Firstgroup Plc · LSE:FGP
Firstgroup — FY2014 Earnings Presentation
43 slides from Firstgroup's earnings presentation, May 21, 2014
Slide 1: FirstGroup plc Full year results
FirstGroup plc Full year results for the 12 months to 31 March 2014 Wednesday 21 May 2014
Slide 2: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: Overview
Overview • Overall trading in line with expectations for the year, excluding impact of unprecedented weather in the fourth quarter • Satisfactory progress in four of our five divisions • Slower progress in First Student – acceleration of contract pricing and capital efficiency programme • Confident
Slide 4: Financial review
Chris Surch Group Finance Director Financial review 4
Slide 5: Financial overview
Financial overview • Adjusted operating profit1 £268m up 5.5% – Weaker Student performance offset by good performance in other divisions, particularly UK Rail – Unprecedented weather conditions impacted First Student and Greyhound performance in Q4 • Net cash inflow (excluding rights issue proceeds)
Slide 6: Financial summary
Financial summary Mar 2014 Mar 2013 restated1 Change Revenue £6,717.4m £6,900.9m (2.7)% Adjusted2 H1 2013 H1 2012 Restated1 Change - EBITDA3 £579.8m £585.7m (1.0)% - Operating profit £268.0m £254.1m +5.5% - Margin % 4.0% 3.7% +0.3pp - Profit before tax £111.9m £90.9m +21.8% - EPS 7.5p 11.0p (31.8)%
Slide 7: First Student
First Student Mar 14 Mar 13 Change $m $m Revenue 2,339.3 2,378.6 (1.7)% Operating profit 152.8 175.2 (12.8)% Margin % 6.5% 7.4% (0.9)pp Operating • Overall weather impact on profit $m Revenue profit of $25m Mar 13 2,378.6 175.2 Net growth / days / • Excluding weather, margin was (62.5) (11.6) other
Slide 8: First Transit
First Transit Mar 14 Mar 13 Change $m $m Revenue 1,290.5 1,286.8 0.3% Operating profit 95.7 77.7 23.2% Margin % 7.4% 6.0% 1.4pp Operating $m Revenue • Strong underlying revenues1 profit +8.0% Mar 13 1,286.8 77.7 • Underlying margin1 broadly FSS (91.7) - maintained Legal - 13.5 • Contract retention r
Slide 9: Greyhound
Greyhound Mar 14 Mar 13 Change $m $m Revenue 990.6 1,022.0 (3.1)% Operating profit 73.2 85.2 (14.1)% Margin % 7.4% 8.3% (0.9)pp Operating • Excluding weather, full year LFL $m Revenue profit revenues were 0.7% lower, and Mar 13 1,022.0 85.2 up 2.4% in the final quarter Passenger revenue (26.7) (26.7
Slide 10: UK Bus
UK Bus Mar 14 Mar 13 Change £m £m Revenue 930.2 1,128.2 (17.6)% Operating profit 44.4 50.8 (12.6)% Margin % 4.8% 4.5% 0.3pp Operating • Excluding disposals and Games, £m Revenue profit LFL passenger revenue growth of Mar 13 1,128.2 50.8 1.8% Depot closures & sales (189.0) - • Passenger volume growth
Slide 11: UK Rail
UK Rail Mar 14 Mar 13 Change £m £m Revenue 2,870.1 2,795.1 2.7% Operating profit 55.2 19.3 186.0% Margin % 1.9% 0.7% 1.2pp • Continued strong demand with like-for-like passenger revenue growth of 5.9% • Underlying passenger volume growth of 5.6% • Strong operational delivery, FGW moved to normal com
Slide 12: Net cash flow
Net cash flow1 £579.8m (£334.5m) (£27.7m) (£36.1m) (£35.3m) (£38.4m) £76.3m £26.9m (£157.2m) - EBITDA Provisions Cash capex Pensions Disposals FGW provision Interest and tax Net cash flow Working capital / other 1. Excluding £584m net proceeds of rights issue. 12
Slide 13: Capital expenditure
Capital expenditure Mar 14 • Underlying investment at 1.2x £m £m depreciation PCV 344.8 • Catch up of underinvestment in previous years Equipment 19.4 • Focus on customer enhancements, IT including transformation 16.5 efficiency improvements and Facilities and depot development 14.6 strengthening IT
Slide 14: Capital structure
Capital structure • Rights issue raised net proceeds of £584m • Shorter dated debt repaid from proceeds of rights issue • April 2013 bond repaid • New £800m five year revolving credit facility • Average debt maturity 6.1 years (2013: 5.4 years) • Liquidity – headroom under committed facilities plus
Slide 15: Medium term financial objectives
Medium term financial objectives • Operational returns: earn returns in excess of cost of capital through cycle – Group revenue (ex Rail) to grow faster than the economies we serve – Improving margins to double digits in First Student and UK Bus, and to 12% in Greyhound – 10-12% post-tax ROCE target
Slide 16: Business review
Tim O’Toole Chief Executive Business review 16
Slide 17: First Student
First Student • Performance affected by historically severe weather, leading to unprecedented amount of school closures and higher operating costs • $100m p.a. cost reductions achieved but inflation continues to exceed price indexation; plans underway to deliver a further $50m of annual savings • Ac
Slide 18: First Transit
First Transit • Strong track record of profitable growth continues, through new business, contract extensions and renewals, with modest capital invested • Demographic trends and outsourcing growth continues to drive opportunities to add to our diverse book of business • Further growth in our market
Slide 19: Greyhound
Greyhound • Underlying demand in traditional Greyhound modestly improving, reflecting macroeconomic environment and improved services • Fleet recapitalisation programme nearing completion; right-sizing of terminals ongoing • Greyhound Express and other point-to-point brands continue to grow profitab
Slide 20: UK Bus
UK Bus • LFL passenger volume growth of 2.6% demonstrates positive reaction to commercial proposition changes (fares, networks, partnerships) • Further network redesigns and fares consultations underway; opportunity to leverage regained price competitiveness in markets furthest along • Senior manage
Slide 21: UK Rail
UK Rail • Solid revenue growth underpinned by robust passenger volume increases and strong operational delivery • First Great Western and First Capital Connect granted direct awards from the Department for Transport, with further negotiations ongoing • Maintained operating performance while deliveri
Slide 22: Clear priorities for each division
Clear priorities for each division • First Student accelerating programme to address contract pricing and focus capital on higher returning opportunities, and targeting further $50m p.a. of identified cost efficiencies • First Transit continues to invest in market leading people and solutions to del
Slide 23: FirstGroup plc Full year results
FirstGroup plc Full year results for the 12 months to 31 March 2014 23
Slide 24: Appendices
First (p Appendices @©OOO®
Slide 25: Financial results
Financial results Mar 14 Mar 131 Change £m £m Revenue 6,717.4 6,900.9 (2.7)% EBITDA 2 579.8 585.7 (1.0)% EBITDA % 8.6% 8.5% 0.1pp Operating profit 3 268.0 254.1 5.5% Margin % 4.0% 3.7% 0.3pp Interest (156.1) (163.2) 4.4% Profit before tax 3 111.9 90.9 23.1% Amortisation/other 4 (71.0) (57.5) (23.5)%
Slide 26: Divisional composition
Divisional composition Revenue (£m) Operating profit (£m) Operating margin (%) Mar 14 Mar 13 Mar 14 Mar 131 Mar 14 Mar 131 First Student 1,467.4 1,503.1 93.5 110.1 6.4% 7.3% First Transit 811.9 814.6 60.3 49.1 7.4% 6.0% Greyhound 624.6 647.1 46.4 54.3 7.4% 8.4% UK Bus 930.2 1,128.2 44.4 50.8 4.8% 4.
Slide 27: First Transit – underlying business full year
First Transit – underlying business full year • Underlying margin 7.4% (2013: 7.6%) adjusted for the disposal of First Support Services (FSS) and the California meal and break claim: Mar 2014 Mar 2013 Revenue Op profit Revenue Op profit Margin Margin $m $m $m $m Underlying Transit 1,290.5 95.7 7.4%
Slide 28: Exceptional items
Exceptional items Mar 14 £m UK Bus depot sales and closures 13.0 UK Rail FGW contract provision 4.6 17.6 • UK Bus depot sales and closures primarily represents a £16.5m gain on the disposal of the eight London bus depots • UK Rail FGW contract provision release of £4.6m as a result of the total loss
Slide 29: UK Rail passenger revenue growth
UK Rail passenger revenue growth Mar 14 Mar 13 FCC 7.7% 7.2% FGW 4.7% 7.7% FSR 5.8% 6.1% FTPE 5.9% 8.5% Hull Trains 6.4% 6.3% Total 5.9% 7.4% • Continued solid demand across all of our franchises – volume growth increased by 5.6% 29
Slide 30: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW old FGW new FSR FTPE Start date Apr 2006 Apr 2006 Oct 2013 Oct 2004 Feb 2004 Expiry date Mar 2014 Oct 2013 - Mar 2015 Mar 2015 Current expiry date - - - Mar 2015 Oct 2015 DfT STA programme Sep 2014 - Sep 2015 - Feb 2016 • DfT Single Tender Action (STA) First Great
Slide 31: UK Rail bonds
UK Rail bonds Mar 14 Mar 13 £m £m FTPE performance bond 10.6 10.6 FSR performance bond 25.0 25.0 FSR season ticket bond 5.4 5.2 FSR maintenance bond 20.7 20.7 FCC performance bond 10.0 22.6 FCC season ticket bond 58.9 43.6 FGW performance bond 10.0 63.4 FGW season ticket bond 26.4 20.4 Total 167.0 2
Slide 32: UK Rail ring-fenced cash
UK Rail ring-fenced cash Mar 14 Mar 13 £m £m FCC 88.7 95.4 FGW 120.7 20.3 FSR 100.3 103.7 FTPE 51.2 54.4 Total 360.9 273.8 32
Slide 33: UK Rail subsidy/(premium) profile
UK Rail subsidy/(premium) profile FGW £m FCC FGW FSR FTPE Total STA FY 2011/12 (188.8) (331.7) - 297.5 113.6 (109.4) FY 2012/13 (228.2) (435.3) - 447.2 57.0 (159.3) FY 2013/14 (254.4) (273.9) (22.0) 506.9 65.7 22.3 FY 2014/15 (85.3) - (90.3) 285.8 51.2 161.4 • FGW franchise payment up to 12 October
Slide 34: Revenue support
Revenue support Estimate Mar 14 Mar 13 13/14 £m £m FCC Revenue support 80% 59.6 46.0 FGW Revenue support 80% 177.4 269.9 Total 237.0 315.9 • FSR eligible for revenue support but currently trading above target revenue 34
Slide 35: Diesel hedge position – including FGW Single Tender Action
Diesel hedge position – including FGW Single Tender Action UK North America 2013/14 2014/15 2015/16 2013/14 2014/15 2015/16 Annual volume (barrels’m) 2.2 2.2 1.4 1.6 1.5 1.5 % hedged 93% 93% 62% 69% 74% 43% Crude rate ($/barrel) $104.83 $101.21 $98.11 $93.38 $90.50 $86.89 Diesel rate ($/barrel) $126
Slide 36: Capital expenditure
Capital expenditure Cash Fixed asset additions Mar 14 Mar 13 Mar 14 Mar 13 £m £m £m £m First Student 130.8 127.7 169.1 150.8 First Transit 18.1 18.0 17.7 18.0 Greyhound 45.8 51.3 45.8 51.3 UK Bus 67.4 72.4 77.4 81.4 UK Rail 68.5 66.1 69.4 63.9 Group items 3.9 2.6 1.6 4.7 Total 334.5 338.1 381.0 370.
Slide 37: Total capital investment
Total capital investment Mar 14 Mar 13 £m £m First Student 194.3 150.8 First Transit 37.2 30.5 Greyhound 60.5 51.3 UK Bus 101.7 103.0 UK Rail 69.4 63.9 Other 1.6 4.8 Total 464.7 404.3 • Total additions of £381.0m plus operating leases of £83.7m • Underlying total equivalent investment increase of £6
Slide 38: Pensions
Pensions Deficit Cash contributions P&L charge1 £m 2014 2013 2012 2014 2013 2012 2014 2013 2012 North America (152.4) (210.2) (215.2) 20.0 28.4 21.6 6.9 4.9 4.3 UK Bus2 (94.3) (24.7) (27.4) 53.6 49.1 54.3 30.4 25.0 32.4 UK Rail3 (14.0) (12.9) (25.3) 48.3 42.4 41.1 56.9 55.7 51.6 Total (260.7) (247.8
Slide 39: Liquidity resources and debt repayment profile
Liquidity resources and debt repayment profile £1,250m Liquidity headroom Liquidity resources at March 2014 were £300m bond 2018 £1,000m £988m, comprising free cash balances of £192m and committed liquidity headroom of £796m. £250m bond 2019 Committed liquidity headroom is mainly £750m provided by a
Slide 40: Net finance costs
Net finance costs Mar 14 Mar 13 £m £m Bonds 88.9 97.7 Bank borrowings 22.4 31.8 Loan notes 1.0 1.0 Senior unsecured loan notes 4.1 4.1 Finance lease interest 13.0 10.7 Notional interest on long term provisions 19.5 19.5 Notional interest on pensions 8.9 0.2 Investment income (1.7) (1.8) Adjusted net
Slide 41: Foreign exchange
Foreign exchange • Weaker US Dollar compared to March: Mar 14 Mar 13 Closing rate for the balance sheet US$ $1.66 $1.52 Closing rate for the balance sheet CAN$ $1.84 $1.55 • Weaker US Dollar rate: Mar 14 Mar 13 Effective rate on US$ earnings $1.61 $1.58 Effective rate on CAN$ earnings $1.69 $1.59 41
Slide 42: Taxation
Taxation Mar 14 Mar 13 £m £m Current tax 5.3 10.6 Deferred tax (11.0) (34.5) Tax credit (5.7) (23.9) Tax paid 8.2 6.3 Tax rate on adjusted profit before tax 20.0% 19.3% 42
Slide 43: 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