REG - FirstGroup plc - Half-year Report
23/11/2023 07:00
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RNS Number : 3894U FirstGroup plc 23 November 2023
FIRSTGROUP PLC
HALF-YEARLY REPORT FOR THE 27 WEEKS TO 30 SEPTEMBER 2023
Growth in profit driven by strong performance in both First Bus and First
Rail:
• Group adjusted operating profit increased to £100.6m (H1 2023: £66.1m)
• Increased Adjusted EPS of 8.1p for continuing operations (H1 2023: 4.6p)
• Increase in declared Interim dividend to 1.5p per share (H1 2023: 0.9p per
share)
• c.£67m returned to shareholders during H1 2024 via the Group's share buyback
programme
• Adjusted net cash at period end of £77.1m
Strategy focused on operational delivery, driving modal shift, targeted
investment in adjacent growth opportunities to diversify the Group's portfolio
and playing a leading role in environmental and societal sustainability:
• First Bus delivered further margin expansion in H1 2024 to 7.1% from 4.8% in
H1 2023 (FY 2023: 6.5%)
• On track to have more than 600 electric buses, over 600 charger heads, and
four fully electric depots in England by March 2024
• Nine-year National Rail Contract awarded to West Coast Partnership following
improvement in services
• Landmark £100m strategic decarbonisation joint venture with Hitachi
• Group's science-based emissions reduction target approved by Science Based
Targets initiative
• c.£75.5m remains of the total £190m being returned to shareholders via
buyback programmes
H1 2024 (£m) H1 2023
(£m)
Cont. Disc. Total Cont. Disc. Total
Revenue 2,207.0 - 2,207.0 2,212.4 2.7 2,215.1
Adjusted(1) operating profit/(loss) 100.6 (2.2) 98.4 66.1 (8.4) 57.7
Adjusted operating profit margin 4.6% 4.5% 3.0% 2.6%
Adjusted profit/(loss) before tax 73.5 (2.2) 71.3 41.0 (8.1) 32.9
Adjusted EPS (2) 8.1p (0.3)p 7.8p 4.6p (1.0)p 3.6p
Dividend per share 1.5p 0.9p
Adjusted net cash(3) 77.1 7.3
H1 2024 (£m) H1 2023 (£m)
Statutory Cont. Disc. Total Cont. Disc. Total
Revenue 2,207.0 - 2,207.0 2,212.4 2.7 2,215.1
Operating (loss)/profit (41.4) 0.1 (41.3) 62.1 (28.6) 33.5
(Loss)/profit before tax (68.5) 0.1 (68.4) 37.0 (28.3) 8.7
EPS(2) (7.9)p (0.1)p
Net debt (1,144.6) (1,475.0)
- Bonds, bank and other debt net of (cash) 384.4 346.3
- IFRS 16 lease liabilities (1,529.0) (1,821.3)
'Cont.' refers to the Continuing operations comprising First Bus, First Rail,
and Group items. 'Disc.' refers to discontinued operations, being First
Student, First Transit and Greyhound US.
H1 2024 statutory operating loss of £(41.4)m includes charges of £142.3m
relating to the Group's termination of its participation in two Local
Government Pension Schemes.
Key developments
First Bus:
• 1.1m passenger journeys a day (H1 2023: 1.0m) and 84m service miles operated
in H1 2024 (H1 2023: 87m)
• Passenger volumes (excluding the extra week in H1 2024) increased 8% vs. H1
2023
• Total revenue increased to £504.9m (H1 2023: £427.7m), despite a c.£19m
reduction in government funding as the industry moves to a more commercial
model
• Operating margin increased to 7.1% (H1 2023: 4.8%) despite ongoing
inflationary pressures and lower funding, due to stronger passenger volumes,
improved driver availability and data-led operational and commercial
efficiencies
• Adjacent Services revenue increased to £116.2m from £65.0m in H1 2023 driven
by First Travel Solutions, new contract wins and contribution of Airporter and
Ensignbus acquired in FY 2023
• Further progress in electrification of fleet and infrastructure:
- 166 electric buses delivered in H1 2024 and over 100 charger heads installed
- third-party B2B charging pilots underway at Caledonia, Scotstoun, Aberdeen and
Leicester depots
- installation of solar panels at 25 depots now completed
First Rail:
• 123.4m passenger journeys in H1 2024 (H1 2023: 114.6m) of which TOCs: 122.1m
and open access 1.3m
• Open access operations performance ahead of expectations, underpinned by
strong leisure volumes during the summer months; Lumo has now carried over 2
million passengers since launch in October 2021
• Management-fee based contracts financial performance was ahead of expectations
due to higher than accrued final fee awards for FY 2023; focus remains on
operational delivery for passengers across all our services
• Nine-year National Rail Contract awarded to West Coast Partnership
(incorporating Avanti West Coast) with a minimum core three-year term to 18
October 2026, with a further six years until 17 October 2032, subject to
ongoing DfT approval
Corporate:
• £10m investment committed to landmark £100m strategic decarbonisation joint
venture with Hitachi focusing on increasing bus battery efficiency, to deliver
material capital savings through extended battery life and increased residual
value
• Initial First Transit earnout proceeds of £48.9m received in H1; receipt of
the balance anticipated in H2 2024
• £75m on-market share buyback programme completed and subsequent £115m
programme launched in August 2023
• £12.2m of the Group's 2024 6.875% bonds opportunistically repurchased
(£172.0m remain outstanding)
• Total gross pension liability of c.£1bn will be removed from the Group's
balance sheet by H2 2024 following:
- termination of participation in two First Bus Local Government Pension Schemes
on 31 October resulting in an anticipated £2-3m annualised cost saving
(c.£1m in FY 2024) and an estimated net cash inflow of £15m after costs
- Greyhound Canada pension scheme bought in and c.$75m (c.£62m) of Greyhound
USA pension liabilities bought out and settled in H1 2024; remaining Greyhound
USA pension remains well hedged
FY 2024 outlook
• Despite the ongoing challenging economic and industrial relations environment,
current trading and the Group's outlook for FY 2024 is in line with our
expectations as set out in the Trading Update published on 11 October 2023
• First Bus: while clearly sensitive to broader consumer spending and inflation
trends, we expect to make some further progress against our expectations in H2
2024, including the impact of the Hitachi JV driven by:
- management actions taken to transform the business delivering further
productivity improvements and enhanced revenues
- lower operating costs as a result of smart efficiency initiatives and the
division's newer fleet
- supportive government policies driving increased demand
• First Rail: the Division's financial performance in H2 2024 is anticipated to
be in line with our expectations
• Adjusted net cash position expected to be in the range of £40-50m at the end
of FY 2024, assuming completion of the £115m buyback programme and before
deployment of potential growth capital
• We will continue to evaluate our pipeline of value-accretive inorganic growth
opportunities
Commenting, Chief Executive Officer Graham Sutherland said:
"I am pleased to report another set of very strong results for the first half
of our 2024 financial year. First Bus is delivering sustainable revenue growth
as we continue to transform the business and our First Rail division also
performed well. This is testament to the capabilities and continued hard work
of all our teams across the Group.
"We are a resilient and profitable business which is well-positioned to create
long-term, value-accretive growth. Leveraging our leading positions in bus and
rail, supported by our strong balance sheet enables us to continue to play a
critical role in supporting governments' economic, societal and environmental
goals."
Contacts at FirstGroup: Contacts at Brunswick Group:
Marianna Bowes, Head of Investor Relations Andrew Porter / Simone Selzer
Stuart Butchers, Head of Corporate Communications Tel: +44 (0) 20 7404 5959
corporate.comms@firstgroup.co.uk (mailto:corporate.comms@firstgroup.co.uk)
Tel: +44 (0) 20 7725 3354
Contacts at Liberum Capital Limited: Contacts at RBC Capital Markets:
Nicholas How / John Fishley James Agnew / Jack Wood
Tel: +44 (0) 20 3100 2000 Tel: +44 (0) 20 7653 4000
A webcast for investors and analysts will be held at 10:30am today -
attendance is by invitation. Please email corporate.comms@firstgroup.co.uk
(mailto: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 (http://www.firstgroupplc.com/investors) . A
playback facility will also be available there in due course.
Notes
(1) 'Adjusted earnings' are shown before net adjusting items and excludes IFRS
16 impacts in First Rail management fee operations. For definitions of
alternative performance measures and other key terms, see the definitions
section on pages 18-19.
(2 ')Adjusted EPS' and EPS based on weighted average number of shares in the
period of 697.7m (H1 2023: 739.8m) reflecting the current year and prior year
share buybacks.
(3 ')Adjusted net cash' is bonds, bank and other debt net of free cash
(i.e.excludes IFRS 16 lease liabilities and ring-fenced cash).
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR
6 Annex 1R: 1.1.
About FirstGroup
FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public
transport services. With £4.8 billion in revenue and around 30,000 employees,
we transported more than 1.8m passengers a day in 2022/23. 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. Each of
our divisions is a leader in its field: First Bus is the second largest
regional bus operator in the UK, serving two-thirds of the country's 15
largest conurbations with a fleet of more than 4,500 buses, and carrying more
than a million passengers a day. 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 more than 3,500 locomotives and
rail carriages through three management fee-based train operating companies
(Avanti West Coast, GWR, SWR) and two open access routes (Hull Trains and
Lumo). We are formally committed to operating a zero-emission First Bus fleet
by 2035, and First Rail will help support the UK Government's goal to remove
all diesel-only trains from service by 2040. In February 2023 FirstGroup was
named as one of the world's cleanest 200 public companies for the fourth
consecutive year by sustainable business media group Corporate Knights in
partnership with US not-for-profit organisation, As You Sow. We provide easy
and convenient mobility, improving quality of life by connecting people and
communities. Visit our website at www.firstgroupplc.com and follow us
@firstgroupplc on X.
CEO review
Introduction
We have delivered another very strong set of results for the first half of our
2024 financial year, despite continued economic challenges. As a result of
good performance in both of our divisions, we have significantly increased our
Adjusted Earnings per share, which is our underlying earnings from First Bus
and First Rail excluding adjusting items and IFRS 16 impacts in the First Rail
management fee-based operations, to 8.1p in H1 2024, from 4.6p in H1 2023.
We have also maintained our strong balance sheet, ending the period with
adjusted net cash of £77.1m having invested in the electrification of our bus
fleet and infrastructure and returned c.£67m to shareholders via our buyback
programmes, of which we have c.£75.5m remaining. In line with our disciplined
capital policy the Board has recommended an interim dividend of 1.5p per share
(H1 2023: 0.9p per share). This will result in a dividend payment of c.£10m,
to be paid on 3 January 2024 to shareholders on the register at 1 December
2023. The amount reflects the current policy of c.3x cover against the Group
adjusted earnings, to be paid one-third interim and two-thirds final.
Operational summary - First Bus
In First Bus we have seen further sustainable profit growth as we benefit from
the management actions to transform the business, as well as the use of our
enhanced data to improve operational and cost performance. We have also been
assisted by a c.6% increase in the number of drivers during the period,
compared to the driver shortages experienced in H1 2023, which has contributed
to an improvement in operated vs. scheduled mileage during H1 2024.
We have continued to grow our Adjacent Services business, thanks to a number
of contract extensions as well as the inclusion for the full period of
Airporter and Ensignbus that we acquired in FY 2023. We also successfully
launched a new Aircoach Leicester-Birmingham airport 24-hour express service
in September and are seeing demand build steadily. The adjacent bus services
market in the UK is considerable, and we are actively reviewing a number of
opportunities to grow the business and win further contracts leveraging our
national footprint and successful track record in managing large contracts
effectively.
Government policy towards the bus sector remains highly supportive and has
contributed to the growth in passenger volumes we have seen over the last few
months. We welcomed the recent announcements regarding the extension of the
£2 fare cap in England to the end of December 2024 and the award of
additional Bus Service Improvement Plan funding for bus services in the North
of England and the Midlands.
A leader in decarbonisation
We continue to make significant progress in our decarbonisation programme and
are on track to have almost 15% of our bus fleet zero emissions and four fully
electric depots in England by March 2024, adding to the progress already made
in Scotland. This is a great achievement and is rapidly establishing the Group
as a leader in public transport decarbonisation.
Whilst we do not yet have full visibility of the impact of running a fully
electric depot, we are confident that the electrification of our bus fleet and
depots will positively transform our business. Electrification will allow us
to standardise our fleet to drive efficiency and lower engineering costs. We
will also be able to simplify our operations and reduce the size of our fleet
whilst delivering the same mileage. Furthermore, by making use of smart
charging software we will optimise our energy use, increase battery efficiency
and potentially extend battery life.
The landmark strategic joint venture with Hitachi that we have recently
announced will help us to continue the electrification of our fleet and depots
with increased efficiency and greater visibility of our financial commitment,
and unlike other possible arrangements, we will retain much of the residual
value in the batteries as they are replaced and taken off our buses. Looking
ahead, we are also excited about the possibilities for future value creation
with Hitachi ZeroCarbon as they deliver market-leading decarbonisation
solutions to transport operators worldwide, leveraging our joint experience
and allowing the Group to capitalise on its market-leading electrification
position.
Growth and partnerships
On a recent site visit for analysts and institutional investors to our new
electric Leicester bus depot we highlighted Leicester City Council's
successful Enhanced Partnership Scheme. The scheme launched in May 2022 and is
delivering an optimised, co-ordinated, multi-operator network with integrated
timetables, ensuring frequent and reliable services, supported by c.£100m of
private and public funding. Patronage on our buses in Leicester was up by just
over 20% during H1 2024 and punctuality and frequency have also increased
significantly, demonstrating the positive impact of the enhanced partnership
model on the communities we serve.
We were also pleased to have been awarded two contracts in Rochdale in July
this year as part of the second tranche of Transport for Greater Manchester's
('TfGM') franchise programme and, more recently, franchise contracts to
operate services for six schools as part of our Rochdale franchise operation.
A number of cities outside London where we operate have expressed an interest
in franchising in recent months, as well as some where we don't currently have
operations. Our mission is for more people to use the bus, to deliver great
value, to shape networks to suit where and when people want to travel and to
serve local communities and grow local economies in a sustainable way. We are
committed to working with local authorities and national governments to
achieve this, whether through enhanced partnerships or franchising contracts,
both of which we believe offer considerable opportunities for our business and
our stakeholders.
Operational summary - First Rail
In September, we were very pleased to have been awarded a new nine-year
National Rail Contract ('NRC') for the West Coast Partnership ('WCP'). This
includes the operation of Avanti West Coast ('Avanti') and acting as the
shadow operator for the HS2 programme through West Coast Partnership
Development ('WCPD'), which involves the development, mobilisation and the
eventual operation of high-speed services under Phase 1 of the HS2 programme.
The WCP team have worked extremely hard to deliver improvements for Avanti
passengers, including an increase in the number of services in the timetable
and improved levels of reliability for customers. The new NRC will allow the
team to make full use of its expertise to deliver further improvements
including programmes to refurbish the existing fleet and to introduce new,
more environmentally friendly trains, which will encourage more passengers to
return to the network and help deliver the UK's decarbonisation agenda.
Our two open access rail operations have again outperformed expectations
thanks to high levels of leisure travel demand over the summer months. Both
operations saw an increase in seat capacity utilisation during H1 2024. Hull
Trains reported a c.33% increase in passenger journeys during the period,
which included increased business travel, following a targeted marketing
campaign. The business has increased capacity to match demand, including
running a ten-car operation at peak demand times. Lumo has now carried more
than two million passengers and a recent independent study concluded that a
London to Edinburgh trip on Lumo results in 95% fewer carbon emissions than
flying. Lumo's financial performance is largely driven by yield and the Lumo
team has continued to effectively manage this throughout H1 2024 to drive
revenue, which increased by over 40%, to £26.1m. Lumo has also recently
become the first UK long-distance operator to offer a flexible ticket, Lumo
Flex, that allows customers to change or refund a ticket without a fee.
The success of our open access operations has demonstrated that, as the
largest rail operator in the UK, we have the experience and entrepreneurial
spirit to resolve challenges and innovate in the rail sector for the future
and encourage passengers back to train travel.
A key part of our strategy is to make use of our capabilities to drive modal
shift and build a diverse and resilient portfolio. We are actively pursuing
opportunities to expand our open access operations, through efficiency
improvements, adding capacity to existing services and identifying
opportunities in new routes and markets. We are also looking to scale up our
additional services businesses to further grow and diversify our revenue
streams.
We continue to market our additional services products, including Mistral
Data, evo-rail and First Customer Contact to other operators both in the UK
and internationally. Mistral has also sold a first product to a major
international train manufacturer in the period, and we continue to explore
further growth opportunities.
The UK rail industry continues to experience challenges as the sector adapts
to the different travel patterns and customer choices that have evolved across
society since the pandemic, while navigating industrial action which has
caused significant disruption for rail passengers and businesses. Across the
sector, passenger numbers and revenues remain well below 2019 levels and as a
consequence, the industry has been engaged in discussions with Government
about changes that can adapt the sector to the differing needs of customers,
balanced against these significant financial challenges faced by the national
rail networks. This is reflected in new draft rail reform legislation. The
industry will continue to explore ways to improve customer experience while
delivering value for Government and for all stakeholders, and we continue to
advocate for a spectrum of future contract models including public/private
partnerships and expanding open access, and for the Government to take steps
in the short term to incentivise operators without requiring primary
legislation.
Corporate activity
Key corporate activity during the period has included our £10m investment
committed to our landmark strategic joint venture with Hitachi as mentioned
above. We have also received initial First Transit earnout proceeds of £48.9m
and expect to receive the balance in H2 2024 of approximately £21m. In
addition, we will have materially reduced our pension exposure by H2 2024 by
removing or fully insuring c.£1bn of gross pension liabilities without
requiring any cash from the Group, following the termination of our
participation in two First Bus Local Government Pension Schemes on 31 October
2023, and buying in our Greyhound Canada pension scheme and buying out and
settling c.$75m (c.£62m) of our Greyhound USA pension liabilities during H1
2024. We have also made good progress with merging our Bus and Group pension
schemes to driver further efficiencies. Furthermore, we opportunistically
repurchased £12.2m of the Group's 2024 6.875% bonds of which £172.0m remains
outstanding.
Building on our strong sustainability credentials
We have continued to progress our sustainability targets and gain further
recognition for our strong sustainability foundations during H1 2024. Our
near-term science-based emission reduction target aligned with a 1.5C ambition
has now been validated and approved by the Science Based Targets Initiative.
Our target includes a 63% reduction in our Scope 1 and 2 emissions by FY 2035
from a FY 2020 base year. We were also extremely pleased to have been ranked
as the top performing bus and rail operator in the FTSE4Good Index during the
period.
FY 2024 outlook
Current trading and the Group's outlook for FY 2024 is in line with our
expectations as set out in the Post-Close Trading Update published on 11
October 2023. Positive free cash generation (after c.£115m of net cash
capital expenditure in First Bus, as well as capital returns to shareholders)
is expected to result in an adjusted net cash position in the range of
£40-50m at the end of FY 2024, including the anticipated capex saving
resulting from the Hitachi JV and assuming the completion of the share buyback
and before investing in potential inorganic growth opportunities.
Although clearly sensitive to broader consumer spending and inflation trends,
we expect to make some further progress against our expectations for First Bus
in H2 2024 as we continue to benefit from the actions we have taken to
transform the business. We are confident of achieving our medium-term 10%
operating margin target for First Bus.
In First Rail, we expect the Division's financial performance to be broadly in
line with our expectations in H2 2024.
Graham Sutherland
Chief Executive Officer
23 November 2023
Business Review
First Bus
£m
H1 2024 H1 2023 Change
Revenue 504.9 427.7 77.2
Revenue per mile (£) 6.01 4.92 +1.09
Adjusted operating profit 36.0 20.7 15.3
Adjusted operating margin 7.1% 4.8% 230bps
EBITDA 68.8 51.0 17.8
Passenger volumes (m) 210 188 +12%
Operational mileage (m) 84 87 (3%)
Net operating assets 512.4 468.0 44.4
Capital expenditure 88.7 46.1 42.6
First Bus revenue increased by 18% to £504.9m (H1 2023: £427.7m) mainly
reflecting increased passenger volumes, a positive pricing impact, improved
performance and lower lost mileage offsetting a c.£19m reduction in funding.
Passenger revenue increased to £377.1m (H1 2023: £322.3m), with revenue per
mile up by just over 20%. Revenue from Adjacent Services increased to £116.2m
in H1 2024 (H1 2023: £65.0m) reflecting a number of contract extensions and
the contribution of Airporter and Ensignbus which were acquired by the Group
in FY 2023.
Adjusted operating profit increased by £15.3m to £36.0m (H1 2023: £20.7m)
with a profit margin of 7.1% (H1 2023: 4.8%) despite ongoing inflationary
pressures, due to stronger passenger volumes, improved driver availability
(compared to the shortfall in H1 2023) and data-led operational and commercial
efficiencies. The division's financial results for H1 2024 include an extra
week which adds c.£1.4m of adjusted operating profit.
Passenger volumes increased by 8% compared with the prior period, with total
mileage down 7%, both excluding the extra week. Volumes in H1 2024 benefited
from improvements in service reliability and continued to be supported by the
free travel for under-22s scheme in Scotland and the £2 fare cap in England.
These schemes have encouraged more people, including concessionary travellers
to use the bus.
Government policy towards the bus sector remains extremely supportive and has
contributed to the growth in passenger volumes we have seen over the last few
months. In October 2023 the DfT announced a further £700m of funding for Bus
Service Improvement Plans in the North and a £150m investment in the
Midlands. The £2 fare cap has also been extended until 31 December 2024.
Operational delivery
The team has continued to work hard to drive operational and cost efficiencies
during H1 2024 as we continue the transformation of the business. The division
is recruiting more drivers and making use of its industry-leading data to
deliver better quality mileage by aligning services to demand, implement
smarter fares and drive operational improvements and cost efficiencies.
We have added more drivers into service during H1 2024 (a net increase of just
over 600 drivers) which has contributed to an improvement in operated vs.
scheduled mileage to 98% (H1 2023: 96%; H2 2023: 97%). We continue to focus on
our workforce and have successfully implemented a number of initiatives to not
only recruit more drivers but to also retain the existing workforce. As well
as the provision of healthcare services for all employees which includes
access to GP appointments, we have scheduled driver catch-ups and a programme
of health and wellbeing workshops.
Inflationary pressures have remained during the period. Costs increased due to
inflation by c.7%, principally in wages (+c.8% on average) but were more than
offset by pricing changes of £31m and network and operational efficiencies of
£18m. We have fuel and electricity hedging programmes in place to mitigate
cost inflation and volatility and these programmes continue to evolve as we
transition the First Bus fleet to zero emissions.
Digital innovation
First Bus is a leader in digital transformation in the bus industry and we
continue to make use of our enhanced data and digital capabilities to
implement smarter pricing strategies, optimise service delivery and drive cost
and capital efficiency. We have made further improvements to our service
delivery and generated more operational efficiencies during H1 2024 using our
data and software tools.
Prospective is an AI platform that enables automated, data-led timetables,
allowing us to accurately predict journey times and plan reliable timetables
based on granular data. During H1 2024 we rolled out the platform across all
of our local business units and our focus during the period has been on
prioritising routes where improvements will have the biggest impact on our
customers. Where we have made use of the platform, customers are benefitting
from an immediate increase in punctuality, with the added benefit of reduced
lost mileage with fewer journeys needing to be adjusted, thereby improving
reliability too.
We are also using software from Optibus to optimise our bus schedules and
driver rosters. Alongside our on-bus technology, data feeds into our
operational systems, our customer apps and real time screens, informs our
drivers and provides tracking information that allows us to analyse and
improve performance. In addition, with Optibus, we have developed a module
that allows us to optimise our schedules when we have a mixed fleet of diesel
and electric vehicles, reducing diesel mileage more than our expectations.
Adjacent Services
We continue to identify and capitalise on opportunities to make use of our
capabilities and assets to grow our Adjacent Services business. In H1 2024 we
delivered further growth in revenue to £116.2m (H1 2023: £65.0m) driven by
increased services at First Travel Solutions, a number of contract extensions,
including within our workplace shuttle services for a number of high-profile
brands, and the contribution of Airporter and Ensignbus which were acquired in
FY 2023.
We have also successfully launched a new Aircoach Leicester-Birmingham airport
24-hour express service in September and are seeing demand build steadily. The
adjacent bus services market in the UK is considerable, and we are actively
reviewing a number of opportunities to grow the business and win further
contracts leveraging our national footprint and successful track record in
managing large customers effectively.
Franchising and partnerships
In July 2023, First Bus was awarded two contracts in Rochdale as part of the
second tranche of Transport for Greater Manchester's franchise programme and,
more recently, franchise contracts to operate services for six schools as part
of our Rochdale franchise operation.
On a recent site visit for analysts and institutional investors to our new
electric Leicester bus depot we highlighted Leicester City Council's
successful Enhanced Partnership Scheme that since its launch in May 2022 is
delivering an optimised, co-ordinated, multi-operator network with integrated
timetables, ensuring frequent and reliable services, supported by c.£100m of
private and public funding. Patronage on our buses in Leicester was up by just
over 20% during H1 2024 and punctuality and frequency have also increased
significantly, demonstrating the positive impact of the enhanced partnership
model on the communities we serve.
A number of cities outside London where we operate have expressed an interest
in franchising in recent months, as well as some where we don't currently have
operations. Our mission is for more people to use the bus, to deliver great
value, to shape networks to where people want to go and to serve local
communities and grow local economies in a sustainable way. We are committed to
working with local authorities and national governments to achieve this,
whether through enhanced partnerships or franchising contracts, both of which
we believe offer considerable opportunities for both our business and our
stakeholders.
Decarbonisation
As a major UK regional bus operator, we have a key role to play in the
decarbonisation of public transport in the UK and we are rapidly establishing
ourselves as a leader in decarbonisation as we progress towards our commitment
of a 100% zero emission bus fleet by 2035.
The electrification of bus fleets and infrastructure requires close
co-operation between operators and local authorities, and funding from both
parties.
We welcomed the announcements earlier this year regarding the second round of
the Zero Emission Bus Regional Areas ('ZEBRA2') programme in England that
includes up to £129m of funding, and Phase 2 of ScotZEB with up to £58m of
funding to support the introduction of zero emission buses and related
infrastructure. We have now submitted applications for the second phase of the
Scottish Government's ScotZeb funding programme and will shortly submit bids
for the ZEBRA2 scheme in England and will provide an update on these
applications in due course.
In H1 2024 we took delivery of 166 electric buses, installed more than 100
charger heads and are on track to have over 600 zero emission vehicles by
March 2024, as well as four fully electric depots, in York, Leicester, Norwich
and Portsmouth, adding to the significant progress we have already made in
Scotland. As part of our bus depot infrastructure decarbonisation and cost
cutting initiatives, we are also installing solar panels at our depots, with
the installations now completed at 25 depots to power the depot buildings and
lower their grid energy consumption.
The electrification of our bus fleet and depots will positively transform our
business, allowing us to standardise our fleet to drive efficiency and lower
engineering costs, simplify our operations, reduce the size of our fleet
whilst delivering the same mileage and by making use of smart charging
software we will optimise our energy use, increase battery efficiency and
potentially extend battery life. Looking further ahead, electrification will
unlock new adjacent revenue streams. These include third party charging at our
depots while our buses are out in service (successful pilot schemes are
already underway at our Caledonia, Scotstoun, Aberdeen and Leicester depots
with DPD and other public service providers), opportunities on battery
residual value and efficient recycling post commercial use, on-site battery
storage and the ability to monetise our experience and expertise as a leader
in decarbonisation.
The landmark strategic partnership with Hitachi into which both the Group and
Hitachi will commit investment of £10m will assist the Group to continue the
electrification of our fleet and depots with increased efficiency, potentially
extend battery life and value and give greater visibility of our financial
commitment. In addition, unlike other possible arrangements, we will retain
much of the residual value in the batteries as they are replaced and taken off
our buses.
As detailed in the Group's announcement on 17 November, the partnership will
result in a c.£20m saving in the Group's FY 2024 capital expenditure and
future savings of c.£40m out to FY 2027. We also anticipate a c.£3m per
annum contribution to the Group's earnings by FY 2026, before any potential
operational benefits.
In addition, through our option to participate in a small non-controlling
interest in Hitachi ZeroCarbon, we will have the opportunity to create future
value leveraging our experience in significant fleet electrification as
Hitachi ZeroCarbon delivers market-leading decarbonisation solutions to
transport operators worldwide, applying our joint experience.
Looking ahead
Whilst the division remains sensitive to consumer spending and inflation
trends, we expect to make some further progress against our expectations in H2
2024, including the impact of the Hitachi JV, as we continue to benefit from
the management actions we have taken to transform the business.
Looking further ahead, we will continue to grow our Adjacent Services
business, evaluate further franchising and enhanced partnership opportunities,
and the decarbonisation of our fleet and infrastructure will further transform
the business and unlock new revenue streams.
First Rail
£m £m £m, change
H1 2024 H1 2023
Revenue from management fee-based operations 1,662.1 1,743.3 (81.2)
Revenue from open access and additional services 105.1 85.5 +19.6
Intra-divisional eliminations (45.3) (44.1) (1.2)
First Rail Revenue 1,721.9 1,784.7 (62.8)
Attributable net income from management fee-based operations(1) 23.2 19.1 +4.1
Gross up for tax, non-controlling interests and IFRS 16 31.7 24.3 +7.4
Adjusted operating profit from open access and additional services 22.1 12.0 +10.1
First Rail adjusted operating profit 77.0 55.4 +21.6
Passenger journeys (m) - management fee-based operations(2) 122.1 113.4 +8.7
Passenger journeys (m) - open access operations 1.3 1.1 +0.2
Passenger journeys (m) - Total 123.4 114.5 +8.9
1 Represents the Group's share of the management fee income
available for dividend distribution from the GWR, SWR, TPE and WCP
(incorporating Avanti West Coast) contracts with DfT on a pre-IFRS 16 basis
net of tax and non-controlling interests as described in more detail on pages
13-14. See also note 3 to the financial statements for a reconciliation to the
segmental disclosures.
2 Totals exclude TPE: H1 2024: 3.3m passenger journeys (H1 2023:
9.3m).
The First Rail division reported total revenue of £1,721.9m in H1 2024 (H1
2023: £1,784.7m). The division's open access operations contributed £46.3m
in revenue for the period (H1 2023: £32.7m). Additional services including
Mistral Data, evo-rail and First Customer Contact delivered gross revenue of
£59.6m (H1 2023: £52.8m) before intra-divisional eliminations in the period
and adjusted operating profit of £6.4m (H1 2023: £5.3m).
During H1 2024 the final variable fee payments due for the management
fee-based operations for the FY 2023 fiscal year were agreed with the DfT at a
rate ahead of the amounts accrued in the Group's FY 2023 financial statements.
As a result, the management fee-based operations reported an increase in
adjusted operating profit for the period, to £54.9m (H1 2023: £43.4m). The
division reported a statutory operating profit of £77.0m (H1 2023: £55.4m).
From FY 2024, performance fee metrics have been updated to place a greater
weighting on quantified, rather than qualitative measures that do not rely on
a subjective assessment of an operator's performance and are now assessed on a
bi-annual basis by the DfT. The Group does not anticipate a material impact on
net income as a result of these changes.
Rail attributable net income from management fee-based operations - being the
Group's share of the management fee income available for distribution from the
GWR, SWR, TPE (operated by the Group until 28 May 2023) and WCP contracts with
the DfT - was £23.2m (H1 2023: £19.1m). The Group receives an annual
inter-company remittance from the TOCs reflecting the post-tax net management
and performance fees from the prior year. These become payable up to the Group
in the second half of the financial year following completion of the
management fee-based operations' audited accounts.
The division's two open access operations Lumo and Hull Trains have continued
to experience strong demand in H1 2024. As a result of high passenger booking
volumes and positive yield management, including inflationary increases in
fares, both operations performed ahead of expectations in H1 2024, delivering
an adjusted operating profit of £15.7m (H1 2023: £6.7m).
Both Lumo and Hull Trains have seen an increase in seat capacity utilisation
during H1 2024, with Lumo's utilisation improving further, to 78% from 74% and
Hull's up to 69% from 57%. Hull Trains have also reported an increase in
passenger journeys by a third during the period, which has included an
increase in business travellers using the service, following a targeted
marketing campaign. The business has increased capacity to match demand,
including running a ten-car operation at peak demand times. Lumo have now
carried more than two million passengers and a recent independent study has
found that a London to Edinburgh trip on Lumo results in 95% fewer carbon
emissions than flying. The financial performance of Lumo is largely driven by
yield and the team have continued to effectively manage yield throughout H1
2024 to drive revenue, which increased by just over 40%, to £26.1m. Lumo has
also recently launched Lumo Flex, a flexible discounted ticket that allows
customers to change or refund a ticket without a fee.
To address energy cost inflation, our train operating companies and open
access operations are members of industry buying groups in order to mitigate
the long-term impact of electricity costs. For our open access operations,
electricity costs represent a material proportion of their total costs, and
these have increased by c.130% in H1 2024. Costs are expected to decrease from
these peak levels with recent reductions in energy prices.
National Rail Contracts
Our three management fee-based operations are all now operating under NRCs,
under which the DfT retains substantially all revenue and cost risk (including
for fuel, energy and wage increases). There is a fixed management fee and the
opportunity to earn an additional variable fee. The punctuality and other
operational targets required to achieve the maximum level of variable fee
under the contracts are designed to incentivise service delivery for
customers.
In September 2023, following a notable improvement in performance, we were
awarded an NRC for the West Coast Partnership which is a partnership between
FirstGroup (70%) and Trenitalia UK Ltd (30%). WCP comprises Avanti West Coast
('Avanti) and West Coast Partnership Development ('WCPD'), the shadow operator
for the HS2 programme, which involves the development, mobilisation and
eventual operation of high-speed services under Phase 1 of the HS2 programme.
The new NRC commenced on 15 October and is for nine years, with a minimum
three-year core term to 18 October 2026, following which a further six years
until 17 October 2032. WCP will earn a fixed management fee of £5.1m per
annum to deliver the contract with the opportunity to earn a variable fee of
up to £15.8m per annum based on a number of criteria. Punctuality and other
targets required to achieve the maximum variable fee are designed to
incentivise the highest level of performance. Fees are also linked to delivery
within WCPD's programme.
Innovation and adjacent rail opportunities
During the year we continued to develop, market and deploy our additional rail
customer, industry and technology tools and services. These services were
initially developed to strengthen our offering to passengers on our large
passenger rail operations, but they are being marketed to, and now also used
by, third party operators.
Our evo-rail track-to-train superfast rail 5G technology uses trackside
antennae to provide a connectivity solution that delivers over 1Gb per second
to trains to enable high speed on-board Wi-Fi which we expect will improve the
passenger experience and help to encourage modal shift towards rail. The
evo-rail technology is generating interest throughout Europe and the USA, with
the first commercial installation on the SWR mainline, the first section of
which has produced excellent results.
Mistral Data, our analytics business, was launched in 2021 and now has 14
software systems in operation built on native cloud technology, allowing them
to be quickly deployed whilst also ensuring security and scalability. In H1
2024 the team has focused on the provision of accurate, timely and targeted
information between passengers and employees. They have successfully released
various customer service products including an email service that alerts
customers when a train is cancelled on the day, with the capability to add
more service impacting messages over the coming months and a personalised
messaging service for front-line staff that sends operational messages
including the location of passengers who may require assistance whilst the
train is moving, and any other relevant information. During the period,
Mistral has also sold a first product to a major train manufacturer.
In H1 2024 our First Customer Contact passenger service centre continued to
support customers, processing delay repay claims and passenger assistance
bookings, with quick turnaround times. The shared passenger service centre
operates at a lower cost than our previous outsourcing arrangements and
provides a single service for customer queries across several rail operations.
Our First Rail Consulting team has experience built up over three decades.
During H1 2024, the team continued to support the WCPD on HS2 and other key
projects in other train operating companies. First Rail Consulting was also
recently one of a small number of consultants appointed by the DfT to its
£600m STARThree framework to advise on the delivery of key rail, road and
aviation projects.
Customer experience
Our train companies continue to work collaboratively with industry partners
and stakeholders to enhance our service offering. GWR undertook a trial with
real-time journey planner Whoosh, and SWR partnered with wellbeing app Go
Jauntly which offers walking maps starting at various stations on the network.
Avanti's innovative low-cost Superfare for flexible travel, offering fares
fixed by destination and now starting from £9 for a one-way ticket between
London and Birmingham, has seen more than 10,000 tickets sold with two-thirds
of users saying they would otherwise not have taken the train. In a separate
initiative Avanti, following a successful trial on the Liverpool route, is
partnering with the rail upgrade business Seatfrog, offering customers a
chance to bid for the company's industry-first Standard Premium as well as
first class upgrades at a low price.
In the period GWR opened three new stations at key transport interchanges
across their network, working in partnership with local authorities in
Reading, Exeter and Bristol. The operator also delivered accessibility
improvements during the period including a £1m package at Chippenham station.
Working with local partners, GWR offered a tourist-focused all-inclusive
ticket including heritage railway and ferry travel in South Devon, and the
Devon & Cornwall Railcard became the first regional railcard in the UK to
go digital this summer.
SWR have invested more than £1.5m into community initiatives across its
network and formed awareness-raising partnerships with Guide Dogs and homeless
charity Missing People and it has installed defibrillators at more than 150
staffed stations. The railway on the Isle of Wight has also now fully reopened
following a £26m investment.
Fleet upgrades
First Rail has an important contribution to make in meeting the challenges of
climate change, and we are working with our partners to reduce carbon
emissions through a number of initiatives including the introduction of
electric trains to replace diesel where possible.
Avanti has taken delivery of the first of its new train fleet following an
investment of £350m in ten electric-only trains and 13 bi-mode trains that
can run under both electric and diesel power. These will replace Avanti's
diesel-only Voyager trains, leading to a 61% reduction in carbon emissions as
well as providing a quieter and roomier service, more reliable Wi-Fi, wireless
charging and a real-time customer information system. The first trains are
undergoing mainline testing ahead of their introduction into customer service.
The programme to refurbish Avanti's electric Pendolino fleet through a £117m
investment programme has continued and is delivering a step change in onboard
customer experience. SWR has taken delivery of 400 Alstom Class 701 trains
ahead of a phased introduction of the trains into operation in 2024.
Rail policy
The UK rail industry continues to experience challenges as the sector adapts
to the different travel patterns and customer choices that have evolved across
society since the pandemic, while navigating industrial action which has
caused significant disruption for rail passengers and businesses. Across the
sector, passenger numbers and revenues remain well below 2019 levels and as a
consequence, the industry has been engaged in discussions with Government
about changes that can adapt the sector to the changing needs of customers,
balanced against these significant financial challenges. The industry will
continue to explore ways to improve customer experience while delivering value
for taxpayers and all stakeholders, and we continue to advocate for a spectrum
of future contract models including public/private partnerships and fully
independent open access, and for the Government to take steps in the short
term to incentivise operators without requiring primary legislation. We
welcome the Government's new draft rail reform bill, announced in the recent
King's Speech, which will frame consultation on future reforms to aid rail
recovery and, in the Government's own words, "develop the right commercial
conditions to empower the private sector to reinvigorate the industry." We are
engaging directly and through industry channels with the Labour Party, which
is still developing its rail policy in detail, and we note the Labour leader's
commitment at the recent party conference to pursue public-private
partnerships.
During the period, a number of trade unions continued to stage industrial
action at train operating companies across the UK; notwithstanding the fact
that under the management fee-based contracts operators bear no revenue risk
and limited cost risk, prolonged industrial action presents enormous
challenges for the reputation and recovery of the industry and, most
importantly, for our passengers who rely on these services to go about their
daily lives. We continue to work closely with our industry partners to do all
that we can to minimise the effects of disruption for our passengers. We
welcome the RMT's decision to agree a way forward with the Rail Delivery Group
and put the offer from operators to its membership, which includes a backdated
2022 pay rise for staff and job security guarantees. We urge those members to
accept this deal which would terminate the national dispute mandate, creating
a pause and respite from industrial action over the Christmas period and into
Spring next year, while allowing for important negotiations on proposed
reforms to take place at local train operating company level, through the
established collective bargaining structures.
As the largest rail operator in the UK, First Rail will play a significant
role in the industry as it evolves, and the success of our open access
operations has demonstrated that we have the experience and entrepreneurial
spirit to introduce new services, resolve challenges and innovate for the
future, encouraging passengers back to rail whilst also growing our business.
Looking ahead
Financial performance is expected to be broadly in line with our expectations
in H2 2024, including bid costs, despite the ongoing industrial relations
challenges.
In the medium to longer term, we anticipate further growth as we actively
pursue opportunities to expand our open access operations through efficiency
improvements, adding capacity to existing services and identifying
opportunities in new routes and markets. We are also looking to scale up our
additional services businesses to further grow and diversify our revenue
streams.
Financial review
Revenue
Revenue from continuing operations decreased slightly to £2,207.0m (H1 2023:
£2,212.4m). First Bus revenue increased by 18% to £504.9m, principally
reflecting strong passenger volumes, service improvements and positive pricing
impact, partly offset by lower receipts from government funding. First Rail
saw increased revenue across its open access and additional services
businesses, although this was more than offset by lower revenue in its
management-fee based operations where we take no substantial revenue risk.
Operating performance
Adjusted operating performance by division is as follows:
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
Revenue Adjusted operating profit(1) Adjusted operating margin(1) Revenue Adjusted operating profit(1) Adjusted operating margin(1) Revenue Adjusted Adjusted
£m
£m
%
£m
£m
%
£m
operating profit(1)
operating margin(1)
£m
%
First Bus 504.9 36.0 7.1 427.7 20.7 4.8 902.5 58.4 6.5
First Rail 1,721.9 77.0 4.5 1,784.7 55.4 3.1 3,893.2 124.8 3.2
Group items(2) (19.8) (12.4) n/a - (10.0) n/a (40.7) (22.2) n/a
Continuing operations 2,207.0 100.6 4.6 2,212.4 66.1 3.0 4,755.0 161.0 3.4
Discontinued operations(3) - (2.2) n/a 2.7 (8.4) n/a 4.0 (6.6) n/a
Total 2,207.0 98.4 4.5 2,215.1 57.7 2.6 4,759.0 154.4 3.2
Statutory operating performance by division is as follows:
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
Revenue Operating profit(1) Operating margin(1) Revenue Operating profit(1) Operating margin(1) Revenue Operating profit(1) Operating margin(1)
£m
£m
%
£m
£m
%
£m
£m
%
First Bus 504.9 (106.3) (21.1) 427.7 16.4 3.8 902.5 51.4 5.7
First Rail 1,721.9 77.0 4.5 1,784.7 55.4 3.1 3,893.2 124.8 3.2
Group items(2) (19.8) (12.1) n/a - (9.7) n/a (40.7) (22.3) n/a
Continuing operations 2,207.0 (41.4) (1.9) 2,212.4 62.1 2.8 4,755.0 153.9 3.2
Discontinued operations(3) - 0.1 n/a 2.7 (28.6) n/a 4.0 31.3 n/a
Total 2,207.0 (41.3) (1.9) 2,215.1 33.5 1.5 4,759.0 185.2 3.9
(1 ')Adjusted' figures throughout this document are before
adjusting and certain other items as set out in note 3 to the interim
financial statements.
(2) Includes elimination of intra-group trading between Bus and Rail
divisions (not material in H1 2023), and charges relating to central
management and other items.
(3) Discontinued operations relates to the Group's residual Greyhound
US activities.
Adjusted operating profit from continuing operations was £100.6m (H1 2023:
£66.1m), reflecting strong demand in the First Rail open access operations,
and higher than anticipated variable fee payments due to the division's
management fee-based contracts for FY 2023 having now been agreed with the
Department for Transport. Despite ongoing inflationary pressures, First Bus
benefited from strong passenger volumes and productivity improvements. Central
costs were £(12.4)m with the increase partly due to costs incurred on
strategic projects.
The Group's EBITDA adjusted for First Rail management fees performance measure
also increased year-on-year.
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
£m
£m
£m
First Bus EBITDA(1) 61.4 42.8 105.0
Attributable net income from First Rail management fee-based operations(2) 23.2 19.1 38.7
First Rail EBITDA from open access and additional services(1) 22.2 12.6 32.5
Group central costs (EBITDA basis(1)) (12.0) (9.6) (21.2)
Group EBITDA adjusted for First Rail management fees 94.8 64.9 155.0
(1) Pre-IFRS 16 basis.
(2) A reconciliation to the segmental disclosures is set out in note
3.
Adjusted earnings were £56.5m (H1 2023: £34.0m), driven by strong adjusted
operating profit performance across the business, partly offset by a higher
taxation charge.
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
£m
£m
£m
First Bus adjusted operating profit 36.0 20.7 58.4
Adjusted operating profit from rail management fee operations excluding IFRS 35.8 25.8 54.0
16(1)
Adjusted operating profit from rail open access and additional service 22.1 12.0 31.5
Group central costs (operating profit basis) (12.4) (10.0) (22.2)
Group adjusted operating profit excluding IFRS 16 impacts from rail management 81.5 48.5 121.7
fee operations
Interest excluding IFRS 16 interest from rail management fee operations(1) (0.9) (6.0) (8.7)
Taxation (20.2) (6.4) (22.1)
Non-controlling interest (3.9) (2.1) (5.3)
Group adjusted earnings(1) 56.5 34.0 85.6
(1) The Group has revised its definition of adjusted earnings, to also exclude
the impact of IFRS 16 depreciation and interest charges in relation to its
rail management fee-based operations given the Group takes no cost risk on
these rolling stock leases. The prior year comparatives have also been updated
for the revised definition. There has been no other change to the calculation,
or to the Group's policy regarding adjusting items.
Reconciliation to non-GAAP measures and performance
Note 3 to the financial statements sets out the reconciliations of operating
profit and profit before tax to their adjusted equivalents.
The principal adjusting items in H1 2024 are as follows:
First Bus pension settlement charge and related items
In September 2023, First Bus concluded a period of consultation with regards
to its two Local Government Pension Funds and subsequently terminated its
participation in these funds on 31 October 2023, with affected employees
enrolled into the First Bus Retirement Savings Plan. Adjusting charges of
£142.3m were recognised in the period for the settlement charge and related
termination costs. A gain of £160.4m was recognised in Other comprehensive
income in relation to the restricted accounting surplus.
Adjusting items - discontinued operations
Following the announcement on 26 October 2022 of EQT Infrastructure's
agreement to sell First Transit to Transdev North America, Inc, the Group
continues to estimate its earnout consideration to be $88.5m (£72.5m). An
initial payment of $62.8m (£48.9m) was received during the first half of the
year, leaving contingent consideration receivable on the Group's balance sheet
of $25.7m (£21.0m). An adjusting credit of £2.3m arose as a result of the
hedging of the cash receipt and the retranslation of the US dollar asset into
pounds sterling.
Group statutory operating profit
Statutory operating loss (continuing basis) was £(41.4)m (H1 2023: profit of
£62.1m), reflecting the charges from adjusting items.
Finance costs and investment income
Net finance costs were £27.1m (H1 2023: £24.8m) with the increase
principally due to interest charges on lease liabilities, a result of the new
management fee TOC Rail leases entered into during the prior year, offset by
higher interest earned on cash balances.
Profit before tax
Statutory loss before tax (continuing basis) was £(68.5)m (H1 2023: profit
£37.0m). Adjusted profit before tax (continuing basis) as set out in note 3
to the financial statements was £73.5m (H1 2023: £41.0m). Adjusting items
(continuing basis) were a charge of £142.0m, reflecting the First Bus pension
settlement charge and related costs. (H1 2023: charge of £4.0m principally
reflecting the loss on disposal of the First Scotland East business).
Tax
The tax charge on adjusted profit before tax on continuing operations was
£18.4m (H1 2023: £6.1m), representing an effective tax rate of 25.0% (H1
2023: 14.9%). The rate has increased because the corporation tax rate has
increased to 25% and the super-deduction for capital expenditure has been
withdrawn. There was a tax credit of £35.6m (H1 2023: charge of £2.0m)
relating to adjusting items and there were no other adjustments to deferred
tax (H1 2023: credit of £0.8m). The total tax credit, including tax on
discontinued operations, was £(17.2)m (H1 2023: charge of £7.3m). The
actual tax paid during the period was £1.5m (H1 2023: £0.4m).
The ongoing Group's effective tax rate is expected to be broadly in line with
UK corporation tax levels (currently 25%).
EPS
Adjusted continuing EPS was 8.1p (H1 2023: 4.6p). Basic EPS was (7.9)p (H1
2023: (0.1)p).
Shares in issue
As at 30 September 2023 there were 662.5m shares in issue (H1 2023: 738.5m),
excluding treasury shares and own shares held in trust for employees of 88.2m
(H1 2023: 11.9m). Since December 2022, 79.3m shares have been repurchased
under the Group's share buyback programmes. 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 697.7m
(H1 2023: 739.8m).
Capital allocation framework
The Group's capital allocation framework can be summarised as follows:
Investment • First Bus: £115m net cash capex for FY 2024, mostly on
electrification; £10m investment in strategic partnership with Hitachi to
purchase up to 1,000 electric bus batteries; estimated capex saving of c.£20m
in FY 2024
• First Rail: continues to be cash capital-light, with any capital
expenditure required by the management fee-based operations fully funded under
the new contracts
Growth • Actively reviewing adjacent organic and inorganic opportunities
where this creates value for shareholders and exceeds the Group's pre-tax WACC
(c.10%)
Returns for shareholders • Progressive dividend policy currently 3x cover of Group adjusted
earnings; paid c.1/3 interim and 2/3 final dividend
• Interim dividend of 1.5p per share declared
Balance sheet • Less than 2.0x Adjusted Net Debt: rail management fee-adjusted
EBITDA target in the medium term
Dividend
The Board has declared an interim dividend of 1.5p per share (c.£10m in
aggregate), to be paid on 3 January 2024 to shareholders on the register at 1
December 2023.
Adjusted cash flow
The Group's adjusted cash outflow of £(108.0)m (H1 2023: outflow of
£(112.1)m) in the period reflects strong underlying cash generated by
operations offset by capital outflows relating to investment in First Bus, the
impact of the share buyback programmes, lease payments and movement in First
Rail ring-fenced cash (£61.0m outflow since FY 2023). The adjusted cash flow
is set out below:
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
£m
£m
£m
EBITDA 342.3 339.5 755.8
Other non-cash income statement charges (134.3) 1.3 10.9
Working capital (74.9) (162.8) (101.3)
Movement in other provisions (18.8) (8.2) (33.0)
Decrease in financial assets 26.0 - -
Settlement of foreign exchange hedge (1.1) (1.8) (1.2)
Pension payments lower than income statement charge 113.1 11.1 13.6
Cash generated by operations 252.3 179.1 644.8
Capital expenditure and acquisitions (115.6) (61.5) (208.5)
Proceeds from disposal of property, plant and equipment 17.2 23.0 147.8
Proceeds from capital grant funding 55.3 70.6 144.2
Proceeds from contingent consideration 48.9 - -
Net proceeds from disposal of businesses - 2.0 2.0
Interest and tax (31.4) (33.2) (64.6)
Shares purchased for Employee Benefit Trust (6.1) (10.7) (15.3)
Share repurchases from buyback programmes, including costs (66.6) - (31.6)
Dividends paid, including to non-controlling interests (19.7) (8.2) (20.8)
Settlement of foreign exchange hedge 4.2 - (12.5)
Lease payments now in debt/other (246.5) (273.2) (557.5)
Adjusted cash flow (108.0) (112.1) 28.0
Foreign exchange movements 0.8 8.6 (4.0)
Net inception of leases (14.8) (1,029.0) (1,231.8)
Lease payments in debt 246.5 276.5 557.5
Other non-cash movements - - 0.2
Movement in net debt in the period 124.5 (856.0) (650.1)
Capital expenditure
Non-First Rail cash capital expenditure was £95.2m, which related to First
Bus and Group items (H1 2023: £46.8m, all in First Bus). First Rail cash
capital expenditure was £20.4m (H1 2023: £14.7m) and is typically matched by
receipts from the DfT under current contractual arrangements or other funding.
During the period leases in the non-First Rail divisions were entered into
with capital values in First Bus of £5.5m and Group items of £1.3m (H1 2023:
Group items £0.2m). First Rail entered into leases with a capital value of
£9.0m (H1 2023: £1,015.9m). No asset-backed financial liabilities were
entered into during the period (H1 2023: £19.3m, all in First Bus).
Non-First Rail gross capital investment (fixed asset and software additions,
plus the capital value of new leases) was £88.8m and comprised First Bus
£88.6m and Group items £0.1m (H1 2023: £65.6m, comprising First Bus
£65.4m, Group items £0.2m). First Rail gross capital investment was £35.2m
(H1 2023: £1,032.2m). The balance between cash capital expenditure and gross
capital investment represents new leases, creditor movements and the
recognition of additional right of use assets in the period.
Funding
As at the period end, the Group had £581.9m of undrawn committed headroom and
free cash (FY 2023: £638.9m), being £300.0m (FY 2023: £300.0m) of committed
headroom and £281.9m (FY 2023: £338.9m) of net free cash after offsetting
overdraft positions.
Net cash/(debt)
As at 30 September 2023 the Group's adjusted net cash, which excludes IFRS 16
lease liabilities and ring-fenced cash, was £77.1m (FY 2023: adjusted net
cash of £109.9m). Reported net debt was £(1,144.6)m (FY 2023: £(1,269.1)m)
after IFRS 16 and including ring-fenced cash of £307.3m (FY 2023: £369.6m),
as follows:
Analysis of net debt 30 September 2023 24 September 25 March 2023
£m
2022
£m
£m
Sterling bond (2024) 172.0 199.9 184.2
Bank loans and overdrafts 96.4 39.9 82.9
Lease liabilities 1,529.0 1,821.3 1,748.6
Asset backed financial liabilities 32.1 49.9 44.2
Loan notes 0.6 0.6 0.6
Gross debt excluding accrued interest 1,830.1 2,111.6 2,060.5
Cash (378.2) (297.6) (421.8)
First Rail ring-fenced cash and deposits (303.2) (315.3) (364.2)
Other ring-fenced cash and deposits (4.1) (23.7) (5.4)
Net debt excluding accrued interest 1,144.6 1,475.0 1,269.1
IFRS 16 lease liabilities - rail 1,492.2 1,780.9 1,711.2
IFRS 16 lease liabilities - non-rail 36.8 40.4 37.4
IFRS 16 lease liabilities - total 1,529.0 1,821.3 1,748.6
Net cash excluding accrued interest (pre-IFRS 16) (384.4) (346.3) (479.5)
Adjusted net cash (pre-IFRS 16 and excluding ring-fenced cash) (77.1) (7.3) (109.9)
Under the terms of the First Rail contractual agreements with the DfT, 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 ratios at the balance sheet date.
Interest rate risk
Exposure to floating interest rates is managed to ensure that at least 50%
(but at no time more than 100%) of the Group's pre-IFRS 16 gross debt is fixed
rate for the medium term.
Fuel and electricity price risk
We use a progressive forward hedging programme to manage commodity risk. As at
November 2023, 81% of our 'at risk' UK crude requirements for H2 2024 (41.2m
litres, which is all in First Bus) was hedged at an average rate of 46p per
litre, 62% of our requirements for the year to the end of March 2025 at 51p
per litre, and 17% of our requirements for the year to the end of March 2026
at 51p per litre. We also have an electricity hedge programme in place, with
89% of our consumption (based on current consumption forecasts) hedged for H2
2024 at £165/MWh, 67% for FY 2025 at £144/MWh and 21% for FY 2026 at
£111/MWh.
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 but accepts that reported Group
earnings will fluctuate as exchange rates against pounds Sterling fluctuate
for the currencies in which the Group does business, although this exposure is
materially reduced following the sales of the North American divisions. 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:
27 weeks to 30 September 2023 26 weeks to 24 September 2022 52 weeks to 25 March 2023
Closing rate Effective rate Closing rate Effective rate Closing rate Effective rate
US Dollar 1.22 1.26 1.09 1.12 1.22 1.11
Canadian Dollar 1.66 1.70 1.48 1.60 1.68 1.76
Pensions
We have updated our pension assumptions for the defined benefit schemes in the
UK and North America. The net pension surplus of £27.9m at the beginning of
the reporting period moved to a net surplus of £5.6m as at the balance sheet
date on 30 September 2023, with the movement principally due to a reduction in
asset values which more than offset the impact of increased discount rates on
scheme liabilities, as well as the impact of the pension actions detailed
below and in note 18. The main factors that influence the balance sheet
position for pensions and the principal sensitivities to their movement at 30
September 2023 are set out below:
Movement Impact
Discount rate -0.1% Decrease surplus by £14m
Inflation +0.1% Decrease surplus by £11m
Life expectancy +1 year Decrease surplus by £37m
On 29 September 2023, and following a period of employee consultation, the
Group gave notice of its intention to terminate the participation of the
relevant First Bus subsidiaries in certain Local Government Pension Schemes
(LGPS) on 31 October 2023, and this was executed at that date. An expense of
£142.3m was recognised in H1 2024 as an adjusting income statement item for
the settlement charges and other related costs, and a gain of £160.4m was
recognised in Other comprehensive income in relation to the restricted
accounting surplus.
During the period, the Limited Partnership created following the sale of the
North American divisions returned £23.7m to The Bus Pension Scheme, linked to
the £500m capital return in December 2021. The amounts held by the Limited
Partnership generated interest income of £3.3m during the period which
increased the value of the related financial asset on the Group's balance
sheet.
The basis on which the Scheme is valued for funding purposes (Technical
Provisions) following the next triennial valuation will determine the final
distribution of funds from the escrow during 2025, and within that the
liabilities are valued by reference to gilt yields. On an agreed low
dependency funding basis, First Bus and First Group scheme shortfalls are in
aggregate c.£46m lower than at the start of the year (c.£146m at 25 March
2023), with c.£97m remaining in escrow.
Balance sheet
Net assets have decreased by £117.1m since 25 March 2023.
Balance sheets - net assets/(liabilities) As at As at As at
30 September 2023
24 September 2022
25 March 2023
£m
£m
£m
First Bus 512.4 468.0 511.9
First Rail 1,240.0 1,501.0 1,368.3
Greyhound (retained) (24.8) (21.6) (21.8)
Divisional net assets 1,727.6 1,947.4 1,858.4
Group items 57.3 221.7 162.1
Borrowings and cash (1,145.0) (1,475.2) (1,275.6)
Taxation (6.9) 18.4 5.3
Held for sale assets 0.7 46.0 0.6
Total 633.7 758.3 750.8
Legacy North American assets and liabilities on balance sheet
As part of the disposal of First Transit to EQT Infrastructure, FirstGroup was
entitled to an 'earnout' consideration of up to $290m (c.£220m). On 26
October 2022, EQT Infrastructure announced its agreement to sell First Transit
to Transdev North America, Inc, and as a result the Group estimates its
earnout consideration will be around $88.5m (£72.3m). During the first half
of the year, an initial payment of $62.8m (£48.9m) was received in relation
to the earnout consideration, with a residual asset of $25.7m (£21.0m) held
on the balance sheet at 30 September 2023.
Post-balance sheet events
• On 19 September, the Group announced it had agreed a new
National Rail Contract (NRC) with the Department for Transport (DfT) for the
West Coast Partnership. The new NRC commenced on 15 October 2023 with a
duration of nine years, including a core minimum three-year term to 18 October
2026.
• On 19 October, the Group completed the buy-out of the 6%
non-controlling interest in Leicester CityBus Limited for consideration of
£3.1m.
• On 31 October, the Group terminated the participation of the
relevant First Bus subsidiaries in certain Local Government Pension Schemes
(LGPS). Details of the accounting impact are provided above, and in note 18 of
the financial statements.
• On 17 November, the Group announced it had agreed a strategic
partnership with Hitachi as part of the Group's bus fleet and infrastructure
decarbonisation programme. The Group and Hitachi have each committed a cash
investment of £10m into the strategic partnership.
Going concern
The Board carried out a review of the Group's financial projections for the 18
months to 31 March 2025 and having regard to the risks and uncertainties to
which the Group is exposed, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the condensed consolidated financial
statements in the half-yearly report have been prepared on the going concern
basis.
Definitions
Unless otherwise stated, all financial figures for the 27 weeks to 30
September 2023 (the 'first half', the 'period' or 'H1 2024') include the
results and financial position of the First Rail business for the period ended
16 September 2023 and the results of all other businesses for the 27 weeks
ended 30 September 2023. The figures for the 26 weeks to 24 September 2022
(the 'prior period' or 'H1 2023') include the results and financial position
of the First Rail business for the period ended 17 September 2022 and the
results of all other businesses for the 26 weeks ended 24 September 2022.
Figures for the 52 weeks to 25 March 2023 ('FY 2023') include the results and
financial position of the First Rail business for the year ended 31 March 2023
and the results of all other businesses for the 52 weeks ended 25 March 2023.
'Cont.' or the 'Continuing operations' refer to First Bus, First Rail, Group
items and Greyhound Canada.
'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 adjusting items as set
out in note 3 to the financial statements, and in the case of 'adjusted EPS',
excluding the impact of IFRS 16 for the Group's management fee-based Rail
operations.
'EBITDA' is adjusted operating profit less capital grant amortisation plus
depreciation.
The Group's 'EBITDA adjusted for First Rail management fees' is First Bus and
First Rail EBITDA from open access and additional services on a pre-IFRS 16
basis, plus First Rail attributable net income from management fee-based
operations, minus central costs.
'Adjusted earnings' is the Group's statutory profit for the period
attributable to equity holders of the parent, excluding adjusting items as
detailed in note 3, and also excluding the impact of IFRS 16 for the Group's
management fee-based Rail operations.
'Net debt/(cash)' is the value of Group external borrowings, excluding accrued
interest, less cash balances.
'Adjusted net debt/(cash)' excludes ring-fenced cash and IFRS 16 lease
liabilities from net debt/(cash).
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. No statement in this document should be construed
as a profit forecast for any period. 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.
There are a number of risks and uncertainties facing the Group in the
remaining six months of the financial year in addition to those mentioned in
the Business and Financial Reviews. The underlying principal risks and
uncertainties in our operating businesses remain as set out in detail on pages
67 to 75 of the Annual Report and Accounts 2023, with several of these risks
being more elevated currently given the wider political and economic backdrop
(impacting cost inflation, driver availability, industrial action, policy
uncertainty and passenger demand levels), namely:
• Economic conditions including economic fluctuations
• Geopolitical
• Climate change
• Contracted businesses
• Growth within the sector
• Financial resources
• Safety
• Pension scheme funding
• Regulatory compliance
• Data security and consumer privacy, including cyber security
• Human resources
Risks that are of particular focus in the final six months of the year include
changes in the UK economy, particularly the effect of rising inflation on the
Group and associated industrial relation challenges across the First Rail
business, noting some progress has been made in the period. A change of UK
Government transport policy could also lead to the renationalisation of our
First Rail operations as the expiry dates of our various agreements with the
DfT are reached. Finally, workforce availability, linked to both labour market
shortages and staff retention, is a key risk that could impact operational
capacity across both our bus and rail operations.
For a full summary of the Principal Risks and Uncertainties facing the Group,
please refer to the Annual Report and Accounts 2023 at
https://www.firstgroupplc.com/investors/annual-report-2023.aspx
(https://www.firstgroupplc.com/investors/annual-report-2023.aspx) .
Graham Sutherland
Ryan Mangold
Chief Executive Officer
Chief Financial Officer
23 November 2023
23 November 2023
Condensed consolidated income statement
Notes Unaudited Unaudited
27 weeks to
26 weeks to
30 September 2023
24 September 2022
£m
£m
Revenue 2, 4 2,207.0 2,212.4
Operating costs before LGPS pension settlement and related charges (2,106.1) (2,150.3)
LGPS pension settlement and related charges (142.3) -
Total operating costs (2,248.4) (2,150.3)
Operating (loss)/profit (41.4) 62.1
Investment income 5 11.0 1.8
Finance costs 5 (38.1) (26.9)
(Loss)/profit before tax (68.5) 37.0
Tax 6 17.2 (5.1)
(Loss)/profit from continuing operations (51.3) 31.9
Profit/(loss) from discontinued operations 4 0.1 (30.5)
(Loss)/profit for the period (51.2) 1.4
Attributable to:
Equity holders of the parent (55.1) (0.6)
Non-controlling interests 3.9 2.0
(51.2) 1.4
Earnings per share
Earnings per share for (loss)/profit from continuing operations attributable
to the ordinary equity holders of the company
Basic (7.9)p 4.0p
Diluted (7.9)p 3.9p
Earnings per share for loss attributable to the ordinary equity holders of the
company
Basic 7 (7.9)p (0.1)p
Diluted 7 (7.9)p (0.1)p
Adjusted results (from continuing operations)(1)
Adjusted operating profit 3 100.6 66.1
Adjusted profit before tax 73.5 41.0
Adjusted EPS 7 8.1p 4.6p
Adjusted diluted EPS 7.8p 4.5p
(1 ) Adjusted for certain items as set out in note 3 and note 7.
The accompanying notes form an integral part of this consolidated income
statement.
Condensed consolidated statement of comprehensive income
Unaudited Unaudited
27 weeks to
26 weeks to
30 September
2023 24 September
£m
2022
£m
(Loss)/profit for the period (51.2) 1.4
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes (70.7) (117.0)
Gain on termination of LGPS participation from restricted accounting surplus 160.4 -
Deferred tax on actuarial (gains)/losses on defined benefit pension schemes (22.3) 30.8
67.4 (86.2)
Items that may be reclassified subsequently to profit or loss
Hedging instrument movements 11.2 (22.8)
Deferred tax on hedging instrument movements (2.2) (4.1)
Cumulative profit on hedging instruments reclassified to the income statement (2.9) -
Exchange differences on translation of foreign operations - continuing (0.6) (4.8)
operations
Exchange differences on translation of foreign operations - discontinued (1.9) 21.2
operations
3.6 (10.5)
Other comprehensive income/(loss) for the period 71.0 (96.7)
Total comprehensive income/(loss) for the period 19.8 (95.3)
Attributable to:
Equity holders of the parent 15.9 (97.3)
Non-controlling interests 3.9 2.0
19.8 (95.3)
Total comprehensive income/(loss) for the period attributable to owners of
FirstGroup plc arises from:
Continuing operations 24.5 (52.1)
Discontinued operations (4.7) (43.2)
19.8 (95.3)
The accompanying notes form an integral part of this consolidated statement of
comprehensive income.
Condensed consolidated balance sheet
Note Unaudited Audited
30 September 2023
£m 25 March 2023
£m
Non-current assets
Goodwill 8 99.6 99.6
Other intangible assets 9.4 10.8
Property, plant and equipment 9 2,171.1 2,329.7
Deferred tax assets 40.5 47.0
Retirement benefit assets 18 28.3 44.6
Derivative financial instruments 13 2.2 0.1
Financial asset 13 97.2 117.6
Investments 2.6 2.5
2,450.9 2,651.9
Current assets
Inventories 25.4 26.0
Contingent consideration receivable 10 21.0 72.3
Trade and other receivables 10 981.8 848.3
Current tax assets 0.9 -
Cash and cash equivalents 17 685.5 791.4
Derivative financial instruments 13 6.8 7.4
1,721.4 1,745.4
Assets held for sale 0.7 8.9
Total assets 4,173.0 4,406.2
Current liabilities
Trade and other payables 1,442.2 1,314.4
Tax liabilities - Current tax liabilities 0.1 0.3
- Other tax and social security 48.2 41.4
Borrowings 11 702.4 554.7
Derivative financial instruments 13 2.4 2.6
Provisions 14 75.8 85.9
Current liabilities 2,271.1 1,999.3
Net current liabilities (549.7) (253.9)
Non-current liabilities
Borrowings 11 1,128.1 1,512.3
Retirement benefit liabilities 18 22.7 16.7
Derivative financial instruments 13 0.6 1.9
Provisions 14 116.8 125.2
1,268.2 1,656.1
Total liabilities 3,539.3 3,655.4
Net assets 633.7 750.8
Equity
Share capital 15 37.5 37.5
Share premium 693.3 693.2
Hedging reserve 3.9 (0.7)
Other reserves 22.4 22.4
Own shares (11.4) (15.4)
Translation reserve (18.8) (16.3)
Retained earnings (107.7) 19.5
Equity attributable to equity holders of the parent 619.2 740.2
Non-controlling interests 14.5 10.6
Total equity 633.7 750.8
The accompanying notes form an integral part of this consolidated balance
sheet.
COndensed consolidated statement of changes in equity
Share capital Share premium Hedging reserve Other reserves Own shares Translation reserve Retained earnings Total Non-controlling interests Total equity
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Balance at 25 March 2023 37.5 693.2 (0.7) 22.4 (15.4) (16.3) 19.5 740.2 10.6 750.8
(Loss)/profit for the period - - - - - - (55.1) (55.1) 3.9 (51.2)
Other comprehensive income/(loss) for the period - - 6.1 - - (2.5) 67.4 71.0 - 71.0
Total comprehensive income/(loss) for the period - - 6.1 - - (2.5) 12.3 15.9 3.9 19.8
Derivative hedging instrument movements transferred to balance sheet (net of - - (1.5) - - - - (1.5) - (1.5)
tax)
Transactions with owners in their capacity as owners
Shares issued - 0.1 - - - - - 0.1 - 0.1
Movement in EBT and treasury shares - - - - 4.0 - (10.0) (6.0) - (6.0)
Share-based payments - - - - - - 6.6 6.6 - 6.6
Deferred tax on share-based payments - - - - - - (0.6) (0.6) - (0.6)
Shares bought back but not yet cancelled - - - - - - (22.7) (22.7) - (22.7)
Liability for shares not yet bought back - - - - - - (93.1) (93.1) - (93.1)
Dividends paid - - - - - - (19.7) (19.7) - (19.7)
Balance at 30 September 2023 (unaudited) 37.5 693.3 3.9 22.4 (11.4) (18.8) (107.7) 619.2 14.5 633.7
Balance at 26 March 2022 37.5 692.8 19.3 22.4 (9.0) (24.0) 137.6 876.6 8.5 885.1
(Loss)/profit for the period - - - - - - (0.6) (0.6) 2.0 1.4
Other comprehensive (loss)/income for the period - - (26.9) - - 16.4 (86.2) (96.7) - (96.7)
Total comprehensive (loss)/income for the period - - (26.9) - - 16.4 (86.8) (97.3) 2.0 (95.3)
Hedging instrument movements transferred to balance sheet (net of tax) - - (14.5) - - - - (14.5) - (14.5)
Transactions with owners in their capacity as owners
Shares issued - 0.2 - - - - - 0.2 - 0.2
Movement in EBT and treasury shares - - - - (4.3) - (6.3) (10.6) - (10.6)
Share-based payments - - - - - - 1.6 1.6 - 1.6
Dividends paid - - - - - - (8.2) (8.2) - (8.2)
Balance at 24 September 2022 (unaudited) 37.5 693.0 (22.1) 22.4 (13.3) (7.6) 37.9 747.8 10.5 758.3
The accompanying notes form an integral part of this consolidated statement of
changes in equity.
Condensed consolidated cash flow statement
Note Unaudited Unaudited
27 weeks to 30 September 2023
26 weeks to 24 September 2022 (restated)
£m
£m
Cash generated by operations 252.3 179.1
Tax paid (1.5) (0.4)
Interest paid (39.4) (35.0)
Net cash from operating activities 16 211.4 143.7
Investing activities
Interest received 9.5 2.2
Proceeds from disposal of property, plant and equipment 17.2 23.0
Purchases of property, plant and equipment (113.9) (60.7)
Purchases of software (1.7) (0.8)
Proceeds from capital grant funding 55.3 70.6
Proceeds from contingent consideration 48.9 -
Net proceeds from disposal of subsidiaries (net of cash disposed) - 2.0
Settlement of foreign exchange hedge 4.2 (16.3)
Net cash from investing activities 19.5 20.0
Financing activities
Shares purchased by Employee Benefit Trust (6.1) (10.7)
Treasury shares purchased via share buyback schemes and directly associated (66.6) -
costs
Shares issued - 0.3
External dividends paid (19.7) (8.2)
Repayment of bond issues (12.2) -
(Repayment of)/proceeds from asset backed financial liabilities (12.1) 14.4
Repayment of lease liabilities (234.4) (271.6)
Net cash flow used in financing activities (351.1) (275.8)
Net decrease in cash and cash equivalents before foreign exchange movements (120.2) (112.1)
Cash and cash equivalents at beginning of period 708.5 700.2
Foreign exchange movements 0.8 8.6
Cash and cash equivalents at the end of the period 589.1 596.7
Cash flow from discontinued operations
Net cash (outflow)/inflow from operating activities (3.7) 10.4
Net cash inflow from investing activities 53.1 2.4
Net cashflow from financing activities - -
Net cashflow from discontinued operations 49.4 12.8
As disclosed in the Group's 2023 Annual Report, during 2023 management
reassessed the classification of cash flows in relation to capital grants
received from the Department for Transport and Transport for Scotland, which
had previously been reported within net cash from operating activities. As
these grants typically relate to the funding of capital investment by the
Group, management concluded that these cash flows represented investing
activities, rather than operating activities, and accordingly have restated
the cash flow for an inflow of £70.6m for the 26 weeks to 24 September 2022.
Cash and cash equivalents are included within current assets on the
consolidated balance sheet. Cash and cash equivalents includes ring-fenced
cash of £307.3m in H1 2024 (full year 2023: £369.6m). The most significant
ring-fenced cash balances are held by the Group's First Rail subsidiaries. All
non-distributable cash in franchised Rail subsidiaries is considered
ring-fenced under the terms of the National Rail Contracts.
Reconciliation to cash flow statement Note Unaudited Audited
30 September 2023
£m 25 March
2023
£m
Cash and cash equivalents - Balance Sheet 17 685.5 791.4
Bank overdraft 17 (96.4) (82.9)
Balances per consolidated cash flow statement 589.1 708.5
Note to the condensed consolidated cash flow statement - reconciliation of net
cash to movement in net debt
Note Unaudited Unaudited
27 weeks to 30 September 2023
26 weeks to 24 September 2022
£m
£m
Net decrease in cash and cash equivalents in period (120.2) (112.1)
Decrease in debt excluding leases 12.2 -
Adjusted cash flow (108.0) (112.1)
Repayment of lease liabilities and asset backed financial liabilities 246.5 276.5
Inception of leases (14.8) (1,029.0)
Foreign exchange movements 0.8 8.6
Other non-cash movements - -
Movement in net debt in period 124.5 (856.0)
Net debt at beginning of period (1,269.1) (619.0)
Net debt at end of period 17 (1,144.6) (1,475.0)
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.
The accompanying notes form an integral part of this consolidated cash flow
statement.
Notes to the CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 Basis of preparation
The half yearly results for the 27 weeks to 30 September 2023 include the
results and financial position of the First Rail division for the period ended
16 September 2023 and the results and financial position for the other
divisions for the 27 weeks ended 30 September 2023. The comparative figures
for the 26 weeks to 24 September 2022 include the results of the First Rail
division for the period ended 17 September 2022 and the results of the other
divisions for the 26 weeks ended 24 September 2022. The comparative figures
for the 52 weeks ended 25 March 2023 include the financial position of the
First Rail division at 31 March 2023 and the financial position of the other
divisions at 25 March 2023.
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 25 March 2023 were approved by the board of directors on 8 June
2023 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.
These condensed consolidated interim financial statements for the half year
reporting period for the 27 weeks to 30 September 2023 have 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 condensed consolidated interim financial statements do 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 25 March 2023, 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 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
certain other items.
These results are unaudited but have been reviewed by the auditor. The
comparative figures for the 26 weeks to 24 September 2022 are unaudited and
are derived from the condensed consolidated interim financial statements for
that period, which was also reviewed by the auditor.
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 2025, 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. The review also
considered the Group's net current liabilities position at 30 September 2023,
and the bond which matures in September 2024. 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 report.
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.
1 Basis of preparation (continued)
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 post-pandemic operating environment,
including assumptions on passenger volume recovery and government support
arrangements as well as inflationary cost and other macroeconomic pressures.
Projections also captured the impact of actions required to address the
Group's climate‑related targets and ambitions.
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 2023 year end. The base case assumes a
continuing recovery in passenger volumes and yields in FY24 and FY25. The base
case assumes the three TOC rail contracts run to their expiry date, should
there be a change in government. The macro projections in the updated base
case assume that the UK operates in a recovering, post-pandemic economy. The
annual budget and medium-term plan also capture the expected financial impact
of the actions required to support the Group's climate-related targets and
ambitions.
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 of passenger
revenues in the second half of FY24 and through FY25 and further inflationary
cost pressures. In First Rail, the downside case assumes reduced TOC
performance fee awards and lower revenues in Hull Trains and Lumo Open Access.
The downside case also assumed a delay in realising proceeds from the
Greyhound property portfolio until after the going concern period, lower
proceeds from the First Transit earnout, and potential downsides should the
Group be impacted by significant climate or cyber security events.
Mitigating actions
If the future operating environment of the Group were to be more challenging
than assumed in the base case or downside case scenarios, the Group would
reduce and defer planned growth capital expenditure 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.
Summary of significant events in the Group
Significant events in relation to the change in the financial position and
performance of the Group:
On 26 October 2022, EQT Infrastructure announced its agreement to sell First
Transit to Transdev North America, Inc. As part of the First Transit disposal
to EQT Infrastructure, FirstGroup is entitled to an earnout consideration. The
Group currently estimates the total earnout consideration to be around $88.5m
(£72.5m), in line with the 2023 year-end assessment. During the first half of
the year, an initial payment of $62.8m (£49.0m) was received in relation to
the earnout consideration, with a residual asset of $25.7m (£21.0m) held on
the balance sheet at 30 September 2023. An adjusting credit of £2.3m arose as
a result of the hedging of the cash receipt and the retranslation of the US
dollar asset into pounds sterling.
In September, First Rail agreed a new National Rail Contract (NRC) with the
Department for Transport (DfT) for the West Coast Partnership (WCP),
comprising Avanti West Coast and the West Coast Partnership Development. The
contract is for nine years and has a minimum three-year term to 18 October
2026, and thereafter a further six years until 17 October 2032, subject to
ongoing DfT approval. On 11 May 2023, the Department for Transport confirmed
that it would not exercise its option to extend FirstGroup's TransPennine
Express NRC, which then duly expired on 28 May 2023.
In First Rail, the final variable fee payments for the division's management
fee-based contracts for the FY 2023 financial year were agreed with the DfT at
a rate ahead of the amounts accrued in the FY 2023 financial statements,
contributing a further c.£12m to adjusted and statutory operating profit in
H1 2024.
First Rail's open access operations Lumo and Hull Trains continued to be
profitable in the period, driven primarily by passenger revenue growth from
increased leisure travel during the summer period.
In the First Bus division, first half performance has been underpinned by
strong passenger volumes and productivity improvements resulting from
management actions taken to transform the business, although these have been
partly offset by ongoing inflationary pressures.
The Group has a £300m sustainability-linked Revolving Credit Facility ('RCF')
with a group of its relationship banks. This committed RCF remains undrawn and
matures in August 2026.
The Company's £75m share buyback programme completed on 3 August 2023 having
repurchased 63,868,786 shares for a total consideration of £75.5m including
transaction costs. On 8 June 2023, the Company announced a new share buyback
programme to purchase up to £115m of ordinary shares. At 30 September 2023,
the Company had repurchased 15,438,871 shares for a total consideration of
£23.5m including transaction costs.
In September 2023, First Bus concluded a period of consultation with regards
to its two Local Government Pension Funds and subsequently terminated its
participation in these funds on 31 October 2023, with affected employees
enrolled into the First Bus Retirement Savings Plan. Adjusting charges of
£142.3m relating to the settlement charge and other costs relating to the
termination were recognised during the period. A gain of £160.4m was
recognised in Other comprehensive income in relation to the restricted
accounting surplus.
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 25 March 2023.
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.
These condensed consolidated interim financial statements were approved by the
Board on 23 November 2023.
2 Revenue
Passenger revenue in First Bus was £377.1m (H1 2023: £322.3m) with the
increase mainly reflecting increased passenger volumes, service improvements
and positive pricing impact, partly offset by funding reductions. First Rail
passenger revenue was £1,405.6m (H1 2023: £1,290.9m).
The principal direct fiscal support recognised during the period comprised
£24.5m (H1 2023: £43.7m) of funding and concessions in First Bus. These are
recognised within revenue in accordance with IFRS 15 (as per our policy on
revenue recognition in the 2023 Annual Accounts), when control of the good or
service is transferred to the customer and the Group is entitled to the
consideration.
The main direct fiscal support recognised in revenue over time for each
division has been as follows:
First Bus: The English, Scottish and Welsh Governments have each supported bus
operators, through a variety of funding schemes since March 2020. In England
the BRG scheme, which provided funding from September 2021 to June 2023, has
been replaced by a new scheme, BSOG+ from July 2023, under which funding is
provided through enhanced BSOG rates per litre and an additional payment per
km operated for eligible miles. In addition to this the DfT implemented a £2
cap on all single fares across the country in January 2023 and are currently
reimbursing operators for any revenue foregone as a result of the reduced
ticket prices. The scheme has recently been extended and will now run until at
least December 2024. In Scotland, the NSG+ scheme which ran throughout FY23
has now ended with the only remaining funding being provided by the NSG scheme
which essentially replaces BSOG. In Wales the BES scheme which funded
operators to a pre-agreed margin in order to allow them to maintain the
network ended in July 2023 and has been replaced by the Bus Transition Fund
(BTF) which operates in an almost identical manner.
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 current year and prior year periods, our First Rail franchises
were operated under the terms of these arrangements.
- EMA in respect of GWR up to 26 June 2022, whereupon GWR
transitioned to a new, three-year NRC with an option for the DfT to extend by
a further three years to June 2028
- ERMA in respect of WCP / Avanti up to 16 October 2022, whereupon
the existing arrangement was extended by a further six months by the DfT to
March 2023. That arrangement was again extended to 15 October 2023, and in
September, a new NRC was awarded for a nine-year period, with a minimum core
three-year term to 18 October 2026
- NRC for SWR throughout both periods
- On 11 May 2023 the DfT confirmed that it would not exercise its
option to extend FirstGroup's TPE NRC, and the contract expired on 28 May
2023. On that date the DfT appointed its Operator of Last Resort to take over
delivery of passenger services on the TPE network
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. Performance based fees are earned through a combination of
scorecards and quantified target methodologies benchmarked off this agreed
service level. 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 assesses 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 considers that this overall basis more appropriately reflects
operating performance and provides a better understanding of the key
performance indicators of the business.
3 Reconciliation to non-GAAP measures and
performance (continued)
Reconciliation of operating (loss)/profit to adjusted operating profit on a 27 weeks to 26 weeks to
continuing basis
30 September 2023
24 September 2022
£m
£m
Operating (loss)/profit on a continuing basis (41.4) 62.1
Adjustments for:
LGPS pension settlement and related charges 142.3 -
Loss on sale of Scotland East - 3.7
Strategic items - 1.9
Greyhound Canada (0.3) (1.6)
Total adjusting operating profit items on a continuing basis 142.0 4.0
Adjusted operating profit on a continuing basis 100.6 66.1
Reconciliation of operating profit/(loss) to adjusted operating loss on a 27 weeks to 26 weeks to
discontinued basis
30 September 2023
24 September 2022
£m
£m
Operating profit/(loss) from discontinued operations 0.1 (28.6)
Adjustments for:
Transit earnout (credit)/charge (2.3) 27.9
Gain on sale of Greyhound properties - (7.7)
Total adjusting operating profit items from discontinued operations (2.3) 20.2
Adjusted operating loss from discontinued operations (2.2) (8.4)
Reconciliation of (loss)/profit before tax to adjusted earnings 27 weeks to 26 weeks to
30 September 2023
24 September 2022
£m
£m
(Loss)/profit before tax (including discontinued operations)(1) (68.4) 8.7
Adjusting operating profit items - continuing operations 142.0 4.0
Adjusting operating profit items - discontinued operations (2.3) 20.2
Adjusting operating profit items - total operations 139.7 24.2
Rail management fee-based operations - IFRS 16 adjustment 7.1 1.5
Adjusted profit before tax including discontinued operations 78.4 34.4
Tax charge on adjusted profit before tax (20.2) (6.4)
Non-controlling interests(2) (3.9) (2.1)
Adjusted earnings including discontinued operations 54.3 25.9
1 See note 4.
2 Statutory non-controlling interests principally reflects Avanti
West Coast and South Western Trains.
Adjusting items
The principal adjusting items in relation to the operating profit adjustments
- continuing operations were as follows:
First Bus pension settlement charge and related items
In September 2023, First Bus concluded a period of consultation with regards
to its two Local Government Pension Funds and subsequently terminated its
participation in these funds on 31 October 2023, with affected employees
enrolled into the First Bus Retirement Savings Plan. Adjusting charges of
£142.3m relating to the settlement charge and other costs relating to the
termination were recognised during the period. A gain of £160.4m was
recognised in Other comprehensive income in relation to the restricted
accounting surplus.
The principal adjusting items in relation to the operating profit adjustments
- discontinued operations were as follows:
Transit earnout charge
Following the announcement on 26 October 2022 of EQT Infrastructure's
agreement to sell First Transit to Transdev North America, Inc, the Group
continues to estimate its total earnout consideration to be $88.5m (£72.5m).
An initial payment of $62.8m (£49.0m) was received during the first half of
the year, leaving contingent consideration receivable on the Group's balance
sheet of $25.7m (£21.0m). An adjusting credit of £2.3m arose as a result of
the hedging of the cash receipt and the retranslation of the US dollar asset
into pounds sterling.
3 Reconciliation to non-GAAP measures and
performance (continued)
Group adjusted attributable EBITDA and operating profit
First Bus EBITDA comprises:
27 weeks to 26 weeks to
30 September 2023
24 September 2022
£m
£m
Pre-IFRS 16 EBITDA 61.4 42.8
IFRS 16 adjustments(1) 7.4 8.2
First Bus adjusted EBITDA per segmental results (note 4) 68.8 51.0
First Rail EBITDA comprises:
Non-management fees based TOCs 22.2 12.6
Group's share of management fee income available for dividends 23.2 19.1
Non-controlling interest 3.9 2.0
Tax at 25% (H1 2023: 19%) 8.7 4.9
IFRS 16 adjustments(1) 228.8 267.0
First Rail adjusted EBITDA per segmental results table (note 4) 286.8 305.6
Group items EBITDA comprises:
Pre-IFRS 16 EBITDA (12.0) (9.6)
IFRS 16 adjustments(1) 0.9 0.9
Group items adjusted EBITDA per segmental results table (note 4) (11.1) (8.7)
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.
4 Business segments information
For management purposes, the Group is organised into three operating divisions
- First Bus, First Rail and Greyhound. The sale of First Student and First
Transit was completed on 21 July 2021, and the sale of Greyhound US and Mexico
completed on 21 October 2021. The properties related to the retained Greyhound
US business were classified as Held for Sale and were therefore treated as
discontinued. Greyhound Canada was retained and is categorised as a Continuing
Operation, although trading operations have ceased. 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 27 weeks to 30 September 2023 are as follows:
Continuing Operations Discontinued Operations
First First Greyhound Group Total Greyhound Group Total
Bus Rail £m Items(1) £m £m Items(1) £m
£m £m £m £m
Passenger revenue 377.1 1,405.6 - - 1,782.7 - - 1,782.7
Contract revenue 94.2 - - (19.8) 74.4 - - 74.4
Rail franchise subsidy receipts - 204.9 - - 204.9 - - 204.9
Other 33.6 111.4 - - 145.0 - - 145.0
Revenue 504.9 1,721.9 - (19.8) 2,207.0 - - 2,207.0
Adjusted EBITDA(2) 68.8 286.8 - (11.1) 344.5 (1.1) (1.1) 342.3
Depreciation (36.6) (229.2) - (1.0) (266.8) - - (266.8)
Software amortisation (0.7) (1.1) - (0.3) (2.1) - - (2.1)
Capital grant amortisation 4.5 20.5 - - 25.0 - - 25.0
Segment results 36.0 77.0 - (12.4) 100.6 (1.1) (1.1) 98.4
Other adjustments (note 3) (142.3) - 0.3 - (142.0) - 2.3 (139.7)
Operating (loss)/profit (106.3) 77.0 0.3 (12.4) (41.4) (1.1) 1.2 (41.3)
Investment income 1.2 1.3 - 8.5 11.0 - - 11.0
Finance costs (1.3) (28.2) - (8.6) (38.1) - - (38.1)
(Loss)/profit before tax (106.4) 50.1 0.3 (12.5) (68.5) (1.1) 1.2 (68.4)
Tax 17.2
Loss after tax (51.2)
1 Group items comprise the elimination of intra-group trading between
Bus and Rail divisions (not material in H1 2023) and charges relating to
central management and other items.
2 Adjusted EBITDA is adjusted operating profit less capital grant
amortisation plus depreciation plus software amortisation.
Balance sheet at 30 September 2023 Total assets Total liabilities Net assets/(liabilities)
£m
£m
£m
Greyhound retained 66.6 (91.4) (24.8)
First Bus 810.8 (298.4) 512.4
First Rail 2,380.1 (1,140.1) 1,240.0
3,257.5 (1,529.9) 1,727.6
Group items 187.9 (130.6) 57.3
Borrowings and cash 685.5 (1,830.5) (1,145.0)
Taxation 41.4 (48.3) (6.9)
Total 4,172.3 (3,539.3) 633.0
Greyhound (held for sale) 0.7 - 0.7
Grand total 4,173.0 (3,539.3) 633.7
The segment results for the 26 weeks to 24 September 2022 were as follows:
Continuing Operations Discontinued Operations
First First Greyhound Group Total Greyhound Group Total
Bus Rail £m Items(1) £m £m Items(1) £m
£m £m £m £m
Passenger revenue 322.3 1,290.9 - - 1,613.2 - - 1,613.2
Contract revenue 54.8 - - - 54.8 - - 54.8
Rail franchise subsidy receipts - 361.2 - - 361.2 - - 361.2
Other 50.6 132.6 - - 183.2 2.7 - 185.9
Revenue 427.7 1,784.7 - - 2,212.4 2.7 - 2,215.1
Adjusted EBITDA(2) 51.0 305.6 - (8.7) 347.9 (8.4) - 339.5
Depreciation (33.2) (310.4) - (1.0) (344.6) - - (344.6)
Software amortisation (0.8) (3.2) - (0.3) (4.3) - - (4.3)
Capital grant amortisation 3.7 63.4 - - 67.1 - - 67.1
Segment results 20.7 55.4 - (10.0) 66.1 (8.4) - 57.7
Other adjustments (note 3) (4.3) - 1.6 (1.3) (4.0) 7.7 (27.9) (24.2)
Operating profit/(loss) 16.4 55.4 1.6 (11.3) 62.1 (0.7) (27.9) 33.5
Investment income - 1.3 - 0.5 1.8 0.4 - 2.2
Finance costs (1.1) (19.5) - (6.3) (26.9) (0.1) - (27.0)
Profit/(loss) before tax 15.3 37.2 1.6 (17.1) 37.0 (0.4) (27.9) 8.7
Tax (7.3)
Profit after tax 1.4
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.
4 Business segments information (continued)
Balance sheet at 25 March 2023 Total assets Total liabilities Net assets/(liabilities)
£m
£m
£m
Greyhound retained 79.8 (101.6) (21.8)
First Bus 775.5 (263.6) 511.9
First Rail 2,460.4 (1,092.1) 1,368.3
3,315.7 (1,457.3) 1,858.4
Group items 251.5 (89.4) 162.1
Borrowings and cash 791.4 (2,067.0) (1,275.6)
Taxation 47.0 (41.7) 5.3
Total 4,405.6 (3,655.4) 750.2
Greyhound (held for sale) 0.6 - 0.6
Grand total 4,406.2 (3,655.4) 750.8
Segment assets and liabilities are determined by identifying the assets and
liabilities that relate to the business of each segment but excluding
intercompany balances, borrowings and cash and taxation.
( )
5 Investment income and finance costs
27 weeks to 26 weeks to
30 September 2023
24 September 2022
£m
£m
Investment income
Bank interest receivable (9.5) (2.2)
Interest on pensions (1.5) -
Total investment income (including discontinued operations) (11.0) (2.2)
Finance costs
Bonds 6.5 6.9
Bank interest and facility fees 3.2 1.6
Finance charges payable in respect of lease liabilities 27.8 20.0
Finance charges payable in respect of asset backed financial liabilities 0.6 0.7
Interest on long term provisions - 0.5
Interest on pensions - (2.8)
Interest - other - 0.1
Total finance costs (including discontinued operations) 38.1 27.0
Total finance costs 38.1 27.0
Investment income (11.0) (2.8)
Net finance costs (including discontinued operations) 27.1 24.8
Investment income relating to discontinued operations was £nil (H1 2023:
£(0.4)m) and finance costs relating to discontinued operations were £nil (H1
2023: £0.1m).
6 Tax on profit on ordinary activities
27 weeks to 26 weeks to
30 September 2023
24 September 2022
£m
£m
Current tax charge 0.7 0.5
Deferred tax (credit)/charge (17.9) 6.8
Total tax (credit)/charge (including discontinued operations) (17.2) 7.3
Tax (credit)/charge attributable to:
(Loss)/profit from continuing operations (17.2) 5.1
Profit from discontinued operations - 2.2
The tax effect of the adjustments disclosed in note 3 was a credit of £35.6m
in H1 2024 (H1 2023: charge of £2.0m). In addition, there were no adjustments
to brought forward tax balances (H1 2023: net credit of £0.8m).
7 Earnings per share (EPS)
Basic EPS is calculated by dividing the loss attributable to equity
shareholders of £(55.1)m in H1 2024 (H1 2023: £(0.6)m) by the weighted
average number of ordinary shares in issue of 697.7m (H1 2023: 739.8m). The
number of ordinary shares used for the basic and diluted calculations is 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.
30 September 2023 24 September 2022
number
number
m
m
Weighted average number of shares used in basic calculation 697.7 739.8
Executive share options 26.0 24.5
Weighted average number of shares used in the diluted calculation 723.7 764.3
The adjusted EPS is intended to highlight the recurring results of the Group
before certain other adjustments as set out in note 3, and before IFRS 16
charges relating to the Group's management fee-based Rail operations. A
reconciliation is set out below:
27 weeks to 26 weeks to
30 September 2023
24 September 2022
£m EPS (p) £m EPS (p)
Basic loss / EPS (55.1) (7.9) (0.6) (0.1)
Management fee-based Rail operations - IFRS 16 adjustments 5.3 0.8 1.1 0.1
Other adjustments (note 3) 139.7 20.0 24.2 3.3
Tax effect of Other adjustments (35.6) (5.1) 2.0 0.3
Other adjustments to deferred tax assets - - (0.8) (0.1)
Adjusted profit and EPS attributable to the ordinary equity holders of the 54.3 7.8 25.9 3.5
company
Adjusted loss from discontinued operations (2.2) (0.3) (8.1) (1.1)
Adjusted profit and EPS from continuing operations 56.5 8.1 34.0 4.6
27 weeks to 26 weeks to
30 September 2023
24 September 2022
pence
pence
Diluted EPS (7.9) (0.1)
Adjusted diluted EPS 7.5 3.4
1 Adjusted diluted EPS for the prior period reflects the amended
definition of adjusted earnings, where it excludes certain adjustments as set
out in note 3, and before IFRS 16 charges relating to the Group's management
fee-based Rail operations.
8 Goodwill and impairment of assets
£m
Cost and carrying amount
At 30 September 2023 and at 26 March 2023 99.6
Disclosures including goodwill by cash generating unit (CGU), details of
impairment testing and sensitivities thereon are set out on pages 180 to 181
of the 2023 Annual Report.
At 30 September 2023, impairment testing was revisited for each of the First
Bus, Hull Trains, and Lumo CGUs. For each of these, it was concluded that
there had been no indicators of impairment since March 2023, therefore no
adjustment was required to the carrying value of the CGUs at 30 September
2023.
9 Property, plant and equipment
Owned assets
Land and Passenger carrying vehicle fleet Other plant and equipment Total
buildings
£m
£m
£m
£m
Cost
At 26 March 2023 213.1 753.5 711.6 1,678.2
Additions 1.5 75.4 29.5 106.4
Transfers to right of use assets - (2.7) - (2.7)
Disposals (0.5) (39.5) (57.9) (97.9)
Foreign exchange movements - (0.1) - (0.1)
At 30 September 2023 214.1 786.6 683.2 1,683.9
Accumulated depreciation and impairment
At 26 March 2023 60.5 432.9 546.1 1,039.5
Charge for period 2.0 26.5 21.7 50.2
Disposals (0.2) (33.1) (56.6) (89.9)
Impairment - - 0.5 0.5
Foreign exchange movements - (0.1) - (0.1)
At 30 September 2023 62.3 426.2 511.7 1,000.2
Carrying amount
At 30 September 2023 151.8 360.4 171.5 683.7
At 25 March 2023 152.6 320.6 165.5 638.7
9 Property, plant and equipment (continued)
Right of use assets
Rolling stock Land and Passenger carrying vehicle fleet Other plant and equipment Total
buildings
£m
£m
£m
£m
£m
Cost
At 26 March 2023 3,781.7 71.4 51.7 8.5 3,913.3
Additions and modifications 8.2 2.3 3.8 1.5 15.8
Transfers from owned assets - - 2.7 - 2.7
Disposals (221.6) (7.4) (0.5) (0.1) (229.6)
At 30 September 2023 3,568.3 66.3 57.7 9.9 3,702.2
Accumulated depreciation and impairment
At 26 March 2023 2,144.7 30.9 40.3 6.4 2,222.3
Charge for period 206.5 4.3 5.3 0.7 216.8
Lease impairment 1.6 - - - 1.6
Disposals (220.6) (4.9) (0.3) (0.1) (225.9)
At 30 September 2023 2,132.2 30.3 45.3 7.0 2,214.8
Carrying amount
At 30 September 2023 1,436.1 36.0 12.4 2.9 1,487.4
At 25 March 2023 1,637.0 40.5 11.4 2.1 1,691.0
The discounted lease liability relating to the right of use assets included
above is shown in note 12.
As at 30 September 2023 the Group had entered into contractual capital
commitments amounting to £252.0m principally representing purchase of PCVs
and TOC commitments.
Owned assets and right of use assets Rolling stock Land and Passenger carrying vehicle fleet Other plant and equipment Total
buildings
£m
£m
£m
£m
£m
Carrying amount
At 30 September 2023 1,436.1 187.8 372.8 174.4 2,171.1
At 25 March 2023 1,637.0 193.1 332.0 167.6 2,329.7
The maturity analysis of lease liabilities is presented in note 12.
Amounts recognised in income statement 27 weeks to 26 weeks to
30 September 2023 24 September 2022
£m £m
Depreciation expense on right of use assets 216.8 257.9
Interest expense on lease liabilities 27.8 20.0
Impairment charge 1.6 -
Expense relating to short-term leases 0.8 -
Expense relating to leases of low value assets 0.1 1.5
247.1 279.4
10 Trade and other receivables
30 September 2023 25 March 2023
£m
£m
Amounts due within one year (from discontinued operations)
Contingent consideration receivable 21.0 72.3
Amounts due within one year (from continuing operations) 30 September 2023 25 March 2023
£m
£m
Trade receivables 329.4 386.1
Loss allowance (37.3) (49.0)
Trade receivables net 292.1 337.1
Other receivables 188.0 210.3
Amounts recoverable on contracts 47.2 22.5
Prepayments 47.9 90.8
Accrued income 406.6 187.6
981.8 848.3
11 Borrowings
30 September 2023 25 March 2023
£m
£m
On demand or within one year
Leases (note 12)(1) 424.7 447.4
Asset backed financial liabilities (note 12)(2) 8.3 17.3
Bank overdraft 96.4 82.9
Loan note 0.6 0.6
Bond 6.875% (repayable 2024)(3) 172.4 6.5
Total current liabilities 702.4 554.7
Within one to two years
Leases (note 12)(1) 351.6 381.6
Asset backed financial liabilities (note 12)(2) 6.0 5.9
Bond 6.875% (repayable 2024) - 184.2
357.6 571.7
Within two to five years
Leases (note 12)(1) 719.7 825.9
Asset backed financial liabilities (note 12)(2) 10.0 12.1
729.7 838.0
More than five years
Leases (note 12)(1) 33.0 93.7
Asset backed financial liabilities (note 12)(2) 7.8 8.9
40.8 102.6
Total non-current liabilities 1,128.1 1,512.3
1 The right of use assets relating to lease liabilities are shown in
note 9. The maturity analysis of lease liabilities is presented in note 12.
2 The maturity analysis of asset backed financial liabilities is
presented in note 12.
3 Includes £0.4m of accrued interest (FY 2023: £6.5m of accrued
interest).
12 Lease liabilities and asset backed financial
liabilities
The Group had the following lease liabilities at the balance sheet dates:
Lease liabilities 30 September 2023 25 March 2023
£m
£m
Due in less than one year 472.9 503.1
Due in more than one year but not more than two years 386.0 421.5
Due in more than two years but not more than five years 759.5 878.8
Due in more than five years 43.3 105.0
1,661.7 1,908.4
Less future financing charges (132.7) (159.8)
1,529.0 1,748.6
Comprising:
Lease liabilities - Rail 1,492.2 1,711.2
Lease liabilities - non-Rail 36.8 37.4
The Group had the following asset backed financial liabilities at the balance
sheet dates:
Asset backed financial liabilities 30 September 2023 25 March 2023
£m
£m
Due in less than one year 8.6 17.9
Due in more than one year but not more than two years 6.4 6.3
Due in more than two years but not more than five years 11.4 13.7
Due in more than five years 9.6 10.9
36.0 48.8
Less future financing charges (3.9) (4.6)
32.1 44.2
Comprising:
Asset backed financial liabilities - non-Rail 32.1 44.2
Asset backed financial liabilities - Rail - -
13 Financial instruments
Non-derivative financial instruments
30 September 2023 25 March 2023
£m
£m
Total non-derivatives
Total non-current assets 97.2 117.6
Total assets 97.2 117.6
Certain pension partnership structures were implemented during 2022. These
structures involved the creation of special purpose vehicles (SPVs) to hold
cash to fund the Bus and Group pension schemes, if required, based on a
designated funding mechanism. Management have concluded that these amounts
represent financial assets under IAS 32.
Derivative financial instruments
30 September 2023 25 March 2023
£m
£m
Derivatives designated and effective as hedging instruments carried at fair
value
Non-current assets
Fuel derivatives (cash flow hedge) 2.0 -
Currency forwards (cash flow hedge) 0.2 0.1
2.2 0.1
Current assets
Fuel derivatives (cash flow hedge) 6.0 3.3
Currency forwards (cash flow hedge) 0.8 4.1
6.8 7.4
Current liabilities
Fuel derivatives (cash flow hedge) 1.5 2.6
Currency forwards (cash flow hedge) 0.9 -
2.4 2.6
Non-current liabilities
Currency forwards (cash flow hedge) - 0.1
Fuel derivatives (cash flow hedge) 0.6 1.8
0.6 1.9
Fair value of the Group's financial assets and financial liabilities
(including trade and other receivables and trade and other payables) on a
continuing basis:
30 September 2023
Fair value Carrying value
Total
£m
Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Financial assets and derivatives
Trade and other receivables - 783.2 - 783.2 783.2
Contingent consideration receivable - 21.0 - 21.0 21.0
Derivative financial instruments - 9.0 - 9.0 9.0
Financial liabilities and derivatives
Borrowings(1) 0.6 1,733.1 - 1,733.7 1,734.1
Trade and other payables - 1,295.9 - 1,295.9 1,295.9
Derivative financial instruments - 3.0 - 3.0 3.0
25 March 2023
Fair value Carrying value
Total
£m
Level 1 Level 2 Level 3 Total
£m
£m
£m £m
Financial assets and derivatives
Trade and other receivables - 596.2 - 596.2 596.2
Contingent consideration receivable - 72.3 - 72.3 72.3
Derivative financial instruments - 7.5 - 7.5 7.5
Financial liabilities and derivatives
Borrowings(1) 0.6 1,984.1 - 1,984.7 1,984.1
Trade and other payables - 1,198.3 - 1,198.3 1,198.3
Derivative financial instruments - 4.5 - 4.5 4.5
(1) Includes lease liabilities as set out in note 12.
13 Financial instruments (continued)
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.
14 Provisions
Insurance claims Legal and other Total
£m
£m
£m
At 26 March 2023 129.9 81.2 211.1
Charged to the income statement 6.6 7.0 13.6
Utilised in the period (21.6) (7.4) (29.0)
Transferred from accruals - 1.7 1.7
Disposed - (5.2) (5.2)
Foreign exchange movements 0.3 0.1 0.4
At 30 September 2023 115.2 77.4 192.6
Current liabilities 40.2 35.6 75.8
Non-current liabilities 75.0 41.8 116.8
At 30 September 2023 115.2 77.4 192.6
Current liabilities 45.5 40.4 85.9
Non-current liabilities 84.4 40.8 125.2
At 25 March 2023 129.9 81.2 211.1
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 four years although certain
liabilities in respect of lifetime obligations of £1.3m in H1 2024 (full year
2023: £1.3m) can extend for more than 25 years. The utilisation of £21.6m in
H1 2024 (full year 2023: £37.1m) represents payments made largely against the
current liability of the preceding year as well as the settlement of certain
large aged claims.
The insurance claims provisions contain £59.7m in H1 2024 (full year 2023:
£73.3m) which is recoverable from insurance companies and is included within
other receivables in note 10.
Legal and other provisions relate to estimated exposures for cases filed or
thought highly likely to be filed for incidents that occurred prior to the
balance sheet date. It is anticipated that most of these items will be settled
within ten years. Also included are provisions in respect of costs anticipated
on the exit of surplus properties which are expected to be settled over the
remaining terms of the respective leases and dilapidation and other provisions
in respect of contractual and other obligations under rail contracts and
restructuring costs. The dilapidation provisions are expected to be settled at
the end of the respective contracts.
15 Called up share capital
30 September 2023 25 March 2023
£m
£m
Allotted, called up and fully paid
750.7m ordinary shares of 5p each (25 March 2023: 750.6m) 37.5 37.5
The Company has one class of ordinary shares which carries no right to fixed
income.
On 16 December 2022, the Company announced a share buyback programme to
purchase up to £75m of ordinary shares. This programme completed on 3 August
2023 having repurchased 63,868,786 shares for a total consideration of £75.5m
including transaction costs.
On 8 June 2023, the Company announced a share buyback programme to purchase up
to £115m of ordinary shares. At 30 September 2023, the Company had
repurchased 15,438,871 shares for a total consideration of £23.5m including
transaction costs.
As at 30 September 2023, £75.5m has been deducted from retained earnings in
respect of shares and directly associated transaction costs relating to the
£75m share buyback programme. A further £115.8m has been deducted from
retained earnings in respect of the shares already purchased, directly
associated transaction costs and the remaining commitment to purchase up to
£115m of ordinary shares relating to the second share buyback programme.
The directors have declared an interim dividend of 1.5p per ordinary share in
respect of the period ended 30 September 2023, totalling approximately £10m.
16 Net cash from operating activities
27 weeks to 30 September 2023 26 weeks to 24 September 2022
£m (restated)
£m
Operating (loss)/profit from:
Continuing Operations (41.4) 62.1
Discontinued Operations 0.1 (28.6)
Total Operations (41.3) 33.5
Adjustments for:
Depreciation charges 266.8 344.6
Capital grant amortisation (25.1) (67.1)
Software amortisation charges 2.1 4.3
Loss on disposal of subsidiaries - 3.7
Impairment charges 2.1 -
Share-based payments 6.6 1.6
Profit on disposal of property, plant and equipment (0.9) (8.0)
Operating cash flows before working capital and pensions 210.3 312.6
Decrease/(increase) in inventories 0.6 (2.6)
Increase in receivables (131.7) (95.8)
Increase/(decrease) in payables due within one year 56.2 (64.1)
Decrease in contingent consideration receivable - 27.9
Decrease in financial assets 23.7 -
Decrease in provisions due within one year (9.3) (14.2)
(Decrease)/increase in provisions due over one year (9.5) 6.0
Settlement of foreign exchange hedge (1.1) (1.8)
Aberdeen Local Government Pension Scheme refund - 11.8
Defined benefit pension payments lower than/(greater than) income statement 113.1 (0.7)
charge
Cash generated by operations 252.3 179.1
Tax paid (1.5) (0.4)
Interest paid(1) (39.4) (35.0)
Net cash from operating activities 211.4 143.7
1 Interest paid includes £27.8m relating to lease liabilities (H1
2023: £20.0m).
As disclosed in the Group's 2023 Annual Report, during 2023 management
reassessed the classification of cash flows in relation to capital grants
received from the Department for Transport and Transport for Scotland, which
had previously been reported within net cash from operating activities. As
these grants typically relate to the funding of capital investment by the
Group, management concluded that these cash flows represented investing
activities, rather than operating activities, and accordingly have restated
the cash flow for an inflow of £70.6m for the 26 weeks to 24 September 2022.
17 Analysis of changes in net debt - adjusted cash flow
At Cash Foreign Other At 30
flow
Exchange
£m
September
26 March
£m
£m
2023
£m
2023
£m
Components of financing activities:
Bonds (184.2) 12.2 - - (172.0)
Lease liabilities(1) (1,748.6) 234.4 - (14.8) (1,529.0)
Asset backed financial liabilities (44.2) 12.1 - - (32.1)
Other debt (0.6) - - - (0.6)
Total components of financing activities (1,977.6) 258.7 - (14.8) (1,733.7)
Cash 421.8 (42.8) (0.8) - 378.2
Bank overdrafts (82.9) (13.3) - (0.2) (96.4)
Ring-fenced cash 369.6 (62.3) - - 307.3
Cash and cash equivalents 708.5 (118.4) (0.8) (0.2) 589.1
Net debt (1,269.1) 140.3 (0.8) (15.0) (1,144.6)
1 Lease liabilities 'Other' includes £14.8m net inception of new
leases.
18 Retirement benefit schemes
The Group supports defined contribution (DC) and defined benefit (DB) schemes
for the benefit of employees across the following business areas:
- UK Bus and Group - including The First UK Bus Pension Scheme,
The FirstGroup Pension Scheme and two Local Government Pension Schemes
- North America - legacy schemes from operations which have now
been sold
- Rail - sponsoring four sections of the Railways Pension Scheme
(RPS) relating to the Group's obligations for its TOCs, with an additional
section for its Open Access Hull Trains business. Since the obligations to the
TOC arrangements are considered to be limited to contributions during the
period of the contract, these are fundamentally different to the obligations
to the other pension arrangements.
Each of these groups of arrangements have therefore been shown separately. The
scheme details are described on pages 211 to 219 of the Annual Report and
Accounts for the 52 weeks ended 25 March 2023.
(a) UK Bus and Group (including Hull Trains)
A consultation on terminating participation in the two Local Government
Pension Schemes (LGPS) was undertaken during the period. On 29 September 2023,
the Group gave notice of its intention to terminate the participation of the
relevant First Bus subsidiaries in these schemes on 31 October 2023. An
adjusting income statement expense for settlement charges and related costs of
£142.3m has been recognised, with a gain of £160.4m recognised in Other
comprehensive income in relation to the restricted accounting surplus.
The termination of participation will remove £556.0m and £157.1m of
obligations and £691.6m and £162.9m of assets (based on conditions at 30
September 2023) from the Group's balance sheet for the Greater Manchester and
Aberdeen schemes respectively during FY 2024.
From a cash perspective, it is expected that there are no payments required in
relation to the exit from the Greater Manchester LGPS fund, while a payment of
£21.9m is expected to be made from the Aberdeen LGPS fund to the Group.
The closure to accrual and previously held irrecoverable surplus amounts are
recognised within the settlement charge disclosed below. Final values will be
recognised at the FY 2024 year end to reflect the values of assets and
obligations at 31 October 2023.
The table below is set out to show amounts charged/(credited) to the condensed
consolidated income statement along with the amounts included in the condensed
consolidated balance sheet arising from the fair value of schemes' assets
(Assets) and the present value of defined benefit obligations (DBO)
(Liabilities) for the UK Bus, Group and Hull Trains DB schemes:
Income statement 27 weeks to 26 weeks to
30 September 2023 24 September
2022
£m £m
Operating
- Current service and administration cost 2.2 4.1
- Past service gain including curtailments (5.1) -
- Settlement charge in relation to LGPS participation termination 141.4 -
Total operating 138.5 4.1
Interest income (1.4) (3.0)
Total income statement 137.1 1.1
18 Retirement benefit schemes (continued)
Balance sheet 30 September 2023 25 March
2023
£m £m
Fair value of scheme assets 1,110.6 2,166.9
Present value of defined benefit obligations (1,092.5) (1,972.5)
Surplus before adjustment 18.1 194.4
Impact of shared cost (0.5) (0.3)
Adjustment for irrecoverable surplus(1) - (156.7)
Surplus in schemes 17.6 37.4
The amount is presented in the condensed consolidated balance sheet as
follows:
Non-current assets 28.3 44.6
Non-current liabilities (10.7) (7.2)
17.6 37.4
1 The irrecoverable surplus in the prior year represented the amount
of the surplus that the Group could not recover through reducing future
Company contributions to LGPS.
The balances in the table above at 30 September 2023 exclude the fair value of
scheme assets and present value of defined benefit obligations relating to the
LGPS arrangements, following termination of participation in these schemes. If
the LGPS arrangements were to be included in the table, the fair value of
scheme assets would be £1,965.0m, and the present value of defined benefit
obligations would be £(1,947.0)m.
(b) North America
Greyhound pension arrangements
The Group has retained certain responsibilities for the provision of
retirement benefits for some legacy schemes.
The Group operates a single legacy DB arrangement in the US, while in Canada,
there is a single legacy plan with a DB and DC section and a small unfunded
supplementary executive retirement plan (SERP).
On 6 July 2023, the Greyhound Employees Retirement Income Plan ('the Canadian
Scheme') was fully bought-in with an insurer (i.e. a bulk annuity policy was
purchased in respect of all members of the Canadian Scheme). There are two
items in the financial statements as a result of the annuitisation of the
Canadian Greyhound Plan - the transaction itself and the requirement to
distribute surplus to members. The buy-in transaction resulted in an
investment gain of C$14.3m, reflected in the OCI; the surplus distribution has
been valued at C$15.8m and has been reflected in the OCI as a change in
assumption. The obligations remain on the Group's balance sheet.
In the US, the Group conducted both a lump sum exercise and partial buy-out
for the plan. Under the lump sum exercise, certain members of the plan were
offered the opportunity to convert their pension into a lump sum, resulting in
an income statement charge of US$0.1m. The partial buy-out was completed on 24
August and removed US$71.3m of obligations and US$71.7m of assets from the
Group's balance sheet, resulting in an income statement charge of US$0.4m.
Both of these transactions for the Greyhound ATU plan resulted in costs of
US$0.5m (£0.4m in the table below) being recognised.
The table below is set out to show amounts charged/(credited) to the condensed
consolidated income statement along with the amounts included in the condensed
consolidated balance sheet arising from the fair value of schemes' assets
(Assets) and the present value of DBO (Liabilities) for the North American DB
schemes:
Income statement 27 weeks to 26 weeks to
30 September 2023 24 September
2022
£m £m
Operating
- Current service and administration cost 1.3 0.9
- Past service charge including curtailments and settlements 0.4 -
Total operating 1.7 0.9
Interest (income)/cost (0.1) 0.2
Total income statement 1.6 1.1
Balance sheet 30 September 2023 25 March
2023
£m £m
Fair value of schemes' assets 273.0 366.8
Present value of defined benefit obligations (285.0) (369.5)
Deficit before adjustment (12.0) (2.7)
Opening irrecoverable surplus - (14.6)
Change in irrecoverable surplus - 7.0
Currency loss on irrecoverable surplus - 0.8
Deficit in schemes (12.0) (9.5)
The amount is presented in the condensed consolidated balance sheet as
follows:
Non-current assets - -
Non-current liabilities (12.0) (9.5)
(12.0) (9.5)
18 Retirement benefit schemes (continued)
First Transit management contracts
The Group retained ten First Transit Management Contracts following the sale
of First Transit in 2021. As at the balance sheet date, the Group had ceased
to sponsor any Transit Management pension arrangements following the expiry of
the last remaining contracts.
Details of the assets and liabilities of these schemes are as follows:
30 September 2023 25 March
£m 2023
£m
Assets - 14.0
Liabilities - (21.8)
Deficits in schemes - (7.8)
Amounts recoverable from contracting authorities - 7.8
Net deficits in schemes - -
(c) Rail contracts
The Railways Pension Scheme (RPS)
The Group is responsible for collecting and paying contributions for a number
of sections of the Railways Pension Scheme (RPS) as part of its obligations
under the contracts which it holds for its TOCs. These responsibilities
continue for the periods of the TOCs and are passed to future contract holders
when those TOCs terminate. Management of the RPS is not the responsibility
of the Group, nor is it liable to benefit from any future surplus or fund any
deficit of those funds.
The Group currently sponsors four sections of the RPS, relating to its
contracting obligations for its TOCs. The RPS is managed by the Railways
Pension Trustee Company Limited, and is subject to regulation from the
Pensions Regulator and relevant UK legislation. The RPS is a shared cost
arrangement. All costs, and any deficit or surplus, are shared 60% by the
employer and 40% by the members. For the TOC sections, under the contractual
arrangements with the DfT, the employer's responsibility is to pay the
contributions following triennial funding valuations while it operates the
contracted services. These contributions are subject to change on
consideration of future statutory valuations. At the end of the franchise, any
deficit or surplus in the scheme section passes to the subsequent train
operating company with no compensating payments from or to the outgoing TOC.
The statutory funding valuations of the various Rail Pension Scheme sections
in which the Group is involved (last finalised with an effective date of 31
December 2013) and the IAS 19 actuarial valuations are carried out for
different purposes and may result in materially different results. The IAS 19
valuation is set out in the disclosures below. The accounting treatment for
the time-based risk-sharing feature of the Group's participation in the RPS is
not explicitly considered by IAS 19 Employee Benefits (Revised). The
contributions currently committed to being paid to each TOC section are lower
than the share of the service cost (for current and future service) that would
normally be calculated under IAS 19 (Revised) and the Group does not account
for uncommitted contributions towards the sections' current or expected future
deficits. Therefore, the Group does not need to reflect any deficit on its
balance sheet. A TOC adjustment (asset) exists that exactly offsets any
section deficit that would otherwise remain after reflecting the cost sharing
with the members. This reflects the legal position that some of the existing
deficit and some of the service costs in the current year will be funded in
future years beyond the term of the current franchise and committed
contributions. The TOC adjustment on the balance sheet date reflects the
extent to which the Group is not currently committed to fund the deficit.
The table below is set out to show amounts charged/(credited) to the condensed
consolidated income statement along with the amounts included in the condensed
consolidated balance sheet arising from the fair value of schemes' assets
(Assets) and the present value of defined benefit obligations (DBO)
(Liabilities) for the TOC defined benefit schemes:
Income statement 27 weeks to 26 weeks to
30 September 2023 24 September 2022
£m £m
Operating
- Current service cost 39.3 69.6
- Administrative cost 1.7 0.7
- Impact of franchise adjustment on operating cost (13.8) (43.7)
Total operating 27.2 26.6
Interest cost 0.6 9.0
Impact of franchise adjustment on net interest income (0.6) (9.0)
Total income statement 27.2 26.6
18 Retirement benefit schemes (continued)
Balance sheet 30 September 2023 25 March
2023
£m £m
Fair value of schemes' assets 3,454.8 3,684.3
Present value of defined benefit obligations (3,317.7) (3,814.5)
Surplus/(deficit) before adjustment 137.1 (130.2)
Franchise adjustment (60%) (82.3) 78.1
Adjustment for employee share of RPS deficits (40%) (54.8) 52.1
Surplus in schemes - -
(d) Valuation assumptions
The valuation assumption used for accounting purposes have been made uniform
to Group standards, as appropriate, when each scheme is actuarially valued.
The key assumptions were as follows:
30 September 2023 25 March 2023
First Bus First Rail North America First Bus First Rail North America
%
%
%
%
%
%
Key assumptions used:
Discount rate 5.50 5.35 5.67 - 5.82 4.67 - 4.69 4.80 4.66 - 4.92
Expected rate of salary increases 3.70 3.20 n/a 3.51 3.22 n/a
Inflation - CPI 2.70 2.70 2.00 2.51 - 2.56 2.72 2.00
Future pension increases 2.70 2.70 n/a 2.53 2.72 n/a
Post-retirement mortality (life expectancy in years)
Current pensioners at 65: 19.3 20.7 19.7 - 21.6 19.4 20.7 19.7 - 21.6
Future pensioners at 65 aged 45 now: 19.7 22.2 21.3 - 22.6 19.8 22.2 21.3 - 22.6
19 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 £59.9m (25 March
2023: £55.0m) and letters of credit for £170.4m (25 March 2023: £169.9m).
The performance bonds primarily relate to First Rail franchise operations of
£56.7m and residual North American obligations of £3.3m. 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
£103.4m to First Rail Train Operating Companies of which £78.5m remains
undrawn. Letters of credit remain in place to provide collateral for legacy
Greyhound insurance and pension obligations.
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 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. Two of the Company's North American subsidiaries participated
in multi-employer pension plans in which their contributions were pooled with
the contributions of other contributing employers. The funding of those plans
is reliant on the ongoing involvement of 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.
19 Contingent liabilities (continued)
First MTR South Western Trains Limited ('FSWT'), a subsidiary of the Company
and the operator of the South Western railway contract, 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 South Western network) is
also a defendant to these proceedings. Separate sets of proceedings have been
issued against London & South Eastern Railway Limited and related entities
('LSER') and against Govia Thameslink Railway Limited and related entities
('GTR') in respect of the operation of other rail services. The three sets of
proceedings are being heard together. The class representative ('CR') alleges
that FSWT, SSWT, LSER and GTR 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. A collective proceedings order ('CPO') has been made by the
CAT in respect of the proceedings. The proceedings have been split into three
trials, the first two of which have been set for June 2024 and June 2025,
respectively, with no date currently set for the final trial. In March 2022,
FSWT, the Company and the CR executed an undertaking under which the Company
has agreed to pay to the CR any sum of damages and/or costs which FSWT fails
to pay, and which FSWT is legally liable to pay to the CR in respect of the
claims (pursuant to any judgment, order or award of a court or tribunal),
including any sum in relation to any settlement of the claims.
20 Related party transactions
There are no related party transactions or changes since the Group's 2023
Annual Report which could have a material effect on the Group's financial
position or performance of the Group in the 27 weeks to 30 September 2023.
21 Events after the reporting period
- On 19 September, the Group announced it had agreed a new
National Rail Contract (NRC) with the Department for Transport (DfT) for the
West Coast Partnership. The new NRC commenced on 15 October 2023 with a
duration of nine years, including a core minimum three-year term to 18 October
2026.
- In September, First Bus concluded a period of
consultation with regards to its two Local Government Pension Funds and
subsequently terminated its participation in these funds on 31 October, with
affected employees enrolled into the First Bus Retirement Savings Plan.
Adjusting charges of £142.3m were recognised in the period for the settlement
charge and related termination costs. A gain of £160.4m was recognised in
Other comprehensive income in relation to the restricted accounting surplus.
- On 19 October, the Group completed the buy-out of the 6%
non-controlling interest in Leicester CityBus Limited for consideration of
£3.1m.
- On 17 November, the Group announced it had agreed a
strategic partnership with Hitachi as part of the Group's bus fleet and
infrastructure decarbonisation programme. The Group and Hitachi have each
committed a cash investment of £10m into the strategic partnership.
Responsibility statement
The directors confirm that these condensed consolidated interim financial
statements 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 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the
first 27 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 27 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.
Graham
Sutherland
Ryan Mangold
Chief Executive
Officer
Chief Financial Officer
23 November
2023
23 November 2023
Independent review report to FirstGroup plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed FirstGroup plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half-Yearly Report of
FirstGroup plc for the 27 week period ended 30 September 2023 (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.
The interim financial statements comprise:
· the Condensed Consolidated Balance Sheet as at 30 September 2023;
· 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.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
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. In preparing the Half-Yearly Report, including
the interim financial statements, the directors are responsible for assessing
the group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half-Yearly Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
23 November 2023
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