REG-FirstGroup PLC: Final Results
27/07/2021 07:05
FIRSTGROUP PLC
RESULTS FOR THE 52 WEEKS TO 27 MARCH 2021
A landmark year of delivery:
* Proud of all our people for delivering vital travel services for our
customers and communities during the pandemic
* Key strategic objective completed: portfolio rationalised with sale of First
Student and First Transit
* Resilient financial performance was significantly ahead of initial
expectations, generating cash despite lower volumes due to travel restrictions
* Working with our industry and Government, we are helping to shape the future
of public transport in the UK
Autumn 2021 proposed return of value increased to £500m (c.41p per share),
with potential for further additional distributions to shareholders in due
course from the following:
* First Transit earnout of up to $240m (carrying value assessed in audited
accounts at $140m)
* Greyhound resolution
* Capacity to increase gearing over time, as end market conditions and hence
business performance improves
* Pension escrow release (up to £117m)
Transformed company: a UK public transport leader with sustainable, profitable
growth prospects:
* Inflection point for First Bus, with most supportive economic and
sustainability-driven government policy backdrop for the industry in decades,
and clear path to raise margins to 10% post-pandemic
* First Rail's balance of risk and reward transformed under new rail
contracting structure
* Renewed focus on capturing incremental opportunities adjacent to core bus
and rail operations
* Environmental, social and economic contributions remain at the heart of
public transport business model
* Simplified, well-capitalised balance sheet: c.£100m pro forma adjusted net
debt(3), no longer encumbered by pension deficit repayments or any significant
contingent liabilities
* Cash generative operating model supports regular dividends commencing in
2022
* Encouraged by improving UK bus passenger volumes (now c.60% of pre-pandemic
levels) as UK reopens
Board changes
* Matthew Gregory has informed Board of intention to step down as Chief
Executive after AGM; David Martin to become interim Executive Chairman.
Comprehensive search underway for a new Chief Executive
Mar 2021 (£m) Mar 2020 (£m) Change (£m)
Cont. Disc. Total Cont. Disc. Total Cont. Disc. Total
Revenue 4,641.8 2,203.2 6,845.0 4,642.8 3,111.8 7,754.6 (1.0) (908.6) (909.6)
Adjusted (1)operating profit 101.9 107.5 209.4 69.7 187.1 256.8 +32.2 (79.6) (47.4)
Adjusted (1)operating profit margin 2.2% 4.9% 3.1% 1.5% 6.0% 3.3% +70bps (110)bps (20)bps
Adjusted (1)profit before tax 39.4 109.9 (70.5)
Adjusted (1)EPS 2.4p 6.8p (4.4)p
Adjusted cash flow (2) 284.0 97.4 +186.6
Adjusted net debt (3) 1,414.3 1,490.9 +76.6
Mar 2021 (£m) Mar 2020 (£m)
Statutory Cont. Disc. Total Cont. Disc. Total
Revenue 4,641.8 2,203.2 6,845.0 4,642.8 3,111.8 7,754.6
Operating profit/(loss) 224.3 61.5 285.8 (215.2) 62.5 (152.7)
Profit/(loss) before tax 115.8 (299.6)
EPS 6.5p (27.0)p
Net debt 2,625.8 3,260.9
- Bonds, bank and other debt net of cash 775.8 879.0
- IFRS 16 right of use lease liabilities 1,850.0 2,381.9
'Cont.' refers to the Continuing operations comprising First Bus, First Rail,
Greyhound and Group items. 'Disc.' refers to discontinued operations, being
First Student and First Transit.
Financial overview
* Resilient performance in light of travel restrictions and other pandemic
effects – Group adjusted operating profit reduction held to £47.4m despite
a Group revenue decline of £909.6m year-on-year: * £101.9m adjusted
operating profit from continuing operations (comprising First Bus, First Rail,
Greyhound and Group items) was in line with our expectations for these
divisions (2020: £69.7m)
* Reduced activity levels in the discontinued operations (First Student and
First Transit) mitigated by cost savings, better than expected revenue
recoveries from customers and higher service levels in Q4
* £224.3m statutory operating profit from continuing operations (2020: loss
of £(215.2)m) reflects £122.4m of net adjusting items compared with
£(284.9)m in 2020: * Includes £71.1m profit on sale of Greyhound properties
and £95.7m reversal of prior year impairments for SWR and TPE rail contracts,
net of rail termination sums
* Partially offset principally by £16.6m in property impairments, £15.1m in
costs associated with the rationalisation of the Group and £11.2m
self-insurance provision increase in Greyhound due to further hardening of the
insurance market in North America
* Net debt and cash flow stronger than initially expected, strong liquidity
preserved: disciplined capital and operating expenditure control supplemented
by Greyhound property sales
* Expect to build momentum in the current financial year, providing a solid
foundation for delivering financial framework objectives – including
commencing regular dividend payments – in 2022
Portfolio rationalisation
* Sale of First Student and First Transit completed on 21 July following
receipt of final regulatory approvals and shareholder approval in May
* Increase in proposed return of value to £500m (equivalent to c.41p per
share) reflects increase in cash proceeds received at completion due to final
working capital and debt and debt-like balances, agreement of final rail
franchise termination sums and National Rail Contracts for SWR and TPE, and
improving cash flow expectations for the ongoing Group
* Proposed return of value to be undertaken in the autumn; distribution
mechanism announced in due course in consultation with shareholders
* Greyhound remains non-core and the Group continues to pursue all exit
options for the business in order to conclude the Group’s portfolio
rationalisation strategy
Commenting, Chairman David Martin said:
"This has been a very active and significant year in the Group’s evolution.
We achieved the key strategic objective, set out when I joined as Chairman in
2019, to unlock value through the sale of our US contract businesses. Within
the context of a proactive and supportive government framework for public
transport and the transition to net-zero, we have created a focused and strong
business with a bright future. Built on a solid foundation of a
well-capitalised balance sheet and a new lower risk model, the ongoing Group
will be cash generative and support a return to shareholder dividends. As we
move forward and deliver for all stakeholders, the Board will continue to
evolve. As a UK public transport leader, FirstGroup has a strong platform on
which to create sustainable value going forward and I am confident in our
prospects to benefit from the many exciting opportunities ahead of us."
Commenting, Chief Executive Matthew Gregory said:
“In this landmark year FirstGroup has more than risen to its challenges. We
have delivered on our strategic objectives, protected our financial
stability, and supported our communities with essential services while helping
to shape the future of public transport in the UK. Having delivered the
substantial portfolio rationalisation strategy and with FirstGroup now
positioned to emerge from the pandemic as a resilient and robust business, I
have decided the time is right for me to move on to new opportunities.
FirstGroup is well placed to capitalise on the considerable opportunities
ahead, helping communities and economies build back better and more
sustainably."
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
corporate.comms@firstgroup.com
+44 (0) 20 7725 3354
Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959
A conference call for investors and analysts will be held at 9:00am today –
attendance is by invitation. Please email corporate.comms@firstgroup.com in
advance of the call to receive joining details. To access the presentation to
be discussed on the conference call, together with a pdf copy of this
announcement, go to www.firstgroupplc.com/investors. A playback facility will
also be available there in due course.
Notes
(1 ) ‘Adjusted’ figures throughout this document are before
rail termination sums net of impairment reversal, gain on disposal of
properties, impairment of land and buildings, strategy costs and certain other
items as set out in note 4 to the financial statements.
(2 ) ‘Adjusted cash flow’ is described in the table shown on
page 23.
(3) 'Adjusted net debt' excludes First Rail ring-fenced cash and IFRS
16 lease liabilities from net debt.
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR
6 Annex 1R: 1.1.
FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public
transport services. With £4.3 billion in revenue and around 30,000 employees,
our UK divisions transported nearly 700,000 passengers a day in the 52 weeks
to 27 March 2021. First Bus is the second largest regional bus operator in the
UK, serving two thirds of the UK’s 15 largest conurbations with a fleet of
c.5,000 buses. First Rail is the UK’s largest rail operator, with many years
of experience running long-distance, commuter, regional and sleeper rail
services. We operate a fleet of c.3,750 rail vehicles on four contracted
operations (Avanti, GWR, SWR, TPE) and two open access routes (Hull Trains and
a new East Coast service launching later in 2021). We create solutions that
reduce complexity, making travel smoother and life easier. Our businesses are
at the heart of our communities and the essential services we provide are
critical to delivering wider economic, social and environmental goals. We are
formally committed to operating a zero-emission First Bus fleet by 2035 and
will not purchase further diesel buses after 2022; and First Rail will help
deliver the UK Government’s goal to remove all diesel-only trains from
service by 2040. Visit our website at www.firstgroupplc.com and follow us
@firstgroupplc on Twitter.
Chairman’s statement
This has been a very active and significant year in FirstGroup's evolution.
This time last year I said that concluding the process to sell First Student
and First Transit was our core objective, as the best route to enhance the
long-term value of our businesses, while respecting our commitments to all our
stakeholders. I was very pleased we completed the sale of these businesses in
July 2021 to EQT Infrastructure for a full strategic value, which looks beyond
the pandemic and reflects the high quality and long-term nature of these
attractive assets.
The sale process
The sale followed a comprehensive and competitive process overseen by the
Board, in order to seek the best possible price for First Student and First
Transit, which was well-publicised for more than a year. Through the sale
process, the businesses were widely marketed, and the Group and our financial
advisers actively engaged with more than 40 potential buyers.
In the context of a competitive process to seek the most attractive proposal,
an earnout structure was agreed for First Transit which would benefit
continuing shareholders in the Group. This reflects First Transit’s strong
prospects for future performance, not least in light of recent ambitious plans
for investment in infrastructure and public transportation in the US. Under
the earnout FirstGroup will receive up to a further $240m (c.£175m), payable
on the third anniversary of the sale (following an independent valuation), or
sooner if the business is sold by EQT Infrastructure to a third party. The
earnout has been initially fair valued at $140m for accounting purposes,
applying discounted cash flow methodology.
Shareholder approval
As a substantial transaction, the sale required approval of a majority of
shareholders in general meeting, which was received in May. As noted at the
time, I and the whole Board take very seriously our responsibility to
understand the different views and perspectives of investors, and recognise
that a number of shareholders did not vote in favour of the resolution. As
FirstGroup enters a new and exciting phase in its development, the Board and I
look forward to continuing an open and constructive dialogue with all
shareholders as we look to the future.
Use of proceeds
As previously set out, the Group has a number of longstanding liabilities. In
determining the use of proceeds of the sale the Board has sought to balance
returning value to shareholders while also making a necessary and substantial
contribution to the UK pension deficit, reducing its debt (including repayment
of Covid Corporate Financing Facility to the UK Government) and addressing
other longstanding liabilities. In parallel, the Board carefully considered
the appropriate capital structure and distribution policy for the ongoing
Group, and it concluded that a well-capitalised, de-risked balance sheet will
provide FirstGroup with flexibility to navigate end-market uncertainty at this
point in the pandemic recovery, pursue its strategy going forward and support
a progressive annual dividend commencing during the financial year ending
March 2023, as described in more detail below.
The Board has announced its intention to increase the proposed return of value
to shareholders from £365m to £500m (equivalent to c.41p per share) in light
of the higher cash proceeds received due to the final adjustments for working
capital and debt and debt-like items in the First Student and First Transit
sale, the greater clarity for First Rail resulting from agreement in May of
the Group's final rail franchise termination sum and the signing of the
National Rail Contracts for SWR and TPE, as well as improving cash flow
expectations for the continuing Group as a result of further easing of
pandemic restrictions in our core UK bus and rail markets. The estimated pro
forma adjusted net debt of c.£100m for the ongoing Group following the sale
and uses of proceeds is therefore unchanged.
The Board remains committed to keeping the balance sheet position of the
ongoing Group under review and will consider the potential for further
additional distributions to shareholders in due course, following
crystallisation of the First Transit earnout, resolution of the legacy
liabilities related to Greyhound and the potential release of monies from
pension escrow (up to £117m). The Board also notes the capacity to increase
gearing over time, as end market conditions and hence business performance
improves.
The proposed return of value is expected to be undertaken in the autumn of
2021, with the distribution mechanism to be announced in due course in
consultation with shareholders.
The future of the Group
FirstGroup has a clear purpose to provide vital transport services that
connect communities – taking customers where they need to go for business,
education, health, social or recreational purposes. FirstGroup’s public
transport services offer efficient, cost effective and convenient travel
options for passengers, both within and between the UK’s congested towns and
cities.
Public transport services are also critical long-term green infrastructure, as
demonstrated during the coronavirus pandemic, and are fundamental to achieving
the goals of the communities they serve, the economy and wider society. The
connections offered by the ongoing Group’s services are a critical enabler
of vibrant local economies and can play an important role in the UK’s
regional ‘levelling up’ agenda. Of course, Westminster and the devolved
governments in other parts of the UK have also recognised that transitioning
more travellers to low- and then zero-carbon transport services is also
critical to meeting the challenge of climate change, and have put in place
substantial funding and strategies which will enhance our investments in our
business in the years to come.
In addition to the Group’s services being a critical enabler for society
meeting its broader environmental, social and governance (ESG) objectives, the
Group’s own Mobility Beyond Today sustainability framework commits to making
progress across a number of key areas. As a transport operator, the most
important element is the Group’s commitments to a zero-emission trajectory
for its vehicle fleets (see the First Bus and First Rail business reviews for
more detail), which will increase its EU Green Taxonomy eligibility year by
year. Taken together, I believe that the increasingly supportive UK policy
backdrop and the growing focus on innovating to enhance passenger convenience
and the sustainability of our business points to a potential inflection point
for the ongoing Group’s growth potential.
The Board
As a natural consequence of the sale of First Student and First Transit and as
the Group enters a new strategic phase, the composition and background of the
Board will evolve.
Matthew Gregory has informed the Board of his intention to step down as Chief
Executive and as an Executive Director at the conclusion of the AGM on 13
September 2021. Accordingly, Matthew will not be seeking re-election at the
AGM. I will become interim Executive Chairman at the conclusion of the AGM
until a permanent Chief Executive is appointed. A comprehensive search is
underway to select a new Chief Executive for the Group. Matthew and I will
work closely together to ensure a smooth handover process. Given his knowledge
and experience of the Group, Matthew will also be available to support me over
the coming months, including with certain matters associated with completing
the transition to the ongoing UK-focused Group.
On behalf of the Board I would like to thank Matthew for his significant
contribution to FirstGroup since joining in 2015, initially as CFO and then
stepping forward to take up the post of Chief Executive in 2018. Matthew has
been instrumental in delivering the Board’s strategy to rationalise our
portfolio of businesses, culminating in the transformational sale of First
Student and First Transit. Matthew was also responsible for delivering margin
improvements particularly in First Student and First Bus, as well as First
Rail's successful Avanti West Coast bid, which restored FirstGroup to its
leading position in UK passenger rail. Under his leadership the Group adeptly
responded to the unprecedented challenges created by the coronavirus pandemic.
He leaves FirstGroup a more focused, resilient and flexible organisation, well
positioned to benefit from the many opportunities ahead. On behalf of the
Board I would like to thank Matthew for all that he has achieved and wish him
every success for the future.
Jane Lodge and Peter Lynas joined the Board as Non-Executive Directors on 30
June 2021, while David Robbie stood down from the Board on the same date. On
behalf of the Board I would like to thank David for his significant
contribution over the past three years, including acting as interim Chairman
for a period in 2019. I would also like to welcome Jane and Peter to the
Board. They join at a pivotal time and I am confident that their considerable
experience and knowledge will enable them both to make a strong contribution
to the Group.
We will continue to oversee an orderly and appropriate evolution of the Board
in order to ensure it has the right balance of skills, experience and
diversity for the Group’s future needs.
Our people
The effects of the coronavirus pandemic will continue to be felt throughout
our business and the communities we serve for some time to come. During the
year the Group has continued to respond to the evolving situation swiftly and
decisively. I am particularly proud of the dedication and fortitude shown by
all our employees during this immensely challenging time. They have more than
risen to the challenges presented and stepped up to support our customers and
communities each and every day.
We are deeply saddened by the loss of employees in each of our divisions due
to coronavirus. On behalf of the Board and everyone at FirstGroup, I offer our
sincere condolences and ongoing support to their families, friends and
colleagues.
Conclusion
There remains a fundamental need for people to travel safely and conveniently
for business, education, social or recreational purposes which is essential to
sustainable and thriving economies and communities. The vital role of public
transport in the UK has never been clearer and following the sale, FirstGroup
is in prime position to deliver on its goals, with a well-capitalised balance
sheet and an operating model that will support an attractive dividend for
shareholders commencing during the financial year ending March 2023. The
ongoing Group has significant opportunities ahead of it as a focused UK public
transport leader and I look forward to the future with confidence.
David Martin
Chairman
27 July 2021
Chief Executive’s review
The Group has faced a number of significant challenges in the past year and
has responded quickly and robustly. As a transportation business, all of our
operations were heavily affected by the actions taken by governments and
society to respond to the coronavirus pandemic. We stayed close to our
customers and stakeholders, adapted our services flexibly in accordance with
their needs, and maintained our financial stability. Alongside this, we also
progressed our strategic plans, culminating in the sale of First Student and
First Transit which completed in July 2021. This transformational transaction
refocuses the Group on our leading public transport operations in the UK and
sets the scene for long-term sustainable value creation.
Protecting our passengers and employees
Our first priority remains the health and safety of the Group’s passengers,
employees and communities. We continue to follow all appropriate public health
authority guidance and have adopted and also developed best practice in areas
such as enhanced cleaning and decontamination of vehicles, depots and
terminals. We take great pride in the way our colleagues and teams across the
Group have provided direct assistance and support to those most in need, right
at the heart of our communities. Very sadly, we have lost employees in the
year as a result of the pandemic, and we offer our deepest condolences to
their loved ones and colleagues.
Adapting services to support our customers and communities
By the start of this financial year, the Group had experienced an average
passenger volume reduction of c.90%, with international lockdowns in place and
all North American schools we serve closed. However, many of our customers and
government partners worked with us to adjust capacity to fit demand while
preserving our ability to restore service quickly as required. Since then,
passenger activity has increased in all divisions, albeit at differing rates,
but remains substantially below pre-pandemic levels in many areas.
Across all divisions we adapted rapidly, both operationally and commercially,
to support our customers and communities. We have reduced our fixed cost base
wherever possible and rigorously focused on variable cost and capital
expenditure control to mitigate the impact of lower revenues.
Operational highlights – continuing operations
Given the impact of social distancing rules and government travel guidance on
passenger volumes, operating our UK bus and rail networks at scale during the
year would have been commercially unviable and many could have ceased.
However, recognising the essential nature of public transport connections to
local economies, Westminster and the devolved governments put in place
comprehensive emergency measures to procure continuity of critical rail
services and to maintain industry-wide bus capacity at a time of significantly
reduced demand and with social distancing restrictions in place.
First Bus and other regional bus operators have effectively provided their
assets and expertise to operate a government-funded bus system over the last
financial year on a broadly cash break-even basis. The Government has recently
announced a recovery funding package of £226.5m which will reinforce delivery
of local bus services across England as passenger numbers rebuild. The funding
package will support the industry’s transition away from the COVID-19 Bus
Service Support Grant (CBSSG) programme which has been in place since May 2020
and will formally come to an end in England on 31 August 2021 with the
introduction of the new package. We are encouraged that passenger volumes have
recovered to c.60% of pre-pandemic levels in some of our local areas in recent
weeks, particularly since social distancing restrictions on public transport
began to be eased from early April.
Meanwhile we have continued to enhance the ease, convenience and value for
money of our services through further digitisation, and our increased
capability to analyse our passenger numbers and routes in real-time will stand
us in good stead as we realign our routes and networks to post-pandemic demand
conditions.
We are also working hard with local transport authorities in our areas to
implement the National Bus Strategy which was announced in March, and we
continue to work towards our commitment of a zero-emission bus fleet by 2035.
For example, we have started to transform our Glasgow Caledonia depot into the
largest electric vehicle charging hub in the UK, with the first phase to
complete ahead of the UN COP26 Climate Change Conference which takes place in
Glasgow in November 2021.
Throughout the year our First Rail contracts were operated under the terms of
the emergency arrangements put in place by the UK Government in response to
the pandemic. In May 2021 we agreed the final payment with the DfT to
terminate our pre-existing franchise contracts by agreement, which then
enabled TPE and SWR to agree National Rail Contracts later that month. These
run to 2023 with potential extensions to 2025 and are the first contracts
awarded under the Government's new model offering a more appropriate balance
of risk and reward for rail operators, passengers and the taxpayer. Under the
new agreements, operators no longer take passenger revenue risk, instead
receiving a fixed fee for operating the service, with the opportunity to earn
additional fees based on performance. We are now discussing similar contracts
for Avanti (potentially extending to 2032) and for GWR.
The final agreement reached with the DfT for the TPE franchise termination was
c.£50m better than the assumption made by the Group in setting aside cash for
the discharge of the rail termination sums at the time of the announcement of
the First Student and First Transit sale.
We welcomed the publication in May 2021 of the UK Government's longer term
ambitions for the future of the UK rail industry. As the largest UK passenger
rail operator, we look forward to helping to bring to reality the
Williams-Shapps Plan for Rail, which puts the expertise, innovation and
experience of private sector rail operators at the heart of the new model for
improving service delivery for passengers in the coming years.
We are proud that all our train operating companies delivered top marks on all
the passenger service metrics assessed to-date under the emergency measures
regime.
Greyhound volumes have improved modestly since the start of the calendar year
and the business is now operating just over half of its pre-pandemic mileage.
As the market leader, we responded to the very challenging conditions with
capacity adjustments aligned to demand, yield management actions and $60m in
fixed cost reductions to maintain a level of service for passengers, while our
competitors withdrew from the market. Negotiations with state agencies to
secure CARES Act emergency grants for vital intercity bus connections have
been modestly ahead of our expectations and further funding is expected to
come through under the Biden administration's recent legislative activities.
In May 2021 we announced the closure of Greyhound Canada after more than a
year of services being suspended due to the pandemic. Greyhound Canada made
significant outreach efforts to the provincial and federal government to
request financial support for the industry, but operations could not continue
in the absence of that financial support.
In December 2020 we announced the sale of three surplus Greyhound properties
for gross proceeds of $137m and continue to actively monetise the remainder of
the property portfolio.
Greyhound remains non-core and sale discussions are ongoing, but the process
has been affected by the pandemic’s impact on this passenger volume-based
business. As clarity improves in its end-markets, we will look to exit the
business.
Operational highlights – discontinued operations
The proportion of First Student’s bus fleet operating either full service or
on a hybrid basis increased to 87% of pre-pandemic levels in early June before
schools in some regions began closing for the summer holidays. During the year
most of our schools where we were not fully operational have been supporting
us with agreements to make either full or partial payments to ensure that we
are in a position to deliver increased services rapidly when needed. Between
services in operation and these agreements with our customers, we secured
c.71% of our pre-pandemic home-to-school revenue in the year.
Alongside this activity we also achieved a good outcome to the bid season,
with retention rates in line with our expectations of 88% of ‘at risk’
contracts or 95% of the whole contract portfolio, and several important new
business wins.
Most of First Transit’s contracts are to provide essential services, so
provision during the year was not reduced as significantly as in some other
parts of the Group. Where service levels did change we worked closely with
clients to agree contractual amendments.
While the rate of recovery varies by sub-segment, overall First Transit
operated c.70% of services and recovered c.86% of revenues in the year
compared with pre-pandemic levels.
The division’s 'at risk' contract retention rate was 89% in the year and it
delivered a number of new business wins across both traditional markets and
new mobility services.
Group financial performance was significantly ahead of our expectations at the
pandemic's outset
Revenue from continuing operations was in line with the prior year at
£4,641.8m (2020: £4,642.8m). Excluding the new Avanti contract, revenue
decreased by £567.4m as a result of the pandemic.
Adjusted operating profit from continuing operations was £101.9m (2020:
£69.7m), an increase of £16.9m excluding the incremental Avanti contribution
of £15.3m. For First Bus and First Rail this largely reflects the terms of
the UK Government-procured emergency arrangements to enable socially distanced
travel, while in Greyhound it comprised the drop through of lower revenues
offset by reduced variable costs, the substantial fixed cost actions and CARES
Act grants for vital bus service connections.
Reduced activity levels due to the pandemic in the discontinued operations
were mitigated by cost savings, better than expected revenue recoveries from
customers and higher service levels in the final quarter, with the businesses
contributing £2,203.2m (2020: £3,111.8m) in revenue and £107.5m (2020:
£187.1m) in adjusted operating profit to the Group.
Statutory operating profit from continuing operations was £224.3m (2020: loss
of £(215.2)m) reflecting £122.4m of net adjusting items compared with
£(284.9)m in 2020, and statutory EPS was 6.5p (2020: (27.0)p).
The Group's new alternative performance measure of Rail-adjusted EBITDA (First
Bus and non-contracted First Rail EBITDA, plus contracted Rail net
attributable earnings, minus central costs) was £87.1m in the year.
Substantial cash flow in period, significantly ahead of expectations
The Group's adjusted cash flow of £284.0m (2020: £97.4m) was well ahead of
initial expectations, reflecting our actions to maintain liquidity and
financial strength despite the passenger volume reductions.
Some capital expenditure was deferred, which in the case of the discontinued
operations was partially reflected in the terms of the sale. First Bus
anticipates c.£90m in capital expenditure in FY22, some of which was deferred
from the last financial year, with £30m spent in FY21.
The Group also secured £109.5m in cash proceeds from the sale of properties
in the year, principally from Greyhound.
Stable liquidity and balance sheet reinforced
Adjusted net debt (bonds, bank debt and other debt net of cash (excluding
First Rail ring-fenced cash) before IFRS 16 leases) reduced by £76.6m in the
year to £1,414.3m (2020: £1,490.9m). IFRS 16 lease liabilities (which are
predominantly First Rail rolling stock leases which expire when the relevant
operations cease) decreased to £1,850.0m (2020: £2,381.9m), with the
majority of the decrease relating to payments made under the rolling stock
lease agreements. Taken together, reported net debt including IFRS 16 lease
liabilities decreased to £2,625.8m (2020: £3,260.9m).
Net debt: EBITDA was 1.6x (2020: 1.3x) on the basis relevant to the Group's
bank covenant tests, comfortably ahead of the enhanced headroom agreed with
our lenders last November.
As at 27 March 2021 the Group’s undrawn committed headroom and free cash
(before First Rail ring-fenced cash) was £1,130.7m (March 2020: £585.7m),
reflecting cash generation in FY21 and new facilities entered into during the
year, notably a £300m bridge to the CCFF and new finance leases and supplier
credit facilities.
Since the last liquidity update in December 2020, the Group has repaid the
£350m April 2021 bond mainly funded from drawdown of the £250m bridge
facility entered into in March 2020, secured £102m in cash proceeds from the
sale of Greyhound properties announced at the end of December 2020, while
operating cash flow in the second half of the financial year was positive and
ahead of our expectations. In March the Group renewed the £300m in commercial
paper issued through the UK Government's Coronavirus Corporate Financing Fund
(CCFF) scheme for a further year and secured a £300m committed bridge
facility from the CCFF maturity in March 2022, thereby providing adequate
financial resources for the short to medium term.
Following receipt of the proceeds of sale of First Student and First Transit,
the Group has begun the process of settling the majority of its outstanding
financial indebtedness, including the repaying the CCFF and cancelling the
£300m committed bridge facility. Following all the funds flows previously
outlined, the ongoing Group expects to have pro forma adjusted net debt of
c.£100m.
Momentum to build during current financial year as sale completes and pandemic
travel restrictions diminish
Overall we expect our financial performance in the current financial year to
provide a strong foundation for delivering the Group's previously announced
financial policy framework (as set out in the Financial review on p.20),
including commencing regular dividend payments during FY23.
First Bus' contribution to adjusted operating profit in FY22 will be dependant
on the pace at which passenger volumes build back. First Rail earnings in FY22
will be driven by the contractual arrangements now in place. Greyhound
expected to exceed its FY21 contribution in light of encouraging recent volume
trajectory. Central costs are expected to be c.£5m lower in FY22, reflecting
half a year of progress towards the £10m per annum reduction target following
completion of the First Student and First Transit sale.
Further ahead, the Group has committed to commencing paying a regular dividend
during FY23, supported by our expectations for a 10% margin in First Bus on
increasing revenues, as passenger volumes return to between 80-90% of
pre-pandemic levels over the first year after restrictions on public transport
are lifted. First Rail's profitability will be driven by our delivery against
performance targets under the new National Rail Contracts whilst we expect to
add further earnings from opportunities adjacent to our core rail operations.
Portfolio rationalisation and the opportunities for the ongoing Group
Following completion of the sale of First Student and First Transit,
FirstGroup is a leader in public transport in the UK, with a clear social
purpose through its vision to provide easy and convenient mobility, improving
quality of life by connecting people and communities. The core of the ongoing
Group is our First Bus and First Rail divisions, which are both leaders in
their respective sectors of the UK public transport industry, with substantial
operational experience, strong stakeholder relationships, deep expertise and a
growing track record of using technology to innovate for passengers.
As described in more detail in the divisional reviews, both divisions are
experiencing substantial – and in many ways very positive – changes in
their operating environment, with the National Bus Strategy and new
developments in the rail contracting model in line with the recently announced
Williams-Shapps Plan for Rail offering new opportunities.
Opportunities
Our goal is to continue to deliver for our passengers and wider society. We
aim to make sure our services are attractive travel choices for customers,
with increasingly sophisticated and easy-to-use journey planning tools, a
range of ticket products catering to a wide range of needs, and reduced
complexity and cost compared to other travel options (in particular owning,
maintaining, insuring and parking a private car in the UK’s increasingly
crowded towns and cities). FirstGroup’s transport services allow flexible
and easy to access travel on WiFi-enabled vehicles to and from key
destinations in towns and cities across the UK.
Travel connections are also fundamental to stronger local economies, expanding
the scale and interconnectivity of neighbourhoods, cities and whole regions
with each other. With the UK's increasingly crowded and congested cities, the
most cost-effective way to enhance those connections – and 'level up'
regional opportunity – is through a dynamic public transport service sector.
The ongoing Group’s services are also a more efficient use of infrastructure
space with lower emissions than other forms of travel in urban areas.
Responsible business
Governments worldwide are also increasingly focused on making it easier for
public transport providers to support the response to the climate change
challenge. FirstGroup expects its services to make an important contribution
to achieving this goal in two ways. Firstly, by facilitating a modal shift of
passengers out of their cars and into public transport, because the per
passenger mile emissions of a typical train or double-decker bus today are
significantly lower than the equivalent number of private vehicles.
Secondly, FirstGroup is committed to accelerating the transition of its own
fleets to zero emissions in the coming years (see the First Bus and First Rail
business reviews), supporting a commensurate growth in green jobs,
manufacturing and new business models such as vehicle-to-grid power, for
example. Both divisions of the ongoing Group will therefore make a significant
contribution to delivering the UK’s climate change commitments.
In addition, the Group has also committed to implementing the Task Force on
Climate-Related Financial Disclosures (TCFD) recommendations in its 2021
Annual Report, a year ahead of the regulatory mandate. FirstGroup is also the
first UK road and rail operator to formally commit to setting a science-based
target (SBT) for reaching net zero emissions by 2050 or earlier, in accordance
with the SBT initiative.
We are also working to create a more diverse and inclusive business in what
has been a ‘traditional’ sector. Our development programmes continue to
increase the proportion of women in senior management roles, from 23% in 2019
to 28% in 2021, and following recent appointments, the female proportion of
the Group's Board has increased to 36%. FirstGroup has also recently signed up
to the ‘Change the Race Ratio’ programme, which commits the Group to
taking action to increase our racial and ethnic diversity and create an
inclusive culture. Detailed targets and action plans are in development, and
the Group will publish its first ethnicity pay gap report in FY22.
Alongside top decile ratings in our sector globally from multiple ESG ratings
providers, FirstGroup is a longstanding constituent in the FTSE4Good index and
was recognised with a place in the 2021 Clean200 report, which ranks the
world’s largest publicly-listed companies by their total clean energy
revenues from products and services that provide solutions for the planet and
define a clean energy future. We are the only passenger transport operator
based in Europe to be listed in this year’s report.
FirstGroup's investment case
Going forward, we expect FirstGroup to be a strong platform for further value
creation based on the following:
* Leading positions in bus and rail transport in the UK: First Bus is a leader
in regional bus operations outside London with c.20% of market share and
strong positions in most of its local areas of operation. First Rail is the
largest passenger rail operator in the UK by revenue with c.27% of the
national passenger rail sector;
* Inflection point for growth, underpinned by supportive government and social
policies: Public transport operators play a vital role in meeting local and
national objectives, including net zero carbon, green jobs, reduced
congestion, improved air quality, and the 'levelling up' agenda, particularly
in 'left behind' towns and regions, as well as the recovery in economic and
social activity following the pandemic;
* Digital innovation to attract more customers, enhance business efficiency
and flexibility: Enhancements to stimulate passenger growth, by delivering
FirstGroup’s vision to provide easy and convenient mobility, improving
quality of life by connecting people and communities;
* First Bus: ready to complete trajectory to delivering a 10% margin in the
first full financial year after pandemic-related social distancing
restrictions on public transport end: With network realignment, service
delivery efficiencies, data-driven pricing and other actions to drive
passenger revenue growth and margin improvement, as described further in the
First Bus business review below;
* First Rail: well-placed for lower risk, long term and cash generative rail
operations: As the largest incumbent operator with four UK passenger rail
contracts expected to at least 2023, First Rail will benefit from the UK
Government’s transition of the passenger rail industry’s commercial
structure to a lower-risk and more predictable model, with a more appropriate
balance of risk and reward, as described further in the First Rail business
review below;
* Opportunities from adjacent markets in UK bus and rail and in new
geographies over time: Leveraging the Group’s considerable industry
knowledge, skills and experience; and
* Critical enabler of society’s ESG goals, accelerating the transition to a
zero-carbon world: Principally through facilitating modal shift from cars and
through FirstGroup’s commitments to transition to a zero-emission bus fleet
by 2035, to cease purchasing further diesel buses after December 2022 and to
support the UK Government’s goal to remove all diesel-only trains from
service by 2040.
Having delivered the substantial portfolio rationalisation strategy and with
FirstGroup now positioned to emerge from the pandemic as a resilient and
robust business, I have decided the time is right for me to move on to new
opportunities. In this landmark year the Group has more than risen to its
challenges. We have delivered on our strategic objectives, protected our
financial stability, and supported our communities with essential services
whilst helping to shape the future of public transport in the UK.
The ongoing Group will have a fundamental role to play in delivering the
UK’s economic, environmental and social objectives, as well as providing a
vital service that is an essential part of the daily lives of many people in
communities across the UK. With a well-capitalised balance sheet and an
operating model that will support an attractive dividend for shareholders,
FirstGroup is well placed to capitalise on the considerable opportunities
ahead, helping communities and economies build back better and more
sustainably.
Matthew Gregory
Chief Executive
27 July 2021
Divisional review
Continuing operations – First Bus
52 weeks to 27 March £m £m, change in
constant currency (1)
2021 2020
Revenue 698.9 835.9 (137.5)
Adjusted operating profit 36.6 46.1 (9.6)
Adjusted operating margin 5.2% 5.5% (30)bps
EBITDA 100.8 113.2 (12.5)
Net operating assets 328.1 379.5
Capital expenditure 24.0 46.3
(1 ) Based on retranslating 2020 foreign currency amounts at 2021
rates.
First Bus reported revenue of £698.9m (2020: £835.9m), reflecting the
effects of the coronavirus pandemic during the year. Government guidelines to
avoid all but essential travel throughout the year meant like-for-like
passenger revenue during the year as a whole was 49% lower, with commercial
passenger volumes 66% lower, although volumes were higher at times during the
various periods of lockdown easing. We are encouraged that passenger volumes
have recovered to c.60% of pre-pandemic levels in recent weeks, particularly
since certain social distancing restrictions on buses in England started to be
eased in early April.
We worked very closely with local authorities and other partners throughout
the year to ensure that key workers were able to rely on our services for
their essential journeys during the pandemic. The UK Government and devolved
administrations put in place a range of measures which were in place
throughout the year to secure continuity of service on these crucial routes
which would otherwise have had to cease. Measures included the rolling
COVID-19 Bus Services Support Grant (CBSSG) and its successor programme in
England, mirrored by similar arrangements in Scotland and Wales. Under these
arrangements, First Bus is paid the costs of operation less revenue received
from customers and other public sector monies. Recoverable costs include all
reasonable operational costs including depreciation and allocated debt finance
together with pension deficit funding. Fixed costs were also reduced by £3.0m
in the year.
As a result of these agreements, the division reported adjusted operating
profit of £36.6m (2020: £46.1m), which is calculated before debt finance
costs and pension deficit contributions which pay down the balance sheet
deficit. Reported statutory profit was £30.8m (2020: £32.4m), principally
reflecting the adjusted operating profit partially offset by the impairment of
land and buildings.
Digital transformation
In recent years our digital transformation has placed First Bus at the
forefront of the industry, including for real-time passenger volume data
capture, GPS functionality and ticketing. We now have an enhanced capability
to assess passenger flows, and make subsequent commercial decisions, with
greater speed and precision. Throughout the pandemic this allowed us to
continuously adjust services in consultation with local stakeholders to ensure
they met travel demands. Going forward, this data will be fundamental in
enabling us to continue to shape our networks to align with evolving customer
needs and trends while being commercially sustainable. This will be
particularly relevant during the eight-week transitional period before the
CBSSG scheme ends following the lifting of social distancing restrictions on
public transport. In the year we also used our new digital platforms to
develop a technical solution to mitigate bridge strike risks.
Customer experience
Our digital transformation has included enhancements to the customer
experience. During the year, we were the first operator to introduce
innovative functionality to our mobile app and websites, enabling customers to
check the real-time available capacity on an approaching bus, including the
wheelchair space. Furthermore, this technology allows customers to check how
busy their bus is likely to be on any day of the week and time of day.
Two-thirds of all ticket transactions now involve our mobile app or other
contactless payment methods. Daily and weekly contactless ‘tap and cap’
fares are now being rolled out to multiple locations across the network, while
in September 2020 we were the first national bus operator to introduce Express
Mode for Apple Pay across all networks.
National Bus Strategy
Buses are vital to help deliver wider economic, social and environmental goals
and we fully support the UK Government’s National Bus Strategy (NBS),
published in March, which provides a clear framework and £3bn in funding for
bus operators and local government to promote bus use in England, including
funding allocated for 4,000 new zero-emission buses across the country. We are
working with local transport authorities in our areas to develop the Bus
Service Improvement Plans and Enhanced Partnerships as outlined in the NBS,
which will align services to the needs of local bus customers and enable
access to the funding available to help deliver them in the coming years. We
already work closely and effectively with local authorities and the
partnership approach will enable us to build on these strong local
relationships as we move toward recovery and work to improve customer
experience.
Fleet decarbonisation
During the year we announced our commitment to operate a wholly zero-emission
bus fleet across the UK by 2035 and will not purchase further diesel buses
after December 2022. In January, we began operating the world’s first fleet
of hydrogen powered double-decker buses in Aberdeen, supported by funding from
the city council, Scottish Government and the EU. In Yorkshire we introduced
new electric double-decker buses to our all-electric York Park&Ride fleet as
well as new electric buses for Leeds, in partnership with local and regional
authorities.
In Glasgow a partnership between First Bus and Transport Scotland announced in
March will replace 126 of the oldest buses in our fleet with electric vehicles
for the city, in addition to the 24 buses already in operation or on order.
Ahead of the UN COP26 Climate Change Conference which takes place in Glasgow
in November 2021, this ambitious collaboration will also begin transforming
our Caledonia bus depot, the UK’s largest, into one of the country’s
biggest electric fleet charging stations, with the potential for 162 vehicles
to be recharged at a time. In January we completed the retrofit of our
1,000(th) bus to the Euro VI low-emission standard, and just under half of our
fleet now meet this benchmark.
As zero-emission bus technology is developing rapidly, we are working with a
number of vehicle manufacturers to evaluate and shape the key attributes of
these vehicles. In February 2021, for example, we announced that we will be
the first operator in the UK to trial the unique vertically integrated
electric bus technology from Arrival.
First Bus medium-term outlook
Passenger volume and revenue levels following the pandemic are difficult to
forecast with any certainty. However, our current expectation is that volumes
will recover to between 80%-90% of pre-pandemic levels during the first year
after social distancing restrictions on public transport end, with further
growth thereafter.
We expect that the effect of any initial volume reductions due to
post-pandemic changes in customer behaviour will be mitigated over time by
targeted network changes, the profound support for modal shift and increasing
bus patronage provided by the NBS, as well as our new data-driven pricing
strategy and ticketing innovations. First Bus has a significant level of
operational gearing and this, together with the operational and engineering
efficiency programmes we have in place as well as cost improvements to the
business already made, means that we expect to deliver 10% margins in the
first full financial year after pandemic-related social distancing
restrictions on public transport end, in a range of potential passenger volume
scenarios.
We are also building on our existing platform of contracted fleet services for
commercial customers in order to deliver further revenue growth and capital
efficiency. We are also well positioned to develop solutions in the nascent UK
market for Mobility as a Service (MaaS), thanks to collaboration with First
Transit colleagues.
Looking ahead, we are already a leader in the industry for low emission
vehicles and look forward to playing our part in decarbonising the UK economy.
Bus networks are key to supporting modal shift particularly from cars to
sustainable, zero-carbon public transport, a key part of the UK’s climate
change goals.
As recognised in the NBS, there is also a significant, growing role for buses
to help deliver on national and local government commitments to reduce
congestion and air pollution, improve city connectivity and ‘level up’
parts of the country through improved economic infrastructure and opportunity.
Buses are the most flexible, value for money solution for providing the
critical public transport services which are so essential to local economies
and communities. The fundamentals for a resurgent bus business are sound, and
we look forward to playing an important role in a robust, and environmentally
sustainable, recovery.
Continuing operations – First Rail
Year to 31 March £m £m, change excl. Avanti
2021 2020
Revenue 3,619.9 3,203.7 (150.2)
Adjusted operating profit 108.1 70.4 +22.4
Adjusted operating margin 3.0% 2.2% (100)bps
Tramlink now reported within First Rail (previously within Group items). 2020
Comparative has been restated accordingly.
First Rail revenue increased to £3,619.9m (2020: £3,203.7m) reflecting a
full year of the Avanti contract, which commenced operations in December 2019.
Tramlink is also reported within First Rail for the first time, with the
comparative restated accordingly. Excluding Avanti and Tramlink, like-for-like
passenger revenues decreased by 84%, with passenger volumes 79% lower due to
the effects of the pandemic. Passenger volumes increased to some extent during
periods of lockdown easing throughout the year, and stand at c.42% of
pre-pandemic levels on average as of mid-July, although under the new
contractual arrangements in place during the year and going forward in the
industry, changes in revenue no longer affect our financial performance. We
continue to work closely with the DfT on the level of service provision as
government guidance changes, and in the summer of 2020, and again from May
2021, we increased services to c.90% of prior levels to support increased
travel activity.
The UK Government acted quickly to ensure the country’s vital rail networks
could continue to operate during the pandemic by introducing Emergency
Measures Agreements (EMAs) which were in place for much of the first half of
the year.
Under these agreements, the DfT waived revenue, cost and contingent capital
risk and our train operating companies (TOCs) were paid a fixed management fee
to operate at agreed service levels, as well as a performance-based fee. The
EMAs were superseded in autumn 2020 by Emergency Recovery Measures Agreements
(ERMAs) for Avanti, SWR and TPE which were similar in structure, the principal
differences being that fees have a lower overall potential and were more
heavily weighted to performance delivery. In the first phase, we were very
pleased to have scored the highest performance marks across all categories for
all four of our rail contracts.
Adjusted operating profit was £108.1m (2020: £70.4m), which reflects the
fees paid, including a first-time contribution from Avanti, the settlement of
historical claims mainly in GWR in H1 and a £(10.2)m loss from Hull Trains
open access reflecting its suspension during parts of the year. The division
reported a statutory operating profit of £203.8m (2020: £69.3m), including a
partial reversal of prior year impairments for SWR and TPE following
agreements reached on rail franchise termination sums and other amounts due to
the DfT (see below).
Contracted Rail net attributable earnings in the year – being the Group's
share of contracted rail fee income available for dividend distribution up to
the parent company – was £42.3m.
Transition to National Rail Contracts
Each ERMA required us to agree with the DfT what, if any, remaining payments
were required to conclude the pre-existing franchise agreements, a process
which Avanti, SWR and TPE have now completed (there is no termination sum
process for GWR given that this contract was entered into after the transition
to the EMAs). These termination sums are paid at the end of the ERMA term, at
which point the pre-existing franchises also end, and allowed us to move
forward with discussions on new National Rail Contracts (NRCs).
The SWR and TPE ERMAs duly expired at the end of May 2021 and the two TOCs are
now operating under the first two NRCs to be agreed. Both have been awarded
for a two-year term to the end of May 2023 with an option to be extended by up
to two further years at the DfT’s discretion. Under the NRCs the DfT will
retain all revenue risk and substantially all cost risk. There is a fixed
management fee and the opportunity to earn an additional performance fee. For
the Group’s 70% share of the First MTR joint venture for SWR the fixed
management fee is £3.3m p.a. and there is the opportunity to earn an
additional fee of up to £9.9m p.a. which is the maximum attainable
performance fee. For TPE the fixed management fee is £2.3m p.a. and there is
the opportunity to earn an additional fee of up to £5.2m p.a. which is the
maximum attainable performance fee. Punctuality and other operational targets
required to achieve the maximum level of performance fee are designed to
incentivise service delivery for customers.
The NRCs achieve a more appropriate balance of risk and reward between
FirstGroup and the Government. They carry no significant contingent capital
risk and there are limited scenarios in which this contingent capital can be
called upon, primarily in the event of early termination of the contracts by
the operator. SWR and TPE will continue to be fully consolidated in the Group
accounts with the net cost of operations and capex to be funded in advance by
the DfT. The Group will receive an annual dividend from the TOCs reflecting
the post-tax net management and performance fees. These dividends are expected
to be paid each September following the completion of the TOC audited
accounts.
For Avanti, the ERMA is in place to the end of March 2022 and can be extended
by a further six months. We are discussing an NRC which could last up to 31
March 2032, with the core and extension periods to be determined. Meanwhile
the DfT recently exercised its option to extend the EMA for GWR until 12
December 2021, subsequent to which it is expected that GWR will move on to an
NRC in due course.
Open access operations
Hull Trains was not eligible for the EMAs or ERMAs, and as a result the
service was temporarily suspended on three occasions during the year when
nationwide lockdowns took place, but has now been restored with encouraging
passenger volumes returning. We are on course to launch a second open access
service between London and Edinburgh in autumn 2021. This will provide a value
for money and sustainable way to travel between the two capitals, where
domestic air travel currently has a significant share of journeys. Reflecting
start-up costs for East Coast and the uncertain demand environment, we expect
our open access operations to record a c.£20m loss in the current financial
year, before making a profit contribution from FY23.
Customer experience innovation
As travel restrictions ease, our TOCs are working collaboratively with
industry partners and stakeholders to build back patronage, while delivering
plans to upgrade our service offering. These plans include the introduction of
flexible commuter tickets and continuing to facilitate a move towards
electronic and mobile ticketing, smartcards and improved apps. New
functionality includes the ability for Avanti passengers to have refreshments
delivered to them without leaving their seat. Avanti has also become the first
UK TOC to offer an additional class of travel as part of its services.
Standard Premium will give customers greater choice of facilities, and is
initially available to buy as an upgrade on the day of travel with advance
tickets on sale later this year.
Innovation and adjacent rail opportunities
In the year we developed and deployed new technology such as next generation
onboard 5G Wi-Fi from evo-rail, developed in-house by First Rail. This
pioneering system was first trialled on the Isle of Wight, and later this year
will be installed on a 70km section of the SWR mainline, followed in 2022 by a
roll out on the London to Birmingham section of Avanti's network.
Our industry-leading cloud technology and analytics systems have allowed us to
integrate real-time data from several systems on to a single platform branded
Mistral Data that enables our teams to identify and resolve potential problems
before they arise. The platform also provides information to our customers via
website and mobile app channels on the formation and facilities available on
each train, which gives customers the ability to plan their journey with
confidence.
During the year we further integrated a variety of customer-facing and back
office functions into our passenger service centre, which was built based on
scalability and the latest technology. The shared service centre operates at a
lower cost than our previous outsourcing arrangements and provides a single
service for customer queries across several First Rail operations.
We continue to provide our consultancy experience as ‘shadow operator’ to
the HS2 infrastructure project. During the last financial year we completed
more than 40 deliverables, including technical and financial baseline reviews
of operational plans for HS2, a fresh view of the travel market on the West
Coast corridor and employee engagement planning.
Fleet decarbonisation
First Rail has an important contribution to make in meeting the challenges of
climate change and we are working with our partners to reduce carbon
emissions, for example through the introduction of electric trains to replace
diesel where possible. Our expertise and capability will help the Government
deliver its ambition to remove all diesel-only trains from service in the UK
by 2040.
GWR have recently taken delivery of the UK’s first tri-mode train which can
use overhead wires, third rail or diesel power. Plans to upgrade the SWR fleet
continue with new suburban rolling stock starting to enter service this year
and a new depot at Feltham was completed in order to stable this fleet. New
all-electric and bi-mode trains will also be introduced by Avanti next year to
replace diesel-only trains in the current fleet.
First Rail medium-term outlook
For some time we have advocated for a longer-term approach to the railway with
passengers at the core, underpinned by a more sustainable balance of risk and
reward for all parties, and welcomed the Williams-Shapps Plan for Rail
published in May 2021. In it the UK Government outlined its ambitions for the
future of the UK rail industry with the expertise, innovation and experience
of private sector rail operators at the heart of the model. As the largest UK
operator with four passenger rail contracts expected to run to at least 2023,
we are well positioned to work closely with industry partners, including the
DfT, to bring this to reality in the coming years.
First Rail has operated 20% of the UK passenger rail market by revenue since
2007 on average, and currently has a c.27% market share. As such, we can draw
on a strong track record of delivery on major projects to enhance passenger
experience, including fleet introductions, major timetable changes, capital
projects on behalf of Network Rail, customer service innovations and managing
the impact of significant infrastructure changes from network electrification
through to route upgrades.
In addition, the rail division has potential for further growth through the
skills and expertise developed in a range of related areas, such as designing
and operating open access services, deploying new rail technology and
customer-facing innovation and the division will also seek to build on its
consultancy experience as ‘shadow operator’ to the HS2 infrastructure
project.
In summary, First Rail's profitability will be driven by our delivery against
performance targets under the new National Rail Contracts whilst we expect to
add further earnings from opportunities adjacent to our core rail operations.
Overall, as the UK passenger rail industry continues its evolution to a more
successful railway system that works better for passengers and taxpayers, we
believe that First Rail is well-placed to generate more resilient and
consistent returns for shareholders in tandem.
Continuing operations – Greyhound (non-core)
52 weeks to 27 March $m £m £m, change in
constant currency (1)
2021 2020 2021 2020
Revenue 422.6 766.0 323.0 603.2 (266.5)
Adjusted operating profit (12.1) (15.3) (10.3) (11.6) –
Adjusted operating margin (2.9)% (2.0)% (3.2)% (1.9)% (150)bps
EBITDA 23.3 44.0 17.0 35.3 (17.9)
Net operating assets (75.1) (163.0) (54.5) (130.8)
Capital expenditure 7.8 61.6 5.7 44.1
(1 ) Based on retranslating 2020 foreign currency amounts at 2021
rates.
Greyhound’s revenue was $422.6m or £323.0m (2020: $766.0m or £603.2m) in
the year as a result of the effects of the pandemic on passenger demand. US
passenger revenues were 59% lower year-on-year, while we suspended our
remaining operations in eastern Canada in May 2020 due to limited demand and
the closure of the US border, and permanently shut it down in May 2021. Total
revenue for the whole division decreased by 45% year-on-year.
As previously noted, during the early part of the financial year,
Greyhound’s overall passenger revenues were c.20% of pre-pandemic levels and
passenger volumes were c.15%. Greyhound led its industry as the only major
coach operator that continued to provide any service for passengers. In the US
during the first quarter, Greyhound operated c.45% of its pre-pandemic
timetabled mileage, sufficient to maintain the integrity of its US network and
provide ongoing service to hundreds of rural communities, many with no other
form of intercity transportation. Greyhound was able to do so through rapid
management action including commercial initiatives, optimising pricing,
managing capacity and cost (principally through reduced variable costs,
furlough as well as $60m in fixed cost reductions) to match lower demand
levels, and utilising employee retention tax credits as appropriate. Greyhound
also secured $130m of the US CARES Act funding made available to state
agencies to maintain operation of intercity rural bus services in the year,
modestly ahead of our expectations.
Over the course of the year, Greyhound flexed operating mileage in response to
volatile passenger demand in different parts of the country as the impact of
the pandemic continued to be felt. Historically low airline fares have also
had an impact on coach passenger demand. Since the start of the calendar year,
US passenger revenue has increased through improved volumes and higher yields,
reaching c.60% of pre-pandemic levels in early July 2021. Passenger mileage
travelled in early July is just over half of pre-pandemic levels. As a result
of these actions, Greyhound was able to largely offset the substantial
reduction in revenue, recording an adjusted operating loss of $(12.1)m or
£(10.2)m (2020: $(15.3)m or £(11.6)m) in the year. Excluding the closure
costs and other losses associated with Greyhound Canada, Greyhound in the US
generated $1.8m in adjusted operating profit in the year (2020: loss of $
(14.9)m). The division reported a statutory profit of £41.6m (2020:
£(253.4)m loss) after £71.1m in profit on sales of property described below
partly offset by a £11.2m charge for historic insurance claims.
Greyhound continues to rationalise its property portfolio by moving operations
to intermodal transport hubs or new facilities better tailored to its needs
when the opportunity arises. During the year 15 surplus locations were sold,
resulting in profit on certain property sales (net of leaseback, property tax
and selling costs) of $101.2m or £71.1m (2020: $12.4m or £9.7m). The largest
was the sale of Greyhound’s oversized legacy garage and customer terminal
facility in the downtown Arts District of Los Angeles, California to a
subsidiary of Prologis, Inc. Under the agreement Greyhound received net $88m
in cash and will lease back the facility for two years, during which time
Greyhound will complete the moves of its terminal and garage operations. The
book value of the remaining properties in the portfolio is $78.6m. A number of
other property sales processes are underway.
In the year, Greyhound has continued to upgrade its offering for passengers,
offering industry-leading streaming entertainment on all buses and new web and
mobile functionality to manage bookings. In light of the demand environment,
new vehicle investment has been very substantially reduced. Together with
disciplined fleet management, operational and maintenance changes have
resulted in further improvements to punctuality, emissions and other
non-financial metrics.
Greyhound outlook
Greyhound remains non-core and FirstGroup continues to pursue all exit options
for the business in order to conclude the Group’s portfolio rationalisation
strategy. Greyhound’s financial performance will continue to be supported by
tight cost control and recoveries of federal grants for operating key coach
services, and is expected to exceed its FY21 contribution in light of the
recent passenger volume trajectory. As set out in the announcement of the sale
of First Student and First Transit, a portion of the net disposal proceeds
will be utilised to de-risk Greyhound's legacy pension and self-insurance
liabilities. The Group will continue to actively manage the Greyhound property
portfolio for value alongside Greyhound’s reduced residual liabilities.
Emerging from the pandemic, Greyhound is primarily focused on our mid- to
long-distance services, utilising short-distance services to support the
national network. Greyhound remains focused on actively managing operating
mileage in response to changing demand as the pandemic's impact on our
customers' travel plans recedes.
Discontinued operations – First Student
52 weeks to 27 March $m £m £m, change in
constant currency (1)
2021 2020 2021 2020
Revenue 1,617.7 2,474.9 1,226.2 1,940.4 (668.3)
Adjusted operating profit 78.1 205.9 55.8 158.8 (101.1)
Adjusted operating margin 4.8% 8.3% 4.6% 8.2% (370)bps
EBITDA 374.3 496.7 282.6 387.6 (96.7)
Net operating assets 3,283.3 3,176.3 2,381.1 2,549.2
Capital expenditure 225.4 370.6 174.0 256.8
(1 ) Based on retranslating 2020 foreign currency amounts at 2021
rates.
First Student revenue was $1,617.7m or £1,226.2m (2020: $2,474.9m or
£1,940.4m), a decrease of $857.2m reflecting the near-total closure of
schools due to the pandemic prior to the start of the financial year. The
reduction was partially offset by recovery of a substantial proportion of our
expected home-to-school revenues by agreement with our school board customers,
such that by the end of the 2019/20 spring term, we were recovering c.55% of
budgeted home-to-school revenues, or an effective recovery rate of 78%
including labour and fuel savings.
Some schools restarted full in-person teaching at the start of the 2020/21
academic year in August/September 2020, but many continued to review and alter
their back-to-school plans in light of dynamic local conditions throughout the
second half of the financial year. Overall, the trend has been for increasing
home-to-school services either full time or as a mixture of in-person and
online teaching, although some of our school customers were able to operate
all-online, principally in the larger urban districts which form a relatively
significant part of our portfolio. The proportion of First Student’s bus
fleet operating either full service or on a hybrid basis was 87% in early June
before schools in some regions began closing for the summer holidays, and
between services in operation and agreements with our customers, we were
securing c.95% of pre-pandemic home-to-school revenue.
At the adjusted operating level, profit decreased by only $127.8m to $78.1m or
£55.8m (2020: $205.9m or £158.8m), reflecting our industry-leading levels of
agreements with customers noted above and the extensive cost actions we have
undertaken to mitigate the reduced activity levels. These include variable
cost savings, temporary salary reductions, removing all non-essential contract
employees, together with some more permanent reductions in back office
headcount where unavoidable. Where appropriate, First Student has also made
use of the employee retention tax credits in the US (and wage subsidies in
Canada) available to all businesses whose operations were disrupted by
government order. All non-contracted capital expenditure was reviewed early in
the pandemic and deferred, reprofiled or converted to leasing where consistent
with customers’ requirements. As a result of the reduced level of operating
activity throughout the year for many of our customers, the division’s
normal seasonal build-up of working capital took place later than normal, and
has not fully normalised. In all, c.$110m of capital expenditure and payroll
tax payments under the US Federal Insurance Contributions Act (FICA) have been
deferred as a consequence of the pandemic, which will subsequently reverse
under the buyers’ ownership as operating conditions normalise. The division
reported a statutory profit of £62.1m (2020: £89.4m) including a £10.2m
benefit from an improved position on historical insurance claims.
In the bid season for the 2020/21 school year, First Student maintained its
leading position in the market, supported by our excellent safety record and
consistently high customer satisfaction scores, which resulted in a contract
retention rate of 88% on contracts up for renewal, or 95% across the entire
portfolio of multi-year contracts. Given the immense complexity of school
start-up in the pandemic, our driver recruitment, retention and safety
programmes have responded well to the challenges posed by the pandemic for the
school bus industry and its employee dynamic, though we continue to track our
employee levels closely as activity levels rebuild.
Despite the pandemic, First Student continued its bolt-on acquisition
activities and driver technology innovation, as well as extending its
leadership in zero-emission school bus operations in North America. In January
2021, First Student announced a collaboration with NextEra Energy Resources,
the world’s largest generator of renewable energy from the wind and sun and
a world leader in battery storage. The collaboration aims to jointly foster
innovation, accelerate the mass adoption of zero-emission school bus vehicles
and also develop early mover capability in the nascent vehicle-to-grid power
management, energy storage and ancillary grid services markets in North
America.
Discontinued operations – First Transit
52 weeks to 27 March $m £m £m, change in
constant currency (1)
2021 2020 2021 2020
Revenue 1,277.4 1,488.4 977.0 1,171.4 (164.1)
Adjusted operating profit 69.1 36.2 51.7 28.3 +23.8
Adjusted operating margin 5.4% 2.4% 5.3% 2.4% +290bps
EBITDA 115.3 80.0 87.1 62.9 +25.7
Net operating assets 410.9 465.0 298.0 372.0
Capital expenditure 27.7 24.1 20.2 16.7
(1 ) Based on retranslating 2020 foreign currency amounts at 2021
rates.
First Transit continued to maintain a high level of service throughout the
year, as its services provide essential transportation options for passengers
needing to travel to work, university, for medical and other essential travel.
While passenger ridership volumes were more than 50% lower year-on-year, our
clients required us to continue to maintain significant levels of service for
the communities we serve throughout the year. First Transit worked closely
with many clients where service levels did change to make contractual
amendments such as additional payments to cover fixed costs or altered
productivity requirements. Overall, First Transit’s revenue was $1,277.4m or
£977.0m (2020: $1,488.4m or £1,171.4m), a decrease of 14.2%.
While the rates of recovery in activity levels have varied by sub-segment
since March 2020 and we have been flexible in both increasing and decreasing
activity levels in conjunction our clients to adapt to local developments, as
of June, First Transit was operating c.87% of pre-pandemic services overall
(compared with c.60% at the low point). Net revenue recovery was running at c.
95% of pre-pandemic expectations in June, reflecting the service levels and
customer arrangements in place.
Adjusted operating profit was $69.1m or £51.7m (2020: $36.2m or £28.3m), or
an increase of $32.9m compared with the prior year. This equates to an
adjusted operating margin of 5.4% (2020: 2.4%). This performance reflects a
number of factors, including the contractual variations negotiated with
customers noted above, substantial variable cost savings, including temporary
furloughing of some employees and salary reductions in the year, and a
reduction in fixed costs by $10m in the year. The division also made use of
fiscal tax credit programmes available to all companies to protect jobs where
appropriate, and also benefited from the non-recurrence of prior year legal
judgment costs (2020: $3.5m). Statutory profit was £20.5m (2020: loss of
£(21.9)m), reflecting a charge of £31.2m for the deterioration of historic
insurance claims.
The division continued to drive further cost efficiencies from lean
maintenance, predictive analytics, procurement, systematic employee engagement
and retention programmes and further shared service efficiencies. First
Transit is not as capital intensive as some of the Group’s other businesses
as for the most part it operates vehicles procured and owned by customers, but
non-essential capital expenditure was deferred or halted in light of the
pandemic.
First Transit continues to build on its portfolio of both existing and
emerging mobility services contracts, benefiting from its reputation for safe,
innovative and best value solutions for clients and another improvement in its
already strong customer service scores, which reached a five-year high in
2021. These included particularly strong responses from clients in the
categories of working with them during the pandemic, technology adding value,
safety and quality of service for passengers. The contract retention rate on
‘at risk’ business in the year was stable at 89% (2020: 89%), and included
retention of five important multi-year contracts with long-term clients
(Houston, Texas, Met Council, Minnesota, Hartford, Connecticut, New Jersey
Transit and City of Pasadena, California).
Despite extended bidding cycles due to the pandemic, First Transit secured new
business wins in its traditional sectors such as MARTA in Atlanta, Georgia in
H1 and Pinellas Suncoast Transit Authority, Florida and Access Services in Los
Angeles, California in H2. In emerging mobility services, First Transit has
extended its partnership with Lyft to provide wheelchair accessible vehicles
to several US cities in the year, as well as operation of bikeshare services
in Portland, Oregon.
The business has also continued to build on its strong position in the
maintenance and operation of autonomous vehicles (AV), electric vehicles (EV),
and in January 2021 announced plans to collaborate with NextEra Energy
Resources to target the rapid growth of EV capabilities in its markets.
Overall, First Transit is well-placed for further growth, not least in light
of the Biden administration's plans for further investment in infrastructure
and public transportation.
Financial review
Financial policy framework
As part of the announcement of the sale of First Student and First Transit, a
financial policy framework for the ongoing Group for the financial year ending
in March 2023 (FY23) and beyond was set out as follows:
Metric Objective
Revenue * First Bus: planning for a range of post-pandemic scenarios; central case envisages passenger volumes recover to c.80-90% of pre-pandemic levels during first twelve months after social distancing restrictions on public transport end, with further growth thereafter
* First Rail: opportunities to build on the base business of four contracted operations with no revenue risk
Profitability * First Bus: targeting a 10% margin in the first full financial year after social distancing restrictions on public transport end (FY23 on UK Government's current plans)
* First Rail: profitability driven by delivering against performance targets under the NRCs while adding earnings in adjacent rail opportunities
* Other: central cost reduction of at least £10m p.a. from FY23; interest c.£50m p.a. (of which c.60% IFRS16); UK corporation tax rate (currently 19% increasing to 25% for FY24)
Investment * First Bus: c.£90m p.a. from FY22, mainly driven by zero-emission bus fleet commitments.
* First Rail: expected to continue to be cash capital-light under the NRCs
Leverage * Targeting leverage ratio of less than 2.0x adjusted net debt: Rail-adjusted EBITDA (1)in the medium term
Dividend * Intention to pay regular dividends to shareholders commencing during FY23
* Targeting annual dividend around 3x covered by Rail-adjusted Profit After Tax (2), assuming normalisation of trading conditions post-pandemic
(1) First Bus and non-contracted First Rail EBITDA, plus contracted Rail net
attributable earnings, minus central costs
(2) First Bus and non-contracted First Rail adjusted operating profit, plus
contracted Rail net attributable earnings, minus central costs, minus treasury
interest, minus tax
In summary, the ongoing Group is expected to be a sustainable and cash
generative business with a well-capitalised balance sheet, and an operating
model that will support an attractive dividend for shareholders.
Group revenue
Revenue from continuing operations was in line with prior year at £4,641.8m
(2020: £4,642.8m). Excluding the new Avanti contract which commenced in
December 2019, revenue from continuing operations decreased by £567.4m as a
result of the pandemic. Avanti revenue was £897.6m for the year (2020:
£331.2m).
Revenue from discontinued operations was £2,203.2m (2020: £3,111.8m),
reflecting the reduced activity levels due to the pandemic, partially offset
by recoveries from some customers. Overall Group revenue in the full year
decreased by 11.7% or £909.6m to £6,845.0m (2020: £7,754.6m).
52 weeks to 27 March 2021 52 weeks to 28 March 2020
Revenue Adjusted operating Adjusted operating margin (3) Revenue £m Adjusted operating profit (3) £m Adjusted operating margin (3) %
£m profit (3) %
£m
First Bus 698.9 36.6 5.2 835.9 46.1 5.5
First Rail 3,619.9 108.1 3.0 3,203.7 70.4 2.2
Greyhound 323.0 (10.3) (3.2) 603.2 (11.6) (1.9)
Group items (4) – (32.5) (35.2)
Continuing operations 4,641.8 101.9 2.2 4,642.8 69.7 1.5
First Student 1,226.2 55.8 4.6 1,940.4 158.8 8.2
First Transit 977.0 51.7 5.3 1,171.4 28.3 2.4
Discontinued operations 2,203.2 107.5 4.9 3,111.8 187.1 6.0
Total Group 6,845.0 209.4 3.1 7,754.6 256.8 3.3
North America in USD $m $m % $m $m %
Greyhound (continuing) 422.6 (12.1) (2.9) 766.0 (15.3) (2.0)
First Student 1,617.6 78.1 4.8 2,474.9 205.9 8.3
First Transit 1,277.4 69.1 5.4 1,488.4 36.2 2.4
Discontinued operations 2,895.0 147.2 5.1 3,963.3 242.1 6.1
Total North America 3,317.6 135.1 4.1 4,729.3 226.8 4.8
(3 ‘)Adjusted’ figures throughout this document are before rail
termination sums net of impairment reversal, gain on disposal of properties,
impairment of land and buildings, strategy costs and certain other items as
set out in note 4 to the financial statements. The statutory operating profit
including discontinued operations for the year was £285.8m (2020: loss of
£(152.7)m) as set out in note 4.
(4) Central management and other items. Tramlink is now reported in First
Rail.
Group adjusted operating performance
Adjusted operating profit from continuing operations was in line with
expectations at £101.9m (2020: £69.7m), an increase of £16.9m excluding the
Avanti contribution of £29.6m (2020: £14.3m). For First Bus and First Rail
this largely reflects the terms of the UK Government-procured emergency
arrangements to enable socially distanced travel, while in Greyhound it
comprised the drop through of lower revenues offset by reduced variable costs,
substantial fixed cost actions and CARES Act grants for vital bus service
connections.
Adjusted operating profit from discontinued operations was £107.5m (2020:
£187.1m) with the impact of reduced activity levels due to the pandemic
mitigated by cost savings, better than expected revenue recoveries from
customers and higher service levels in the final quarter. Overall Group
adjusted operating profit decreased by £47.4m to £209.4m (2020: £256.8m).
The shareholder circular relating to the sale of First Student and First
Transit published on 10 May 2021 stated that "adjusted operating profit for
the year ended 31 March 2021 will be ahead of the top of the range of analyst
consensus forecasts of approximately £171 million", subject to completion of
the audit process. Subsequent to this profit forecast being made, the further
increase in North American insurance provisions described below was
reclassified as an adjusting item for the purposes of adjusted operating
profit as well as further revenue recovery recognition agreed with customers.
Note that software amortisation of £11.3m (2020: £16.1m) is no longer
classed as a separately disclosed item and has been charged to divisional and
Group adjusted results and the prior periods are restated accordingly.
Group central costs for FY22 are anticipated to reduce by c.£5m from FY21
levels, reflecting the previously announced annual run rate reduction of
c.£10m after completion of the First Student and First Transit sale.
Reconciliation to non-GAAP measures and performance
Note 4 to the financial statements sets out the reconciliations of operating
profit/(loss) and loss before tax to their adjusted equivalents. The adjusting
items are as follows:
Other intangible asset amortisation charges
The charge for the year was £4.1m (2020: £4.9m).
Strategy costs
The charge of £37.1m (2020: £58.2m) comprises £21.1m costs incurred to date
related to the sale of First Student and First Transit, £7.0m for the
proposed sale of Greyhound, £6.9m of costs related to restructuring in
Greyhound Canada, including the cost of severance, legal costs, lease
termination costs and other costs of closure. £2.1m relates to other costs
associated with the rationalisation of the Group.
North American insurance provisions
FirstGroup North American insurance arrangements involve retaining the working
loss layers in a captive and insuring against the higher losses. Based on our
actuaries’ recommendation and a second additional, independent actuarial
review, last year we increased our reserve to $657m. During this financial
year we have continued to see a deteriorating claims environment with legal
judgements increasingly in favour of plaintiffs and punitive in certain
regions. In this hardening motor claims environment, we have seen further
significant new adverse settlements and developments on a number of aged
insurance claims, and as a result our actuaries have increased their
expectation of the reserve required on historical claims. Partially offsetting
this, there has been a significant change in the market-based discount rate
used in the actuarial calculation from 0.8% to 1.65%.
In light of the continued change in claims environment we have increased the
provision to provide more protection for historical claims, and the resulting
self-insurance reserve level is above the midpoint of the actuarial range.
These changes in accounting estimates combined with the discount rate movement
has resulted in the Group recording an additional charge of $44.8m or £32.2m
(2020: $175.2m or £141.3m); of this charge, $15.6m or £11.2m relates to
Greyhound and $29.2m or £21.0m relates to discontinued operations.
The charge comprises $57.0m or £41.0m relating to losses from historical
claims (of this, $18.6m or £13.4m relates to Greyhound and $38.4m or £27.6m
relates to discontinued operations) and a credit of $12.2m or £8.8m relating
to the change in the discount rate (of this, $3.0m or £2.2m relates to
Greyhound and $9.2m or £6.6m relates to discontinued operations). It is
expected that the majority of these claims will be settled over the next five
years. Following these charges, the provision at 27 March 2021 stands at $659m
(2020: $657m) compared with the actuarial range of $554m to $723m (2020: $551m
to $683m). Of the total provision at 27 March 2021, $156m relates to Greyhound
and $503m relates to discontinued operations.
The charge to the adjusted operating profit for the current period reflects
this revised environment and the businesses continue to build the higher
insurance costs into their bidding processes and hurdle rates for investment.
The Group also actively evaluates alternatives to reduce insurance risk and
ongoing expense, and continues to make improvements to claims management
processes. It has been agreed that the self-insurance provisions for First
Student and First Transit will transfer under the sale of those businesses
with no further purchase price adjustment and part of the proceeds from the
sale will be used to de-risk the residual self-insurance provisions of
Greyhound.
Gain on disposal of properties
Greyhound recognised a profit of £71.1m on sale of properties in the year
(2020: £1.3m). A gain of £51.6m was recognised on the disposal of property
in Los Angeles, California. A gain of £20.2m was recognised on the disposal
of property in Denver, Colorado, while a loss of £0.7m was recognised on
disposal of a number of other properties in Canada.
Impairment of land and buildings
An impairment charge of £10.0m has been booked in respect of the Aberdeen
headquarters and £6.6m for First Bus premises in Southampton.
Rail termination sums net of impairment reversal
The Group has agreed franchise termination sums with the DfT in respect of all
our obligations under the ERMAs. These are included in adjusting items,
together with the agreed settlement and other adjustments under the net asset
clauses of the ERMA and the release of the impairment provisions relating to
SWR and TPE as at 28 March 2020.
Discontinued operations
With the announcement of the agreed sale of First Student and First Transit to
EQT Infrastructure on 23 April 2021 and subsequent completion on 21 July, the
financial results of the disposal group have been reclassified as discontinued
operations on the face of the income statement and the balance sheet and cash
flow statement adjusted accordingly.
The transaction has been structured on a 'locked box' basis as of 27 March
2021, with all economic benefits or costs for the buyer's account from that
date onwards, albeit these will continue to be disclosed as discontinued
operations up to the point of transaction completion.
Group statutory operating performance
Statutory operating profit from continuing operations was £224.3m (2020: loss
of £(215.2)m) reflecting £122.4m of net adjusting items compared with
£(284.9)m in 2020, as noted above.
Finance costs and investment income
Net finance costs were £170.0m (2020: £146.9m) with the increase principally
due to the increase in lease interest from £42.6m in 2020 to £73.1m in 2021.
This increase was mainly due to the new rolling stock leases in relation to
the start of the Avanti operation from December 2019 and the GWR DA-3 rolling
stock lease liabilities from March 2020. Net finance costs for FY22 are
estimated to be c.£100m including IFRS16 lease interest but excluding
anticipated debt make-whole costs of c.£65m.
Profit before tax
Adjusted profit before tax as set out in note 4 to the consolidated financial
statements was £39.4m (2020: profit £109.9m) including discontinued
operations. An overall credit of £76.4m (2020: £(409.5)m) for adjustments
principally reflecting gains on property disposals of £71.1m (2020: £9.3m),
Rail termination sums net of impairment reversal credit of £95.7m (2020:
nil), North America self-insurance reserve charge of £32.2m (2020: £141.3m),
restructuring and reorganisation charges of £37.1m (2020: £58.2m),
impairment on land and buildings £16.6m (2020: nil) and other intangible
asset amortisation charges of £4.1m (2020: £4.9m), resulted in a profit
before tax including discontinued operations of £115.8m (2020: loss before
tax of £(299.6)m).
Tax
The tax charge, on adjusted profit before tax, for the year was £4.2m (2020:
£24.6m), representing an effective tax rate of 10.7% (2020: 22.4%). The
reduced effective rate is due to reduced deferred tax on US state taxes and
the comparatively lower profits. There was a tax charge of £30.6m (2020:
credit of £39.6m) relating to other intangible asset amortisation charges and
other adjustments, partly offset by the write back of previously unrecognised
deferred tax assets of £10.1m (2020: a charge of £40.0m). The total
statutory tax charge was £24.7m (2020: £25.0m) representing an effective tax
rate on the statutory loss before tax of 21.3% (2020: (8.3)%). This rate is
different from the effective tax rate on adjusted profits primarily because
the underlying profit is higher so the reduced deferred tax on US state taxes
has less impact and certain adjustments are not tax deductible. The actual tax
paid during the year was £4.5m (2020: £2.9m) and differs from the tax charge
of £24.7m primarily due to refunds received during the year in respect of
prior years and payments to be made post-year end. The ongoing Group's
effective tax rate is expected to be broadly in line with UK corporation tax
levels (currently 19% and increasing to 25% from 1 April 2023).
EPS
Adjusted EPS was 2.4p (2020: 6.8p). Basic EPS was 6.5p (2020: (27.0)p).
Shares in issue
As at 27 March 2021 there were 1,206.4m shares in issue (2020: 1,210.8m),
excluding treasury shares and own shares held in trust for employees of 15.4m
(2020: 8.7m). 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 1,203.6m (2020: 1,210.9m).
Capital expenditure
Road cash capital expenditure was £112.2m (2020: £283.4m) and comprised
First Student £50.6m (2020: £193.0m), First Transit £16.2m (2020: £18.8m),
Greyhound £14.9m (2020: £38.8m), First Group America £nil (2020: £1.5m),
First Bus £30.1m (2020: £30.1m) and Group items £0.2m (2020: £2.7m). First
Rail capital expenditure was £116.5m (2020: £115.7m) and is typically
matched by franchise receipts or other funding.
In addition, during the year we entered into leases in the Road divisions with
capital values in First Student of £37.5m (2020: £75.1m), First Transit of
£17.0m (2020: £13.8m), Greyhound of £9.0m (2020: £21.3m) and First Bus of
£4.6m (2020: £6.3m) and Group items £0.3m (2020: £0.4m). During the year
First Rail entered into leases with a capital value of £105.2m.
Gross capital investment (fixed asset and software additions plus the capital
value of new leases) was £516.0m (2020: £2,326.5m) and comprised First
Student £211.5m (2020: £331.9m), First Transit £37.2m (2020: £30.5m),
Greyhound £14.7m (2020: £65.4m), First Bus £28.6m (2020: £52.6m), First
Rail £223.8m (2020: £1,842.9m) and Group items £0.3m (2020: £3.2m). The
balance between cash capital expenditure and gross capital investment
represents new leases, creditor movements and the recognition of additional
right of use assets in the year.
Adjusted cash flow
The Group's adjusted cash flow of £284.0m (2020: £97.4m) was well ahead of
initial expectations, reflecting our actions to maintain liquidity and
financial strength despite the passenger volume reductions. Some capital
expenditure and working capital outflows were deferred, which in the case of
the discontinued operations were reflected in the terms of the sale. First Bus
cash flows were affected by the timing of a c.£70m CBSSG settlement from DfT,
which is expected during FY22. The Group also secured £109.5m in cash
proceeds from the sale of properties in the year, principally from Greyhound.
The foreign exchange gain in the year in part reflects the hedging strategy
put in place for the net proceeds of the First Student and First Transit sale.
The adjusted cash flow is set out below:
52 weeks to end March 2021 2020 (restated) £m
£m
EBITDA 1,169.5 1,108.9
Other non-cash income statement charges 9.6 8.8
Working capital 166.1 71.5
Movement in other provisions 72.7 (64.5)
Pension payments in excess of income statement charge (59.2) (38.8)
Cash generated by operations 1,358.7 1,085.9
Capital expenditure and acquisitions (391.0) (352.8)
Proceeds from disposal of property, plant and equipment 119.0 30.5
Proceeds from disposal of business – 16.2
Interest and tax (152.1) (126.1)
Lease payments now in debt/other (650.6) (556.3)
Adjusted cash flow 284.0 97.4
Foreign exchange movements 78.5 (24.1)
Inception of new leases (210.2) (1,828.1)
Lease payments now in debt 644.1 549.2
Other non-cash movements (161.3) (2.0)
Adjustment on transition to IFRS 16 – (1,168.2)
Movement in net debt in the period 635.1 (2,375.8)
Funding and risk management
Liquidity within the Group has remained strong. At 27 March 2021, there was
£1,130.6m (2020: £585.7m) of undrawn committed headroom and free cash, being
£346.1m (2020: £348.6m) of committed headroom and £784.5m (2020: £237.1m)
of net free cash after offsetting overdraft positions. This reflects the
previously disclosed issuance of £300m in commercial paper through the UK
Government’s CCFF scheme in April 2020 which was renewed for a further year
in March 2021, cash flow in the period and the timing of working capital
movements in First Student. Subsequent to the year end the Group completed the
sale of First Student and First Transit for net cash proceeds of c.£2.3bn
that is being applied to significantly deleverage the balance sheet with pro
forma adjusted net debt of c.£100m after all funds flows relating to the
transaction. The Group expects to settle £1.8bn of outstanding debt including
the CCFF commercial paper, the 2022 bond and other debt, incurring c.£65m in
make-whole costs; to contribute £220m in cash and transfer £117m into escrow
in respect of the UK Bus and Group pensions schemes; to apply a total of
c.£260m for Greyhound legacy liability de-risking and other short-term
capital requirements; and to make the proposed £500m return of value to
shareholders in due course.
Following the transaction, the majority of our debt has either been repaid, or
will be repaid after required notice periods have elapsed, including under the
£800m Revolving Credit Facility. Once these repayments have taken place, the
remaining drawn facilities will include the £200m 2024 bond and fleet finance
leases in First Bus and Greyhound. The £800m revolving credit facilities
remain in place for up to three months and the Group is in discussions with
its banking group for a more suitable facility going forwards for a smaller
remaining Group. The Group does not enter into speculative financial
transactions and uses only authorised financial instruments for certain
financial risk management purposes.
The covenant relief obtained in November 2020 will no longer be required once
the USPP is repaid in August. All other debt on which relief had been
obtained has either been repaid and cancelled, or, in the case of the
Revolving Credit Facility, we have advised the agent that the relief no longer
applies. For the March 2021 covenant test the net debt:EBITDA ratio was 1.6x
and the fixed charge cover ratio was 1.6x, well within the original covenant
ratios.
Net debt
The Group’s adjusted net debt at 27 March 2021, which excludes the impact of
IFRS 16 and the capitalisation of Right of Use Assets and First Rail
ring-fenced cash was £1,414.3m (2020: £1,490.9m). Reported net debt was
£2,625.8m (2020: £3,260.9m) after IFRS 16 and including First Rail
ring-fenced cash, as follows:
27 March 2021 28 March 2020 (restated)
Analysis of net debt Cont. Disc. Total Group Total Group £m
£m £m £m
Sterling bond (2021) 349.9 – 349.9 348.7
Sterling bond (2022) 323.4 – 323.4 322.7
Sterling bond (2024) 199.8 – 199.8 199.8
CCFF 298.2 – 298.2 –
Bank loans and overdrafts 620.1 – 620.1 656.3
Supplier financing – 159.2 159.2 –
Lease liabilities 1,784.4 188.5 1,972.8 2,473.1
Senior unsecured loan notes 198.8 – 198.9 219.8
Loan notes 0.7 – 0.7 9.4
Gross debt excluding accrued interest 3,775.3 347.7 4,123.0 4,229.8
Cash (784.3) (50.0) (834.3) (319.5)
First Rail ring-fenced cash and deposits (638.5) – (638.5) (611.9)
Other ring-fenced cash and deposits (16.1) (8.3) (24.4) (37.5)
Net debt excluding accrued interest 2,336.4 289.4 2,625.8 3,260.9
IFRS 16 lease liabilities – Road 66.8 127.4 194.2 283.3
IFRS 16 lease liabilities – Rail 1,655.8 – 1,655.8 2,098.6
IFRS 16 lease liabilities – total 1,722.6 127.4 1,850.0 2,381.9
Net debt excluding accrued interest (pre-IFRS 16) 613.8 162.0 775.8 879.0
Adjusted net debt (pre-IFRS 16 and excluding First Rail ring-fenced cash) 1,252.3 162.0 1,414.3 1,490.9
Under the terms of the First Rail contractual agreements, cash can only be
distributed by the TOCs up to the amount of their retained profits. The
ring-fenced cash represents cash that is in the TOCs at the balance sheet
date. First Rail ring-fenced cash increased by £26.6m to £638.5m in the year
principally due to the pre-funding of working capital flows noted elsewhere.
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.
Fuel price risk
We use a progressive forward hedging programme to manage commodity risk. As at
27 March 2021, 44% of our ‘at risk’ UK crude requirements for the current
year in the UK (1.7m barrels) were hedged at an average rate of $61 per
barrel, 17% of our requirements for the year to end March 2023 at $55 per
barrel, and 1% of our requirements for the year to end March 2024 at $62 per
barrel. Greyhound’s fuel exposure is largely unhedged because its
competitors – passenger cars and the airlines – do not hedge their fuel
exposure, so Greyhound’s pricing is responsive to fuel price changes.
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.
Foreign exchange
The most significant exchange rates to pounds Sterling for the Group are as
follows:
52 weeks to 27 March 2021 52 weeks to 28 March 2020
Closing rate Effective rate Closing rate Effective rate
US Dollar 1.38 1.39 1.25 1.29
Canadian Dollar 1.74 1.75 1.74 1.72
Pensions
We have updated our pension assumptions as at 27 March 2021 for the defined
benefit schemes in the UK and North America. The net pension deficit
(comprising continued and discontinued operations) of £313m at the beginning
of the period was £296m at the end of the year, with UK Bus schemes
increasing from £93m to £164m, and North America decreasing from £218m to
£129m. The main factors that influence the balance sheet position for
pensions and the principal sensitivities to their movement at 27 March 2021
are set out below:
Movement Impact
Discount rate +0.1% Reduce deficit by £32m
Inflation +0.1% Increase deficit by £27m
Life expectancy +1 year Increase deficit by £90m
The Trustee and Company have finalised the 2019 funding valuation for the
First UK Bus Pension Scheme. Taking into account the parent company guarantee
provided by FirstGroup plc, the funding deficit of £271m at the valuation
date is lower than that of the previous triennial valuation (£302m as at
April 2016), but higher than the balance sheet position on an accounting basis
at the relevant date. The funding shortfall on a targeted low dependency basis
(with a discount rate of gilts +0.5% per annum) at the reporting date is
estimated to be c.£170m higher than the deficit reported in these financial
statements.
We are now actively engaging with the Trustee on strategic discussions in
relation to a long-term funding target for the Scheme, including liability
management options, covenant, de-risking the investment strategy and securing
member benefits. Such a long-term funding target (often referred to as low
dependency or self-sufficiency) is not defined precisely but may be achieved
by setting a funding target in line with a discount rate for liabilities in
the range of Gilts to Gilts +50bps. In our opinion, funding the Scheme to such
a level within a reasonably short time horizon, while taking actions to reduce
exposure to investment risk, is both realistic and achievable – especially
given the rate at which the Scheme is now maturing following closure first to
new entrants and then subsequently to ongoing accrual. Such a lower risk, low
dependency funding target could be c.£100m higher than the value of
liabilities in the funding valuation.
In November, an annuity buy-in was completed for all the current pensioners in
the Aberdeen LGPS. The pensioners represent £230m, or 70%, of our Scotland
LGPS pension liabilities, and removing our exposure to that risk represents a
material reduction to the Group’s overall ongoing pension risk.
As part of the sale of First Student and First Transit, memoranda of
understanding have been agreed with the Group Pension Scheme and Bus Pension
scheme whereby £220m of cash will be contributed to the Bus Scheme and £117m
in total put into escrow that could be released back to the Group depending on
future triennial valuation outcomes.
Balance sheet
Net assets have decreased by £22.6m since 28 March 2020. The principal
reasons for the decrease are actuarial losses on defined benefit pension
schemes (net of deferred tax) of £33.8m and unfavourable translation reserve
movements of £110.9m partly offset by the profit for the year of £91.1m and
favourable derivative hedging movements net of tax of £28.0m.
As at 27 March 2021 As at 28 March 2020
Balance sheets – Net assets/(liabilities) Cont. £m Disc. Total Group Total Group £m
£m £m
First Bus 328.1 – 328.1 379.5
First Rail 925.6 – 925.6 1,348.7
Greyhound (54.5) – (54.5) (130.8)
Discontinued operation – First Student – 2,381.1 2,381.1 2,549.2
Discontinued operation – First Transit – 298.0 298.0 372.0
Divisional net assets 1,199.2 2,679.1 3,878.3 4,518.6
Group items (38.1) (10.0) (48.1) (35.2)
Net debt (2,336.4) (289.4) (2,625.8) (3,260.9)
Taxation (13.5) (36.8) (50.3) (45.8)
Total (1,188.8) 2,342.9 1,154.1 1,176.7
Post-balance sheet events
* On 23 April announced sale of First Student and First Transit (see
discontinued operations note 14) and completed the sale on 21 July
* Cancelled the £300m bridge facility that matures in March 2022
* Repaid Sterling bond 2021 of £350m on 15 April
* Repaid a further £527m of indebtedness and contributed £220m to UK Bus
Pension Scheme in applying some of the sale proceeds from the sale of First
Student and First Transit
* Following the sale of First Student and First Transit, the letters of
credit, surety bonds and parent company guarantees relating to those
businesses have been cancelled or in the process of being released
* Agreed termination sum with the DfT relating to the TPE franchise
* Signed National Rail Contracts for SWR and TPE in May for initial two year
term with the DfT having an option to extend the respective contracts for a
further two years to May 2025
* Agreed with the DfT the extension of the Emergency Measures Agreement for
GWR to December 2021
* Announced the closure of Greyhound Canada on 15 May
Going concern
The Board reviewed an updated base case and a severe but plausible downside
scenario, considering the progress made since the Group’s announcement of
its full year results for the 52 weeks ended 27 March 2020 (FY20) and the
potential mitigating actions.
Based on their review of the financial forecasts for the period to September
2022 and having regard to the risks and uncertainties to which the Group is
exposed, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the 12 month
period from the date on which the financial statements were approved.
Accordingly, they continue to adopt a going concern basis of accounting in
preparing the consolidated financial statements in this full year report.
In the FY20 results the Group disclosed that the risks and uncertainties
facing the Group at that stage of the pandemic indicated that material
uncertainty existed that could cast doubt on the Group’s and the Company’s
ability to continue as a going concern. The material uncertainty related to:
* the uncertainty regarding the levels of fiscal financial and contractual
support which may be provided beyond the period for which that funding and
contractual support is currently being provided;
* whether passenger volumes recover to the levels necessary to sustain the
business without the current fiscal financial and contractual support;
* the ability of the Group to obtain covenant waivers from debt providers if
required;
* the ability of the Group to draw down on c.£550m of the currently available
but uncommitted facilities throughout the going concern period; and
* the timing of cash flows, including movements in working capital and the
timing of receipts of contractual and fiscal support that may impact debt
levels at covenant test dates.
Update since the FY20 results
As noted in the Chief Executive's review and divisional reviews, compared with
the position in July 2020 we now have substantially greater clarity about the
resilience of our businesses, the contractual arrangements in First Rail
through the ERMA in Avanti, NRCs in SWR and TPE and the EMA in GWR, and the
fiscal arrangements in place in the UK and North America.
* Continued support from governments, school boards and other contract
customers throughout the FY21 pandemic period have demonstrated a commitment
to maintaining the essential public transport services the Group operates. In
the US, further fiscal support bills are being legislated through Congress in
FY22 including significant provision for further support to the public
transport sector.
* Passenger volume levels have outperformed our prior forecast assumptions in
year-to-date trading. It is anticipated that governments will continue to
support minimum operating service levels through the emergence from the
pandemic until social distancing is removed and these services can be run
commercially.
* Management has demonstrated the flexibility of our businesses to generate
cash flows well within required debt facility and covenant levels since the
pandemic struck.
* On 21 July 2021 the Group completed the sale of First Student and First
Transit to EQT Infrastructure for net proceeds of c.£2.3bn. The transaction
has resulted in a material deleveraging and de-risking of the business.
Evaluation of going concern
The Board evaluated whether it was appropriate to prepare the company and
consolidated financial statements in this report on a going concern basis and
in doing so considered whether any material uncertainties exist that cast
doubt on the Group’s and the Company’s ability to continue as a going
concern over the going concern period, and in particular whether any of the
circumstances giving rise to the material uncertainties at the 2020 year-end
still existed.
Consistent with prior years, the Board’s going concern assessment is based
on a review of future trading projections, including whether the amended
banking covenants are likely to be met and whether there is sufficient
committed facility headroom to accommodate future cash flows for the going
concern period. Divisional management teams prepared detailed, bottom-up
projections for their businesses reflecting the impact of the coronavirus
pandemic operating environment, including customer revenue recovery where
services had been disrupted and what government or contractual support
arrangements were in place.
Base case scenario
These projections were the subject of a series of executive management reviews
and were used to update the base case scenario that was used for the purposes
of the going concern assessment at the 2021 year end. The base case assumes a
gradual recovery in passenger volumes as a result of an anticipated lifting of
social distancing and travel restrictions in FY22, but that passenger volumes
remain below pre-pandemic levels in the going concern assessment period. The
macro projections in the updated base case assume that the UK operates in a
post-Brexit coronavirus economy. We have not assumed any further North
American fiscal support beyond what has already been committed by the federal
governments.
Severe, plausible downside scenario
In addition, a severe but plausible downside case was also modelled which
assumes a more protracted post-pandemic recovery profile. In Greyhound and
First Bus the severe but plausible downside case assumes slower recovery with
passenger revenues in the second half of FY22 at an average rate of 57% and
75% of pre-pandemic levels respectively. In First Rail, the downside case
assumes reduced TOC performance fee awards and operating losses in Hull Trains
and East Coast Open Access.
Mitigating actions
If the impact on the Group of the pandemic were to be more protracted than
assumed in the base case scenario, the Group would reduce and defer planned
growth capex and further reduce costs in line with a lower volume operating
environment to the extent that the essential services we operate are not
required to be run for the governments and communities we support.
Going concern statement
Based on the scenario modelling undertaken, and the potential mitigating
actions referred to above, the Board is satisfied that the Group’s liquidity
over the going concern period is sufficient for the business needs.
Definitions
Unless otherwise stated, all financial figures for the 52 weeks to 27 March
2021 (the ‘year’ or ‘FY21’) include the results and financial position
of the First Rail business for the year ended 31 March 2021 and the results
and financial position of all the other businesses for the 52 weeks ended 27
March 2021. The figures for the 52 weeks to 28 March 2020 (the ‘prior
year’ or ‘FY20’) include the results and financial position of First
Rail for the year ended 31 March 2020 and the results and financial position
of all the other businesses for the 52 weeks ended 28 March 2020.
'Cont.' or the 'Continuing operations' refer to First Bus, First Rail,
Greyhound and Group items.
'Disc.' or the 'Discontinued operations' refer to First Student and First
Transit.
References to 'adjusted operating profit', 'adjusted profit before tax', and
'adjusted EPS' throughout this document are before rail termination sums net
of impairment reversal, gain on disposal of properties, impairment of land and
buildings, strategy costs and certain other items as set out in note 4 to the
financial statements.
'EBITDA’ is adjusted operating profit less capital grant amortisation plus
depreciation plus software amortisation.
'Rail-adjusted EBITDA' is First Bus and non-contracted First Rail EBITDA, plus
contracted Rail net attributable earnings, minus central costs.
'Rail-adjusted Profit After Tax' is First Bus and non-contracted First Rail
adjusted operating profit, plus contracted Rail net attributable earnings,
minus central costs, minus treasury interest, minus tax.
'Net debt' is the value of Group external borrowings excluding the fair value
adjustment for coupon swaps designated against certain bonds, excluding
accrued interest, less cash balances.
'Adjusted net debt' excludes First Rail ring-fenced cash and IFRS 16 lease
liabilities from net debt.
References to ‘like-for-like’ revenue adjust for changes in the
composition of the divisional portfolio, holiday timing, severe weather and
other factors, for example engineering possessions in First Rail, that distort
the period-on-period trends in our passenger revenue businesses.
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.
Principal risks and uncertainties
The Board has conducted a thorough assessment of the principal risks and
uncertainties facing the Group for the remainder of the financial year,
including those that would threaten the successful and timely delivery of its
strategic priorities, future performance, solvency and liquidity.
The most immediate risk facing the Group remains the impact to the Group and
each of its businesses from the coronavirus pandemic. We have set out in more
detail elsewhere in this document (and previously announced) the measures we
have taken and continue to take as a Group and in each of our businesses to
mitigate those risks. In our going concern statement we have highlighted
continued uncertainties that could, in certain severe downside scenarios, cast
significant doubt on the Group’s ability to continue as a going concern.
The Directors recognise that significant judgements had to be made in deciding
what assumptions to make regarding how the impact of the coronavirus pandemic
might evolve over the coming months and what impact that will have on the
ability of each of the business divisions to resume near normal levels of
service. Many of those judgements are, by their nature, highly subjective and
the modelled outcomes depend to a significant degree on how the coronavirus
pandemic evolves during the remaining months of the financial year. There is
therefore a much higher degree of uncertainty than would usually be the case
in making the key judgements and assumptions that underpin the financial
forecasts.
A summary of the Principal Risks and Uncertainties will be set out in the
Annual Report and Accounts.
Matthew
Gregory
Ryan Mangold
Chief
Executive
Chief Financial Officer
27 July
2021
27 July 2021
Consolidated income statement
For the 52 weeks ended 27 March
Continuing Operations Notes 2021 £m 2020 £m
Revenue 2 4,641.8 4,642.8
Operating costs (4,417.5) (4,858.0)
Operating profit/(loss) 224.3 (215.2)
Investment income 5 1.8 2.6
Finance costs 5 (150.9) (125.6)
Profit/(loss) before tax 75.2 (338.2)
Tax 6 (15.8) 3.6
Profit/(loss) from continuing operations 59.4 (334.6)
Profit from discontinued operations 14 31.7 10.0
Profit/(loss) for the year 91.1 (324.6)
Attributable to:
Equity holders of the parent 78.4 (327.2)
Non-controlling interests 12.7 2.6
91.1 (324.6)
Earnings per share
Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company
Basic earnings per share 3.9p (27.8)p
Diluted earnings per share 3.9p (27.8)p
Earnings per share for profit attributable to the ordinary equity holders of the company
Basic earnings per share 7 6.5p (27.0)p
Diluted earnings per share 7 6.4p (27.0)p
Adjusted results (from continuing operations) (1)
Adjusted operating profit 4 101.9 69.7
Adjusted loss before tax (47.2) (53.3)
Adjusted EPS 7 (3.5)p (3.4)p
Adjusted diluted EPS (3.5)p (3.4)p
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
52 weeks ended 27 March
2021 £m 2020 £m
Profit/(loss) for the year 91.1 (324.6)
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes (49.3) (29.0)
Deferred tax on actuarial losses on defined benefit pension schemes 15.5 1.1
Writing down previously recognised deferred tax assets on actuarial losses on defined benefit schemes - (25.7)
(33.8) (53.6)
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements 16.4 (29.3)
Deferred tax on derivative hedging instrument movements (3.6) 5.9
Exchange differences on translation of foreign operations (110.9) 91.3
(98.1) 67.9
Other comprehensive (loss)/income for the year (131.9) 14.3
Total comprehensive loss for the year (40.8) (310.3)
Attributable to:
Equity holders of the parent (53.5) (312.9)
Non-controlling interests 12.7 2.6
(40.8) (310.3)
Total comprehensive (loss)/income for the period attributable to owners of FirstGroup Plc arises from
Attributable to
Continuing operations 18.1 (400.1)
Discontinued operations (58.9) 89.8
(40.8) (310.3)
The accompanying notes form an integral part of this consolidated statement of
comprehensive income.
Consolidated balance sheet
As at 27 March
Note 2021 £m 2020 (restated)1 £m
Non-current assets
Goodwill 8 83.9 1,663.2
Other intangible assets 9 16.2 51.9
Property, plant and equipment 10 2,443.7 4,374.5
Deferred tax assets 19 35.0 33.6
Retirement benefit assets 52.9 53.2
Derivative financial instruments 18 1.2 15.8
Investments 8.3 32.9
2,641.2 6,225.1
Current assets
Inventories 11 29.4 63.3
Trade and other receivables 12 676.7 1,170.6
Current tax assets 0.4 9.8
Cash and cash equivalents 1,438.9 968.9
Derivative financial instruments 18 14.9 4.8
2,160.3 2,217.4
Assets held for sale – continuing operations 11.9 1.0
Assets held for sale – discontinued operations 14 3,479.5 -
Total assets 8,292.9 8,443.5
Current liabilities
Trade and other payables 13 1,587.6 1,816.9
Tax liabilities – Current tax liabilities 14.4 7.5
– Other tax and social security 34.6 42.9
Borrowings 15 1,326.2 776.7
Derivative financial instruments 18 11.8 44.2
Provisions 20 74.4 232.1
3,049.0 2,920.3
Net current liabilities (888.7) (702.9)
Non-current liabilities
Borrowings 15 2,492.0 3,502.9
Derivative financial instruments 18 1.2 19.2
Retirement benefit liabilities 324.5 366.6
Deferred tax liabilities 19 - 38.8
Provisions 20 135.5 419.0
2,953.2 4,346.5
Liabilities held for sale - discontinued operations 14 1,136.6 -
Total liabilities 7,138.8 7,266.8
Net assets 1,154.1 1,176.7
Equity
Share capital 21 61.1 61.0
Share premium 689.6 688.6
Hedging reserve (3.4) (28.3)
Other reserves 4.6 4.6
Own shares (9.0) (10.2)
Translation reserve 524.7 635.6
Retained earnings (89.6) (141.5)
Equity attributable to equity holders of the parent 1,178.0 1,209.8
Non-controlling interests (23.9) (33.1)
Total equity 1,154.1 1,176.7
1 Details of restatement are included in note 1.
The accompanying notes form an integral part of this consolidated balance
sheet.
Consolidated statement of changes in equity
52 weeks ended 27 March
Share Capital (note 21) £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 31 March 2019 60.7 684.0 17.5 4.6 (4.7) 544.3 232.5 1,538.9 (31.2) 1,507.7
Loss for the year – – – – – – (327.2) (327.2) 2.6 (324.6)
Other comprehensive income/(loss) for the year – – (23.4) – – 91.3 (53.6) 14.3 – 14.3
Total comprehensive (loss)/income for the year – – (23.4) – – 91.3 (380.8) (312.9) 2.6 (310.3)
Shares issued 0.3 4.6 – – – – – 4.9 – 4.9
Derivative hedging instrument movements transferred to balance sheet (net of tax) – – (22.4) – – – – (22.4) – (22.4)
Dividends paid/other – – – – – – 0.7 0.7 (4.5) (3.8)
Movement in EBT and treasury shares – – – – (5.5) – (4.2) (9.7) – (9.7)
Share-based payments – – – – – – 10.3 10.3 – 10.3
Balance at 28 March 2020 61.0 688.6 (28.3) 4.6 (10.2) 635.6 (141.5) 1,209.8 (33.1) 1,176.7
Balance at 29 March 2020 61.0 688.6 (28.3) 4.6 (10.2) 635.6 (141.5) 1,209.8 (33.1) 1,176.7
Profit for the year – – – – – – 78.4 78.4 12.7 91.1
Other comprehensive income/(loss) for the year – – 12.8 – – (110.9) (33.8) (131.9) – (131.9)
Total comprehensive (loss)/income for the year – – 12.8 – – (110.9) 44.6 (53.5) 12.7 (40.8)
Shares issued 0.1 1.0 – – – – – 1.1 – 1.1
Derivative hedging instrument movements transferred to balance sheet (net of tax) – – 15.2 – – – – 15.2 – 15.2
Reserves reclassification – – (3.1) – – – 3.1 – – –
Dividends paid/other – – – – – – (1.6) (1.6) (3.5) (5.1)
Movement in EBT and treasury shares – – – – 1.2 – (6.1) (4.9) – (4.9)
Share-based payments – – – – – – 11.9 11.9 – 11.9
Balance at 27 March 2021 61.1 689.6 (3.4) 4.6 (9.0) 524.7 (89.6) 1,178.0 (23.9) 1,154.1
The accompanying notes form an integral part of this consolidated statement of
changes in equity.
Consolidated cash flow statement
52 weeks ended 27 March
Note 2021 £m 2020 (restated) £m
Cash generated by operations 22 1,358.7 1,085.9
Tax paid (4.5) (2.9)
Interest paid (149.8) (125.9)
Net cash from operating activities 22 1,204.4 957.1
Investing activities
Interest received 2.0 2.7
Proceeds from disposal of property, plant and equipment 119.0 30.5
Purchases of property, plant and equipment (385.5) (321.8)
Purchases of software (4.1) (9.2)
Disposal of businesses - 16.2
Acquisition of businesses (1.4) (21.8)
Net cash used in investing activities (270.0) (303.4)
Financing activities
Shares purchased by Employee Benefit Trust (4.7) (9.8)
Shares issued 0.5 4.5
Proceeds from CCFF 298.2 –
Drawdowns from bank facilities 117.7 123.4
Repayment of bank facilities (89.6)
Repayment of loan notes (8.7) –
Repayments of lease liabilities (669.2) (596.5)
Fees for finance facilities (2.1) (2.1)
Net cash flow used in financing activities (357.9) (480.5)
Net increase in cash and cash equivalents before foreign exchange movements 576.5 173.2
Cash and cash equivalents at beginning of year 886.5 711.2
Foreign exchange movements (19.6) 2.1
Cash and cash equivalents at end of year 1,443.4 886.5
Prior year has been restated and increased by £99.6m at 28 March 2020. An
£82.4m overdraft had been set off against the cash balance In the prior
period. Ring fenced cash has been restated and increased by £17.2m as cash
balances relating to companies under the control of First Transit had not been
recognised in prior periods.
Cash and cash equivalents are included within current assets on the
consolidated balance sheet. Cash and cash equivalents includes ring-fenced
cash of £662.9m at 27 March 2021 (28 March 2020: £632.2m). The most
significant ring-fenced cash balance are held by the Group’s First Rail
subsidiaries. All cash in franchised Rail subsidiaries is considered
ring-fenced under the terms pf the Emergency Measures Agreement. Non Rail
ring-fenced cash includes two elements: (1) loss escrow funds maintained by
various third-party administrators, the purpose of which is to provide a
source of funds for use by the administrators for payment of the
self-insurance liability for losses and loss adjustment expenses in accordance
with agreements between the administrators and the Business, and (2) balances
within First Transit subsidiaries where those subsidiaries act as a
disbursement agent on the behalf of their customers and the cash is only
allowed to be used to settle customer liabilities.
Reconciliation to cash flow statement £m £m
Cash and cash equivalents – Continuing operations 1,438.9 920.0
Cash and cash equivalents – Discontinued operations 58.3 48.9
Cash and cash equivalents – Total operations 1,497.2 968.9
Bank overdraft (53.8) (82.4)
Balances per consolidated cash flow statement 1,443.4 886.5
Note to the consolidated cash flow statement –
reconciliation of net cash flow to movement in net debt
2021 £m 2020 (restated) £m
Net increase in cash and cash equivalents in year 576.5 172.7
Increase in debt and IAS17 finance leases (292.5) (75.3)
Adjusted cash flow 284.0 97.4
Payment of lease liabilities 644.1 549.2
Inception of new leases (210.2) (1,828.3)
Fees capitalised against bank facilities and bond issues 2.1 0.7
Foreign exchange movements 78.5 (24.1)
Other non-cash movements (163.5) (2.5)
Movement in net debt in year 635.1 (1,207.6)
Adjustment for transition to IFRS 16 - (1,168.2)
Net debt at beginning of year (3,260.9) (885.1)
Net debt at end of year (2,625.8) (3,260.9)
Prior year has been restated and increased by £99.6m at 28 March 2020. An
£82.4m overdraft had been set off against the cash balance In the prior
period. Ring fenced cash has been restated and increased by £17.2m as cash
balances relating to companies under the control of First Transit had not been
recognised in prior periods.
Adjusted cash flow is stated prior to cash flows in relation to debt and IAS17
finance leases.
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 52 weeks ended 27 March 2021 or 28 March 2020, but
is derived from those accounts. Statutory Accounts for 2020 have been
delivered to the Registrar of Companies and those for 2021 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 July 2021. Copies of the Statutory Accounts for the
52 weeks ended 27 March 2021 will be available to all shareholders in July and
will also be available thereafter at the Registered Office of the Company at
395 King Street, Aberdeen, AB24 5RP.
Basis of accounting
The financial statements have been prepared in accordance with IFRSs in
conformity with the requirements of the Companies Act 2006 (IFRS) and the
applicable legal requirements of the Companies Act 2006. In addition to
complying with international accounting standards in conformity with
requirements of the Companies Act 2006, the consolidated financial statements
also comply with international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union.
On 31 December 2020 EU-adopted IFRS was brought into UK law and became
UK-adopted international accounting standards, with future changes to IFRS
being subject to endorsement by the UK Endorsement Board. The consolidated
financial statements will transition to UK adopted international accounting
standards for financial periods beginning 1 April 2021.
The financial statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments, and on a going
concern basis.
As set out on pages 26 to 27, the Group has undertaken detailed reviews of the
potential impact of coronavirus using financial outlook modelling. Based on
their review of the financial forecasts and having regard to the risks and
uncertainties to which the Group is the Directors believe that the Company and
the Group have adequate resources to continue in operational existence for the
twelve-month period from the date on which the financial statements were
approved. Accordingly, the financial statements have been prepared on a going
concern basis.
The financial statements for the 52 weeks ended 27 March 2021 include the
results and financial position of the First Rail business for the year ended
31 March 2021 and the results and financial position of all the other
businesses for the 52 weeks ended 27 March 2021. The financial statements for
the 52 weeks ended 28 March 2020 include the results and financial position of
the First Rail businesses for the year ended 31 March 2020 and the results and
financial position of all the other businesses for the 52 weeks ended 28 March
2020.
The prior year cash and cash equivalents balance has been restated. The total
impact is an increase of £99.6m at 28 March 2020 which comprises two
restatements. The first for an £82.4m overdraft which in prior year was
incorrectly offset against cash balances when the group had no ability for net
physical settlement. This has been grossed up and the impact is to increase
cash balances by £82.4m with a corresponding increase in borrowings of the
same amount. At 31 March 2019, the impact of the correction is to increase
borrowings by £81.9m and increase cash and cash equivalents by the same
amount. The second restatement is in relation to certain entities, in First
Transit, which the group controls that were incorrectly excluded from
consolidation in prior years. These have been consolidated in the current year
and the effect of this is an increase in cash balances of £17.2m and a
corresponding increase in payables of £17.2m. There is no material impact on
the consolidated income statement. The impact on the cash flow statement is an
increase in cash balance of £99.6m and increase on cash generated from
operations of £1.1m. As this may be considered a prior period error the Group
and Company should present a third balance sheet to capture the opening
position at 29 March 2020. However, having reviewed the guidance, management
has opted instead to present the impact of the restatement in this note only,
on the basis of materiality, as there is no impact on net assets.
Adoption of new and revised standards
The accounting policies adopted are consistent with those of the previous
financial year except for the changes arising from new standards and
amendments to existing standards which have been adopted in the current year.
Adoptions in the current year include amendments to IAS 1 ‘Presentation of
Financial Statements’, amendments to IFRS3 ‘Business Combinations’ and
Phase 2 of the ‘Interest Rate Benchmark Reform’.
There has been no material change as a result of applying these amendments and
no significant impact is expected from any the future standards and amendments
that are visible.
2 Revenue
2021 £m 2020 £m
Services rendered 1,368.6 4,268.4
First Rail franchise subsidy receipts 2,905.9 369.1
Other revenues 367.3 5.3
Revenue from continuing operations 4,641.8 4,642.8
Discontinued operations 2,203.2 3,111.8
Revenue 6,845.0 7,754.6
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. First
Student and First Transit are categorised as Discontinued at 27 March 2021.
The divisions are managed separately in line with the differing services that
they provide and the geographical markets which they operate in. The principal
activities of these divisions are described in the Strategic report.
The segment results for the 52 weeks to 27 March 2021 are as follows:
Continuing Operations Discontinued Operations
First Bus £m First Rail £m Greyhound £m Group Items (1) £m Continuing Operations £m First Student £m First Transit £m Group Items (1) £m Total £m
Passenger revenue 383.1 537.7 179.3 - 1,100.1 - - - 1,100.1
Contract revenue 46.5 - - - 46.5 1,191.8 867.1 - 2,105.4
Charter/private hire - - 1.3 - 1.3 18.1 0.6 - 20.0
Rail franchise subsidy receipts - 2,905.9 - - 2,905.9 - - - 2,905.9
Other 269.3 176.3 142.4 - 588.0 16.3 109.3 - 713.6
Revenue 698.9 3,619.9 323.0 – 4,641.8 1,226.2 977.0 - 6,845.0
EBITDA (2) 100.8 711.1 17.0 (29.1) 799.8 282.6 87.1 - 1,169.5
Depreciation (68.7) (607.9) (26.2) (2.8) (705.6) (223.6) (32.9) - (962.1)
Software amortisation (1.4) (1.4) (2.2) (0.6) (5.6) (3.2) (2.5) - (11.3)
Capital grant amortisation 5.9 6.3 1.1 - 13.3 - - - 13.3
Segment results 36.6 108.1 (10.3) (32.5) 101.9 55.8 51.7 - 209.4
Other intangible asset amortisation charges - - (1.1) - (1.1) (3.0) - - (4.1)
Other adjustments (note 4) (5.8) 95.7 53.0 (19.4) 123.5 9.3 (31.2) (21.1) 80.5
Operating profit/(loss) (3) 30.8 203.8 41.6 (51.9) 224.3 62.1 20.5 (21.1) 285.8
Investment income 2.0
Finance costs (172.0)
Profit before tax 115.8
Tax (24.7)
Profit after tax 91.1
1 Group items comprise central management and other items.
2 EBITDA is adjusted operating profit less capital grant amortisation plus
depreciation plus software amortisation.
3 Although the segment results are used by management to measure
performance, statutory operating profit by operating division is also
disclosed for completeness.
The segment results for 52 weeks ended 28 March 2020 are as follows:
Continuing Operations Discontinued Operations
First Bus £m First Rail £m Greyhound (1) £m Group Items (2) £m Continuing Operations £m First Student £m First Transit £m Group Items (2) £m Total £m
Passenger revenue 758.2 2,584.1 532.7 - 3,875.0 - - - 3,875.0
Contract revenue 63.5 17.8 - - 81.3 1,764.9 1,031.9 - 2,878.1
Charter/private hire - - 3.5 - 3.5 159.4 5.0 - 167.9
Rail franchise subsidy receipts - 369.1 - - 369.1 - - - 369.1
Other 14.2 232.7 67.0 - 313.9 16.1 134.5 - 464.5
Revenue 835.9 3,203.7 603.2 - 4,642.8 1,940.4 1,171.4 - 7,754.6
EBITDA (3) 113.2 538.6 35.3 (28.7) 658.4 387.6 62.9 - 1,108.9
Depreciation (69.2) (518.2) (39.7) (4.3) (631.4) (225.8) (32.2) - (889.4)
Software amortisation (5) (0.9) (1.0) (8.1) (0.7) (10.7) (3.0) (2.4) - (16.1)
Capital grant amortisation 3.0 49.5 0.9 - 53.4 - - - 53.4
Segment results 46.1 68.9 (11.6) (33.7) 69.7 158.8 28.3 - 256.8
Other intangible asset amortisation charges - - (2.5) - (2.5) (2.4) - - (4.9)
Other adjustments (note 4) (13.7) (1.1) (239.3) (28.3) (282.4) (67.0) (50.2) (5.0) (404.6)
Operating profit/(loss) (4) 32.4 67.8 (253.4) (62.0) (215.2) 89.4 (21.9) (5.0) (152.7)
Investment income 2.7
Finance costs (149.6)
Loss before tax (299.6)
Tax (25.0)
Loss after tax (324.6)
1 Greyhound segment results contain £8.4m of property gains on the
disposal of properties.
2 Group Items comprise central management and other Items.
3 EBITDA is adjusted operating profit less capital grant amortisation plus
depreciation plus software amortisation.
4 Although the segment results are used by management to measure
performance, statutory operating (loss)/profit by operating division is also
disclosed for completeness.
5 Restated to charge £18.1m of software amortisation to divisional
results in arriving at adjusted operating profit. Software amortisation is no
longer treated as an adjusting item but as a cost in arriving at operating
profit, as this treatment is considered more appropriate
4 Reconciliation to non-GAAP measures and performance
In measuring the Group and divisional 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, material property gains or losses, aged legal and
self-insurance claims, significant adverse development factors on insurance
provisions, significant movements on discount rates used to discount the
insurance reserve onerous contract provisions, impairment charges and pension
settlement gains or losses including GMP equalisation. 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
provides a better understanding of the key performance indicators of the
business.
Reconciliation of operating profit/(loss) to adjusted operating profit 52 weeks ending 27 March 2021 £m 52 weeks ending 28 March 2020 £m
Operating profit/(loss) on a continuing basis 224.3 (215.2)
Adjustments for:
Greyhound impairment charges - 186.9
Strategy costs 15.2 47.7
Rail termination sums net of impairment reversal (95.7) –
Impairment of land and buildings 16.6 –
Other intangible asset amortisation charges 1.1 2.5
Ineffectiveness on derivatives 0.3 –
Gain on disposal of properties (71.1) (1.3)
North America insurance provisions 11.2 43.7
Fuel over hedge – 4.3
Increase in SWR performance bond – 1.1
Total operating profit adjustments on a continuing basis (122.4) 284.9
Adjusted operating profit on a continuing basis (note 3) 101.9 69.7
Reconciliation of operating profit/(loss) to adjusted operating profit 52 weeks ending 27 March 2021 £m 52 weeks ending 28 March 2020 £m
Operating profit from discontinued operations 61.5 62.5
Adjustments for:
Strategy costs 21.9 10.5
Other intangible asset amortisation charges 3.0 2.4
Gain on disposal of properties - (8.0)
North America insurance provisions 21.0 97.6
Transit legal settlements - 4.9
Student losses on onerous contracts – 14.1
Fuel over hedge – 3.1
Total operating profit adjustments from discontinued operations 46.0 124.6
Adjusted operating profit from discontinued operations (note 3) 107.5 187.1
Reconciliation of profit/(loss) before tax to adjusted profit before tax and adjusted earnings 52 weeks ending 27 March 2021 £m 52 weeks ending 28 March 2020 £m
Profit/(loss) before tax 115.8 (299.6)
Operating profit adjustments – continuing operations (122.4) 284.9
Operating profit adjustments – discontinued operations 46.0 124.6
Operating profit adjustments – total operations (76.4) 409.5
Adjusted profit before tax including discontinued operations 39.4 109.9
Adjusted tax charge (see below) (4.2) (24.6)
Non-controlling interests (1) (6.1) (2.6)
Adjusted earnings including discontinued operations 29.1 82.7
1 Statutory non-controlling interests in both 2021 and 2020
principally reflect Avanti West Coast). Adjusted non-controlling interests of
£6.6m (2020: £nil) relate to termination sums and other adjustments at South
Western Rail.
4 Reconciliation to non-GAAP measures and performance (continued)
Reconciliation of tax charge to adjusted tax charge 52 weeks ending 27 March 2021 £m 52 weeks ending 28 March 2020 £m
Tax charge (note 6) 24.7 25.0
Tax effect of adjusting items (note 7) (30.6) 39.6
Write back of previously unrecognised deferred tax assets (note 7) 10.1 -
Write down of previously recognised deferred tax assets (note 7) - (40.0)
Adjusted tax charge including discontinued operations 4.2 24.6
The adjusting items are as follows:
Strategy costs
The total charge of £37.1m (2020: £58.2m) comprises of £15.1m (2020:
£47.4m) from continuing operations and £21.9m (2020: £10.5m) from
discontinued operations. The charge comprises £21.0m related to the sale of
First Student & First Transit, £7.0m for the proposed sale of Greyhound,
£6.9m of costs related to restructuring in Greyhound Canada, including the
cost of severance, legal costs, lease termination costs and other costs of
closure and £2.1m relates to other costs associated with the rationalisation
of the Group.
North American insurance provisions
FirstGroup North American insurance arrangements involve retaining the working
loss layers in a captive and insuring against the higher losses. Based on our
actuaries’ recommendation and a second additional, independent actuarial
review, last year we increased our reserve to $657m. During this financial
year we have continued to see a deteriorating claims environment with legal
judgements increasingly in favour of plaintiffs and punitive in certain
regions. In this hardening motor claims environment, we have seen further
significant new adverse settlements and developments on a number of aged
insurance claims, and as a result our actuaries have increased their
expectation of the reserve required on historical claims.
In addition, there has been a significant change in the market-based discount
rate used in the actuarial calculation from 0.8% to 1.65%, creating the
requirement to increase the provision.
In light of the continued change in claims environment we have increased the
provision to provide more protection for historical claims, and the resulting
self-insurance reserve level is above the midpoint of the actuarial range.
These changes in accounting estimates combined with the discount rate movement
has resulted in the Group recording an additional charge of $44.8m or £32.2m
(2020: $175.2m or £141.3m); of this charge, $15.6m or £11.2m relates to
Greyhound and $29.2m or £21.0m relates to discontinued operations.
The charge comprises $57.0m or £41.0m relating to losses from historical
claims (of this, $18.6m or £13.4m relates to Greyhound and $38.4m or £27.6m
relates to discontinued operations) and a credit of $12.2m or £8.8m relating
to the change in the discount rate (of this, $3.0m or £2.2m relates to
Greyhound and $9.2m or £6.6m relates to discontinued operations). It is
expected that the majority of these claims will be settled over the next five
years. Following these charges, the provision at 27 March 2021 stands at $659m
(2020: $657m) compared with the actuarial range of $554m to $723m (2020: $551m
to $683m). Of the total provision at 27 March 2021, $156m relates to
Greyhound and $503m relates to discontinued operations.
The charge to the adjusted operating profit for the current period reflects
this revised environment and the businesses continue to build the higher
insurance costs into their bidding processes and hurdle rates for investment.
The Group also actively evaluates alternatives to reduce insurance risk and
ongoing expense, and continues to make improvements to claims management
processes. It has been agreed that the self-insurance provisions for First
Student and First Transit will transfer under the sale of those business and
part of the proceeds from the sale will be used to de-risk the residual self
insurance provisions of Greyhound.
Rail Termination Sums net of impairment reversal
The Group has agreed franchise termination sums with the DfT in respect of all
our obligations under the ERMAs. The agreed amounts are SWR £33.2m
(FirstGroup 70% share – the 100% consolidation amount is £47.4m), Nil for
TPE (net of other favourable settlements) and Nil for Avanti. These are
included in Adjusting Items, together with the agreed settlement and other
adjustments under the Net Asset clauses of the ERMA and the release of the
impairment provisions relating to SWR and TPE as at 31 March 2020.
SWR £m TPE £m Total £m
Termination sums payable (100% included – FG share £33.2m) (47.4) - (47.4)
Adjustments relating to the Net Asset clauses of the ERMA (31.1) 6.2 (24.9)
Release of provision for impairment at 31 March 2020 88.1 79.9 168.0
Adjusting items 9.6 86.1 95.7
Impairment of land and buildings
An impairment charge of £10.0m has been booked in respect of the Aberdeen
Headquarters and £6.6m for First Bus premises in Southampton.
Other intangible asset amortisation charges
The amortisation charge for the year was £4.1m (2020: £4.9m) with the
reduction due to a number of customer contract intangibles which have now been
fully amortised with the remainder mainly relating to brand amortisation in
Greyhound. This charge is made up of £1.1m from continuing operations and
£3.0m from discontinuing operations.
Ineffectiveness on derivatives
There was a charge of £0.3m relating to ineffectiveness on three fuel hedges
of £0.2m and an ineffective element on foreign exchange and currency
derivatives due to IFRS 13 credit value adjustments of £0.1m.
Gain on disposal of properties
Greyhound recognised a profit of £71.1m on sale of properties in the year
(2020: £1.3m). A Gain of £51.6m was recognised on the disposal of property
in Los Angeles, California. A Gain of £20.2m was recognised on the disposal
of property in Denver, Colorado, whilst a loss of £0.7m was recognised on
disposal of a number of other properties in Canada.
4 Reconciliation to non-GAAP measures and performance (continued)
Reconciliation of underlying (1) adjusted including discontinued operations (2) 52 weeks ending 27 March 2021 52 weeks ending 28 March 2020 (restated)
Reported £m Avanti franchise 12 months £m Avanti adjusted £m Reported £m Avanti franchise 3 months £m Avanti adjusted £m Effect of foreign exchange £m Adjusted constant currency £m %
change
Revenue 6,845.0 (897.6) 5,947.4 7,754.6 (331.2) 7,423.4 (89.5) 7,333.9 (18.9)%
Operating profit 209.4 (29.6) 179.8 256.8 (14.3) 242.5 (0.8) 241.7 (25.6)%
Reconciliation of constant currency including discontinued operations (3) 52 weeks ending 27 March 2021 £m 52 weeks ending 28 March 2020 (restated)
Reported £m Effect of foreign exchange £m Constant Currency £m % change
Revenue 6,845.0 7,754.6 (89.5) 7,665.1 (10.7)%
Adjusted operating profit 209.4 256.8 (0.8) 256.0 (18.2)%
Adjusted profit before tax 39.4 109.9 2.4 112.3 (64.9)%
Adjusted EPS 2.4p 6.8p 0.2p 7.0p (65.7)%
Net debt 2,625.8 3,260.9 (22.5) 3,238.4 18.9%
1 Growth excluding Avanti franchise (which became part of First Rail in
December 2019 in constant currency).
2 ‘Adjusted’ figures throughout this document are before
self-insurance reserve charges, strategy costs, impairments, other intangible
asset amortisation charges and any other charges which are included in note 4
to the financial statements.
3 Changes ‘in constant currency’ throughout this document are based on
retranslating 2020 foreign currency amounts at 2021 rates.
5 Investment income and finance costs
2021 £m 2020 £m
Investment income
Bank interest receivable (2.0) (2.7)
Finance costs
Bonds 55.8 56.5
Bank borrowings 15.7 18.5
CCFF funding 2.0 -
Supplier financing 3.0 1.2
Senior unsecured loan notes 9.1 9.2
Loan notes 0.1 1.2
Finance charges payable in respect of leases 73.1 42.6
Notional interest on long-term provisions 3.8 11.8
Notional interest on pensions 9.0 8.6
Notional interest – other 0.4 -
Total finance costs (including discontinued operations) 172.0 149.6
Finance costs before adjustments 172.0 149.6
Investment income (2.0) (2.7)
Net finance cost before adjustments 170.0 146.9
Investment income of £0.2m and finance costs of £21.2m relate to
discontinued operations (note 14).
6 Tax on profit/(loss) on ordinary activities
2021 £m 2020 £m
Current tax 17.2 (0.7)
Adjustments with respect to prior years 5.5 1.2
Total current tax charge (including discontinued operations) 22.7 0.5
Origination and reversal of temporary differences 27.0 (14.1)
Adjustment in respect of prior years (14.9) 1.4
Adjustments attributable to changes in tax rates and laws - (2.8)
Writing down of previously recognised deferred tax assets - 40.0
Write back of previously unrecognised deferred tax assets (10.1) -
Total deferred tax charge (note 19) 2.0 24.5
Total tax charge (including discontinued operations) 24.7 25.0
Tax charge/(credit) attributable to:
Profit from continuing operations 15.8 (3.6)
Profit from discontinued operations 8.9 28.6
7 Earnings per share (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders
of £78.4m (2020: loss £327.2m) by the weighted average number of ordinary
shares of 1,203.6m (2020: 1,210.9m). 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.
2021 Number m 2020 Number m
Weighted average number of shares used in basic calculation 1,203.6 1,210.9
Executive share options 27.9 14.8
Weighted average number of shares used in the diluted calculation 1,231.5 1,225.7
The adjusted EPS is intended to highlight the recurring operating results of
the Group before amortisation charges and certain other adjustments as set out
in note 4. A reconciliation is set out below:
2021 2020
£m EPS (pence) £m EPS (pence)
Basic profit/(loss)/EPS 78.4 6.5 (327.2) (27.0)
Amortisation charges (note 4) 4.1 0.3 4.9 0.4
Other adjustments (note 4) (80.5) (6.7) 404.6 33.4
NCI on SWR 6.6 0.6 - -
Tax effect of above adjustments 30.6 2.5 (39.6) (3.3)
Write down of previously unrecognised deferred tax assets (10.1) (0.8) - -
Write down of previously recognised deferred tax assets - - 40.0 3.3
Adjusted profit and EPS attributable to the ordinary equity holders of the company 29.1 2.4 82.7 6.8
Adjusted profit from discontinued operations 70.9 5.9 123.4 10.2
Adjusted (loss)/EPS from continuing operations (41.8) (3.5) (40.7) (3.4)
Diluted EPS 2021 pence 2020 pence
Diluted EPS 6.4 (27.0)
Adjusted diluted EPS 2.4 6.7
8 Goodwill
2021 £m 2020 £m
Cost
At 29 March/31 March 1,955.3 1,862.7
Additions - 1.7
Transfers to held for sale - discontinued operations (1,442.0) -
Foreign exchange movements (165.6) 90.9
At 27 March/28 March 347.7 1,955.3
Accumulated impairment losses
At 29 March/31 March 292.1 264.6
Foreign exchange movements (28.3) 27.5
At 27 March/28 March 263.8 292.1
Carrying amount
At 27 March/28 March (from continuing operations) 83.9 1,663.2
Goodwill acquired in a business combination is allocated, at acquisition, to
the CGUs that are expected to benefit from that business combination. The
carrying amount of goodwill has been allocated as follows:
Carrying amount 2021 £m 2020 £m
Held for sale - discontinued operations – First Student 1,162.1 1,269.4
Held for sale - discontinued operations – First Transit 279.9 309.8
1,442.0 1,579.2
First Bus 78.3 78.4
First Rail 5.6 5.6
83.9 84.0
1,525.9 1,663.2
9 Other intangible assets
Customer contracts £m Greyhound brand and trade name £m Software £m Total £m
Cost
At 31 March 2019 471.4 71.5 76.2 619.1
Acquisitions 11.1 – – 11.1
Additions – – 9.2 9.2
Transfers – – (0.2) (0.2)
Foreign exchange movements 19.3 2.7 2.7 24.7
At 28 March 2020 501.8 74.2 87.9 663.9
Acquisitions 0.9 – – 0.9
Additions – – 4.1 4.1
Transfers to held for sale – discontinued operations (460.6) – (21.2) (481.8)
Disposals – – (3.8) (3.8)
Foreign exchange movements (42.1) (5.8) (6.9) (54.8)
At 27 March 2021 – 68.4 60.1 128.5
Accumulated amortisation and impairment
At 31 March 2019 460.3 43.7 40.0 544.0
Charge for year 2.4 2.5 16.1 21.0
Transfers – – 0.9 0.9
Impairment (1) – 16.7 6.3 23.0
Foreign exchange movements 18.6 1.8 2.7 23.1
At 28 March 2020 481.3 64.7 66.0 612.0
Charge for year 2.9 1.2 11.0 15.1
Transfers to held for sale - discontinued operations (443.7) – (16.3) (460.0)
Disposals – – (3.3) (3.3)
Foreign exchange movements (40.5) (5.1) (5.9) (51.5)
At 27 March 2021 – 60.8 51.5 112.3
Carrying amount
At 27 March 2021 – 7.6 8.6 16.2
At 28 March 2020 20.5 9.5 21.9 51.9
1 The impairment charge of £nil (2020: £23.0m) relates to Greyhound.
10 Property, plant and equipment
Owned assets Land and buildings £m Passenger carrying vehicle fleet £m Other plant and equipment £m Total £m
Cost
At 31 March 2019 463.9 3,217.0 866.9 4,547.8
Acquisitions – 16.2 – 16.2
Additions in the year 10.1 294.0 149.1 453.2
Transfers to right of use assets (1) – (0.7) – (0.7)
Transfers from right of use assets/held for sale (2) 34.9 23.0 – 57.9
Disposals (15.6) (90.4) (161.4) (267.4)
Reclassified as assets held for sale (24.4) (122.9) 7.1 (140.2)
Foreign exchange movements 11.3 103.9 14.3 129.5
At 28 March 2020 480.2 3,440.1 876.0 4,796.3
At 29 March 2020 480.2 3,440.1 876.0 4,796.3
Acquisitions – 0.6 – 0.6
Additions in the year 4.9 197.4 135.5 337.8
Transfers to right of use assets (1) – (89.2) – (89.2)
Transfers from right of use assets (1) – 91.7 – 91.7
Disposals (37.0) (119.6) (93.0) (249.6)
Reclassified as assets held for sale (14.6) (110.4) – (125.0)
Transferred to held for sale - discontinued operations (134.2) (2,150.6) (251.5) (2,536.3)
Foreign exchange movements (23.9) (233.1) (32.4) (289.4)
At 27 March 2021 275.4 1,026.9 634.6 1,936.9
Accumulated depreciation and impairment
At 31 March 2019 101.0 1,686.8 668.5 2,456.3
Charge for year 15.0 234.7 143.3 393.0
Transfers to right of use assets (1) – (0.2) – (0.2)
Transfers from right of use assets/held for sale (2) 8.4 7.9 – 16.3
Disposals (4.9) (93.4) (160.5) (258.8)
Impairment (3) – 108.4 8.4 116.8
Reclassified as assets held for sale (2.8) (121.5) 6.4 (117.9)
Foreign exchange movements 3.2 55.9 12.3 71.4
At 28 March 2020 119.9 1,878.6 678.4 2,676.9
At 29 March 2020 119.9 1,878.6 678.4 2,676.9
Charge for year 13.5 226.6 51.7 291.8
Transfers to right of use assets (1) - (11.5) – (11.5)
Transfers from right of use assets (1) - 44.3 - 44.3
Disposals (8.9) (103.7) (86.9) (199.5)
Impairment (3) 16.6 - - 16.6
Reclassified as assets held for sale (2.7) (106.5) - (109.2)
Transferred to held for sale - discontinued operations (52.6) (1,076.6) (229.0) (1,358.2)
Foreign exchange movements (8.3) (131.0) (24.3) (163.6)
At 27 March 2021 77.5 720.2 389.9 1,187.6
Carrying amount
At 27 March 2021 197.9 306.7 244.7 749.3
At 28 March 2020 360.3 1,561.5 197.6 2,119.4
1. Transfers to right of use assets represents purchased property, plant and
equipment that was transitioned to lease shortly after purchase. Transfers
from right of use assets represents lease buyouts.
2. Transfers from right of use assets comprise £22.3m of cost and £7.9m
accumulated depreciation. Transfers from assets held for sale comprises
£34.9m of cost and £8.4m of accumulated depreciation.
3. The impairment charge of £16.6m in 2021 relates to assets associated with
Bus and Group. The impairment charge of £116.8m in 2020 relates to assets
associated with Greyhound.
10 Property, plant and equipment (continued)
Right of use assets
Rolling stock £m Land and buildings £m Passenger carrying vehicle fleet £m Other plant and equipment £m Total £m
Cost
At 30 March 2019 - - - - -
Adjustment on transition to IFRS 16 829.4 217.2 257.1 4.3 1,308.0
At 31 March 2019 829.4 217.2 257.1 4.3 1,308.0
Additions 1,712.0 36.8 85.6 2.3 1,836.7
Transfer from owned assets (1) - - 0.7 - 0.7
Transfer to owned assets (1) - - (23.0) - (23.0)
Foreign exchange movements - 7.3 12.4 0.2 19.9
At 28 March 2020 2,541.4 261.3 332.8 6.8 3,142.3
At 29 March 2020 2,541.4 261.3 332.8 6.8 3,142.3
Additions in the year 102.9 56.6 13.7 0.5 173.7
Transfer from owned assets (1) - - (91.7) - (91.7)
Transfers to owned assets (1) - - 89.2 - 89.2
Disposals (46.8) (4.3) - - (51.1)
Transferred to held for sale - discontinued operations - (177.0) (174.3) (0.4) (351.7)
Foreign exchange movements - (20.9) (24.6) - (45.5)
At 27 March 2021 2,597.5 115.7 145.1 6.9 2,865.1
Accumulated depreciation and impairment
At 30 March 2019 - - - - -
Adjustment on transition to IFRS 16 208.6 - 93.2 - 301.8
At 31 March 2019 208.6 - 93.2 - 301.8
Transfer from onerous contract provision 44.2 - - - 44.2
Transfer from owned assets (1) - - 0.2 - 0.2
Transfer to owned assets (1) - - (7.9) - (7.9)
Charge for period 399.5 59.4 35.0 2.5 496.4
Impairment (2) - 33.8 13.0 - 46.8
Foreign exchange movements - 0.8 4.9 - 5.7
At 28 March 2020 652.3 94.0 138.4 2.5 887.2
At 29 March 2020 652.3 94.0 138.4 2.5 887.2
Transfer to owned assets (1) - - (44.3) - (44.3)
Transfers from owned assets (1) - - 11.5 - 11.5
Charge for period 571.2 52.7 44.7 1.8 670.4
Impairment (2) (146.5) 3.5 - - (143.0)
Disposals (17.4) (1.5) - - (18.9)
Transferred to held for sale -discontinued operations - (79.0) (93.2) (0.4) (172.6)
Foreign exchange movements - (8.3) (11.2) - (19.5)
At 27 March 2021 1,059.6 61.4 45.9 3.9 1,170.8
Carrying amount
At 27 March 2021 1,537.9 54.3 99.2 3.0 1,694.3
At 28 March 2020 1,889.1 167.3 194.4 4.3 2,255.1
1 Transfers from owned assets represents purchased property, plant and
equipment that was transitioned to lease shortly after purchase. Transfers to
owned assets represents lease buyouts.
2 The impairment charge of £3.5m relates to First Student. The impairment
reversal of £146.5m relates to SWR and TPE (2020: £46.8m relates to
Greyhound).
The discounted lease liability relating to the right of use assets included
above are shown in note 15.
10 Property, plant and equipment (continued)
Owned assets and right of use assets
Rolling stock £m Land and buildings £m Passenger carrying vehicle fleet £m Other plant and equipment £m Total £m
Carrying amount
At 27 March 2021 1,537.9 252.2 405.9 247.7 2,443.7
At 28 March 2020 1,889.1 527.6 1,755.9 201.9 4,374.5
The maturity analysis of lease liabilities is presented in note 16.
Amounts recognised in income statement (including discontinued operations) 2021 £m 2020 £m
Depreciation expense on right of use assets 670.4 496.4
Interest expense on lease liabilities 73.1 42.6
Expense relating to short-term leases 4.7 31.7
Expense relating to leases of low value assets 3.4 3.4
751.6 574.1
11 Inventories
2021 £m 2020 £m
Spare parts and consumables from continuing operations 29.4 63.3
On 27 March 2021 inventories of £19.5m (2020: £nil) have been transferred to
held for sale - discontinued operations, see note 14.
In the opinion of the Directors there is no material difference between the
balance sheet value of inventories and their replacement cost. There was no
material write-down of inventories during the current or prior year.
12 Trade and other receivables
Amounts due within one year (from continuing operations) 2021 £m 2020 £m
Trade receivables 223.5 652.2
Loss allowance (7.3) (4.9)
Trade receivables net 216.2 647.3
Other receivables 162.4 90.2
Amounts recoverable on contracts 23.3 91.2
Prepayments 75.6 90.3
Accrued income 199.2 251.6
676.7 1,170.6
On 27 March 2021 trade and other receivables of £548.4m (2020: £nil) have
been transferred to held for sale - discontinued operations, see note 14.
13 Trade and other payables
Amounts falling due within one year (from continuing operations) 2021 £m 2020 (restated) £m
Trade payables 182.3 336.9
Other payables 239.5 402.9
Accruals 1,047.0 838.5
Deferred income 112.8 152.3
Season ticket deferred income 6.0 86.3
1,587.6 1,816.9
Prior year has been restated and increased by £17.2m as liabilities relating
to companies under the control of First Transit had not been recognised in
prior periods.
On 27 March 2021 trade and other payables of £325.4m (2020: £nil) have been
transferred to held for sale - discontinued operations, see note 14.
14 Discontinued Operations
The sale of First Student and First Transit was approved by a Shareholder
majority on 27th May 2021. As such they are reported in the current period as
discontinued operations. Financial information relating to the discontinued
operation for the period to the date of disposal is set out below.
Financial performance and cash flow information
The financial performance and cash flow information presented are for the 52
weeks ended 27 March 2021 and 28 March 2020.
Discontinued Operations 2021 £m 2020 £m
Revenue 2,203.2 3,111.8
Operating costs (2,141.6) (3,049.3)
Operating profit 61.6 62.5
Investment income 0.2 0.1
Finance costs (21.2) (24.0)
Profit before tax 40.6 38.6
Tax (8.9) (28.6)
Profit for the year after tax 31.7 10.0
Attributable to:
Equity holders of the parent 30.9 10.0
Non-controlling interests 0.8 –
31.7 10.0
EPS 2021 pence 2020 Pence
Basic EPS 2.6 0.8
Diluted EPS 2.5 0.8
Net cash inflow from operating activities 331.4 280.0
Net cash outflow from investing activities (227.3) (163.3)
Net cash outflow from financing activities (111.9) (86.0)
Net (decrease)/increase in cash generated by the division (7.8) 30.7
Details of the Sale of the Divisions
The sale of First Student and First Transit was approved by a majority of
FirstGroup shareholders on 27 May 2021 and completed on 21 July 2021. The
headline enterprise value is $4.6bn (£3.3bn), which includes a First Transit
earnout of up to $240m (c.£175m). Initial net proceeds are c.£2,190m (after
deducting First Student and First Transit self-insurance liabilities valued at
c.£390m and c.£505m in debt and debt-like items, net working capital and
other adjustments).
14 Discontinued Operations (continued)
Assets and liabilities of disposal group classified as held for sale
The following assets and liabilities were reclassified as held for sale in
relation to the discontinued operation as at 27 March 2021:
2021 £m
Non-current assets
Goodwill 1,442.0
Other intangible assets 21.8
Property, plant and equipment 1,357.2
Derivative Financial Instruments 0.5
Investments 30.9
2,852.4
Current assets
Inventories 19.5
Trade and other receivables 548.4
Current tax assets 0.4
Derivative Financial Instruments 0.1
Assets held for sale 0.4
Cash and cash equivalents 58.3
627.1
Total assets of discontinued operations 3,479.5
Current liabilities
Trade and other payables 325.4
Tax liabilities – Current tax liabilities 3.5
Derivative Financial Instruments 0.9
Borrowings 68.4
Provisions 138.6
536.8
Net current assets 90.3
Non-current liabilities
Borrowings 279.3
Derivative Financial Instruments 0.2
Retirement benefit liabilities 24.7
Deferred tax liabilities 33.6
Provisions 262.0
599.8
Total liabilities of discontinued operations 1,136.6
Net assets of discontinued operations 2,342.9
15 Borrowings
2021 £m 2020 £m (restated)
On demand or within 1 year
Leases (note 16) (3) 581.4 642.2
Bank overdraft 53.8 82.4
Loan notes (note 17) - 8.7
CCFF 298.2 -
Bond 8.75% (repayable 2021) (1) 380.1 30.4
Bond 5.25% (repayable 2022) (2) 5.6 5.8
Bond 6.875% (repayable 2024) (2) 7.1 7.2
Total current liabilities from continuing operations 1,326.2 776.7
Amounts relating to held for sale - discontinued operations 68.4 -
Total current liabilities 1,394.6 776.7
Within 1-2 years
Leases (note 16) (3) 572.8 587.4
Syndicated loans 116.5 -
Loan notes (note 17) 0.7 0.7
Bond 8.75% (repayable 2021) - 355.1
Bond 5.25% (repayable 2022) 323.4 -
1,013.4 943.2
Within 2-5 years
Syndicated loan facilities 449.8 573.9
Leases (note 16) (3) 577.0 1,030.3
Bond 5.25% (repayable 2022) - 322.6
Bond 6.875% (repayable 2024) 199.8 199.8
Senior unsecured loan notes 72.5 80.3
1,299.1 2,206.9
Over 5 years
Leases (note 16) (3) 53.2 213.3
Senior unsecured loan notes 126.3 139.5
179.5 352.8
Total non-current liabilities at amortised cost from continuing operations 2,492.0 3,502.9
Amounts related to held for sale - discontinued operations 279.3 -
Total non-current liabilities 2,771.3 3,502.9
'Bank overdraft' has been restated and increased by £82.4m at 28 March 2020,
as an overdraft had been set off against the cash balance In the prior
periods.
1. Includes accrued interest.
2. Includes accrued interest only.
3 The right of use assets relating to lease liabilities are shown in note
10. The maturity analysis of lease liabilities is presented in note 16.
16 Lease liabilities
The Group had the following lease liabilities at the balance sheet dates
excluding liabilities relating to the discontinued operations:
Maturity analysis: 2021 £m 2020 £m
Due in less than one year 632.3 702.4
Due in more than one year but not more than two years 592.9 632.8
Due in more than two years but not more than five years 606.6 1,089.3
Due in more than five years 71.7 240.6
1,903.5 2,665.1
Less future financing charges (119.1) (191.9)
1,784.4 2,473.2
On 27 March 2021 Lease liabilities of £187.5m (2020: £nil) have been
transferred to held for sale - discontinued operations, see note 14.
The total cash outflow for lease principal recorded on the balance sheet
amounted to £669.2m (2020: £596.5m), this includes cash outflow relating to
discontinued operations amounting to £111.9m (2020: £86.0m).
The right of use assets related to the lease liabilities is presented in note
10.
17 Loan notes
The Group had the following loan notes issued as at the balance sheet dates
relating to continuing operations:
2021 £m 2020 £m
Due in less than one year – 8.7
Due in more than one year but not more than two years 0.7 0.7
0.7 9.4
18 Financial instruments
Derivative financial instruments
2021 £m 2020 £m
Total derivatives
Total non-current assets 1.2 15.8
Total current assets 14.9 4.8
Total assets from continuing operations 16.1 20.6
Amounts relating to held for sale - discontinued operations 0.6 –
Total Assets 16.7 20.6
Total current liabilities 11.8 44.2
Total non-current liabilities 1.2 19.2
Total liabilities from continuing operations 13.0 63.4
Amounts relating to held for sale - discontinued operations 1.1 -
Total liabilities 14.1 63.4
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Coupon swaps (fair value hedge) – 13.3
Fuel derivatives (cash flow hedge) 1.0 –
Cross currency swaps (net investment hedge) 0.3 –
Currency forwards (cash flow hedge) – 2.5
1.3 15.8
Current assets
Fuel derivatives (cash flow hedge) 1.9 –
Cross currency swaps (net investment hedge) 13.5 –
Currency forwards (cash flow hedge) – 4.8
15.4 4.8
Current liabilities
Fuel derivatives (cash flow hedge) 4.8 32.4
Currency forwards (cash flow hedge) 1.1 –
Currency forwards (net investment hedge) 6.4 4.4
12.3 36.8
Non-current liabilities
Currency forwards (cash flow hedge) 0.6 –
Fuel derivatives (cash flow hedge) 0.8 19.2
1.4 19.2
Derivatives designated classified as held for trading
Current liability
Fuel derivatives 0.4 7.4
0.4 7.4
19 Deferred tax
The major deferred tax liabilities/(assets) recognised by the Group and
movements thereon during the current and prior reporting periods are
as follows:
Accelerated tax depreciation £m Retirement benefit schemes £m Other temporary differences £m Tax losses £m Total £m
At 31 March 2019 188.9 (60.0) 98.0 (255.7) (28.8)
Charge to income statement 10.5 6.4 0.5 7.1 24.5
Charge/(credit) to other comprehensive income and equity – 24.6 (11.8) – 12.8
Foreign exchange and other movements 7.9 (1.6) 5.0 (14.6) (3.3)
At 29 March 2020 207.3 (30.6) 91.7 (263.2) 5.2
Charge to income statement 6.8 6.4 (26.8) 15.6 2.0
Charge/(credit) to other comprehensive income and equity – (15.5) 10.0 – (5.5)
Transferred to held for sale - discontinued operations (185.8) 6.3 (77.4) 223.3 (33.6)
Foreign exchange and other movements (17.6) 1.0 (10.8) 24.3 (3.1)
At 27 March 2021 10.7 (32.4) (13.3) – (35.0)
Certain deferred tax assets and liabilities have been offset. The following is
the analysis of the deferred tax balances for financial reporting purposes:
2021 2021 Discontinued 2021 £m 2020 £m
Continuing £m
£m
Deferred tax assets (35.0) – (35.0) (33.6)
Deferred tax liabilities – 33.6 33.6 38.8
(35.0) 33.6 (1.4) 5.2
The deferred tax asset relates to the UK and is recognised as the Group
forecasts sufficient taxable profits in future periods.
No deferred tax has been recognised on deductible temporary differences of
£232.2m (2020: £220.6m) and tax losses of £430.4m (2020: £478.7m) and US
tax credits of £9.7m have not been recognised. £42.7m of the losses are
subject to expiry with £28.4m expiring in 2024, £11.5m expiring in 2025 to
2028 and £2.8m expiring thereafter.
No deferred tax asset has been recognised in respect of £2.9m (2020: £2.9m)
of capital losses.
20 Provisions
2021 £m 2020 £m
Insurance claims 111.9 382.8
Legal and other 22.8 34.6
Pensions 0.8 1.6
Non-current liabilities from continuing operations 135.5 419.0
On 27 March 2021 Provisions of £400.6m (2020: £nil) have been transferred to
held for sale - discontinued operations, see note 14.
Insurance claims £m Legal and other £m Pensions £m Total £m
At 29 March 2020 588.9 60.6 1.6 651.1
Charged to the income statement 205.4 13.3 – 218.7
Utilised in the year (186.0) (19.3) – (205.3)
Transferred from accruals – (3.8) (0.4) (4.2)
Notional interest 3.8 – – 3.8
Transferred to held for sale - discontinued operations (389.4) (11.2) – (400.6)
Foreign exchange movements (50.5) (3.1) – (53.6)
At 27 March 2021 172.2 36.5 1.2 209.9
Current liabilities 60.3 13.7 0.4 74.4
Non-current liabilities 111.9 22.8 0.8 135.5
At 27 March 2021 172.2 36.5 1.2 209.9
Current liabilities 206.1 26.0 – 232.1
Non-current liabilities 382.8 34.6 1.6 419.0
At 28 March 2020 588.9 60.6 1.6 651.1
20 Provisions (continued)
The insurance claims provision arises from estimated exposures for incidents
occurring prior to the balance sheet date. It is anticipated that the majority
of such claims will be settled within the next five years although certain
liabilities in respect of lifetime obligations of £10.3m (2020: £35.4m) can
extend for up to 30 years. The utilisation of £205.3m (2020: £219.4m)
represents payments made against the current liability of the preceding year
as well as the settlement of certain large aged claims.
The insurance claims provisions contains £24.7m (2020: £22.1m) which is
recoverable from insurance companies and is included within other receivables
in note 12.
Legal and other provisions relate to estimated exposures for cases filed or
thought highly likely to be filed for incidents that occurred prior to the
balance sheet date. It is anticipated that most of these items will be settled
within ten years. Also included are provisions in respect of costs anticipated
on the exit of surplus properties which are expected to be settled over the
remaining terms of the respective leases and dilapidation, other provisions in
respect of contractual obligations under rail franchises and restructuring
costs. The dilapidation provisions are expected to be settled at the end of
the respective franchise.
The pensions provision relates to unfunded obligations that arose on the
acquisition of certain First Bus companies. It is anticipated that this will
be utilised over approximately five years.
21 Called up share capital
2021 £m 2020 £m
Allotted, called up and fully paid
1,221.8m (2020: 1,219.5m) ordinary shares of 5p each 61.1 61.0
The Company has one class of ordinary shares which carries no right to fixed
income.
During the year 2.3m shares were issued to satisfy principally SAYE exercises.
22 Net cash from operating activities
2021 £m 2020 (restated) £m
Operating profit/(loss) from:
Continuing Operations 224.3 (215.2)
Discontinued Operations 61.5 62.5
Total Operations 285.8 (152.7)
Adjustments for:
Depreciation charges 962.3 889.4
Capital grant amortisation (13.3) (53.4)
Software amortisation charges 11.2 16.1
Other intangible asset amortisation charges 4.1 4.9
Impairment charges 16.6 189.0
Share-based payments 11.9 10.3
Profit on disposal of property, plant and equipment (73.0) (12.9)
Operating cash flows before working capital and pensions 1,205.6 890.7
Increase/(decrease) in inventories 12.0 (1.7)
Increase in receivables (5.9) (9.0)
Increase in payables due within one year 197.0 167.9
(Decrease)/increase in provisions due within one year (1.7) 9.7
Increase in provisions due over one year 10.9 67.1
Defined benefit pension payments in excess of income statement charge (59.2) (38.8)
Cash generated by operations 1,358.7 1,085.9
Tax paid (4.5) (2.9)
Interest paid (1) (149.8) (125.9)
Net cash from operating activities (2) 1,204.4 957.1
1 Interest paid includes £73.1m relating to lease liabilities (2020:
£42.6m)
2 Net cash from operating activities is stated after an outflow of £17.3m
(2020: inflow of £13.2m) in relation to financial derivative settlements.
Ring-fenced cash has been restated and increased by £17.2m at 29 March 2020
and £18.3m as at 31 March 2019, as cash balances relating to companies under
the control of First Transit had not been recognised in prior periods. The
cashflow impact of these changes has been reflected in payables since the
liabilities relating to companies under the control of First Transit had not
been recognised in prior periods.
Responsibility Statement of the Directors on the Annual Report
The responsibility statement below has been prepared in connection with the
Group’s full annual report for the 52 weeks ended 28 March 2021. Certain
parts thereof are not included within the announcement.
We confirm to the best of our knowledge:
* the financial statements, prepared in accordance with the relevant financial
reporting framework, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole
* the Management Report, which is incorporated into the Directors’ Report,
includes a fair review of the development and performance of the business and
the position of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
* The Directors consider that the annual report and financial statements,
taken as a whole, are fair, balanced and understandable and provide
information necessary for the shareholders to assess the Company’s and the
Group’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Ryan Mangold
Chief Financial Officer
27 July 2021
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