REG-FirstGroup PLC: Half-year Report
09/12/2021 07:05
FIRSTGROUP PLC
HALF-YEARLY REPORT FOR THE 26 WEEKS TO 25 SEPTEMBER 2021
* A transformed business having exited North American operations, with further
value to be realised including from First Transit earnout and Greyhound
property disposals and other receipts, in addition to the £500m recently
returned to shareholders
* Resilient financial performance in period; no change to management's FY22
expectations, recognising there is uncertainty around the pace of recovery in
light of the evolving circumstances of the pandemic
* First Bus on track to deliver 10% margin in first full year after
pandemic-related restrictions end, with c.£20m in annualised cost
efficiencies delivered since 2019
* First Rail's four management fee-based operations are delivering performance
metrics in line with management expectations
* Passenger volume recovery ongoing, and renewed government commitment to
strengthening convenient, low-carbon public transport connections is becoming
a reality
* Cash generative businesses support intention to commence regular dividends
within next 12 months and strong balance sheet provides flexibility to capture
the opportunities ahead
H1 2022 (£m) H1 2021 (£m) Change (£m)
Cont. Disc. Total Cont. Disc. Total Cont. Disc. Total
Revenue 2,139.1 970.6 3,109.7 2,053.1 1,048.5 3,101.6 +86.0 (77.9) +8.1
Adjusted (1)operating profit 51.8 121.3 173.1 55.7 (45.3) 10.4 (3.9) +166.6 +162.7
Adjusted (1)operating profit margin 2.4% 12.5% 5.6% 2.7% (4.3)% 0.3% (30)bps +1,680bps +530bps
Adjusted (1)profit/(loss) before tax 103.7 (73.3) +177.0
Rail management fee-adjusted Attributable loss (4) (1.2) (10.4) +9.2
Adjusted (1)EPS 6.6p (5.3)p +11.9p
Adjusted cash flow (2) 1,704.7 197.9 +1,506.9
Adjusted Net (Cash)/Debt (3) (613.9) 1,532.1 +2,146.0
H1 2022 (£m) H1 2021 (£m)
Statutory Cont. Disc. Total Cont. Disc. Total
Revenue 2,139.1 970.6 3,109.7 2,053.1 1,048.5 3,101.6
Operating profit/(loss) 52.2 592.3 644.5 37.8 (54.2) (16.4)
Profit/(loss) before tax 516.5 (100.1)
EPS 42.4p (8.3)p
Net debt 234.2 2,946.1
- Bonds, bank and other debt net of (cash) (1,188.8) 681.1
- IFRS 16 lease liabilities 1,423.0 2,265.0
'Cont.' refers to the Continuing operations comprising First Bus, First Rail,
Group items and Greyhound retained assets and liabilities including Greyhound
Canada. 'Disc.' refers to discontinued operations, being First Student, First
Transit and Greyhound US. Statutory operating profit from discontinued
operations of £592.3m includes the gain on sale of First Student and First
Transit.
Corporate activity
* Three North American divisions sold for combined enterprise value of
c.$4.6bn, c.£2.2bn in debt and other liabilities repaid or de-risked and
£500m returned to shareholders
* Further value to be realised over time, including from First Transit earnout
(up to c.£180m, estimated fair value of £102m), Greyhound property portfolio
realisation (estimated £120m net realisable value from FY23 onwards),
potential UK pension escrow release of up to £117m
* Capital structure reorganisation completed; £676.4m of liquidity (new
£300m, multi-year sustainability-linked RCF and free cash) as at 6 December
2021, before pensions escrow and Greyhound liability de-risking payments
planned before financial year end
* New financial framework for investment, gearing and shareholder returns in
place; Rail management fee-adjusted EBITDA and Attributable Profit(4) measures
introduced to better reflect cash flow characteristics of rail contracts
Financial overview
* Resilient financial performance in light of travel restrictions and other
pandemic effects in the period – Total Group adjusted operating profit
(including discontinued operations) increased by £162.7m: * Continuing
operations in line with management expectations, with £51.8m adj. operating
profit reflecting UK governments' procurement of service capacity from First
Bus to enable socially distanced travel for most of H1 and new low-risk
management contracts in First Rail, partially offset by open access losses
* Discontinued operations adjusted operating profit of £121.3m reflects
increased volume of travel activity in North America, ongoing grant receipts
in Greyhound, as well as no depreciation being charged to profit under the
accounting rules once the divisions become classed as held for sale
* £52.2m statutory operating profit from continuing operations (H1 2021:
profit of £37.8m) includes £0.4m credit from net adjusting items (H1 2021:
£(17.9)m)
* £471.4m credit from net adjusting items in discontinued operations (H1
2021: £8.9m) principally reflect the portfolio rationalisation and uses of
the proceeds: * Gain on sale of First Student and First Transit, including
realisation of £450.6m in cumulative foreign currency gains since date of
original acquisition, partially offset by transaction and other costs
* Greyhound impairment reversal to reflect the sale value, partially offset by
transaction and closure costs
* At period end, Adjusted Net Debt/(Cash)(3) was £(613.9)m (H1 2021:
£1,532.1m) reflecting receipts from First Student and First Transit disposal
and the previously outlined uses of the proceeds including debt repayments and
cash contributions to the defined benefit pension schemes
* More recently, Adjusted Net Cash(3) was £137.3m as at 6 December 2021,
reflecting further actions undertaken since the period end, including: * the
£500m returned to shareholders via the recent tender offer
* Initial cash consideration of £100.9m received from Greyhound sale as well
as four subsequent Greyhound property sales for $6.8m in total; since closing
the transaction the Group has also begun receiving certain US federal funding
scheme payments ($1.5m to date) relating to losses during period of ownership
as well as rental income and the first tranches of deferred consideration
Current trading and outlook
* First Bus passenger volume recovery ongoing; 71% of equivalent 2019 levels
on average in recent weeks represents a slowdown in the rate of improvement,
with pandemic-related restrictions varying by UK region
* No change to management expectations for First Bus adjusted operating profit
for FY22, which reflects the current pandemic-related restrictions and
government funding schemes in place, some further passenger volume
improvement, and with our pricing strategy expected to broadly offset the
effects of industry-wide driver shortages
* First Bus remains on track to deliver 10% adjusted operating margin in the
first full year after pandemic-related restrictions end
* First Rail's four management fee-based operations are delivering performance
metrics in line with management expectations. Previously anticipated losses on
the open access operations reflect costs incurred on start-up of the new Lumo
service and at Hull Trains
* Both divisions continue to develop additional revenue opportunities, with
further progress on affiliate contracts at First Rail, and additional B2B
contracts in First Bus
* Expect to end the financial year with c.£10-20m in Adjusted Net Debt
(following £117m payment into pensions escrow and plans for c.£150m of
further de-risking of Greyhound liabilities)
* While some uncertainty remains around pace of recovery in light of the
evolving circumstances of the pandemic, there is no change to management's
expectations for FY22: expect to build operational momentum in current
financial year, providing a solid foundation for delivering financial
framework objectives – including commencing regular dividends within the
next twelve months
Commenting, Executive Chairman David Martin said:
"We have delivered on our commitment to unlock value. By divesting our North
American operations, we have strengthened our financial position, refocused on
our market-leading public transport operations in the UK, and returned £500m
in value to our shareholders.
"With a well-capitalised balance sheet and an operating model that supports
our intention to begin regular dividends to shareholders within the next 12
months, FirstGroup is now a more resilient and flexible business. I am
confident that we are well-placed to create long term, sustainable value from
the opportunities ahead, underpinned by the UK policy backdrop which places
public transport at the centre of the economic recovery, decarbonisation and
levelling up agendas."
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
corporate.comms@firstgroup.co.uk
+44 (0) 20 7725 3354
Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959
A webcast for investors and analysts will be held at 9:00am today –
attendance is by invitation. Please email corporate.comms@firstgroup.co.uk in
advance of the webcast to receive joining details. To access the presentation
to be discussed on the webcast, 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
the gain on sale of First Student and First Transit, partial reversal of
impairment charges on Greyhound and certain other items as set out in note 3
in the interim results section.
(2 ) ‘Adjusted cash flow’ is described in the table shown on
p.18.
(3) 'Adjusted Net Debt' excludes First Rail ring-fenced cash and IFRS
16 lease liabilities from net debt.
(4) For definitions of the Rail management fee-adjusted alternative
performance measures and other key terms, see the definitions section on p.21.
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR
6 Annex 1R: 1.2.
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 through four management
fee-based train operating companies (Avanti, GWR, SWR, TPE) and two open
access routes (Hull Trains and Lumo, our new East Coast service which launched
in October 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 to cease purchasing
further diesel buses after 2022; and First Rail will help support 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.
Results overview
FirstGroup is a transformed business. Through the sale of the three North
American divisions, we have simplified and refocused the Group on our leading
UK public transport businesses, substantially strengthened the balance sheet
and de-risked legacy liabilities, and set out our plans to emerge from the
pandemic as a more resilient and robust enterprise, well-equipped to capture
the many opportunities ahead.
In addition to these 'self-help' actions, the operating environment for public
transport companies in the UK has also substantially shifted. A new lower-risk
passenger rail operating model is emerging, which rewards operators that
demonstrate consistent delivery of quality services for passengers rather than
overly ambitious revenue growth forecasts as was the case in the past. As the
largest incumbent operator, we are well-placed to earn a consistent stream of
low-risk earnings from our four existing management fee-based rail operations,
while using our expertise and experience to continue building affiliate
earnings from the UK rail industry and elsewhere.
As the second largest regional bus operator in the UK, we are also well-placed
to benefit from the increasing recognition at all levels of government and
society of the value of stronger bus networks. At their best, bus networks
provide the most responsive, flexible and value-for-money solution to the air
quality, congestion and connectivity problems increasingly faced by our towns
and cities. Through supporting modal shift out of cars and our commitments to
convert our fleets to zero carbon buses, we also have an important part to
play in decarbonising transport in our operating areas. There is an
unprecedented focus on all of these opportunities by Government – and
increasingly this renewed ambition has the funding programmes behind it to
deliver.
In the short term, our financial results are complex, affected by the sale of
three divisions, c.£2.2bn of debt repayments and de-risking of pensions and
other liabilities , as well as a £500m cash return to shareholders, some of
which completed after the period end. Further inflows to the Group are also
expected over time from certain deferred and contingent aspects of the
portfolio rationalisation (including the First Transit earnout, cash in escrow
for the UK pension schemes, and the net proceeds from the Greyhound assets and
liabilities retained). The Board is committed to keeping the balance sheet
position of the Group under review and will consider the potential for further
additional distributions to shareholders in due course following
crystallisation of some of these matters and in light of other value creation
opportunities that present themselves. We also note the capacity to increase
gearing over time, as end market conditions and hence business performance
improves.
The FirstGroup emerging from this transformation has a clear and important
role to play at the heart of our communities and economies, is
cash-generative, well-capitalised, and committed to investing in a low carbon
future while supporting a regular dividend to shareholders. In summary, we
believe it is very well-placed to create substantial further shareholder value
in future.
Portfolio rationalisation strategy delivered; uses of proceeds substantially
complete
In the 26 weeks to 25 September 2021, the Group announced and completed the
sale of First Student and First Transit for a headline enterprise value of
$4.6bn and net disposal proceeds of $3.1bn (£2.3bn), repaid £1.8bn of bank
facilities, commercial paper, bonds and other debt, paid £220m in cash into
the UK Bus pension scheme, and made payments of £73.7m into the Greyhound US
and Canadian pensions schemes to begin the process of de-risking them. In the
period the Group also signed a new multi-year £300m sustainability-linked
Revolving Credit Facility (RCF) with a group of its relationship banks.
Since the period end, the Group has announced and completed the sale of
Greyhound Lines, Inc. to FlixMobility GmbH for net cash proceeds at closing of
c.£100.9m, received cash proceeds from four Greyhound property sales, and
begun receiving funding awards from the American Rescue Plan (ARP) relating to
losses incurred while Greyhound was under the Group's ownership during the
pandemic, as well as rental income and the first tranches of the deferred
consideration. The Group has also returned £500m to shareholders through a
tender offer since the period end.
During the remainder of the current financial year, the Group expects to
utilise c.£150m to accelerate de-risking of the remaining Greyhound pension
and insurance liabilities and to place the agreed £117m into escrow for the
First Bus and Group UK pension schemes. In light of the expected corporate
activities noted above and current trading expectations, the Group continues
to estimate that Adjusted Net Debt at the end of FY22 will be in the range of
£10-20m.
Protecting our passengers and employees
Our first priority has been and remains the health and safety of our
passengers, employees and communities. We continue to follow all appropriate
public health authority guidance and continue to maintain our commitment to
best practice in areas such as enhanced cleaning and decontamination of
vehicles, depots and terminals. We take great pride in the way all our
colleagues and teams have provided direct assistance and support to those most
in need, right at the heart of our communities.
We are deeply saddened to have lost employees in the period as a result of the
pandemic. On behalf of the Board and everyone at FirstGroup, I offer our
sincere condolences and ongoing support to their families, friends and
colleagues.
Operational highlights – continuing operations
Social distancing rules and government guidance to limit travel gradually
eased over the period, although this has taken place faster in England than in
Scotland or Wales. This has resulted in a commensurate increase in passenger
volumes on our bus and rail networks, although travel activity has yet to
fully recover to levels seen before the start of the pandemic.
Recognising the essential nature of public transport connections to local
economies, Westminster and the devolved governments put in place comprehensive
emergency measures at the start of the pandemic to procure continuity of the
management 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. Their commitment to the important role played by
transport has continued, with further grant funding and other contractual
arrangements supporting the recovery in travel volumes that is now underway.
For the majority of the period, First Bus and other regional bus operators
effectively provided their assets and expertise to operate a government-funded
bus system on a broadly cash break-even basis. In England the COVID-19 Bus
Service Support Grant (CBSSG) programme formally came to end on 1 September
2021, and since that time delivery of local bus services across England has
been reinforced by the Department for Transport (DfT)'s £226.5m Bus Recovery
Grant (BRG) funding package for the industry announced in early July. The BRG
scheme, which is allocated to regional bus operators based on mileage and
volumes meaning operators are now taking a level of passenger volume risk, is
in place through to March 2022. Scotland and Wales continue to operate under
schemes similar to CBSSG, with discussions underway which may push the current
end date for the Scottish scheme out from the end of March 2022, and the Welsh
scheme funded to the end of July 2022. These schemes allow for relatively
limited changes to the level of service provision, fares and other matters
while they are in place.
First Bus has also worked closely with its local authority partners in England
on the Bus Service Improvement Plans which build on the National Bus Strategy
(NBS), and has also been awarded £13m in funding to support our investment in
68 electric buses in Leicester as part of the first 'fast-track' round of
funding under the NBS, with further opportunities in the pipeline. As we
continue to work towards our commitment of operating a zero-emission bus fleet
by 2035, we were pleased to select Hitachi Europe as prime strategic partner
for our First Caledonia depot in Glasgow, under which Hitachi will provide
electric bus batteries 'as a service', smart charging software and collaborate
on other technology to further decarbonise what will soon be the largest
electric vehicle charging hub in the UK. The depot hosted a joint event with
Hitachi for delegates of the recent UN COP26 Climate Change Conference.
First Bus passenger volumes have increased to 71% of equivalent 2019 levels on
average in recent weeks. There is some evidence of a slowdown in the rate of
recovery recently, as the travel guidance and activity levels in Scotland and
Wales and in many education settings across the UK remain somewhat restricted
in light of the pandemic. Notwithstanding this, our planning assumption for
the purposes of our future network realignment plans remains that 80-90% of
pre-pandemic passenger volume levels will be reached during the twelve months
following the end of pandemic-related restrictions in our operating areas.
These network plans continue to be optimised as we use our new digital tools
to observe how passenger demand patterns are evolving.
In common with a number of sectors in the UK, the bus industry is currently
experiencing driver shortages, with the resultant impact on mileage operated
itself holding back passenger volume recovery in some of our areas.
Notwithstanding this, and the recent increases in global fuel prices, First
Bus remains confident that it has the tools to deliver its 10% margin
objective for the first full financial year after pandemic-related
restrictions on public transport users come to an end, through network
realignment to observed demand, data-driven pricing, ticketing and customer
innovations, and the c.£20m in annualised cost efficiencies, fixed cost
reductions and other savings achieved since 2019, with further engineering
savings expected.
First Bus also continues to progress its strategy to develop and grow its
share of the business-to-business (B2B) services market. For example, in
October it acquired the 50% not already owned in the SPS JV, which operates
the contract to provide transport for workers employed at the Hinkley Point C
nuclear power station. First Bus was appointed official transport operators of
the delegate shuttle service at the COP26 climate conference in Glasgow,
providing zero emissions travel throughout the event, and has a number of
other B2B contracts in the pipeline.
Our four First Rail management fee-based Train Operating Companies (TOCs) have
continued to deliver overall passenger and other performance metrics in line
with our expectations, and are accruing for the fixed fees plus a substantial
proportion of the performance fees on the concession-style contracts in place.
Under these 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. In the period both SWR and TPE
commenced operating under new National Rail Contracts which run to 2023 with
potential extensions to 2025. Discussions are ongoing with DfT regarding the
GWR and West Coast Partnership (incorporating Avanti) National Rail Contracts,
with expected durations of up to six and ten years respectively (during the
period the current pandemic-related emergency arrangements on these contracts
were extended to March and October 2022 respectively). Meanwhile the division
was recently awarded £5m in additional work to assist with the TransPennine
Route upgrade over two years, demonstrating its capabilities to provide
affiliate services to the wider rail industry.
In October our new Lumo open access operation launched with strong passenger
bookings, and Hull Trains' passenger volumes are also currently running
modestly ahead of our expectations and the industry average. Both of our open
access operations primarily serve leisure travellers, which as a segment
nationally has returned to more than 90% of equivalent 2019 levels in recent
periods. As previously indicated, we expect our two open access operations to
record a c.£20m loss between them in the current financial year, before both
making a profit contribution from FY23.
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 aims to put the expertise, innovation and
experience of private sector rail operators at the heart of the new model for
providing efficient, reliable and high quality services for passengers in the
coming years.
Discontinued operations
With the completion of the sale of First Student and First Transit on 21 July
2021, the financial results of these two divisions have been reclassified as
discontinued operations. The transaction was 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. Accordingly, their results are disclosed in
the accounts as part of discontinued operations up to the point of transaction
completion.
Prior to its sale on 21 October 2021, Greyhound had received $108m in cash
grants under the US Department of the Treasury’s Coronavirus Economic Relief
for Transportation Services (CERTS) scheme, which was retained by Greyhound
Lines Inc. to be spent on its operations in accordance with the terms of the
grant. Greyhound remains eligible to receive further awards from other US
federal schemes and, to the extent that further such recoveries are made which
relate to the period Greyhound was under the Group's ownership, FlixMobility
will pay equivalent amounts to FirstGroup. Since the sale completed, the Group
has begun receiving such CARES and ARP payments ($1.5m to date from a
potential total of c.$80m).
Almost all of Greyhound's property holdings in the US and Canada, with an
estimated net market value of c.$200m as at 25 September 2021, were excluded
from the sale to FlixMobility and leased back for varying periods. FirstGroup
intends to monetise all of these properties over time and has since sold four
for $6.8m.
In addition to the properties, FirstGroup has also retained certain other
Greyhound liabilities, including its self-insurance reserve liabilities up to
the date of closing, defined benefit pensions schemes, and certain
environmental and other net liabilities and costs including the now-closed
Canadian operation. After the c.£150m in pension and self-insurance
de-risking expected to take place before year end, the Group estimates that
the balance of the total Greyhound assets and liabilities retained will result
in c.$155m (c.£120m) in net value for the Group being realised over time,
based on current valuations.
Resilient financial performance in the period
Revenue from continuing operations (comprising First Bus, First Rail and Group
items, as well as certain retained Greyhound assets and liabilities) increased
to £2,139.1m (H1 2021: £2,053.1m), principally reflecting improving First
Bus passenger revenues broadly offset by lower receipts from government grants
and other funding mechanisms, while First Rail revenue was broadly flat
compared with the prior period.
Adjusted operating profit from continuing operations was in line with
expectations at £51.8m (H1 2021: £55.7m), with an increase in the adjusted
operating profit of First Bus offset by a reduction in that of First Rail.
These largely reflect the changing terms of the various UK Government
arrangements to support passenger travel during the period.
Discontinued operations contributed £970.6m (H1 2021: £1,048.5m) in revenue
and £121.3m in adjusted operating profit (H1 2021: loss of £ (45.3) m) to
the Group, reflecting the increased volume of travel activity in North America
compared with the equivalent period in 2020, ongoing grant receipts in
Greyhound as well as there being no charge for depreciation under IFRS5 from
the point that tangible assets are classified as Held for Sale and therefore
no depreciation has been charged to First Student and First Transit's
operating results for the period 28 March to the sale completion on 21 July
2021.
The statutory operating profit from continuing operations of £52.2m (H1 2021:
£37.8m) reflects £0.4m credit from net adjusting items compared with
£(17.9)m in H1 2021, and statutory EPS from continuing operations was (3.4)p
(H1 2021: (3.7)p).
The Group's Rail management fee-adjusted EBITDA alternative performance
measure (which focuses on the adjusted earnings from First Bus, non
management-fee based Rail operations net of central costs plus the actual net
fees available to be distributed as dividends up to FirstGroup from the four
management fee-based rail operations, as described in more detail on p.16) was
£45.4m (H1 2021: £50.4m). This was a decrease of £5.0m over H1 2021,
principally reflecting the losses in the period from open access rail
operations partially offset by an improvement in the contribution from First
Bus. The Group's Rail management fee-adjusted Attributable Loss was £(1.2)m
in the period, an improvement of £9.2m over H1 2021, with a substantial
reduction in cash interest (interest charge excluding notional interest and
lease interest on IFRS 16 Right of Use assets) offset by the reduced
contribution from First Rail. As previously indicated, these metrics will
define our leverage and dividend policies going forward, as set out in the
financial policy framework on p.15.
Substantial adjusted cash flow in period
The Group's adjusted cash flow of £1,704.7m (H1 2021: £197.9m) in the period
reflects positive operational cash flow from the continuing divisions as well
as the proceeds from the sales of First Student and First Transit, offset by
the repayment of debt and de-risking of certain retained liabilities.
Underlying operational cash flow in the period was £113.5m (H1 2021:
£763.5m), reflecting our actions to maintain liquidity and financial strength
despite the passenger volume reductions. Cash generated in First Bus includes
working capital inflows from CBSSG receipts while First Rail recorded a cash
outflow primarily due to timing of ring-fenced cash outflows and losses in the
open access operations.
As a result of the proceeds received, the Group had Adjusted Net Cash of
£613.9m (H1 2021: Adjusted net debt of £1,532.1m) as at 25 September 2021.
IFRS 16 lease liabilities (predominantly First Rail rolling stock leases)
decreased to £1,255.7m (H1 2021: £1,867.9m), while First Rail ring-fenced
cash was £ (518.3)m (H1 2021: £726.0m). Taken together, reported net debt
including IFRS 16 lease liabilities and Rail ring-fenced cash decreased to
£234.2m (H1 2021: £2,946.1m).
Since the period end, the Group has completed the tender offer which returned
£500m to shareholders. It has also sold Greyhound Lines, Inc. and
subsequently four Greyhound properties, and began receiving ARP payments
relating to losses during period of its ownership. As a result, the Group's
Adjusted Net Cash was £137.3m as at 6 December 2021. On the same date, the
Group’s undrawn committed headroom and free cash (before First Rail
ring-fenced cash) was £676.4m prior to the further Greyhound pension and
majority of insurance de-risking and contribution into escrow for the UK
pension schemes which are both expected to take place before the end of the
financial year.
Outlook
While there remains some uncertainty around the pace of recovery in light of
the evolving circumstances of the pandemic, there is no change to our
expectations for FY22: we expect to continue to build operational momentum in
the current financial year, providing a solid foundation for delivering the
Group's previously announced financial framework objectives in the medium term
(as set out in the financial policy framework on p.15), including our
intention to commence regular dividends within the next 12 months.
Our expectations for First Bus' contribution to adjusted operating profit in
FY22 are unchanged, and reflect the current pandemic-related restrictions and
government funding schemes in place, and assume some further passenger volume
improvement during the balance of the financial year. Our pricing strategy is
expected to broadly offset the effects of the driver shortages and cost
headwinds being experienced in common with many UK industry sectors,
underpinned in part by the Bus Recovery Grant in England and the CBSSG-style
arrangements in Scotland and Wales. First Rail earnings in FY22 will
principally be driven by the management fee-based contracts currently in
place, offset by the expected losses in the open access operations and modest
profits from other affiliate contracts. 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 the recent completion of the portfolio
rationalisation.
Further ahead, the Group intends to pay a regular dividend, supported by the
resilience of the balance sheet and 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 pandemic-related restrictions
affecting travel patterns are lifted. First Rail's profitability will be
driven by the fixed fees plus our delivery against performance targets under
the new National Rail Contracts whilst we expect to add further earnings from
opportunities affiliated to our core operations, including the transition into
profit in FY23 of our open access rail operations.
Sustainability developments
The Group began implementing the Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations in its 2021 Annual Report, a year ahead of
the regulatory mandate, and is committed to building on this in the FY22
reporting cycle. This will include setting a science-based target (SBT) during
the current financial year for reaching net zero emissions by 2050 or earlier,
in accordance with the SBT initiative.
First Bus continued to introduce zero-emission vehicles in the period with
deliveries expected to accelerate in the second half.
FirstGroup is also working to create a more diverse and inclusive business in
what has been a ‘traditional’ sector. Since 2017, female employees have
almost doubled to just under 20% of the total UK workforce. Despite
recruitment activity being significantly reduced by the pandemic, we have
increased the proportion of female hires for the third successive year, to
24.1%. 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 the coming weeks. As an example of how we support
the career progression of colleagues from ethnic minority backgrounds, First
Rail has created two new development programmes to help colleagues prepare for
and attain their first management role, and to support existing managers from
BAME backgrounds to progress into more senior leadership positions.
In the period the Group entered into a £300m sustainability linked RCF, under
which the interest rate varies with the Group’s leverage and its performance
against two sustainability KPIs, being the level of Scope 1, 2 and 3 carbon
emissions per £m of revenue from its First Bus and First Rail operations, and
the relative growth of its zero-emission bus fleet in the UK.
FirstGroup's investment case
Going forward, in addition to the substantial value potentially to be realised
from the deferred and contingent elements of the portfolio rationalisation and
the increased balance sheet flexibility, we believe FirstGroup has 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 restrictions 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 sustainability goals, accelerating the
transition to a zero-carbon world: Principally through facilitating modal
shift from cars and through FirstGroup’s commitments to transition to
operating 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.
Conclusion
The ability for people to travel safely and conveniently for business,
education, social or recreational purposes is essential to the long-term
sustainability of our economies and communities. With more and more
stakeholders recognising the importance of a thriving public transport sector,
FirstGroup is in prime position to deliver on its goals, with a
well-capitalised balance sheet and an operating model that will support our
intention to recommend an attractive dividend for shareholders commencing
within the next 12 months. I am very confident that the Group now has the
flexibility, the resilience and the capability to create sustainable,
long-term value from the opportunities ahead.
David Martin
Executive Chairman
8 December 2021
Divisional review
Continuing operations – First Bus
26 weeks to 25 September £m £m, change in
constant currency (1)
H1 2022 H1 2021
Revenue 392.5 311.0 +81.5
Adjusted operating profit 26.8 17.4 +9.3
Adjusted operating margin 6.8% 5.6% +120bps
EBITDA 55.5 48.1 +7.3
Net operating assets 509.4 408.6
Capital expenditure 11.9 9.7
(1 ) Based on retranslating H1 2021 foreign currency amounts at
H1 2022 rates.
First Bus reported revenue of £392.5m (H1 2021: £311.0m), principally
reflecting a 46% increase in like-for-like passenger revenue following volume
increases as pandemic travel restrictions began to ease over the period. In
England, social distancing restrictions on buses and guidance to avoid travel
where possible were removed in July, although the latter has remained in place
in Scotland and Wales which together represent more than a quarter of First
Bus revenues. Overall passenger volumes were 58% of the equivalent period in
2019, with commercial passenger volumes at 59% and concessions at 55%.
First Bus has worked very closely with local and national authorities and
other partners to ensure that passengers have been able to rely on its
services throughout the pandemic. For the majority of the period, First Bus
and other regional bus operators effectively provided their assets and
expertise to operate a government-funded bus system on a broadly cash
break-even basis. Under these arrangements, First Bus was paid the costs of
operation less revenue received from customers and other public sector monies.
Recoverable costs included all reasonable operational costs including
depreciation and allocated debt finance together with pension deficit funding.
Over the period, First Bus operated c.85% of the service mileage in the
equivalent period in 2019. The CBSSG programme formally came to end in England
on 1 September 2021, and since that time delivery of local bus services across
England has been reinforced by the DfT's £226.5m Bus Recovery Grant (BRG)
funding package for the industry. The BRG scheme, which is allocated to
regional bus operators based on mileage and volumes, is in place through to
March 2022 as passenger numbers rebuild. Services in Scotland and Wales
continue to operate under schemes similar to CBSSG, with discussions underway
that may extend the Scottish scheme out beyond the current end date of 31
March 2022, and the Welsh scheme funded to the end of July 2022. As a result
of the operation of these arrangements, the division reported operating profit
of £26.8m (H1 2021: £17.4m) in the period, with no adjusting items.
Through investments in real-time passenger volume data capture, GPS
functionality and ticketing, First Bus has moved to the forefront of the
digital transformation of the bus industry. This has transformed our ability
to understand and assess passenger flows and make subsequent commercial
decisions more efficiently. These tools allow us to observe how passenger
demand patterns are evolving and will allow us to optimise our networks and
timetables to align with customer needs.
We have also continued to roll out innovative functionality to our customers,
building on our award-winning mobile app, such as launching 'tap on tap off'
payment technology on buses in West Yorkshire. We are driving up the volume of
ticket transactions which involve contactless payment methods or our app,
reaching 70% in the period. We also continue to bring new ticketing options to
customers, including daily and weekly contactless capping fares in Leicester
and Potteries in recent months with more areas to follow. These also deepen
our knowledge of customers' needs and enable us to structure our pricing
models more efficiently.
The division also continues to progress its cost reduction and operational
efficiency programmes, which have delivered annualised savings of c.£20m
since 2019, with further engineering savings expected.
Throughout the period First Bus also worked closely with its local authority
partners in England on the Bus Service Improvement Plans which build on the
National Bus Strategy (NBS). The majority of these were submitted in October
and although bespoke to the local needs of each area, many focused on actions
to improve bus priority measures including bus lanes, funded fares reductions
for certain groups of passengers, frequency and network enhancements on key
routes and further 'capped' period ticketing schemes. The next stage is for
DfT to review and assess the plans submitted by each local authority and
allocate funding accordingly. As previously indicated, the vast majority of
these measures are to be delivered in First Bus local areas through Enhanced
Partnerships (rather than franchising), and work is now progressing to
establish these by the Government’s April 2022 target. In the period the
Scottish Government committed to funding free bus travel for all under-22’s
from 31 January 2022, which will also enhance passenger flows. In December a
major project to lengthen the Eclipse bus rapid transit (BRT) project operated
by FirstGroup in Hampshire was completed. Jointly funded by the National
Productivity Investment Fund, Hampshire County Council and the Government’s
Transforming Cities Fund, with First Bus also committing to investing in
additional buses, Eclipse services already carry 60% more passengers than the
two services they replaced, and bus use in the whole local area has increased
by more than 12% since the service was first introduced.
First Bus continues to be successful in securing funding assistance from
government for zero-emission vehicles, in line with its commitment to
operating a wholly-zero-emission bus fleet by 2035. In October we were awarded
£13m in funding to support 68 new electric buses in Leicester as part of the
first 'fast-track' round of funding under the NBS, with further opportunities
in the pipeline. In the period our Glasgow Caledonia depot continued its
transformation into the largest electric vehicle charging hub in the UK, with
60% of chargers installed and the first 24 of 150 electric buses now
operational. In November First Bus selected Hitachi Europe as prime strategic
partner for the decarbonisation programme at the depot in Glasgow, under which
Hitachi will provide bus batteries 'as a service' for First Glasgow’s
electric fleet, smart charging software and will collaborate on other low
carbon technology such as solar panels and battery energy storage solutions
for the site. The depot hosted a joint event with Hitachi for delegates of the
recent UN COP26 Climate Change Conference. The division's collaboration with
innovative electric vehicle manufacturer Arrival is targeting testing and
validation in Spring 2022. In England the government announced a further
£355m funding for zero emission buses in the October Spending Review, and in
Scotland a further £50m has been announced.
First Bus has also progressed its strategy to develop and grow its share of
the B2B services market. In October it acquired the 50% not already owned in
the SPS JV, which operates the contract to provide transport for workers
employed at the Hinkley Point C nuclear power station in Somerset, for up to
£10m. SPS now employs around 450 people running a 156 vehicle operation,
delivering shuttle services seven days a week to and from the site, with
annual revenues of c.£37m. First Bus was also appointed official transport
operator of delegate shuttle services at the COP26 climate conference in
Glasgow, and has a number of other B2B contracts in the pipeline.
Looking ahead
We are encouraged that bus volumes have improved over the course of the
period, increasing to c.71% of equivalent 2019 levels on average in recent
weeks, although as previously indicated, forecasting short term volume and
revenue levels remains challenging in light of the continuing pandemic-related
effects on passengers' travel patterns. There is some evidence of a slowdown
in the pace of recovery recently as a result of the travel advisory position
in Scotland and Wales and the activity levels being observed in particular in
many education settings in across the UK in light of the pandemic. Our
Aircoach business in Ireland has increased its activity levels but remains
heavily linked to the passenger aviation levels. Notwithstanding this, our
planning assumption for the purposes of our future network realignment plans
remains that 80-90% of pre-pandemic levels will be reached during the twelve
months following the end of pandemic-related restrictions in our operating
areas, with further growth thereafter as a result of the support for modal
shift and higher bus usage offered by the NBS, social changes more broadly and
our business-to-business strategy.
In common with many other businesses in the UK, First Bus is currently
experiencing a shortage of available drivers and higher than normal lost
mileage in some localities, although the division has stepped up recruitment
and retention activities in response, as well as refreshing our overall
employee proposition to ensure we sustain a strong team of colleagues. There
is no change to our expectations for First Bus' contribution to adjusted
operating profit in FY22, which reflects the current pandemic-related
restrictions and government funding schemes that are in place, and assumes
some further passenger volume improvement during the balance of the financial
year, with our pricing strategy expected to broadly offset the effects of the
driver shortages and cost headwinds being experienced. We also remain
confident that First Bus is on track to deliver its 10% margin objective for
the first full financial year after pandemic-related restrictions come to an
end, through the inherent operating leverage of the business to increased
passenger volumes, our data-driven network realignment plans, the cost
efficiency programme implemented in recent years, as well as our new pricing
strategy and ticketing innovations which are being progressively rolled out.
Continuing operations – First Rail
Six months to 18 September £m
H1 2022 H1 2021 £m, change
Revenue 1,746.6 1,741.9 +4.7
Adjusted operating profit 39.2 59.4 (20.2)
Rail attributable net income from management fee-based TOCs (1) 17.5 20.4 (2.9)
Tramlink now reported within First Rail (previously within Group items). H1
2021 comparative has been restated accordingly.
(1) Pre-IFRS 16 basis net of tax and minority interests represents the
Group's share of the management fee income available for dividend distribution
from the GWR, SWR, TPE and WCP (incorporating Avanti) contracts with DfT as
described in more detail on p.16. See also note 4 to the financial statements
for a reconciliation to the segmental disclosures.
First Rail revenue increased modestly to £1,746.6m (H1 2021: £1,741.9m).
Tramlink is now reported within First Rail, with the comparative restated
accordingly. Under the contractual arrangements in place for our four
management fee-based TOCs during the year and going forward in the industry,
changes in passenger revenue no longer affect our financial performance so
although like-for-like passenger revenues increased significantly relative to
the prior period, there was an offsetting reduction in income from DfT.
Passenger volumes in our businesses continue to recover as demand began to
return following the easing of travel restrictions in England from Spring
2021. We are seeing demand recovering particularly well in the leisure market,
where demand on some flows is higher than before the pandemic. Although
passenger volumes have increased, they still remain at c.65% of the equivalent
2019 period on average in recent weeks. We continue to work closely with the
DfT on appropriate service provision, with services currently running at
c.85-90% of 2019 equivalent levels.
Under the Emergency Measures Agreements (EMAs) put in place during the
pandemic to secure the continued operation of the country’s rail networks,
the DfT waived revenue, cost and contingent capital risk and our four major
train operating companies are paid a fixed management fee to continue to
operate the rail network at agreed service levels. The fee varies according to
each contract and includes the potential for a small performance-based fee. In
the period the four management fee-based TOCs delivered overall passenger and
other performance metrics in line with our expectations, and accordingly are
accruing for the fixed fees plus a substantial proportion of the performance
fees as a result. Adjusted operating profit was £39.2m (H1 2021: £59.4m),
which reflects the fees paid under the current arrangements as well as costs
incurred on start-up of the new Lumo open access service and at Hull Trains.
The division reported a statutory operating profit of £43.2m (H1 2021:
£41.1m) reflecting a £4.0m final credit adjustment in relation to TPE and
SWR franchise termination sums. Rail attributable net income from management
fee-based TOCs – being the Group's share of the management fee income
available for dividend distribution from the GWR, SWR TPE and WCP
(incorporating Avanti) contracts with the DfT – was £17.5m (H1 2021:
£20.4m).
During the period both TPE and SWR transitioned to the Government’s new
National Rail Contracts. 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 substantially all
revenue risk and substantially all cost risk. There is a fixed management fee
and the opportunity to earn an additional performance fee. The 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 operators and
the Government and carry no significant contingent capital risk.
Discussions are ongoing with the DfT regarding National Rail Contracts for our
other two management fee-based operations, GWR and West Coast Partnership
(incorporating Avanti). The DfT have indicated that the West Coast Partnership
National Rail Contract which will follow the current agreement could last up
to ten years to October 2032, and that GWR's could last up to six years to
June 2028. In the period the DfT extended the current emergency agreements for
GWR and West Coast Partnership (incorporating Avanti) to March and October
2022 respectively. Beyond the NRCs the DfT have begun dialogue with operators
about the next generation of Passenger Service Contracts which will focus
operators on continuing to run services efficiently and providing reliable and
high-quality services for passengers.
Open access operations were not eligible for the DfT's emergency pandemic
support, which meant our Hull Trains service was temporarily suspended on a
number of occasions reflecting lower passenger demand. Having restarted
operations following the ending of lockdown restrictions, Hull Trains is
recently seeing encouraging passenger volumes running ahead of the industry
average. Our new Lumo open access service began operations in October, and has
seen strong passenger bookings. Lumo’s purely electric fleet provides a
value for money and sustainable way to travel between London, Newcastle and
Edinburgh, routes where a significant number of passengers still travel by
air. As previously indicated, as a result of the start-up costs for Lumo and
the demand environment for Hull Trains, we expect our open access operations
to record a c.£20m loss between them in the current financial year, before
both making a profit contribution from FY23.
The division was recently awarded additional work to assist in the
Transpennine Route Upgrade project to upgrade railways in the North of
England. Worth c.£5m in fees over the next two years, this demonstrates our
expertise in rail and ability to generate earnings from affiliated services to
the wider industry. Meanwhile evo-rail, our solution to power next generation
onboard Wi-Fi, is progressing to installation on SWR and also has a number of
trials either underway or in negotiation in international markets.
Our rail companies continue to work together with industry partners and
stakeholders to upgrade the customer offering. During the period flexible
season tickets were introduced across the country and we continue to develop
our suite of mobile ticketing and customer apps. New functionality includes
the ability for SWR passengers to check car park capacity and a customer
loyalty scheme. In the period Avanti also became the first UK TOC to offer an
additional class of travel as part of its services, Standard Premium, which
gives customers greater choice of facilities. On 1 November SWR reopened the
Isle of Wight’s railway following a £26m investment into trains, stations
and infrastructure funded by the DfT, Isle of Wight Council and Solent Local
Enterprise Partnership. On 20 November, GWR reopened the Dartmoor Line in
partnership with Devon County Council and Network Rail, the first to be
reinstated under the DfT’s ‘Restoring your Railway‘ initiative.
First Rail is working with its partners to reduce carbon emissions, for
example through the introduction of electric trains to replace diesel where
possible, and our expertise and capability will help the Government deliver
its ambition to remove all diesel-only trains from service in the UK by 2040.
New suburban rolling stock for SWR starts to enter service this year and a new
depot at Feltham was completed in the period to stable this fleet. New
all-electric and bi-mode trains will also be introduced by Avanti next year,
and a £117m refurbishment of the operator’s electric Pendolino fleet began
in the period. We are also working to increase connectivity with other
transport modes, with new, secure bike spaces, bus connections and car parking
introduced across our networks in the period.
Looking ahead
First Rail earnings in FY22 will principally be driven by the management
fee-based contracts currently in place, offset by the expected losses in the
open access operations and modest profits from other affiliate contracts.
Longer term it will be driven by the fixed fees plus our delivery against
performance targets under the new National Rail Contracts whilst we expect to
add further earnings from opportunities affiliated to our core operations,
including the transition into profit in FY23 of our open access rail
operations.
We have long advocated for a more sustainable balance of risk and reward for
all parties which would underpin a longer-term approach to the railway with
passengers at its centre. This is well aligned to the Government's
Williams-Shapps Plan for Rail, and as the largest UK operator with four
passenger rail contracts expected to run until at least 2023, we are well
positioned to work closely with industry partners to bring the Plan 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, resulting in a strong track record of delivery on major projects, and
potential for further growth through opportunities in addressable markets
affiliated with our core management fee-based operations. As the UK passenger
rail industry continues its evolution to a more successful and sustainable
railway system that works better for all parties, we are well-placed both to
drive increased patronage and to generate resilient and consistent returns for
shareholders.
Greyhound retained assets and liabilities including Greyhound Canada
In the period £(4.0)m (H1 2021: £(7.0)m) of operating losses were recorded
for the Greyhound Canada operations which were permanently shut down in May
2021, of which £(0.4)m (H1 2021: £(7.4)m) were classed as adjusted operating
losses, with the remainder being restructuring and closure costs.
Greyhound remains eligible to receive further funding awards from US federal
schemes such as the CARES Act and the ARP, and, to the extent that further
such recoveries are made which relate to losses for miles run incurred while
Greyhound was under the Group's ownership during the pandemic, the buyer will
pay equivalent amounts to FirstGroup. Since the sale completed, $1.5m has been
received in CARES and ARP payments relating to pre-closing operations.
Almost all of Greyhound's property holdings in the US and Canada, with an
aggregate estimated net market value of c.$200m, were excluded from the sale.
The buyer has entered into lease agreements at market rental levels to use the
properties in the US for varying periods as part of Greyhound’s future
operations. The majority of these are subject to a three-year lease term, with
the remainder subject to a six-month initial term followed by six-month
rolling terms. FirstGroup intends to monetise all of these retained properties
over time to further optimise net proceeds and has since sold four such
properties for $6.8m.
In addition to the retained properties, FirstGroup has also retained certain
other Greyhound liabilities, including Greyhound’s self-insurance reserve
liabilities up to the date of closing ($161.7m as at 25 September 2021),
Greyhound defined benefit pensions schemes ($64.9m as at 25 September 2021
following a cash injection of $102.4m in the period), and certain
environmental and other net liabilities and costs including the now-closed
Canadian operation. After the c.£150m in pension and self-insurance
de-risking expected to take place before year end the Group estimates that the
balance of the total Greyhound assets and liabilities retained will result in
c.$155m (c.£120m) in net value being realised over time.
Discontinued operations – First Student, First Transit and Greyhound US
First Student revenue was $669.5m or £479.5m (H1 2021: $509.6m or £404.4m)
in the period prior to completion of the sale on 21 July 2021, reflecting the
reopening of more schools compared with the prior period. At the adjusted
operating level, profit increased significantly to $123.4m or £88.2m (H1
2021: $(66.7)m or £(50.3)m) as a result of the increased activity levels, and
no depreciation charge in the current period due to the division being classed
as held for sale. Statutory profit of £73.4m reflects a self-insurance
provision charge due to a deterioration in respect of prior years' insurance
claims and also a one-off charge for accelerated state and federal employment
taxes.
First Transit recorded revenue of $417.7m or £299.7m (H1 2021: $613.9m or
£484.5m) in the period prior to completion of the sale on 21 July 2021, with
a high level of service continuing to be maintained despite the pandemic, as
it provides essential transportation options for passengers. Adjusted
operating profit was $29.0m or £20.7m (H1 2021: $17.1m or £13.4m),
principally reflecting no depreciation charge in the current period due to the
division being classed as held for sale. The division continued to win new
business in the period, and remains well positioned for further growth,
especially in light of the $1.2tn bipartisan Infrastructure Investment and
Jobs Act recently signed into law and other federal legislative priorities.
Statutory profit of £14.2m (H1 2021: £13.4m) reflects a self-insurance
provision charge due to a deterioration in respect of prior years' insurance
claims.
Greyhound’s US operations generated revenue of $265.6m or £191.4m (H1 2021:
$202.7m or £159.6m) in the period, reflecting an improvement in passenger
demand as pandemic restrictions eased, partially offset by lower CARES Act
receipts in the period. Through continued cost management, federal funding
receipts and other actions Greyhound was able to increase adjusted operating
profit to $17.2m or £12.4m (H1 2021: $(9.8)m or £(8.4)m) in the period.
Statutory profit of £56.0m (H1 2021: loss of £(8.9)m) reflects the partial
reversal of prior year impairments of Greyhound as well as a self-insurance
provision charge due to a deterioration in respect of prior years' insurance
claims.
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 pandemic-related restrictions end, with further growth thereafter
* First Rail: opportunities to build on the base business of four management fee-based TOCs with no revenue risk
Profitability * First Bus: targeting a 10% margin in the first full financial year after pandemic-related restrictions end
* First Rail: profitability driven by fixed fees plus delivering against performance targets under NRCs while adding earnings in affiliated rail opportunities, including transition into profit of open access operations
* Other: central cost reduction of at least £10m p.a. from FY23; interest c.£50m p.a. (of which c.40% cash); UK corporation tax rate (currently 19% increasing to 25% for FY24)
Investment * First Bus: c.£90m p.a. mainly driven by zero-emission bus fleet commitments
* First Rail: expected to continue to be cash capital-light under the NRCs
Leverage * Less than 2.0x Adjusted Net Debt: Rail management fee-adjusted EBITDA (1)in the medium term
Dividend * Intention to commence regular dividends to shareholders within the next 12 months
* Targeting annual dividend around 3x covered by Rail management fee-adjusted Attributable Profit (2), assuming normalisation of trading conditions post-pandemic
(1) First Bus and First Rail EBITDA not from management fee-based TOCs, plus
Rail attributable net income from management fee-based TOCs, minus central
costs (see also p.16)
(2) First Bus and First Rail adjusted operating profit not from management
fee-based TOCs, plus Rail attributable net income from management fee-based
TOCs, minus central costs, minus cash interest, minus tax (see also p.16)
Revenue
Revenue from continuing operations increased to £2,139.1m (H1 2021:
£2,053.1m), principally reflecting improving passenger revenues in First Bus
broadly offset by lower receipts from government grants and other funding
mechanisms.
Revenue from discontinued operations was £970.6m (H1 2021: £1,048.5m),
reflecting the trading results of First Student and First Transit in the stub
period of FirstGroup's ownership to 21 July 2021 and Greyhound's US operations
for the whole period. Overall, total revenue in the period was flat at
£3,109.7m (H1 2021: £3,101.6m).
26 weeks to 25 September 2021 26 weeks to 26 September 2020 52 weeks to 27 March 2021
Revenue Adjusted operating Adjusted operating margin (1) Revenue £m Adjusted operating profit (1) £m Adjusted operating margin (1) % Revenue £m Adjusted operating profit (1) £m Adjusted operating margin (1) %
£m profit (1) %
£m
First Bus 392.5 26.8 6.8 311.0 17.4 5.6 698.9 36.6 5.2
First Rail 1,746.6 39.2 2.2 1,741.9 59.4 3.4 3,619.9 108.1 3.0
Greyhound retained - (0.4) n/m 0.2 (7.4) n/m 0.2 (10.7) n/m
Group items (2) - (13.8) - (13.7) ? (32.5)
Continuing operations 2,139.1 51.8 2.4 2,053.1 55.7 2.7 4,319.0 101.5 2.4
First Student 479.5 88.2 18.4 404.4 (50.3) (12.4) 1,226.2 55.8 4.6
First Transit 299.7 20.7 6.9 484.5 13.4 2.8 977.0 51.7 5.3
Greyhound US 191.4 12.4 6.5 159.6 (8.4) (5.3) 322.8 0.4 0.1
Discontinued operations 970.6 121.3 12.5 1,048.5 (45.3) (4.3) 2,526.0 107.9 4.3
Total 3,109.7 173.1 5.6 3,101.6 10.4 0.3 6,845.0 209.4 3.1
North America in USD $m $m % $m $m % $m $m %
Greyhound retained - (0.7) n/m 0.3 (9.5) n/m 0.3 (14.2) n/m
First Student 669.5 123.4 18.4 509.6 (66.7) (13.1) 1,617.6 78.1 4.8
First Transit 417.7 29.0 6.9 613.9 17.1 2.8 1,277.4 69.1 5.4
Greyhound US 265.6 17.2 6.5 202.7 (9.8) (4.8) 422.3 2.1 0.5
Discontinued operations 1,352.8 169.6 12.7 1,326.2 (59.4) (4.5) 3,317.3 149.3 4.5
Total North America 1,352.8 168.9 12.7 1,326.5 (68.9) (5.2) 3,317.6 135.1 4.1
(1 ‘)Adjusted’ figures throughout this document are before the gain on
sale of First Student and First Transit, partial reversal of impairment
charges on Greyhound and certain other items as set out in note 3 to the
financial statements. The statutory operating profit including discontinued
operations for the period was £644.5m (H1 2021: loss of £(16.4)m) as set out
in note 4.
(2) Central management and other items. Tramlink is now reported in First
Rail.
Adjusted operating performance
Adjusted operating profit from continuing operations was in line with
expectations at £51.8m (H1 2021: £55.7m), with an increase in the adjusted
operating profit of First Bus offset by a reduction in that of First Rail.
These principally reflect the UK governments' procurement of service capacity
from First Bus to enable socially distanced travel for most of H1 and the new
low-risk management contracts in First Rail, partially offset by open access
rail losses during the period.
Adjusted operating profit from discontinued operations of £121.3m (H1 2021:
loss of £ (45.3)m) reflected the increased volume of travel activity in North
America compared with equivalent period in 2020, ongoing receipt of grant
funds by Greyhound and no depreciation being charged to profit in the period
in the divisions classed as held for sale under accounting rules. Overall
Group adjusted operating profit increased by £162.7m to £173.1m (H1 2021:
£10.4m). 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 North American disposals.
The Group's Rail management fee-adjusted EBITDA performance measure is
calculated as follows:
26 weeks to 25 September 2020 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
£m
First Bus EBITDA 47.6 39.9 84.5
First Rail EBITDA not from management fee-based TOCs (7.4) 2.0 (8.9)
Rail attributable net income from management fee-based TOCs (1)– Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts 17.5 20.4 42.3
Group central costs (EBITDA basis) (13.0) (12.9) (30.8)
Group Rail management fee-adjusted EBITDA 44.7 49.4 87.1
1 A reconciliation to the segmental disclosures is set out in note 4.
The Group's Rail management fee-adjusted Attributable Profit performance
measure is calculated as follows:
26 weeks to 25 September 2020 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
£m
First Bus adjusted operating profit 26.8 17.4 36.6
First Rail adjusted operating profit not from management fee-based TOCs (7.6) 2.4 (10.4)
Rail attributable net income from management fee-based TOCs (1)– Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts 17.5 20.4 42.3
Group central costs (operating profit basis) (13.9) (13.7) (32.5)
Cash interest (2) (28.4) (44.1) (21.3)
Tax (3) 4.3 7.2 5.2
Group's Rail management fee-adjusted Attributable (Loss)/Profit (1.2) (10.4) 19.9
(1) A reconciliation to the segmental disclosures is set out in note
4.
(2) Pro forma interest charge excluding notional interest, lease
interest on IFRS16 Right of Use assets and interest on discontinued
operations.
(3) Pro forma taxation at 19%.
Reconciliation to non-GAAP measures and performance
Note 3 to the financial statements sets out the reconciliations of operating
profit/(loss) and loss before tax to their adjusted equivalents.
The principal adjusting items in relation to the continuing business are as
follows:
Greyhound Canada closure
£3.6m in relation to Greyhound Canada restructuring and closure costs were
incurred during the period.
First Rail termination sums
£4.0m credit representing final adjustments of residual matters regarding the
TPE and SWR termination sums.
The principal adjusting items in relation to the discontinued operations are
as follows:
Other intangible asset amortisation charges
The amortisation charge for the period was £0.4m.
Gain on sale of First Student and First Transit
As a result of the disposal of First Student and First Transit, a gain on sale
of £479.4m was realised. This includes a gain of £450.6m as a result of the
unrealised translation reserves that have been realised on the disposal of
First Student and First Transit. This represents the cumulative foreign
currency gains on these businesses since date of original acquisition and
arises primarily from the Laidlaw acquisition in 2007 when the US Dollar rate
was approximately $2.00:£1. See Note 14 for more details.
Other costs associated with the disposal of First Student and First Transit
£31.5m of costs were incurred in the period associated with the disposal of
First Student and First Transit that were not directly attributable to the
sale. These are therefore not included in the gain on disposal calculation.
These comprise IT and other separation related costs, certain management
bonuses and incentives, premium on hedging costs in relation to disposal
proceeds, lease termination and certain other costs.
Partial reversal of prior year impairments of Greyhound
As a result of the terms of the disposal of the Greyhound US business, there
is a credit of £55.4m representing the partial reversal of the prior years’
impairment charges on tangible fixed assets and intangible assets.
Professional fees relating to Greyhound
During the period there was a charge of £2.9m relating to the sale of
Greyhound comprising principally legal and professional costs.
Employment taxes relating to First Student and First Transit
There was a charge of £6.6m during the period due to a one-off charge for
accelerated state and federal employment taxes in relation to First Student
and First Transit.
North American insurance provisions
During the period there was a charge of £22.4m for insurance costs comprising
£11.4m in relation to First Student and First Transit due to a deterioration
in respect of prior years’ claims, and a charge of £11.0m for additional
provisions required in Greyhound also due to a deteriorating insurance
position on prior year claims.
The adjusting items in relation to finance cost adjustments – continuing
operations are as follows:
Total make-whole costs (bonds and facilities)
Costs of £50.0m comprise a charge of £30.4m for the early repayment of the
$275m US Private Placement (USPP) and a charge of £19.6m for the early
repayment of the £325m 2022 Bond.
Write off of unamortised bridge, bond and facility costs
There was a charge of £8.6m for unamortised fees which had been capitalised
and were being amortised over the terms of the £325m 2022 Bond, the $275m
USPP and various bank facilities, including the £800m RCF and Bridge
facilities which were cancelled on completion of the sale of First Student and
First Transit.
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 classified as discontinued
operations on the face of the income statement and the balance sheet and cash
flow statement adjusted accordingly. The transaction was 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.
On 21 October 2021 the Group announced the sale of Greyhound lines Inc. to a
wholly owned subsidiary of FlixMobility GmbH. Accordingly, Greyhound US is
also classified as discontinued operations and held for sale as at the balance
sheet date. Greyhound Canadian operations were not sold but were permanently
closed in May 2021. Comparatives for this business are included within
continuing operations albeit non-core activities.
Group statutory operating profit
Statutory operating profit from continuing operations was £52.2m (H1 2021:
£37.8m) reflecting the £0.4m credit from net adjusting items (compared with
£(17.8)m in net adjusting items in H1 2021).
Finance costs and investment income
Net finance costs were £128.0m (H1 2021: £83.7m) with the increase
principally due to debt make-whole costs of £50.0m in total in relation to
the early settlement of the £325m 2022 bond and the $275m US Private
Placement (USPP), partially offset by lower finance costs following the
repayment of debt after receipt of the First Student and First Transit
disposal proceeds. Net finance costs for FY22 are estimated to be c.£100m
including c.£40m in IFRS16 lease interest but excluding debt make-whole
costs.
Profit before tax
Adjusted profit before tax as set out in note 3 to the financial statements
was £103.7m (H1 2021: loss of £(73.3)m) including discontinued operations.
An overall credit of £412.8m (including £58.6m of adjusting items in net
finance costs) (H1 2021: charge of £(26.8)m) for adjustments principally
reflecting the profit on sale of First Student and First Transit, resulted in
a statutory profit before tax of £516.5m (H1 2021: loss of £(100.1)m).
Tax
The tax charge, on adjusted profit before tax including discontinued
operations, for the period was £21.6m (H1 2021: credit of £13.5m), There was
a tax credit of £24.3m (H1 2021: charge of £1.8m) relating to adjusting
items and a one-off tax charge of £5.9m (H1 2021: nil) from adjustments to
deferred tax. The total statutory tax charge was £3.2m (H1 2021: credit of
£11.7m). The actual tax paid during the period was £12.2m (H1 2021: £0.8m).
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 6.6p (H1 2021: (5.3)p). Basic EPS was 42.4p (H1 2021:
(8.3)p).
Shares in issue
As at 25 September 2021 there were 1,215.3m shares in issue (H1 2021:
1,204.7m), excluding treasury shares and own shares held in trust for
employees of 7.6m (H1 2021: 16.1m). 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) in the period was 1,203.4m (H1 2021:
1,203.3m). Subsequent to the period end, 476.2m shares were acquired pursuant
to the tender offer and cancelled. As at 6 December 2021 there were 746.8m
shares in issue (excluding treasury shares and own shares held in trust for
employees), and as a result the weighted average number of shares in issue at
the end of the current financial year (excluding treasury shares and own
shares held in trust for employees) is expected to be c.1.1bn.
Adjusted cash flow
The Group's adjusted cash flow of £1,704.7m (H1 2021: £197.9m) in the period
reflects positive operational cash flow from the continuing divisions as well
as the proceeds from the sales of First Student and First Transit, offset by
repayment of debt and de-risking of certain retained liabilities (including
the Greyhound US and Canadian pension schemes as well as the £220m in
payments made into the pension schemes in the UK).
Underlying operational cash flow in the period was £113.5m (H1 2021:
£763.5m), 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 now anticipates c.£60-65m in
capital expenditure net of government grants in FY22, some of which was
deferred from the last financial year, and c.£60m in FY23. Cash generated in
First Bus includes working capital inflows from CBSSG receipts while First
Rail recorded a cash outflow primarily due to timing of ring-fenced cash
outflows and losses in the open access operations. The adjusted cash flow is
set out below:
26 weeks to 25 September 2020 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
£m
EBITDA 478.9 465.0 1,169.5
Other non-cash income statement charges 480.6 7.1 9.6
Gain on disposal of subsidiary (479.4) - -
Working capital (7.6) 290.6 166.1
Movement in other provisions (20.4) 8.8 72.7
Pension payments in excess of income statement charge (338.6) (8.0) (59.2)
Cash generated by operations 113.5 763.5 1,358.7
Capital expenditure and acquisitions (142.2) (134.6) (391.0)
Proceeds from disposal of property, plant and equipment 3.4 4.4 119.0
Proceeds from disposal of business 2,293.4 - -
Interest and tax (167.9) (81.8) (152.1)
Lease payments now in debt/other (395.5) (353.6) (675.7)
Adjusted cash flow 1,704.7 197.9 258.9
Foreign exchange movements (7.9) 9.1 78.5
Inception of new leases 172.4 (150.7) (210.2)
Lease payments now in debt 378.4 347.6 669.3
Other non-cash movements 144.0 (89.1) (161.4)
Movement in net debt in the period 2,391.6 314.8 635.1
Capital expenditure
Road cash capital expenditure was £114.5m (H1 2021: £59.0m) and comprised
First Student £72.6m (H1 2021: £28.7m), First Transit £21.8m (H1 2021:
£18.6m), Greyhound £11.0m (H1 2021: £0.8m), First Bus £8.7m (H1 2021:
£10.2m) and Group items £0.4m (H1 2021: £0.7m). First Rail capital
expenditure was £25.1m (H1 2021: £70.4m) and is typically matched by
receipts from the DfT under the current contractual arrangements or other
funding.
In addition, during the period leases in the Road divisions were entered into
with capital values in First Student of £8.4m (H1 2021: £24.5m), First
Transit of £1.3m (H1 2021: £10.4m), Greyhound of £2.1m (H1 2021: £0.4m)
and First Bus of £1.9m (H1 2021: £0.4m) and Group items £0.7m (H1 2021:
£0.2m). During the period First Rail entered into leases with a capital value
of £26.1m (H1 2021: £54.5).
Gross capital investment (fixed asset and software additions plus the capital
value of new leases) was £178.2m (H1 2021: £196.4m) and comprised First
Student £94.7m (H1 2021: £110.0m), First Transit £13.5m (H1 2021: £16.1m),
Greyhound £12.3m (H1 2021: £1.4m), First Bus £11.9m (H1 2021: £9.7m),
First Rail £44.9m (H1 2021: £58.8m) and Group items £0.9m (H1 2021:
£0.4m). 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.
Funding and risk management
During the period, the Group sold First Student and First Transit to EQT
Infrastructure in July for net cash proceeds of $3,123m and has subsequently
reorganised the Group's debt arrangements. On 31 August 2021, the Group
announced it had signed a new multi-year £300m sustainability-linked RCF with
a group of its relationship banks, which contains customary financial
covenants of Net Debt/EBITDA and EBITDA/Net Interest, all as defined within
the credit agreement. The new RCF replaced all the Group's former committed
syndicated and bilateral banking facilities, which have been repaid and
cancelled. The Group also repaid the UK Government's Covid Corporate Financing
Facility (CCFF) commercial paper, all of its Private Placement debt and
redeemed the £325m bonds due November 2022.
As at the period end, the Group had £1,161.0m of undrawn committed headroom
and free cash, being £300.0m (H1 2021: £320.4m) of committed headroom and
£861.0m (H1 2021: £645.2m) of net free cash after offsetting overdraft
positions.
Subsequent to the period end, the Group completed the tender offer which
returned £500m to shareholders and sold Greyhound Lines, Inc. to FlixMobility
GmbH in October for initial cash proceeds of £100.9m, received cash proceeds
from four Greyhound property sales, recovered funding awards from the ARP
relating to losses incurred while Greyhound was under the Group's ownership
during the pandemic, as well as rental income and the first tranches of the
deferred consideration. As a result, as at 6 December 2021, the Group had
£676.4m of undrawn committed headroom and free cash, being £300.0m of
committed headroom and £376.4m of net free cash after offsetting overdraft
positions.
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
6 December 2021, 73% of our ‘at risk’ UK crude requirements for the
current year (0.7m barrels) were hedged at an average rate of $59 per barrel,
63% of our requirements for the year to the end of March 2023 at $63 per
barrel, and 14% of our requirements for the year to the end of March 2024 at
$75 per barrel.
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:
26 weeks to 25 September 2021 26 weeks to 26 September 2020 52 weeks to 27 March 2021
Closing rate Effective rate Closing rate Effective rate Closing rate Effective rate
US Dollar 1.37 1.39 1.27 1.30 1.38 1.39
Canadian Dollar 1.73 1.72 1.71 1.72 1.74 1.75
Net debt
The Group’s Adjusted Net (Cash)/Debt at 25 September 2021, which excludes
the impact of IFRS 16 and the capitalisation of Right of Use Assets and First
Rail ring-fenced cash was £(630.4)m (H1 2021: £1,541.2m). Reported net debt
was £234.2m (H1 2021: £2,955.2m) after IFRS 16 and including First Rail
ring-fenced cash of £518.3m (H1 2021: £726.0m), as follows:
25 September 2021 26 September 2020 27 March 2021
Analysis of net debt Cont. Disc. Total Group Total Group £m Total Group £m
£m £m £m
Sterling bond (2021) - - - 352.7 349.9
Sterling bond (2022) - - - 322.7 323.4
Sterling bond (2024) 199.9 - 199.9 199.8 199.8
CCFF - - - 299.0 298.2
Bank loans and overdrafts 31.4 - 31.4 655.1 620.1
Supplier financing - - - 84.6 159.2
Lease liabilities 1,359.1 63.9 1,423.0 2,265.0 1,972.9
Senior unsecured loan notes - - - 215.0 198.8
Loan notes 0.6 - 0.6 0.7 0.7
Gross debt excluding accrued interest 1,591.0 63.9 1,654.9 4,394.6 4,123.0
Cash (892.2) (0.2) (892.4) (701.3) (834.3)
First Rail ring-fenced cash and deposits (518.3) - (518.3) (726.0) (638.5)
Other ring-fenced cash and deposits (10.0) - (10.0) (21.2) (24.4)
Net debt excluding accrued interest 170.5 63.7 234.2 2,946.1 2,625.8
IFRS 16 lease liabilities – Road 63.5 47.2 110.7 272.1 194.2
IFRS 16 lease liabilities – Rail 1,255.7 - 1,255.7 1,867.9 1,655.8
IFRS 16 lease liabilities – total 1,319.2 47.2 1,366.4 2,140.0 1,850.0
Net (cash)/debt excluding accrued interest (pre-IFRS 16) (1,148.7) 16.5 (1,132.2) 806.1 775.8
Adjusted Net (Cash)/Debt (pre-IFRS 16 and excluding First Rail ring-fenced cash) (630.4) 16.5 (613.9) 1,532.1 1,414.3
Under the terms of the First Rail contractual agreements, cash can only be
distributed by the TOCs either up to the lower amount of their retained
profits or the amount determined by prescribed liquidity ratios. The
ring-fenced cash represents that which is not available for distribution or
the amount required to satisfy the liquidity ratio at the balance sheet date.
As a result of the tender offer, Greyhound sale and related cash flows
subsequent to the period end described previously, the Group's Adjusted Net
Cash was £137.3m as at 6 December 2021.
Pensions
We have updated our pension assumptions as at 25 September 2021 for the
defined benefit schemes in the UK and North America. The net pension deficit
(comprising continued and discontinued operations) of £296m at the beginning
of the period moved to a net surplus of £10m at the end of the period
principally due to good asset performance and cash contributed to the schemes
(including cash payments of £220m to the First Bus Pension Scheme on 26 July
2021 and cash payments to the Greyhound ATU Pension Scheme of $23.8m on 30
March 2021 and $51.2m on 2 August 2021), as well as the disposal of the First
Student and First Transit pension arrangements. CAD36.2m was also paid into
the Greyhound Canada pensions scheme in the period following closure of the
business in May 2021. The main factors that influence the balance sheet
position for pensions and the principal sensitivities to their movement at 25
September 2021 are set out below:
Movement Impact
Discount rate +0.1% Reduce deficit by £38m
Inflation +0.1% Increase deficit by £32m
Life expectancy +1 year Increase deficit by £90m
The cash contributed to the legacy North American pension plans has enabled us
to accelerate our de-risking of these plans, and we are now planning our
strategy for terminating and winding-up the plans.
We are seeking to agree valuation results with the Trustees of the UK pension
schemes, and agree a strategy for reaching a self-sufficiency funding target.
We expect that the schemes should be able to reach the funding target without
any further deficit contributions. Funding for a Limited Partnership agreement
that was agreed as part of the sale of the North American divisions will be
available to the schemes in the event that it is required, but will otherwise
be returned to the company if the funding target it met within the agreed
timescales.
Balance sheet
Net assets have increased by £45.5m since 27 March 2021. The principal
reasons for the increase are profitability in the period, combined with a
stronger US dollar at closing on translation of the residual net assets in
North America, partially offset by actuarial losses in the pension schemes.
As at 25 As at 26 September 2020 As at 27 March 2021
September 2021
Balance sheets – Net assets/(liabilities) Cont. £m Disc. Total Group Total Group £m Total Group £m
£m £m
First Bus 509.4 - 509.4 408.6 328.1
First Rail 777.7 - 777.7 983.9 925.6
Greyhound (49.0) 136.9 87.9 (102.1) (54.5)
Discontinued operation – First Student - - - 2,334.5 2,381.1
Discontinued operation – First Transit - - - 359.3 298.0
Divisional net assets 1,238.1 136.9 1,375.0 3,984.2 3,878.3
Group items 53.2 - 53.2 (9.8) (5.2)
Net debt (170.5) (63.7) (234.2) (2,955.2) (2,668.7)
Taxation 5.2 0.4 5.6 (3.0) (50.3)
Total 1,126.0 73.6 1,199.6 1,016.2 1,154.1
Post-balance sheet events
* On 4 October acquired the remaining 50% shareholding in Somerset Passenger
Solutions Ltd (SPS) joint venture
* On 21 October announced the sale of Greyhound Lines, Inc (see discontinued
operations note 14) and completed on the sale on the same day
* On 18 November three special resolutions and one ordinary resolution were
passed to approve the tender offer to return £500m to shareholders. The
tender offer was executed on 2 December
* A number of legacy Greyhound properties were sold with proceeds totalling
$6.8m (£4.9m)
Going concern
The Directors have carried out a review of the Group’s financial projections
for the 18 months to 31 March 2023, with due regard for the risks and
uncertainties to which the Group is exposed, the uncertain economic climate
and the impact that this could have on trading performance, as described in
note 1 to the financial statements. Based on this review, the Directors
believe that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the condensed
consolidated financial statements have been prepared on the going concern
basis in preparing this half-yearly report.
Definitions
Unless otherwise stated, all financial figures for the 26 weeks to 25
September 2021 (the 'first half', the 'period' or 'H1 2022') include the
results and financial position of the First Rail business for the period ended
18 September 2021 and the results of all other businesses for the 26 weeks
ended 25 September 2021. The figures for the 26 weeks to 26 September 2020
(the 'prior period' or 'H1 2021') include the results and financial position
of the First Rail business for the period ended 26 September 2020 and the
results and financial position of all other businesses for the 26 weeks ended
26 September 2020. Figures for the 52 weeks to 27 March 2021 (‘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. Results for the 52
weeks to 26 March 2022 ('FY22') will include the results and financial
position for First Rail for the year ending 31 March 2022 and the results and
financial position of all the other businesses for the 52 weeks ending 26
March 2022.
'Cont.' or the 'Continuing operations' refer to First Bus, First Rail,
Greyhound retained assets and liabilities including Greyhound Canada and Group
items.
'Disc.' or the 'Discontinued operations' refer to First Student, First Transit
and Greyhound US.
References to 'adjusted operating profit', 'adjusted profit before tax', and
'adjusted EPS' throughout this document are before the gain on sale of First
Student and First Transit, partial reversal of impairment charges on Greyhound
and certain other items as set out in note 3 to the financial statements.
'EBITDA’ is adjusted operating profit less capital grant amortisation plus
depreciation.
The Group's 'Rail management fee-adjusted EBITDA' is First Bus and First Rail
EBITDA not from management fee-based TOCs, plus Rail attributable net income
from management fee-based TOCs, minus central costs.
The Group's 'Rail management fee-adjusted Attributable Profit' is First Bus
and First Rail adjusted operating profit not from management fee-based TOCs,
plus Rail attributable net income from management fee-based TOCs, minus
central costs, minus cash 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.
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.
For a full summary of the Principal Risks and Uncertainties facing the Group,
please refer to the Annual Report and Accounts 2021 at
https://www.firstgroupplc.com/investors/annual-report-2021.aspx.
David
Martin
Ryan Mangold
Executive
Chairman
Chief Financial Officer
8 December
2021
8 December 2021
Condensed consolidated income statement
Notes Unaudited Unaudited 26 weeks to 26 September 2020 (restated) £m Audited 52 weeks to 27 March 2021 (restated) £m
26 weeks to
25 September 2021 £m
Revenue 2, 4 2,139.1 2,053.1 4,319.0
Operating costs (2,086.9) (2,015.3) (4,148.0)
Operating profit 52.2 37.8 171.0
Investment income 5 0.3 1.5 1.8
Finance costs 5 (117.0) (72.8) (143.7)
(Loss)/profit before tax (64.5) (33.5) 29.1
Tax 6 26.4 (0.7) (3.4)
(Loss)/profit from continuing operations (38.1) (34.2) 25.7
Profit/(loss) from discontinued operations 14 551.4 (54.2) 65.4
Profit/(loss) for the period 513.3 (88.4) 91.1
Attributable to:
Equity holders of the parent 510.7 (99.3) 78.4
Non-controlling interests 2.6 10.9 12.7
513.3 (88.4) 91.1
Earnings per share
Earnings per share for (loss)/profit from continuing operations attributable to the ordinary equity holders of the company
Basic (3.4)p (3.7)p 0.8p
Diluted (3.4)p (3.7)p 0.8p
Earnings per share for (loss)/profit attributable to the ordinary equity holders of the company
Basic 7 42.4p (8.3)p 6.5p
Diluted 7 42.4p (8.3)p 6.4p
Adjusted results (from continuing operations) (1)
Adjusted operating profit 3 51.8 55.7 101.4
Adjusted loss before tax (6.3) (15.6) (40.5)
Adjusted EPS 7 (0.4)p (1.4)p (3.8)p
Adjusted diluted EPS (0.4)p (1.4)p (3.8)p
(1 ) Adjusted for certain items as set out in note 3.
The accompanying notes form an integral part of this consolidated income
statement.
Prior year restatements are detailed in note 1.
Condensed consolidated statement of comprehensive income
Unaudited Unaudited 26 weeks to 26 September 2020 (restated) £m Audited 52 weeks ended 27 March 2021 (restated) £m
26 weeks to
25 September
2021 £m
Profit/(loss) for the period 513.3 (88.4) 91.1
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes (30.7) (54.2) (49.3)
Deferred tax on actuarial losses on defined benefit pension schemes 2.7 9.4 15.5
Impact of UK tax rate change on deferred tax on actuarial losses 10.0 - -
(18.0) (44.8) (33.8)
Items that may be reclassified subsequently to profit or loss
Hedging instrument movements 15.5 (5.1) 16.4
Deferred tax on hedging instrument movements (3.9) 1.3 (3.6)
Exchange differences on translation of foreign operations – continuing operations 0.6 0.7 1.3
Exchange differences on translation of foreign operations – discontinued operations (1.7) (38.8) (112.2)
Reclassification of foreign currency translation reserve on discontinued operations (see 14(b)) (450.6) - -
(440.1) (41.9) (98.1)
Other comprehensive loss for the period (458.1) (86.7) (131.9)
Total comprehensive income/(loss) for the period 55.2 (175.1) (40.8)
Attributable to:
Equity holders of the parent 52.6 (186.0) (53.5)
Non-controlling interests 2.6 10.9 12.7
55.2 (175.1) (40.8)
Total comprehensive income/(loss)for the period attributable to owners of FirstGroup Plc arises from
Attributable to
Continuing operations (42.9) (85.4) (50.2)
Discontinued operations 98.1 (89.7) 9.4
55.2 (175.1) (40.8)
The accompanying notes form an integral part of this consolidated statement of
comprehensive income.
Prior year restatements are detailed in note 1.
Condensed consolidated balance sheet
Note Unaudited Unaudited 26 September 2020 (restated) £m Audited 27 March 2021 £m
25 September 2021
£m
Non-current assets
Goodwill 8 83.9 1,634.3 83.9
Other intangible assets 9 9.9 47.4 16.2
Property, plant and equipment 10 1,973.1 4,294.0 2,443.7
Deferred tax assets 68.1 41.3 35.0
Retirement benefit assets 23 61.2 52.5 52.9
Derivative financial instruments 18 3.0 0.8 1.2
Investments 2.0 38.0 8.3
2,201.2 6,108.3 2,641.2
Current assets
Inventories 27.6 55.9 29.4
Trade and other receivables 12 912.7 1,062.5 676.7
Current tax assets 0.3 5.4 0.4
Cash and cash equivalents 22 1,420.5 1,448.5 1,438.9
Derivative financial instruments 18 7.4 7.4 14.9
Current assets 2,368.5 2,579.7 2,160.3
Assets held for sale – continuing operations 11 2.4 4.2 11.9
Assets held for sale – discontinued operations 14 288.3 - 3,479.5
2,659.2 2,583.9 5,651.7
Total assets 4,860.4 8,692.2 8,292.9
Current liabilities
Trade and other payables 13 1,508.1 1,950.0 1,587.6
Tax liabilities – Current tax liabilities 8.4 8.8 14.4
– Other tax and social security 54.8 20.5 34.6
Borrowings 15 593.2 1,372.4 1,326.2
Derivative financial instruments 18 0.8 28.4 11.8
Provisions 19 83.7 395.1 74.4
Current liabilities 2,249.0 3,775.2 3,049.0
Liabilities held for sale – discontinued operations 14 214.7 - 1,136.6
2,463.7 3,775.2 4,185.6
Net current assets/(liabilities) 119.5 (1,195.5) (888.7)
Non-current liabilities
Borrowings 15 997.8 3,051.8 2,492.0
Derivative financial instruments 18 - 13.6 1.2
Retirement benefit liabilities 23 51.2 412.4 324.5
Deferred tax liabilities - 20.4 -
Provisions 19 148.1 402.6 135.5
1,197.1 3,900.8 2,953.2
Total liabilities 3,660.8 7,676.0 7,138.8
Net assets 1,199.6 1,016.2 1,154.1
Equity
Share capital 20 61.1 61.1 61.1
Share premium 690.5 689.0 689.6
Hedging reserve 6.8 (25.0) (3.4)
Other reserves 4.6 4.6 4.6
Own shares (6.4) (9.8) (9.0)
Translation reserve 73.0 604.8 524.7
Retained earnings 392.0 (286.3) (89.6)
Equity attributable to equity holders of the parent 1,221.6 1,038.4 1,178.0
Non-controlling interests (22.0) (22.2) (23.9)
Total equity 1,199.6 1,016.2 1,154.1
Prior year restatements are detailed in note 1.
The accompanying notes form an integral part of this consolidated balance
sheet.
COndensed consolidated statement of changes in equity
Share capital £m Share premium £m Hedging reserve £m Other reserves £m Own shares £m Translation reserve £m Retained earnings £m Total £m Non-controlling interests £m Total equity £m
Balance at 28 March 2021 61.1 689.6 (3.4) 4.6 (9.0) 524.7 (89.6) 1,178.0 (23.9) 1,154.1
Income for the period - - - - - - 510.7 510.7 2.6 513.3
Other comprehensive loss for the period - - 11.6 - - (451.7) (18.0) (458.1) - (458.1)
Total comprehensive income/(loss) for the period - - 11.6 - - (451.7) 492.7 52.6 2.6 55.2
Shares issued - 0.9 - - - - - 0.9 - 0.9
Hedging instrument movements transferred to balance sheet (net of tax) - - (1.4) - - - - (1.4) - (1.4)
Disposal of non-controlling interest in First Transit - - - - - - - - (0.7) (0.7)
Movement in EBT and treasury shares - - - - 2.6 - (13.4) (10.8) - (10.8)
Share-based payments - - - - - - 2.3 2.3 - 2.3
Balance at 25 September 2021 (unaudited) 61.1 690.5 6.8 4.6 (6.4) 73.0 392.0 1,221.6 (22.0) 1,199.6
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
Loss for the period - - - - - - (99.3) (99.3) 10.9 (88.4)
Other comprehensive (loss)/ income for the period - - (3.8) - - (38.1) (44.8) (86.7) - (86.7)
Total comprehensive (loss)/income for the period - - (3.8) - - (38.1) (144.1) (186.0) 10.9 (175.1)
Shares issued 0.1 0.4 - - - - - 0.5 - 0.5
Hedging instrument movements transferred to balance sheet (net of tax) - - 14.4 - - - - 14.4 - 14.4
Reserves reclassification - - (7.3) - - 7.3 - - - -
Movement in EBT and treasury shares - - - - 0.4 - (5.3) (4.9) - (4.9)
Share-based payments - - - - - - 4.6 4.6 - 4.6
Balance at 26 September 2020 (unaudited) 61.1 689.0 (25.0) 4.6 (9.8) 604.8 (286.3) 1,038.4 (22.2) 1,016.2
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 income/(loss) 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
Hedging instrument movements transferred to balance sheet (net of tax) – – 15.2 – – – – 15.2 – 15.2
Reserves reclassification – – (3.1) – – – 3.1 – – –
Dividends paid – – – – – – (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.
Condensed consolidated cash flow statement
Note Unaudited Unaudited 26 weeks to 26 September 2020 (restated) £m Audited 52 weeks 27 March 2021 £m
26 weeks to 25 September 2021
£m
Cash generated by operations 113.5 763.5 1,358.7
Tax paid (12.2) (0.8) (4.5)
Interest paid (156.0) (82.6) (149.8)
Net cash from operating activities 21 (54.7) 680.1 1,204.4
Investing activities
Interest received 0.3 1.6 2.0
Proceeds from disposal of property and plant and equipment 3.4 4.4 119.0
Purchases of property, plant and equipment (135.2) (129.4) (385.5)
Purchases of software (4.4) (3.8) (4.1)
Net proceeds from disposal of subsidiaries (net of cash disposed) (1) 2,293.4 - -
Acquisition of business (2.7) (1.4) (1.4)
Net cash used in investing activities 2,154.8 (128.6) (270.0)
Financing activities Shares purchased by Employee Benefit Trust (17.4) (4.7) (4.7)
Shares issued 0.6 - 0.5
Dividends paid to non-controlling shareholders (0.3) - -
Proceeds from CCFF - 299.0 298.2
Repayments of CCFF (298.2) - -
Proceeds from borrowings - 115.5 117.7
Repayment of bank facilities (581.2) (86.0) (89.6)
Repayment of bond issues (675.4) - -
Repayment of senior unsecured loans (200.1) - -
Repayment of loan notes - (8.7) (8.7)
Repayments of lease liabilities (378.3) (347.5) (669.2)
Fees for finance facilities (1.7) (1.4) (2.1)
Net cash flow used in financing activities (2,152.0) (33.8) (357.9)
Net (decrease)/increase in cash and cash equivalents before foreign exchange movements (51.9) 517.7 576.5
Cash and cash equivalents at beginning of period 1,443.4 886.5 886.5
Foreign exchange movements (3.9) (15.3) (19.6)
Cash and cash equivalent at the end of the period 1,387.6 1,388.9 1,443.4
(1 ) £2,293.4m comprises cash consideration received of
£2,377.3m less cash and cash equivalent sold of £83.9m per Note 14 (b).
Cash and cash equivalents are included within current assets on the
consolidated balance sheet. Cash and cash equivalents includes ring-fenced
cash of £528.3m in H1 2022 (H1 2021: £738.1m; full year 2021: £662.9m). 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 of the Emergency Measures Agreement. In the prior
periods, 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 Note Unaudited Unaudited 6 months to 25 September 2020 (restated) £m Audited 52 weeks to 27 March 2021 (restated) £m
6 months to 26 September 2021
£m
Cash and cash equivalents – Balance Sheet 1,420.5 1,448.5 1,438.9
Cash and cash equivalents – Held for Sale 0.2 - 58.3
Cash and cash equivalents – Total operations 1,420.7 1,448.5 1,497.2
Bank overdraft 15 (33.1) (59.6) (53.8)
Balances per consolidated cash flow statement 1,387.6 1,388.9 1,443.4
Prior year restatements are detailed in note 1.
Note to the condensed consolidated cash flow statement – reconciliation of
net cash to movement in net debt
Note Unaudited Unaudited 26 weeks to 26 September 2020 (restated) £m Audited 52 weeks to 27 March 2021 (restated) £m
26 weeks to 25 September 2021
£m
Net (decrease)/increase in cash and cash equivalents in period (51.9) 517.7 576.5
Decrease/(increase) in debt excluding leases 1,756.6 (319.8) (317.6)
Adjusted cash flow 1,704.7 197.9 258.9
Payment of lease liabilities 378.3 347.6 669.3
(Inception)/termination of leases Fees capitalised against bank facilities and bond issues 172.4 (1.7) (150.7) 0.1 (210.2) 2.1
Foreign exchange movements (7.9) 9.1 78.5
Other non-cash movements 145.8 (89.2) (163.5)
Movement in net debt in period 2,391.6 314.8 635.1
Net debt at beginning of period (2,625.8) (3,260.9) (3,260.9)
Net debt at end of period 22 (234.2) (2,946.1) (2,625.8)
Other non-cash movements consist of movements in supplier financing of
£159.2m in H1 2022 (H1 2021: £(84.6)m; full year 2021: £(159.2)m)
amortisation of debt issue fees of £(12.5)m in H1 2022 (H1 2021: £(1.4)m;
full year 2021: £(3.2)m) and other non-cash movements of £(0.9)m in H1 2022
(H1 2021: £(3.2)m; full year 2021: £(1.1)m).
Supplier Financing are amounts due to the principal supplier of school buses
in the US and Canada for deliveries of vehicles. As the ageing of these
payables exceed 6 months interest starts to be charged and they are
subsequently transferred from trade payables to borrowings. On completion of
the sale of First Student & First Transit, this liability was transferred to
EQT infrastructure.
Management considers that adjusted cash flow is an appropriate measure for
assessing the Group cash flow as it is the measure that is used to assess both
Group and divisional cash performance against budgets and forecasts. Adjusted
cash flow is stated prior to cash flows in relation to debt excluding leases.
This is a change and a restatement from the treatment reported in the
financial statement for the 52 weeks to 27 March 2021 and for the 26 weeks to
26 September 2020 when adjusted cashflow was stated prior to cash flows in
relation to debt and to finance leases.
The accompanying notes form an integral part of this consolidated cash flow
statement.
Notes to the half yearly results
1 Basis of preparation
The half yearly results for the 26 weeks to 25 September 2021 include the
results and financial position of the First Rail division for the period ended
18 September 2021 and the results and financial position for the other
divisions for the 26 weeks ended 25 September 2021. The comparative figures
for the 26 weeks to 26 September 2020 include the results and financial
position of the First Rail division for the period ended 26 September 2020 and
the results and financial position of the other divisions for the 26 weeks
ended 26 September 2020.
These half yearly results do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Statutory accounts for the
year ended 27 March 2021 were approved by the board of directors on 27 July
2021 and delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of the Companies
Act 2006. The half yearly results have been reviewed, not audited.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
FirstGroup plc transitioned to UK-adopted International Accounting Standards
in its consolidated financial statements on 28 March 2021. This change
constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of
the change in framework. This condensed consolidated interim financial report
for the half-year reporting period for the 26 weeks to 25 September 2021 has
been prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 27 March 2021, which
has been prepared in accordance with both “International Accounting
Standards in conformity with the requirements of the Companies Act 2006” and
“International Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union”, and any public
announcements made by FirstGroup plc during the interim reporting period.
The accounting policies applied are consistent with those described in the
Group’s latest annual audited financial statements, except for a number of
amendments to IFRSs which became effective for the financial years beginning
on 1 April 2021 and for income tax which at the interim is based on applying
expected full year effective tax rates to the interim results. There has been
no material change as a result of applying these amendments. We have also
included certain non-GAAP measures in order to reflect management’s reported
view of financial performance excluding other intangible asset amortisation
charges and certain other items.
These results are unaudited but have been reviewed by the auditor. The
comparative figures for the 26 weeks to 26 September 2020 are unaudited and
are derived from the half-yearly financial report for that period, which was
also reviewed by the auditor.
Restatements
The results for the 26 weeks to 26 September 2020 and for the 52 weeks to 27
March 2021 have been restated since they have been split into the results for
the continuing operations and the results for the discontinued operations.
The cash and cash equivalents balance and trade and other payables balance at
26 September 2020 has been restated. This restatement is in relation to
certain entities in First Transit, which the group controls that were
incorrectly excluded from consolidation at 26 September 2020, but were
correctly consolidated and included at 27 March 2021. The effect of this
restatement is an increase in cash balances of £9.1m and a corresponding
increase in payables of £9.1m at 26 September 2020. There is no impact on the
consolidated income statement.
Going concern – basis of preparation
The Directors have carried out a review of the Group’s financial projections
for the 18 months to 31 March 2023, with due regard for the risks and
uncertainties to which the Group is exposed, the uncertain economic climate
and the impact that this could have on trading performance. Based on this
review, the Directors believe that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the half yearly results have been prepared on the going concern
basis in preparing this half-yearly report.
Update since the FY21 results
As noted in the Chief Executive’s review and business reviews, following the
sale of First Student, First Transit and Greyhound the Group has repaid the
vast majority of the debt (as at half year end in net cash position of
£613.9m before Rail ring fenced cash and IFRS16) and partially de-risked the
Greyhound legacy liabilities, combined with substantially greater clarity
about the resilience of the remaining portfolio.
1 Basis of preparation (continued)
* The contractual arrangements in First Rail through the ERMA in Avanti,
NRC’s in SWR and TPE and the EMA in GWR, provide confidence in the near-term
cash generation of our Rail businesses
* In our First Bus division, grant funding for high service levels from the UK
government and other contract customers throughout the FY21 pandemic period
have demonstrated a commitment to maintaining the essential public transport
services the Group operates
* Passenger volume levels in First Bus and First Rail have performed broadly
in line with 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 and until
these services can be run commercially
* On 31 August 2021, the Group announced it had signed a new £300m
sustainability-linked Revolving Credit Facility (‘RCF’) with a group of
its relationship banks. This committed RCF has an initial maturity of four
years and remains undrawn
* Management has demonstrated the flexibility of our businesses to generate
cash flows well within required debt facility and covenant levels since the
pandemic struck.
Evaluation of going concern
The Board evaluated whether it was appropriate to prepare the half yearly
results 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.
Consistent with prior years, the Board’s going concern assessment is based
on a review of future trading projections, including whether 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 assumptions on passenger volume recovery and government
support arrangements.
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 the easing 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. The base case also includes £500m return of
capital to shareholders in December 2021 and substantial de-risking of the
Greyhound historic insurance liabilities and pensions liabilities retained by
the Group.
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 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 75% of pre-pandemic
levels. In First Rail, the downside case assumes reduced TOC performance fee
awards and operating losses in Hull Trains and East Coast Open Access. The
downside case also assumes a lower net recovery of Greyhound funds
post-closing.
Mitigating actions
If the impact on the Group of the pandemic were to be more protracted than
assumed in the base case or downside case scenarios, the Group would reduce
and defer planned growth capex spend and further reduce costs in line with a
lower volume operating environment to the extent that the essential services
we operate in Bus 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
and covenant headroom over the going concern period is sufficient for the
business needs.
Operating and financial review
The operating and financial review considers the impact of seasonality on the
Group and also the principal risks and uncertainties facing it in the
remaining six months of the financial year.
1 Basis of preparation (continued)
Summary of significant events in the Group
Significant events in relation to the change in the financial position and
performance of the Group:
On 21 July 2021 the Group completed the sale of First Student and First
Transit divisions to EQT Infrastructure for net disposal proceeds of $3,194m
(excluding earn out). The resultant gain on disposal was £479.4m which
includes £450.6m of cumulative foreign exchange gains on these businesses
since original acquisition recycled through the Income Statement.
Following the receipt of the proceeds of sale, the Group has completed the
reorganisation of the Group's debt arrangements and settled the majority of
its outstanding financial indebtedness as set out below:
Debt repayments since completion of sale of Student and Transit Date £m $m C$m
Bank debt:
China Construction Bank Bilateral 15 July - 82.5 -
Bridge Facility 23 July 250.0 - -
RCF Repayments 23 July - 295.0 -
Caixa Bank Bilateral 26 July 60.0 - -
RCF Repayment 28 July 70.0 50.0 -
RCF Repayment 3 August - - 95.0
380.0 427.5 95.0
Other debt:
Government CCFF 28 July 299.0 - -
US Private Placement (inc Make-whole costs (MW)) 11 August - 321.1 -
Bond 6 Repayment (inc MW) 17 September 358.3 - -
657.3 321.1 -
Total debt repaid 1,037.3 748.6 95.0
In addition £220m was paid into the First Bus Pension Scheme on 26 July 2021
and $51.2m was paid into the Greyhound ATU Pension Scheme on 2 August 2021.
On 31 August 2021, the Group signed a new multi-year £300m
sustainability-linked Revolving Credit Facility ('RCF') with a group of its
relationship banks. The new RCF replaced all the Group's former committed
syndicated and bilateral banking facilities, which were repaid and cancelled.
In First Rail both TPE and SWR transitioned from Emergency Recovery Measures
Agreements to National Rail Contracts during the period.
In First Bus following the end of the CBSSG scheme across England on 30 August
2021, the DfT has introduced a new £204m discretionary Bus Recovery Grant
designed to support local bus operators to return to commercial operation
during the period 1 September 2021 to 15 March 2022. Each operator will
receive a share of the overall funding based on lost revenue and relative
mileage.
Greyhound became eligible for Coronavirus Economic Relief for Transportation
Services funding during the period. Although the funding was not received
until shortly after period end as there was certainty of the arrangements at
the balance sheet date a receivable of $84.6m and deferred income of the same
amount has been recognised at the balance sheet date.
On 21 October 2021, the Group announced the completion of the sale of
Greyhound Lines, Inc. to a wholly-owned subsidiary of FlixMobility GmbH for a
cash consideration of $165m. As a result of the disposal there has been a
partial reversal of prior years’ impairment charges of £55.4m.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of these half yearly results requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results might differ from these estimates.
In preparing these half yearly results, the significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 27 March 2021.
This half-yearly report has been prepared in respect of the Group as a whole
and accordingly matters identified as being significant or material are so
identified in the context of FirstGroup plc and its subsidiary undertakings
taken as a whole.
This half-yearly financial report was approved by the Board on 8 December
2021.
2 Revenue
The principal direct fiscal support recognised during the period comprised
£920.2m (H1 2021: £1,314.7m; full year 2021: £2,900.7m) of EMA funding in
First Rail, £30.3m (H1 2021 £48.4m; full year 2021: £99.7m) of CARES Act
5311(f) and American Rescue Plan Act funding in Greyhound and £127.9m (H1
2021: £180.4m; full year 2021: £266.5m) of CBSSG, concessions and other
funding in First Bus. These are recognised within revenue in accordance with
IFRS 15 (as per our policy on revenue recognition in the FY2021 Annual
Accounts), when control of the good or service is transferred to the customer
and the group is entitled to the consideration.
Government grants were obtained in the UK and in North America businesses,
through the UK furlough scheme and the CARES and CEWS Acts respectively. There
was £7.7m (H1 2021: £55.7m; full year 2021: £95.7m) of CARES and CEWS Act
employee retention credits in First Student, £2.8m (H1 2021: £16.7m; full
year 2021: £28.9m) in First Transit and £0.2m (H1 2021: £2.6m; full year
2021: £3.2m) in Greyhound accounted for through operating costs, as well as
furlough support obtained in the UK. These amounts were recognised as an
offset to the related costs when conditions were met and expenses were
incurred.
The main direct fiscal support recognised in revenue over time for each
division has been as follows:
Greyhound: Subsidy funding was made available under section 5311(f) of the
terms of the US CARES Act and under the American Recue Plan Act. These Acts
allow Greyhound to claim for losses made from operating intercity bus services
in the US after 20 January 2020. The subsidy funding receivable is recognised
as other revenue in the period in which the
services are provided and the operational costs are incurred.
First Bus: Funding schemes remain in place across the vast majority of the
operation (initially CBSSG and now Bus Recovery Grants (BRGs) in England,
CSG-R in Scotland and BES2.0 in Wales). CBSSG, CSG-R and BES2.0 were all in
place from the start of the year and take the form of a grant payable to
operators to offset any losses incurred from running an agreed level of
mileage with CSG-R and BES2.0 likely to remain in place throughout the
financial year. CBSSG was replaced by BRG across England on 1 September 2021
with BRG being a more commercially focused scheme than its predecessor which
makes fixed payments to operators to run a minimum level of commercial mileage
but also gives them the flexibility to make greater levels of adjustments to
the network and increase fares to improve its underlying commercial viability.
First Rail: The Emergency Measures Agreements (EMAs), the Emergency Recovery
Measures Agreement (ERMAs) and the National Rail Contracts (NRCs) transferred
substantially all revenue and substantially all cost risk to the government
and for the full period our First Rail franchises were operated under the
terms of these arrangements.
* EMA in respect of GWR for the full period,
* ERMA in respect of WCP / Avanti for the full period
* ERMAs for SWR and TPE from 1 April 2021 to 30 May 2021, and the new NRCs
from 30 May 2021 to 25 Sept 2021
Under the arrangements, our franchised TOCs are paid a fixed management fee to
continue to operate the rail network at a service level agreed with the
government. Net DfT funding including the management and performance fee is
recognised as revenue in Rail franchise subsidy receipts, in line with the
revenue recognition policy for franchise subsidy receipts from the DfT.
Disaggregated revenue by operating segment is set out in note 4.
3 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
by management 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 strategic items (including material M&A and group restructuring
projects), costs of acquisitions including aborted acquisitions and impairment
of assets. Other items below £5.0m would not normally be considered as
adjusting items unless part of a larger strategic project, but items which
distort year-on-year comparisons that exceed this amount could potentially be
classified as an adjusting item and are assessed on a case by case basis. Such
potential adjusting other items include: restructuring and reorganisation
costs, property gains or losses, aged legal and self-insurance claims,
movements on insurance discount rates, onerous contract provisions and pension
settlement gains or losses. In addition, management assess divisional
performance before other intangible asset amortisation charges (excluding
software amortisation), 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 to adjusted operating profit on a continuing basis 26 weeks to 26 weeks to 26 September 2020 (restated) (2) £m 52 weeks to 27 March 2021 (restated) £m
25 September 2021
£m
Operating profit on a continuing basis 52.2 37.8 171.0
Adjustments for:
Other intangible asset amortisation charges - 0.1 0.2
Strategy costs - - (0.9)
Greyhound Canada closure 3.6 (0.5) 9.5
Impairment of land and buildings - - 16.6
Rail termination sums net of impairment reversal (4.0) 18.3 (95.7)
Loss on disposal of property - - 0.7
Total adjusting operating profit items on a continuing basis (0.4) 17.9 (69.6)
Adjusted operating profit on a continuing basis 51.8 55.7 101.4
26 weeks to 26 September 2020 has been restated to split the results into
continuing operations and discontinued operations.
Reconciliation of operating profit/(loss) to adjusted operating profit on a discontinued basis 26 weeks to 26 weeks to 26 September 2020 (restated) (2) £m 52 weeks to 27 March 2021 £m
25 September 2021
£m
Operating profit from discontinued operations including gain on sale of First Student and First Transit 592.3
Less Gain on sale of First Student and First Transit (479.4)
Operating profit/(loss) from discontinued operations 112.9 (54.2) 114.8
Adjustments for:
Other intangible asset amortisation charges 0.4 2.0 3.9
Other costs associated with the disposal of First Student and First Transit 31.5 5.2 -
Partial reversal of prior year impairments of Greyhound (55.4) - -
Professional fees relating to Greyhound 2.9 1.7 -
Employment taxes relating to First Student and First Transit 6.6 - -
Strategy costs - - 28.9
Gain on disposal of property - (71.8)
North America insurance provisions 22.4 - 32.2
Total adjusting operating profit items from discontinued operations 8.4 8.9 (6.8)
Adjusted operating profit from discontinued operations 121.3 (45.3) 108.0
Reconciliation of profit/(loss) before tax to adjusted (loss)/profit before tax 26 weeks to 26 weeks to 26 September 2020 (restated) (2) £m 52 weeks to 27 March 2021 £m
25 September 2021
£m
Profit/(loss) before tax (including discontinued operations) (3) 516.5 (100.1) 115.8
Adjusting operating profit items – continuing operations (0.4) 17.9 (69.6)
Adjusting operating profit items – discontinued operations 8.4 8.9 (6.8)
Gain on sale of First Student and First Transit (479.4) - -
Adjusting operating profit items – total operations (471.4) 26.8 (76.4)
Adjusting finance cost items – continuing operations 58.6 - -
Adjusted profit/(loss) before tax including discontinued operations 103.7 (73.3) 39.4
Adjusted tax credit/(charge) (21.6) 13.5 (4.2)
Non-controlling interests (1) (2.6) (3.8) (6.1)
Adjusted earnings including discontinued operations 79.5 (63.6) 29.1
1. Statutory non-controlling interests principally reflects Avanti West Coast
and South Western Rail. Adjusted non-controlling interests of £nil in H1 2022
(H1 2021: £7.1m; full year 2021: £6.6m) relate to termination sums and other
adjustments at South Western Rail.
2. The prior periods the 26 weeks to 26 September 2020 and the 52 weeks to 27
March 2021 have been restated to split the results into continuing operations
and discontinued operations.
3. See note 4.
3 Reconciliation to non-GAAP measures and performance (continued)
The principal adjusting items in relation to the operating profit adjustments
- continuing business are as follows:
Greyhound Canada closure
Costs of £3.6m in relation to Greyhound Canada restructuring and closure
costs were incurred during the period.
Rail termination sums
A £4.0m credit which represents the final adjustments in relation to residual
maters in relation to TPE and SWR termination sums.
The principal adjusting items in relation to the operating profit adjustments
- discontinued operations are as follows:
Other intangible asset amortisation charges
The amortisation charge for the period was £0.4m.
Gain on sale of First Student and First Transit
As a result of the disposal of First Student and First Transit on 21 July
2021, a gain on sale of £479.4m was realised. This includes a gain of
£450.6m as a result of the unrealised translation reserves that have been
realised on the disposal of First Student and First Transit. This represents
the cumulative foreign currency gains on these businesses since date of
original acquisition and arises primarily from the Laidlaw acquisition in 2007
where the US Dollar rate was approximately $2.00. See note 14 for more
details.
Other costs associated with the disposal of First Student and First Transit
Costs of £31.5m were incurred during the period which are associated with the
disposal of First Student and First Transit but not directly attributable to
the sale. These costs are therefore not included in the gain on disposal
calculation. These comprise IT and other separation related costs, certain
management bonuses and incentives, premium on hedging costs in relation to
disposal proceeds, lease termination costs and certain other costs.
Partial reversal of prior year impairments of Greyhound
As a result of the terms of the disposal of the Greyhound US business on 21
October 2021, there is a credit of £55.4m representing the partial reversal
of the prior years’ impairment charges on tangible fixed assets and
intangible assets.
Professional fees relating to Greyhound
During the period there was a charge of £2.9m relating to the sale of
Greyhound comprising principally legal and professional costs.
Employment taxes relating to First Student and First Transit
There was a charge of £6.6m during the period due to a one-off charge for
accelerated State and Federal Employment Taxes in relation to First Student
and First Transit.
North America insurance provisions
During the period there was a charge of £22.4m for insurance costs comprising
£11.4m in relation to First Student and First Transit due to a deterioration
in respect of prior years’ claims as the transportation industry continued
to deal with substantial insurance cost increases driven by the continued
escalation in higher value claims, and a charge of £11.0m for additional
provisions required in Greyhound also due to a deteriorating position.
The adjusting items in relation to the finance costs adjustments - continuing
operations are as follows:
For all of these costs the comparatives for H1 2021 and the full year 2021
were nil.
Total make-whole costs (bonds and facilities)
Costs of £50.0m comprise a charge of £30.4m for the early repayment of the
$275m US Private Placement (USPP) and a charge of £19.6m for the early
repayment of the £325m 2022 Bond.
Write off of unamortised bridge, bond and facility costs
There was a charge of £8.6m for unamortised fees which had been capitalised
and were being amortised over the terms of the £325m 2022 Bond, the $275m
USPP and various bank facilities, including the £800m RCF and Bridge
facilities which were cancelled on completion of sale of First Student and
First Transit.
3 Reconciliation to non-GAAP measures and performance (continued)
Reconciliation of constant currency including discontinued operations(1)
26 weeks to
26 September 2020
26 weeks to Reported (restated) £m Effect of foreign exchange £m Constant Currency £m % change
25 September 2021 £m
Revenue 3,109.7 3,101.6 (84.2) 3,017.4 +3.1%
Adjusted operating profit 173.1 10.4 13.0 23.4 +639.7%
Adjusted profit/(loss) before tax 103.7 (73.3) 17.6 (55.7) +286.2%
Adjusted EPS 6.6p (5.3)p 1.2p (4.1)p +261.0%
Net debt 234.2 2,946.1 (55.4) 2,890.7 (91.9)%
(1) Changes ‘in constant currency’ throughout this document are based on
retranslating H1 2021 foreign currency amounts at H1 2022 rates
Net debt as at 26 September 2020 has been restated and reduced by £9.1m at 26
September 2020, as cash balances relating to companies under the control of
First Transit had not been recognised in prior periods.
4 Business segments 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 were categorised as Discontinued Operations at 27
March 2021 and the sale of these completed on 21 July 2021. Greyhound was
categorised as Discontinued Operations at 25 September 2021 and the sale of
this completed on 21 October 2021.The divisions are managed separately in line
with the differing services that they provide and the geographical markets
which they operate in. There is a clear distinction between each division and
no judgement is required to identify each reportable segment.
The segment results for the 26 weeks to 25 September 2021 are as follows:
Continuing Operations Discontinued Operations
First Bus £m First Rail £m Grey- hound £m Group Items (1) £m Continuing Operations £m First Student £m First Transit £m Grey- hound £m Group Items (1) £m Total £m
Passenger revenue 266.3 699.2 - - 965.5 - - 132.6 - 1,098.1
Contract revenue 32.9 - - - 32.9 450.3 203.2 - - 686.4
Charter/private hire - - - - - 21.8 0.1 0.8 - 22.7
Rail franchise subsidy receipts - 948.4 - - 948.4 - - - - 948.4
Other 93.3 99.0 - - 192.3 7.4 96.4 58.0 - 354.1
Revenue 392.5 1,746.6 - - 2,139.1 479.5 299.7 191.4 - 3,109.7
Adjusted EBITDA (2) 55.5 304.2 (0.2) (12.2) 347.3 88.2 20.7 22.7 - 478.9
Depreciation (30.3) (302.5) (0.2) (1.3) (334.3) - - (10.5) - (344.8)
Software amortisation (0.7) (0.8) - (0.3) (1.8) - - (0.4) - (2.2)
Capital grant amortisation 2.3 38.3 - - 40.6 - - 0.6 - 41.2
Segment results 26.8 39.2 (0.4) (13.8) 51.8 88.2 20.7 12.4 - 173.1
Other intangible asset amortisation charges - - - - - - - (0.4) - (0.4)
Other adjustments (note 3) - 4.0 (3.6) - 0.4 (14.8) (6.5) 44.0 448.7 471.8
Operating profit/(loss) (3) 26.8 43.2 (4.0) (13.8) 52.2 73.4 14.2 56.0 448.7 644.5
Investment income - 0.2 - 0.1 0.3 - - - - 0.3
Finance costs (4) (1.3) (20.8) (0.7) (94.2) (117.0) (7.5) (0.7) (3.1) - (128.3)
Profit/(loss) before tax 25.5 22.6 (4.7) (107.9) (64.5) 65.9 13.5 52.9 448.7 516.5
Tax (3.2)
Profit after tax 513.3
1 Group items comprise central management and other items.
2 Adjusted 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.
4 Finance costs under Group items include £58.6m of adjusting items
for total make-whole costs (bonds and facilities) and for the write off of
unamortised bridge, bond and facility costs (see note 3).
4 Business segments information (continued)
Balance sheet at 25 September 2021 Total assets Total liabilities Net assets/(liabilities)
£m £m £m
Greyhound Retained 107.5 (156.5) (49.0)
First Bus 710.7 (201.3) 509.4
First Rail 2,093.7 (1,316.0) 777.7
2,911.9 (1,673.8) 1,238.1
Group items 171.3 (118.1) 53.2
Borrowings and Cash 1,420.5 (1,591.0) (170.5)
Taxation 68.4 (63.2) 5.2
Total 4,572.1 (3,446.1) 1,126.0
Greyhound (held for sale) (2) 287.7 (150.8) 136.9
Borrowings and Cash (1) 0.2 (63.9) (63.7)
Taxation 0.4 - 0.4
Total 288.3 (214.7) 73.6
Grand total 4,860.4 (3,660.8) 1,199.6
(1) Net debt includes lease liabilities recognised under IFRS 16 of
£1,423.0m and comprises Greyhound £75.6m, First Bus £84.6m, First Rail
£1,255.7m and Group items £7.1m.
(2) Greyhound US is classified as held for sale at 25 September 2021
and shown as such in the Condensed Consolidated Balance Sheet .
The segment results for the 26 weeks to 26 September 2020 (restated)(4) are as
follows:
Continuing Operations Discontinued Operations
First Bus £m First Rail £m Grey-hound £m Group Items (1) £m Continuing Operations £m First Student £m First Transit £m Grey-hound £m Group Items (1) £m Total £m
Passenger revenue 182.2 314.2 0.2 - 496.6 - - 88.9 - 585.5
Contract revenue 19.3 8.3 - - 27.6 393.2 401.4 - - 822.2
Charter/private hire - - - - - 5.6 0.3 1.0 - 6.9
Rail franchise subsidy receipts - 1,347.3 - - 1,347.3 - - - - 1,347.3
Other revenues (2) 109.5 72.1 - - 181.6 5.6 82.8 69.7 - 339.7
Revenue 311.0 1,741.9 0.2 - 2,053.1 404.4 484.5 159.6 - 3,101.6
Adjusted EBITDA (3) 48.1 333.8 (7.1) (11.9) 362.9 65.0 30.9 6.2 - 465.0
Depreciation (33.7) (275.6) (0.3) (1.5) (311.1) (113.6) (16.3) (13.1) - (454.1)
Software amortisation (0.7) (0.4) - (0.3) (1.4) (1.7) (1.2) (2.0) - (6.3)
Capital grant amortisation 3.7 1.6 - - 5.3 - - 0.5 - 5.8
Segment results 17.4 59.4 (7.4) (13.7) 55.7 (50.3) 13.4 (8.4) - 10.4
Other intangible asset amortisation charges - - (0.1) - (0.1) (1.5) - (0.5) - (2.1)
Other adjustments (note 3) - (18.3) 0.5 - (17.8) - - - (6.9) (24.7)
Operating (loss)/profit (3) 17.4 41.1 (7.0) (13.7) 37.8 (51.8) 13.4 (8.9) (6.9) (16.4)
Investment income - 1.3 - 0.2 1.5 0.1 - - - 1.6
Finance costs (1.2) (29.1) (0.4) (42.1) (72.8) (7.9) (1.2) (3.4) - (85.3)
(Loss)/profit before tax 16.2 13.3 (7.4) (55.6) (33.5) (59.6) 12.2 (12.3) (6.9) (100.1)
Tax 11.7
Loss after tax (88.4)
(1 ) Group items comprise central management and other items.
(2) Other revenue principally includes: First Transit - management
revenue, reimbursable costs and some of the COVID-19 relief revenue from
customers to cover fixed costs; Greyhound - £48.4m of CARES Act 5311(f)
funding; First Bus - £109.5m of CBSSG/CSG funding; First Rail - includes
Emergency Measurements Agreement management and performance fees, other
industry funded projects and other contractual services with third party rail
operators.
(3) Adjusted EBITDA is adjusted operating profit less capital grant
amortisation plus depreciation and software amortisation.
(4) The prior period, comprising the 26 weeks to 26 September 2020 has
been restated to split the results into continuing operations and discontinued
operations.
4 Business segments information (continued)
Balance sheet at 26 September 2020 Total assets (restated) Total liabilities (restated) Net assets/(liabilities)
£m £m £m
First Student 2,924.7 (590.2) 2,334.5
First Transit 640.8 (281.5) 359.3
Greyhound 272.8 (374.9) (102.1)
First Bus 746.4 (337.8) 408.6
First Rail 2,533.9 (1,550.0) 983.9
7,118.6 (3,134.4) 3,984.2
Group items 87.5 (97.3) (9.8)
Net debt (1) 1,439.4 (4,394.6) (2,955.2)
Taxation 46.7 (49.7) (3.0)
Total 8,692.2 (7,676.0) 1,016.2
Total assets and total liabilities at 26 September 2020 have been restated.
This restatement is in relation to certain entities, in First Transit, which
the group controls that were incorrectly excluded from consolidation in prior
years. The effect of the restatement is to increase the cash balances by
£9.1m and to increase the payables by £9.1m at 26 September 2020.
(1) Net debt includes lease liabilities recognised under IFRS 16 of
£2,140.0m and comprises First Student £105.9m, First Transit £35.9m,
Greyhound £68.9m, First Bus £53.4m, First Rail £1,868.0m and Group items
£7.9m.
The segment results for the 52 weeks to 27 March 2021 are as follows:
Continuing Operations Discontinued Operations
First Bus £m First Rail £m Grey-hound £m Group Items (1) £m Continuing Operations £m First Student £m First Transit £m Grey-hound £m Group Items (1) £m Total £m
Passenger revenue 383.1 537.7 0.2 - 921.0 - - 179.1 - 1,100.1
Contract revenue 46.5 - - - 46.5 1,191.8 867.1 - - 2,105.4
Charter/private hire - - - - - 18.1 0.6 1.3 - 20.0
Rail franchise subsidy receipts - 2,905.9 - - 2,905.9 - - - - 2,905.9
Other 269.3 176.3 - - 445.6 16.3 109.3 142.4 - 713.6
Revenue 698.9 3,619.9 0.2 – 4,319.0 1,226.2 977.0 322.8 - 6,845.0
Adjusted EBITDA (2) 100.8 711.1 (9.4) (29.1) 773.4 282.6 87.1 26.4 - 1,169.5
Depreciation (68.7) (607.9) (1.4) (2.8) (680.8) (223.6) (32.9) (24.8) - (962.1)
Software amortisation (1.4) (1.4) - (0.6) (3.4) (3.2) (2.5) (2.2) - (11.3)
Capital grant amortisation 5.9 6.3 - - 12.2 - - 1.1 - 13.3
Segment results 36.6 108.1 (10.8) (32.5) 101.4 55.8 51.7 0.5 - 209.4
Other intangible asset amortisation charges - - (0.2) - (0.2) (3.0) - (0.9) - (4.1)
Other adjustments (note 3) (5.8) 95.7 (10.1) (10.0) 69.8 9.3 (31.2) 63.1 (30.5) 80.5
Operating profit/(loss) (3) 30.8 203.8 (21.1) (42.5) 171.0 62.1 20.5 62.7 (30.5) 285.8
Investment income - 1.6 - 0.2 1.8 0.2 - - - 2.0
Finance costs (2.6) (55.7) (1.1) (84.3) (143.7) (17.8) (3.4) (7.1) - (172.0)
Profit/(loss)before tax 28.2 149.7 (22.2) (126.6) 29.1 44.5 17.1 55.6 (30.5) 115.8
Tax (24.7)
Profit after tax 91.1
1 Group items comprise central management and other items.
2 Adjusted 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.
4 Business segments information (continued)
Balance sheet at 27 March 2021 Total assets Total liabilities Net assets/(liabilities)
£m £m £m
Greyhound 266.1 (320.6) (54.5)
First Bus 732.1 (404.0) 328.1
First Rail 2,272.0 (1,346.4) 925.6
3,270.2 (2,071.0) 1,199.2
Group items 68.9 (107.0) (38.1)
Borrowings and Cash 1,438.9 (3,775.3) (2,336.4)
Taxation 35.4 (48.9) (13.5)
Total 4,813.4 (6,002.2) (1,188.8)
First Student 2,848.6 (467.5) 2,381.1
First Transit 572.2 (274.2) 298.0
Group - (10.0) (10.0)
Borrowings and Cash (1) 58.3 (347.7) (289.4)
Taxation 0.4 (37.2) (36.8)
Total 3,479.5 (1,136.6) 2,342.9
Grand total 8,292.9 (7,138.8) 1,154.1
1 Segment assets and liabilities are determined by identifying the
assets and liabilities that relate to the business of each segment but
excluding intercompany balances, net debt and taxation.
2 First Student and First Transit were classified as held for sale at
27 March 2021 and shown as such in the Condensed Consolidated Balance Sheet.
Reconciliation to Group Rail management fee-adjusted EBITDA and operating
profit
First Bus EBITDA comprises:
26 weeks to 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
25 September 2021
£m
Pre-IFRS16 EBITDA 47.6 39.9 84.5
IFRS16 adjustments (1) 7.9 8.2 16.3
First Bus adjusted EBITDA per segmental results table above 55.5 48.1 100.8
First Rail EBITDA comprises:
Non-management fees based TOCs (7.4) 2.0 (8.9)
Group’s share of management fee income available for dividends (net of tax and minority interest) 17.5 20.4 42.3
Tax 4.7 5.8 11.8
Minority interest 2.8 4.2 7.9
Depreciation relating to contracted TOCs 2.9 2.6 30.9
Pre-EMA/ERMA and other adjustments 4.1 10.3 18.6
IFRS16 adjustments (1) 279.6 288.5 608.6
First Rail adjusted EBITDA per segmental results table above 304.2 333.8 711.2
Group items EBITDA comprises:
Pre-IFRS16 EBITDA (13.0) (12.9) (30.8)
IFRS16 adjustments (1) 0.8 1.0 1.7
Group items adjusted EBITDA per segmental results table above (12.2) (11.9) (29.1)
First Rail adjusted operating profit comprises:
Non-management fees based TOCs (7.6) 2.4 (10.4)
Group’s share of management fee income available for dividends (net of tax and minority interest) 17.5 20.4 42.3
Tax 4.7 5.8 11.8
Minority interest 2.8 4.2 7.9
Pre-EMA/ERMA and other adjustments 4.1 10.3 18.6
IFRS16 adjustments/other (1) 17.7 16.3 37.9
First Rail adjusted operating profit per segmental results table above 39.2 59.4 108.1
(1) IFRS 16 adjustments to EBITDA principally reflect the add back of
operating lease rental costs charged to the income statement before the
adoption of IFRS 16. IFRS 16 adjustments to operating profit reflect operating
lease rental costs less depreciation charges on Right of Use Assets.
5 Investment income and finance costs
26 weeks to 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
25 September 2021
£m
Investment income
Bank interest receivable (0.3) (1.6) (2.0)
Finance costs
Bonds 15.4 27.5 55.8
Bank borrowings 14.9 9.2 15.7
Total make-whole costs (bonds and facilities) 50.0 - -
Write off of unamortised bridge, bond and facility costs 8.6 - -
Senior unsecured loan notes 3.2 4.7 9.1
CCFF funding - 0.9 2.0
Supplier financing - - 3.0
Loan notes - - 0.1
Finance charges payable in respect of leases 24.6 36.7 73.1
Notional interest on long term provisions 3.4 2.5 3.8
Notional interest on pensions 5.8 3.8 9.0
Notional interest - other 2.4 - 0.4
Total finance costs (including discontinued operations) 128.3 85.3 172.0
Total finance costs 128.3 85.3 172.0
Investment income (0.3) (1.6) (2.0)
Net finance costs (including discontinued operations) 128.0 83.7 170.0
Split:
Adjusted net finance costs 69.4 83.7 170.0
Other adjustments (note 3) 58.6 - -
128.0 83.7 170.0
Investment income of £nil in H1 2022 (H1 2021: £0.1m; full year 2021:
£0.2m) and finance costs of £11.3m (H1 2021: £12.5m; full year 2021:
£28.3m) relate to discontinued operations (note 14).
6 Tax on profit on ordinary activities
26 weeks to 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
25 September 2021
£m
Current tax charge 1.8 6.6 22.7
Deferred tax charge/(credit) 1.4 (18.3) 2.0
Total tax charge/(credit) (including discontinued operations) 3.2 (11.7) 24.7
The tax charge is reduced by a credit of £4.3m to reflect that the change in
the UK tax rate to 25% from 2023 has been substantively enacted.
Tax charge/(credit) attributable to:
(Loss)/profit from continuing operations (26.4) 0.7 3.4
Profit/(loss) from discontinued operations 29.6 (12.4) 21.3
The tax effect of the adjustments disclosed in note 3 was a credit of £24.3m
in H1 2022 (H1 2021: charge of £1.8m; full year 2021: charge of £30.6m). In
addition, there were further adjustments to brought forward tax balances
giving rise to a net charge of £5.9m (H1 2021: nil ; full year 2021: credit
of £10.1m),.
7 Earnings per share (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders
of £510.7m in H1 2022 (H1 2021: loss £99.3m; full year 2021: profit £78.4m)
by the weighted average number of ordinary shares in issue of 1,203.4m (H1
2021: 1,203.3m; full year 2021: 1,203.6m). 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.
25 September 2021 26 September 2020 number m 27 March 2021 number m
number
m
Weighted average number of shares used in basic calculation 1,203.4 1,203.3 1,203.6
Executive share options (1) - - 27.9
Weighted average number of shares used in the diluted calculation 1,203.4 1,203.3 1,231.5
The adjusted EPS is intended to highlight the recurring results of the Group
before amortisation charges and certain other adjustments as set out in note
3. A reconciliation is set out below:
26 weeks to 26 weeks to 26 September 2020 (restated) (2) 52 weeks to 27 March 2021
25 September 2021
£m EPS (p) £m EPS (p) £m EPS (p)
Basic profit/(loss) / EPS 510.7 42.4 (99.3) (8.3) 78.4 6.5
Amortisation charges (note 3) 0.4 - 2.1 0.2 4.1 0.3
Finance cost adjustments (note 3) 58.6 4.9 - - - -
Other adjustments (note 3) (471.8) (39.2) 24.7 2.1 (80.5) (6.8)
NCI on SWR (note 3) - - 7.1 0.6 6.6 0.6
Tax effect of above adjustments (24.3) (2.0) 1.8 0.1 30.6 2.5
Other adjustments to deferred tax assets 5.9 0.5 - - (10.1) (0.8)
Adjusted profit/(loss) and EPS attributable to the ordinary equity holders of the company 79.5 6.6 (63.6) (5.3) 29.1 2.3
Adjusted profit/(loss) from discontinued operations 84.4 7.0 (46.6) (3.9) 74.0 6.1
Adjusted loss EPS from continuing operations (4.9) (0.4) (17.0) (1.4) (44.9) (3.8)
26 weeks to 26 weeks to 26 September 2020 (restated) pence 52 weeks to 27 March 2021 pence
25 September 2021
pence
Diluted EPS 42.4 (8.3) 6.4
Adjusted diluted EPS 6.6 (5.3) 2.4
(1) For the period ended 26 weeks to 25 September 2021 and 26
September 2020 the loss from continuing operations make the executive share
options anti-dilutive and therefore have not been included in these periods.
(2) The prior period the 26 weeks to 26 September 2020 has been
restated to split the results into continuing operations and discontinued
operations.
8 Goodwill and impairment of assets
£m
Cost
At 28 March 2021 347.7
Transfers to assets held for sale – discontinued operations (266.1)
Foreign exchange movements 2.3
At 25 September 2021 83.9
Accumulated impairment losses At 28 March 2021 Transfers to assets held for sale – discontinued operations 263.8 (266.1)
Foreign exchange movements 2.3
At 25 September 2021 -
Carrying amount
At 25 September 2021 83.9
At 27 March 2021 83.9
At 26 September 2020 1,634.3
Goodwill transferred to held for sale – discontinued operations on 25
September 2021 in relation to Greyhound is shown in the table above. On 27
March 2021 goodwill of £1,442.0m (26 September 2020: £nil) was transferred
to held for sale - discontinued operations in relation to First Student and
First Transit. See note 14.
Disclosures including goodwill by cash generating unit (CGU), details of
impairment testing and sensitivities thereon are set out on pages 177 to 179
of the 2021 Annual Report.
First Bus
At 25 September 2021 we have revisited the First Bus impairment testing and
concluded there are no indicators of impairment since March 2021. Therefore no
adjustment to the carrying value of First Bus is required at 25 September
2021.
Hull Trains
At 25 September 2021 we have revisited the Hull Trains impairment testing and
concluded there are no indicators of impairment since March 2021. Therefore no
adjustment to the carrying value of Hull Trains is required at 25 September
2021.
Greyhound
For the 52 weeks ending 27 March 2021 the value of the Greyhound CGU was
assessed on a fair value less costs to sell basis for the purposes of the
impairment review, which was consistent with the intention to divest of the
business and this represents the recoverable amount in accordance with IAS36 .
The CGU valuation on a fair value less costs to sell basis was assessed as a
Level 3 fair value in the hierarchy as defined by IFRS 13, assessing the value
of a stand-alone Greyhound business using a discounted cash flow approach.
A risk adjusted view of the discounted future cash flows for the next three
years, including £180.7m of net property disposal proceeds, was prepared to
determine the potential value that a market participant may ascribe to the
Greyhound CGU. A long-term revenue growth rate of 1.0% (2020 1.0%) and
terminal margin of 5% (2020: 5.4%) on a stand-alone CGU basis has been
assumed. Cash flows are discounted using a pre-tax discount rate of 11.2%
(March 2020: 9.7%).
On this basis the fair value less costs to sell of Greyhound exceeded its
carrying value by £57.6m, therefore no additional impairment was required at
27 March 2021. An impairment reversal was not recognised due to uncertainties
caused by coronavirus. Greyhound was not classified as held for sale at that
time since there was not enough probability that the sale would complete
within one year.
At 25 September 2021 we have revisited the Greyhound CGU impairment testing
and concluded there are no indicators of impairment since March 2021. The
actual net proceeds from the disposal of the Greyhound US business on 21
October 2021 represent the FVLCTS of the business and indicate that the prior
year impairment losses on Greyhound have decreased. A credit of £55.4m
represents the partial reversal of the prior year impairments on Greyhounds
intangible (£4.2m) and tangible assets (owned £37.4m, right of use assets
£13.8m) and is included in non-Gaap items in the 26 weeks to 25 September
2021 in note 3.
9 Other intangible assets
Customer contracts £m Greyhound brand and trade name £m Software £m Total £m
Cost
At 28 March 2021 - 68.4 60.1 128.5
Additions - - 3.6 3.6
Disposals - - (0.3) (0.3)
Transferred to held for sale – discontinued operations - (55.6) (38.0) (93.6)
Foreign exchange movements - 0.5 0.5 1.0
At 25 September 2021 - 13.3 25.9 39.2
Accumulated amortisation and impairment
At 28 March 2021 - 60.8 51.5 112.3
Charge for the period - 0.2 2.0 2.2
Disposals - - (0.3) (0.3)
Impairment - 1.6 - 1.6
Impairment reversal - (3.4) (0.8) (4.2)
Transferred to held for sale – discontinued operations - (46.3) (36.8) (83.1)
Foreign exchange movements - 0.4 0.4 0.8
At 25 September 2021 - 13.3 16.0 29.3
Carrying amount
At 25 September 2021 - - 9.9 9.9
At 27 March 2021 - 7.6 8.6 16.2
At 26 September 2020 19.5 8.8 19.1 47.4
The impairment of £1.6m relates to the impairment of the Greyhound trading
name.
Other assets transferred to held for sale – discontinued operations on 25
September 2021 in relation to Greyhound are shown in the table above. On 27
March 2021 other intangible assets of £21.8m (26 September 2020: £nil) were
transferred to held for sale - discontinued operations in relation to First
Student and First Transit. See note 14.
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 28 March 2021 275.4 1,026.9 634.6 1,936.9
Additions 5.2 15.6 15.4 36.2
Transferred to held for sale – discontinued operations (35.9) (289.3) (65.6) (390.8)
Disposals (1.6) (34.6) (2.7) (38.9)
Reclassified as held for sale – continuing operations (0.4) - - (0.4)
Foreign exchange movements 0.6 2.5 0.5 3.6
At 25 September 2021 243.3 721.1 582.2 1,546.6
Accumulated depreciation and impairment
At 28 March 2021 77.5 720.2 389.9 1,187.6
Transferred to held for sale – discontinued operations (17.2) (214.0) (59.0) (290.2)
Charge for period 3.4 22.7 42.6 68.7
Disposals (0.9) (35.3) (2.6) (38.8)
Impairment reversal - (34.8) (2.6) (37.4)
Reclassified as held for sale – continuing operations - - - -
Foreign exchange movements 0.3 2.4 0.5 3.2
At 25 September 2021 63.1 461.2 368.8 893.1
Carrying amount
At 25 September 2021 180.2 259.9 213.4 653.5
At 27 March 2021 197.9 306.7 244.7 749.3
At 26 September 2020 347.2 1,513.7 237.5 2,098.4
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 28 March 2021 2,597.4 115.7 145.1 6.9 2,865.1
Additions 26.1 1.7 1.6 0.8 30.2
Disposals (101.7) (0.4) (0.6) - (102.7)
Transferred to held for sale – discontinued operations - (62.0) (41.6) (0.3) (103.9)
Foreign exchange movements - 0.5 0.4 - 0.9
At 25 September 2021 2,521.8 55.5 104.9 7.4 2,689.6
Accumulated depreciation and impairment
At 28 March 2021 1,059.6 61.4 45.9 3.9 1,170.8
Charge for period 259.4 6.8 8.6 0.7 275.5
Disposals (7.3) (0.2) (0.4) - (7.9)
Impairment reversal - (10.4) (3.4) - (13.8)
Transferred to held for sale – discontinued operations - (38.2) (16.6) (0.3) (55.1)
Foreign exchange movements - 0.4 0.1 - 0.5
At 25 September 2021 1,311.7 19.8 34.2 4.3 1,370.0
Carrying amount
At 25 September 2021 1,210.1 35.7 70.7 3.1 1,319.6
At 27 March 2021 1,537.8 54.3 99.2 3.0 1,694.3
At 26 September 2020 1,827.3 166.2 198.7 3.4 2,195.6
The discounted lease liability relating to the right of use assets included
above are shown in note 15.
At 25 September 2021 the Group had entered into contractual capital
commitments amounting to £134.7m, principally representing buses ordered in
the United Kingdom and commitments under South Western Railway, Avanti West
Coast Railway and East Coast Railway.
10 Property, plant and equipment (continued)
Rolling stock £m Land and buildings £m Passenger carrying vehicle fleet £m Other plant and equipment £m Total £m
Carrying amount
At 25 September 2021 1,210.1 215.9 330.6 216.5 1,973.1
At 27 March 2021 1,537.9 252.2 405.9 247.7 2,443.7
At 26 September 2020 1,827.3 513.4 1,712.4 240.9 4,294.0
The maturity analysis of lease liabilities is presented in note 16.
Property, plant and equipment and right of use assets transferred to held for
sale – discontinued operations on 25 September 2021 in relation to Greyhound
are shown in the tables above. On 27 March 2021 property plant and equipment
in total of £1,357.2m (comprising owned assets of £1,178.1m and right of use
assets of £179.1m) (26 September 2020: £nil) were transferred to held for
sale - discontinued operations in relation to First Student and First Transit.
See note 14.
Amounts recognised in income statement (including discontinued operations) 25 September 2021 £m 26 September 2020 £m 27 March 2021 £m
Depreciation expense on right of use assets 275.5 308.3 670.4
Interest expense on lease liabilities 24.6 36.7 73.1
Expense relating to short-term leases 0.3 3.2 4.7
Expense relating to leases of low value assets 1.7 1.7 3.4
302.1 349.9 751.6
11 Assets held for sale – continuing operations
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Assets held for sale 2.4 4.2 11.9
Assets held for sale from continuing operations primarily relate to properties
in Greyhound Canada.
12 Trade and other receivables
Amounts due within one year (from continuing operations) 25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Trade receivables 231.4 369.8 223.5
Loss allowance (10.2) (5.1) (7.3)
Trade receivables net 221.2 364.7 216.2
Other receivables 224.1 177.7 162.4
Contingent consideration receivable 101.8 - -
Amounts recoverable on contracts 21.2 72.4 23.3
Prepayments 104.7 137.5 75.6
Accrued income 239.7 310.2 199.2
912.7 1,062.5 676.7
On 25 September 2021, trade and other receivables of £114.0m were transferred
to held for sale – discontinued operations in relation to Greyhound. On 27
March 2021, trade and other receivables of £548.4m (26 September 2020: £nil)
were transferred to held for sale – discontinued operations in relation to
First Student and First Transit. See note 14.
13 Trade and other payables
Amounts falling due within one year (from continuing operations) 25 September 2021 26 September 2020 (restated) £m 27 March 2021 £m
£m
Trade payables 241.7 248.3 182.3
Other payables 204.2 314.6 239.5
Accruals 942.0 1,066.5 1,047.0
Deferred income 107.6 312.6 112.8
Season ticket deferred income 12.6 8.0 6.0
1,508.1 1,950.0 1,587.6
Other payables at 26 September 2020 have been restated. This 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 period and the effect of this is an increase in
other payables of £9.1m.
On 25 September 2021, trade and other payables of £148.9m were transferred to
held for sale – discontinued operations in relation to Greyhound. On 27
March 2021, trade and other payables of £325.4m (26 September 2020: £nil)
were transferred to held for sale – discontinued operations in relation to
First Student and First Transit. See note 14.
14 Discontinued operations
First Student and First Transit
The sale of First Student and First Transit was approved by a shareholder
majority on 27th May 2021 and was reported as a discontinued operation in the
financial statements for the 52 weeks ended 27 March 2021. The sale completed
on 21 July 2021. Net proceeds were c.£2,323m excluding earn out.
First Student and First Transit are therefore reported in the current period
as discontinued operations. Financial information relating to the discontinued
operation for the period to the date of disposal (21 July 2021) is set out
below in (a).
Greyhound
The disposal of Greyhound Lines, Inc to a wholly-owned subsidiary of
FlixMobility GmbH was announced and completed on 21 October 2021. Greyhound US
is reported as a discontinued operation for the 26 weeks to 25 September 2021,
and the assets and liabilities sold are classed as held for sale as at 25
September 2021.
1. Financial performance and cash flow information
The financial performance and cash flow information presented are for the 26
weeks to 25 September 2021 (which includes the results of First Student and
First Transit to the period before disposal on 21 July 2021) and for the 26
weeks to 26 September 2020 and the 52 weeks ended 27 March 2021. The split of
operating profit/(loss) into First Student, First Transit, Greyhound and Group
items is shown in note 4.
Discontinued Operations 26 weeks to 25 September 2021 £m 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
Revenue 970.6 1,048.5 2,526.0
Operating costs (857.7) (1,102.7) (2,411.2)
Operating profit/(loss) 112.9 (54.2) 114.8
Investment income - 0.1 0.2
Finance costs (11.3) (12.5) (28.3)
Profit/(loss) before tax 101.6 (66.6) 86.7
Tax (29.6) 12.4 (21.3)
Profit/(loss) for the year after tax 72.0 (54.2) 65.4
Gain on sale of the divisions after tax (see (b) below) 479.4 - -
Profit from discontinued operation 551.4 (54.2) 65.4
Attributable to:
Equity holders of the parent 551.4 (55.0) 64.6
Non-controlling interests - 0.8 0.8
551.4 (54.2) 65.4
EPS 26 weeks to 25 September 2021 pence 26 weeks to 26 September 2020 pence 52 weeks to 27 March 2021 pence
Basic EPS 45.8 (4.6) 5.7
Diluted EPS 45.8 (4.6) 5.6
Net cash inflow from operating activities 140.4 107.5 256.2
Net cash outflow from investing activities (193.1) (51.1) (126.7)
Net cash outflow from financing activities (88.6) 52.0 (124.6)
Net (decrease)/increase in cash generated by the division (141.3) 108.4 4.9
Other comprehensive income from discontinued operations
26 weeks to 25 September 2021 £m 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
Actuarial (losses)/gains on defined benefit pension schemes (3.0) 5.1 51.4
Deferred tax on actuarial gains/(losses) on defined benefit pension schemes - 2.1 (4.6)
Hedging instrument movements 2.7 (5.2) 7.6
Deferred tax on hedging instrument movements (0.7) 1.3 (2.0)
Exchange differences on translation of discontinued operations (1.7) (38.8) (112.2)
Total (2.7) (35.5) (59.8)
(b) Details of the sale of First Student and First Transit
26 weeks to 25 September 2021 £m 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
Consideration received or receivable: - -
Cash 2,377.3 - -
Direct transaction costs/fees (54.0) - -
Fair value of contingent consideration 101.8 - -
Total net disposal consideration 2,425.1 - -
Carrying amount of net assets sold (2,396.3) - -
Gain on sale before tax and reclassification of foreign currency translation reserve 28.8 - -
Reclassification of foreign currency translation reserve 450.6 - -
Gain on sale of the division before tax 479.4
Tax on gain - - -
Gain on sale of the divisions after tax 479.4 - -
As part of the disposal transaction, FirstGroup are entitled to an ‘earn
out’ consideration of up to $240m (c. £181m) relating to First Transit. The
earn out is for a period of 3 years from 21 July 2021 and is calculated as a
percentage of the Realised Equity Value.
The earn out was fair valued at 25 September 2021 using stochastic modelling
of discounted cash flows and assumes EQT does not dispose of the business by
the third anniversary (21 July 2024). Fair value was $140m (c. £102m) at 25
September 2021.
The carrying amounts of assets and liabilities as at the date of sale (21 July
2021) were:
21 July 2021 £m
Non-current assets
Goodwill 1,448.0
Other intangible assets 23.0
Property, plant and equipment 1,464.3
Investments 26.4
2,961.7
Current assets
Inventories 21.8
Trade and other receivables 411.9
Current tax assets 0.8
Assets held for sale 0.5
Cash and cash equivalents 83.9
518.9
Total assets 3,480.6
Current liabilities
Trade and other payables 357.8
Tax liabilities – Current tax liabilities -
Borrowings 65.1
Provisions 131.2
554.1
Net current liabilities (35.2)
Non-current liabilities
Borrowings 194.9
Retirement benefit liabilities 24.4
Deferred tax liabilities 56.6
Provisions 254.3
530.2
Total liabilities of discontinued operations 1,084.3
Net assets 2,396.3
(c) 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 operations as at 25 September 2021 in relation to
Greyhound and as at 27 March 2021 in relation to First Student and First
Transit:
25 September 2021 £m 26 September 2020 £m 27 March 2021 £m
Non-current assets
Goodwill - - 1,442.0
Other intangible assets 10.5 - 21.8
Property, plant and equipment 149.4 - 1,357.2
Derivative Financial Instruments - - 0.5
Investments - - 30.9
159.9 - 2,852.4
Current assets
Inventories 4.6 - 19.5
Trade and other receivables 114.0 - 548.4
Current tax assets 0.4 - 0.4
Derivative Financial Instruments - - 0.1
Assets held for sale 9.2 - 0.4
Cash and cash equivalents 0.2 - 58.3
128.4 - 627.1
Total assets of discontinued operations 288.3 - 3,479.5
Current liabilities
Trade and other payables 148.9 - 325.4
Tax liabilities – Current tax liabilities - - 3.5
Derivative Financial Instruments - - 0.9
Borrowings 9.8 - 68.4
Provisions 1.9 - 138.6
160.6 - 536.8
Net current (liabilities)/assets (32.2) 90.3
Non-current liabilities
Borrowings 54.1 - 279.3
Derivative Financial Instruments - - 0.2
Retirement benefit liabilities - - 24.7
Deferred tax liabilities - - 33.6
Provisions - - 262.0
54.1 - 599.8
Total liabilities of discontinued operations 214.7 - 1,136.6
Net assets of discontinued operations 73.6 - 2,342.9
15 Borrowings
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
On demand or within 1 year
Leases (note 16) (3) 561.6 631.5 581.4
Bank overdraft 33.1 59.6 53.8
Unamortised loan fees (1.7) - -
CCFF - 299.0 298.2
Bond 8.75% (repayable 2021) (1) - 367.4 380.1
Bond 5.25% (repayable 2022) (2) - 14.6 5.6
Bond 6.875% (repayable 2024) (2) 0.2 0.3 7.1
Total current liabilities: borrowings – from continuing operations 593.2 1,372.4 1,326.2
Amounts relating to held for sale – discontinued operations 9.8 - 68.4
Total current liabilities 603.0 1,372.4 1,394.6
Within 1 – 2 years
Syndicated loans - 60.0 116.5
Leases (note 16) (3) 392.1 607.6 572.8
Supplier financing - 84.6 -
Loan notes (note 17) 0.6 0.7 0.7
Bond 5.25% (repayable 2022) - - 323.4
392.7 752.9 1,013.4
Within 2 – 5 years
Syndicated loan facilities - 535.5 449.8
Leases (note 16) (3) 366.3 871.8 577.0
Bond 5.25% (repayable 2022) - 322.7 -
Bond 6.875% (repayable 2024) Senior unsecured loan notes 199.9 - 199.8 78.5 199.8 72.5
566.2 2,008.3 1,299.1
More than 5 years
Leases (note 16) (3) 38.9 154.1 53.2
Senior unsecured loan notes - 136.5 126.3
38.9 290.6 179.5
Total non-current liabilities at amortised cost from continuing operations 997.8 3,051.8 2,492.0
Amounts related to held for sale – discontinued operations 54.1 - 279.3
Total non-current liabilities 1,051.9 3,051.8 2,771.3
(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 which have been transferred to held for sale –
discontinued operations:
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Due in less than one year 604.6 691.1 632.3
Due in more than one year but not more than two years 404.7 647.5 592.9
Due in more than two years but not more than five years 377.2 916.7 606.6
Due in more than five years 41.8 179.2 71.7
1,428.3 2,434.5 1,903.5
Less future financing charges (69.4) (169.5) (119.1)
1,358.9 2,265.0 1,784.4
Comprising:
Lease liabilities - Road 103.2 397.1 182.8
Lease liabilities - Rail 1,255.7 1,867.9 1,601.6
On 25 September 2021, lease liabilities of £63.9m were transferred to held
for sale – discontinued in relation to Greyhound. On 27 March 2021 lease
liabilities of £187.5m (26 September 2020: £nil) were transferred to held
for sale - discontinued operations in relation to First Student and First
Transit, part of amounts related to held for sale. See note 14.
The total cash outflow for lease principal recorded on the balance sheet
amounted to £378.6m in H1 2022 (H1 2021: £347.5m; full year 2021: £669.2m),
this includes cash outflow relating to discontinued operations amounting to
£88.6m (H1 2021: £85.8m; full year 2021: 124.6m)
The right of use assets relating 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:
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Due in less than one year - - -
Due in more than one year but not more than two years 0.6 0.7 0.7
0.6 0.7 0.7
18 Financial instruments
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Total derivatives
Total non-current assets 3.0 0.8 1.2
Total current assets 7.4 7.4 14.9
Total assets from continuing operations 10.4 8.2 16.1
Amounts relating to held for sale – discontinued operations - - 0.6
Total assets 10.4 8.2 16.7
Total current liabilities 0.8 28.4 11.8
Total non-current liabilities - 13.6 1.2
Total liabilities from continuing operations 0.8 42.0 13.0
Amounts relating to held for sale – discontinued operations - - 1.1
Total liabilities 0.8 42.0 14.1
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Cross currency swaps (net investment hedge) - - 0.3
Currency forwards (cash flow hedge) - 0.8 -
Fuel derivatives (cash flow hedge) 3.0 - 1.0
3.0 0.8 1.3
Current assets
Fuel derivatives (cash flow hedge) 7.4 - 1.9
Currency forwards (cash flow hedge) - 2.3 -
Cross currency swaps (net investment hedge) - 5.1 13.5
7.4 7.4 15.4
Current liabilities
Fuel derivatives (cash flow hedge) Currency forwards (net investment hedge) - - 24.0 4.4 4.8 6.4
Currency forwards (cash flow hedge) 0.8 - 1.1
0.8 28.4 12.3
Non-current liabilities
Fuel derivatives (cash flow hedge) - 13.6 0.8
Currency forwards (cash flow hedge) - - 0.6
- 13.6 1.4
Derivatives classified as held for trading
Current assets
Currency forwards - - -
Current liabilities
Fuel derivatives - - 0.4
18 Financial instruments (continued)
Fair value of the Group's financial assets and financial liabilities
(including cash, trade and other receivables, trade and other payables) on a
continuing basis:
25 September 2021
Fair value Carrying value
Total
£m
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets and derivatives
Contingent consideration receivable - - 101.8 101.8 101.8
Derivative financial instruments - 10.4 - 10.4 10.4
Financial liabilities and derivatives
Borrowings (1) - 1,622.4 - 1,622.4 1,655.1
Derivative financial instruments - 0.8 - 0.8 0.8
26 September 2020
Fair value Carrying value Total £m
Level 1 (restated) £m Level 2 (restated) £m Level 3 £m Total £m
Financial assets and derivatives
Derivative financial instruments - 8.2 - 8.2 8.2
Financial liabilities and derivatives
Borrowings (1) 1,039.4 3,562.4 - 4,601.8 4,424.2
Derivative financial instruments - 42.0 - 42.0 42.0
27 March 2021
Fair value Carrying value Total £m
Level 1 £m Level 2 £m Level 3 £m Total £m
Financial assets and derivatives
Derivative financial instruments - 16.1 - 16.1 16.1
Financial liabilities and derivatives
Borrowings (1) 919.0 2,948.5 - 3,867.5 3,814.4
Derivative financial instruments - 13.0 - 13.0 13.0
(1) Includes lease liabilities as set out in note 16.
On 25 September 2021 fair value of financial assets and financial liabilities
of £(63.9)m being borrowings of £(63.9)m (Level 2) were transferred to held
for sale – discontinued operations in relation to Greyhound. On 27 March
2021 fair value of financial assets and financial liabilities of £(351.0)m
being borrowings of £(159.2)m (Level 1) and £(191.3)m (Level 2) and
derivative financial instruments of £(0.5)m (Level 2) were transferred to
held for sale – discontinued operations in relation to First Student and
First Transit (26 September 2020: £nil). See note 14.
The estimated fair value of cash and cash equivalents, short term trade and
other receivables and short term trade and other payables is a reasonable
approximation to the carrying value of these items.
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 year.
18 Financial instruments (continued)
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
25 September 2021 26 September 2020 27 March 2021
Derivative contracts
1. Interest rate swaps - - - 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 10.4 (37.6) (3.1) 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 (0.8) 3.8 (8.1) 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. Cross Currency Swaps - - 13.8 Level 2 Discounted cash flow: future cashflows are estimated based on forward exchange rates and interest rates and then discounted at a rate that reflects the credit risk of the various counterparties.
Fair value measurements using significant unobservable inputs (level 3)
As part of the disposal of First Student and First Transit on 21 July 2021,
FirstGroup are entitled to an earnout payment of up to £181m ($240m) relating
to First Transit. The earnout is for a period of 3 years from 21 July 2021 and
is calculated as 62.5% of the realised equity value and will results in a
payment of between nil and $240m.
There is a contingent consideration receivable within trade and other
receivables of £101.8m ($139.9m) at 25 September 2021 (25 September 2020:
£nil; 27 March 2021: £nil). This represents the fair value of the earnout of
First Transit from the sale of First Student and First Transit on 21 July 2021
and has been calculated using stochastic modelling of discounted cash flows
and assumes that EQT (the buyer) does not dispose of the business by the third
anniversary (21 July 2024).
The following table summarises the quantitative information about the
significant unobservable inputs used in the level 3 fair value measurement of
the contingent consideration receivable:
Fair value at 26 September 2021 £m Unobservable inputs Range of inputs (probability weighted average) Relationship of unobservable inputs to fair value
101.8m Weighted average cost of capital 12.5% An increase or decrease in the discount rate of 50 bps would decrease or increase the fair value by £8.0m and £8.1m respectively.
FY20 EV/EBITDA multiple 11.2x If expected cash inflow were 10% higher or lower, the fair value would increase or decrease by £11.1m and £12.8m respectively.
Asset volatility 30.0% If asset volatility were 2.5% higher or lower, the fair value would decrease or increase by £3.7m and £3.9m respectively.
An assessment of the contingent consideration receivable was undertaken as at
25 September 2021 and will be undertaken at the end of each reporting period.
These assessments are reviewed by the Chief Financial Officer and included in
the Accounting Judgements as presented to the Audit Committee.
19 Provisions
Insurance claims £m Legal and other £m Pensions £m Total £m
At 28 March 2021 172.2 36.5 1.2 209.9
Charged to the income statement 33.7 6.8 - 40.5
Utilised in the period (15.5) (6.0) - (21.5)
Notional interest 1.5 - - 1.5
Transferred to held for sale – discontinued operations - (1.9) - (1.9)
Foreign exchange movements 3.1 0.2 - 3.3
At 25 September 2021 195.0 35.6 1.2 231.8
Current liabilities 68.3 15.0 0.4 83.7
Non-current liabilities 126.7 20.6 0.8 148.1
At 26 September 2021 195.0 35.6 1.2 231.8
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 198.2 196.9 - 395.1
Non-current liabilities 368.0 33.3 1.3 402.6
At 26 September 2020 566.2 230.2 1.3 797.7
On 25 September 2021 provisions of £1.9m were transferred to held for sale
– discontinued operations in relation to Greyhound. On 27 March 2021
provisions of £400.6m (26 September 2020: £nil) were transferred to held for
sale – discontinued operations in relation to First Student and First
Transit. See note 14.
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 £11.7m in H1 2022 (H1 2021:
£34.0m, full year 2021: £10.3m) can extend for up to 30 years. The
utilisation of £15.5m in H1 2022 (H1 2021: £135.3m, full year 2021:
£205.3m) represents payments made largely against the current liability of
the preceding year.
The insurance claims provisions contain £24.9m in H1 2022 (H1 2021: £21.7m,
full year 2021: £24.7m) 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 and rail estimated
termination sums relating to the ERMA’s in TPE and SWR, 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.
20 Called up share capital
25 September 2021 26 September 2020 £m 27 March 2021 £m
£m
Allotted, called up and fully paid
1,222.9m ordinary shares of 5p each 61.1 61.1 61.1
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 in H1
2022 was 1,215.3m (H1 2021: 1,204.7m). At the end of the period in H1 2022
7.6m shares (H1 2021: 16.1m shares) were being held as treasury shares and own
shares held in trust for employees.
21 Net cash from operating activities
26 weeks to 25 September 2021 26 weeks to 26 September 2020 £m 52 weeks to 27 March 2021 £m
£m
Operating profit/(loss) from:
Continuing Operations 52.2 37.8 224.3
Discontinued Operations (including gain on sale of First Student and First Transit) 592.3 (54.2) 61.5
Total Operations 644.5 (16.4) 285.8
Adjustments for:
Depreciation charges 344.9 454.1 962.3
Capital grant amortisation (41.7) (5.8) (13.3)
Software amortisation charges 2.3 6.3 11.2
Other intangible asset amortisation charges 0.5 2.1 4.1
Gain on disposal of subsidiaries (479.4) - -
(Reversal of impairment)/impairment charges (55.4) - 16.6
Share-based payments 2.3 4.6 11.9
(Profit)/loss on disposal of property, plant and equipment (0.9) 2.5 (73.0)
Operating cash flows before working capital and pensions 417.1 447.4 1,205.6
(Increase)/decrease in inventories (5.1) 6.8 12.0
(Increase)/decrease in receivables (112.0) 115.9 (5.9)
Increase in payables due within one year 150.1 174.3 197.0
Increase/(decrease) in provisions due within one year 1.5 36.7 (1.7)
Increase/(decrease) in provisions due over one year 0.5 (9.6) 10.9
Defined benefit pension payments in excess of income statement charge (338.6) (8.0) (59.2)
Cash generated by operations 113.5 763.5 1,358.7
Tax paid (12.2) (0.8) (4.5)
Interest paid (1) (156.0) (82.6) (149.8)
Net cash from operating activities (54.7) 680.1 1,204.4
(1) Interest paid includes £24.6m relating to lease liabilities (H1
2021: £36.7m; year end 2021: £73.1m).
22 Analysis of changes in net debt – adjusted cash flow
At 28 March 2021 £m Cash flow £m Foreign Exchange £m Other £m At 25
September
2021
£m
Components of financing activities:
Bank loans (566.3) 581.2 (2.4) (12.5) -
Unamortised loan fees - 1.7 - - 1.7
Bonds (873.1) 675.4 - (2.2) (199.9)
Senior unsecured loan notes (198.8) 200.1 (0.6) (0.7) -
CCFF (298.2) 298.2 - - -
Supplier financing (1) (159.2) - - 159.2 -
Lease liabilities (2) (1,972.9) 378.3 (1.0) 172.6 (1,423.0)
Other debt (0.7) - - 0.1 (0.6)
Total components of financing activities (4,069.2) 2,134.9 (4.0) 316.5 (1,621.8)
Cash 834.3 62.0 (3.9) - 892.4
Bank overdrafts (53.8) 20.7 - - (33.1)
Ring-fenced cash 662.9 (134.6) - - 528.3
Cash and cash equivalents 1,443.4 (51.9) (3.9) - 1,387.6
Net debt (including held for sale – discontinued operations) (2,625.8) 2,083.0 (7.9) 316.5 (234.2)
1. Other movement in supplier finance is a non-cash movement.
2. Lease liabilities ‘Other’ includes £212.9m reduction in relation to
leases disposed of, offset by inception of new leases of £40.3m.
On 25 September 2021, net debt of £63.7m relates to held for sale –
discontinued operations in relation to Greyhound, see note 14.
At 29 March 2020 (restated) £m Cash flow £m Foreign Exchange £m Other £m At 26
September
2020
£m
Components of financing activities:
Bank loans (573.9) (29.3) 8.0 (0.3) (595.5)
Bonds (877.5) - - 2.3 (875.2)
Fair value of interest rate coupon swaps 6.4 - - (6.4) -
Senior unsecured loan notes (219.8) - 4.9 (0.1) (215.0)
CCFF - (299.0) - - (299.0)
Supplier financing (1) - - - (84.6) (84.6)
Lease liabilities (2) (2,473.2) 25.5 11.5 171.2 (2,265.0)
Other debt (9.4) 8.7 - - (0.7)
Total components of financing activities (4,147.4) (294.1) 24.4 82.1 (4,335.0)
Cash 319.5 397.1 (15.3) - 701.3
Bank overdrafts (82.4) 22.8 - - (59.6)
Ring-fenced cash 649.4 97.8 - - 747.2
Cash and cash equivalents 886.5 517.7 (15.3) - 1,388.9
Net debt (3,260.9) 223.6 9.1 82.1 (2,946.1)
Bank overdrafts of £82.4m at 29 March 2020 and £59.6m at 26 September 2020
have been reclassified within the cash and cash equivalents section.
Previously the overdrafts were presented within bank loans in the components
of financing activities section. Ring-fenced cash has been restated and
increased by £17.2m at 29 March 2020 and £9.1m at 26 September 2020, as cash
balances relating to companies under the control of First Transit had not been
recognised in prior periods.
1. Other movement in supplier finance is a non-cash movement.
2. Lease liabilities ‘Other’ includes £321.9m repayment of lease
liabilities formerly classified as operating leases through repayment, net of
the £150.7m inception of new leases.
22 Analysis of changes in net debt – adjusted cash flow (continued)
At 29 March 2020 £m Cash flow £m Foreign Exchange £m Other £m At 27
March
2021
£m
Components of financing activities:
Bank loans (573.9) (28.1) 35.7 - (566.3)
Bonds (877.5) - - 4.4 (873.1)
Fair value of interest rate coupon swaps 6.4 - - (6.4) -
Senior unsecured loan notes (219.8) 21.3 (0.3) (198.8)
CCFF - (298.2) - - (298.2)
Supplier financing (1) - - - (159.2) (159.2)
Lease liabilities (2) (2,473.2) 669.2 41.1 (210.0) (1,972.9)
Other debt (9.4) 8.7 - - (0.7)
Total components of financing activities (4,147.4) 351.6 98.1 (371.5) (4,069.2)
Cash 319.5 532.5 (17.7) - 834.3
Bank overdrafts (82.4) 28.6 - (53.8)
Ring-fenced cash 649.4 15.4 (1.9) - 662.9
Cash and cash equivalents 886.5 576.5 (19.6) - 1,443.4
Net debt (including held for sale – discontinued operations) (3,260.9) 928.1 78.5 (371.5) (2,625.8)
1. Supplier financing relates wholly to First Student and the payable in
respect of these items is included within discontinued operations in note 14.
2. Lease liabilities ‘other’ includes £242.6m inception of new leases,
this comprises £107.5m of PCV and property leases in First Student, £105.2m
of rolling stock leases across TOCs and £29.9m of other PCV and property
leases across the Group offset by £32.4m of lease terminations in the year.
On 27 March 2021, net debt of £289.4m (2020: £nil) relates to held for sale
– discontinued operations, in relation to First Student and First Transit
see note 14.
Accrued interest of £0.2m in H1 2022 (H1 2022: £29.7m; full year 2021:
£42.9m) is excluded from the values above and derivative valuations are
presented as the clean values.
23 Retirement benefit schemes
The Group operates or participates in a number of defined benefit pension
schemes. These include schemes providing benefits to the majority of First
Rail employees and legacy arrangements for employees or former employees of
First Bus and in North America. The scheme details are described on pages 207
to 209 of the Annual Report and Accounts for the 52 weeks ended 27 March 2021.
The Group currently sponsors six sections of the Railways Pension Scheme
(RPS), relating to its obligations for its TOCs, and for Hull Trains, its Open
Access operator. The Railways Pension Trustee Company Limited is responsible
for managing the RPS, which is subject to regulation by 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 terms agreed with DfT, the
employer’s responsibility is to pay the contributions agreed with the
Trustee, whilst it operates the franchise or contract. There is no residual
liability or asset for any deficit, or surplus, which remains at the end of
the franchise or contract 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 last signed off valuation for the TOC sections was effective 31
December 2013, and these disclosures reflect a roll-forward of that valuation.
The market value of the assets at 25 September 2021 for all defined benefit
schemes totalled £7,212m (H1 2021: £6,442m; full year 2021: £6,468m). This
excludes Transit Management contracts, detailed in the table below.
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:
25 September 2021 26 September 2020 27 March 2021
First Bus First Rail North America First Bus % First Rail % North America % First Bus % First Rail % North America %
% % %
Key assumptions used:
Discount rate 1.90 1.90 2.25 1.55 1.55 2.38 2.05 2.05 2.87
Expected rate of salary increases 3.75 3.75 2.50 2.00 3.05 2.50 2.55 3.05 2.50
Inflation – CPI 2.75 2.75 2.00 2.00 2.00 2.00 2.55 2.55 2.00
Future pension increases 2.75 2.75 - 2.00 2.00 - 2.55 2.55 -
23 Retirement benefit schemes (continued)
Amounts (charged)/credited to the condensed consolidated income statement in
respect of these defined benefit schemes are as follows:
26 weeks to 25 September 2021 First North America Total First Total
Bus £m non-rail Rail £m
£m £m £m
Current service cost (5.1) (2.4) (7.5) (69.2) (76.7)
Past service costs including curtailments and settlements - 27.7 27.7 - 27.7
Impact of franchise adjustment on operating cost - - - 42.2 42.2
Net interest cost (0.7) (1.1) (1.8) (8.4) (10.2)
Impact of franchise adjustment on net interest cost - - - 8.4 8.4
(5.8) 24.2 18.4 (27.0) (8.6)
Less discontinued operations - (21.7) (21.7) - (21.7)
(5.8) 2.5 (3.3) (27.0) (30.3)
26 weeks to 26 September 2020 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Current service cost (5.3) (4.4) (9.7) (54.4) (64.1)
Impact of franchise adjustment on operating cost - - - 28.4 28.4
Net interest cost (0.8) (3.0) (3.8) (9.5) (13.3)
Impact of franchise adjustment on net interest cost - - - 9.5 9.5
(6.1) (7.4) (13.5) (26.0) (39.5)
Less discontinued operations - 5.4 5.4 - 5.4
(6.1) (2.0) (8.1) (26.0) (34.1)
52 weeks to 27 March 2021 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Current service cost (8.2) (8.0) (16.2) (115.1) (131.3)
Past service gain including curtailments and settlements (0.9) (1.5) (2.4) - (2.4)
Impact of franchise adjustment on operating cost - - - 58.0 58.0
Net interest cost (1.7) (5.8) (7.5) (19.2) (26.7)
Impact of franchise adjustment on net interest cost - - - 19.1 19.1
(10.8) (15.3) (26.1) (57.2) (83.3)
Less discontinued operations - 10.7 10.7 - 10.7
(10.8) (4.6) (15.4) (57.2) (72.6)
Actuarial gains and losses have been reported in the condensed consolidated
statement of comprehensive income.
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 25 September 2021 First Bus North America Total non-rail First Rail Total
£m £m £m £m £m
Fair value of schemes' assets 3,061.4 422.1 3,483.5 3,728.7 7,212.2
Present value of defined benefit obligations (2,900.5) (461.9) (3,362.4) (5,855.5) (9,217.9)
Surplus/(deficit) before adjustments 160.9 (39.8) 121.1 (2,126.8) (2,005.7)
Adjustment for irrecoverable surplus (1) (99.7) (7.6) (107.3) - (107.3)
First Rail franchise adjustment (60%) - - - 1,272.3 1,272.3
Adjustment for employee share of RPS deficits (40%) - - - 850.7 850.7
Liability recognised in the condensed consolidated balance sheet 61.2 (47.4) 13.8 (3.8) 10.0
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 61.2 - 61.2 - 61.2
Non-current liabilities - (47.4) (47.4) (3.8) (51.2)
61.2 (47.4) 13.8 (3.8) 10.0
23 Retirement benefit schemes (continued)
As at 26 September 2020 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Fair value of schemes' assets 2,872.9 441.0 3,313.9 3,128.3 6,442.2
Present value of defined benefit obligations (2,825.3) (677.7) (3,503.0) (5,564.4) (9,067.4)
Surplus/(deficit) before adjustments 47.6 (236.7) (189.1) (2,436.1) (2,625.2)
Adjustment for irrecoverable surplus (1) (166.3) - (166.3) - (166.3)
First Rail franchise adjustment (60%) - - - 1,457.2 1,457.2
Adjustment for employee share of RPS deficits (40%) - - - 974.4 974.4
Liability recognised in the condensed consolidated balance sheet (118.7) (236.7) (355.4) (4.5) (359.9)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 52.5 - 52.5 - 52.5
Non-current liabilities (171.2) (236.7) (407.9) (4.5) (412.4)
(118.7) (236.7) (355.4) (4.5) (359.9)
As at 27 March 2021 First Bus £m North America £m Total non-rail £m First Rail £m Total £m
Fair value of schemes' assets 2,720.3 364.9 3,085.2 3,382.7 6,467.9
Present value of defined benefit obligations (2,775.2) (469.6) (3,244.8) (5,336.2) (8,581.0)
Deficit before adjustments (54.9) (104.7) (159.6) (1,953.5) (2,113.1)
Adjustment for irrecoverable surplus (1) (108.7) - (108.7) - (108.7)
First Rail franchise adjustment (60%) - - - 1,168.8 1,168.8
Adjustment for employee share of RPS deficits (40%) - - - 781.4 781.4
Liability recognised in the condensed consolidated balance sheet (163.6) (104.7) (268.3) (3.3) (271.6)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 52.9 - 52.9 - 52.9
Non-current liabilities (216.5) (104.7) (321.2) (3.3) (324.5)
(163.6) (104.7) (268.3) (3.3) (271.6)
(1)The irrecoverable surplus represents the amount of the surplus that the
Group could not recover through reducing future company contributions to Local
LGPS.
On 27 March 2021 a net pension liability of £24.7m (25 September 2021: £nil;
26 September 2020: £nil) comprising assets of £72.9m and liabilities of
£97.6m was transferred to held for sale – discontinued operations in
relation to First Student and First Transit, comprising the FirstGroup America
scheme and the Executive Supplementary scheme. See note 14.
Total assets including Transit Management subsidiaries (see below) and
discontinued operations are £7,488.7m (25 September 2020: £6,766.3m; 27
March 2021: £6,890.4m) and total liabilities are £9,596.0m (25 September
2020: £9,582.1m; 27 March 2021: £9,132.8m).
Transit management contracts
The Group has retained Transit Management Contacts which contain defined
benefit pension arrangements. As these contracts expire, the number of pension
arrangements are reducing. The number of single-employer pension schemes in
the retained Transit Management subsidiaries has reduced from 7 to 6 over the
period. The pension contributions and deficits relating to these schemes are
fully indemnified by the contracting authority. Details of the assets and
liabilities of these schemes is as follows:
25 September 2021 £m 26 September 2020 (restated) (1) £m 27 March 2021 (1) £m
Assets 276.5 324.1 349.6
Liabilities (378.1) (514.7) (454.2)
Deficits in schemes (101.6) (190.6) (104.6)
Amounts recoverable from contracting authorities 101.6 190.6 104.6
Net deficits in schemes - – –
(1)Defined benefit pensions for the Transit Management Contracts were not
included or disclosed at 26 September 2020 but have been added above as a
restatement to 26 September 2020.
24 Contingent liabilities
To support subsidiary undertakings in their normal course of business, the
FirstGroup plc and certain subsidiaries have indemnified certain banks and
insurance companies who have issued performance bonds for £139.3m (H1 2021:
£1,055.5m, March 2021: £743.0m) and letters of credit for £185.0m (H1 2021:
£458.3m, March 2021: £422.8m). The performance bonds relate to the North
American and First Bus businesses of £47.2m (H1 2021: £753.1m, March 2021:
£517.3m) and the First Rail franchise operations of £92.1m (H1 2021:
£302.4m, March 2021: £225.7m). The letters of credit relate substantially to
insurance arrangements in the UK and North America. The parent company has
committed further support facilities of up to £20.8m to First Rail Train
Operating Companies of which all remains undrawn. Following the sale of First
Student and First Transit, the letters of credit, surety bonds and parent
company guarantees relating to First Student and First Transit were cancelled.
The Group is party to certain unsecured guarantees granted to banks for
overdraft and cash management facilities provided to itself and subsidiary
undertakings. The Company has given certain unsecured guarantees for the
liabilities of its subsidiary undertakings arising under certain loan notes,
HP contracts, finance leases, operating leases and certain pension scheme
arrangements. It also provides unsecured cross guarantees to certain
subsidiary undertakings as required by VAT legislation. First Bus subsidiaries
have provided unsecured guarantees on a joint and several basis to the
Trustees of the First Bus Pension Scheme. The Company’s North American
subsidiaries participate in a number of multi-employer pension schemes in
which their contributions are pooled with the contributions of other
contributing employers. The funding of these schemes is therefore reliant on
the ongoing participation by third parties.
In its normal course of business the Group has ongoing contractual
negotiations with Government and other organisations. The Group is party to
legal proceedings and claims which arise in the normal course of business,
including but not limited to employment and safety claims. The Group takes
legal advice as to the likelihood of success of claims and counterclaims. No
provision is made where due to inherent uncertainties, no accurate
quantification of any cost, or timing of such cost, which may arise from any
of the legal proceedings can be determined.
The Group’s operations are required to comply with a wide range of
regulations, including environmental and emissions regulations. Failure to
comply with a particular regulation could result in a fine or penalty being
imposed on that business, as well as potential ancillary claims rooted in
non-compliance.
The inquest relating to the death of seven passengers in the Croydon tram
incident in November 2016 completed on 22 July 2021. The Office of Rail & Road
(ORR) investigations into the incident are ongoing and it is uncertain when
they will be concluded. The tram was operated by Tram Operations Limited
(‘TOL’), a subsidiary of the Group, under a contract with a TfL
subsidiary. TOL provides the drivers and management to operate the tram
services, whereas the infrastructure and trams are owned and maintained by a
TfL subsidiary. Management continue to monitor developments. To date, no
formal ORR proceedings have been commenced and, as such, it is not possible to
assess whether any financial penalties or related costs could be incurred.
First MTR South Western Trains Limited (FSWT), a subsidiary of the Company and
the operator of the SWR rail franchise, is a defendant to collective
proceedings before the UK Competition Appeal Tribunal (the CAT) in respect of
alleged breaches of UK competition law. Stagecoach South Western Trains
Limited (SSWT) (the former operator of the SWR rail franchise) is also a
defendant to these proceedings. A separate set of proceedings has been issued
against London & South Eastern Railway Limited (LSER) in respect of another
rail franchise. The two sets of proceedings are being heard together. The
class representative alleges that FSWT, SSWT and LSER breached their
obligations under UK competition law by not making boundary fares sufficiently
available for sale, and/or by failing to ensure that customers were aware of
the existence of boundary fares and/or bought an appropriate fare in order to
avoid being charged twice for part of a journey.
In November 2021, the CAT handed down a judgment in which it indicated it
would make a collective proceedings order in both sets of proceedings allowing
them to proceed. FSWT, SSWT and LSER applied for permission to appeal the
decision but permission was refused by the CAT with written reasons provided
on 3 December 2021. FSWT, SSWT and LSER have until 17 December 2021 to each
renew their application for permission to appeal before the Court of Appeal,
should one or more of them decide to do so. If such applications are made, it
is likely that the Court of Appeal will decide whether to grant permission to
appeal in late Q1 2022 or Q2 2022. In the meantime, the proceedings in the CAT
have not been stayed pending appeals so the case will continue, the next step
being that FSWT, SSWT and LSER will file defences. At present the Company
cannot accurately determine the likelihood, quantum or timing of any damages
and costs which may arise from these proceedings.
25 Related party transactions
There are no related party transactions or changes since the Group’s 2021
Annual Report which could have a material effect on the Group’s financial
position or performance of the Group in the 26 weeks to 26 September 2021.
26 Post balance sheet events
* On 4 October acquired the remaining 50% shareholding in Somerset Passenger
Solutions Ltd (SPS) joint venture
* On 21 October announced the sale of Greyhound Lines, Inc (see discontinued
operations note 14) and completed on the sale on the same day
* On 18 November three special resolutions and one ordinary resolution were
passed to approve the tender offer to return £500m to shareholders. The
tender offer was executed on 2 December
* A number of legacy Greyhound properties were sold with proceeds totalling
$6.8m (£4.9m)
Responsibility statement
The directors confirm that these half yearly results have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
* an indication of important events that have occurred during the first 26
weeks and their impact on the half yearly results, and a description of the
principal risks and uncertainties for the remaining 26 weeks of the financial
year; and
* material related-party transactions in the first 26 weeks and any material
changes in the related-party transactions described in the last annual report.
The Directors of FirstGroup plc are listed on the Group's website at
www.firstgroupplc.com.
David
Martin
Ryan Mangold
Executive
Chairman
Chief Financial Officer
8 December
2021
8 December 2021
Independent review report to FirstGroup plc
Report on the Half Yearly Results
Our conclusion
We have reviewed FirstGroup PLC’s Half Yearly Results (the “interim
financial statements”) in the Half-Yearly Report of FirstGroup PLC for the
26 week period ended 25 September 2021 (the “period”).
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
What we have reviewed
The interim financial statements comprise:
* the Condensed Consolidated Balance Sheet as at 25 September 2021;
* the Condensed Consolidated Income Statement for the period then ended;
* the Condensed Consolidated Statement of Comprehensive Income for the period
then ended;
* the Condensed Consolidated Cash Flow Statement for the period then ended;
* the Condensed Consolidated Statement of Changes in Equity for the period
then ended; and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-Yearly Report of
FirstGroup PLC have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial
Conduct Authority.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half-Yearly Report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half-Yearly Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the Half-Yearly Report based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
What a review of interim financial statements involves
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 enquiries, 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, 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.
We have read the other information contained in the Half-Yearly Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
8 December 2021
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