Firstgroup Plc · LSE:FGP
Firstgroup — FY2012 Earnings Presentation
50 slides from Firstgroup's earnings presentation, May 23, 2012
Slide 1: FirstGroup plc Preliminary results
FirstGroup plc Preliminary results for the 12 months to 31 March 2012 Wednesday 23 May 2012 1
Slide 2: Tim O'Toole, Chief Executive
Tim O’Toole Chief Executive 2
Slide 3: Summary 2011/12
Summary 2011/12 • First Student now set on path to recovery – plan delivering in line with our targets, operating margin stabilised in H2 • First Transit – continued good returns with typically low capital requirement underpinned by established credentials and track record • Greyhound – the actions
Slide 4: Nick Chevis Financial Review
Nick Chevis Acting Finance Director Financial Review 4
Slide 5: Financial summary 2011/12
Financial summary 2011/12 • Overall trading for the Group in line with our expectations – Operating profit of £428.5m – Adjusted EPS 40.0p – Full year dividend of 23.67p covered 1.7x by adjusted EPS • Significantly lower exceptional items reflecting actions taken to de-risk UK Bus pension scheme • N
Slide 6: Financial results
Financial results Mar 12 Mar 11 Continuing operations 1 Change £m £m Revenue 6,678.7 6,416.7 4.1% EBITDA 2 742.9 768.9 (3.4)% EBITDA % 11.1% 12.0% (0.9)pp Operating Profit2 428.5 456.7 (6.2)% Margin % 6.4% 7.1% (0.7)pp Interest (157.1) (182.4) (13.9)% Profit before tax2 271.4 274.3 (1.1)% • Revenue
Slide 7: Income statement
Income statement Mar 12 Mar 11 Continuing operations1 Change £m £m Profit before tax2 271.4 274.3 (1.1)% Amortisation charges (30.9) (42.9) Exceptional items 39.4 (104.9) Profit before tax 279.9 126.5 121.3% Tax (50.1) (16.7) Profit after tax 229.8 109.8 109.3% Proposed final dividend 16.05p 15.0p 7
Slide 8: First Student
First Student Mar 12 Mar 11 Change $m $m Revenue 2,497.9 2,480.2 0.7% EBITDA 406.9 432.9 (6.0)% EBITDA % 16.3% 17.5% (1.2)pp Operating Profit 169.5 200.2 (15.3)% Margin % 6.8% 8.1% (1.3)pp • Adjusting for the extra week US Dollar revenues were reduced by 1.3% compared to the same period last year •
Slide 9: First Transit
First Transit Mar 12 Mar 11 Change $m $m Revenue 1,242.6 1,199.0 3.6% EBITDA 104.2 103.5 0.7% EBITDA % 8.4% 8.6% (0.2)pp Operating Profit 89.1 89.5 (0.4)% Margin % 7.2% 7.5% (0.3)pp • Adjusting for the extra week US Dollar revenue increased by 2.0% compared to the same period last year • Operating p
Slide 10: Greyhound
Greyhound Mar 12 Mar 11 Change $m $m Revenue 1,049.3 985.0 6.5% EBITDA 128.0 106.6 20.1% EBITDA % 12.2% 10.8% 1.4pp Operating Profit 81.0 62.3 30.0% Margin % 7.7% 6.3% 1.4pp • Strong like-for-like revenue growth of 4.1% • Greyhound US like-for-like revenue growth accelerated to 5.5% in H2 • Manageme
Slide 11: UK Bus
UK Bus Mar 12 Mar 11 Change £m £m Revenue 1,157.2 1,137.5 1.7% EBITDA 207.1 220.0 (5.9)% EBITDA % 17.9% 19.3% (1.4)pp Operating Profit 134.4 148.8 (9.7)% Margin % 11.6% 13.1% (1.5)pp • Overall revenue broadly flat year on year after adjusting for the extra week • Steady like-for-like passenger reven
Slide 12: UK Rail
UK Rail Mar 12 Mar 11 Change £m £m Revenue 2,506.1 2,269.8 10.4% EBITDA 163.5 158.6 3.1% EBITDA % 6.5% 7.0% (0.5)pp Operating Profit 110.5 108.7 1.7% Margin % 4.4% 4.8% (0.4)pp • Continued strong demand with like-for-like passenger revenue growth of 8.4% • Strong contribution from FTPE, franchise ex
Slide 13: UK Rail passenger revenue growth
UK Rail Passenger revenue growth Mar 12 Mar 11 FCC 9.3% 4.6% FGW 8.0% 4.9% FSR 7.4% 5.9% FTPE 10.2% 7.7% Hull Trains 1.1% 3.7% Total 8.4% 5.3% • Continued solid demand across all of our franchises – passenger volumes increased by 3.8% 13
Slide 14: Cash flow
Cash flow £743m £21m £63m £14m £29m £87m £541m £294m £155m £128m £119m 14
Slide 15: Capital investment
Capital investment Mar 12 Mar 11 £m £m Cash capital expenditure 293.6 283.6 Creditor movement 29.9 (20.0) Fixed asset additions 323.5 263.6 Assets acquired under operating lease 43.4 23.6 Total equivalent investment 366.9 287.2 • Underlying total equivalent investment increase of £79.7m or 27.8% in
Slide 16: Capital structure: strong liquidity, commitment to investment grade
Capital structure: strong liquidity, commitment to investment grade Mar 12 Mar 11 Mar 10 Average debt maturity 5.5 years 6.1 years 6.3 years Net debt £1,837.5m £1,949.4m £2,281.5m Net debt:EBITDA 2.5x 2.5x 3.0x • Committed facility headroom plus free cash of £796m at March 2012 • Continued net debt
Slide 17: Tim O'Toole Business Review
Tim O’Toole Chief Executive Business Review 17
Slide 18: First Student
First Student Clear market leader in highly fragmented marketplace Market worth $24bn per annum – only 30% is in private sector First Student operates one third of outsourced market Portfolio diversified with >1,400 medium-term contracts Creating a sustainable competitive advantage from scale Strong
Slide 19: First Student
First Student • Recovery plan performing in line with our expectations • Performance stabilised with operating margin in H2 slightly ahead of prior year • Cost savings now expected to be c.$100m per annum (original target of $65m per annum) • Strengthened commercial team and focused retention strate
Slide 20: First Student - recovery plan progress update
First Student - recovery plan progress update Recovery plan initiated to strengthen business model and create sustainable competitive advantage Established best practices and ‘standard way’ of operating across almost 600 locations New structure implemented de-layered management Revised performance m
Slide 21: First Transit
First Transit Market is worth $22bn per annum – approx 30% is outsourced Strong returns from typically low capital requirement Established credentials and proven track record are key Market leader in highly fragmented marketplace Diversified >360 contracts across core business segments Scale and exp
Slide 22: First Transit
First Transit • Management expertise and proven track record supporting strong contract retention >90% • Strong performance from shuttle business during the year: – Further expansion of services at Fort McMurray, Alberta – Award of contract at Chicago’s Midway Airport • Largest provider of universit
Slide 23: Greyhound
Greyhound Iconic brand synonymous with affordable long-distance travel The only national network of scheduled intercity coach services Approx 20m passengers per annum Greyhound Express attracting users back to bus travel plus a new customer demographic Unique scale drives success of Express - strong
Slide 24: Greyhound
Greyhound • Business now delivering strong growth and improved returns • Operating profit more than doubled over past two years • Greyhound Express is highly successful - attracting passengers back to bus travel and new users – Expanded Express services in year - represents >20% of the business – No
Slide 25: UK Bus
UK Bus Market >£4bn per annum (ex London) almost entirely privatised, bus travel diversified by journey type A market leader with almost one quarter of deregulated market - 2.6m passengers a day Contracted revenues from London (c.12% of market) Traditionally strong, diversified networks in good bus
Slide 26: UK Bus
UK Bus • Despite steady performance in 2011/12, recognised the need to reform operating model in order to achieve sustainable growth • Prior strategy delivered strong cost control but affected patronage growth • Operating model was not sustainable in the long term – mileage reduced by 13% since 2008
Slide 27: UK Bus – clear strategy to fix and grow
UK Bus – clear strategy to fix and grow • Clear detailed strategy informed by root and branch review of all operations completed in the year • Comprehensive plans tailored to each operation, focused around three key areas: Reposition and rebalance the portfolio Improve operating discipline and e
Slide 28: UK Bus – repositioning the portfolio
UK Bus – repositioning the portfolio Established and diversified platform with market leadership in territories where propensity for bus travel is high >3,500 person/km2 UK Bus portfolio Deregulated Bus (Revenue 2011/12) Operations Potential for Regulated improvement c. £225m Reposition & rebalance
Slide 29: UK Rail
UK Rail Consistent strong performance and highly successful record Strong team, well regarded with unique experience of diverse operations – operating c.25% of UK rail market Trusted partner on key infrastructure projects Highly regulated qualification process Well placed to develop current and futu
Slide 30: UK Rail
UK Rail • Strong growth trends continued across all of our franchises • First TransPennine Express successfully extended for a further three years to 2015 at margins closer to the industry average • Continued Government funding in major infrastructure projects • Entering a period of transition in ra
Slide 31: Summary
Summary • Fundamentally strong and diverse portfolio; four of out of five divisions performing in line with our expectations – Student – recovery in line with our targets – Transit – steady performance with continued strong returns – Greyhound – strong results from a transformed business – Rail – we
Slide 32: Preliminary results Q&A
FirstGroup plc Preliminary results for the 12 months to 31 March 2012 Q&A 32
Slide 33: Appendices
Appendices Preliminary results for the 12 months to 31 March 2012 33
Slide 34: Divisional Composition
Divisional Composition Revenue (£m) Operating Profit (£m) Operating Margin (%) 20121 20112 20121 20112 2012 2011 Student 1,567.2 1,594.4 107.1 128.3 6.8% 8.0% Transit 778.6 771.5 55.8 57.2 7.2% 7.4% Greyhound 657.2 634.6 50.6 40.2 7.7% 6.3% UK Bus 1,157.2 1,137.5 134.4 148.8 11.6% 13.1% UK Rail 2,50
Slide 35: First Student – H1 / H2 Margin
First Student – H1 / H2 Margin Year to 31 Mar 2012 Year to 31 Mar 2011 H1 H2 FY H1 H2 FY $m $m $m $m $m $m Revenue 1,107.6 1,390.3 2,497.9 1,074.8 1,405.4 2,480.2 Operating Profit 9.0 160.5 169.5 40.0 160.2 200.2 Margin % 0.8% 11.5% 6.8% 3.7% 11.4% 8.1% • Trading in H1 reflected the carry-over of la
Slide 36: Exceptional items & amortisation
Exceptional items & amortisation Mar 12 Mar 11 £m £m UK Bus Pension Scheme changes (73.3) - UK Rail bid costs 10.2 2.7 UK Bus depot sales & closures 10.7 - Competition Commission costs 1.9 1.4 UK Rail FGW contract provision - 59.9 First Student recovery plan - 39.5 UK Rail settlement of NR claim - (
Slide 37: Cash flow
Cash flow Mar 12 Mar 11 Change £m £m £m EBITDA (including discontinued operations) 742.6 770.7 (28.1) Exceptional items 49.4 (100.8) 150.2 Impairment charges - 19.5 (19.5) Other non-cash Income Statement items 9.8 11.4 (1.6) Working capital excluding FGW provision movement 20.5 75.2 (54.7) Working c
Slide 38: Cash capital expenditure
Cash capital expenditure Cash Fixed Asset Additions Mar 12 Mar 11 Mar 12 Mar 11 £m £m £m £m First Student 115.6 117.2 135.6 132.0 First Transit 31.9 6.8 29.7 9.0 Greyhound 44.1 45.0 44.2 41.6 UK Bus1 33.6 66.7 45.1 32.4 UK Rail 63.4 46.7 64.5 48.1 Group items 5.0 1.2 4.4 0.5 Total 293.6 283.6 323.5
Slide 39: Diesel Hedge Position
Diesel Hedge Position UK North America 2011/12 2012/13 2013/14 2011/12 2012/13 2013/14 Annual volume (barrels’m) 2.5 2.5 1.8 1.7 1.7 1.7 % Hedged 86% 83% 46% 59% 69% 40% Crude rate ($/barrel) $88.27 $102.54 $104.61 $94.69 $94.10 $95.48 Diesel rate ($/barrel) $105.86 $124.06 $128.05 $112.87 $121.45 $
Slide 40: Pensions
Pensions Deficit Cash Contributions Income Statement Charge £m 2012 2011 2010 2012 2011 2010 2012 2011 2010 North America (215.2) (158.4) (157.3) 21.6 11.3 13.7 7.2 7.4 9.1 UK Bus (27.4) (30.1) (129.0) 54.3 34.7 31.0 (9.5) (1.9) 1.7 UK Rail (25.3) (54.7) (44.5) 41.1 38.6 40.1 32.2 35.6 31.9 Total (2
Slide 41: Liquidity resources and debt repayment profile
Liquidity resources and debt repayment profile LIQUIDITY RESOURCES AND DEBT REPAYMENT PROFILE Free cash and committed headroom at March 2012 £300m Bond 2013 900 £300m Bond 2018 750 Liquidity resources at March 2012 of £796m comprised free cash balances of £164m and committed liquidity £250m Bond 201
Slide 42: Net Finance Costs
Net Finance Costs Mar 12 Mar 11 £m £m Bonds 92.6 91.6 Bank borrowings 34.3 64.2 Loan notes 1.0 1.0 Senior unsecured loan notes 3.9 - Finance lease interest 8.4 7.8 Notional interest 18.9 19.7 Investment income (2.0) (1.9) Net finance costs before exceptional items 157.1 182.4 Hedge ineffectiveness o
Slide 43: Foreign Exchange
Foreign Exchange • Weaker CAN$ reduced translated Sterling debt compared to March 2011 Mar 12 Mar 11 Closing rate for the balance sheet US$ $1.60 $1.60 Closing rate for the balance sheet CAN$ $1.60 $1.57 • The movement in the effective rate resulted in a marginal increase in operating profit Mar 12
Slide 44: Taxation
Taxation Mar 12 Mar 11 £m £m Current tax (5.3) 36.7 Deferred tax 55.4 (20.0) Tax charge on continuing operations 50.1 16.7 Tax rate on adjusted profit before tax 20.1% 21.8% Cash tax rates (based on PBT) 6.3% 19.7% 44
Slide 45: 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 (188.8) (331.7) 297.5 113.6 - (109.4) FY 2012/13 (229.6) (436.4) 439.1 56.7 - (170.2) • Increase in subsidy to FSR in 2012/13
Slide 46: Revenue support/profit share
Revenue support/profit share Mar 12 Mar 11 11/12 £m £m FCC Revenue Support 80% 33.2 26.9 FGW Revenue Support 80% 205.4 141.3 FTPE Profit Share 75% / 50% (5.8) (10.9) Total 232.8 157.3 • FSR eligible for revenue support but currently trading above target revenue • FTPE 75% profit share represents the
Slide 47: UK Rail Bonds
UK Rail Bonds Mar 12 Mar 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 24.0 FCC Performance bond 19.0 18.6 FCC Season ticket bond 56.1 50.0 FGW Performance bond 56.1 46.2 FGW Season ticket bond 25.8 22.3 Total 218.3 19
Slide 48: UK Rail Ring-fenced Cash
UK Rail Ring-fenced Cash Mar 12 Mar 11 £m £m FCC 109.6 86.3 FGW 72.8 75.8 FSR 70.8 55.1 FTPE 70.0 66.6 Total 323.2 283.8 The level of ring-fenced cash at 31 March 2012 is higher than would normally be expected due to the timing of Government receipts at FSR and the temporary impact of liquidity rati
Slide 49: UK Rail franchise contracts
UK Rail franchise contracts FCC FGW FSR FTPE Years 4+2+1 7 10 8+5 Start date Apr 2006 Apr 2006 Oct 2004 Feb 2004 Expiry date Sept 2013 Mar 2013 Nov 2014 Jan 2012 Extension period Apr 2015 (performance related) Authority extension period (at Jan 2017 discretion of the DfT) • The DfT decided to end th
Slide 50: 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