REG-FirstGroup PLC: Half-year Report <Origin Href="QuoteRef">FGP.L</Origin> - Part 3
14/11/2017 07:05
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– 5 years
Finance leases (note 15) 39.2 91.5 64.8
Syndicated bank loans - 52.5 -
Bond 6.125% (repayable 2019) - 276.7 -
Bond 8.75% (repayable 2021) 364.3 377.8 369.0
403.5 798.5 433.8
More than 5 years
Finance leases (note 15) 0.1 - 0.1
Bond 5.25% (repayable 2022) 321.1 320.5 321.1
Bond 6.875% (repayable 2024) 199.6 199.6 199.6
520.8 520.1 520.8
Total non-current liabilities at amortised cost 1,246.3 1,725.4 1,586.4
15 Hire Purchase (HP) contracts and finance leases
The Group had the following obligations under HP contracts and finance leases
as at the balance sheet dates:
30 September 2017 30 September 2016 31 March 2017
Minimum payments Present value Minimum payments £m Present value of payments £m Minimum payments £m Present value of payments £m
£m of payments
£m
Due within 1 year 58.2 56.7 57.4 55.9 66.9 65.3
Due within 1 – 2 years 50.8 48.2 63.1 60.0 56.4 53.5
Due within 2 – 5 years 42.6 39.2 100.1 91.5 70.2 64.8
Due in more than 5 years 0.1 0.1 - - 0.1 0.1
151.7 144.2 220.6 207.4 193.6 183.7
Less future financing charges (7.5) - (13.2) - (9.9) -
144.2 144.2 207.4 207.4 183.7 183.7
16 Loan notes
The Group had the following loan notes issued as at the balance sheet dates:
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Due within 2 – 5 years 9.5 9.6 9.5
17 Derivative financial instruments
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Total derivatives
Total non-current assets 45.5 70.3 48.6
Total current assets 4.2 1.1 1.7
Total assets 49.7 71.4 50.3
Total current liabilities 13.7 36.3 29.5
Total non-current liabilities 4.7 18.1 8.6
Total liabilities 18.4 54.4 38.1
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Coupon swaps (fair value hedge) 42.2 67.2 48.6
Fuel derivatives (cash flow hedge) 3.3 3.1 -
45.5 70.3 48.6
Current assets
Fuel derivatives (cash flow hedge) 4.2 0.9 0.6
Currency forwards (cash flow hedge) - 0.2 0.7
4.2 1.1 1.3
Current liabilities
Fuel derivatives (cash flow hedge) 9.0 36.3 29.4
Currency forwards (cash flow hedge) 4.5 - 0.1
13.5 36.3 29.5
Non-current liabilities
Fuel derivatives (cash flow hedge) 3.5 18.1 8.6
Currency forwards (cash flow hedge) 1.2 - -
4.7 18.1 8.6
Derivatives classified as held for trading
Current assets
Currency forwards - - 0.4
Current liabilities
Currency forwards 0.2 - -
The fair value measurements of the financial derivatives held by the Group
have been derived based on observable market inputs (as categorised within
Level 2 of the fair value hierarchy under IFRS 7 (2009)).
17 Derivative financial instruments (continued)
Fair value of the Group’s financial assets and financial liabilities that
are measured at fair value on a recurring basis:
30 September 2017
Fair value Carrying value
Total
£m
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Cash and cash equivalents 428.8 - - 428.8 428.8
Trade and other receivables - 483.8 - 483.8 483.8
Derivative financial instruments - 49.7 - 49.7 49.7
Financial liabilities and derivatives
Financial liabilities - 1,892.0 - 1,892.0 1,678.9
Trade and other payables - 1,283.8 - 1,283.8 1,283.8
Derivative financial instruments - 18.4 - 18.4 18.4
30 September 2016
Fair value Carrying value Total £m
Level 1 £m Level 2 £m Level 3 £m Total £m
Financial assets
Cash and cash equivalents 310.5 - - 310.5 310.5
Trade and other receivables - 407.7 - 407.7 407.7
Derivative financial instruments - 71.4 - 71.4 71.4
Financial liabilities and derivatives
Financial liabilities 52.5 2,104.3 - 2,156.8 1,899.3
Trade and other payables - 1,034.1 - 1,034.1 1,034.1
Derivative financial instruments - 54.4 - 54.4 54.4
31 March 2017
Fair value Carrying value Total £m
Level 1 £m Level 2 £m Level 3 £m Total £m
Financial assets
Cash and cash equivalents 400.9 - - 400.9 400.9
Trade and other receivables - 527.7 - 527.7 527.7
Derivative financial instruments - 50.3 - 50.3 50.3
Financial liabilities and derivatives
Financial liabilities - 1,958.7 - 1,958.7 1,790.8
Trade and other payables - 1,155.3 - 1,155.3 1,155.3
Derivative financial instruments - 38.1 - 38.1 38.1
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly or indirectly.
Level 3: Inputs for the asset or liability that are not based on observable
market data.
There were no transfers between level 1 and level 2 during the current or
prior periods.
Financial assets/(liabilities) Fair values (£m) at Fair value hierarchy Valuation technique(s) and key inputs
30 September 2017 30 September 2016 31 March 2017
Derivative contracts
1. Interest rate swaps 42.2 67.2 48.6 Level 2 Discounted cash flow; future cash flows are estimated based on forward interest rates and contract interest rates then discounted at a rate that reflects the credit risk of the various counterparties.
2. Fuel derivatives (5.0) (50.4) (37.4) Level 2 Discounted cash flow; future cash flows are estimated based on forward fuel priced and contract rates and then discounted at a rate that reflects the credit risk of the various counterparties.
3. Currency forwards (5.9) 0.2 1.0 Level 2 Discounted cash flow; future cash flows are estimated based on forward exchange rates and contract rates and then discounted at a rate that reflects the credit risk of the various counterparties.
4. Trade and other receivables 483.8 407.7 527.7 Level 2 Carried at amortised cost using the effective interest rate method.
5. Trade and other payables 1,283.8 1,034.1 1,155.3 Level 2 Initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method.
6. Borrowings 1,892.0 2,156.8 1,958.7 Level 2 Measured either on an amortised cost basis or at fair value. The fair values are calculated by discounting the future cash flows that will arise under the contracts.
18 Provisions
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Insurance claims 215.1 228.9 236.1
Legal and other 35.7 49.1 45.7
Pensions 2.3 2.6 2.4
Non-current liabilities 253.1 280.6 284.2
Insurance claims £m Legal and other £m Pensions £m Total £m
At 1 April 2017 391.0 60.4 2.4 453.8
Charged to the income statement 78.2 2.3 - 80.5
Utilised in the period (93.5) (11.6) (0.1) (105.2)
Notional interest 5.6 - - 5.6
Foreign exchange movements (24.7) (1.9) - (26.6)
At 30 September 2017 356.6 49.2 2.3 408.1
Current liabilities 141.5 13.5 - 155.0
Non-current liabilities 215.1 35.7 2.3 253.1
At 30 September 2017 356.6 49.2 2.3 408.1
Current liabilities 154.9 14.7 - 169.6
Non-current liabilities 236.1 45.7 2.4 284.2
At 31 March 2017 391.0 60.4 2.4 453.8
Current liabilities 149.1 10.9 - 160.0
Non-current liabilities 228.9 49.1 2.6 280.6
At 30 September 2016 378.0 60.0 2.6 440.6
The current liabilities above are included within accruals in note 13.
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 six years although certain
liabilities in respect of lifetime obligations of £21.4m (H1 2016: £22.7m)
can extend for up to 30 years. The utilisation of £93.5m (H1 2016: £95.0m)
represents payments made largely against the current liability of the
preceding year.
The total insurance provision of £356.6m includes £25.6m 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 10 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 and other provisions
in respect of contractual obligations under rail franchises. The dilapidation
provisions are expected to be settled at the end of the respective franchise.
The pension’s provision relates to unfunded obligations that arose on the
acquisition of certain First Bus companies. It is anticipated that this will
be utilised over five to 10 years.
19 Acquisition of businesses and subsidiary undertakings
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Provisional fair value of net assets acquired:
Property, plant and equipment 1.6 - -
Other intangible assets 0.7 - -
Other liabilities (0.3) - -
2.0 - -
Goodwill 1.2 - -
Satisfied by cash paid and payable 3.2 - -
On 11 August 2017, the Group completed the acquisition of Falcon
Transportation, a Chicago-based provider of school and charter transportation
services. The £3.2m consideration represent £2.9m cash paid in the period
and £0.3m of deferred consideration.
20 Called up share capital
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Allotted, called up and fully paid
1,209.2m ordinary shares of 5p each 60.5 60.2 60.4
The Company has one class of ordinary shares which carries no right to fixed
income. The number of ordinary shares of 5p each in issue, excluding treasury
shares and shares held in trust for employees, at the end of the period was
1,206.4m (H1 2016: 1,204.3m). At the end of the period 2.8m shares (H1 2016:
0.9m shares) were being held as treasury shares and own shares held in trust
for employees.
21 Net cash for operating activities
30 September 2017 30 September 2016 £m 31 March 2017 £m
£m
Operating profit 57.4 77.9 283.6
Adjustments for:
Depreciation charges 192.5 165.7 352.9
Capital grant amortisation (3.7) (3.0) (5.3)
Amortisation charges 32.0 28.5 60.2
Impairment charges - - 4.5
Share-based payments 4.4 3.6 8.2
Loss/(profit) on disposal of property, plant and equipment 3.3 (17.2) (18.9)
Operating cash flows before working capital and pensions 285.9 255.5 685.2
(Increase)/decrease in inventories (0.1) 2.5 1.3
(Increase)/decrease in receivables (24.8) 39.7 (36.7)
Increase/(decrease) in payables 157.7 (44.0) 56.3
Decrease in provisions (19.3) (19.8) (30.6)
Defined benefit pension payments in excess of income statement charge (31.0) (26.1) (37.6)
Cash generated by operations 368.4 207.8 637.9
Tax paid (7.1) (5.1) (10.2)
Interest paid (70.9) (73.5) (100.9)
Interest element of HP contracts and finance leases (2.4) (3.4) (6.4)
Net cash from operating activities 288.0 125.8 520.4
22 Retirement benefit schemes
The Group operates or participates in a number of defined benefit pension
schemes which cover the majority of UK employees and certain North American
employees. The scheme details are described on pages 125 to 126 of the Annual
Report and Accounts for the year ended 31 March 2017.
The Group currently sponsors six sections of the RPS, relating to its
franchising obligations for its TOCs, and for Hull Trains, its Open
Access operator. The RPS is governed by the Railways Pension Trustee Company
Limited, and is subject to regulation from the Pensions Regulator and relevant
UK legislation. The RPS is a shared cost arrangement. All costs, and any
deficit or surplus, are shared 60% by the employer and 40% by the members. For
the TOC sections, under the franchising obligations, the employer’s
responsibility is to pay the contributions requested by the Trustee, whilst
it operates the franchise. There is no residual liability or asset for any
deficit, or surplus, which remains at the end of the franchise period.
Since the contributions being paid to each TOC section are lower than the
share of the service cost that would normally be calculated under IAS19, the
Group does not make any contribution towards the sections’ deficits.
Therefore, the Group does not need to reflect any deficit on its balance
sheet. A franchise adjustment (asset) exists that exactly offsets any section
deficit that would otherwise remain after reflecting the cost sharing with the
members.
The market value of the assets at 30 September 2017 for all defined benefit
schemes totalled £4,994m (H1 2016: £4,154m; full year 2017: £4,141m).
Contributions are paid to all defined benefit pension schemes in accordance
with rates recommended by the schemes’ actuaries. The valuations are made
using the Projected Unit Credit Method.
The key assumptions were as follows:
30 September 2017 30 September 2016 31 March 2017
First Bus First Rail North America First Bus % First Rail % North America % First Bus % First Rail % North America %
% % %
Key assumptions used:
Discount rate 2.85 2.85 3.45 2.40 2.40 3.10 2.80 2.80 3.65
Expected rate of salary increases 3.55 3.55 2.50 3.45 3.20 2.50 2.00 3.35 2.50
Inflation – CPI 1.95 1.95 2.00 1.85 1.85 2.00 2.00 2.00 2.00
Future pension increases 1.95 1.95 - 1.85 1.85 - 2.00 2.00 -
Amounts (charged)/credited to the condensed consolidated income statement in
respect of these defined benefit schemes are as follows:
6 months to 30 September 2017 First North America Total First Total
Bus £m non-rail Rail £m
£m £m £m
Current service cost (10.2) (5.3) (15.5) (29.1) (44.6)
Impact of franchise adjustment on operating cost - - - 17.9 17.9
Net interest cost (1.6) (3.6) (5.2) (4.7) (9.9)
Impact of franchise adjustment on net interest cost - - - 4.7 4.7
(11.8) (8.9) (20.7) (11.2) (31.9)
6 months to 30 September 2016 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Current service cost (8.2) (4.6) (12.8) (15.3) (28.1)
Impact of franchise adjustment on operating cost - - - 4.9 4.9
Net interest cost (0.4) (3.7) (4.1) (2.6) (6.7)
Impact of franchise adjustment on net interest cost - - - 2.6 2.6
(8.6) (8.3) (16.9) (10.4) (27.3)
Year to 31 March 2017 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Current service cost (16.7) (9.9) (26.6) (37.1) (63.7)
Impact of franchise adjustment on operating cost - - - 11.3 11.3
Past service gain on TOC schemes - - - 4.1 4.1
Net interest cost (1.1) (7.7) (8.8) (5.8) (14.6)
Impact of franchise adjustment on net interest cost - - - 5.8 5.8
(17.8) (17.6) (35.4) (21.7) (57.1)
Actuarial gains and losses have been reported in the condensed consolidated
statement of comprehensive income.
22 Retirement benefit schemes (continued)
The amounts included in the condensed consolidated balance sheet arising from
the Group’s obligations in respect of its defined benefit pension schemes
are as follows:
As at 30 September 2017 First Bus North America Total non-rail First Rail Total
£m £m £m £m £m
Fair value of schemes' assets 2,595.4 489.8 3,085.2 1,909.2 4,994.4
Present value of defined benefit obligations (2,525.5) (675.4) (3,200.9) (2,721.8) (5,922.7)
Surplus/(deficit) before adjustments 69.9 (185.6) (115.7) (812.6) (928.3)
Adjustment for irrecoverable surplus (1) (178.5) - (178.5) - (178.5)
First Rail franchise adjustment (60%) - - - 485.6 485.6
Adjustment for employee share of RPS deficits (40%) - - - 325.0 325.0
Liability recognised in the condensed consolidated balance sheet (108.6) (185.6) (294.2) (2.0) (296.2)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 41.8 - 41.8 - 41.8
Non-current liabilities (150.4) (185.6) (336.0) (2.0) (338.0)
(108.6) (185.6) (294.2) (2.0) (296.2)
As at 30 September 2016 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Fair value of schemes' assets 2,603.6 513.9 3,117.5 1,036.6 4,154.1
Present value of defined benefit obligations (2,777.5) (748.2) (3,525.7) (1,594.6) (5,120.3)
Deficit before adjustments (173.9) (234.3) (408.2) (558.0) (966.2)
Adjustment for irrecoverable surplus (1) (89.5) - (89.5) - (89.5)
First Rail franchise adjustment (60%) - - - 332.2 332.2
Adjustment for employee share of RPS deficits (40%) - - - 223.2 223.2
Liability recognised in the condensed consolidated balance sheet (263.4) (234.3) (497.7) (2.6) (500.3)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 20.0 - 20.0 - 20.0
Non-current liabilities (283.4) (234.3) (517.7) (2.6) (520.3)
(263.4) (234.3) (497.7) (2.6) (500.3)
As at 31 March 2017 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Fair value of schemes' assets 2,614.5 508.7 3,123.2 1,018.0 4,141.2
Present value of defined benefit obligations (2,586.6) (725.4) (3,312.0) (1,519.9) (4,831.9)
Surplus/(deficit) before adjustments 27.9 (216.7) (188.8) (501.9) (690.7)
Adjustment for irrecoverable surplus (1) (167.7) - (167.7) - (167.7)
First Rail franchise adjustment (60%) - - - 299.1 299.1
Adjustment for employee share of RPS deficits (40%) - - - 200.8 200.8
Liability recognised in the condensed consolidated balance sheet (139.8) (216.7) (356.5) (2.0) (358.5)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 34.0 - 34.0 - 34.0
Non-current liabilities (173.8) (216.7) (390.5) (2.0) (392.5)
(139.8) (216.7) (356.5) (2.0) (358.5)
(1)The irrecoverable surplus represents the amount of the surplus that the
Group could not recover through reducing future company contributions to Local
LGPS.
Responsibility statement
Each of the Directors confirms that to the best of his/her knowledge:
*
The condensed set of financial statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the issuer, or the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R;
*
The interim management report includes a fair review of the information
required by DTR 4.2.7R; and
*
The interim management report includes a fair review of the information
required by DTR 4.2.8R.
The Directors of FirstGroup plc are listed on the Group's website at
www.firstgroupplc.com.
Tim
O’Toole
Matthew Gregory
Chief
Executive
Chief Financial Officer
14 November 2017
14 November 2017
Independent review report to FirstGroup plc
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2017 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidated cash flow statement and related notes 1 to
22. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim
Financial Information Performed by the Independent Auditor of the Entity”
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the company those matters we are required to state to it in
an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34 “Interim Financial Reporting” as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 “Review of Interim Financial Information
Performed by the Independent Auditor of the Entity” issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2017 is not prepared,
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules
of the United Kingdom’s Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
14 November 2017
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