FirstGroup plc · LSE:FGP
FirstGroup — Investor Presentation (August 2019)
18 slides from FirstGroup's investor presentation, Aug 14, 2019
Slide 1: FirstGroup plc West Coast Partnership award
FirstGroup plc West Coast Partnership award 14 August 2019 14 August 2019 FirstGroup West Coast Partnership award
Slide 2: Overview
Overview ▪ First Trenitalia (70:30 FirstGroup:Trenitalia partnership) selected by the Department for Transport (DfT) to operate the West Coast Partnership from 8 December 2019 ▪ Unique opportunity in two phases: − Phase 1: Operate InterCity West Coast, one of the most consistently successful interci
Slide 3: Phases of the partnership
Phases of the partnership 2019 2026 2031 2034 Phase 1 Role 1. InterCity operations Initial Franchise period Possible extension – revenue Operate InterCity West Dec 2019 – Mar 2026 and cost reset period Coast services Role 2. Shadow Operator Shadow Operator period Design, develop and Dec 2019 – Mar 2
Slide 4: InterCity West Coast operations
Phase 1 InterCity West Coast operations ▪ Services to Manchester, Liverpool, Birmingham, Glasgow and North Wales from London Euston ▪ 39m passenger journeys in 2019 – 69% leisure, 22% business, 9% commuter ▪ Key statistics (current franchise): − Passenger revenue (2018/19): £1.2bn; ave yield £31 / j
Slide 5: Delivering for passengers
Phase 1 Delivering for passengers ▪ Exceptional customer experience: 56 Pendolino trains completely refurbished, incorporating 25,000 brand new seats and additional luggage space. Better and more reliable free Wi-Fi and at-seat power, with wireless charging and onboard entertainment. Catering upgrad
Slide 6: Shadow Operator
Phase 1 Shadow Operator ▪ Shadow Operator is on a cost reimbursement basis for agreed activities, with incentive payments based on performance against pre-defined criteria ▪ Working as key partners to HS2, the DfT, our stakeholders and customers to develop world-class high speed services and maximis
Slide 7: Integrated Operations
Phase 2 Integrated Operations ▪ First Trenitalia will operate HS2 and the reshaped InterCity West Coast rail services together as an integrated operation in the second phase, under a management contract ▪ Revenue and cost risk will transfer to DfT and First Trenitalia will earn a management fee equi
Slide 8: Initial Franchise period (2019-2026)
Key terms – Phase 1 Initial Franchise period (2019-2026) ▪ Revenue growth during InterCity West Coast ‘traditional’ franchise operation: − Mid-single digit revenue CAGR from £1.25bn baseline in 2018/19, lower than the historic growth rate over the last ten years − Supported by 1.2% CAGR in seat mile
Slide 9: GDP protection mechanism
Key terms – Phase 1 GDP protection mechanism ▪ GDP is a well established measure of economic performance, GDP forecast used in the mechanism is produced by Office for Budget Responsibility (OBR) ▪ Target GDP index set by DfT in the bid, after each year Actual GDP compared to Target index ▪ Current G
Slide 10: FRM protection
Key terms – Phase 1 FRM protection ▪ Forecast Revenue Mechanism (FRM) provides an overall level of revenue protection ▪ Shortfall and Surpluses are shared whatever the cause once the franchise FRM revenue falls outside of a 4% band of our Bid revenue ▪ FRM Revenue includes passenger revenue, perform
Slide 11: Integrated Operations (2026-2031)
Key terms – Phase 2 Integrated Operations (2026-2031) ▪ First Trenitalia not on revenue risk ▪ Management contract with annual cost budget setting ▪ Fixed management fee equivalent to a low single digit margin on existing revenues, with incentive payments based on performance against pre-defined cri
Slide 12: Bid derisking
Bid derisking ▪ Initial bids submitted in July 2018 after external validation and extensive review by both JV partners ▪ DfT bid assessment on weighted price and quality scores ▪ Assumptions have been kept under rigorous internal review, as well as back-tested against the performance of current ICWC
Slide 13: 70:30 partnership with Trenitalia
70:30 partnership with Trenitalia ▪ JV agreement with Trenitalia: complementary skillsets; condition of entry to the process that bidders could demonstrate experience in operating high speed rail networks − Trenitalia planned, launched and operated high speed networks in Italy which have delivered s
Slide 14: Key financials
Key financials ▪ Total revenue in 2018/19 was £1.25bn ▪ Mid single digit revenue CAGR assumed, lower than historical growth rates, and principally economic fundamentals-driven (RPI and GDP) ▪ Premium payments to government on first phase of £1.6bn real NPV ▪ First phase margin towards the high end o
Slide 15: Summary
Summary ▪ Unique opportunity and contract with our strong partners Trenitalia ▪ More appropriate risk/reward balance ▪ Committed to delivering this partnership successfully for our customers, shareholders and other stakeholders ▪ With our rail portfolio strengthened through today’s award, we will no
Slide 16: Commitments and bonds
Appendix Commitments and bonds Initial Franchise period Management contract Real Funding Commitments, £m FirstGroup FirstGroup 100% 100% Comments Share (70%) Share (70%) For the management contract, any drawdown at the end of Parent Company £102m £71m £45m £32m the Initial Bid Period will be added t
Slide 17: Timeline
Appendix Timeline 2 Nov 2016 Joint Venture agreement signed with Trenitalia 19 Jan 2017 West Coast Partnership prospectus published 22 Jun 2017 Shortlisted bidders announced 13 July 2018 West Coast Partnership original bid submission 23 Nov 2018 Binding re-bid submitted 14 Aug 2019 West Coast Partne
Slide 18: 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