FirstGroup plc · LSE:FGP
FirstGroup — H1 2014 Earnings Presentation
42 slides from FirstGroup's earnings presentation, Nov 6, 2013
Slide 1: FirstGroup plc Half-yearly results
FirstGroup plc Half-yearly results for the six months to 30 September 2013 Wednesday 6 November 2013
Slide 2: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: Overview
Overview • Trading for the period in line with our expectations, despite continued headwinds in some markets • Divisional performances on track and recovery plans progressing • Focused on achieving our medium term targets including growth, margins and returns • While much remains to be done, we are
Slide 4: Financial review
Chris Surch Group Finance Director Financial review 4
Slide 5: Key highlights
Key highlights • Underlying operating profit £109.9m up 10.1% • Underlying EPS 1.9p in line with last half year • Net cash outflow of £103.0m (H1 2012: £250.2m outflow) – London depot disposal completion c.£80m proceeds • Rights issue net proceeds £584m • Underlying capital investment increased to £
Slide 6: Financial summary
Financial summary Sep 2013 Sep 2012 restated1 Change Revenue £3,300.7m £3,250.0m +1.6% Underlying2 H1 2013 H1 2012 Restated1 Change - EBITDA3 £269.2m £262.3m +2.6% - Operating profit £109.9m £99.8m +10.1% - Margin % 3.3% 3.1% +0.2pp - Profit before tax £28.3m £19.7m +43.7% - EPS 1.9p 1.9p - Other H1
Slide 7: First Student
First Student Sep 13 Sep 12 Change $m $m Revenue 1,029.7 1,017.2 1.2% Operating profit 18.1 10.8 67.6% Margin % 1.8% 1.1% 0.7pp $m Revenue Operating • Ongoing efficiency actions profit underway to achieve double Sep 12 1,017.2 10.8 digit margin target Net growth /days (8.9) 3.8 • $100m cost savings
Slide 8: First Transit
First Transit Sep 13 Sep 12 Change $m $m Revenue 630.8 627.8 0.5% Operating profit 48.6 45.5 6.8% Margin % 7.7% 7.2% 0.5pp Operating • Strong underlying $m Revenue Profit revenues1 +8.8% Sep 12 627.8 45.5 • Underlying margin1 FSS (48.0) (0.9) maintained Sep 12 continuing • Growth principally driven
Slide 9: Greyhound
Greyhound Sep 13 Sep 12 Change $m $m Revenue 514.7 532.6 (3.4)% Operating profit 49.1 54.5 (9.9)% Margin % 9.5% 10.2% (0.7)pp $m Revenue Operating • US economic conditions continue profit to affect core market – though Sep 12 532.6 54.5 some improvement in Q2 Passenger revenue (17.9) (17.9) • Margin
Slide 10: UK Bus
UK Bus Sep 13 Sep 12 Change £m £m Revenue 490.7 572.9 (14.3)% Operating profit 17.3 21.0 (17.6)% Margin % 3.5% 3.7% (0.2)pp Operating • LFL passenger revenue £m Revenue profit Sep 12 572.9 21.0 growth of 1.7% Depot closures and sales (71.9) (3.7) • Passenger volume growth Games Transport (17.2) (3.8
Slide 11: UK Rail
UK Rail Sep 13 Sep 12 Change £m £m Revenue 1,395.2 1,296.4 7.6% Operating profit 32.8 23.8 37.8% Margin % 2.4% 1.8% 0.6pp • Continued strong demand with like-for-like passenger revenue growth of 5.7% • Underlying passenger volume growth of 3.6% 11
Slide 12: Net cash flow
Net cash flow1 269.2 (194.7) 76.3 (22.8) (106.9) (30.8) (7.6) (23.1) (62.6) (103.0) FGW provision Provisions Cash capex EBITDA Pensions Exceptionals/other Disposals Working capital Net cash outflow Interest & tax • Full year net cash flow is expected to be broadly neutral 1. Excluding the proceeds o
Slide 13: Capital structure
Capital structure • Rights issue raised net proceeds of £584m • Liquidity – headroom under committed facilities plus free cash: £1,003m (2012: £718m) • April 2013 Bond repaid • Shorter dated debt repaid from proceeds of rights issue • Average debt maturity 6.5 years (2012: 5.1 years) • As previously
Slide 14: Committed to medium term financial objectives
Committed to 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 • Ca
Slide 15: Business review
Tim O’Toole Chief Executive Business review 15
Slide 16: First Student
First Student • Market remains challenging, growth opportunities limited • Driving comprehensive change programme across the business • Continue to drive efficiencies and uniform best practice throughout business – Labour – Fleet – Engineering • Growing non-school charter business to improve asset u
Slide 17: First Transit
First Transit • Grown business by average 6% per year over last four years, while maintaining good margins • Broad-based growth continues across our service offering, from renewals, contract expansions, and further outsourcing • Continue to invest in our market-leading shuttle bus business • Increas
Slide 18: Greyhound
Greyhound • While traditional Greyhound customers continue to feel effects of downturn, there are some signs of improvement • US margins remain resilient despite recent revenue volatility, demonstrating effect of actions taken to improve cost and operating flexibility • Strong growth continues in Gr
Slide 19: UK Bus
UK Bus • Highly bespoke programme to position business for improved growth and margins – tailored to local market needs and opportunities Portfolio Repositioning completed Disciplined Lost mileage down 20%, punctuality continuing to improve operations Network 10 major exercises undertaken so far, an
Slide 20: UK Rail
UK Rail • Solid passenger revenue and volume growth across all of our franchises • Focus on operating performance, alongside delivery of major upgrades to infrastructure and capacity across our networks • 23-month First Great Western contract signed; First Capital Connect discussions ongoing • Franc
Slide 21: Summary
Summary • Recovery plans progressing in First Student and UK Bus, well positioned with growth opportunities in Transit, Greyhound and UK Rail • Early stages of a multi-year programme with much still to do • Focused on medium term financial objectives including revenue, margin and returns, while cont
Slide 22: Q&A
FirstGroup plc Half-yearly results for the six months to 30 September 2013 Q&A
Slide 23: Appendices
First (p Appendices © =
Slide 24: Financial results
Financial results Sep 13 Sep 121 Change £m £m Revenue 3,300.7 3,250.0 1.6% EBITDA 2 269.2 262.3 2.6% EBITDA % 8.2% 8.1% 0.1pp Operating Profit 3 109.9 99.8 10.1% Margin % 3.3% 3.1% 0.2pp Interest (81.6) (80.1) (1.9)% Profit before tax 3 28.3 19.7 43.7% Amortisation/other 4 (44.6) (18.8) (137.2)% Exc
Slide 25: Divisional composition
Divisional composition Revenue (£m) Operating Profit (£m) Operating Margin (%) Sep 13 Sep 12 Sep 13 Sep 12 Sep 13 Sep 12 Student 666.4 640.3 11.0 5.2 1.7% 0.8% Transit 408.7 397.2 31.4 28.8 7.7% 7.3% Greyhound 333.7 337.3 31.8 34.8 9.5% 10.3% UK Bus 490.7 572.9 17.3 21.0 3.5% 3.7% UK Rail 1,395.2 1,
Slide 26: First Transit – underlying business
First Transit – underlying business • Underlying margin maintained at 7.7% adjusted for the disposal of First Support Services (FSS): Sep 2013 Sep 2012 Revenue Op profit Revenue Op profit Margin Margin $m $m $m $m Core 630.8 48.6 7.7% 579.8 44.6 7.7% FSS - - - 48.0 0.9 1.9% Total Transit 630.8 48.6
Slide 27: Exceptional items
Exceptional items Sep 13 £m UK Bus depot sales and closures 15.3 UK Rail bid costs (7.0) 8.3 • UK Bus depot sales and closures primarily represents a £16.5m gain on the disposal of the eight London bus depots • UK Rail bid costs were incurred during the period principally in connection with the Scot
Slide 28: Capital expenditure
Capital expenditure Cash Fixed Asset Additions Sep 13 Sep 12 Sep 13 Sep 12 £m £m £m £m First Student 96.5 29.4 96.4 90.9 First Transit 8.1 7.8 8.0 7.8 Greyhound 32.6 24.9 32.6 24.8 UK Bus 35.6 58.7 61.0 48.1 UK Rail 21.1 31.8 20.4 31.8 Group items 0.8 2.1 0.8 2.1 Total 194.7 154.7 219.2 205.5 Cash 1
Slide 29: Pensions
Pensions Deficit Cash contribution P&L charge1 Sep Mar Sep Sep Mar Sep Sep Mar Sep £m 2013 2013 2012 2013 2013 2012 2013 2013 2012 North America (152.0) (210.2) (223.3) 21.5 28.4 23.2 3.7 4.9 2.4 UK Bus2 (45.3) (24.7) (48.7) 25.4 49.1 25.3 15.5 25.0 13.7 UK Rail3 (7.9) (12.9) (17.5) 28.6 42.4 18.9 2
Slide 30: IAS 19 changes
IAS 19 changes • The half year to September 2012 and full year to 31 March 2013 have been restated: 6 months 12 months to Sep 12 to Mar 13 £m £m UK Bus (19) (37) UK Rail (11) (25) Greyhound 1 2 Impact on operating profit (29) (60) Interest on pensions (Greyhound) (5) (10) Total impact before FGW pro
Slide 31: Diesel hedge position
Diesel hedge position UK North America 2013/14 2014/15 2015/16 2013/14 2014/15 2015/16 Annual volume (barrels’m) 2.2 2.2 1.4 1.6 1.6 1.6 % Hedged 93% 74% 39% 69% 55% 19% Crude rate ($/barrel) $104.83 $100.44 $97.21 $93.38 $89.93 $87.07 Diesel rate ($/barrel) $126.53 $122.22 $118.44 $122.57 $118.81 $
Slide 32: Gross debt distribution
Gross debt distribution £m 1,250 Liquidity Headroom 1,000 Liquidity resources at September 2013 of £300m Bond 2018 £1,003m comprised free cash balances of £199m £250m Bond 2019 and committed liquidity headroom of £804m. Committed liquidity headroom is provided mainly £350m Bond 2021 750 by a $1.25 b
Slide 33: Net finance costs
Net finance costs Sep 13 Sep 12 £m £m Bonds 45.6 46.2 Bank borrowings 13.3 17.5 Loan notes 0.5 0.5 Senior unsecured loan notes 2.0 2.0 Finance lease interest 7.3 5.1 Notional interest on long term provisions 10.0 9.7 Notional interest on pensions 3.6 0.1 Investment income (0.7) (1.0) Net finance cos
Slide 34: Foreign exchange
Foreign exchange • Weaker US Dollar compared to March: Sep 13 Mar 13 Sep 12 Closing rate for the balance sheet US$ $1.61 $1.52 $1.62 Closing rate for the balance sheet CAN$ $1.66 $1.55 $1.59 • Stronger US Dollar rate: Sep 13 Mar 13 Sep 12 Effective rate on US$ earnings $1.56 $1.58 $1.62 Effective ra
Slide 35: Taxation
Taxation Sep 13 Sep 12 £m £m Current tax 2.0 3.0 Deferred tax (13.8) (12.9) Tax credit (11.8) (9.9) Tax paid 4.2 4.8 Tax rate on underlying profit before tax 22.0% 20.1% • Tax rate increased due to higher proportion of North American profit 35
Slide 36: UK Rail passenger revenue growth
UK Rail Passenger revenue growth Six months to: Sep 13 Mar 13 Sep 12 Mar 12 FCC 6.9% 6.3% 8.2% 8.1% FGW 4.6% 6.7% 8.9% 8.0% FSR 6.2% 6.6% 5.3% 6.6% FTPE 6.3% 7.8% 9.4% 9.8% Hull Trains 8.0% 9.4% 2.6% 0.6% Total 5.7% 6.7% 8.1% 7.9% • Continued solid demand across all of our franchises – passenger vol
Slide 37: UK Rail subsidy/(premium) profile
UK Rail subsidy/(premium) profile £m FCC FGW FSR FTPE Total FY 2011/12 (188.8) (331.7) 297.5 113.6 (109.4) HY 2012/13 (105.5) (200.5) 206.4 26.0 (73.6) FY 2012/13 (228.2) (435.3) 447.2 57.0 (159.3) HY 2013/14 (118.0) (234.2) 231.2 30.8 (90.2) • FGW franchise payment increase for HY reflects £43m for
Slide 38: Revenue support/profit share
Revenue support/profit share Estimate Sep 13 Mar 13 Sep 12 Six months to: 13/14 £m £m £m FCC Revenue Support 80% 39.3 20.0 26.0 FGW Revenue Support 80% 153.4 137.6 132.3 FTPE Profit Share 50% (1.4) (3.1) (1.5) Total 191.3 154.5 156.8 • FSR eligible for revenue support but currently trading above tar
Slide 39: UK Rail bonds
UK Rail bonds Sep 13 Sep 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 21.1 FCC Season ticket bond 58.0 56.1 FGW Performance bond 63.4 63.4 FGW Season ticket bond 19.8 25.8 Total 225.3 2
Slide 40: UK Rail ring-fenced cash
UK Rail ring-fenced cash Sep 13 Sep 12 £m £m FCC 74.7 62.1 FGW 14.8 36.1 FSR 85.6 69.1 FTPE 43.1 42.8 Total 218.2 210.1 40
Slide 41: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW old FGW new FSR FTPE Start date Apr 2006 Apr 2006 Oct 2013 Oct 2004 Feb 2004 Expiry date Mar 2014 Oct 2013 - Mar 2015 Mar 2015 Current expiry date - - - Mar 2015 Oct 2015 DfT STA programme Sep 2014 - Sep 2015 - Feb 2016 • DfT STA FGW franchise runs to September 20
Slide 42: 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 FirstGroup plc's current expectations an