17 2017/18 2018/19 2019/20 2016/17 2017/18 2018/19 2019/20 Annual volume (barrels 'm) 1.8 1.8 1.7 1.2 1.4 1.4 1.4 1.4 % hedged 91% 89% 48% 10% 68% 42% 20% 4% Crude rate ($/barrel) $69.94 $61.08 $56.18 $42.58 $71.64 $58.27 $49.57 $4
Slide 37: Foreign exchange
Foreign exchange ▪ Lower US Dollar compared to March balance sheet date: 30 Sep 2016 31 Mar 2016 30 Sep 2015 Closing rate for the balance sheet US$ $1.30 $1.41 $1.52 Closing rate for the balance sheet CAN$ $1.71 $1.87 $2.02 ▪ Lower US Dollar compared to prior year effective rate: 6 months to Year to
Slide 38: Pensions
Pensions Deficit Cash contributions P&L charge1 £m Sep Mar Sep Sep Mar Sep Sep Mar Sep 2016 2016 2015 2016 2016 2015 2016 2016 2015 North America (234.3) (212.5) (130.2) 9.6 20.1 16.3 4.6 7.6 3.0 First Bus (263.4) (57.5) (27.2) 29.3 41.6 25.7 8.2 20.2 10.4 First Rail (2.6) (0.9) (0.7) 10.4 27.1 13.1
Slide 39: Debt profile
Debt profile £400m £350m £350m £300m £300m 8.75% £325m 8.125% £250m Apr 2021 5.25% £250m Sept 2018 6.125% bond1 Nov 2022 bond £200m Jan 2019 bond bond1 £200m £150m 6.875% Sept 2024 £100m bond £50m £0m H1 17/18 FY 20/21 FY 23/24 FY 16/17 FY 17/18 H1 18/19 FY 18/19 H1 19/20 FY 19/20 H1 20/21 H1 21/22
Slide 40: Net finance costs and taxation
Net finance costs and taxation Net finance costs, £m Sep 2016 Sep 2015 Bonds 42.1 42.1 Bank borrowings 6.8 6.3 Loan notes 0.5 0.5 Senior unsecured loan notes 2.3 2.1 Finance lease interest 3.4 4.4 Notional interest on long term provisions 7.9 7.2 Notional interest on pensions 4.8 4.0 Investment inco
Slide 41: 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