REG-FirstGroup PLC: Final Results <Origin Href="QuoteRef">FGP.L</Origin> - Part 2
01/06/2017 07:05
- Part 2: For the preceding part double click ID:nPRr16553a
retail
and interchange facilities. We are also introducing new ticket machines which
make it easy to find the best value fares. In the year more than 5,000
frontline employees took part in our customer service training programmes
across the division. £770,000 was made available in the year from GWR’s
£2.25m Customer and Communities Improvement Fund. A similar fund has been
introduced by TPE this year, which will work with community organisations
across the network.
Future priorities
We will continue to focus on working with our industry partners to realise the
upgrade plans across the network, so that passengers will begin to see the
benefits from new and better trains, more seats and services, quicker journey
times, improved stations and new technology.
We will also continue to examine opportunities to grow our rail business
through our disciplined approach to the DfT’s franchising process, aiming to
deliver ambitious improvements for passengers and appropriate returns for
shareholders, at an acceptable level of risk. During the year we announced
70:30 partnerships with Trenitalia UK Limited to bid together for the East
Midlands and West Coast Partnership rail franchise competitions.
First Rail outlook
Although like-for-like passenger revenue in the fourth quarter increased by
2.5%, we remain cautious on the rate of passenger growth in light of current
industry conditions, and expect divisional margin to be lower as a result. We
look forward to commencing operation of the South Western franchise from
August 2017 in conjunction with our partner MTR Corporation.
Finance costs and investment income
Net finance costs before adjustments were £132.0m (2016: £132.4m) with the
decrease principally reflecting lower interest rates, partly offset by adverse
foreign exchange translation.
Profit before tax
Adjusted profit before tax as set out in note 4 to the financial statements
was £207.0m (2016: £168.3m), with the increase due principally to higher
adjusted operating profit. An overall charge of £54.4m (2016: £54.8m) for
adjustments including other intangible asset amortisation charges of £60.2m
(2016: £51.9m) resulted in statutory profit before tax of £152.6m (2016:
£113.5m).
Tax
The tax charge, on adjusted profit before tax, for the year was £53.8m (2016:
£38.7m) representing an effective rate of 26.0% (2016: 23.0%). Higher profits
in the North American businesses led to the increase in rate. There was a tax
credit of £17.3m (2016: £21.6m) relating to other intangible asset
amortisation charges and other adjustments of £54.4m (2016: £54.8m). The
total tax charge was £36.5m (2016: £17.1m). The effective tax rate on
statutory profit before tax is 23.9% (2016: 15.1%). The Group’s tax rate is
sensitive to the geographic mix of profits including higher tax rates in the
US and Canada and to changes in tax law and rates in the jurisdictions in
which it operates. The statutory rate is lower than the effective rate on
adjusted profits because the majority of intangible asset amortisation is in
higher-taxed North America.
Over the medium term, our tax rate is likely to increase as the mix of our
business changes. However any legislative changes may also impact our tax rate
with any significant reduction in US tax rates tending to offset the impact of
higher profits.
The actual tax paid during the year was £10.2m (2016: £7.0m). This is less
than the tax charge primarily because of losses carried forward in the US.
EPS
Adjusted EPS increased by 20.4% to 12.4p (2016: 10.3p) and basic EPS increased
24.0% to 9.3p (2016: 7.5p), primarily due to improvements in operating profit.
Shares in issue
As at 31 March 2017 there were 1,207.3m shares in issue (2016: 1,204.2m),
excluding treasury shares and own shares held in trust for employees of 0.4m
(2016: 0.7m). 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 1,204.8m (2016: 1,204.0m).
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 adjusting
items are as follows:
Other intangible asset amortisation charges
The amortisation charge for the year was £60.2m (2016: £51.9m). The increase
primarily reflects a higher charge in the North America divisions due to the
impact of foreign exchange and an incremental £6.6m in software intangible
amortisation this year, partly offset by a lower charge in First Rail as the
GWR franchise intangible was fully expensed at the end of its first Direct
Award period.
Gain on disposal of property
During the year the sale of a Greyhound terminal in San Jose, California was
completed which resulted in a gain on sale of £21.6m (2016: £nil).
Restructuring and reorganisation costs
There was a charge of £16.8m (2016: £nil) in the year for restructuring and
reorganisation costs across the Group relating to the business turnarounds.
Ineffectiveness on financial derivatives
There was a £1.0m non-cash credit (2016: £0.4m charge) during the year due
to ineffectiveness on financial derivatives.
Capital expenditure
As planned we continue to invest in our businesses. Cash capital expenditure
was £404.3m (2016: £405.2m) and comprised First Student £198.7m (2016:
£245.7m), First Transit £17.8m (2016: £20.5m), Greyhound £30.1m (2016:
£21.1m), First Bus £74.4m (2016: £57.6m), First Rail £80.4m (2016:
£58.1m) and Group items £2.9m (2016: £2.2m). 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 £8.0m (2016: £1.3m).
Gross capital investment was £365.6m (2016: £413.3m) and comprised First
Student £165.9m (2016: £209.2m), First Transit £25.8m (2016: £20.4m),
Greyhound £31.7m (2016: £24.8m), First Bus £63.9m (2016: £91.3m), First
Rail £75.4m (2016: £65.4m) and Group items £2.9m (2016: £2.2m). The
balance between cash capital expenditure and gross capital investment
represents creditor movements in the year.
Cash flow
The £111.2m improvement in net cash inflow (before First Rail end of
franchise cash flows) was driven by the increase in cash generated by
operations and the proceeds from the sale of a Greyhound terminal in the year.
This cash inflow, combined principally with no First Rail end of franchise
cash flows (2016: £20.8m outflow) and movements in debt due to foreign
exchange, resulted in a decrease in net debt of £120.3m (2016 increase:
£2.9m), as detailed below.
Year to 31 March 2017 2016 £m
£m
EBITDA 686.6 615.9
Other non-cash income statement (credits)/charges (6.2) 6.4
Working capital excluding First Rail end of franchise cash flows 23.9 (16.0)
Movement in other provisions (30.6) (18.6)
Pension payments in excess of income statement charge (37.6) (33.6)
Cash generated by operations excluding First Rail end of franchise cash flows 636.1 554.1
Capital expenditure (404.3) (405.2)
Proceeds from disposal of property, plant and equipment 43.0 19.5
Interest and tax (116.3) (122.4)
Dividends payable to non-controlling minority shareholders (11.9) (10.0)
Other 0.6 -
Net cash inflow before First Rail end of franchise cash flows 147.2 36.0
First Rail end of franchise cash flows - (20.8)
Foreign exchange movements (26.5) (15.3)
Other non-cash movements (0.4) (2.8)
Movement in net debt in the year 120.3 (2.9)
Funding and risk management
Liquidity within the Group has remained strong. At the year end there was
£941.1m (2016: £940.2m) of headroom on committed facilities and free cash,
being £800.0m (2016: £800.0m) of committed headroom and £141.1m (2016:
£140.2m) 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 3.6 years
(2016: 4.4 years). The Group’s main revolving bank facilities require
renewal in July 2021 following a two-year amendment and extension agreed in
March 2017. 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
including fuel purchases for the UK divisions 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
2016/17 in the UK, 91% of our ‘at risk’ crude requirements (1.8m barrels
p.a.) were hedged at an average rate of $70 per barrel. We have hedged 89% of
our ‘at risk’ UK crude requirements for the year to 31 March 2018 at $60
per barrel and 55% of our requirements for the year to 31 March 2019 at $55
per barrel.
In North America 68% of 2016/17 ‘at risk’ crude oil volumes (1.4m barrels
p.a.) were hedged at an average rate of $72 per barrel. We have hedged 57% of
the volumes for the year to 31 March 2018 at $57 per barrel and 28% of our
volumes for the year to 31 March 2019 at $50 per barrel.
Balance sheet
Net assets have increased by £442.7m since the start of the year. The
principal reasons for this are the retained profit for the year of £116.1m,
favourable translation reserve movements of £356.2m and favourable after tax
hedging reserve movements of £50.7m, partly offset by actuarial losses on
defined benefit pension schemes (net of deferred tax) of £82.4m.
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 2017 Year to 31 March 2016
Closing Effective Closing rate Effective rate
rate rate
US Dollar 1.25 1.29 1.41 1.49
Canadian Dollar 1.67 1.74 1.87 1.93
Seasonality
First Student generates less revenue and profit 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 profit is typically
higher in the first half of the year due to demand being stronger in the
summer months.
Pensions
We have updated our pension assumptions as at 31 March 2017 for the defined
benefit schemes in the UK and North America. The net pension deficit of
£270.9m at the beginning of the year has increased to £358.5m at the end of
the year principally due to lower real discount rates partly offset by higher
asset returns. The main factors that influence the balance sheet position for
pensions and the sensitivities to their movement at 31 March 2017 are set out
below:
Movement Impact
Discount rate +0.1% Reduce deficit by £38m
Inflation +0.1% Increase deficit by £32m
Net debt
The Group’s net debt at 31 March 2017 was £1,289.9m (2016: £1,410.2m) and
comprised:
31 March 2017 31 March 2016
Analysis of net debt Fixed Variable Total Total £m
£m £m £m
Sterling bond (2018) 298.8 - 298.8 298.3
Sterling bond (2019) - 249.8 249.8 249.8
Sterling bond (2021) - 348.3 348.3 348.2
Sterling bond (2022) 321.1 - 321.1 320.5
Sterling bond (2024) 199.6 - 199.6 199.6
HP contracts and finance leases 180.4 3.3 183.7 238.3
Senior unsecured loan notes 80.0 - 80.0 105.9
Loan notes 8.7 0.8 9.5 9.7
Gross debt excluding accrued interest 1,088.6 602.2 1,690.8 1,770.3
Cash (141.1) (140.2)
First Rail ring-fenced cash and deposits (255.8) (217.5)
Other ring-fenced cash and deposits (4.0) (2.4)
Net debt excluding accrued interest 1,289.9 1,410.2
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.
Dividends
The Board recognises that dividends are an important component of total
shareholder return for many investors and remains committed to reinstating a
sustainable dividend at the appropriate time, having regard to the Group’s
financial performance, balance sheet and outlook. The Board will not be
recommending payment of a dividend in respect of the year to 31 March 2017 at
the Group’s Annual General Meeting but will continue to review the
appropriate timing for restarting dividend payments.
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 that 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 2017
(the ‘year’ or ‘2017’) include the results of the First Rail business
for the year to 31 March 2017 and the results of all the other businesses for
the 52 weeks ended 25 March 2017. The figures for the year to 31 March 2016
(the ‘prior year’ or ‘2016’) include the results of First Rail for the
year to 31 March 2016 and the results of all the other businesses for the 52
weeks ended 26 March 2016. Results for 2018 will include the results of First
Rail for the year to 31 March 2018 and the results of all the other business
for the 53 weeks ended 31 March 2018.
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.
‘ROCE’ or Return on Capital Employed is a measure of capital efficiency
and is calculated by dividing adjusted operating profit after tax by all year
end assets and liabilities excluding debt items.
'EBITDA’ is adjusted operating profit less capital grant amortisation plus
depreciation.
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 revenue 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 2017 of 3.6 years (2016: 4.4 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
(2016: £800m) was undrawn at the year end. This facility has a maturity of
July 2021.
The Directors have carried out a detailed review of the Group’s budget for
the year to 31 March 2018 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
1 June 2017 1 June 2017
Consolidated income statement
For the year ended 31 March
Continuing Operations Notes 2017 £m 2016 £m
Revenue 2 5,653.3 5,218.1
Operating costs (5,369.7) (4,971.8)
Operating profit 283.6 246.3
Investment income 5 1.2 1.4
Finance costs 5 (132.2) (134.2)
Profit before tax 152.6 113.5
Tax 6 (36.5) (17.1)
Profit for the year 116.1 96.4
Attributable to:
Equity holders of the parent 112.3 90.3
Non-controlling interests 3.8 6.1
116.1 96.4
Earnings per share
Basic 7 9.3p 7.5p
Diluted 7 9.2p 7.5p
Adjusted results1
Adjusted operating profit 4 339.0 300.7
Adjusted profit before tax 4 207.0 168.3
Adjusted EPS 7 12.4p 10.3p
1 Adjusted for certain items as set out in note 4.
The accompanying notes form an integral part of this consolidated income
statement.
Consolidated statement of comprehensive income
Year ended 31 March
2017 2016 £m
£m
Profit for the year 116.1 96.4
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes (89.7) (59.2)
Deferred tax on actuarial losses on defined benefit pension schemes 7.3 16.1
(82.4) (43.1)
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements 69.7 (13.7)
Deferred tax on derivative hedging instrument movements (19.0) 0.6
Exchange differences on translation of foreign operations 356.2 110.5
406.9 97.4
Other comprehensive income for the year 324.5 54.3
Total comprehensive income for the year 440.6 150.7
Attributable to:
Equity holders of the parent 436.8 144.6
Non-controlling interests 3.8 6.1
440.6 150.7
The accompanying notes form an integral part of this consolidated statement of
comprehensive income.
Consolidated balance sheet
As at 31 March
Note 2017 2016 £m
£m
Non-current assets
Goodwill 8 1,956.1 1,736.3
Other intangible assets 9 150.6 162.2
Property, plant and equipment 10 2,276.5 2,142.2
Deferred tax assets 18 25.8 62.7
Retirement benefit assets 34.0 31.0
Derivative financial instruments 17 48.6 41.5
Investments 33.3 25.4
4,524.9 4,201.3
Current assets
Inventories 11 64.5 61.4
Trade and other receivables 12 790.9 694.4
Current tax assets 0.7 –
Cash and cash equivalents 400.9 360.1
Assets held for sale 2.9 3.5
Derivative financial instruments 17 1.7 16.7
1,261.6 1,136.1
Total assets 5,786.5 5,337.4
Current liabilities
Trade and other payables 13 1,155.3 1,101.9
Tax liabilities – Current tax liabilities 5.1 16.4
– Other tax and social security 20.3 20.6
Borrowings 14 204.4 168.4
Derivative financial instruments 17 29.5 68.1
1,414.6 1,375.4
Net current liabilities 153.0 239.3
Non-current liabilities
Borrowings 14 1,586.4 1,712.1
Derivative financial instruments 17 8.6 35.5
Retirement benefit liabilities 392.5 301.9
Deferred tax liabilities 18 24.3 17.0
Provisions 19 284.2 262.3
2,296.0 2,328.8
Total liabilities 3,710.6 3,704.2
Net assets 2,075.9 1,633.2
Equity
Share capital 20 60.4 60.2
Share premium 678.9 676.4
Hedging reserve (17.9) (68.6)
Other reserves 4.6 4.6
Own shares (1.2) (1.4)
Translation reserve 708.4 352.2
Retained earnings 621.9 585.4
Equity attributable to equity holders of the parent 2,055.1 1,608.8
Non-controlling interests 20.8 24.4
Total equity 2,075.9 1,633.2
The accompanying notes form an integral part of this consolidated balance
sheet.
Tim O’Toole Matthew Gregory
1 June 2017 1 June 2017
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 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 / other – – – – – – – – (9.3) (9.3)
Movement in EBT and treasury shares – – – – 0.5 – (1.3) (0.8) – (0.8)
Share-based payments – – – – – – 6.4 6.4 – 6.4
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
Balance at 1 April 2016 60.2 676.4 (68.6) 4.6 (1.4) 352.2 585.4 1,608.8 24.4 1,633.2
Total comprehensive income for the year – – 50.7 – – 356.2 29.9 436.8 3.8 440.6
Shares issued 0.2 2.5 – – – – – 2.7 – 2.7
Dividends paid / other – – – – – – – – (7.4) (7.4)
Movement in EBT and treasury shares – – – – 0.2 – (1.6) (1.4) – (1.4)
Share-based payments – – – – – – 8.2 8.2 – 8.2
Balance at 31 March 2017 60.4 678.9 (17.9) 4.6 (1.2) 708.4 621.9 2,055.1 20.8 2,075.9
The accompanying notes form an integral part of this consolidated statement of
changes in equity.
Consolidated cash flow statement
Year ended 31 March
Note 2017 2016 £m
£m
Net cash from operating activities 21 520.4 409.5
Investing activities
Interest received 1.2 1.4
Proceeds from disposal of property, plant and equipment 43.0 19.5
Purchases of property, plant and equipment (374.1) (405.2)
Purchase of intangible assets (30.2) –
Net cash used in investing activities (360.1) (384.3)
Financing activities
Dividends paid to non-controlling shareholders (11.9) (10.0)
Shares purchased by Employee Benefit Trust (1.5) –
Shares issued 2.1 –
Repayment of senior unsecured loans (41.0) –
Repayment of loan notes (0.1) –
Repayments under HP contracts and finance leases (75.0) (80.3)
Fees for bank facility amendments (1.8) –
Net cash flow used in financing activities (129.2) (90.3)
Net increase/(decrease) in cash and cash equivalents before foreign exchange movements 31.1 (65.1)
Cash and cash equivalents at beginning of year 360.1 420.5
Foreign exchange movements 9.7 4.7
Cash and cash equivalents at end of year per consolidated balance sheet 400.9 360.1
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
2017 2016 £m
£m
Net increase/(decrease) in cash and cash equivalents in year 31.1 (65.1)
Decrease in debt and finance leases 116.1 80.3
Net cash flow 147.2 15.2
Foreign exchange movements (26.5) (15.3)
Other non-cash movements (0.4) (2.8)
Movement in net debt in year 120.3 (2.9)
Net debt at beginning of year (1,410.2) (1,407.3)
Net debt at end of year (1,289.9) (1,410.2)
Net cash flow is stated prior to cash flows in relation to debt and finance
leases.
Net debt excludes all accrued interest.
The accompanying notes form an integral part of this consolidated cash flow
statement.
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 2017 or 2016, but is derived
from those accounts. Statutory Accounts for 2016 have been delivered to the
Registrar of Companies and those for 2017 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 2017.
Copies of the Statutory Accounts for the year ended 31 March 2017 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
2017 2016 £m
£m
Services rendered 5,653.3 5,197.7
Rail franchise subsidy receipts – 20.4
Revenue 5,653.3 5,218.1
Finance income 1.2 1.4
Total revenue as defined by IAS 18 5,654.5 5,219.5
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 2017 are as follows:
First First Greyhound First First Group Total
Student Transit £m Bus Rail items (1) £m
£m £m £m £m £m
Revenue 1,780.3 1,042.0 684.7 861.7 1,268.8 15.8 5,653.3
EBITDA (2) 348.7 91.9 79.4 104.5 98.8 (36.7) 686.6
Depreciation (177.6) (18.6) (36.8) (67.5) (50.3) (2.1) (352.9)
Capital grant amortisation – – – – 5.3 – 5.3
Segment results (2) 171.1 73.3 42.6 37.0 53.8 (38.8) 339.0
Other intangible asset amortisation charges (49.6) (1.8) (8.5) – (0.3) – (60.2)
Other adjustments (note 4) (2.5) (0.2) 19.6 (10.9) – (1.2) 4.8
Operating profit (3) 119.0 71.3 53.7 26.1 53.5 (40.0) 283.6
Investment income 1.2
Finance costs (132.2)
Profit before tax 152.6
Tax (36.5)
Profit after tax 116.1
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.
3 Business segments and geographical information continued
The segment results for the year to 31 March 2016 are as follows:
First Student £m First Transit £m Greyhound £m First Bus £m First Rail £m Group items (1) £m Total £m
Revenue 1,553.5 864.8 605.1 870.9 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
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 operating 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 restructuring and reorganisation
costs relating to the business turnarounds, property disposals, aged legal and
self-insurance claims, revisions to onerous contracts and pension settlement
gains or losses. In addition, management assess divisional performance before
other intangible asset amortisation charges as these are typically a result of
Group decisions and therefore the divisions have little or no control over
these charges. Management consider that this overall basis more appropriately
reflects operating performance and provide a better understanding of the key
performance indicators of the business.
Reconciliation of operating profit to adjusted operating profit 2017 2016 £m
£m
Operating profit 283.6 246.3
Adjustments for:
Other intangible asset amortisation charges 60.2 51.9
Gain on disposal of property (21.6) –
Restructuring and reorganisation costs 16.8 –
Legal claims – 1.0
First Bus depot sales and closures – 1.8
Pensions past service gain – (10.8)
North America insurance reserves – 10.5
Total operating profit adjustments 55.4 54.4
Adjusted operating profit (note 3) 339.0 300.7
Reconciliation of profit before tax to adjusted profit before tax 2017 2016 £m
£m
Profit before tax 152.6 113.5
Operating profit adjustments (see table above) 55.4 54.4
Ineffectiveness on financial derivatives (1.0) 0.4
Adjusted profit before tax 207.0 168.3
Adjusted tax charge (53.8) (38.7)
Non-controlling interests (3.8) (6.1)
Adjusted earnings 149.4 123.5
4 Reconciliation to non-gaap measures and performance continued
The adjusting items are as follows:
Other intangible asset amortisation charges
The amortisation charge for the year was £60.2m (2016: £51.9m). The increase
primarily reflects a higher charge in the North America divisions due to the
impact of foreign exchange and an incremental £6.6m software intangible
amortisation this year, partly offset by a lower charge in First Rail as the
GWR franchise intangible was fully expensed at the end of its first Direct
Award period.
Gain on disposal of property
During the year the sale of a Greyhound terminal in San Jose, California was
completed which resulted in a gain on sale of £21.6m (2016: £nil).
Restructuring and reorganisation costs
There was a charge of £16.8m (2016: £nil) in the year for restructuring and
reorganisation costs across the Group relating to the business turnarounds.
Ineffectiveness on financial derivatives
There was a £1.0m non-cash credit (2016: £0.4m charge) during the year due
to ineffectiveness on financial derivatives.
5 Investment income and finance costs
2017 2016 £m
£m
Investment income
Bank interest receivable (1.2) (1.4)
Finance costs
Bonds 83.7 84.2
Bank borrowings 11.4 13.0
Senior unsecured loan notes 4.3 4.3
Loan notes 1.0 1.0
Finance charges payable in respect of HP contracts and finance leases 6.4 8.9
Notional interest on long term provisions 17.5 14.8
Notional interest on pensions 8.9 7.6
Finance costs before adjustments 133.2 133.8
Hedge ineffectiveness on financial derivatives (1.0) 0.4
Total finance costs 132.2 134.2
Finance costs before adjustments 133.2 133.8
Investment income (1.2) (1.4)
Net finance cost before adjustments 132.0 132.4
6 Tax on profit on ordinary activities
2017 2016 £m
£m
Current tax 9.5 7.0
Adjustments with respect to prior years (13.8) 14.1
Total current tax (credit)/charge (4.3) 21.1
Origination and reversal of temporary differences 50.4 22.4
Adjustments with respect to prior years (9.6) (26.4)
Total deferred tax charge/(credit) 40.8 (4.0)
Total tax charge 36.5 17.1
7 Earnings per share (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders
(Basic profit) of £112.3m (2016: £90.3m) by the weighted average number of
ordinary shares of 1,204.8m (2016: 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.
2017 number 2016 number m
m
Weighted average number of shares used in basic calculation 1,204.8 1,204.0
Executive share options 11.5 8.0
Weighted average number of shares used in the diluted calculation 1,216.3 1,212.0
The adjusted EPS is intended to highlight the recurring operating results of
the Group before amortisation charges, ineffectiveness on financial
derivatives and certain other adjustments as set out in note 4. A
reconciliation is set out below:
2017 2016
£m EPS (pence) £m EPS (pence)
Basic profit/EPS 112.3 9.3 90.3 7.5
Amortisation charges (note 9) 60.2 5.0 51.9 4.4
Ineffectiveness on financial derivatives (1.0) (0.1) 0.4 –
Other adjustments (note 4) (4.8) (0.4) 2.5 0.2
Tax effect of above adjustments (17.3) (1.4) (21.6) (1.8)
Adjusted profit/EPS 149.4 12.4 123.5 10.3
2017 2016 pence
pence
Diluted EPS 9.2 7.5
Adjusted diluted EPS 12.3 10.2
8 Goodwill
2017 2016 £m
£m
Cost
At 1 April 1,740.3 1,663.2
Foreign exchange movements 219.8 77.1
At 31 March 1,960.1 1,740.3
Accumulated impairment losses
At 1 April and 31 March 4.0 4.0
Carrying amount
At 31 March 1,956.1 1,736.3
The calculation of value in use for each CGU is most sensitive to the
principal assumptions of discount rate, growth rates and margins achievable.
Sensitivity analysis has been performed on the calculations and confirms that
no reasonably possible changes in the assumptions would cause the carrying
amount of the CGUs to exceed their recoverable amount in respect of the First
Transit, Greyhound, First Bus and First Rail divisions.
The value in use of the First Student division exceeds its carrying amount by
£709.2m (2016: £232.3m). The sensitivity analysis indicates that the First
Student margin or growth rates would need to fall in excess of 218 or 184
basis points respectively compared to medium term double digit margin
expectations for there to be an impairment to the carrying value of net assets
in this business. An increase in the discount rate in excess of 161 basis
points would lead to the value in use of the division being less than its
carrying amount.
Following their review of goodwill, the Directors have concluded that there is
no impairment to any of the CGUs.
9 Other intangible assets
Customer contracts £m Greyhound brand and trade name £m Rail franchise agreements £m Software £m Total £m
Cost
At 1 April 2015 414.8 63.3 36.1 – 514.2
Additions – – – 11.6 11.6
Cessation of franchise – – (30.6) – (30.6)
Foreign exchange movements 19.0 2.7 – – 21.7
At 31 March 2016 433.8 66.0 5.5 11.6 516.9
Additions – – – 30.2 30.2
Cessation of franchise – – (5.5) – (5.5)
Foreign exchange movements 57.2 8.7 – 1.1 67.0
At 31 March 2017 491.0 74.7 – 42.9 608.6
Amortisation
At 1 April 2015 260.3 24.0 32.9 – 317.2
Charge for year 45.6 3.1 3.2 – 51.9
Cessation of franchise – – (30.6) – (30.6)
Foreign exchange movements 15.0 1.2 – – 16.2
At 31 March 2016 320.9 28.3 5.5 – 354.7
Charge for year 50.1 3.5 – 6.6 60.2
Cessation of franchise – – (5.5) – (5.5)
Foreign exchange movements 44.5 3.9 – 0.2 48.6
At 31 March 2017 415.5 35.7 – 6.8 458.0
Carrying amount
At 31 March 2017 75.5 39.0 – 36.1 150.6
At 31 March 2016 112.9 37.7 – 11.6 162.2
10 Property, plant and equipment
Land and buildings £m Passenger carrying vehicle fleet £m Other plant and equipment £m Total £m
Cost
At 1 April 2015 497.1 2,978.2 842.4 4,317.7
Additions in the year 16.7 285.3 98.4 400.4
Disposals (41.3) (96.5) (281.2) (419.0)
Reclassified as held for sale (1.8) (100.4) – (102.2)
Foreign exchange movements 12.3 117.3 14.6 144.2
At 31 March 2016 483.0 3,183.9 674.2 4,341.1
Additions in the year 13.3 218.0 96.1 327.4
Disposals (11.1) (97.4) (33.5) (142.0)
Reclassified as held for sale – (148.0) – (148.0)
Foreign exchange movements 36.9 312.8 41.1 390.8
At 31 March 2017 522.1 3,469.3 777.9 4,769.3
Accumulated depreciation and impairment
At 1 April 2015 104.2 1,510.7 675.7 2,290.6
Charge for year 9.3 225.8 90.6 325.7
Disposals (33.7) (87.2) (274.9) (395.8)
Reclassified as held for sale (0.2) (98.5) – (98.7)
Foreign exchange movements 2.6 64.0 10.5 77.1
At 31 March 2016 82.2 1,614.8 501.9 2,198.9
Charge for year 12.8 249.6 90.5 352.9
Disposals (2.8) (97.4) (18.6) (118.8)
Impairment – 4.5 – 4.5
Reclassified as held for sale – (147.6) – (147.6)
Foreign exchange movements
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