Firstgroup Plc · LSE:FGP
Firstgroup — H1 2018 Earnings Presentation
40 slides from Firstgroup's earnings presentation, Nov 14, 2017
Slide 1: FirstGroup plc Half-yearly results
FirstGroup plc Half-yearly results For the six months to 30 September 2017 Tuesday 14 November 2017 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017
Slide 2: Tim O'Toole, Chief Executive
Tim O'Toole Chief Executive 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017 2
Slide 3: Overview
Overview ▪ Overall trading for the Group in the first half consistent with plans outlined at start of the financial year ▪ Strong cash performance in the period, in addition to inflows from SWR ▪ Solid performances partially obscured by impact of recent severe hurricanes ▪ Confident that the Group w
Slide 4: Matthew Gregory, Chief Financial Officer: Financial review
Matthew Gregory Chief Financial Officer Financial review 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017 4
Slide 5: Financial overview
Financial overview ▪ Group revenue +8.1% including new SWR rail franchise and favourable fx; excluding these, Group revenue was +0.9% with growth in four out of five divisions ▪ Adjusted operating profit £89.4m (H1 2016: £89.0m) principally reflects solid trading and favourable fx offset by impact o
Slide 6: Financial summary
Financial summary Change in £m Sep 2017 Sep 2016 Change constant currency1 Revenue 2,771.3 2,564.7 +8.1% +3.5% Adjusted2 - EBITDA 278.2 251.7 +10.5% +3.7% - Operating profit 89.4 89.0 +0.4% (9.1)% - Margin % 3.2% 3.5% (30)bps (50)bps - Net finance costs (58.9) (67.1) (12.2)% - Profit before tax 30.5
Slide 7: Revenue performance
Revenue performance Sep 2017 Change ▪ Growth in First Transit, First Rail, Greyhound and £m revenue (constant fx) First Bus First Student 763.1 (1.9)% First Transit 536.4 +4.3% ▪ First Student fewer operating days; 'up or out' Greyhound 358.8 +1.3% bidding strategy continues First Bus 428.2 +0.3% Fi
Slide 8: Operating performance
Operating performance Sep 2017 H1 2017 Margin change ▪ First Student lower with fewer operating days in £m operating profit1 margin1 (constant fx) period, as anticipated First Student 14.8 1.9% (70)bps First Transit 20.9 3.9% (230)bps ▪ First Transit principally impacted by hurricanes, Greyhound 23.
Slide 9: Income statement – continued
Income statement – continued Change £m Sep 2017 Sep 2016 Change (constant fx) Adjusted1 Operating profit 89.4 89.0 +0.4% (9.1)% Net finance costs (58.9) (67.1) (12.2)% Reduction due lower net debt and Profit before tax 30.5 21.9 +39.3% +2.0% lower interest rates Tax (9.2) (5.5) Higher effective tax
Slide 10: Net cash flow (£m)
Net cash flow (£m) Operating cash flow / cash conversion1: Sep 2017: £132.9m / +149% Sep 2016: £43.1m / +48% Group cash capex and acquisitions £(194.0)m 1 Operating cash flow divided by Group adjusted operating profit 14 November 2017 FirstGroup half-yearly results for the six months to 30 September
Slide 11: Financial position
Financial position ▪ Strong liquidity and stable financing position with net debt of £1,179.9m − Headroom under committed facilities plus free cash: £844.1m (Mar 2017: £941.1m) − Net debt: EBITDA ratio 1.7x (H1 2016: 2.4x) − Long term facilities in place – average maturity 3.2 years (Mar 2017: 3.6 y
Slide 12: Tim O'Toole, Chief Executive: Business review
Tim O'Toole Chief Executive Business review 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017 12
Slide 13: First Student
First Student ▪ Fourth year of 'up or out' bidding strategy to deliver higher returning contract portfolio − 5.3% average price increases on 'at risk' business − 83% retention rate on 'at risk' business (94% overall) ▪ Good operational start up to school year, despite scale of ongoing driver recruit
Slide 14: First Transit
First Transit ▪ First Transit continues to grow and respond to changing opportunities − 14 new contracts and 94% retention rate in the period ▪ Growth partially offset by impact of hurricanes especially on Puerto Rico and costs associated with driver shortages ▪ Expect to restore margins in the seco
Slide 15: Greyhound
Greyhound ▪ Currently deriving most impact from new pricing and yield tools in short haul markets − Greyhound Express LFL growth +7.8% ▪ Generated growth sufficient to offset weak demand for long haul, where budget airlines' fuel cost advantage is most significant – and a slowdown in US South West t
Slide 16: First Bus
First Bus ▪ Encouraging return to LFL revenue growth in the face of uncertain industry conditions ▪ Each bus company is delivering a programme of actions tailored to their local conditions − Mix of network changes, fare adjustments, mobile and contactless ticketing, depot rationalisations and other
Slide 17: First Rail
First Rail ▪ LFL passenger revenue growth increased to 3.2%; margin improvement principally benefiting from revenue performance and cost efficiencies ▪ Significant capacity expansion on all of our franchises underway − GWR: 93 Hitachi Intercity Express Trains entering service through to end 2019 − T
Slide 18: Summary
Summary ▪ Solid trading and strong cash performance in the period ▪ Confident that the Group will make further progress and deliver substantial cash generation for the full year ▪ Continue to progress our plans to enhance the experience of our customers, and create value for shareholders, commensura
Slide 19: FirstGroup plc Half-yearly results
FirstGroup plc Half-yearly results For the six months to 30 September 2017 Tuesday 14 November 2017 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017
Slide 20: Appendices
Appendices 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017 20
Slide 21: Financial results
Financial results £m Sep 2017 Sep 2016 Change Revenue 2,771.3 2,564.7 +8.1% EBITDA1 278.2 251.7 +10.5% EBITDA margin % 10.0% 9.8% +20bps Operating profit2 89.4 89.0 +0.4% Operating profit margin % 3.2% 3.5% (30)bps Net finance costs (58.9) (67.1) (12.2)% Profit before tax2 30.5 21.9 +39.3% Non-GAAP
Slide 22: Divisional performance
Divisional performance Revenue Operating profit1 Operating margin1 Sep 2017 Sep 2016 Sep 2017 Sep 2016 Sep 2017 Sep 2016 £m First Student 763.1 719.5 14.8 14.0 1.9% 1.9% First Transit 536.4 482.5 20.9 30.0 3.9% 6.2% Greyhound 358.8 333.4 23.5 25.8 6.5% 7.7% First Bus 428.2 426.1 15.8 13.5 3.7% 3.2%
Slide 23: First Student
First Student $m Sep 2017 Sep 2016 Change Revenue 982.8 1,004.5 (2.2)% Operating profit1 18.1 26.2 (30.9)% Margin % 1.8% 2.6% (80) bps $m Revenue Operating profit1 Sep 2016 1,004.5 26.2 Operating days (16.1) (7.5) Weather 8.6 4.9 Pricing above inflation 10.8 10.8 Net growth (45.9) (4.4) Management c
Slide 24: First Transit
First Transit $m Sep 2017 Sep 2016 Change Revenue 692.0 663.6 4.3% Operating profit1 26.7 41.4 (35.5)% Margin % 3.9% 6.2% (230) bps $m Revenue Operating profit1 Sep 2016 663.6 41.4 Growth / new business 11.6 0.9 Pay above inflation - (6.3) Hurricanes (1.1) (6.1) Inflation / FX / Other 17.9 (3.2) Sep
Slide 25: Greyhound
Greyhound $m Sep 2017 Sep 2016 Change Revenue 463.0 457.5 +1.2% Operating profit1 30.5 34.3 (11.1)% Margin % 6.6% 7.5% (90) bps $m Revenue Operating profit1 Sep 2016 457.5 34.3 Revenue 6.9 6.9 Cost inflation - (11.4) Hurricanes (1.3) (0.8) FX / management cost actions / (0.1) 1.5 other Sep 2017 463.
Slide 26: First Bus
First Bus £m Sep 2017 Sep 2016 Change Revenue 428.2 426.1 +0.5% Operating profit1 15.8 13.5 +17.0% Margin % 3.7% 3.2% +50 bps £m Revenue Operating profit1 Sep 2016 426.1 13.5 Revenue 6.1 6.1 Cost inflation - (14.0) Depot closures and actions (4.0) 8.9 Other - 1.3 Sep 2017 428.2 15.8 1 Before amortis
Slide 27: First Rail
First Rail £m Sep 2017 Sep 2016 Change Revenue 677.4 595.8 +13.7% Operating profit1 31.1 22.1 +40.7% Margin % 4.6% 3.7% +90 bps 1 Before amortisation charges and certain other items 14 November 2017 FirstGroup half-yearly results for the six months to 30 September 2017 27
Slide 28: First Rail passenger revenue growth
First Rail passenger revenue growth Six months to Sep 2017 Mar 2017 Sep 2016 Mar 2016 Great Western Railway (GWR) 1.6% 0.5% (0.1)% 5.4% TransPennine Express (TPE) 9.7% 7.1% 2.0% 5.5% South Western Railway (SWR) 2.9% n/a n/a n/a Hull Trains 8.0% 8.2% 6.0% 13.5% Total 3.2% 1.9% 0.7% 5.6% ▪ Like-for-li
Slide 29: Non-GAAP adjustments
Non-GAAP adjustments £m Sep 2017 Sep 2016 Amortisation charges (32.0) (28.5) Gain on disposal of property - 21.6 Restructuring and reorganisation costs - (4.2) Ineffectiveness on financial derivatives (0.4) 0.3 Other non-GAAP adjusting items (0.4) 17.7 Total non-GAAP adjustments (32.4) (10.8) 14 Nov
Slide 30: Current diesel hedge position
Current diesel hedge position UK North America Year to 31 March 2017/18 2018/19 2019/20 2017/18 2018/19 2019/20 Annual volume (barrels 'm) 1.9 1.7 1.3 1.4 1.4 1.3 % hedged 89% 63% 26% 63% 38% 21% Crude rate ($/barrel) $60.14 $54.86 $49.80 $56.37 $49.80 $49.57 Diesel rate ($/barrel) $74.63 $71.69 $67
Slide 31: Foreign exchange
Foreign exchange ▪ Higher US Dollar compared to March balance sheet date: 30 Sep 2017 31 Mar 2017 30 Sep 2016 Closing rate for the balance sheet US$ $1.35 $1.25 $1.30 Closing rate for the balance sheet CAN$ $1.67 $1.67 $1.71 ▪ Lower US Dollar compared to prior year effective rate: 6 months to Year t
Slide 32: Net finance costs and taxation
Net finance costs and taxation Net finance costs, £m Sep 2017 Sep 2016 Bonds 41.3 42.1 Bank borrowings 3.3 6.8 Loan notes 0.5 0.5 Senior unsecured loan notes 1.0 2.3 Finance lease interest 2.4 3.4 Notional interest on long term provisions 5.6 7.9 Notional interest on pensions 5.2 4.8 Investment inco
Slide 33: EBITDA by division
EBITDA by division Revenue EBITDA1 EBITDA margin1 Sep 2017 Sep 2016 Sep 2017 Sep 2016 Sep 2017 Sep 2016 £m First Student 763.1 719.5 104.1 98.4 13.6% 13.7% First Transit 536.4 482.5 31.4 38.6 5.9% 8.0% Greyhound 358.8 333.4 40.1 43.2 11.2% 13.0% First Bus 428.2 426.1 47.4 45.5 11.1% 10.7% First Rail
Slide 34: Total capital expenditure and acquisitions
Total capital expenditure and acquisitions Fixed asset & software additions Cash (including acquisitions) Sep 2017 Sep 2016 Sep 2017 Sep 2016 First Student1 72.4 97.2 123.8 84.2 First Transit 9.2 6.9 9.4 5.6 Greyhound 14.4 14.9 11.6 6.8 First Bus 39.7 58.7 3.4 33.6 First Rail 57.1 28.5 56.5 22.8 Gro
Slide 35: Capital expenditure and acquisitions
Capital expenditure and acquisitions £m Sep 2017 ▪ Disciplined reinvestment in passenger carrying fleet continue Passenger carrying vehicles (PCV) 128.2 − Capital allocation decisions focused IT including transformation 1.7 increasingly on maintenance of Equipment 8.4 existing asset portfolio and se
Slide 36: First Rail ring-fenced cash and bonds
First Rail ring-fenced cash and bonds First Rail ring-fenced cash, £m Sep 2017 Sep 2016 GWR 243.1 194.6 TPE 54.6 33.4 SWR 86.1 - Total 383.8 228.0 First Rail bonds, £m Sep 2017 Sep 2016 GWR performance bond 10.0 10.0 GWR season ticket bond 28.4 28.8 TPE performance bond (old franchise) - 4.4 TPE sea
Slide 37: Debt profile
Debt profile £300m £400m 8.125% Sept 2018 £350m bond £350m £300m 8.75% £325m Apr 2021 £250m £250m 5.25% bond1 6.125% Nov 2022 £200m Jan 2019 bond £200m bond1 £150m 6.875% Sept 2024 £100m bond £50m £0m FY 17/18 H1 18/19 FY 18/19 H1 19/20 FY 19/20 H1 20/21 FY 20/21 H1 21/22 FY 21/22 H1 22/23 FY 22/23
Slide 38: Pensions
Pensions Deficit Cash contributions P&L charge1 £m Sep Mar Sep Sep Mar Sep Sep Mar Sep 2017 2017 2016 2017 2017 2016 2017 2017 2016 North America (185.6) (216.7) (234.3) 13.3 14.0 9.6 5.3 9.9 4.6 First Bus (108.6) (139.8) (263.4) 33.3 50.0 29.3 10.2 16.7 8.2 First Rail (2.0) (2.0) (2.6) 11.1 21.9 10
Slide 39: Return on capital employed (ROCE)
Return on capital employed (ROCE) Group Road divisions ROCE ROCE As at 30 September 2016 7.1% 5.2% Foreign exchange 1.2% 1.1% ROCE at constant currency 8.3% 6.3% Rail trading 0.3% - Tax rate / pensions / other (0.7)% (0.5)% As at 30 September 2017 7.9% 5.8% 14 November 2017 FirstGroup half-yearly re
Slide 40: 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