REG-FirstGroup PLC: Trading update

FirstgroupAnnouncement

25/02/2022 07:15

FIRSTGROUP PLC
TRADING UPDATE
* Current trading is in line with management's expectations, notwithstanding
the recent omicron-related travel restrictions
* First Bus volumes have improved to more than 70% of pre-pandemic levels
overall – and to around 75% in our operations in England – since the
easing of the omicron-related government restrictions
* First Rail management fee-based operations are delivering performance
metrics in line with our expectations, with our open access operations
slightly ahead
* The Group's proactive management of Greyhound legacy assets and liabilities
is ahead of plan, with the vast majority of insurance de-risking now completed
and further property disposals achieved
Overall current trading for the continuing Group is in line with
management’s expectations as set out in our half-yearly results announcement
of 9 December 2021. Although the restrictions implemented by Government as a
response to the omicron variant temporarily reduced demand levels, we are
encouraged by the improving passenger volume trends subsequently.

First Bus

Across our overall bus portfolio, passenger volumes have increased to more
than 70% of 2020 equivalent levels, with higher volumes of around 75% in our
operations in England. This follows the easing of restrictions put in place in
response to the omicron variant, as well as the return to schools and
universities after the Christmas and New Year period when demand is typically
lower. The reductions in mileage that we were experiencing in certain areas
have begun to ease as the number of employees self-isolating has reduced in
recent weeks. Performance in our business-to-business segment is in line with
our expectations with new contracts signed since December and a growing
pipeline of opportunities.

Buses have a central role to play in achieving many of society’s objectives.
The UK Government's recently published Levelling Up White Paper reinforced the
importance of public transport connectivity, and we also look forward to the
Bus Service Improvement Plan funding decisions which are expected shortly from
the Department for Transport ('DfT'). These will help local authorities and
bus operators throughout England accelerate delivery of better, more reliable
services for passengers, in line with the ambitions of the National Bus
Strategy.

In early February, the Scottish Government announced a new £94m bus grant
scheme, which includes an additional £40m to support passenger volume
recovery. The new scheme starts from 1 April, replacing the existing pandemic
support arrangements in Scotland which end on that date. Although all travel
restrictions in England ended on 24 February, passenger volumes remain
significantly below pre-pandemic levels and in order to maintain services and
support the economic recovery, the industry is engaging with the DfT regarding
an extension to the Bus Recovery Grant funding which is currently in place
until early April 2022. The recovery grant scheme in Wales is currently funded
to the end of July 2022.

First Rail

Our management fee-based rail operations are delivering performance metrics in
line with our expectations overall for the second half of FY22. The DfT has
confirmed that Avanti and GWR's performance measures were slightly above
target for the first six months of FY22, with TPE and SWR's tracking in line
with the annual targets under their respective National Rail Contracts. All
four of our management fee-based rail operations moved to reduced timetables
for a period following agreement with the DfT in order to better manage staff
shortages caused by the omicron variant and ensure a reliable service for
passengers.

Open access operations Hull Trains and Lumo, which are the only segment of our
First Rail division with passenger revenue risk, are both currently marginally
ahead of our expectations, supported by leisure travel demand which has been
more resilient.

Proactive management of Greyhound legacy assets and liabilities

As part of the Greyhound sale in October 2021, we announced that the Group
would retain its pensions and insurance legacy liabilities which we would
de-risk, as well as Greyhound's property holdings which we would continue to
monetise over time. We are pleased to update on significant progress made in
both of these areas.

The Group has recently concluded a reinsurance risk transfer agreement that
de-risks c.$147m of Greyhound's legacy self-insurance reserves with a
subsidiary of Randall & Quilter Investment Holdings Ltd ('R&Q'), a leading
non-life global speciality insurance company. Under the agreement, effective 1
December 2021, R&Q indemnifies the Group for these liabilities and any adverse
developments on them up to a maximum of $275m. The liabilities covered remain
on the Group balance sheet but with an offsetting asset reflecting the risk
transfer agreement. The cash cost to the Group of this agreement is modestly
better than budgeted for in our guidance for FY22 Adjusted Net Debt(1) of
c.£10-20m. As a result, the Group's exposure to Greyhound's legacy
self-insurance liabilities has reduced to c.$19m of older claims not covered
by the risk transfer agreement or recently settled.

Since the half-yearly results in early December, we have also successfully
completed as planned a further three Greyhound property sales, for c.$32m, and
are encouraged by the ongoing strengthening of the US commercial property
market. In line with the Greyhound sale agreement we also continue to receive
American Rescue Plan and CARES Act funding relating to pre-disposal losses and
deferred consideration.

In summary, the Group is ahead of plan to realise the previously guided
c.$155m in net value from the legacy Greyhound assets and liabilities during
FY23 and beyond.

Commenting, David Martin, Executive Chairman said:

"We now have a focused and simplified Group and continue to enhance our
financial strength and resilience by proactively managing the legacy assets
and liabilities associated with last year's portfolio rationalisation. We are
pleased that passengers are returning to travel again following the easing of
the omicron-related restrictions put in place in December. It demonstrates our
conviction that there is significant latent demand for travel on our services
and we look forward to providing vital connections for our customers as the
recovery continues to build. Public transport has a key role to play in the
UK's economic, decarbonisation and levelling up agendas and I remain confident
that FirstGroup is very well placed to capture our many opportunities to
create long term, sustainable value."

 Contacts at FirstGroup:                          Contacts at Brunswick PR:        
 Faisal Tabbah, Head of Investor Relations        Andrew Porter / Simone Selzer    
 Stuart Butchers, Group Head of Communications    Tel: +44 (0) 20 7404 5959        
 corporate.comms@firstgroup.co.uk                                                  
 Tel: +44 (0) 20 7725 3354                                                         

Notes

(1       ) 'Adjusted Net Debt' excludes First Rail ring-fenced cash and
IFRS 16 lease liabilities from net debt.

All '$' amounts are United States dollars. 'FY22' refers to the 52 weeks to 26
March 2022.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR
6 Annex 1R: 3.1.

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public
transport services. With £4.3 billion in revenue and around 30,000 employees,
our UK divisions transported nearly 700,000 passengers a day in the 52 weeks
to 27 March 2021. First Bus is the second largest regional bus operator in the
UK, serving two-thirds of the UK’s 15 largest conurbations with a fleet of
c.5,000 buses. First Rail is the UK’s largest rail operator, with many years
of experience running long-distance, commuter, regional and sleeper rail
services. We operate a fleet of c.3,750 rail vehicles through four management
fee-based train operating companies (Avanti, GWR, SWR, TPE) and two open
access routes (Hull Trains and Lumo, our new East Coast service which launched
in October 2021). We create solutions that reduce complexity, making travel
smoother and life easier. Our businesses are at the heart of our communities
and the essential services we provide are critical to delivering wider
economic, social and environmental goals. We are formally committed to
operating a zero-emission First Bus fleet by 2035 and to cease purchasing
further diesel buses after 2022; and First Rail will help support the UK
Government’s goal to remove all diesel-only trains from service by 2040.
Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on
Twitter.



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