FirstGroup plc · LSE:FGP
FirstGroup — H1 2011/12 Earnings Presentation
42 slides from FirstGroup's earnings presentation, Nov 9, 2011
Slide 1: FirstGroup plc Half yearly results
FirstGroup plc Half yearly results for six months to 30 September 2011 Wednesday 9 November 2011 1
Slide 2: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: 2011 Overview
2011 Overview • Overall Group trading in line with our expectations; achieved our objectives for the period • First Student – good momentum in recovery plan with positive early indicators • Steady performance in First Transit, continued growth in core segments • Actions taken in Greyhound delivering
Slide 4: Jeff Carr Financial Review
Jeff Carr Finance Director Financial Review 4
Slide 5: Key highlights
Key highlights • Overall performance in line with expectations – operating profit of £163m • Continued earnings growth – adjusted EPS +6.7% • An exceptional credit of £58m in the period, principally as a result of the pension benefit in UK Bus scheme change from RPI to CPI • Further progress to redu
Slide 6: Financial results
Financial results Sep 11 Sep 10 Continuing operations1 Change £m £m Revenue 3,168.8 3,069.9 3.2% EBITDA 2 323.4 331.3 (2.4)% EBITDA % 10.2% 10.8% (0.6)pp Operating Profit2 163.0 170.4 (4.3)% Margin % 5.1% 5.6% (0.5)pp Interest (78.5) (92.9) (15.5)% Profit before tax2 84.5 77.5 9.0% • Revenue grew by
Slide 7: Income statement
Income statement Sep 11 Sep 10 Continuing operations Change £m £m Profit before tax1 84.5 77.5 9.0% Amortisation charges (15.1) (17.7) Exceptional items 58.4 22.0 Profit before tax 127.8 81.8 56.2% Tax (28.0) (19.0) Profit after tax 99.8 62.8 58.9% Proposed interim dividend 7.62p 7.12p 7.0% Basic EP
Slide 8: First Student
First Student Sep 11 Sep 10 Change $m $m Revenue 1,107.6 1,074.6 3.1% EBITDA 129.5 157.3 (17.7)% EBITDA % 11.7% 14.6% (2.9)pp Operating Profit 9.0 40.0 (77.5)% Margin % 0.8% 3.7% (2.9)pp • Adjusting for the extra week revenues were 2.4% lower than corresponding period last year • As previously indic
Slide 9: First Transit
First Transit Sep 11 Sep 10 Change $m $m Revenue 627.3 596.5 5.2% EBITDA 51.4 46.9 9.6% EBITDA % 8.2% 7.9% 0.3pp Operating Profit 44.1 39.6 11.4% Margin % 7.0% 6.6% 0.4pp • Adjusting for the extra week revenue increased by 1.2% compared to corresponding period last year • Continued earnings growth a
Slide 10: Greyhound
Greyhound Sep 11 Sep 10 Change $m $m Revenue 556.6 513.0 8.5% EBITDA 73.5 61.5 19.5% EBITDA % 13.2% 12.0% 1.2pp Operating Profit 49.4 39.2 26.0% Margin % 8.9% 7.6% 1.3pp • Like-for-like passenger revenue growth of 3.7% • Greyhound US like-for-like revenue growth in Q1 of 3.7% accelerated to 4.1% in
Slide 11: UK Bus
UK Bus Sep 11 Sep 10 Change £m £m Revenue 586.9 570.5 2.9% EBITDA 96.5 91.5 5.5% EBITDA % 16.4% 16.0% 0.4pp Operating Profit 59.4 55.4 7.2% Margin % 10.1% 9.7% 0.4pp • Adjusting for the extra week overall revenue was down by 1.2% compared to the corresponding period last year • Like-for-like passeng
Slide 12: UK Rail
UK Rail Sep 11 Sep 10 Change £m £m Revenue 1,162.6 1,053.1 10.4% EBITDA 84.6 74.9 13.0% EBITDA % 7.3% 7.1% 0.2pp Operating Profit 55.7 48.4 15.1% Margin % 4.8% 4.6% 0.2pp • Strong earnings growth and margin enhancement • Like-for-like passenger revenue growth of 9.0% • FTPE franchise extended for 3
Slide 13: UK Rail passenger revenue growth
UK Rail Passenger revenue growth Six months to: Sep 11 Mar 11 Sep 10 Mar 10 FCC 11.0% 6.2% 2.8% 2.6% FGW 7.9% 4.5% 5.4% 2.5% FSR 8.3% 8.1% 3.5% 2.8% FTPE 10.7% 9.3% 5.7% 5.7% Hull Trains 1.7% 0.4% 7.7% (3.1)% Total 9.0% 6.0% 4.4% 2.8% • Improving like-for-like revenue growth • Continued strong deman
Slide 14: Cash flow
Cash flow Sep 11 Sep 10 Change £m £m £m EBITDA (including discontinued operations) 323.3 332.2 (8.9) Exceptional items (cash impact) (4.2) 22.3 (26.5) Other non-cash P&L items 2.4 4.1 (1.7) Working capital (26.5) (16.4) (10.1) Provisions (46.2) (30.2) (16.0) Pension payments in excess of income stat
Slide 15: Strengthening financial platform
Strengthening financial platform • New medium-term committed funding secured – US$150m private placement notes at fixed rate of 4.26% – $67m US finance leases at fixed rate of 2.35% – £15m UK Bus finance leases at fixed rate of 3.7% • Committed facility headroom of £601m at Sep 2011 • Continue to re
Slide 16: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 16
Slide 17: First Student
First Student • Execution of plan to reform operating model is well underway • Strong school start up – improved operating performance • Improved performance in recent bid season: – Focused retention strategy and new commercial team – Retained all of our 10 largest contracts up for renewal – Returne
Slide 18: First Student – recovery plan
First Student – recovery plan • Addressing performance and strengthening the operating model, focusing on six key areas: Improve driver labour Improve maintenance Eliminate bureaucracy productivity efficiency and costs and non-value add activity Maximise contract Drive step change in Transform organ
Slide 19: First Student recovery plan – labour productivity
First Student recovery plan – labour productivity • Significant opportunity to improve productivity through standard processes applied across 600 locations • Best practices in standard hours being applied across all route components to ensure greater efficiency, accuracy and fairness • Significant o
Slide 20: First Student recovery plan – engineering efficiencies
First Student recovery plan – engineering efficiencies • Significant opportunity to deliver productivity and efficiency improvements in engineering, maintenance and improved procurement practices • Identified opportunity to increase productivity by >10% through lean practices Example of engineering
Slide 21: First Transit
First Transit • Continued to deliver growth • Focusing on core business segments • Good growth in shuttle bus market – Key provider of university campus bus services in US, won further contracts including Kennesaw State university during period – Further contract wins to provide services in Fort McM
Slide 22: Greyhound
Greyhound • Tough decisions taken in the past now delivering results – revenue growth and operating margin improvement • 7-Eleven partnership - unlocking new markets through additional sales channels – Rolled out nationwide partnership with 7-Eleven and PayNearMe on 1 Nov following successful 3 mont
Slide 23: Greyhound Express – driving growth
Greyhound Express – driving growth • Launched December 2010 on high density city pair routes • Significantly enhanced customer proposition - 50 seat new and refurbished coaches with WiFi, power plugs, leather seats and more leg room • Within 11 months expanded to 65 markets from six hubs in three ma
Slide 24: UK Bus
UK Bus • Market leading position with our regional bus operations focused mainly in high density, urban areas • Good progress in London with new contract wins and improved operating performance • Expect trading conditions to remain challenging – Impact of softening macroeconomic trends, including re
Slide 25: UK Rail
UK Rail • Strong growth trends across all of our franchises and secured FTPE extension for further 3 years to 2015 • Vernon Barker (formerly MD of FTPE) appointed MD of UK Rail division – strong focus on customer service and proven track record • Significant opportunities in rail refranchising when
Slide 26: Summary
Summary • Addressing First Student – implementation of plan well underway, encouraging progress • First Transit – excellent reputation and strong pipeline of opportunities for continued growth from low capital investment • Greyhound – actions taken are delivering good results, leveraging advantage o
Slide 27: Q&A
Q&A 27
Slide 28: Appendices
Appendices Half yearly results for the six months to 30 September 2011 28
Slide 29: Diesel Hedge Position
Diesel Hedge Position UK North America 2011/12 2012/13 2013/14 2011/12 2012/13 2013/14 Annual volume (barrels’m) 2.6 2.6 2.0 1.7 1.7 1.7 % Hedged 84% 65% 27% 59% 48% 21% Crude rate ($/barrel) $88.07 $100.76 $103.24 $94.69 $92.71 $93.70 Diesel rate ($/barrel) $105.58 $122.20 $126.21 $112.87 $119.80 $
Slide 30: Gross Debt Distribution
150 300 450 600 750 900 0 £m FY 11/12 H2 FY 12/13 H1 FY 12/13 H2 FY 13/14 H1 FY 13/14 H2 FY 14/15 H1 FY 14/15 H2 FY 15/16 H1 FY 15/16 H2 FY 16/17 H1 FY 16/17 H2 FY 17/18 H1 FY 17/18 H2 Gross Debt Distribution FY 18/19 H1 FY 18/19 H2 FY 19/20 H1 FY 19/20 H2 FY 20/21 H1 FY 20/21 H2 FY 21/22 H1 FY 21/2
Slide 31: Net Finance Costs
Net Finance Costs Sep 11 Sep 10 £m £m Bonds 47.0 46.2 Bank borrowings 17.0 33.8 Loan notes 0.5 0.5 Senior unsecured loan notes 1.7 - Finance lease interest 3.8 3.3 Notional interest 9.3 9.8 Investment income (0.8) (0.7) Hedge ineffectiveness on financial derivatives ¹ 10.0 (1.2) Net finance costs 88
Slide 32: Foreign Exchange
Foreign Exchange • Stronger US$ increased translated Sterling debt compared to March Sep 11 Mar 11 Sep 10 Closing rate for the balance sheet US$ $1.56 $1.60 $1.58 Closing rate for the balance sheet CAN$ $1.64 $1.57 $1.62 • Weaker US$ compared to last half year reduced reported US earnings in period
Slide 33: Exceptional items & amortisation
Exceptional items & amortisation Sep 11 Sep 10 £m £m UK Bus Pension Scheme changes (73.3) - UK Rail bid costs 2.1 - Competition Commission costs 1.0 - UK Rail settlement of NR claim - (22.5) Other exceptional items 1.1 0.2 Loss on disposal of properties 0.7 1.5 Ineffectiveness on financial derivativ
Slide 34: Cash capital expenditure
Cash capital expenditure Sep 11 Sep 10 £m £m First Student 37.0 55.7 First Transit 16.3 3.4 Greyhound 5.6 16.3 UK Bus 21.8 54.8 UK Rail 11.0 16.7 Group items 0.1 0.3 Total 91.8 147.2 Cash purchases 65.8 142.1 Disposal proceeds (29.9) (13.4) New finance leases 55.9 18.5 91.8 147.2 34
Slide 35: Taxation
Taxation Sep 11 Sep 10 £m £m Current tax 8.2 14.7 Deferred tax 19.8 4.3 Tax charge on continuing operations 28.0 19.0 Tax rate on adjusted profit before tax 22.3% 25.0% Cash tax rates (based on full year PBT) 7.0% 9.0% 35
Slide 36: Pensions
Pensions (Deficit)/Surplus Cash Contribution P&L Charge Sep Mar Sep Sep Mar Sep Sep Mar Sep £m 2011 2011 2010 2011 2011 2010 2011 2011 2010 North America (237.8) (158.4) (182.6) 18.0 11.3 6.3 3.4 7.4 4.3 UK Bus 4.5 (30.1) (122.2) 20.5 34.7 17.6 (6.6) (1.9) 4.8 UK Rail (27.9) (54.7) (44.8) 18.8 38.6
Slide 37: UK Rail subsidy/(premium) profile
UK Rail subsidy/(premium) profile £m FCC FGW FSR FTPE GBRf Total FY 2009/10 (145.3) (140.7) 249.2 115.8 2.8 81.8 FY 2010/11 (156.7) (249.9) 270.0 120.8 0.4 (15.4) FY 2011/12 (192.7) (337.3) 297.2 113.6 - (119.2) 37
Slide 38: Revenue support/profit share
Revenue support/profit share Estimate Sep 11 Mar 11 Sep 10 10/11 £m £m £m FCC Revenue Support 80% 21.7 26.9 19.9 FGW Revenue Support 80% 100.3 141.3 73.5 FTPE Profit Share 52% (1.5) (10.9) (5.4) Total 120.5 157.3 88.0 • FSR eligible for revenue support but currently trading above target revenue 38
Slide 39: UK Rail Bonds
UK Rail Bonds Sep 11 Sep 10 £m £m FTPE Performance bond 8.8 8.8 FSR Performance bond 25.0 25.0 FSR Season ticket bond 4.5 4.0 FSR Maintenance bond 20.7 23.9 FCC Performance bond 19.0 22.5 FCC Season ticket bond 50.0 44.0 FGW Performance bond 46.2 46.2 FGW Season ticket bond 22.4 19.5 Total 196.6 193
Slide 40: UK Rail Ring-fenced Cash
UK Rail Ring-fenced Cash Sep 11¹ Sep 10 £m £m FCC 59.3 61.5 FGW 47.6 65.9 FSR 55.7 27.9 FTPE 71.0 64.0 Total 233.6 219.3 1. Slide amended on 27 February 2012 as previously published version had transposed the figures in the ‘Sep 11’ column. The total is unchanged from the slide published in November
Slide 41: 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 Expiry date Mar 2012 Mar 2013 Nov 2014 Jan 2012 Extension period Mar 2016* Apr 2015 (performance related) Authority extension period (at Up to Mar 2015 Jan 2017 discretion of the DfT) •
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