FirstGroup plc · LSE:FGP
FirstGroup — FY2018 Earnings Presentation
38 slides from FirstGroup's earnings presentation, May 31, 2018
Slide 1: FirstGroup plc Full year results
FirstGroup plc Full year results For the twelve months to 31 March 2018 Thursday 31 May 2018 31 May 2018 FirstGroup full year results for the twelve months to 31 March 2018
Slide 2: Overview
Overview ▪ This year’s results fell short of our ambitions – disappointed that we did not make the further progress we intended based on the trends we saw at end of prior year ▪ However Group delivered strong cash generation and stable adjusted earnings despite a challenging operating environment in
Slide 3: Financial summary
Financial summary Change in SWR- and 53rd week- £m Mar 2018 Mar 2017 Change constant adjusted change, in currency1 constant currency2 Revenue 6,398.4 5,653.3 +13.2% +14.0% +1.0% Adjusted3 - EBITDA 690.6 686.6 +0.6% +2.1% - Operating profit 317.0 339.0 (6.5)% (4.3)% (10.4)% - Margin % 5.0% 6.0% (100)
Slide 4: Revenue performance
Revenue performance ▪ Group revenue growth +1.0% in constant currency excluding benefit of new SWR franchise and 53rd week ▪ Road divisions flat excluding the 53rd week; First Student and First Bus most impacted by service suspensions due to the weather in the final quarter 80.5 6,398.4 ▪ Solid LFL
Slide 5: Operating profit performance
Operating profit performance ▪ Road divisions: good margin progress in Bus – offset by Greyhound long haul challenges, Transit's driver labour costs and reduced margin in Student ▪ Rail division: solid profitability driven by GWR and SWR, partially offset by losses in TPE 339.0 331.2 10.7 317.0 9.7
Slide 6: First Student
First Student 2017/18: ▪ Fourth year of 'up or out' bidding strategy continued to deliver − 83% retention better than prior year but lower than we had targeted − 5.3% average price increases on 'at risk' business ▪ Initial bidding for 2018/19 school year progressing well ▪ Ongoing driver shortage co
Slide 7: First Transit
First Transit 2017/18: ▪ Continuing to find growth by responding to new opportunities − 33 new contracts and 82% retention rate in the period − Main wins this year in fixed route, paratransit ▪ Responded well in H2 to the contract cost challenges experienced in H1 ▪ Close down of Canadian oil sands
Slide 8: Greyhound
Greyhound 2017/18: ▪ Positive short haul and Express trends from pricing and yield tools – Greyhound Express LFL growth +7.7% ▪ However insufficient to offset weaker passenger demand in long haul – impact of growth in ultra low cost carrier fleet capacity and secondary airport connections ▪ Limited
Slide 9: First Bus
First Bus 2017/18: ▪ Encouraging improvement in LFL revenue growth (H1: +0.6%, FY: +1.1%) underpinned by modest commercial passenger volume growth ▪ Momentum behind substantial margin improvement, from stabilised volumes and cumulative effect of ongoing cost efficiency actions, some fuel benefit ▪ L
Slide 10: First Rail
First Rail 2017/18: ▪ LFL passenger revenue growth +4.1%; solid financial contribution in year ▪ GWR revenue growth accelerated in part from introduction of Hitachi InterCity Express Trains; facing ongoing infrastructure upgrades ▪ SWR launched during Waterloo station upgrade; made solid contributio
Slide 11: Non-GAAP adjustments
Non-GAAP adjustments £m Mar Mar ▪ Greyhound non-cash goodwill and other 2018 2017 asset impairments of £277.3m due to Amortisation charges (70.9) (60.2) structural changes in long haul competitive environment Greyhound goodwill and other asset ▪ £106.3m provision for possible losses over (277.3) - i
Slide 12: Income statement – continued
Income statement – continued Reported Change in £m Mar 2018 Mar 2017 change constant fx Adjusted1 Operating profit 317.0 339.0 (6.5)% (4.3)% Lower net debt, Net finance costs (120.0) (132.0) (9.1)% lower interest rates Profit before tax 197.0 207.0 (4.8)% (1.2)% Tax (44.2) (53.8) Impact of recent -
Slide 13: Capital expenditure
Capital expenditure £m Mar Mar ▪ Disciplined investment in passenger 2018 2017 carrying fleet and IT programmes Passenger carrying vehicles (PCV) 249.1 224.7 continues IT including transformation & software 28.5 33.3 Equipment 18.9 19.6 ▪ Expect Road capital investment before acquisitions of c.£350-
Slide 14: Net cash flow
Net cash flow (£m) 690.6 Operating cash flow / cash conversion1: Mar 2018: £296.0m / 93% Mar 2017: £301.1m / 89% 30.1 296.0 11.4 (425.6) (10.5) 88.5 199.0 (47.9) 110.5 (137.6) EBITDA Disposal proceeds Operating cash flow Net cash flow other provisions First Rail start of Gross cash capex Pensions ch
Slide 15: Financial position
Financial position ▪ Strong liquidity, stable financing position: net debt £1,070.3m (2017: £1,289.9m) − Headroom under committed facilities plus free cash: £766.4m (2017: £941.1m) − Net debt: EBITDA ratio 1.5x (2017: 1.9x), or 2.1x adjusted for Rail ring-fenced cash (2017: 2.3x) − Placed $275m in n
Slide 16: 2018/19 guidance
2018/19 guidance ▪ Group earnings expected to be broadly stable − Expecting overall improvement in Road margins and returns, underpinned by First Bus turnaround momentum and First Student's growth plans − Smaller contribution expected from the First Rail portfolio, reflecting slower rate of industry
Slide 17: FirstGroup today
FirstGroup today Student 45% Rail division 31% of revenue 17% of adjusted operating profit Road 30% of gross capex currently Rail (funded through franchise) Road divisions 83% 17% Capital light – raises Group ROCE 69% of revenue Transit to 9.5% 83% of adjusted operating profit 70% of gross capex 17%
Slide 18: Future priorities
Future priorities ▪ This year’s results fell short of our ambitions – disappointed we did not make further progress as intended, based on the trends we saw at end of last year ▪ Tim O'Toole has stepped down from the Board and his position as Chief Executive − Process to select successor is underway
Slide 19: FirstGroup plc Full year results
FirstGroup plc Full year results For the twelve months to 31 March 2018 Thursday 31 May 2018 31 May 2018 FirstGroup full year results for the twelve months to 31 March 2018
Slide 20: Appendices
Appendices 31 May 2018 FirstGroup full year results for the twelve months to 31 March 2018 20
Slide 21: Financial results
Financial results £m Mar 2018 Mar 2017 Change Revenue 6,398.4 5,653.3 +13.2% EBITDA1 690.6 686.6 +0.6% EBITDA margin % 10.8% 12.1% (130)bps Operating profit2 317.0 339.0 (6.5)% Operating profit margin % 5.0% 6.0% (100)bps Net finance costs (120.0) (132.0) (9.1)% Profit before tax2 197.0 207.0 (4.8)%
Slide 22: Divisional performance
Divisional performance Change Change Change Revenue ex SWR / Operating profit2 ex SWR / Operating margin2 ex SWR / 53rd week, 53rd week, 53rd week, Mar 2018 Mar 2017 in constant Mar 2018 Mar 2017 in constant Mar 2018 Mar 2017 in constant fx1 fx1 fx1 £m First Student 1,771.1 1,780.3 (1.1)% 156.5 171.
Slide 23: First Student
First Student Change in constant $m Mar 2018 Mar 2017 currency1 Revenue 2,350.6 2,323.3 +0.9% Operating profit2 210.4 222.0 (5.3)% Margin % 9.0% 9.6% (60)bps $m Revenue Operating profit2 Mar 2017 2,323.3 222.0 H2 winter weather hit vs PY (8.8) (6.2) H1 weather make-up vs PY 8.3 4.6 Pricing above inf
Slide 24: First Transit
First Transit Change in constant $m Mar 2018 Mar 2017 currency1 Revenue 1,420.4 1,358.9 +4.2% Operating profit2 77.8 95.2 (18.9)% Margin % 5.5% 7.0% (160)bps $m Revenue Operating profit2 Mar 2017 1,358.9 95.2 Growth / new business / pricing 6.2 2.2 Pay above inflation − (13.7) Hurricane impact (1.1)
Slide 25: Greyhound
Greyhound Change in constant $m Mar 2018 Mar 2017 currency1 Revenue 912.7 894.0 +1.7% Operating profit2 32.8 55.2 (39.0)% Margin % 3.6% 6.2% (250)bps $m Revenue Operating profit2 Mar 2017 894.0 55.2 Revenue 0.6 0.6 Cost inflation − (16.5) Hurricanes / fires (2.6) (2.3) Inflation / mgmt actions / oth
Slide 26: First Bus
First Bus Change in constant £m Mar 2018 Mar 2017 currency1 Revenue 879.4 861.7 +1.9% Operating profit2 50.2 37.0 +34.6% Margin % 5.7% 4.3% +140bps £m Revenue Operating profit2 Mar 2017 861.7 37.0 Revenue 12.5 12.5 Weather (3.9) (3.5) Cost inflation − (25.1) Depot closures / mgmt. actions (6.5) 21.7
Slide 27: First Rail
First Rail £m Mar 2018 Mar 2017 Change Revenue 1,968.8 1,268.8 +55.2% Operating profit1 57.8 53.8 +7.4% Margin % 2.9% 4.2% (130)bps 1 Before amortisation charges and certain other items 31 May 2018 FirstGroup full year results for the twelve months to 31 March 2018 27
Slide 28: First Rail passenger revenue growth
First Rail passenger revenue growth Mar 2018 Mar 2017 Great Western Railway (GWR) 2.7% 0.3% TransPennine Express (TPE) 10.0% 5.9% Hull Trains 3.3% 5.8% Total 4.1% 1.3% ▪ Like-for-like volume increased by 1.4% 31 May 2018 FirstGroup full year results for the twelve months to 31 March 2018 28
Slide 29: Current diesel hedge position
Current diesel hedge position UK North America Year to 31 March 2018/19 2019/20 2020/21 2018/19 2019/20 2020/21 Annual volume (barrels 'm) 1.9 1.9 1.2 1.4 1.3 1.3 % hedged 82% 57% 20% 53% 28% 14% Crude rate ($/barrel) $58.42 $62.68 $62.62 $54.71 $53.00 $63.97 Diesel rate ($/barrel) $73.64 $74.54 $74
Slide 30: Foreign exchange
Foreign exchange ▪ Higher US Dollar compared to prior year balance sheet date: 31 Mar 2018 31 Mar 2017 Closing rate for the balance sheet US$ $1.40 $1.25 Closing rate for the balance sheet CAN$ $1.81 $1.67 ▪ Higher US Dollar compared to prior year effective rate: Year to Year to 31 Mar 2018 31 Mar 2
Slide 31: Net finance costs and taxation
Net finance costs and taxation Net finance costs, £m Mar 2018 Mar 2017 Bonds 84.3 83.7 Bank borrowings 8.8 11.4 Loan notes 1.1 1.0 Senior unsecured loan notes 1.3 4.3 Finance lease interest 4.6 6.4 Notional interest on long term provisions 11.0 17.5 Notional interest on pensions 10.2 8.9 Investment
Slide 32: EBITDA by division
EBITDA by division Revenue EBITDA1 EBITDA margin1 Mar 2018 Mar 2017 Mar 2018 Mar 2017 Mar 2018 Mar 2017 £m First Student 1,771.1 1,780.3 335.2 348.7 18.9% 19.6% First Transit 1,072.7 1,042.0 79.8 91.9 7.4% 8.8% Greyhound 690.2 684.7 58.8 79.4 8.5% 11.6% First Bus 879.4 861.7 116.3 104.5 13.2% 12.1%
Slide 33: Total capital expenditure and acquisitions
Total capital expenditure and acquisitions Fixed asset/Software additions Cash (including acquisitions) £m Mar 2018 Mar 2017 Mar 2018 Mar 2017 First Student1 186.0 198.7 205.1 165.9 First Transit 19.0 17.8 28.5 17.8 Greyhound 46.6 30.1 44.4 31.7 First Bus 42.8 74.4 20.9 63.9 First Rail 126.2 80.4 12
Slide 34: First Rail commitments and bonds
First Rail commitments and bonds SWR Mar 2018, £m GWR TPE Total 70% share First Rail commitments Parent company support (PCS) total commitment A 30.0 189.0 82.6 301.6 - Of which, unbonded commitment (non-cash) B 30.0 104.6 51.8 186.4 - Of which, PCS bond (non-cash) C - 84.4 30.8 115.2 Performance bo
Slide 35: Pensions
Pensions Deficit Cash contributions P&L charge1 £m Mar Mar Mar Mar Mar Mar Mar Mar Mar 2018 2017 2016 2018 2017 2016 2018 2017 2016 North America (162.7) (216.7) (212.5) 17.6 14.0 20.1 10.3 9.9 7.6 First Bus (108.4) (139.8) (57.5) 62.4 50.0 41.6 21.5 16.7 20.2 First Rail (2.6) (2.0) (0.9) 31.5 21.9
Slide 36: Financial position
Financial position £500m £400m £350m £300m £250m £325m 8.75% £200m 6.125% 5.25% £200m Apr 2021 6.875% Jan 2019 Nov 2022 £100m bond1 Sept 2024 bond1 bond bond £0m H1 23/24 H1 18/19 H2 18/19 H1 19/20 H2 19/20 H1 20/21 H2 20/21 H1 21/22 H2 21/22 H1 22/23 H2 22/23 H2 23/24 H1 24/25 H2 24/25 H1 25/26 H2
Slide 37: ROCE
ROCE Group Road divisions ROCE ROCE As at 31 March 2017 7.3% 5.7% Foreign exchange 0.6% 0.4% ROCE at constant currency 7.9% 6.1% SWR 0.5% − Rail divisions trading (0.1)% − TPE contract provision 0.3% − Road divisions trading (0.7)% (0.6)% Greyhound impairment 0.9% 0.5% 53rd week 0.3% 0.3% Tax rate /
Slide 38: 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