REG-FirstGroup PLC: Final Results <Origin Href="QuoteRef">FGP.L</Origin> - Part 2
14/06/2016 07:05
- Part 2: For the preceding part double click ID:nPRrEDB3Ea
industry’s focus on customer
needs going forwards.
In March 2016 we finalised a formal alliance between GWR and Network Rail
covering five key areas of working, committing both companies to a more
aligned approach. It covers improved joint planning for major upgrade projects
such as electrification, to help minimise disruption for passengers as much as
possible. A similar partnership has been signed with TPE.
Prudent investment in our key assets
With the commencement of the new GWR direct award in September 2015, we
launched new branding which reflects the line’s strong heritage. This change
is consistent with our emphasis on developing local brands that connect with
our customers and the communities in which we operate. Alongside the ongoing
investment in the rail network, there will be a substantial fleet upgrade. As
well as the InterCity Express trains already due to be introduced during the
direct award period, in the year we secured approval to procure 29 new long
distance trains, creating more than 1,000 additional peak-time seats into and
out of Paddington every day. Overall, we will create 3m more seats across the
network by December 2018, as well as quicker journey times and more frequent
services.
During the new TPE franchise more than £500m will be invested to transform
rail services across the North and Scotland. There will be a large increase in
the number of carriages compared with today, providing 13m more seats, and the
customer experience will be enhanced over time with almost three quarters of
the fleet being new. Introducing state-of-the-art intercity trains will mean
faster and more reliable journeys with more seats and luggage space. The
remaining vehicles will be extensively refurbished and our stations will also
benefit from £18m of investment in customer facilities. During the year we
continued to progress the roll out of free Wi-Fi services both on-train and
in-station throughout the GWR network and this will also be introduced on all
TPE trains and stations going forwards.
Responsible partnerships with our customers and communities
In the latest independent Transport Focus National Rail Passenger Survey
(completed during autumn 2015) all of FirstGroup’s three train operating
companies scored above the national average for customer satisfaction. Hull
Trains topped the national table with their highest ever score at 97%, ten
points higher than the average of long-distance operators. GWR increased its
year-on-year measure for overall satisfaction by three points to 84%, its
highest score since the survey began in 1999. TPE scored 83%, up a point
year-on-year.
More than 40 schemes are benefiting in the year as part of GWR’s £2.2m
Customer and Communities Improvement Fund, supporting social need in areas we
serve. A similar fund is being introduced by TPE which will continue to work
with community groups across the network. The team will also work with Job
Centre Plus to provide discounted travel for jobseekers and help them back
into the workforce, and will also provide discount schemes for 16 to 18 year
olds and customers travelling in large groups.
Future priorities
We continue to demonstrate the extensive operational strengths as well as the
fleet and infrastructure upgrade capabilities that we have built up through
our involvement in the rail industry since privatisation. We have secured a
longer future for all three of our rail operating companies as well as a new
open access opportunity, and this gives us a strong position in First Rail to
build on over the medium term. With more than half of the UK rail network by
passenger revenue expected to be refranchised by 2020, we will continue to
examine each bidding opportunity on its merits.
Outlook
In the year ahead we are expecting the rate of passenger revenue growth in
our rail operations to moderate in line with recent industrywide trends. We
expect our divisional margin (after bid costs) will rebase toward industry
norms following the start of the new TPE franchise terms and the investments
being made for the benefit of customers.
We will continue to be active in UK rail franchise bidding, where our
approach has been and will continue to be disciplined, aiming to deliver
ambitious improvements for passengers and appropriate returns for
shareholders, at an acceptable level of risk.
Finance costs and investment income
Net finance costs before adjustments were £132.4m (2015: £139.7m) with the
decrease principally reflecting lower interest rates.
Profit before tax
Adjusted profit before tax as set out in note 4 to the financial statements
was £168.3m (2015: £163.9m), with the increase due principally to lower net
finance costs. An overall charge of £54.8m (2015: £58.1m) for adjustments
including other intangible asset amortisation charges of £51.9m (2015:
£54.3m) resulted in statutory profit before tax of £113.5m (2015: £105.8m).
Tax
The tax charge, on adjusted profit before tax, for the year was £38.7m
(2015: £36.1m) representing an effective rate of 23.0% (2015: 22.0%). There
was a tax credit of £21.6m (2015: credit of £15.8m) relating to other
intangible asset amortisation charges and other adjustments. The total tax
charge was £17.1m (2015: charge of £20.3m). The actual tax paid during the
year was £7.0m (2015: £4.5m).
EPS
Adjusted EPS increased by 5.1% to 10.3p (2015: 9.8p). Basic EPS increased
21.0% to 7.5p (2015: 6.2p), with both improvements primarily due to lower net
finance costs.
Shares in issue
As at 31 March 2016 there were 1,204.3m shares in issue (2015: 1,203.7m),
excluding treasury shares and own shares held in trust for employees of 0.6m
(2015: 1.2m). The weighted average number of shares in issue for the purpose
of basic EPS calculations (excluding treasury shares and own shares held in
trust for employees) was 1,204.0m (2015: 1,204.0m).
EBITDA
EBITDA by division is set out below:
Year to 31 March 2016 Year to 31 March 2015
Revenue EBITDA 1 EBITDA margin 1 Revenue £m EBITDA 1 £m EBITDA margin 1 £m
£m £m %
First Student 1,553.5 266.4 17.1% 1,478.8 260.9 17.6%
First Transit 864.8 74.7 8.6% 844.8 72.1 8.5%
Greyhound 605.1 69.7 11.5% 609.6 73.1 12.0%
First Bus 870.9 113.4 13.0% 896.1 118.5 13.2%
First Rail 1,308.4 122.4 9.4% 2,207.1 137.8 6.2%
Group 2 15.4 (30.7) 14.3 (38.0)
Total Group 5,218.1 615.9 11.8% 6,050.7 624.4 10.3%
North America in US Dollars $m $m % $m $m %
First Student 2,332.7 396.8 17.0% 2,368.6 412.5 17.4%
First Transit 1,303.4 112.6 8.6% 1,362.1 116.1 8.5%
Greyhound 914.0 105.9 11.6% 986.0 119.1 12.1%
Total North America 4,550.1 615.3 13.5% 4,716.7 647.7 13.7%
1 Adjusted operating profit less capital grant amortisation plus
depreciation.
Change in the basis of estimate for accounting for First Rail pensions
The Group has re-estimated the calculation of the First Rail franchise
pension adjustment under IAS19 (revised) to better reflect the commercial
terms of the GWR and TPE franchises. This change in accounting estimate has
been triggered by the new Direct Awards operated by GWR and First TransPennine
Express in the year and has been applied prospectively from 1 April 2015. As a
result of this change in accounting estimate the operating profit charge for
First Rail pension schemes for the full year is £18.6m lower at £27.4m than
it would otherwise have been. The change in the basis of estimate has no
effect on the cash contributions made to the First Rail pension schemes in the
year.
Reconciliation to non-GAAP measures and performance
Note 4 to the financial statements sets out the reconciliations of operating
profit and profit before tax to their adjusted equivalents. The principal
adjusting items are as follows:
Other intangible asset amortisation charges
The charge for the year was £51.9m (2015: £54.3m). The reduction primarily
reflects a lower charge in First Rail as the GWR franchise intangible was
fully expensed at the end of its first Direct Award period, partly offset by a
higher charge in First Student due to the full year effect of the Mile Square
acquisition.
Pensions past service gain
During the year we agreed with the FirstGroup Pension Scheme Trustee to
change the basis for revaluing pensions in payment from RPI to CPI. This
change has led to a reduction in the liabilities and as a result a £10.8m
past service gain has been recognised.
North America insurance reserves
There have been significant adverse developments on a small number of old and
unusual insurance claims in North America during the year. The impact of these
adverse developments was a charge of £10.5m.
First Bus depot sales and closures
There was a charge of £1.8m (2015: £7.5m) in the year relating to operating
losses on a legacy depot closure.
Legal claims
A legal claim that pre-dates the Laidlaw acquisition and was acquired with
the former Laidlaw entities had further adverse developments during the year
and has been settled for £1.0m more than was originally provided for within
adjusted items.
Ineffectiveness on financial derivatives
There was a £0.4m (2015: £0.3m) non-cash charge during the year due to
ineffectiveness on financial derivatives.
Cash flow
The net cash inflow for the year before First Rail end of franchise cash
flows was £36.0m (2015: £39.4m). This cash inflow combined with the end of
franchise outflows of £20.8m (2015: £107.9m) and movements in debt due to
foreign exchange contributed to a net debt increase of £2.9m (2015: £103.5m)
as detailed below:
Year to Year to 31 March 2015 £m
31 March 2016
£m
EBITDA 615.9 624.4
Other non-cash income statement charges/(credits) 6.4 (14.0)
Working capital excluding First Rail end of franchise cash flows (16.0) (11.6)
Movement in other provisions (18.6) (27.2)
Pension payments in excess of income statement charge (33.6) (12.3)
Cash generated by operations excluding First Rail end of franchise cash flows 554.1 559.3
Capital expenditure (405.2) (428.9)
Acquisitions - (11.0)
Proceeds from disposal of property, plant and equipment 19.5 47.5
Interest and tax (122.4) (124.4)
Dividends payable to non-controlling minority shareholders (10.0) (2.0)
Other - (1.1)
Net cash inflow before First Rail end of franchise cash flows 36.0 39.4
First Rail end of franchise cash flows (20.8) (107.9)
Foreign exchange movements (15.3) (31.7)
Other non-cash movements in relation to financial instruments (2.8) (3.3)
Movement in net debt in the year (2.9) (103.5)
The net cash inflow before First Rail end of franchise cash flows was
slightly lower than the prior year, principally reflecting the reduction in
cash generated by operations, lower proceeds from disposals of property, plant
and equipment partly offset by the planned lower capital expenditure.
Capital expenditure
As planned we continue to invest in our businesses. Cash capital expenditure
was £405.2m (2015: £428.9m) and comprised First Student £245.7m (2015:
£174.9m), First Transit £20.5m (2015: £21.6m), Greyhound £21.1m (2015:
£49.8m), First Bus £57.6m (2015: £104.1m), First Rail £58.1m (2015:
£75.0m) and Group items £2.2m (2015: £3.5m). First Rail capital expenditure
is typically matched by franchise receipts or other funding.
In addition during the year we entered into operating leases for passenger
carrying vehicles with capital values in First Transit of £1.3m (2015:
£9.2m).
Gross capital investment was £413.3m (2015: £425.1m) and comprised First
Student £209.2m (2015: £170.4m), First Transit £20.4m (2015: £30.3m),
Greyhound £24.8m (2015: £50.9m), First Bus £91.3m (2015: £93.9m), First
Rail £65.4m (2015: £76.1m) and Group items £2.2m (2015: £3.5m).
Net debt
The Group’s net debt at 31 March 2016 was £1,410.2m (2015: £1,407.3m) and
comprised:
31 March 31 March 2015
2016
Analysis of net debt Fixed Variable Total Total £m
£m £m £m
Sterling bond (2018) 298.3 - 298.3 297.8
Sterling bond (2019) - 249.8 249.8 249.8
Sterling bond (2021) - 348.2 348.2 348.2
Sterling bond (2022) 320.5 - 320.5 320.0
Sterling bond (2024) 199.6 - 199.6 199.5
HP contracts and finance leases 219.9 18.4 238.3 302.2
Senior unsecured loan notes 105.9 - 105.9 100.6
Loan notes 8.7 1.0 9.7 9.7
Gross debt excluding accrued interest 1,152.9 617.4 1,770.3 1,827.8
Cash (140.2) (223.8)
First Rail ring-fenced cash and deposits (217.5) (196.0)
Other ring-fenced cash and deposits (2.4) (0.7)
Net debt excluding accrued interest 1,410.2 1,407.3
Under the terms of the First Rail franchise agreements, cash can only be
distributed by the TOCs either up to the lower amount of their retained
profits or the amount determined by prescribed liquidity ratios. The
ring-fenced cash represents that which is not available for distribution or
the amount required to satisfy the liquidity ratio at the balance sheet date.
Funding and risk management
Liquidity within the Group has remained strong. At 31 March 2016 there was
£940.2m (2015: £1,023.8m) of committed headroom and free cash, being
£800.0m (2015: £800.0m) of committed headroom and £140.2m (2015: £223.8m)
of free cash. Largely due to the seasonality of First Student, committed
headroom typically reduces during the financial year up to October and
increases thereafter. Treasury policy requires a minimum of £150m of
committed headroom at all times. Our average debt maturity was 4.4 years
(2015: 5.2 years). The Group’s main revolving bank facilities require
renewal in June 2019.
The Group does not enter into speculative financial transactions and uses
only authorised financial instruments for certain risk management purposes.
Interest rate risk
We seek to reduce our exposure by using a combination of fixed rate debt and
interest rate derivatives to achieve an overall fixed rate position over the
medium term of at least 50% of net debt.
Foreign currency risk
‘Certain’ and ‘highly probable’ foreign currency transaction
exposures may be hedged at the time the exposure arises for up to two years at
specified levels, or longer if there is a very high degree of certainty. The
Group does not hedge the translation of earnings into the Group reporting
currency (pounds Sterling), but accepts that reported Group earnings will
fluctuate as exchange rates against pounds Sterling fluctuate for the
currencies in which the Group does business. During the year, the net cash
generated in each currency may be converted by Group Treasury into pounds
Sterling by way of spot transactions in order to keep the currency composition
of net debt broadly constant.
Fuel price risk
We use a progressive forward hedging programme to manage commodity risk. In
2015/16 in the UK, 94% of our ‘at risk’ crude requirements (1.9m barrels
p.a.) were hedged at an average rate of $88 per barrel. At year end we had
hedged 89% of our ‘at risk’ UK crude requirements for the year to 31 March
2017 at $70 per barrel and 83% of our requirements for the year to 31 March
2018 at $62 per barrel.
In North America 77% of 2015/16 ‘at risk’ crude oil volumes (1.5m barrels
p.a.) were hedged at an average rate of $86 per barrel. At year end we had
hedged 68% of the volumes for the year to 31 March 2017 at $72 per barrel and
34% of our volumes for the year to 31 March 2018 at $61 per barrel.
Balance sheet
Net assets have increased by £147.0m since the start of the year. The
principal reasons for this are the retained profit for the year of £96.4m,
favourable translation reserve movements of £110.5m partly offset by
actuarial losses on defined benefit pension schemes (net of deferred tax) of
£43.1m and unfavourable after tax hedging reserve movements of £13.1m.
Goodwill
The carrying value (net assets including goodwill but excluding intercompany
balances) of each cash generating unit (CGU) was tested for impairment during
the year and there continues to be sufficient headroom in all of the CGUs.
Foreign exchange
The most significant exchange rates to Sterling for the Group are as follows:
Year to 31 March 2016 Year to 31 March 2015
Closing Effective Closing rate Effective rate
rate rate
US Dollar 1.41 1.49 1.49 1.58
Canadian Dollar 1.87 1.93 1.88 1.83
Pensions
We have updated our pension assumptions as at 31 March 2016 for the defined
benefit schemes in the UK and North America. The net pension deficit of
£239.4m at the beginning of the year has increased to £270.9m at the end of
the year principally due to poor asset returns partly offset by higher real
discount rates. The main factors that influence the balance sheet position for
pensions and the sensitivities to their movement at 31 March 2016 are set out
below:
Movement Impact
Discount rate +0.1% Reduce deficit by £32m
Inflation +0.1% Increase deficit by £26m
Seasonality
First Student generates lower revenues and profits in the first half of the
financial year than in the second half of the year as the school summer
holidays fall into the first half. Greyhound operating profits are typically
higher in the first half of the year due to demand being stronger in the
summer months.
Forward-looking statements
Certain statements included or incorporated by reference within this document
may constitute ‘forward-looking statements’ with respect to the business,
strategy and plans of the Group and our current goals, assumptions and
expectations relating to our future financial condition, performance and
results.
By their nature, forward-looking statements involve known and unknown risks,
assumptions, uncertainties and other factors which cause actual results,
performance or achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
Shareholders are cautioned not to place undue reliance on the forward-looking
statements. Except as required by the UK Listing Rules and applicable law, the
Group does not undertake any obligation to update or change any
forward-looking statements to reflect events occurring after the date of this
document.
Other information
Unless otherwise stated, all financial figures for the year to 31 March 2016
(the ‘year’ or ‘2015/16’) include the results of the rail business for
the year to 31 March 2016 and the results of all the other businesses for the
52 weeks ended 26 March 2016. The figures for the year to 31 March 2015 (the
‘prior year’ or ‘2014/15’) include the results of the rail business
for the year to 31 March 2015 and the results of all the other businesses for
the 52 weeks ended 28 March 2015. No account is taken of foreign exchange
translation effects in the description of divisional performances and outlook.
All references to 'adjusted' figures throughout this document are before
other intangible asset amortisation charges and certain other items as set out
in note 4 to the financial statements.
All references to ‘underlying’ revenue throughout this document is in
constant currency and adjusted for changes in First Rail franchise portfolio.
‘ROCE’ or Return on Capital Employed is calculated by dividing adjusted
operating profit after tax by all year end assets and liabilities excluding
debt items.
References to ‘like-for-like’ revenue adjust for changes in the
composition of the divisional portfolio, holiday timing, severe weather and
other factors that distort the year-on-year trends in our passenger revenue
businesses.
Going concern
The Group has established a strong balanced portfolio of businesses with
approximately 50% of Group revenues secured under medium term contracts with
government agencies and other large organisations in the UK and North America.
The Group has a diversified funding structure with average debt duration at 31
March 2016 of 4.4 years (2015: 5.2 years) and which is largely represented by
medium term unsecured bank facilities and long term unsecured bond debt. The
Group has an £800m committed revolving banking facility of which £800m
(2015: £800m) was undrawn at the year end. This facility has a maturity of
June 2019.
The Directors have carried out a detailed review of the Group’s budget for
the year to 31 March 2017 and medium term plans, with due regard for the risks
and uncertainties to which the Group is exposed, the uncertain economic
climate and the impact that this could have on trading performance. Based on
this review, the Directors believe that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, the financial statements have been prepared on a going
concern basis.
Tim
O’Toole
Matthew Gregory
Chief
Executive
Chief Financial Officer
14 June
2016
14 June 2016
Consolidated income statement
For the year ended 31 March
Notes 2016 2015 £m
£m
Revenue 2 5,218.1 6,050.7
Operating costs (4,971.8) (5,804.9)
Operating profit 246.3 245.8
Investment income 5 1.4 1.8
Finance costs 5 (134.2) (141.8)
Profit before tax 113.5 105.8
Tax 6 (17.1) (20.3)
Profit for the year 96.4 85.5
Attributable to:
Equity holders of the parent 90.3 75.2
Non-controlling interests 6.1 10.3
96.4 85.5
Earnings per share
Basic 7 7.5p 6.2p
Diluted 7 7.5p 6.2p
Adjusted results 1
Adjusted operating profit 4 300.7 303.6
Adjusted profit before tax 4 168.3 163.9
Adjusted EPS 7 10.3p 9.8p
1 Adjusted for certain items as set out in note 4.
Consolidated statement of comprehensive income
Year ended 31 March
2016 2015 £m
£m
Profit for the year 96.4 85.5
Items that will not be reclassified subsequently to profit or loss
Actuarial (losses)/gains on defined benefit pension schemes (59.2) 33.9
Deferred tax on actuarial (losses)/gains on defined benefit pension schemes 16.1 (6.7)
(43.1) 27.2
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements (13.7) (89.9)
Deferred tax on derivative hedging instrument movements 0.6 26.6
Exchange differences on translation of foreign operations 110.5 223.9
97.4 160.6
Other comprehensive income for the year 54.3 187.8
Total comprehensive income for the year 150.7 273.3
Attributable to:
Equity holders of the parent 144.6 263.0
Non-controlling interests 6.1 10.3
150.7 273.3
Consolidated balance sheet
As at 31 March
Note 2016 2015 £m
£m
Non-current assets
Goodwill 8 1,736.3 1,659.2
Other intangible assets 9 162.2 197.0
Property, plant and equipment 10 2,142.2 2,027.1
Deferred tax assets 18 62.7 60.5
Retirement benefit assets 31.0 32.9
Derivative financial instruments 17 41.5 45.3
Investments 25.4 3.1
4,201.3 4,025.1
Current assets
Inventories 11 61.4 69.9
Trade and other receivables 12 694.4 716.6
Cash and cash equivalents 360.1 420.5
Assets held for sale 3.5 1.4
Derivative financial instruments 17 16.7 15.5
1,136.1 1,223.9
Total assets 5,337.4 5,249.0
Current liabilities
Trade and other payables 13 1,101.9 1,139.0
Tax liabilities 37.0 35.3
Financial liabilities 14 168.4 136.0
Derivative financial instruments 17 68.1 74.5
1,375.4 1,384.8
Net current liabilities 239.3 160.9
Non-current liabilities
Financial liabilities 14 1,712.1 1,805.7
Derivative financial instruments 17 35.5 22.6
Retirement benefit liabilities 301.9 272.3
Deferred tax liabilities 18 17.0 40.7
Provisions 19 262.3 236.7
2,328.8 2,378.0
Total liabilities 3,704.2 3,762.8
Net assets 1,633.2 1,486.2
Equity
Share capital 20 60.2 60.2
Share premium 676.4 676.4
Hedging reserve (68.6) (55.5)
Other reserves 4.6 4.6
Own shares (1.4) (1.9)
Translation reserve 352.2 241.7
Retained earnings 585.4 533.1
Equity attributable to equity holders of the parent 1,608.8 1,458.6
Non-controlling interests 24.4 27.6
Total equity 1,633.2 1,486.2
Consolidated statement of changes in equity
Year ended 31 March
Share capital £m Share premium £m Hedging reserve £m Other reserves £m Own shares £m Translation reserve £m Retained earnings £m Total £m Non- controlling interests £m Total equity £m
Balance at 1 April 2014 60.2 676.4 7.8 4.6 (1.8) 17.8 446.4 1,211.4 11.6 1,223.0
Total comprehensive income for the year – – (63.3) – – 223.9 102.4 263.0 10.3 273.3
Purchase of non-controlling interests 1 – – – – – – (7.0) (7.0) (4.0) (11.0)
Acquisition of non-controlling interests – – – – – – – – 11.7 11.7
Non-controlling interests put option 2 – – – – – – (12.8) (12.8) – (12.8)
Dividends paid – – – – – – – – (2.0) (2.0)
Movement in EBT and treasury shares – – – – (0.1) – (1.0) (1.1) – (1.1)
Share-based payments – – – – – – 5.2 5.2 – 5.2
Deferred tax on share-based payments – – – – – – (0.1) (0.1) – (0.1)
Balance at 31 March 2015 60.2 676.4 (55.5) 4.6 (1.9) 241.7 533.1 1,458.6 27.6 1,486.2
Total comprehensive income for the year – – (13.1) – – 110.5 47.2 144.6 6.1 150.7
Dividends paid – – – – – – – – (10.0) (10.0)
Movement in EBT and treasury shares – – – – 0.5 – (1.3) (0.8) – (0.8)
Share-based payments – – – – – – 6.4 6.4 – 6.4
Other – – – – – – – – 0.7 0.7
Balance at 31 March 2016 60.2 676.4 (68.6) 4.6 (1.4) 352.2 585.4 1,608.8 24.4 1,633.2
1 On 14 August 2014, the Group purchased the non-controlling
interests share of Hull Trains Limited for a consideration of £3.0m and on 24
March 2015, the Group purchased the non-controlling interests share of
Cardinal Coach Lines UCL for a consideration of CAD$17.0m. As both of these
represent a transaction with minority equity owners of the business without a
change of control, they have been recognised as an equity transaction in the
Group’s reserves and not as a business combination or investment.
2 On 25 August 2014, the Group completed the acquisition of a 51%
share in Mile Square Transportation, Inc, a school bus transportation company
based in New York. Included within the purchase agreement is a put option for
the Group to purchase the remaining 49% from the non-controlling interest
party for a fixed price of US$19.1m. As the put option is a contract to
purchase the Group’s own equity instruments it gives rise to a financial
liability for the fixed price amount in accordance with paragraph 23 in IAS
32. The financial liability has been recognised in the balance sheet and the
initial recognition is treated as a reclassification from equity.
Consolidated cash flow statement
Year ended 31 March
Note 2016 2015 £m
£m
Net cash from operating activities 21 409.5 325.2
Investing activities
Interest received 1.4 1.8
Proceeds from disposal of property, plant and equipment 19.5 47.5
Purchases of property, plant, equipment and software (405.2) (428.9)
Acquisition of subsidiary/business – (11.0)
Net cash used in investing activities (384.3) (390.6)
Financing activities
Dividends paid to non-controlling shareholders (10.0) (2.0)
Shares purchased by Employee Benefit Trust – (1.1)
Repayments under HP contracts and finance leases (80.3) (67.9)
Fees for bank facility amendments and bond issues – (4.7)
Net cash flow from financing activities (90.3) (75.7)
Net decrease in cash and cash equivalents before foreign exchange movements (65.1) (141.1)
Cash and cash equivalents at beginning of year 420.5 553.9
Foreign exchange movements 4.7 7.7
Cash and cash equivalents at end of year per consolidated balance sheet 360.1 420.5
Cash and cash equivalents are included within current assets on the
consolidated balance sheet.
Note to the consolidated cash flow statement –
reconciliation of net cash flow to movement in net debt
2016 2015 £m
£m
Net decrease in cash and cash equivalents in year (65.1) (141.1)
Decrease in debt and finance leases 80.3 67.9
Fees capitalised against bank facilities and bond issues – 4.7
Net cash flow 15.2 (68.5)
Foreign exchange movements (15.3) (31.7)
Other non-cash movements in relation to financial instruments (2.8) (3.3)
Movement in net debt in year (2.9) (103.5)
Net debt at beginning of year (1,407.3) (1,303.8)
Net debt at end of year (1,410.2) (1,407.3)
Net debt excludes all accrued interest.
Notes to the consolidated financial statements
1 General information
The financial information set out above does not constitute the Company’s
Statutory Accounts for the year ended 31 March 2016 or 2015, but is derived
from those accounts. Statutory Accounts for 2015 have been delivered to the
Registrar of Companies and those for 2016 will be delivered following the
Company’s Annual General Meeting. The auditors have reported on both sets of
account; their reports were unqualified and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement
has been computed in accordance with International Financial Reporting
Standards (IFRSs), this announcement does not in itself contain sufficient
information to comply with IFRSs. The Company expects to publish full
financial statements that comply with IFRSs in June 2016.
Copies of the Statutory Accounts for the year ended 31 March 2016 will be
available to all shareholders in June and will also be available thereafter at
the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.
2 Revenue
2016 2015 £m
£m
Services rendered 5,197.7 5,717.4
Rail franchise subsidy receipts 20.4 333.3
5,218.1 6,050.7
Finance income 1.4 1.8
Total revenue as defined by IAS 18 5,219.5 6,052.5
3 Business segments and geographical information
For management purposes, the Group is organised into five operating divisions
– First Student, First Transit, Greyhound, First Bus and First Rail. These
divisions are managed separately in line with the differing services that they
provide and the geographical markets which they operate in.
The segment results for the year to 31 March 2016 are as follows:
First First Greyhound First Bus First Rail Group items 1 £m Total
Student Transit £m £m £m £m
£m £m
Revenue 1,553.5 864.8 605.1 870.9 1,308.4 15.4 5,218.1
EBITDA 2 266.4 74.7 69.7 113.4 122.4 (30.7) 615.9
Depreciation (153.8) (14.6) (34.2) (61.4) (60.0) (1.7) (325.7)
Capital grant amortisation – – – – 10.5 – 10.5
Segment results 2 112.6 60.1 35.5 52.0 72.9 (32.4) 300.7
Other intangible asset amortisation charges (42.1) (3.4) (3.1) – (3.3) – (51.9)
Other adjustments (note 4) (2.8) (7.2) (1.5) (1.8) - 10.8 (2.5)
Operating profit 3 67.7 49.5 30.9 50.2 69.6 (21.6) 246.3
Investment income 1.4
Finance costs (134.2)
Profit before tax 113.5
Tax (17.1)
Profit after tax 96.4
The segment results for the year to 31 March 2015 are as follows:
First Student £m First Transit £m Greyhound £m First Bus £m First Rail £m Group items 1 £m Total £m
Revenue 1,478.8 844.8 609.6 896.1 2,207.1 14.3 6,050.7
EBITDA 2 260.9 72.1 73.1 118.5 137.8 (38.0) 624.4
Depreciation (146.0) (12.4) (31.4) (66.7) (96.2) (0.6) (353.3)
Capital grant amortisation – – – – 32.5 – 32.5
Segment results 2 114.9 59.7 41.7 51.8 74.1 (38.6) 303.6
Other intangible asset amortisation charges (39.8) (3.4) (2.9) – (8.2) – (54.3)
Other adjustments (note 4) (12.2) – 25.3 (7.9) – (8.7) (3.5)
Operating profit 3 62.9 56.3 64.1 43.9 65.9 (47.3) 245.8
Investment income 1.8
Finance costs (141.8)
Profit before tax 105.8
Tax (20.3)
Profit after tax 85.5
1 Group items comprise Tram operations, central management and other
items.
2 EBITDA is adjusted operating profit less capital grant amortisation
plus depreciation.
3 Although the segment results are used by management to measure
performance, statutory operating profit by operating division is also
disclosed for completeness.
4 Reconciliation to non-gaap measures and performance
In measuring the Group adjusted performance, additional financial measures
derived from the reported results have been used in order to eliminate factors
which distort year on year comparisons. The Group’s adjusted performance is
used to explain year on year changes when the effect of certain items are
significant, including other intangible asset amortisation, business
disposals, aged legal and self-insurance claims, revisions to onerous
contracts and pension past settlement gains or losses, as management consider
that this basis more appropriately reflects operating performance and a better
understanding of the key performance indicators of the business.
Reconciliation of operating profit to adjusted operating profit Year to Year to 31 March 2015 £m
31 March 2016
£m
Operating profit 246.3 245.8
Adjustments for:
Other intangible asset amortisation charges 51.9 54.3
Gain on disposal of property – (25.3)
Legal claims 1.0 12.2
IT licences – 8.7
First Bus depot sales and closures 1.8 7.5
Pensions past service gain (10.8) –
North America insurance reserves 10.5 –
Other – 0.4
Total operating profit adjustments 54.4 57.8
Adjusted operating profit (note 3) 300.7 303.6
Reconciliation of profit before tax to adjusted profit before tax Year to Year to 31 March 2015 £m
31 March 2016
£m
Profit before tax 113.5 105.8
Operating profit adjustments (see table above) 54.4 57.8
Ineffectiveness on financial derivatives 0.4 0.3
Adjusted profit before tax 168.3 163.9
Adjusted tax charge (38.7) (36.1)
Non-controlling interests (6.1) (10.3)
Adjusted earnings 123.5 117.5
The principal adjusting items are as follows:
Other intangible asset amortisation charges
The charge for the year was £51.9m (2015: £54.3m). The reduction primarily
reflects a lower charge in First Rail as the GWR franchise intangible was
fully expensed at the end of Direct Award 1, partly offset by a higher charge
for First Student due to the full year effect if the Mile Square acquisition.
Legal claims
A legal claim that pre-dates the Laidlaw acquisition and was acquired with
the former Laidlaw entities had further adverse developments during the year
and has been settled for £1.0m more than was originally provided for within
adjusted items.
First Bus depot sales and closures
There was a charge of £1.8m (2015: £7.5m) in the year relating to operating
losses on a legacy depot closure.
Pensions past service gain
During the year we agreed with the FirstGroup Pension Scheme Trustee to
change the basis for revaluing pensions in payment from RPI to CPI. This
change has led to a reduction in the liabilities and as a result £10.8m past
service gain has been recognised.
North America Insurance reserves
There have been significant adverse developments on a small number of old and
unusual insurance claims in North America during the year. The impact of these
adverse developments was a charge of £10.5m.
Ineffectiveness on financial derivatives
There was a £0.4m (2015: £0.3m) non-cash charge during the year due to
ineffectiveness on financial derivatives.
Year to 31 March 2015 underlying
In addition, Management have presented underlying revenue for the year to 31
March 2015 which is in constant currency and adjusted for changes in the First
Rail franchise portfolio.
A reconciliation is set out below:
Revenue
£m
Year to 31 March 2015 as reported 6,050.7
Changes in First Rail franchise portfolio (952.4)
Foreign exchange movements 134.0
Year to 31 March 2015 underlying 5,232.3
5 Investment income and finance costs
2016 2015 £m
£m
Investment income
Bank interest receivable (1.4) (1.8)
Finance costs
Bonds 84.2 84.9
Bank borrowings 13.0 16.8
Senior unsecured loan notes 4.3 4.1
Loan notes 1.0 1.0
Finance charges payable in respect of HP contracts and finance leases 8.9 9.4
Notional interest on long term provisions 14.8 15.2
Notional interest on pensions 7.6 10.1
Finance costs before adjustments 133.8 141.5
Hedge ineffectiveness on financial derivatives 0.4 0.3
Total finance costs 134.2 141.8
Finance costs before adjustments 133.8 141.5
Investment income (1.4) (1.8)
Net finance cost before adjustments 132.4 139.7
6 Tax on profit on ordinary activities
2016 2015 £m
£m
Current tax 7.0 11.2
Adjustments with respect to prior years 14.1 6.5
Total current tax charge 21.1 17.7
Origination and reversal and temporary differences 22.4 15.9
Adjustments with respect to prior years (26.4) (13.3)
Total deferred tax (credit)/charge (4.0) 2.6
Total tax charge 17.1 20.3
7 Earnings per share (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders
of £90.3m (2015: £75.2m) by the weighted average number of ordinary shares
of 1,204.0m (2015: 1,204.0m). The number of ordinary shares used for the basic
and diluted calculations are shown in the table below.
The difference in the number of shares between the basic calculation and the
diluted calculation represents the weighted average number of potentially
dilutive ordinary share options.
2016 2015 Number m
Number
m
Weighted average number of shares used in basic calculation 1,204.0 1,204.0
Executive share options 8.0 3.6
Weighted average number of shares used in the diluted calculation
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