FirstGroup plc · LSE:FGP
FirstGroup — H1 2012/13 Earnings Presentation
44 slides from FirstGroup's earnings presentation, Nov 7, 2012
Slide 1: FirstGroup plc Half yearly results to 30 September 2012
FirstGroup plc Half yearly results to 30 September 2012 Wednesday 7 November 2012 1
Slide 2: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: Overview
Overview • Overall trading for first half is in line with our expectations, despite continued economic weakness • Results reflect expected reductions in UK Bus, where we are taking action to reposition the business and restore growth, and in UK Rail as a result of the transition to the three year ex
Slide 4: Business improvement programmes at different stages across the Group
Business improvement programmes at different stages across the Group Early Mid Advanced Progressing extensive Recovery plan firmly Strong growth and operating programme to reposition the established and seeing performance with further business progress opportunities First Student First Transit Greyh
Slide 5: Chris Surch Financial Review
Chris Surch Group Finance Director Financial Review 5
Slide 6: Key highlights
Key highlights • Overall trading for the Group in line with our expectations – Operating profit £128.7m – Underlying EPS 7.2p – Cash outflow £250.2m – Interim dividend of 7.62p, held in line with last year • Underlying investment in the business up by 37% • Headroom under committed facilities plus f
Slide 7: Financial Summary
Financial Summary Continuing Sep 12 Sep 11 Change operations1 £m £m Revenue 3,250.0 3,168.8 2.6% Operating Profit2 128.7 163.0 (21.0)% Margin % 4.0% 5.1% (1.1)pp Operating £m Revenue • Revenue grew 5.4% excluding the extra Profit2 Sep 11 3,169 163 week of trading last year Student (43) - • Operating
Slide 8: First Student
First Student Sep 12 Sep 11 Change $m $m Revenue 1,017.2 1,107.6 (8.2)% Operating Profit 10.8 9.0 20.0% Margin % 1.1% 0.8% 0.3pp Operating • US Dollar revenues excluding the $m extra week reduced by 3% Profit • Operating margin excluding the Sep 11 9.0 extra week increased by 1.1% Extra week (9.5) •
Slide 9: First Transit
First Transit Sep 12 Sep 11 Change $m $m Revenue 627.8 627.3 0.1% Operating Profit 45.5 44.1 3.2% Margin % 7.2% 7.0% 0.2pp $m Operating • US Dollar revenues excluding Profit the extra week increased by Sep 11 44.1 4% Extra week (2.4) • Operating margin increased by Employee Healthcare (2.8) 0.2pp to
Slide 10: Greyhound
Greyhound Sep 12 Sep 11 Change $m $m Revenue 532.6 556.6 (4.3)% Operating Profit 52.5 49.4 6.3% Margin % 9.9% 8.9% 1.0pp Operating • Like-for-like revenue growth of 1.6% - $m Profit US 2.0% & Canada 0.5% Sep 11 49.4 • Revenue growth impacted by softening economic conditions Extra week (0.4) • Canada
Slide 11: UK Bus
UK Bus Sep 12 Sep 11 Change £m £m Revenue 572.9 586.9 (2.4)% Operating Profit 39.6 59.4 (33.3)% Margin % 6.9% 10.1% (3.2)pp • Adjusting for the extra week revenue Operating £m Profit increased by 1.6% Sep 11 59.4 • Like-for-like passenger revenue growth of 2.6% - improved revenue Extra week (3.5) gr
Slide 12: UK Rail
UK Rail Sep 12 Sep 11 Change £m £m Revenue 1,296.4 1,162.6 11.5% Operating Profit 35.4 55.7 (36.4)% Margin % 2.7% 4.8% (2.1)pp • Continued strong demand with like-for-like passenger revenue growth of 8.1% • Operating margin reduction principally as a result of the expected lower profits at FTPE as w
Slide 13: UK Rail passenger revenue growth
UK Rail Passenger revenue growth Six months to: Sep 12 Mar 12 Sep 11 Mar 11 FCC 8.2% 8.1% 11.0% 6.2% FGW 8.9% 8.0% 7.9% 4.5% FSR 5.3% 6.6% 8.3% 8.1% FTPE 9.4% 9.8% 10.7% 9.3% Hull Trains 2.6% 0.6% 1.7% 0.4% Total 8.1% 7.9% 9.0% 6.0% • Continued solid demand across all of our franchises – passenger v
Slide 14: Exceptional items
Exceptional items Sep 12 £m UK Rail bid costs 12.3 UK Bus depot sales and closures 3.3 First Transit legal settlements 5.9 21.5 • UK Rail bid costs were incurred during the period on our bids for West Coast, Greater Western, Thameslink and Essex Thameside franchises • UK Bus depot sales and closures
Slide 15: Capital investment
Capital investment Sep 12 Sep 11 £m £m First Student 90.6 55.4 First Transit 13.1 16.0 Greyhound 24.9 26.3 UK Bus 67.6 47.4 UK Rail 31.8 22.9 Other 2.1 - Total 230.1 168.0 • Underlying total equivalent investment increase of £62.1m or 37% in the period principally reflecting new buses in Student and
Slide 16: Cash generated by operations
Cash generated by operations Sep 12 £m H1 lower due to Student seasonality EBITDA 291.2 Significant improvement expected in Working capital (107.8) H2 principally due to seasonality and UK Rail payments timing Exceptional items (21.5) Principally UK Rail bid costs Expected to increase by £40m in FGW
Slide 17: Pensions
Pensions • Group deficit increased by £21m to £289m • New IAS 19 rules will apply from 2013/14 onwards. Estimated to reduce operating profit in the current year as follows: £m 2012/13 UK Bus (37) UK Rail (25) Greyhound (8) Total (70) • It must be emphasised that these are non-cash changes and will n
Slide 18: Financing
Financing • Net Debt : EBITDA ratio is at 2.9x (2011: 2.7x) • Net Debt : EBITDA ratio is usually higher in our first half and has increased in the period due to investment in the transformation programme • Liquidity – headroom under committed facilities plus free cash £718m • Sufficient headroom to
Slide 19: Financial Summary
Financial Summary • Trading during the period has been in line with expectations • Each of our divisions are at different stages in their recovery or transformation • The management actions we are taking are producing signs of encouraging results • As is typical of our operating model, we expect tha
Slide 20: Tim O'Toole Operational Review
Tim O’Toole Chief Executive Operational Review 20
Slide 21: First Student
First Student • Programme to address performance and strengthen operating model now firmly established and making good progress • Continued roll out of management actions across the breadth of our operations in 38 US States and nine Canadian Provinces/Territories • Good performance in recent bid sea
Slide 22: First Transit
First Transit • Continued steady growth and strong contract retention of >90% • Leveraging our reputation as the leading provider of flexible public transport solutions – e.g. established new transit system in Independence, Missouri • Strengthened our core services with new contract wins across diff
Slide 23: Greyhound
Greyhound • Leveraging the positive effects of a more flexible and agile operating model, enabling us to mitigate the impact of a sluggish economy and the lower pump prices on summer trading • Non-stop, enhanced Greyhound Express services continue to expand and achieve higher growth – Rolled out Exp
Slide 24: UK Bus
UK Bus • Continue to see challenging trading conditions as a result of lower economic activity in the major urban areas where we operate, increased fuel costs and reduced Government funding • Progressing programme to fix and restore growth, focused around three main areas: – Repositioning and rebala
Slide 25: UK Rail
UK Rail • We are the country’s largest rail operator with a quarter of the market and unrivalled expertise of every type of rail franchise • Revenue growth of 8% with strong contributions from all of our TOCs • Focused on performance – PPM MAA is at 90% or above for all of our franchises • Difficult
Slide 26: Summary
Summary • With fundamentally strong and diverse operations together with our improvement programmes, we are confident of achieving our goals to enhance performance and deliver improved growth and returns • In a period of transition and while there is significant work still to do, we are satisfied wi
Slide 27: Q&A
FirstGroup plc Half yearly results to 30 September 2012 Q&A 27 27
Slide 28: Appendices
Appendices Half yearly results for the six months to 30 September 2012 28
Slide 29: Financial results
Financial results Sep 12 Sep 11 Continuing operations1 Change £m £m Revenue 3,250.0 3,168.8 2.6% EBITDA 2 291.2 317.3 (8.2)% EBITDA % 9.0% 10.0% (1.0)pp Operating Profit3 128.7 163.0 (21.0)% Margin % 4.0% 5.1% (1.1)pp Interest (80.0) (78.5) (1.9)% Profit before tax3 48.7 84.5 (42.4)% Amortisation ch
Slide 30: Divisional composition
Divisional composition Revenue (£m) Operating Profit (£m) Operating Margin (%) Sep 121 Sep 11 Sep 121 Sep 11 Sep 121 Sep 11 Student 640.3 683.3 5.2 5.5 0.8% 0.8% Transit 397.2 387.3 28.8 27.2 7.3% 7.0% Greyhound 337.3 343.6 33.5 30.5 9.9% 8.9% UK Bus 572.9 586.9 39.6 59.4 6.9% 10.1% UK Rail 1,296.4
Slide 31: Cash flow
Cash flow Sep 12 Sep 11 £m £m Cash generated by operations 71.0 204.3 Gross capital expenditure (154.7) (121.7) Disposal proceeds 3.2 29.9 Interest, tax and other (100.9) (102.5) Dividends (including minority dividends) (83.0) (79.7) Proceeds from sale of businesses 14.2 5.5 Net cash outflow (250.2)
Slide 32: Capital Expenditure
Capital Expenditure Cash Fixed Asset Additions Sep 12 Sep 11 Sep 12 Sep 11 £m £m £m £m First Student 29.4 45.7 90.9 55.4 First Transit1 7.8 17.0 7.8 16.0 Greyhound 24.9 26.3 24.8 26.3 UK Bus1 58.7 21.8 48.1 23.4 UK Rail 31.8 10.9 31.8 24.6 Group items 2.1 - 2.1 - Total 154.7 121.7 205.5 145.7 Cash 8
Slide 33: Pensions
Pensions (Deficit)/Surplus Cash Contribution P&L Charge Sep Mar Sep Sep Mar Sep Sep Mar Sep £m 2012 2012 2011 2012 2012 2011 2012 2012 2011 North America (223.3) (215.2) (237.8) 23.2 21.6 18.0 3.6 7.1 3.4 UK Bus (48.7) (27.4) 4.5 25.3 54.3 20.5 (4.9) (9.4) (6.6) UK Rail (17.5) (25.3) (27.9) 18.9 41.
Slide 34: Diesel hedge position
Diesel hedge position UK North America 2012/13 2013/14 2014/15 2012/13 2013/14 2014/15 Annual volume (barrels’m) 2.5 1.8 1.5 1.6 1.6 1.6 % Hedged 88% 64% 17% 69% 56% 22% Crude rate ($/barrel) $102.27 $103.40 $97.81 $93.58 $93.62 $88.85 Diesel rate ($/barrel) $123.73 $126.30 $121.35 $120.94 $122.05 $
Slide 35: Gross Debt Distribution
Gross Debt Distribution £m 900 Liquidity Headroom at Sept 2012 750 Liquidity resources at September 2012 of £718m £300m Bond 2013 comprised free cash balances of £94m and committed liquidity headroom of £624m. £300m Bond 2018 600 Committed liquidity headroom is provided mainly by a $1.25 billion rev
Slide 36: Net finance costs
Net finance costs Sep 12 Sep 11 £m £m Bonds 46.2 47.0 Bank borrowings 17.5 17.0 Loan notes 0.5 0.5 Senior unsecured loan notes 2.0 1.7 Finance lease interest 5.1 3.8 Notional interest 9.7 9.3 Investment income (1.0) (0.8) Hedge ineffectiveness on financial derivatives ¹ 3.3 10.0 Net finance costs 83
Slide 37: Foreign exchange
Foreign exchange • Weaker US Dollar reduced translated Sterling debt compared to March Sep 12 Mar 12 Sep 11 Closing rate for the balance sheet US$ $1.62 $1.60 $1.56 Closing rate for the balance sheet CAN$ $1.59 $1.60 $1.64 • Effective US Dollar rate in line with prior period Sep 12 Mar 12 Sep 11 Eff
Slide 38: Taxation
Taxation Sep 12 Sep 11 £m £m Current tax 3.0 8.2 Deferred tax (7.1) 19.8 Tax (credit) / charge on continuing operations (4.1) 28.0 Tax paid 4.8 4.3 Tax rate on underlying profit before tax 20.1% 22.3% 38
Slide 39: UK Rail subsidy/(premium) profile
UK Rail subsidy/(premium) profile £m FCC FGW FSR FTPE GBRf Total FY 2010/11 (156.7) (249.9) 270.0 120.8 0.4 (15.4) 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) (436.4) 446.9 56.5 - (161.2) 39
Slide 40: Revenue support/profit share
Revenue support/profit share Estimate Sep 12 Mar 12 Sep 11 Six months to: 12/13 £m £m £m FCC Revenue Support 80% 26.0 33.2 21.7 FGW Revenue Support 80% 132.3 205.4 100.3 FTPE Profit Share 50% (1.5) (5.8) (1.5) Total 156.8 232.8 120.5 • FSR eligible for revenue support but currently trading above tar
Slide 41: UK Rail bonds
UK Rail bonds Sep 12 Sep 11 £m £m FTPE Performance bond 10.6 8.8 FSR Performance bond 25.0 25.0 FSR Season ticket bond 5.0 4.5 FSR Maintenance bond 20.7 20.7 FCC Performance bond 21.1 19.0 FCC Season ticket bond 56.1 50.0 FGW Performance bond 63.4 46.2 FGW Season ticket bond 25.8 22.4 Total 227.7 19
Slide 42: UK Rail ring-fenced cash
UK Rail ring-fenced cash Sep 12 Sep 11 £m £m FCC 62.1 59.3 FGW 36.1 47.6 FSR 69.1 55.7 FTPE 42.8 71.0 Total 210.1 233.6 42
Slide 43: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW FSR FTPE Years 4+2+3 7+3 10 8+5 Start date Apr 2006 Apr 2006 Oct 2004 Feb 2004 Current Expiry date Sep 2013 Mar 2013 Nov 2014 Apr 2015 • Due to the pause in the current live Rail franchise process the expiry date for the franchises may be extended • We are discuss
Slide 44: 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