FIRSTGROUP PLC
HALF-YEARLY REPORT FOR THE 26 WEEKS TO 24
SEPTEMBER 2022
- Resilient financial performance delivered despite the
challenging political, economic and industrial relations
environment FirstGroup is experiencing, in commin with many UK
businesses
- Group's adjusted attributable profit was in line with
management expectations in the period, and expectations for the
current financial year are broadly unchanged despite a shift in
mix
- Financial performance in First Rail was led by strong growth in
open access operations; working hard to deliver passenger service
level objectives across the four management fee-based
contracts
- Continuing to strengthen First Bus for when current funding
arrangements end, while managing industry-wide driver shortages and
cost inflation in the near term
- Progress made monetising contingent values from exiting
North America, with £122m sale of
legacy Greyhound properties anticipated to complete in December and
First Transit earnout recently triggered at c.£74m
- Strategy focused on continuous improvement in operational
delivery, targeted investment in adjacent growth opportunities and
playing a leading role in the decarbonisation of public
transport
|
|
|
H1 2023
(£m) |
|
|
|
H1 2022
(£m) |
|
Cont. |
Disc. |
Total |
|
Cont. |
Disc. |
Total |
Revenue |
2,212.4 |
2.7 |
2,215.1 |
|
2,139.1 |
970.6 |
3,109.7 |
Adjusted1 operating
profit/(loss) |
66.1 |
(8.4) |
57.7 |
|
51.8 |
121.3 |
173.1 |
Adjusted1 operating
profit margin |
3.0% |
|
2.6% |
|
2.4% |
12.5% |
5.6% |
Adjusted1 profit/(loss)
before tax |
41.0 |
(8.1) |
32.9 |
|
(6.3) |
110.0 |
103.7 |
Adjusted1
EPS2 |
4.4p |
(1.0)p |
3.4p |
|
(0.4)p |
7.0p |
6.6p |
Group adjusted attributable
profit3 |
|
|
30.8 |
|
|
|
13.3 |
Dividend per share |
|
|
0.9p |
|
|
|
- |
Adjusted net
cash/(debt)4 |
|
|
7.3 |
|
|
|
603.9 |
|
|
|
|
|
|
|
|
|
|
|
H1 2023
(£m) |
|
|
|
H1 2022 (£m) |
Statutory |
Cont. |
Disc. |
Total |
|
Cont. |
Disc. |
Total |
Revenue |
2,212.4 |
2.7 |
2,215.1 |
|
2,139.1 |
970.6 |
3,109.7 |
Operating profit/(loss) |
62.1 |
(28.6) |
33.5 |
|
52.2 |
592.3 |
644.5 |
Profit/(loss) before tax |
37.0 |
(28.3) |
8.7 |
|
(64.5) |
581.0 |
516.5 |
EPS2 |
|
|
(0.1)p |
|
|
|
42.4p |
Net cash/(debt) |
|
|
(1,475.0) |
|
|
|
(234.2) |
- Bonds, bank and other debt net
of (cash) |
|
|
346.3 |
|
|
|
1,188.8 |
- IFRS 16 lease
liabilities |
|
|
(1,821.3) |
|
|
|
(1,423.0) |
|
|
|
|
|
|
|
|
|
|
'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 2023 financial summary
(continuing operations vs H1 2022 unless otherwise
stated)
- Group adjusted operating profit increased to £66.1m (H1 2022:
£51.8m), principally reflecting:
- increased open access earnings with aggregate rail management
fee-based income broadly in line
- lower First Bus adjusted operating profit, reflecting the
slower transition from pandemic recovery funding towards a
commercial model and cost impacts of inflation
- lower central costs
- Group adjusted attributable profit3 increased to
£30.8m (H1 2022: pro forma £13.3m)
- Statutory operating profit of £62.1m (H1 FY23: £52.2m) includes
net adjusting item charges of £4.0m
- Adjusted net cash4 of £7.3m (March 2022: adjusted net debt of £(3.9)m), with
£557.7m of undrawn committed liquidity
- Interim dividend declared of 0.9p, in line with announced
policy
Key developments
First Bus:
- Commercial volumes increased by 32%, with concession volumes
recovering more slowly
- Revenue beginning to benefit from recent pricing actions,
partly offset by reductions in funding level
- As the industry moves towards a more commercial model, network
realignments commencing to better align to demand, First Scotland
East location disposed of and regional management structure
reorganised
- However, the recent extension of recovery funding arrangements
in England, ongoing driver
shortages and the cost inflationary backdrop limit the pace of
near-term progress
First Rail:
- Open access operations ahead of plan, underpinned by strong
leisure volumes for Lumo and Hull Trains
- Focused on operational delivery for passengers across all our
services in a challenging industrial relations environment
- West Coast Partnership (WCP) contract recently extended,
enabling the Avanti West Coast team to execute their plans to
restore services to the levels that passengers rightly expect
Corporate:
- Sale of almost all remaining legacy Greyhound properties for
$141m (£122m) to Twenty Lake Holdings
expected to complete in December
2022; as a result, the Group's exit from residual Greyhound
will be substantially complete at an aggregate net value in excess
of $160m since start of the financial
year
- FirstGroup estimates First Transit earnout consideration of
c.$85m (£74m at hedged rates) to be
received during FY 2024, following recently announced sale of the
Transit business by EQT Infrastructure
- Potential for additional distributions as the contingent values
from exiting North America are
realised
FY 2023 outlook
- Although the political, economic and industrial relations
backdrop and pace of travel volume recovery are challenges,
management's expectations for FY 2023 are broadly unchanged despite
a shift in mix
- First Bus: although clearly sensitive to the broader consumer
spending and inflation trends, we expect sequential progress in H2
2023, with the realignments of routes/timetables in October and
pricing actions partially offset by a higher cost base for
increased mileage as a result of the extension of recovery funding
in England, currently in place
until March 2023
- First Rail: we expect higher profit from our open access
operations with the four management fee-based operations to deliver
aggregate financial performance broadly in line with management
expectations
- On track to realise the further c.£5m in annual central cost
savings previously guided
- Adjusted net cash4 position expected to be in the
range of £100-110m at the end of FY
2023 after receipt of Greyhound property proceeds in December and
before any deployment of this capital
Commenting, Chief Executive Officer
Graham Sutherland said:
"We have delivered a resilient financial performance in the
period despite significant headwinds – demonstrating our strengths
in the UK bus and rail markets and the increasing capability and
potential we are building into our businesses as public transport
continues to navigate the aftershocks of pandemic travel
restrictions.
"With a strong balance sheet and an important role supporting
the sustainability and economic growth agendas in our core UK
public transport markets, we see clear opportunities to create
further value and deliver progressive returns to shareholders in
the coming years."
Contacts at
FirstGroup:
Investor relations: Faisal Tabbah / Marianna Bowes
Media: Stuart Butchers
corporate.comms@firstgroup.co.uk
Tel: +44 (0) 20 7725 3354 |
Contacts at
Brunswick PR:
Andrew Porter / Simone Selzer
Tel: +44 (0) 20 7404 5959 |
A webcast for investors and analysts will be held at
9:00am today – attendance is by
invitation. Please email corporate.comms@firstgroup.co.uk in
advance of the webcast to receive joining details. To access the
presentation to be discussed on the webcast, together with a pdf
copy of this announcement, go to www.firstgroupplc.com/investors. A
playback facility will also be available there in due course.
Notes
1
‘Adjusted’ figures throughout this document are before adjusting
items as set out in note 3 to the financial statements.
2 Weighted average number of
shares reduced from 1,203.4m to
739.8m between H1 2023 and H1 2022,
reflecting the tender offer completed in December 2021; as a result EPS figures are not
directly comparable between the two periods.
3 For definitions of
alternative performance measures and other key terms, see the
definitions section from page 17.
4 'Adjusted net cash/(debt)
excludes ring-fenced cash and IFRS 16 lease liabilities from net
debt as shown in the table on page 14.
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93.
Classification as per DTR 6 Annex 1R: 1.2.
FirstGroup plc (LSE: FGP.L) is a leading private sector provider
of public transport services. With £4.6 billion in revenue and more
than 30,000 employees, our UK divisions transported nearly
1.5m passengers a day in the last
financial year. 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.4,900 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.3,800 rail vehicles through four management
fee-based train operating companies (Avanti West Coast, GWR, SWR,
TPE) and two open access routes (Hull Trains and Lumo). 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. In 2022 FirstGroup was named as one of
the world's cleanest 200 public companies for the third consecutive
year by sustainable business media group Corporate Knights in
partnership with US not-for-profit organisation, As You Sow. Visit
our website at www.firstgroupplc.com and follow us @firstgroupplc
on Twitter.
CEO review
Introduction and strategic summary
Since joining FirstGroup as Chief Executive Officer in
May 2022, I have focused on
understanding the strategic opportunities and risks of our public
transport operations across the UK. I believe that the Group has
demonstrated that it is financially resilient in the face of the
political, economic and industrial relations headwinds currently
being experienced. It is clear there are several challenges to
overcome, uncertainties to resolve and improvements to be made in
the consistency of our service delivery, and these will be a key
focus in the coming months and years. However, as the regional bus
market returns to a more commercial model and our realignment of
First Bus to reflect changing passenger trends is completed, we
believe there is scope for significant earnings growth and margin
enhancement over time. Meanwhile we are confident that our
experience and market position in rail stands us in good stead as
this industry continues its evolution.
As a leader in both bus and rail in the UK, FirstGroup already
has a robust platform to build on and there are a number of organic
and inorganic opportunities to invest for growth where we have a
comparative advantage. For example, our capabilities and experience
in First Bus can be deployed more proactively into bus franchising,
business to business (B2B) contracted services (including employee
shuttle), as well as new revenue opportunities allied to the
electrification of our fleets and depots. There are significant
challenges at present in parts of our rail operations, particularly
in Avanti West Coast and TransPennine Express (TPE), where our
teams are completely focused on delivering their plans to tackle
the issues that are causing disruption for passengers. In rail we
also have notable successes such as our Lumo open access service,
which in its first year of operation has already served a million
passengers, many of whom would otherwise have flown between
London and Edinburgh at a far greater environmental cost.
As the largest private sector rail operator in the UK we have the
experience and entrepreneurial spirit to resolve challenges, fix
problems and innovate for the future, encouraging passengers back
to the railway while growing our business.
Our existing bus and rail businesses are cash generative and we
have a strong financial position with scope to increase gearing
prudently over time. I believe the core Group is therefore very
well-placed to capture adjacent growth opportunities in the UK and
elsewhere while also offering a sustainable, progressive dividend
as part of a balanced capital allocation policy going forward, with
the potential for additional distributions to shareholders as the
contingent values from exiting North
America are realised.
We will continue to invest to meet our commitment of
transitioning our regional bus operations to a 100% zero emission
fleet by 2035 as part of our objective to be a sustainability
leader in public transport. We continue to work successfully with
local authorities to secure government funding assistance for zero
emission vehicles and associated infrastructure. Based on our
recent committed orders, including the largest Electric Vehicle
(EV) bus order outside of London
to-date, almost 13% of our entire fleet will be electrified by
March 2024. We are also accelerating
our investment in energy efficiency and some self-generation of
power, and exploring additional revenue streams relating to the
electrification of our networks. In addition, in further
recognition of our sustainability progress, I am pleased to report
that we were ranked third in the World Benchmarking Alliance’s
recently published Transport Benchmark. The Benchmark uses publicly
available information to assess ninety of the world’s largest
transportation companies on their progress towards decarbonisation
and their contributions to a just transition and social
transformation.
Protecting our passengers and
employees
Our first priority has always been, and remains, the health and
safety of our passengers, employees and the communities in which we
operate. We maintain robust safety management systems and
technology solutions throughout the Group, with a clear focus on
ensuring compliance with policies, processes, and procedures, as
well as operating our safety behavioural change programme, which
aims to make safety a personal core value for every employee. Since
the start of the coronavirus pandemic we have followed all
appropriate public health authority guidance and maintained our
commitment to best practice in areas such as enhanced cleaning and
decontamination of vehicles, depots and stations. We take great
pride in the way all our colleagues and teams continue to provide
direct assistance and support to those most in need, right at the
heart of our communities.
Operational summary – First Bus
Whilst our commercial passenger volumes have increased in the
period, concessionary volumes continue to recover more slowly and
we have been severely affected by cost inflation. Nevertheless, we
have made progress in the period with several of the key drivers
that will support improvement in bus margins once the sector
transitions to a more commercial model, including yield and pricing
actions, network realignment and the sale of First Scotland East.
However, the extension of the Bus Recovery Grant funding in
England into H2 2023, the tapering
of concession funding, inflation and continued industry-wide driver
shortages are limiting the scope for significant margin progress in
the near term. Despite this, we have a range of opportunities ahead
to right-size and optimise our route networks, our operating
portfolio and our engineering practices using new tools and
enhanced data. In our B2B business we have been awarded a five-year
extension to our contract to transport employees at Hinkley Point
in our Somerset Passenger Services business, and we recently
announced that our Aircoach business has completed the acquisition
of the Northern Ireland-based
transport firm Airporter. Overall, we continue to target revenue
growth and a 10% margin in regional bus over time.
Operational summary – First Rail
The industrial action that has taken place across the rail
sector during H1 2023 has caused significant disruption for our
passengers, although the financial impact on our business overall
is relatively limited under the terms of our four management
fee-based contracts. We are committed to working closely with
government and our partners across the industry to deliver a
successful railway that serves the needs of our customers and
communities. Our open access operations Lumo and Hull Trains were
profitable in the period, a significant swing from losses incurred
in the prior financial year, which reflected the start-up of Lumo
and periodic pandemic-related closures of Hull Trains. Following
the award of an up to six-year National Rail Contract to Great
Western Railway (GWR) in June 2022,
in October 2022 we agreed with the
Department for Transport (DfT) an extension of the current
contractual arrangements for the West Coast Partnership (WCP) to
March 2023. The extension allows our
team at Avanti West Coast to sustain their focus on delivering
their robust plan to increase the availability of trained drivers
and restore services to the levels that passengers rightly expect.
Discussions are ongoing with DfT regarding the longer-term National
Rail Contract for WCP.
Resilient performance with Group
adjusted attributable profit in line with management
expectations
Revenue from continuing operations increased to £2,212.4m (H1
2022: £2,139.1m), with increased passenger revenue in First Bus
partly offset by lower grant funding receipts, while First Rail
revenue increased across both open access and management-fee based
operations.
Adjusted operating profit from continuing operations was £66.1m
(H1 2022: £51.8m), with First Rail higher, principally reflecting
the transition from loss to profit of our open access operations,
while First Bus was lower than the prior period, primarily
reflecting the net impact of inflation and changes in the pandemic
recovery funding model as the sector transitions to a more fully
commercial model. The additional leases recognised under IFRS 16
for the new GWR contract are now expected to increase adjusted
profit by approximately £22m in FY 2023 rather than by £30m as
guided on signing, as the leases were signed later and at different
lease terms. Central costs of £(10.0)m were lower than the prior
period, reflecting the actions taken to resize the organisation
following the North American disposals. Adjusted EPS was 4.4p (H1
2022: adjusted loss (0.4)p from continuing operations).
Statutory operating profit (continuing basis) of £62.1m (H1
2022: £52.2m) includes £4.0m of net costs from adjusting items (H1
2022: £0.4m credit), and statutory EPS was (0.1)p (H1 2022:
42.4p).
The Group reports on two alternative profit performance
measures, which focus on the contractually agreed net fees
available to be distributed up to the parent company from the
management fee-based operations (as described in more detail on
page 12) rather than their earnings, which management believes is
helpful to aid understanding of the Group's underlying performance.
The first of these, Group adjusted attributable profit, increased
in the period to £30.8m (H1 2022: pro forma £13.3m). Meanwhile the
Group's EBITDA adjusted for First Rail management fees was £118.8m
on a rolling last twelve month basis (FY 2022: £98.5m). As
previously noted, these metrics define our leverage and dividend
policies as set out on page 14.
Underlying cash flow in period in line
with expectations
The Group's adjusted cash outflow of £(112.1)m (H1 2022: inflow
of £1,704.7m, including inflows of £2.3bn relating to the disposal
of the North American operations) in the period reflects strong
underlying cash generated by operations offset by outflows relating
to investment in First Bus, lease payments and movement in First
Rail ring-fenced cash (£125.1m outflow since FY 2022).
At the period end, the Group had adjusted net cash of £7.3m (FY
2022: adjusted net debt of £(3.9)m). The Group's accounts continue
to consolidate the Train Operating Companies (TOCs) which manage
the four management-fee based operations, including their
substantial ring-fenced cash balances and right of use liabilities
under IFRS 16, which primarily relate to the leased rolling stock
used to operate these contracts. Both ring-fenced cash and the IFRS
16 liabilities are excluded from the Group's adjusted net
cash/(debt) measure.
IFRS 16 lease liabilities increased to £1,821.3m (FY 2022:
£1,083.2m) mainly as a result of new and updated lease arrangements
across the First Rail management-fee based operations, while
ring-fenced cash was £339.0m (FY 2022: £468.1m). Taken together,
the reported net debt including IFRS 16 lease liabilities and
ring-fenced cash increased to £(1,475.0)m (FY 2022: £(619.0)m).
Corporate activity
In September the Group announced the sale of all but two of its
remaining Greyhound US properties to an affiliate of Twenty Lake
Holdings LLC, for net proceeds of c.$141m cash (£122m). The portfolio sale is subject
to customary closing conditions, with completion expected to occur
and the proceeds received in December
2022. In addition, the Group also completed the sale of a
site in Denver for $9m in August 2022.
In aggregate, profits on sale of c.$90m (net of property tax, selling and other
costs) are expected to be booked over the course of the financial
year. Following these property sales, FirstGroup's residual legacy
Greyhound assets comprise deferred consideration, residual real
estate in Canada and two sites in
the US (both under contract subject to due diligence), and funding
awards from the Coronavirus Aid, Relief, and Economic Security
(CARES) Act and American Rescue Plan (ARP) schemes relating to the
period Greyhound was under the Group's ownership, altogether valued
at c.$55m. Legacy Greyhound
liabilities (comprising residual insurance and pension liabilities
which FirstGroup expects to de-risk in due course) and other
provisions total c.$35m.
In accordance with the terms of the disposal of First Transit by
FirstGroup plc to EQT Infrastructure V (EQT Infrastructure) in
July 2021, the Group was notified in
October 2022 that affiliates of EQT
Infrastructure had signed an agreement to sell First Transit to
Transdev North America, Inc. The sale is subject to customary
conditions, including regulatory and antitrust clearance processes
in the US and Canada. As part of
the First Transit disposal to EQT Infrastructure, FirstGroup is
entitled to an earnout consideration, which is calculated as a
percentage of the realised equity value on the sale by EQT and
contemplating the cash flows generated by First Transit since
March 2021 to completion (subject to
certain permitted leakage provisions). We currently estimate the
earnout consideration will be around £74m based on the information
received on the sale by EQT and accordingly, we have recorded a
non-cash loss of £27.9m relative to the previous carrying value of
the earnout. The final earnout consideration amount will be
determined in the period following completion of the sale, with
receipt expected in FY 2024.
Following a period of significant gilt yield rises since the
start of 2022, gilt yield movements in the period immediately
following the period end were exceptional. The Bus Pension Scheme
was able to maintain its high level of hedge protection against
interest rate and inflation risks throughout this volatile period.
As a precautionary measure, after the period end the Group agreed
to make £95m from the Limited Partnership created following the
sale of the North American divisions (the escrow) available to the
Scheme to assist with liquidity management. This amount has been
loaned from the escrow to the Scheme on a short term basis, whilst
its investment strategy and assets are repositioned as necessary.
Following the rise in gilt yields, the funding shortfall (the basis
which will determine the final distribution of funds from the
escrow following the next triennial valuation) is currently
materially lower than it was at the beginning of the period.
On 26 May 2022 the Group announced
it had received a series of unsolicited, conditional proposals from
I Squared Capital Advisors (UK) LLP (I Squared) in relation to a
possible offer to acquire the entire issued, and to be issued,
share capital of the Company. The unsolicited offers received from
I Squared resulted in a final proposal on 15
August 2022 of 135 pence per
FirstGroup share (comprising 133.9
pence plus the 1.1 pence final
dividend being paid on 19 August
2022) together with further contingent value from the First
Transit earnout. The Board, having carefully evaluated this
proposal together with its advisers, concluded that the cash
component significantly undervalued FirstGroup's continuing
operations and its future prospects, and the contingent value did
not provide shareholders with sufficient certainty. On 16 August 2022 I Squared announced that it did
not intend to make a firm offer for FirstGroup and was therefore
bound by the restrictions contained within Rule 2.8 of the City
Code on Takeovers and Mergers.
Interim dividend
The Board is declaring an interim dividend of 0.9p per share
(c.£6.7m in aggregate), to be paid on 23
December 2022 to shareholders on the register at
18 November 2022. The amount reflects
the current policy of c.3x cover against the Group adjusted
attributable profit, to be paid one third interim and two thirds
final.
Looking ahead
Although the political, economic and industrial relations
backdrop and pace of travel volume recovery are challenges, our
expectations for FY 2023 are broadly unchanged, despite a shift in
mix between our bus and rail divisions. While First Bus is clearly
sensitive to broader consumer spending and inflation trends, we do
expect sequential progress in H2 2023, with the realignments of
routes and timetables in October and our pricing actions partially
offset by a higher cost base for increased mileage as a result of
the extension of recovery funding in England, which is currently in place until
March 2023. In First Rail, we expect
the four management fee-based operations to deliver aggregate
financial performance broadly in line with management expectations,
with higher profit from our open access operations over FY 2023. We
are on track to realise the further c.£5m in annual central cost
savings previously guided to this financial year, ahead of our
original target. We expect our adjusted net cash position to be in
the range of £100-110m at the end of
FY 2023 after receipt of the Greyhound property proceeds in
December and before any deployment of this capital.
In the medium term we expect further value creation through both
earnings growth, as First Bus continues the transition to a more
commercial model, and from targeted deployment of growth
capital.
Graham
Sutherland
Chief Executive Officer
9 November 2022
Business review
First Bus
|
|
£m |
|
£m,
change |
26 weeks to 24 September |
H1 2023 |
H1 2022 |
|
Revenue |
427.7 |
392.5 |
|
+35.2 |
Adjusted operating profit |
20.7 |
26.8 |
|
(6.1) |
Adjusted operating margin |
4.8% |
6.8% |
|
(200)bps |
EBITDA |
51.0 |
55.5 |
|
(4.5) |
Net operating assets |
468.0 |
509.4 |
|
(41.4) |
Capital expenditure |
46.1 |
9.9 |
|
+36.2 |
First Bus reported revenue of £427.7m (H1 2022: £392.5m),
principally reflecting improving passenger volumes partially offset
by lower government funding support (including the tapering of
concession reimbursement to current volume levels) than in H1 2022.
Overall passenger volumes increased by 29% compared with the prior
period, underpinned by commercial volumes, whilst the pace of
recovery in concessionary and peak-time commuter travel remains
slower. During H1 2023 commercial passenger volumes were at 78% and
concessions at 68% of 2019 equivalent levels. First Bus is
currently operating c.80% on average of the service mileage
compared with the equivalent period in 2019 following the network
changes we implemented in October
2022.
For a substantial portion of FY 2022 First Bus and other
regional bus operators effectively provided their assets and
expertise to operate a government-funded bus system on a broadly
cash break-even basis to ensure continuity of service during the
pandemic. Under these arrangements, called the Covid Bus Service
Support Grant-Restart (CBSSG-R) programme in England, operators were paid the costs of
operation, less revenue received from customers and other public
sector monies. Recoverable costs included all reasonable
operational costs, including depreciation and allocated debt
finance, together with any pension deficit funding. In Wales and Scotland bus operators received government
pandemic support funding which is in place to July 2023 and Autumn 2022 respectively. The
CBSSG-R programme in England
formally came to an end on 1 September
2021, and since that time delivery of local bus services
across England has been reinforced
by the DfT's £226.5m Bus Recovery Grant (BRG) package, which was
allocated to regional bus operators based on mileage and volumes.
In March 2022 the DfT announced a
further £150m in transitional funding for regional bus and light
rail operators, and this scheme was subsequently extended with a
further £130m announced in August
2022, to support bus operators in England to March
2023. In FY 2022 the Scottish Government committed to
funding free bus travel for all under-22s from 31 January 2022 and we have subsequently seen a
significant increase in the volume of under-22s travelling on our
services in Scotland. In
September 2022 the DfT announced £60m
of funding in order to cap adult regional bus fares in England at £2 between January and March 2023. The division reported adjusted
operating profit of £20.7m (H1 2022: £26.8m) in the period,
reflecting the changes in the funding regime noted above and cost
inflation. Statutory operating profit was £16.4m (H1 2022:
£26.8m).
Optimising our business
We are continuing to enhance our business and its prospects for
when the current transitional period ends. Our cost reduction and
operational efficiency programmes have delivered annualised savings
of c.£20m since 2019 and we have several initiatives in place to
deliver further savings. In H1 2023, higher than anticipated
inflation impacted a number of our key input costs, including pay,
fuel and utility costs. We have continued the roll out of a number
of initiatives to ensure that we continue to offer an attractive
and competitive employee proposition, as industry-wide driver
shortages remain elevated. The vast majority of our local wage
agreements (a number of which are multi-year) have been concluded
in FY 2022 and H1 2023, with a small number set to be concluded
shortly. Fuel costs were mitigated by our fuel hedge programme. We
have also implemented energy efficiency measures such as aligning
electricity usage with building occupancy, awareness campaigns to
encourage behavioural change and we are accelerating our investment
in the self-generation of power. This has included the installation
of new energy efficient lighting, bus washes and energy management
systems, and we are commencing the installation of solar panels at
a number of our depots.
We have continued to develop our pricing and yield management
strategy, resulting in a shift towards shorter term products such
as lower entry single and return fares, and updated weekly and
monthly discounts being implemented across our operations. Having
been prohibited from doing so under the earlier CBSSG pandemic
funding, we increased fares in October
2021, and have since made further interventions within the
CPI cap permitted under more recent funding schemes. The increases
we have implemented have been designed to better match our new
ticketing products to evolving travel trends, whilst at the same
time recognising the potential impact of the cost of living crisis
on discretionary passenger journeys by retaining low single
fares.
As part of our initiatives to address underperforming locations,
we completed the sale of our First Scotland East operations to
McGill's Group in September 2022. We
have also completed a reorganisation of our regional management
structure in the period.
Digital innovation
Our real-time passenger volume data capture, GPS functionality
and ticketing systems are allowing us to make commercial decisions
more efficiently, optimise our networks and timetables and roll out
innovative functionality to our customers. We are also able to
structure our pricing models more effectively and introduce new
ticketing options for customers that are more closely aligned with
their preferences and able to attract new customers. In addition,
we are partnering with specialist software companies to roll out
enhanced timetabling, vehicle and employee rostering capabilities
across the network, improving efficiency and reducing cost. Ticket
transactions using digital payment methods now account for around
70% of our ticket transactions, and during H1 2023 we continued the
roll out of ‘tap on tap off’ capped payment technology, which is
now installed on more than half of our fleet. We are also
participating in the development of a multi operator contactless
payment ticketing system in a partnership between the bus industry
and Transport for West Midlands.
The scheme will allow passengers to access the best value travel
for a day or week across multiple operators.
Fleet decarbonisation
We continue to work successfully with local authorities to
secure government funding assistance for zero emission vehicles and
associated infrastructure under the Zero Emission Buses Regional
Area (ZEBRA) funding in England,
and Transport Scotland’s Scottish Zero Emission Bus (ScotZEB)
funding scheme. In August 2022 First
Bus placed the UK’s largest ever EV bus order outside of
London with UK manufacturer
Wrightbus. The £81m order totalling 193 buses will see new zero
emission buses being rolled out from March
2023. We anticipate that we will have 591 EVs, almost 13% of
our entire fleet, by March 2024. In
addition to growing our EV fleet we are also identifying
opportunities to generate adjacent revenue streams created by the
transition of our fleet and depot infrastructure to
electricity.
B2B and other contracted revenue
In H1 2023 we have continued to develop and grow our activities
in the B2B bus services market and have further contracts in the
pipeline. Having acquired the 50% of Somerset Passenger Solutions
(SPS) that we did not own in FY 2022, in H1 2023 we agreed a five
year extension to our contract to provide passenger transport for
the construction workers employed at the EDF Hinkley Point C
nuclear power station. During the period we have also been active
with regard to bus franchising opportunities. In the period First
West of England took over the
running of the m1 metrobus service, a bus rapid transit contract
serving more than 50,000 passengers a week, from Bristol Community
Transport after its parent HCT Group announced that it would cease
operation of the route. Subsequent to the period end we announced
in October 2022 that our Aircoach
operation had completed the acquisition of Northern Ireland-based Airporter. This has
expanded Aircoach’s footprint in Ireland, increasing its daily routes to seven,
with an enhanced all-island route connecting the north west to
Belfast International Airport,
Dublin Airport and Dublin city
centre.
First Bus outlook
Although clearly sensitive to broader consumer spending and
inflation trends, we expect sequential progress in H2 2023, with
the realignments of routes and timetables in October and pricing
actions partially offset by a higher cost base for increased
mileage as a result of the extension of the transitional Bus
Recovery Grant funding, currently in place until March 2023.
Looking further ahead, we are focused on rightsizing our
regional bus business around the actual passenger activity we are
seeing as the sector moves to a more commercial model. We have the
tools in place to continue to adapt our operations, deliver further
efficiencies and manage the inflationary environment, as recovery
funding tapers off. We will accelerate the decarbonisation of our
fleet and have identified a number of potential opportunities to
deploy growth capital, including to create additional revenue
streams from the electrification of our fleets and depots, develop
our B2B business, and pursue attractive, potentially scalable
opportunities in bus franchising.
First Rail
|
|
£m |
|
£m,
change |
Six months to 17 September |
H1 2023 |
H1 2022 |
|
Revenue from management fee-based
operations |
1,743.3 |
1,729.8 |
|
+13.5 |
Revenue from open access and
additional services |
85.5 |
45.7 |
|
+39.8 |
Inter-divisional eliminations |
(44.1) |
(28.9) |
|
(15.2) |
First Rail revenue |
1,784.7 |
1,746.6 |
|
+38.1 |
|
|
|
|
|
Attributable net income from
management fee-based operations1 |
19.1 |
17.5 |
|
+1.6 |
Gross up for tax, minorities and
IFRS 16 |
24.3 |
29.3 |
|
(5.0) |
Adjusted operating profit/(loss)
from open access and additional services |
12.0 |
(7.6) |
|
+19.6 |
First Rail adjusted operating
profit |
55.4 |
39.2 |
|
+16.2 |
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 minority interests as described in more detail on page 12. See
also note 3 to the financial statements for a reconciliation to the
segmental disclosures.
Total revenue increased in H1 2023 to £1,784.7m (H1 2022:
£1,746.6m), with passenger volumes increasing in the period. Open
access contributed £32.7m in revenue in the period (H1 2022: £6.6m)
and adjusted operating profit of £6.7m (H1 2022: adjusted loss
£(10.4)m), reflecting the successful launch of Lumo and the
restoration of regular Hull Trains services following periods of
closure due to the pandemic in the prior period. Additional
services such as Mistral Data and rail contact centres delivered
gross revenue of £52.8m (H1 2022: £39.1m) before interdivisional
eliminations in the period and adjusted operating profit of £5.3m
(H1 2022: £2.8m).
In H1 2023 the four management fee-based operations have
recorded performance fees at management's best estimate in
aggregate for the period. 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 and WCP (incorporating Avanti West Coast) contracts with the
DfT – was £19.1m (H1 2022: £17.5m). The Group receives an annual
dividend 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 TOC audited accounts.
First Rail adjusted operating profit increased to £55.4m (H1
2022: £39.2m), which principally reflects the increase in open
access contribution, as well as higher IFRS 16 lease depreciation
following the award of the new GWR contract in June 2022, which is now expected to increase
adjusted profit by approximately £22m in FY 2023 rather than £30m
as guided on signing, as the leases were signed later and at
different lease rates. The division reported a statutory operating
profit of £55.4m (H1 2022: £43.2m).
Transition to National Rail
Contracts
In May 2021 SWR and TPE
transitioned to the Government’s new National Rail Contracts (NRCs)
which run to May 2023 with potential
extensions to May 2025. In
March 2022 the DfT issued a Prior
Information Notice which provides for a NRC for TPE starting in
Spring 2023, with a minimum core term of four years with up to a
further four years at the DfT’s discretion. GWR was awarded an NRC
in June 2022 with a core three-year
term to 21 June 2025, with an option
for the DfT to extend it by up to three further years to
June 2028. Under the NRCs, the DfT
retains substantially all revenue and cost risk (including for fuel
and wage increases). There is a fixed management fee and the
opportunity to earn an additional performance fee. The punctuality
and other operational targets required to achieve the maximum level
of performance fee under the contracts are designed to incentivise
service delivery for customers.
The West Coast Partnership (WCP) has been operating under an
Emergency Recovery Measures Agreement (ERMA) which was put in place
by the DfT in September 2020. On
7 October 2022 the Group announced
that it had agreed with the DfT to extend the current contractual
arrangements for WCP to the end of March
2023 under broadly the same terms and conditions. The WCP
contract comprises operation of Avanti West Coast and acting as
shadow operator to the HS2 programme. The agreement will allow the
team at Avanti West Coast to sustain their focus on delivering
their robust plan to restore service levels to the levels that
passengers expect. Discussions are ongoing with DfT regarding the
longer-term NRC for WCP which is currently envisaged will run up to
October 2032. Under these contractual
arrangements the four TOCs continue to be fully consolidated in the
Group accounts with the net cost of operations and capital
expenditure funded in advance by the DfT.
Innovation and adjacent rail
opportunities
We continue to develop, market and deploy our additional rail
customer, industry and technology tools and services. In the
period, the installation of our evo-rail track-to-train superfast
rail-5G technology across 70 kilometres of the SWR main line
commenced, and international trials continued. Our analytics
business Mistral Data developed a new application in the period
that identifies areas of potential low rail-wheel adhesion, based
on real-time wheel slip reported data, which was installed on the
SWR network.
To address energy cost inflation in our open access operations,
both Lumo and Hull Trains have joined an industry hedging group to
mitigate the long-term impact of electricity costs which represent
a significant proportion of their costs.
Rail sector
The rail sector is in the midst of a period of reform aiming to
modernise industry practices and secure its long-term future at a
time when passenger volumes in a number of segments remain below
pre-pandemic levels. First Rail has on average operated a fifth of
the UK passenger rail market by revenue since 2007, and currently
has a quarter of the market. As a result, we have a strong track
record of delivery on major projects such as fleet introductions,
capital projects on behalf of Network Rail, customer service
innovations and managing the impact of significant infrastructure
changes, from network electrification through to route upgrades,
and through our experience as a ‘shadow operator’ on the HS2
infrastructure project. We believe this unrivalled knowledge and
expertise stands us in good stead as the industry structure in the
UK continues to evolve.
A number of trade unions have held industrial action at train
operating companies across the UK and at Network Rail during H1
2023. Whilst the financial impact of industrial action is expected
to be limited under the terms of the management fee-based
contracts, it is possible that if industrial action continues over
a prolonged period of time, this could impact some of the
performance metrics. We will continue to work with our industry
partners to do all that we can to minimise the disruption for our
passengers caused by prolonged industrial action, as well as
continuing talks on securing the long-term future for the
railways.
First Rail outlook
For FY 2023, we expect higher profit increases from our open
access operations, with the four management fee-based operations to
deliver aggregate financial performance broadly in line with
management expectations. We continue to work collaboratively with
our industry partners and stakeholders to enhance our service
offering and to increase connectivity with other transport modes
for our customers.
Looking further ahead, in the medium term we expect a broadly
consistent level of contribution from First Rail's four management
fee-based operations for their contractual durations, with further
growth from open access and additional rail services. As the UK’s
largest operator we are well placed both to drive increased
patronage and to generate resilient and consistent returns for
shareholders as the UK passenger rail industry continues its
evolution to a more customer-focused and sustainable railway system
that works better for all parties.
Financial review
Discontinued operations
In the first half of the year, the Group’s residual Greyhound US
activities are disclosed as discontinued operations. As described
in more detail in the 2022 Annual Report and Accounts, the Group
completed the sale of its First Student and First Transit divisions
to EQT Infrastructure on 21 July
2021, and the sale of Greyhound lines Inc. to a wholly owned
subsidiary of FlixMobility GmbH on 21
October 2021. All three are reported as discontinued
operations in the prior periods.
Revenue
Revenue from continuing operations increased to £2,212.4m (H1
2022: £2,139.1m), principally reflecting increased passenger
volumes partly offset by lower receipts from government grants in
First Bus, and in First Rail increased revenue across open access,
additional services and management-fee based operations.
Operating performance
Statutory operating performance by division is as follows:
|
26
weeks to 24 September 2022 |
26 weeks
to 25 September 2021 |
52 weeks
to 26 March 2022 |
|
Revenue
£m |
Operating
profit1
£m |
Operating
margin1
% |
Revenue
£m |
Operating
profit1
£m |
Operating
margin1
% |
Revenue
£m |
Operating
profit1
£m |
Operating
margin1
% |
First Bus |
427.7 |
16.4 |
3.8 |
392.5 |
26.8 |
6.8 |
789.9 |
45.2 |
5.7 |
First Rail |
1,784.7 |
55.4 |
3.1 |
1,746.6 |
43.2 |
2.5 |
3,801.2 |
91.8 |
2.4 |
Group items2 |
- |
(9.7) |
n/a |
- |
(17.8) |
n/a |
- |
(14.2) |
n/a |
Continuing operations |
2,212.4 |
62.1 |
2.8 |
2,139.1 |
52.2 |
2.4 |
4,591.1 |
122.8 |
2.7 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
2.7 |
(28.6) |
n/a |
970.6 |
592.3 |
n/a |
996.9 |
683.3 |
n/a |
|
|
|
|
|
|
|
|
|
|
Total |
2,215.1 |
33.5 |
1.5 |
3,109.7 |
644.5 |
20.7 |
5,588.0 |
806.1 |
14.4 |
Adjusted operating performance by division is as follows:
|
26
weeks to 24 September 2022 |
26 weeks
to 25 September 2021 |
52 weeks
to 26 March 2022 |
|
Revenue
£m |
Adjusted operating
profit1
£m |
Adjusted operating
margin1
% |
Revenue
£m |
Adjusted operating
profit1
£m |
Adjusted operating
margin1
% |
Revenue
£m |
Adjusted
operating profit1
£m |
Adjusted
operating margin1
% |
First Bus |
427.7 |
20.7 |
4.8 |
392.5 |
26.8 |
6.8 |
789.9 |
45.2 |
5.7 |
First Rail |
1,784.7 |
55.4 |
3.1 |
1,746.6 |
39.2 |
2.2 |
3,801.2 |
87.8 |
2.3 |
Group items2 |
- |
(10.0) |
n/a |
- |
(14.2) |
n/a |
- |
(26.3) |
n/a |
Continuing operations |
2,212.4 |
66.1 |
3.0 |
2,139.1 |
51.8 |
2.4 |
4,591.1 |
106.7 |
2.3 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
2.7 |
(8.4) |
n/a |
970.6 |
121.3 |
n/a |
996.9 |
120.1 |
n/a |
|
|
|
|
|
|
|
|
|
|
Total |
2,215.1 |
57.7 |
2.6 |
3,109.7 |
173.1 |
5.6 |
5,588.0 |
226.8 |
4.1 |
1
‘Adjusted’ figures throughout this document are before
adjusting and certain other items as set out in note 3 to the
financial statements.
2 Central management, other
items and retained Greyhound results.
Adjusted operating profit from continuing operations was £66.1m
(H1 2022: £51.8m), reflecting the transition from loss to profit of
our open access rail operations, while First Bus was lower than the
prior period, primarily reflecting net cost inflation and the
changes in the pandemic recovery funding regime in September 2021. The additional leases recognised
under IFRS 16 for the new GWR contract are now expected to increase
adjusted profit by approximately £22m in FY 2023 rather than by
£30m as guided on signing, as the leases were signed later and at
different lease terms. Central costs of £(10.0)m were lower than
the prior period, reflecting the actions taken to resize the
organisation following the North American disposals.
The Group's adjusted attributable profit alternative performance
measure is calculated as follows and increased significantly in the
period:
|
26 weeks to 24
September 2022
£m |
26 weeks to 25
September 2021
£m |
52 weeks to 26 March
2022
£m |
First Bus adjusted operating
profit |
20.7 |
26.8 |
45.2 |
Attributable net income from First
Rail management fee-based operations1 – Group's share of
the management fee income available for dividend distribution from
GWR, SWR, TPE and WCP contracts |
19.1 |
17.5 |
45.5 |
First Rail adjusted operating
profit/(loss) from open access and additional services |
12.0 |
(7.6) |
(9.7) |
Group central costs (operating
profit basis) |
(10.0) |
(13.9) |
(26.3) |
Subtotal |
41.8 |
22.8 |
54.7 |
|
|
|
|
Cash interest2 |
(8.3) |
(10.3) |
(20.7) |
Tax3 |
(2.7) |
0.8 |
2.2 |
Group adjusted attributable
profit |
30.8 |
13.3 |
36.2 |
1 A reconciliation to the
segmental disclosures is set out in note 3.
2 Pro forma interest charge
excluding notional interest, lease interest on IFRS 16 Right of Use
assets and interest on discontinued operations.
3 Pro forma taxation at
19%.
A reconciliation of the Group's adjusted attributable profit
measure to adjusted earnings after tax is shown below:
|
H1 2023
Group adjusted attributable profit
£m |
Movements |
H1 2023
Adjusted earnings
after tax
£m |
|
Adjusted
First Rail earnings to IFRS 16 basis
£m |
Gross up
tax and minority interests
£m |
Actual
interest and tax
£m |
|
First Bus adjusted operating
profit |
20.7 |
- |
- |
- |
20.7 |
Attributable net income from First
Rail management fee-based operations1 |
19.1 |
17.4 |
6.9 |
- |
43.4 |
First Rail adjusted operating profit
from open access and additional services |
12.0 |
- |
- |
- |
12.0 |
Group central costs (operating
profit basis) |
(10.0) |
- |
- |
- |
(10.0) |
Subtotal |
41.8 |
17.4 |
6.9 |
- |
66.1 |
|
|
|
|
|
|
Cash interest2 |
(8.3) |
(20.0) |
- |
3.2 |
(25.1) |
Tax3 |
(2.7) |
- |
(4.9) |
1.5 |
(6.1) |
Minority interest |
- |
- |
(2.0) |
- |
(2.0) |
Total |
30.8 |
(2.6) |
- |
4.7 |
32.9 |
1 A reconciliation to the
segmental disclosures is set out in note 3.
2 Pro forma interest charge
excluding notional interest, lease interest on IFRS 16 Right of Use
assets and interest on discontinued operations, H1 FY22 pro forma
due to material deleveraging following the sale of North American
businesses.
3 Pro forma taxation at
19%.
The Group's EBITDA adjusted for First Rail management fees
performance measure also increased year-on-year. On a last twelve
month basis, the Group's EBITDA adjusted for First Rail management
fees was £118.8m. It is calculated as follows:
|
26 weeks to 24
September 2022
£m |
26 weeks to 25
September 2021
£m |
52 weeks to 26 March
2022
£m |
First Bus EBITDA1 |
42.8 |
47.6 |
87.6 |
Attributable net income from First
Rail management fee-based operations2 – Group's share of
the management fee income available for dividend distribution from
GWR, SWR, TPE and WCP contracts |
19.1 |
17.5 |
45.5 |
First Rail EBITDA from open access
and additional services1 |
12.6 |
(7.4) |
(9.7) |
Group central costs (EBITDA
basis1) |
(9.6) |
(13.0) |
(24.8) |
Group EBITDA adjusted for First
Rail management fees |
64.9 |
44.7 |
98.6 |
1 Pre-IFRS 16 basis.
2 A reconciliation to the
segmental disclosures is set out in note 3.
Reconciliation to non-GAAP measures
and performance
Note 3 to the financial statements sets out the reconciliations
of operating profit/(loss) and loss before tax to their adjusted
equivalents.
The principal adjusting items in H1 2023 are as follows:
First Bus restructuring
As part of the restructuring of the First Bus division to
transition to a more commercial model, the Group completed the sale
of its First Scotland East business in September 2022, realising a loss on disposal of
£(3.7)m. In line with this transition plan, the Group also incurred
costs of £(0.6)m relating to the reorganisation of its First Bus
regional management structure.
Other restructuring costs
Restructuring costs of £(1.3)m were incurred in relation to the
Group's central functions as part of its ongoing cost efficiency
initiatives.
Greyhound Canada
A provision relating to the continued winding down of Greyhound
Canada operations was released in the period.
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 now estimates its earnout
consideration to be around £74m based on the information received
on the sale by EQT. This gives rise to a non-cash adjusting charge
of £27.9m (before currency hedging entered into after the period
end) relative to the carrying value of the earnout of £106.1m as at
26 March 2022. A gain of £7.7m arose
upon disposal of Greyhound US property during the first half of the
year.
Group statutory operating profit
Statutory operating profit (continuing basis) was £62.1m (H1
2022: £52.2m), reflecting the £(4.0)m charge from net adjusting
items, compared with the £0.4m credit in net adjusting items in H1
2022.
Finance costs and investment
income
Net finance costs were £24.8m (H1 2022: £128.0m) with the
decrease principally due to lower finance costs following the
repayment of debt after receipt of the First Student and First
Transit disposal proceeds, and the impact in the prior year of debt
early settlement make-whole costs of £50.0m and charges of £8.6m
for the write-off of unamortised fees.
Profit before tax
Statutory profit before tax (continuing basis) was £37.0m (H1
2022: loss of £(64.5)m). Adjusted profit before tax (continuing
basis) as set out in note 4 to the financial statements was £41.0m
(H1 2022: adjusted loss of £(6.3)m). Adjusting items were an
overall charge of £4.0m, principally reflecting the loss on
disposal of the First Scotland East business (H1 2022: charge of
£58.2m mainly reflecting the adjusting finance costs).
Tax
The tax charge on statutory profit before tax (continuing basis)
was £5.1m (H1 2022: tax credit of £26.4m) representing an effective
tax rate of 13.8% (H1 2022: not meaningful). The tax charge on
adjusted profit before tax including discontinued operations for
the period was £6.1m (H1 2022: £21.6m), representing an effective
tax rate of 18.5% (H1 2022: 20.8%). The lower rate in the current
period reflects the absence of profits in the US which had a higher
effective tax rate. There was a tax charge of £2.0m (H1 2022:
credit of £24.3m) relating to adjusting items and a tax credit of
£0.8m (H1 2022: charge of £5.9m) from adjustments to deferred tax.
The total tax charge, including tax on discontinued operations, was
£7.3m (H1 2022: £3.2m). The actual tax paid during the period was
£0.4m (H1 2022: £12.2m).
The ongoing Group's effective tax rate is expected to be broadly
in line with UK corporation tax levels (currently 19% and
increasing to 25% from 1 April
2023).
EPS
Total adjusted diluted EPS was 3.2p (H1 2022: 6.6p). Basic EPS
was (0.1)p (H1 2022: 42.4p).
Shares in issue
As at 24 September 2022 there were
738.5m shares in issue (H1 2022:
1,215.3m), excluding treasury shares
and own shares held in trust for employees of 11.9m (H1 2022: 7.6m). In December
2021, 476.2m shares were
acquired pursuant to a tender offer and cancelled. 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 739.8m (H1 2022: 1,203.4m).
Capital allocation framework
The Group's capital allocation framework can be summarised as
follows:
Sustainable investment |
- First Bus: c.£90m per annum in net cash capital expenditure,
principally transition of bus fleet to 100% zero emissions by 2035,
expected to be covered by operational cash generation
- First Rail: continues to be cash capital-light, with any
capital expenditure required by the four management fee-based
operations fully funded under the contracts
|
Growth |
- Actively reviewing organic and inorganic opportunities to
deploy capital in the UK and elsewhere
|
Returns for shareholders |
- Dividends: progressive annual dividends, 3x covered by Group
adjusted attributable profit
- Interim dividend of 0.9p per share declared (expected to be
c.1/3 interim, 2/3 final typically)
- Potential for additional distributions as the contingent values
from exiting North America are realised
|
Balance sheet |
- Maintain leverage of less than 2.0x Adjusted Net Debt: rail
management fee-adjusted EBITDA
|
Dividend
The Board has declared an interim dividend of 0.9p per share
(c.£6.7m in aggregate), to be paid on 23
December 2022 to shareholders on the register at
18 November 2022.
Adjusted cash flow
The Group's adjusted cash outflow of £(112.1)m (H1 2022: inflow
of £1,704.7m, including inflows of £2.3bn relating to the disposal
of the North American operations) in the period reflects strong
underlying cash generated by operations offset by outflows relating
to investment in First Bus, lease payments and movement in First
Rail ring-fenced cash (£125.1m outflow since FY 2022. The adjusted
cash flow is set out below:
|
|
26 weeks to 24
September 2022
£m |
26 weeks to 25
September 2021
£m |
52 weeks to 26 March
2022
£m |
EBITDA |
|
339.5 |
478.9 |
862.1 |
Other non-cash income statement
charges |
|
1.3 |
1.2 |
3.8 |
Working capital |
|
(92.2) |
(7.6) |
(11.6) |
Movement in other provisions |
|
(8.2) |
(20.4) |
(27.4) |
Increase in financial
assets/contingent consideration receivable |
|
- |
- |
(223.1) |
Settlement of foreign exchange
hedge |
|
(1.8) |
- |
- |
Pension payments in excess of income
statement charge/LGPS refund |
|
11.1 |
(338.6) |
(340.4) |
Cash generated by
operations |
|
249.7 |
113.5 |
263.4 |
Capital expenditure and
acquisitions |
|
(61.5) |
(142.2) |
(262.9) |
Proceeds from disposal of property,
plant and equipment |
|
23.0 |
3.4 |
23.1 |
Net proceeds from disposal of
businesses |
|
2.0 |
2,293.4 |
2,320.0 |
Interest and tax |
|
(33.2) |
(167.9) |
(196.6) |
Share buy back resulting from tender
offer |
|
- |
- |
(506.0) |
External dividends paid |
|
(8.2) |
- |
- |
Lease payments now in
debt/other |
|
(283.9) |
(395.5) |
(632.1) |
Adjusted cash flow |
|
(112.1) |
1,704.7 |
1,008.9 |
Foreign exchange movements |
|
8.6 |
(7.9) |
(3.8) |
Net (inception)/termination of
leases |
|
(1,029.0) |
172.4 |
184.1 |
Lease payments in debt |
|
276.5 |
378.4 |
609.8 |
Other non-cash movements |
|
- |
144.0 |
207.8 |
Movement in net debt in the
period |
|
(856.0) |
2,391.6 |
2,006.8 |
Capital expenditure
Non-First Rail cash capital expenditure was £46.8m, all of which
related to First Bus (H1 2022: £114.5m, comprising First Bus £8.7m,
Group items £0.4m, First Student £72.6m, First Transit £21.8m and
Greyhound £11.0m). First Rail cash capital expenditure was £14.7m
(H1 2022: £25.1m) and is typically matched by receipts from the DfT
under current contractual arrangements or other funding.
In addition, during the period leases in the non-First Rail
divisions were entered into with capital values in First Bus of
£19.3m and Group items £0.2m (H1 2022: First Bus £1.9m, Group items
£0.7m, First Student £8.4m, First Transit £1.3m and Greyhound
£2.1m). During the period First Rail entered into leases with a
capital value of £1,015.9m (H1 2022: £26.1m).
Non-First Rail gross capital investment (fixed asset and
software additions, plus the capital value of new leases) was
£65.6m and comprised First Bus £65.4m and Group items £0.2m (H1
2022: £178.2m, comprising First Bus £11.9m, Group items £0.9m,
First Student £94.7m, First Transit £13.5m, Greyhound £12.3m).
First Rail gross capital investment was £1,032.2m (H1 2022:
£44.9m). 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 £557.7m of undrawn committed
headroom and free cash (FY 2022: £532.1m), being £300.0m (FY 2022:
£300.0m) of committed headroom and £257.7m (FY 2022: £232.1m) of
net free cash after offsetting overdraft positions.
Net cash/(debt)
As at 24 September 2022 the
Group’s adjusted net cash, which excludes the capitalisation of
Right of Use Assets under IFRS 16 and ring-fenced cash, was £7.3m
(FY 2022: adjusted net debt of £(3.9)m). Reported net debt was
£1,475.0m (FY 2022: £619.0m) after IFRS 16 and including
ring-fenced cash of £339.0m (FY 2022: £468.1m), as follows:
Analysis of net debt |
|
24 September
2022
£m |
25 September
2021
£m |
26 March 2022
£m |
Sterling bond (2024) |
|
199.9 |
199.9 |
199.9 |
Bank loans and overdrafts |
|
39.9 |
31.4 |
87.5 |
Lease liabilities |
|
1,821.3 |
1,366.4 |
1,083.2 |
Asset backed financial
liabilities |
|
49.9 |
56.6 |
35.5 |
Loan notes |
|
0.6 |
0.6 |
0.6 |
Gross debt excluding accrued
interest |
|
2,111.6 |
1,654.9 |
1,406.7 |
Cash |
|
(297.6) |
(892.4) |
(319.6) |
First Rail ring-fenced cash and
deposits |
|
(315.3) |
(518.3) |
(440.4) |
Other ring-fenced cash and
deposits |
|
(23.7) |
(10.0) |
(27.7) |
Net debt excluding accrued
interest |
|
1,475.0 |
234.2 |
619.0 |
|
|
|
|
|
IFRS 16 lease liabilities –
rail |
|
1,780.9 |
1,255.7 |
1,031.2 |
IFRS 16 lease liabilities –
non-rail |
|
40.4 |
110.7 |
52.0 |
IFRS 16 lease liabilities –
total |
|
1,821.3 |
1,366.4 |
1,083.2 |
|
|
|
|
|
Net (cash)/debt excluding accrued
interest (pre-IFRS 16) |
|
(346.3) |
(1,132.2) |
(464.2) |
|
|
|
|
|
Adjusted net (cash)/debt
(pre-IFRS 16 and excluding ring-fenced cash) |
|
(7.3) |
(603.9) |
3.9 |
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 price risk
We use a progressive forward hedging programme to manage
commodity risk. As at 9 November
2022, 97% of our ‘at risk’ UK crude requirements for H2 2023
(44m litres, which is all in First
Bus) were hedged at an average rate of 40p per litre, 63% of our
requirements for the year to the end of March 2024 at 46p per litre, and 10% of our
requirements for the year to the end of March 2025 at 59p per litre.
Foreign currency risk
‘Certain’ and ‘highly probable’ foreign currency transaction
exposures (including fuel purchases for the UK divisions) may be
hedged into the Group reporting currency (pounds Sterling) 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. In
accordance with this policy, the legacy Greyhound property sale and
First Transit earnout proceeds have been substantially hedged into
pounds Sterling during the period, at a rate of $1.1543. 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:
|
26
weeks to 24 September 2022 |
26 weeks
to 25 September 2021 |
52 weeks
to 26 March 2022 |
|
Closing
rate |
Effective
rate |
Closing rate |
Effective rate |
Closing rate |
Effective rate |
US Dollar |
1.09 |
1.12 |
1.37 |
1.39 |
1.32 |
1.40 |
Canadian Dollar |
1.48 |
1.60 |
1.73 |
1.72 |
1.64 |
1.73 |
Pensions
We have updated our pension assumptions for the defined benefit
schemes in the UK and North
America. The net pension surplus (comprising continued and
discontinued operations) of £186.7m at the beginning of the
reporting period moved to a net surplus of £60.2m as at the balance
sheet date on 24 September 2022, with
the movement principally due to a deterioration in pension asset
performance partially offset by the impact of higher discount rates
in the period. The main factors that influence the balance sheet
position for pensions and the principal sensitivities to their
movement at 24 September 2022 are set
out below:
|
Movement |
Impact |
Discount rate |
+0.1% |
Increase surplus by
£21m |
Inflation |
+0.1% |
Decrease surplus by
£17m |
Life expectancy |
+1 year |
Decrease surplus by
£61m |
Following a period of significant gilt yield rises since the
start of 2022, gilt yield movements in the period immediately
following the balance sheet date were exceptional. The Bus Pension
Scheme was able to maintain its high level of hedged protection
against interest rate and inflation risks throughout this volatile
period. As a precautionary measure, after the period end the Group
agreed to make £95m from the Limited Partnership created following
the sale of the North American divisions (the escrow) available to
the Scheme to assist with liquidity management. This amount has
been loaned from the escrow to the Scheme on a short term basis,
whilst its investment strategy and assets are repositioned as
necessary.
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. As at the reporting date, the Scheme liabilities were
estimated to be around 12% higher on a funding basis than on the
accounting basis shown on the balance sheet. Following the rise in
gilt yields, the funding shortfall is currently materially lower
than it was at the beginning of the period, although slightly
higher than at the reporting date, with volatility in gilt yields
remaining elevated.
Balance sheet
Net assets have decreased by £126.8m since 26 March 2022. The principal reason is the
reduction in the net pension surplus. The GWR leases under the new
NRC arrangement underpin the increase in First Rail’s net assets,
with the related liability reflected in reported net debt.
Balance sheets – net
assets/(liabilities) |
|
As at
24 September 2022
£m |
As at
25 September 2021
£m |
As at
26 March 2022
£m |
First Bus |
|
468.0 |
509.4 |
626.4 |
First Rail |
|
1,501.0 |
777.7 |
597.3 |
Greyhound (retained) |
|
(21.6) |
(49.0) |
(4.8) |
Divisional net assets |
|
1,947.4 |
1,238.1 |
1,218.9 |
Group items |
|
221.7 |
53.2 |
245.8 |
Borrowings and cash |
|
(1,475.2) |
(170.5) |
(619.0) |
Taxation |
|
18.4 |
5.2 |
0.9 |
Held for sale assets |
|
46.0 |
73.6 |
38.5 |
Total |
|
758.3 |
1,199.6 |
885.1 |
Legacy North American assets and
liabilities on balance sheet
As part of the disposal of First Transit to EQT Infrastructure,
FirstGroup is entitled to an ‘earnout’ consideration of up to
$290m (c.£220m). The earnout is for a
period of three years from 21 July
2021 and is calculated as a percentage of the realised
equity value on disposal of the First Transit business by EQT
Infrastructure or an arm's length valuation as at the third
anniversary of the sale (21 July
2024) if not disposed by that point. Following the
announcement on 26 October 2022 of
EQT Infrastructure’s agreement to sell First Transit to Transdev
North America, Inc, the Group now estimates its earnout
consideration will be around £74m. Following the property sales
announced in the period, total Greyhound assets and liabilities are
carried at a value of £24.4m.
Post-balance sheet events
- 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 earnout
consideration to be around £78m. The Group considered this to be an
adjusting event and therefore it was reflected in the fair value of
the contingent consideration receivable for the earnout at
24 September 2022. In the first half
of the year this gives rise to a non-cash, adjusting charge of
£27.9m relative to the carrying value of the earnout of £106m at
26 March 2022.
- In light of the liquidity problems encountered by several UK
Defined Benefit pension schemes which have resulted from recent
rapid and significant movements in government bond yields,
FirstGroup provided a short-term loan of £95m to the Bus Pension
Scheme so that it could continue to maintain its current level of
risk management during the uncertain times as the Bank of
England support in the market is
withdrawn, and to allow its asset portfolio to be rebalanced in an
orderly manner. The Company utilised the funds held in escrow
following the sale of the North American business to support the
Scheme funding strategy as the source of funds for the loan.
- In October 2022 an extension of
the current contractual arrangements for WCP was agreed with DfT to
March 2023. Discussions are ongoing
with DfT regarding the longer-term NRC for WCP.
- On 28 October 2022, the Group
announced that its Aircoach business had agreed a deal to purchase
the Northern Ireland-based
transport firm Airporter.
Going concern
The Board carried out a review of the Group’s financial
projections for the 18 months to 31 March
2024 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 26 weeks
to 24 September 2022 (the 'first
half', the '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. The figures for the 26 weeks
to 25 September 2021 (the 'prior
period' or 'H1 2022') include the results and financial position of
the First Rail business for the period ended 18 September 2021 and the results of all other
businesses for the 26 weeks ended 25
September 2021. Figures for the 52 weeks to 26 March 2022 ('FY 2022') include the results and
financial position of the First Rail business for the year ended
31 March 2022 and the results of all
other businesses for the 52 weeks ended 26
March 2022. Results for the 52 weeks to 25 March 2023 ('FY 2023') will include the
results and financial position for First Rail for the year ending
31 March 2023 and the results and
financial position of all the other businesses for the 52 weeks
ending 25 March 2023.
'Cont.' or the 'Continuing operations' refer to First Bus, First
Rail and Group items.
'Disc.' or the 'Discontinued operations' refer to First Student,
First Transit and Greyhound US.
References to 'adjusted operating profit', 'adjusted profit
before tax', and 'adjusted EPS' throughout this document are before
the adjusting items as set out in note 3 to the financial
statements.
'EBITDA’ is adjusted operating profit less capital grant
amortisation plus depreciation.
The Group's 'EBITDA adjusted for First Rail management fees' is
First Bus, central costs 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.
'Group adjusted attributable profit' is First Bus and First Rail
adjusted operating profit from open access and additional services,
plus First Rail attributable net income from management fee-based
operations, minus central costs, minus cash interest, minus
tax.
'Net debt' is the value of Group external borrowings excluding
the fair value adjustment for coupon swaps designated against
certain bonds, excluding accrued interest, less cash balances.
'Adjusted net Cash/(Debt)' excludes ring-fenced cash and IFRS 16
lease liabilities from net debt.
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 76 to 81 of the
Annual Report and Accounts 2022, 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
- Climate change
- Geopolitical
- Contracted businesses
- Competition and emerging technologies
- Transactions
- Financial resources
- Pandemic
- Safety
- Data security including cyber security and GDPR
- Regulatory compliance
- 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. 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
2022 at
https://www.firstgroupplc.com/investors/annual-report-2022.aspx.
Graham
Sutherland
Ryan Mangold
Chief Executive
Officer
Chief Financial Officer
9 November
2022
9 November 2022
Condensed consolidated income statement
|
Notes |
|
Unaudited
26 weeks to
24 September 2022
£m |
Unaudited
26 weeks to
25 September 2021
£m |
Revenue |
2, 4 |
|
2,212.4 |
2,139.1 |
Operating costs |
|
|
(2,150.3) |
(2,086.9) |
Operating profit |
|
|
62.1 |
52.2 |
Investment income |
5 |
|
1.8 |
0.3 |
Finance costs |
5 |
|
(26.9) |
(117.0) |
Profit/(loss) before tax |
|
|
37.0 |
(64.5) |
Tax |
6 |
|
(5.1) |
26.4 |
Profit/(loss) from continuing
operations |
|
|
31.9 |
(38.1) |
(Loss)/profit from discontinued
operations |
13 |
|
(30.5) |
551.4 |
Profit for the period |
|
|
1.4 |
513.3 |
Attributable to: |
|
|
|
|
Equity holders of the
parent |
|
|
(0.6) |
510.7 |
Non-controlling
interests |
|
|
2.0 |
2.6 |
|
|
|
1.4 |
513.3 |
Earnings per share |
|
|
|
|
|
|
|
|
|
Earnings per share for
profit/(loss) from continuing operations attributable to the
ordinary equity holders of the company |
|
|
|
|
Basic |
|
|
4.0p |
(3.4)p |
Diluted |
|
|
3.9p |
(3.4)p |
Earnings per share for
(loss)/profit attributable to the ordinary equity holders of the
company |
|
|
|
|
Basic |
7 |
|
(0.1)p |
42.4p |
Diluted |
7 |
|
(0.1)p |
42.4p |
|
|
|
|
|
Adjusted results (from continuing
operations)1 |
|
|
|
|
Adjusted operating profit |
3 |
|
66.1 |
51.8 |
Adjusted profit/(loss) before
tax |
|
|
41.0 |
(6.3) |
Adjusted EPS |
7 |
|
4.4p |
(0.4)p |
Adjusted diluted EPS |
|
|
4.3p |
(0.4)p |
1
Adjusted for certain items as set out in note 3.
The accompanying notes form an integral part of this
consolidated income statement.
Condensed consolidated statement of comprehensive income
|
|
Unaudited
26 weeks to
24 September
2022
£m |
Unaudited
26 weeks to
25 September
2021
£m |
Profit for the period |
|
1.4 |
513.3 |
|
|
|
|
Items that will not be
reclassified subsequently to profit or loss |
|
|
|
Actuarial losses on defined benefit
pension schemes |
|
(117.0) |
(30.7) |
Deferred tax on actuarial losses on
defined benefit pension schemes |
|
30.8 |
2.7 |
Impact of UK tax rate change on
deferred tax on actuarial losses |
|
- |
10.0 |
|
|
(86.2) |
(18.0) |
Items that may be reclassified
subsequently to profit or loss |
|
|
|
Hedging instrument movements |
|
(22.8) |
15.5 |
Deferred tax on hedging instrument
movements |
|
(4.1) |
(3.9) |
Exchange differences on translation
of foreign operations – continuing operations |
|
(4.8) |
0.6 |
Exchange differences on translation
of foreign operations – discontinued operations |
|
21.2 |
(1.7) |
Reclassification of foreign currency
translation reserve on discontinued operations |
|
- |
(450.6) |
|
|
(10.5) |
(440.1) |
|
|
|
|
Other comprehensive loss for the
period |
|
(96.7) |
(458.1) |
|
|
|
|
Total comprehensive (loss)/income
for the period |
|
(95.3) |
55.2 |
Attributable to: |
|
|
|
Equity holders of the
parent |
|
(97.3) |
52.6 |
Non-controlling
interests |
|
2.0 |
2.6 |
|
|
(95.3) |
55.2 |
Total comprehensive (loss)/income for the period attributable to
owners of FirstGroup Plc arises from |
|
|
|
Attributable to |
|
|
|
Continuing operations |
|
(52.1) |
(42.9) |
Discontinued operations |
|
(43.2) |
98.1 |
|
|
(95.3) |
55.2 |
The accompanying notes form an integral part of this
consolidated statement of comprehensive income.
Condensed consolidated balance sheet
|
Note |
|
Unaudited
24 September 2022
£m |
Audited
26 March 2022
£m |
Non-current assets |
|
|
|
|
Goodwill |
8 |
|
93.5 |
93.5 |
Other intangible assets |
|
|
10.1 |
12.4 |
Property, plant and equipment |
9 |
|
2,389.7 |
1,692.7 |
Contingent consideration
receivable |
11 |
|
- |
106.1 |
Deferred tax assets |
|
|
65.8 |
36.1 |
Retirement benefit assets |
21 |
|
67.6 |
203.0 |
Derivative financial
instruments |
16 |
|
5.2 |
4.2 |
Financial asset |
16 |
|
117.0 |
117.0 |
Investments |
|
|
2.7 |
2.2 |
|
|
|
2,751.6 |
2,267.2 |
Current assets |
|
|
|
|
Inventories |
|
|
30.7 |
28.9 |
Contingent consideration
receivable |
11 |
|
78.2 |
- |
Trade and other receivables |
11 |
|
804.4 |
682.3 |
Current tax assets |
|
|
- |
3.1 |
Cash and cash equivalents |
20 |
|
636.6 |
787.7 |
Derivative financial
instruments |
16 |
|
21.4 |
26.2 |
Assets held for sale |
10 |
|
46.0 |
38.5 |
|
|
|
1,617.3 |
1,566.7 |
Total assets |
|
|
4,368.9 |
3,833.9 |
Current liabilities |
|
|
|
|
Trade and other payables |
|
|
1,174.8 |
1,245.1 |
Tax liabilities – Current tax
liabilities |
|
|
0.9 |
- |
– Other tax and social security |
|
|
46.5 |
38.3 |
Borrowings |
14 |
|
502.6 |
677.0 |
Derivative financial
instruments |
16 |
|
21.2 |
- |
Provisions |
17 |
|
107.9 |
114.6 |
Current liabilities |
|
|
1,853.9 |
2,075.0 |
Net current liabilities |
|
|
(236.6) |
(508.3) |
Non-current liabilities |
|
|
|
|
Borrowings |
14 |
|
1,609.2 |
736.8 |
Retirement benefit liabilities |
21 |
|
7.4 |
16.3 |
Derivative financial
instruments |
16 |
|
0.4 |
- |
Provisions |
17 |
|
139.7 |
120.7 |
|
|
|
1,756.7 |
873.8 |
Total liabilities |
|
|
3,610.6 |
2,948.8 |
Net assets |
|
|
758.3 |
885.1 |
Equity |
|
|
|
|
|
|
|
|
|
Share capital |
18 |
|
37.5 |
37.5 |
Share premium |
|
|
693.0 |
692.8 |
Hedging reserve |
|
|
(22.1) |
19.3 |
Other reserves |
|
|
22.4 |
22.4 |
Own shares |
|
|
(13.3) |
(9.0) |
Translation reserve |
|
|
(7.6) |
(24.0) |
Retained earnings |
|
|
37.9 |
137.6 |
Equity attributable to equity
holders of the parent |
|
|
747.8 |
876.6 |
Non-controlling interests |
|
|
10.5 |
8.5 |
Total equity |
|
|
758.3 |
885.1 |
The accompanying notes form an integral part of this
consolidated balance sheet.
COndensed consolidated statement of changes in equity
|
Share
capital
£m |
Share
premium
£m |
Hedging
reserve
£m |
Other
reserves
£m |
Own
shares
£m |
Translation reserve
£m |
Retained
earnings
£m |
Total
£m |
Non-controlling interests
£m |
Total
equity
£m |
Balance at 26 March
2022 |
37.5 |
692.8 |
19.3 |
22.4 |
(9.0) |
(24.0) |
137.6 |
876.6 |
8.5 |
885.1 |
(Loss)/income 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
income/(loss) for the period |
- |
- |
(26.9) |
- |
- |
16.4 |
(86.8) |
(97.3) |
2.0 |
(95.3) |
Shares issued |
- |
0.2 |
- |
- |
- |
- |
- |
0.2 |
- |
0.2 |
Hedging instrument
movements transferred to balance sheet (net of tax) |
- |
- |
(14.5) |
- |
- |
- |
- |
(14.5) |
- |
(14.5) |
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 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 28 March
2021 |
61.1 |
689.6 |
(3.4) |
4.6 |
(9.0) |
524.7 |
(89.6) |
1,178.0 |
(23.9) |
1,154.1 |
Income for the
period |
- |
- |
- |
- |
- |
- |
510.7 |
510.7 |
2.6 |
513.3 |
Other comprehensive
income/(loss) for the period |
- |
- |
11.6 |
- |
- |
(451.7) |
(18.0) |
(458.1) |
- |
(458.1) |
Total comprehensive
income/(loss) for the period |
- |
- |
11.6 |
- |
- |
(451.7) |
492.7 |
52.6 |
2.6 |
55.2 |
Shares issued |
- |
0.9 |
- |
- |
- |
- |
- |
0.9 |
- |
0.9 |
Hedging instrument
movements transferred to balance sheet (net of tax) |
- |
- |
(1.4) |
- |
- |
- |
- |
(1.4) |
- |
(1.4) |
Disposal
of non-controlling interest in First
Transit |
- |
- |
- |
- |
- |
- |
- |
- |
(0.7) |
(0.7) |
Movement in EBT and
treasury shares |
- |
- |
- |
- |
2.6 |
- |
(13.4) |
(10.8) |
- |
(10.8) |
Share-based
payments |
- |
- |
- |
- |
- |
- |
2.3 |
2.3 |
- |
2.3 |
Balance at 25
September 2021 (unaudited) |
61.1 |
690.5 |
6.8 |
4.6 |
(6.4) |
73.0 |
392.0 |
1,221.6 |
(22.0) |
1,199.6 |
The accompanying notes form an integral part of this
consolidated statement of changes in equity.
Condensed consolidated cash flow statement
|
Note |
Unaudited
26 weeks to 24 September 2022
£m |
Unaudited
26 weeks to 25 September 2021
£m |
Cash generated by
operations |
|
249.7 |
113.5 |
Tax paid |
|
(0.4) |
(12.2) |
Interest paid |
|
(35.0) |
(156.0) |
Net cash from/(used in) operating
activities |
19 |
214.3 |
(54.7) |
|
|
|
|
Investing activities |
|
|
|
Interest received |
|
2.2 |
0.3 |
Proceeds from disposal of property
and plant and equipment |
|
23.0 |
3.4 |
Purchases of property, plant and
equipment |
|
(60.7) |
(135.2) |
Purchases of software |
|
(0.8) |
(4.4) |
Net proceeds from disposal of
subsidiaries (net of cash disposed)1 |
|
2.0 |
2,293.4 |
Settlement of foreign exchange
hedge |
|
(16.3) |
- |
Acquisition of business |
|
- |
(2.7) |
Net cash (used in)/from investing
activities |
|
(50.6) |
2,154.8 |
Financing
activities
Shares purchased by Employee Benefit Trust |
|
(10.7) |
(17.4) |
Shares issued |
|
0.3 |
0.6 |
External dividends paid |
|
(8.2) |
- |
Dividends paid to non-controlling
shareholders |
|
- |
(0.3) |
Repayments of CCFF |
|
- |
(298.2) |
Repayment of bank facilities |
|
- |
(581.2) |
Repayment of bond issues |
|
- |
(675.4) |
Repayment of senior unsecured
loans |
|
- |
(200.1) |
Proceeds from/(repayment of) asset
backed financial liabilities |
|
14.4 |
(65.8) |
Repayments of lease liabilities |
|
(271.6) |
(312.5) |
Fees for finance facilities |
|
- |
(1.7) |
Net cash flow used in financing
activities |
|
(275.8) |
(2,152.0) |
Net decrease in cash and cash
equivalents before foreign exchange movements |
|
(112.1) |
(51.9) |
Cash and cash equivalents at
beginning of period |
|
700.2 |
1,443.4 |
Foreign exchange movements |
|
8.6 |
(3.9) |
Cash and cash equivalents at the
end of the period |
|
596.7 |
1,387.6 |
1
H1 2023 amount of £2.0m comprises cash consideration received of
£7.2m less cash and cash equivalent sold of £5.2m. H1 2022 amount
of £2,293.4m comprises cash consideration received of £2,377.3m
less cash and cash equivalent sold of £83.9m.
Cash and cash equivalents are included within current assets on
the consolidated balance sheet. Cash and cash equivalents includes
ring-fenced cash of £339.0m in H1 2023 (full year 2022: £468.1m).
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 and ERMAs. Non Rail
ring-fenced cash includes three elements: (1) loss escrow funds
maintained by various third-party administrators, the purpose of
which is to provide a source of funds for use by the administrators
for payment of the self-insurance liability for losses and loss
adjustment expenses in accordance with agreements between the
administrators and the Business; (2) balances within former First
Transit subsidiaries which were retained by the Group following the
sale of First Transit, where those subsidiaries act as a
disbursement agent on the behalf of their customers and the cash is
only allowed to be used to settle customer liabilities; (3) funds
in escrow for upfront deposit received relating to the sale of
Greyhound property portfolio.
Reconciliation to cash flow statement
|
Note |
Unaudited
24 September 2022
£m |
Audited
26 March
2022
£m |
Cash and cash
equivalents – Balance Sheet |
20 |
636.6 |
787.7 |
Bank overdraft |
20 |
(39.9) |
(87.5) |
Balances per
consolidated cash flow statement |
|
596.7 |
700.2 |
Note to the condensed consolidated
cash flow statement – reconciliation of net cash to movement in net
debt
|
Note |
Unaudited
26 weeks to 24 September 2022
£m |
Unaudited
26 weeks to 25 September 2021
£m |
Net decrease in cash
and cash equivalents in period |
|
(112.1) |
(51.9) |
Decrease in debt
excluding leases |
|
- |
1,756.6 |
Adjusted cash
flow |
|
(112.1) |
1,704.7 |
Payment of lease
liabilities |
|
276.5 |
378.3 |
(Inception)/termination of leases |
|
(1,029.0) |
172.4 |
Fees capitalised
against bank facilities and bond issues |
|
- |
(1.7) |
Foreign exchange
movements |
|
8.6 |
(7.9) |
Other non-cash
movements |
|
- |
145.8 |
Movement in net
debt in period |
|
(856.0) |
2,391.6 |
Net debt at beginning
of period |
|
(619.0) |
(2,625.8) |
Net debt at end of
period |
20 |
(1,475.0) |
(234.2) |
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 26 weeks to 24 September 2022 include the results and
financial position of the First Rail division for the period ended
17 September 2022 and the results and
financial position for the other divisions for the 26 weeks ended
24 September 2022. The comparative
figures for the 26 weeks to 25 September
2021 include the results of the First Rail division for the
period ended 18 September 2021 and
the results of the other divisions for the 26 weeks ended
25 September 2021. The comparative
figures for the 52 weeks ended 26 March
2022 include the financial position of the First Rail
division at 31 March 2022 and the
financial position of the other divisions at 26 March 2022.
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 26
March 2022 were approved by the board of directors on
14 June 2022 and delivered to the
Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006. The half yearly results have been reviewed,
not audited.
These condensed consolidated interim financial statements for
the half year reporting period for the 26 weeks to 24 September 2022 has been prepared in accordance
with the UK-adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
The 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 26 March 2022, 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 other intangible asset amortisation charges
and certain other items.
These results are unaudited but have been reviewed by the
auditor. The comparative figures for the 26 weeks to 25 September 2021 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
2024, with due regard for the risks and uncertainties to
which the Group is exposed, the uncertain economic climate and the
impact that this could have on trading performance. Based on this
review, the Directors believe that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the half yearly results have been
prepared on the going concern basis in preparing this report.
Update since the FY22 results
- The contractual arrangements in First Rail have continued to
develop with the award of a six-year National Rail Contract to GWR
in June 2022. In October an extension
of the current contract arrangements was agreed for the West Coast
Partnership to March 2023, and
discussions are ongoing with DfT regarding the longer-term National
Rail Contract for the West Coast Partnership.
- The Group’s open access operations Lumo and Hull Trains were
profitable in the period, a significant swing from losses incurred
in the prior financial year in these operations, which reflected
the start-up of Lumo and periodic pandemic-related closures of Hull
Trains.
- In the First Bus division, good progress has been made in the
period with several of the key drivers that the Group believes will
support the improvement in Bus margins once the sector transitions
to a more commercial model, including yield and pricing actions,
network realignment and the sale of First Scotland East.
- Commercial passenger volume levels in First Bus have increased
in the period although concessionary volumes continue to recover
more slowly. In the near term the tapering of concession funding,
the extension of the Bus Recovery Grant funding into H2 2023,
inflation and continued driver shortages will limit the scope for
significant margin progress.
- The Group has a £300m sustainability-linked Revolving Credit
Facility (‘RCF’) with a group of its relationship banks. This
committed RCF remains undrawn. In June
2022, the Group exercised its option to extend the maturity
of the facility for a further year to August
2025.
- Management has demonstrated the flexibility of our businesses
to generate cash flows well within required debt facility and
covenant levels since the pandemic struck.
Evaluation of going concern
The Board evaluated whether it was appropriate to prepare the
half yearly results in this report on a going concern basis and in
doing so considered whether any material uncertainties exist that
cast doubt on the Group’s and the Company’s ability to continue as
a going concern over the going concern period.
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 pressures.
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 2022 year end. The base case assumes a gradual recovery in
passenger volumes in FY23 and FY24 as activity reaches its
normalised post-pandemic levels, although passenger volumes remain
below pre-pandemic levels in the going concern assessment period.
The macro projections in the updated base case assume that the UK
operates in a recovering, post-pandemic economy.
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
FY23 and through FY24 and further inflationary cost pressures. In
First Rail, the downside case assumes reduced TOC performance fee
awards, lower revenues in Hull Trains and East Coast Open Access,
and the risk of losing one National Rail Contract. The downside
case also assumed a delay in realising proceeds from the Greyhound
property portfolio until after the going concern period.
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 earnout
consideration to be around $85m
(£78.2m). In the first half of the year this gives rise to a
non-cash, adjusting charge of £27.9m relative to the carrying value
of the earnout of £106.1m at 26 March
2022.
The contractual arrangements in First Rail have continued to
develop with the award of a six-year National Rail Contract to GWR
in June 2022. In October an extension
of the current contract arrangements was agreed for the West Coast
Partnership to March 2023, and
discussions are ongoing with DfT regarding the longer-term National
Rail Contract for the West Coast Partnership.
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 26 March 2022,
with the exception of the First Transit earnout where the estimated
valuation is now underpinned by EQT Infrastructure’s agreement to
sell First Transit to Transdev North America, Inc.
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 9 November
2022.
2
Revenue
Passenger revenue in First Bus was £322.3m (H1 2022: £266.3m) as
passenger volumes continued their post-pandemic recovery. First
Rail Passenger revenue was £1,290.9m (H1 2022: £699.2m).
The principal direct fiscal support recognised during the period
comprised £247.1m (H1 2022: £920.2m) of EMA/ERMA funding in First
Rail and £43.7m (H1 2022: £127.9m) of BRG, NSG+ and BES 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 2022 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. The current
BRG scheme in England, which has
been in place since September 2021,
has recently been extended by the DfT to run through to the end of
March 2023 providing a fixed monthly
payment to operators to offset some of their commercial revenue
losses. The Scottish NSG+ scheme provides operators with a fixed
payment per km operated. In Wales
the BES scheme which funds operators to a pre-agreed margin has
been extended again and will now continue until March 2023.
First Rail: The Emergency Measures Agreements (EMAs), the
Emergency Recovery Measures Agreement (ERMAs) and the National Rail
Contracts (NRCs) transferred substantially all revenue and
substantially all cost risk to the government and for the full
period our First Rail franchises were operated under the terms of
these arrangements.
- EMA in respect of GWR 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 for the full period. On
16 October 2022, the existing
arrangement was extended by a further six months by the DfT to
March 2023
- NRCs for SWR and TPE for the full period
Under the arrangements, our franchised TOCs are paid a fixed
management fee to continue to operate the rail network at a service
level agreed with the government. Net DfT funding including the
management and performance fee is recognised as revenue in Rail
franchise subsidy receipts, in line with the revenue recognition
policy for franchise subsidy receipts from the DfT.
Disaggregated revenue by operating segment is set out in note
4.
3
Reconciliation to non-GAAP measures and performance
In measuring the Group and divisional adjusted operating
performance, additional financial measures derived from the
reported results have been used by management in order to eliminate
factors which distort year-on-year comparisons. The Group’s
adjusted performance is used to explain year-on-year changes when
the effect of certain items are significant, including strategic
items (including material M&A and group restructuring
projects), costs of acquisitions including aborted acquisitions and
impairment of assets. Other items below £5.0m would not normally be
considered as adjusting items unless part of a larger strategic
project, but items which distort year-on-year comparisons that
exceed this amount could potentially be classified as an adjusting
item and are assessed on a case by case basis. Such potential
adjusting other items include: restructuring and reorganisation
costs; property gains or losses; aged legal and self-insurance
claims; movements on insurance discount rates; onerous contract
provisions; and pension settlement gains or losses. In addition,
management 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
profit to adjusted operating profit on a continuing basis |
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Operating profit on a continuing
basis |
|
62.1 |
52.2 |
Adjustments for: |
|
|
|
Loss on sale of Scotland East |
|
3.7 |
- |
Strategic items |
|
1.9 |
- |
Greyhound Canada |
|
(1.6) |
3.6 |
Rail termination sums
net of impairment reversal |
|
- |
(4.0) |
Total adjusting operating profit
items on a continuing basis |
|
4.0 |
(0.4) |
Adjusted operating profit on a
continuing basis |
|
66.1 |
51.8 |
Reconciliation of operating
(loss)/profit to adjusted operating (loss)/profit on a discontinued
basis |
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Operating (loss)/profit from
discontinued operations including gains on sale of First Student
and First Transit |
|
(28.6) |
592.3 |
Less gain on sale of First Student
and First Transit |
|
- |
(479.4) |
Operating (loss)/profit from
discontinued operations |
|
(28.6) |
112.9 |
Adjustments for: |
|
|
|
Transit earnout charge |
|
27.9 |
|
Gain on sale of Greyhound
properties |
|
(7.7) |
- |
Other intangible asset amortisation
charges |
|
- |
0.4 |
Other costs associated with the
disposal of First Student and First Transit |
|
- |
31.5 |
Partial reversal of prior year
impairments of Greyhound |
|
- |
(55.4) |
Professional fees relating to
Greyhound |
|
- |
2.9 |
Employment taxes
relating to First Student and First Transit |
|
- |
6.6 |
North America insurance
provisions |
|
- |
22.4 |
Total adjusting operating profit
adjustments from discontinued operations |
|
20.2 |
8.4 |
Adjusted operating (loss)/profit
from discontinued operations |
|
(8.4) |
121.3 |
Reconciliation of profit before
tax to adjusted profit before tax |
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Profit before tax (including
discontinued operations)1 |
|
8.7 |
516.5 |
Adjusting operating profit items –
continuing operations |
|
4.0 |
(0.4) |
Adjusting operating profit items –
discontinued operations |
|
20.2 |
8.4 |
Gain on sale of First Student and
First Transit |
|
- |
(479.4) |
Adjusting operating profit items –
total operations |
|
24.2 |
(471.4) |
Finance costs adjustment –
continuing operations |
|
- |
58.6 |
Adjusted profit before tax
including discontinued operations |
|
32.9 |
103.7 |
Adjusted tax charge |
|
(6.1) |
(21.6) |
Non-controlling
interests2 |
|
(2.0) |
(2.6) |
Adjusted earnings including
discontinued operations |
|
24.8 |
79.5 |
- See note 4.
- 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 restructuring
As part of the restructuring of the Bus division to transition
to a more commercial model, the Group completed the sale of its
First Scotland East business in September
2022, realising a loss on disposal of £(3.7)m. In line with
this transition plan, the Group also incurred costs of £(0.6)m
relating to the reorganisation of its Bus management structure.
Other restructuring costs
Restructuring costs of £(1.3)m were incurred in relation to the
Group’s central functions, as part of its ongoing cost efficiency
initiatives.
Greyhound Canada
A provision relating to the continued winding down of Greyhound
Canada operations was released in the period.
3
Reconciliation to non-GAAP measures and performance (continued)
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 now estimates its earnout
consideration to be around $85m
(£78.2m). This gives rise to a non-cash adjusting charge of £27.9m
relative to the carrying value of the earnout of £106.1m at
26 March 2022.
Greyhound US strategic items
A gain of £7.7m arose upon disposal of Greyhound US property
during the first half of the year.
Group adjusted attributable EBITDA and
operating profit
First Bus EBITDA comprises:
|
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Pre-IFRS16 EBITDA |
|
42.8 |
47.6 |
IFRS16 adjustments1 |
|
8.2 |
7.9 |
First Bus adjusted
EBITDA per segmental results (note 4) |
|
51.0 |
55.5 |
First Rail EBITDA comprises:
Non-management fees based TOCs |
|
12.6 |
(7.4) |
Group’s share of management fee
income available for dividends |
|
19.1 |
17.5 |
Depreciation relating to contracted
TOCs |
|
- |
2.9 |
Pre-EMA/ERMA and other
adjustments |
|
- |
4.1 |
Minority interest |
|
2.0 |
2.8 |
Tax at 19% |
|
4.9 |
4.7 |
IFRS16 adjustments1 |
|
267.0 |
279.6 |
First Rail adjusted
EBITDA per segmental results table (note 4) |
|
305.6 |
304.2 |
Group items EBITDA comprises:
Pre-IFRS16 EBITDA |
|
(9.6) |
(13.0) |
IFRS16 adjustments1 |
|
0.9 |
0.8 |
Group items adjusted
EBITDA per segmental results table (note 4) |
|
(8.7) |
(12.2) |
First Rail adjusted operating profit
comprises:
Non-management fees based TOCs |
|
12.0 |
(7.6) |
Group’s share of management fee
income available for dividends |
|
19.1 |
17.5 |
Pre-EMA/ERMA and other
adjustments |
|
- |
4.1 |
Minority interest |
|
2.0 |
2.8 |
Tax at 19% |
|
4.9 |
4.7 |
IFRS16 adjustments1 |
|
17.4 |
17.7 |
First Rail adjusted
operating profit per segmental results table (note 4) |
|
55.4 |
39.2 |
1 IFRS16
adjustments to EBITDA principally reflect the add back of operating
lease rental costs charged to the income statement before the
adoption of IFRS16. IFRS16 adjustments to operating profit reflect
operating lease rental costs less depreciation charges on Right of
Use Assets.
4
Business segments information
For management purposes, the Group was organised into five
operating divisions – First Bus, First Rail, First Student, First
Transit and Greyhound. First Student and First Transit were
categorised as Discontinued Operations at 27
March 2021 and the sale of these completed on 21 July 2021. Greyhound US and Mexico were categorised as Discontinued
Operations at 25 September 2021 and
the sale of this completed on 21 October
2021. The properties related to the retained Greyhound US
business have been classified as held for sale and have therefore
been treated as discontinued. Greyhound Canada was retained and is categorised as a
Continuing Operation however, 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 26 weeks to 24 September 2022 are as follows:
|
Continuing Operations |
Discontinued Operations |
|
|
First
Bus
£m |
First
Rail
£m |
Greyhound
£m |
Group
Items1
£m |
Total
£m |
Greyhound
£m |
Group
Items1
£m |
Total
£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
EBITDA2 |
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 intangible asset
amortisation charges |
- |
- |
- |
- |
- |
- |
- |
- |
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 24 September
2022 |
Total assets
£m |
Total
liabilities
£m |
Net
assets/(liabilities)
£m |
Greyhound retained |
128.4 |
(150.0) |
(21.6) |
First Bus |
720.6 |
(252.6) |
468.0 |
First Rail |
2,483.8 |
(982.8) |
1,501.0 |
|
3,332.8 |
(1,385.4) |
1,947.4 |
Group items |
287.7 |
(66.0) |
221.7 |
Borrowings and cash |
636.6 |
(2,111.8) |
(1,475.2) |
Taxation |
65.8 |
(47.4) |
18.4 |
Total |
4,322.9 |
(3,610.6) |
712.3 |
Greyhound (held for
sale)1 |
46.0 |
- |
46.0 |
Grand total |
4,368.9 |
(3,610.6) |
758.3 |
1 Greyhound US and Canada land and properties are classified as
held for sale at 24 September 2022
and shown as such in the Condensed Consolidated Balance Sheet
.
The segment results for the 26 weeks to 25 September 2021 are as follows:
|
Continuing Operations |
Discontinued Operations |
|
|
First
Bus
£m |
First
Rail
£m |
Grey-
hound
£m |
Group
Items1
£m |
Continuing Operations
£m |
First
Student
£m |
First
Transit
£m |
Grey-
hound
£m |
Group
Items1
£m |
Total
£m |
Passenger revenue |
266.3 |
699.2 |
- |
- |
965.5 |
- |
- |
132.6 |
- |
1,098.1 |
Contract revenue |
32.9 |
- |
- |
- |
32.9 |
450.3 |
203.2 |
- |
- |
686.4 |
Charter/private
hire |
- |
- |
- |
- |
- |
21.8 |
0.1 |
0.8 |
- |
22.7 |
Rail franchise subsidy
receipts |
- |
948.4 |
- |
- |
948.4 |
- |
- |
- |
- |
948.4 |
Other |
93.3 |
99.0 |
- |
- |
192.3 |
7.4 |
96.4 |
58.0 |
- |
354.1 |
Revenue |
392.5 |
1,746.6 |
- |
- |
2,139.1 |
479.5 |
299.7 |
191.4 |
- |
3,109.7 |
Adjusted
EBITDA2 |
55.5 |
304.2 |
(0.2) |
(12.2) |
347.3 |
88.2 |
20.7 |
22.7 |
- |
478.9 |
Depreciation |
(30.3) |
(302.5) |
(0.2) |
(1.3) |
(334.3) |
- |
- |
(10.5) |
- |
(344.8) |
Software
amortisation |
(0.7) |
(0.8) |
- |
(0.3) |
(1.8) |
- |
- |
(0.4) |
- |
(2.2) |
Capital grant
amortisation |
2.3 |
38.3 |
- |
- |
40.6 |
- |
- |
0.6 |
- |
41.2 |
Segment
results |
26.8 |
39.2 |
(0.4) |
(13.8) |
51.8 |
88.2 |
20.7 |
12.4 |
- |
173.1 |
Other intangible asset
amortisation charges |
- |
- |
- |
- |
- |
- |
- |
(0.4) |
- |
(0.4) |
Other adjustments (note
3) |
- |
4.0 |
(3.6) |
- |
0.4 |
(14.8) |
(6.5) |
44.0 |
448.7 |
471.8 |
Operating
profit/(loss) |
26.8 |
43.2 |
(4.0) |
(13.8) |
52.2 |
73.4 |
14.2 |
56.0 |
448.7 |
644.5 |
Investment income |
- |
0.2 |
- |
0.1 |
0.3 |
- |
- |
- |
- |
0.3 |
Finance
costs3 |
(1.3) |
(20.8) |
(0.7) |
(94.2) |
(117.0) |
(7.5) |
(0.7) |
(3.1) |
- |
(128.3) |
Profit/(loss) before
tax |
25.5 |
22.6 |
(4.7) |
(107.9) |
(64.5) |
65.9 |
13.5 |
52.9 |
448.7 |
516.5 |
Tax |
|
|
|
|
|
|
|
|
|
(3.2) |
Profit after
tax |
|
|
|
|
|
|
|
|
|
513.3 |
1 Group items comprise central
management and other items.
2 Adjusted
EBITDA is adjusted operating profit less capital grant amortisation
plus depreciation plus software amortisation.
3 Finance
costs under Group items include £58.6m of adjusting items for total
make-whole costs (bonds and facilities) and for the write off of
unamortised bridge, bond and facility costs (see note 3).
Balance sheet at 26 March
2022 |
Total assets
£m |
Total
liabilities
£m |
Net
assets/(liabilities)
£m |
Greyhound retained |
132.2 |
(137.0) |
(4.8) |
First Bus |
806.0 |
(179.6) |
626.4 |
First Rail |
1,659.9 |
(1,062.6) |
597.3 |
|
2,598.1 |
(1,379.2) |
1,218.9 |
Group items |
370.4 |
(124.6) |
245.8 |
Borrowings and cash |
787.7 |
(1,406.7) |
(619.0) |
Taxation |
39.2 |
(38.3) |
0.9 |
Total |
3,795.4 |
(2,948.8) |
846.6 |
Greyhound (held for
sale)1 |
38.5 |
- |
38.5 |
Grand total |
3,833.9 |
(2.948.8) |
885.1 |
1 Greyhound US and Canada land and properties are classified as
held for sale at 26 March 2022 and
shown as such in the Condensed Consolidated Balance
Sheet.
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
|
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Investment income |
|
|
|
Bank interest receivable |
|
(2.2) |
(0.3) |
Finance costs |
|
|
|
Bonds |
|
6.9 |
15.4 |
Bank interest and facility fees |
|
1.6 |
14.9 |
Total make-whole costs (bonds and
facilities) |
|
- |
50.0 |
Write off of unamortised bridge,
bond and facility costs |
|
- |
8.6 |
Senior unsecured loan notes |
|
- |
3.2 |
Finance charges payable in respect
of lease liabilities |
|
20.0 |
22.9 |
Finance charges payable in respect
of asset backed financial liabilities |
|
0.7 |
1.7 |
Interest on long term
provisions |
|
0.5 |
3.4 |
Interest on pensions |
|
(2.8) |
5.8 |
Interest - other |
|
0.1 |
2.4 |
Total finance costs (including
discontinued operations) |
|
27.0 |
128.3 |
|
|
|
|
Total finance costs |
|
27.0 |
128.3 |
Investment income |
|
(2.2) |
(0.3) |
Net finance costs (including
discontinued operations) |
|
24.8 |
128.0 |
|
|
|
|
Split: |
|
|
|
Adjusted net finance costs |
|
24.8 |
69.4 |
Other adjustments (note 3) |
|
- |
58.6 |
|
|
24.8 |
128.0 |
Investment income relating to discontinued operations was
£(0.4)m (H1 2022: £nil) and finance costs relating to discontinued
operations were £0.1m (H1 2022: £11.3m).
6
Tax on profit on ordinary activities
|
|
26 weeks to
24 September 2022
£m |
26 weeks to
25 September 2021
£m |
Current tax charge |
|
0.5 |
1.8 |
Deferred tax charge |
|
6.8 |
1.4 |
Total tax charge (including
discontinued operations) |
|
7.3 |
3.2 |
Tax charge/(credit) attributable
to: |
|
|
|
Profit/(loss) from continuing
operations |
|
5.1 |
(26.4) |
Profit from discontinued
operations |
|
2.2 |
29.6 |
The tax effect of the adjustments disclosed in note 3 was a
charge of £2.0m in H1 2023 (H1 2022: credit of £24.3m). In
addition, there were further adjustments to brought forward tax
balances giving rise to a net credit of £0.8m (H1 2022: charge of
£5.9m).
7
Earnings per share (EPS)
EPS is calculated by dividing the (loss)/profit attributable to
equity shareholders of £(0.6)m in H1 2023 (H1 2022: £510.7m) by the
weighted average number of ordinary shares in issue of 739.8m (H1 2022: 1,203.4m). 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.
|
|
24 September
2022
number
m |
25 September 2021
number
m |
Weighted average number of shares
used in basic calculation |
|
739.8 |
1,203.4 |
Executive share
options1 |
|
24.5 |
- |
Weighted average number of shares
used in the diluted calculation |
|
764.3 |
1,203.4 |
1 For the
period ended 25 September 2021 the
loss from continuing operations made the executive share options
anti-dilutive and therefore the options were not included in this
period.
7
Earnings per share (EPS) (continued)
The adjusted EPS is intended to highlight the recurring results
of the Group before amortisation charges and certain other
adjustments as set out in note 3. A reconciliation is set out
below:
|
|
26
weeks to
24 September 2022 |
26 weeks
to
25 September 2021 |
|
|
£m |
EPS (p) |
£m |
EPS (p) |
Basic (loss)/profit /
EPS |
|
(0.6) |
(0.1) |
510.7 |
42.4 |
Amortisation charges (note 3) |
|
- |
- |
0.4 |
- |
Finance cost adjustments (note
3) |
|
- |
- |
58.6 |
4.9 |
Other adjustments (note 3) |
|
24.2 |
3.3 |
(471.8) |
(39.2) |
Tax effect of above adjustments |
|
2.0 |
0.3 |
(24.3) |
(2.0) |
Other adjustments to deferred tax
assets |
|
(0.8) |
(0.1) |
5.9 |
0.5 |
Adjusted profit and EPS
attributable to the ordinary equity holders of the company |
|
24.8 |
3.4 |
79.5 |
6.6 |
Adjusted (loss)/profit from
discontinued operations |
|
(8.1) |
(1.0) |
84.4 |
7.0 |
Adjusted profit/(loss) EPS from
continuing operations |
|
32.9 |
4.4 |
(4.9) |
(0.4) |
|
|
26 weeks to
24 September 2022
pence |
26 weeks to
25 September 2021
pence |
Diluted EPS |
|
(0.1) |
42.4 |
Adjusted diluted EPS |
|
3.2 |
6.6 |
8
Goodwill and impairment of assets
|
£m |
Cost |
|
At 27 March 2022 |
93.5 |
At 24 September 2022 |
93.5 |
|
|
Accumulated
impairment losses
At 27 March 2022 |
- |
At 24 September 2022 |
- |
|
|
Carrying amount |
|
At 24 September 2022 |
93.5 |
At 26 March 2022 |
93.5 |
Disclosures including goodwill by cash generating unit (CGU),
details of impairment testing and sensitivities thereon are set out
on pages 185 to 186 of the 2022 Annual Report.
First Bus
At 24 September 2022 the First Bus
impairment testing was revisited and it was concluded that there
are no indicators of impairment since March
2022. Therefore no adjustment to the carrying value of First
Bus is required at 24 September
2022.
Hull Trains
At 24 September 2022 the Hull
Trains impairment testing was revisited and it was concluded that
there are no indicators of impairment since March 2022. Therefore no adjustment to the
carrying value of Hull Trains is required at 24 September 2022.
Lumo
At 24 September 2022 the Lumo
operation’s impairment testing was revisited and it was concluded
that there are no indicators of impairment since March 2022. Therefore no adjustment to the
carrying value of Lumo is required at 24
September 2022.
9
Property, plant and equipment
Owned assets
|
Land and
buildings
£m |
Passenger carrying
vehicle fleet
£m |
Other plant and
equipment
£m |
Total
£m |
Cost |
|
|
|
|
At 27 March 2022 |
203.6 |
799.1 |
662.8 |
1,665.5 |
Additions |
- |
31.4 |
30.2 |
61.6 |
Disposals |
(7.9) |
(93.7) |
(4.0) |
(105.6) |
Transfers |
- |
2.3 |
(2.3) |
- |
At 24 September 2022 |
195.7 |
739.1 |
686.7 |
1,621.5 |
|
|
|
|
|
Accumulated depreciation and
impairment |
|
|
|
|
At 27 March 2022 |
76.9 |
484.2 |
448.0 |
1,009.1 |
Charge for period |
1.9 |
22.8 |
62.0 |
86.7 |
Disposals |
(4.5) |
(68.6) |
(2.8) |
(75.9) |
At 24 September 2022 |
74.3 |
438.4 |
507.2 |
1,019.9 |
|
|
|
|
|
Carrying amount |
|
|
|
|
At 24 September 2022 |
121.4 |
300.7 |
179.5 |
601.6 |
At 26 March 2022 |
126.7 |
314.9 |
214.8 |
656.4 |
9
Property, plant and equipment (continued)
Right of use assets
|
Rolling stock
£m |
Land and
buildings
£m |
Passenger carrying
vehicle fleet
£m |
Other plant and
equipment
£m |
Total
£m |
Cost |
|
|
|
|
|
At 27 March 2022 |
2,585.6 |
55.9 |
60.2 |
7.5 |
2,709.2 |
Additions and modifications |
1,002.6 |
13.4 |
(0.3) |
0.4 |
1,016.1 |
Disposals |
(4.0) |
(0.6) |
(6.5) |
(0.3) |
(11.4) |
Foreign exchange movements |
- |
0.5 |
- |
- |
0.5 |
At 24 September 2022 |
3,584.2 |
69.2 |
53.4 |
7.6 |
3,714.4 |
|
|
|
|
|
|
Accumulated depreciation and
impairment |
|
|
|
|
|
At 27 March 2022 |
1,609.7 |
22.5 |
35.6 |
5.1 |
1,672.9 |
Charge for period |
246.8 |
4.0 |
6.3 |
0.8 |
257.9 |
Disposals |
(0.8) |
(0.2) |
(3.9) |
(0.1) |
(5.0) |
Foreign exchange movements |
- |
0.5 |
- |
- |
0.5 |
At 24 September 2022 |
1,855.7 |
26.8 |
38.0 |
5.8 |
1,926.3 |
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
At 24 September 2022 |
1,728.5 |
42.4 |
15.4 |
1.8 |
1,788.1 |
At 26 March 2022 |
975.9 |
33.4 |
24.6 |
2.4 |
1,036.3 |
The discounted lease liability relating to the right of use
assets included above is shown in note 14.
£990.0m of additions relate to the extension of leases as a
result of signing of the National Rail Contract in Great Western
Railway. As at 24 September 2022 the
Group had entered into contractual capital commitments amounting to
£91.6m principally representing buses ordered in the United Kingdom.
|
Rolling stock
£m |
Land and
buildings
£m |
Passenger carrying
vehicle fleet
£m |
Other plant and
equipment
£m |
Total
£m |
Carrying amount |
|
|
|
|
|
At 24 September 2022 |
1,728.5 |
163.8 |
316.1 |
181.3 |
2,389.7 |
At 26 March 2022 |
975.9 |
160.1 |
339.5 |
217.2 |
1,692.7 |
The maturity analysis of lease liabilities is presented in note
15.
Amounts recognised
in income statement |
|
26
weeks to
24 September 2022
£m |
26 weeks
to
25 September 2021
£m |
Depreciation expense
on right of use assets |
|
257.9 |
275.5 |
Interest expense on
lease liabilities |
|
20.0 |
24.6 |
Expense relating to
short-term leases |
|
- |
0.3 |
Expense relating to
leases of low value assets |
|
1.5 |
1.7 |
|
|
279.4 |
302.1 |
10
Assets held for sale
|
|
24 September
2022
£m |
26 March 2022
£m |
Assets held for sale |
|
46.0 |
38.5 |
Assets held for sale relate to properties in discontinued
Greyhound US of £44.8m and properties in continuing Greyhound
Canada of £1.2m.
11
Trade and other receivables
|
|
24 September
2022
£m |
26 March 2022
£m |
Amounts due within one year (from
discontinued operations) |
|
|
|
Contingent consideration
receivable |
|
78.2 |
- |
Amounts due after more than one
year (from discontinued operations) |
|
|
|
Contingent consideration
receivable |
|
- |
106.1 |
Amounts due within one year (from
continuing operations) |
|
24 September
2022
£m |
26 March 2022
£m |
Trade receivables |
|
300.9 |
292.1 |
Loss allowance |
|
(20.6) |
(15.2) |
Trade receivables net |
|
280.3 |
276.9 |
Other receivables |
|
212.9 |
194.7 |
Amounts recoverable on
contracts |
|
53.4 |
3.1 |
Prepayments |
|
71.4 |
69.4 |
Accrued income |
|
186.4 |
138.2 |
|
|
804.4 |
682.3 |
12
Business disposals
First Scotland East Limited
On 19 September 2022, the Group
completed the divestment of its subsidiary, First Scotland East
Limited, to McGill’s Bus Service Limited, for a total consideration
of £11.0m. Of the total consideration, £7.2m of cash was received
at completion, with the remaining £5.0m of cash to be received over
the next three years. The cost of the disposal was £2.5m, including
transaction fees, recognition of insurance indemnification and PCV
warranty provisions, offset by a working capital adjustment of
£1.3m. There are no conditions attached to the deferred
consideration.
Net assets disposed were £14.7m, including £5.2m of cash, giving
rise to a loss before tax on disposal of £3.7m. The loss has been
recognised as an adjusting item. First Scotland East Limited was
included within the Bus segment.
13
Discontinued operations
First Student and First Transit
The sale of First Student and First Transit was approved by a
shareholder majority on 27 May 2021
and was reported as a discontinued operation in the financial
statements for the 52 weeks ended 27 March
2022 for the period to the sale completion on 21 July 2021. Proceeds net of direct transaction
costs/fees were £2,323.3m excluding earnout. Financial information
relating to the discontinued operation for the period to the date
of disposal (21 July 2021) was
presented in the Group’s FY22 Annual Report.
As part of the disposal transaction, FirstGroup are entitled to
an ‘earnout’ consideration of up to $290m (c.£220m) relating to First Transit. The
earnout is for a period of three years from 21 July 2021 and is calculated as a percentage of
the Realised Equity Value.
On 26 October 2022, EQT
Infrastructure announced its agreement to sell First Transit to
Transdev North America, Inc. As a result of this agreement, the
Group estimates the earnout consideration to be around $85m (£78.2m). In the first half of the year this
gives rise to a non-cash, adjusting charge of £27.9m relative to
the carrying value of the earnout of £106.1m at 26 March 2022.
At 26 March 2022, the earnout was
fair valued using stochastic modelling of discounted cash flows and
assumed EQT did not dispose of the business by the third
anniversary (21 July 2024). Fair
value at 26 March 2022 was
$140m (£106.1m).
Greyhound
The disposal of Greyhound Lines, Inc to a wholly-owned
subsidiary of FlixMobility GmbH was announced and completed on
21 October 2021. Greyhound US was
therefore reported as a discontinued operation for the period to
the sale completion in the financial statements for the 52 weeks to
26 March 2022. The properties
relating to the retained Greyhound US business were classified as
held for sale and therefore in FY23 continue to be treated as
discontinued as it is anticipated that these properties will be
disposed of in 2022 as part of a single plan to exit the Greyhound
business. Financial information relating to the discontinued
operation for the period to the date of disposal (21 October 2021) was presented in the Group’s
FY22 Annual Report.
14
Borrowings
|
|
24 September
2022
£m |
26 March 2022
£m |
On demand or within 1
year |
|
|
|
Leases (note 15)1 |
|
445.1 |
573.4 |
Asset backed financial liabilities
(note 15)2 |
|
17.4 |
9.0 |
Bank overdraft |
|
39.9 |
87.5 |
Bond 6.875% (repayable
2024)3 |
|
0.2 |
7.1 |
Total current
liabilities |
|
502.6 |
677.0 |
Within 1 – 2 years |
|
|
|
Leases (note 15)1 |
|
336.0 |
167.8 |
Asset backed financial liabilities
(note 15)2 |
|
8.3 |
15.7 |
Bond 6.875% (repayable 2024) |
|
199.9 |
- |
Loan notes |
|
0.6 |
0.6 |
|
|
544.8 |
184.1 |
Within 2 – 5 years |
|
|
|
Leases (note 15)1 |
|
836.6 |
294.4 |
Asset backed financial liabilities
(note 15)2 |
|
14.1 |
10.5 |
Bond 6.875% (repayable 2024) |
|
- |
199.9 |
|
|
850.7 |
504.8 |
More than 5 years |
|
|
|
Leases (note 15)1 |
|
203.6 |
47.6 |
Asset backed financial liabilities
(note 15)2 |
|
10.1 |
0.3 |
|
|
213.7 |
47.9 |
Total non-current
liabilities |
|
1,609.2 |
736.8 |
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
15.
2 The
maturity analysis of asset backed financial liabilities is
presented in note 15.
3 Includes
accrued interest only.
15
Lease liabilities and asset backed financial liabilities
The Group had the following lease liabilities at the balance
sheet dates:
Lease liabilities |
|
24 September
2022
£m |
26 March 2022
£m |
Due in less than one year |
|
503.4 |
593.0 |
Due in more than one year but not
more than two years |
|
374.0 |
179.4 |
Due in more than two years but not
more than five years |
|
893.8 |
304.4 |
Due in more than five years |
|
217.3 |
59.8 |
|
|
1,988.5 |
1,136.6 |
Less future financing charges |
|
(167.2) |
(53.4) |
|
|
1,821.3 |
1,083.2 |
Comprising: |
|
|
|
Lease liabilities - Road |
|
40.4 |
52.1 |
Lease liabilities - Rail |
|
1,780.9 |
1,031.1 |
The Group had the following asset backed financial liabilities
at the balance sheet dates:
Asset backed financial
liabilities |
|
24 September
2022
£m |
26 March 2022
£m |
Due in less than one year |
|
18.0 |
9.3 |
Due in more than one year but not
more than two years |
|
8.9 |
16.6 |
Due in more than two years but not
more than five years |
|
16.1 |
11.9 |
Due in more than five years |
|
12.5 |
0.5 |
|
|
55.5 |
38.3 |
Less future financing charges |
|
(5.6) |
(2.8) |
|
|
49.9 |
35.5 |
Comprising: |
|
|
|
Asset backed financial liabilities -
Road |
|
49.9 |
35.5 |
Asset backed financial liabilities -
Rail |
|
- |
- |
16
Financial instruments
Non-derivative financial instruments
|
|
24 September
2022
£m |
26 March 2022
£m |
Total non-derivatives |
|
|
|
Total non-current assets |
|
117.0 |
117.0 |
Total assets |
|
117.0 |
117.0 |
Certain pension partnership structures were implemented during
the previous financial year. 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. The amounts paid into the Bus and Group SPVs during the
previous financial year were £95m and £22m respectively. Management
have concluded that these amounts represent financial assets under
IAS 32.
Derivative financial instruments
|
|
24 September
2022
£m |
26 March 2022
£m |
|
|
|
|
Derivatives designated and
effective as hedging instruments carried at fair value |
|
|
|
Non-current assets |
|
|
|
Fuel derivatives (cash flow
hedge) |
|
2.2 |
4.0 |
Currency forwards (cash flow
hedge) |
|
3.0 |
0.2 |
|
|
5.2 |
4.2 |
Current assets |
|
|
|
Fuel derivatives (cash flow
hedge) |
|
14.5 |
25.6 |
Cross currency swaps (net investment
hedge) |
|
6.9 |
- |
Currency forwards (cash flow
hedge) |
|
- |
0.6 |
|
|
21.4 |
26.2 |
Current liabilities |
|
|
|
Fuel derivatives (cash flow
hedge) |
|
0.4 |
- |
Currency forwards (net investment
hedge) |
|
20.8 |
- |
|
|
21.2 |
- |
Non-current liabilities |
|
|
|
Fuel derivatives (cash flow
hedge) |
|
0.4 |
- |
|
|
0.4 |
- |
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:
|
24
September 2022 |
|
Fair
value |
Carrying
value
Total
£m |
|
Level 1
£m |
Level 2
£m |
Level 3
£m |
Total
£m |
Financial assets and
derivatives |
|
|
|
|
|
Trade and other receivables |
- |
540.7 |
- |
540.7 |
540.7 |
Contingent consideration
receivable |
- |
78.2 |
- |
78.2 |
78.2 |
Derivative financial
instruments |
- |
26.6 |
- |
26.6 |
26.6 |
Financial liabilities and
derivatives |
|
|
|
|
|
Borrowings1 |
0.6 |
2,050.1 |
- |
2,050.7 |
2,111.8 |
Trade and other payables |
- |
1,070.3 |
- |
1,070.3 |
1,070.3 |
Derivative financial
instruments |
- |
21.6 |
- |
21.6 |
21.6 |
|
26 March
2022 |
|
Fair
value |
Carrying
value
Total
£m |
|
Level 1
£m |
Level 2
£m |
Level 3
£m |
Total
£m |
Financial assets and
derivatives |
|
|
|
|
|
Trade and other receivables |
- |
443.1 |
- |
443.1 |
443.1 |
Contingent consideration
receivable |
- |
- |
106.1 |
106.1 |
106.1 |
Derivative financial
instruments |
- |
30.4 |
- |
30.4 |
30.4 |
Financial liabilities and
derivatives |
|
|
|
|
|
Borrowings1 |
10.6 |
1,345.4 |
- |
1,356.0 |
1,326.3 |
Trade and other payables |
- |
1,144.1 |
- |
1,144.1 |
1,144.1 |
Derivative financial
instruments |
- |
- |
- |
- |
- |
1 Includes lease
liabilities as set out in note 14.
16
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. The announcement of EQT Infrastructure’s
agreement to sell First Transit to Transdev North America, Inc,
means that the Group’s valuation of the earnout now reflects an
observable market value, and the contingent consideration
receivable has therefore been reclassified from Level 3 to Level 2
at 24 September 2022.
17
Provisions
|
Insurance claims
£m |
Legal and other
£m |
Pensions
£m |
Total
£m |
At 27 March 2022 |
148.0 |
86.0 |
1.3 |
235.3 |
Charged to the income statement |
7.6 |
17.2 |
(1.3) |
23.5 |
Utilised in the period |
(16.0) |
(17.7) |
- |
(33.7) |
Notional interest |
0.6 |
- |
- |
0.6 |
Foreign exchange movements |
18.9 |
3.0 |
- |
21.9 |
At 24 September 2022 |
159.1 |
88.5 |
- |
247.6 |
|
|
|
|
|
Current liabilities |
55.7 |
52.2 |
- |
107.9 |
Non-current liabilities |
103.4 |
36.3 |
- |
139.7 |
At 24 September 2022 |
159.1 |
88.5 |
- |
247.6 |
|
|
|
|
|
Current liabilities |
51.8 |
62.7 |
0.1 |
114.6 |
Non-current liabilities |
96.2 |
23.3 |
1.2 |
120.7 |
At 26 March 2022 |
148.0 |
86.0 |
1.3 |
235.3 |
|
|
|
|
|
The insurance claims provision arises from estimated exposures
for incidents occurring prior to the balance sheet date. It is
anticipated that the majority of such claims will be settled within
the next five years although certain liabilities in respect of
lifetime obligations of £9.5m in H1 2023 (full year 2022: £8.9m)
can extend for up to 30 years. The utilisation of £16.0m in H1 2023
(full year 2022: £43.0m) represents payments made largely against
the current liability of the preceding year.
The insurance claims provisions contain £94.8m in H1 2023 (full
year 2022: £88.5m) which is recoverable from insurance companies
and is included within other receivables in note 11.
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 obligations under rail
franchises and restructuring costs. The dilapidation provisions are
expected to be settled at the end of the respective franchise.
18
Called up share capital
|
|
24 September
2022
£m |
26 March 2022
£m |
Allotted, called up and fully
paid |
|
|
|
750.4m ordinary shares of 5p each
(26 March 2022: 750.2m) |
|
37.5 |
37.5 |
The Company has one class of ordinary shares which carries no
right to fixed income.
The directors have declared an interim dividend of 0.9p per
ordinary share in respect of the period ended 24 September 2022, totalling approximately
£6.7m.
19 Net
cash from operating activities
|
26 weeks to 24
September 2022
£m |
26 weeks to 25
September 2021
£m |
Operating profit/(loss) from: |
|
|
Continuing Operations |
62.1 |
52.2 |
Discontinued Operations (including
gain on sale of First Student and First Transit) |
(28.6) |
592.3 |
Total Operations |
33.5 |
644.5 |
Adjustments for: |
|
|
Depreciation charges |
344.6 |
344.9 |
Capital grant amortisation |
(67.1) |
(41.7) |
Software amortisation charges |
4.3 |
2.3 |
Other intangible asset amortisation
charges |
- |
0.5 |
Loss/(gain) on disposal of
subsidiaries |
3.7 |
(479.4) |
Reversal of impairment charges |
- |
(55.4) |
Share-based payments |
1.6 |
2.3 |
Profit on disposal of property,
plant and equipment |
(8.0) |
(0.9) |
Operating cash flows before working
capital and pensions |
312.6 |
417.1 |
Increase in inventories |
(2.6) |
(5.1) |
Increase in receivables |
(95.8) |
(112.0) |
Increase in payables due within one
year |
6.5 |
150.1 |
Decrease in contingent consideration
receivable |
27.9 |
- |
(Decrease)/increase in provisions
due within one year |
(14.2) |
1.5 |
Increase in provisions due over one
year |
6.0 |
0.5 |
Settlement of foreign exchange
hedge |
(1.8) |
- |
Aberdeen Local Government Pension
Scheme refund |
11.8 |
- |
Defined benefit pension payments in
excess of income statement charge |
(0.7) |
(338.6) |
Cash generated by operations |
249.7 |
113.5 |
Tax paid |
(0.4) |
(12.2) |
Interest paid1 |
(35.0) |
(156.0) |
Net cash from/(used in) operating
activities |
214.3 |
(54.7) |
1 Interest
paid includes £20.0m relating to lease liabilities (H1 2022:
£22.9m).
20
Analysis of changes in net debt – adjusted cash flow
|
At
27 March
2022
£m |
Cash
flow
£m |
Foreign
Exchange
£m |
Other
£m |
At
24
September
2022
£m |
Components of
financing activities: |
|
|
|
|
|
Bonds |
(199.9) |
- |
- |
- |
(199.9) |
Lease
liabilities1 |
(1,083.2) |
271.6 |
- |
(1,009.7) |
(1,821.3) |
Asset backed financial
liabilities2 |
(35.5) |
4.9 |
- |
(19.3) |
(49.9) |
Other debt |
(0.6) |
- |
- |
- |
(0.6) |
Total components of
financing activities |
(1,319.2) |
276.5 |
- |
(1,029.0) |
(2,071.7) |
|
|
|
|
|
|
Cash |
319.6 |
(30.6) |
8.6 |
- |
297.6 |
Bank overdrafts |
(87.5) |
47.6 |
- |
- |
(39.9) |
Ring-fenced cash |
468.1 |
(129.1) |
- |
- |
339.0 |
Cash and cash
equivalents |
700.2 |
(112.1) |
8.6 |
- |
596.7 |
|
|
|
|
|
|
Net debt |
(619.0) |
164.4 |
8.6 |
(1,029.0) |
(1,475.0) |
- Lease liabilities ‘Other’ includes £1,009.7m net inception
of new leases. This comprises £1,025.4m inception of new leases,
being £1,011.8m of rolling stock leases, £13.4m of property leases
and £0.2m of PCV leases, offset by £15.7m lease disposals. Lease
disposals consists of £12.7m of rolling stock leases and £3.0m of
property and other leases.
- Asset backed financial liabilities ‘Other’ includes £19.3m
of inception of leases in First Bus.
21
Retirement benefit schemes
The Group supports defined contribution and defined benefit
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 (see note 13)
- Rail - sponsoring six 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 220 to 229 of
the Annual Report and Accounts for the 52 weeks ended 26 March 2022.
(a) UK Bus and Group (including Hull
Trains)
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 defined benefit schemes:
Income
statement |
|
26
weeks to
24 September 2022 |
26 weeks
to
25 September
2021 |
|
|
£m |
£m |
Operating |
|
|
|
– Current service and
administration cost |
|
4.1 |
5.1 |
– Past service gain
including curtailments and settlements |
|
- |
- |
Total
operating |
|
4.1 |
5.1 |
Interest
(income)/cost |
|
(3.0) |
0.7 |
Total income
statement |
|
1.1 |
5.8 |
21
Retirement benefit schemes (continued)
|
|
|
|
Balance
sheet |
|
24
September 2022 |
26
March
2022 |
|
|
£m |
£m |
Fair value of scheme
assets |
|
2,068.3 |
2,930.1 |
Present value of
defined benefit obligations |
|
(1,930.7) |
(2,571.7) |
Surplus before
adjustment |
|
137.6 |
358.4 |
Impact of shared
cost |
|
(0.3) |
1.4 |
Adjustment for
irrecoverable surplus1 |
|
(73.2) |
(162.3) |
Surplus in
schemes |
|
64.1 |
197.5 |
The amount is presented
in the condensed consolidated balance sheet as follows: |
|
|
|
Non-current assets |
|
67.6 |
203.0 |
Non-current
liabilities |
|
(3.5) |
(5.5) |
|
|
64.1 |
197.5 |
- The irrecoverable surplus represents the amount of the
surplus that the Group could not recover through reducing future
Company contributions to LGPS, see below.
(b) North
America
Greyhound pension arrangements
The Group has retained certain responsibilities for the
provision of retirement benefits for a number of legacy
schemes.
The Group operates a single legacy defined benefit arrangement
in the US, while in Canada, there
are three funded legacy plans and a small unfunded supplementary
executive retirement plan. The assets for the funded plans in
Canada have been co-mingled in a
master trust for a number of years and are being merged into a
single plan (subject to regulatory approval) in order to further
improve oversight and streamline investment strategy, which is
expected to result in efficiency savings when winding up the
plans.
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 North
American defined benefit schemes:
Income
statement |
|
26
weeks to
24 September 2022 |
26 weeks
to
25 September
2021 |
|
|
£m |
£m |
Operating |
|
|
|
– Current service and
administration cost |
|
0.9 |
2.4 |
– Past service gain
including curtailments and settlements |
|
- |
(27.7) |
|
|
|
|
Total
operating |
|
0.9 |
(25.3) |
Interest cost |
|
0.2 |
1.1 |
Total income
statement |
|
1.1 |
(24.2) |
|
|
|
|
Balance
sheet |
|
24
September 2022 |
26
March
2022 |
|
|
£m |
£m |
Fair value of
schemes' assets |
|
429.9 |
412.4 |
Present value of
defined benefit obligations |
|
(424.8) |
(408.7) |
Surplus before
adjustment |
|
5.1 |
3.7 |
Change in irrecoverable
surplus |
|
(9.0) |
(13.7) |
Currency loss on
irrecoverable surplus |
|
- |
(0.8) |
Deficit in
schemes |
|
(3.9) |
(10.8) |
The amount is presented
in the condensed consolidated balance sheet as follows: |
|
|
|
Non-current assets |
|
- |
- |
Non-current
liabilities |
|
(3.9) |
(10.8) |
|
|
(3.9) |
(10.8) |
During FY22, the Group transferred responsibility for the
FirstGroup America (US) and Supplementary Executive (Canada) schemes. As such, these schemes have
been removed from the balance sheet position and the tables
above.
21
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’s First Transit subsidiary companies
sponsored a total of five single-employer pension arrangements. The
Group is indemnified against any pension liabilities by the
relevant transit authorities, and pension costs are reimbursed as
they fall due. The Group will not retain any pension liability upon
expiry of the contract or if the contracts are reassigned.
Details of the assets and liabilities of these schemes are as
follows:
|
|
24
September 2022
£m |
26
March
2022
£m |
Assets |
|
317.1 |
281.6 |
Liabilities |
|
(336.6) |
(322.1) |
Deficits in
schemes |
|
(19.5) |
(40.5) |
Amounts recoverable
from contracting authorities |
|
19.5 |
40.5 |
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 six 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 |
|
26
weeks to
24 September 2022 |
26 weeks
to
25 September 2021 |
|
|
£m |
£m |
Operating |
|
|
|
– Current service
cost |
|
69.6 |
69.2 |
– Administrative
cost |
|
0.7 |
- |
– Impact of franchise
adjustment on operating cost |
|
(43.7) |
(42.2) |
|
|
|
|
Total
operating |
|
26.6 |
27.0 |
Interest cost |
|
9.0 |
8.4 |
Impact of franchise
adjustment on net interest income |
|
(9.0) |
(8.4) |
Total income
statement |
|
26.6 |
27.0 |
21
Retirement benefit schemes (continued)
|
|
|
|
Balance
sheet |
|
24
September 2022 |
26
March
2022 |
|
|
£m |
£m |
Fair value of
schemes' assets |
|
3,769.5 |
3,790.6 |
Present value of
defined benefit obligations |
|
(3,770.8) |
(5,066.1) |
Deficit before
adjustment |
|
(1.3) |
(1,275.5) |
Franchise adjustment
(60%) |
|
0.8 |
765.3 |
Adjustment for employee
share of RPS deficits (40%) |
|
0.5 |
510.2 |
Surplus/(deficit) 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:
|
|
24
September 2022 |
|
|
26 March
2022 |
|
|
First Bus
% |
First Rail
% |
North America
% |
|
|
First Bus
% |
First Rail
% |
North America
% |
Key assumptions used: |
|
|
|
|
|
|
|
|
|
Discount rate |
|
5.17 |
4.65 |
4.77 - 5.17 |
|
|
2.91 - 2.97 |
2.83 |
3.72 - 4.19 |
Expected rate of salary
increases |
|
3.84 |
3.25 |
n/a |
|
|
4.01 |
3.43 |
n/a |
Inflation – CPI |
|
2.75 - 2.84 |
2.75 |
2.00 |
|
|
2.89 - 3.01 |
2.93 |
2.00 |
Future pension increases |
|
2.74 - 2.84 |
2.75 |
n/a |
|
|
2.681 |
2.93 |
n/a |
22
Contingent
liabilities
To support subsidiary undertakings in their normal course of
business, FirstGroup plc and certain subsidiaries have indemnified
certain banks and insurance companies who have issued performance
bonds for £71.3m (26 March 2022:
£69.4m) and letters of credit for £224.0m (26 March 2022: £219.7m). The performance bonds
primarily relate to residual North American obligations of £3.6m
and the First Rail franchise operations of £67.7m. The letters of
credit relate substantially to insurance arrangements in the UK and
North America. The parent company
has committed further support facilities of up to £98.5m to First
Rail Train Operating Companies of which £60.6m remains undrawn.
Following the sale of Greyhound, the majority of the surety bonds
were cancelled, with a residual amount of £3.6m remaining as noted
above. 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 participate in multi-employer pension
schemes in which their contributions are pooled with the
contributions of other contributing employers. The funding of these
schemes is therefore reliant on the ongoing participation by third
parties.
In its normal course of business the Group has ongoing
contractual negotiations with national, regional and local
Government and other organisations. The Group is party to legal
proceedings and claims which arise in the normal course of
business, including but not limited to employment and safety
claims. The Group takes legal advice as to the likelihood of
success of claims and counterclaims. No provision is made where due
to inherent uncertainties, no accurate quantification of any cost,
or timing of such cost, which may arise from any of the legal
proceedings can be determined.
The Group’s operations are required to comply with a wide range
of regulations, including environmental and emissions regulations.
Failure to comply with a particular regulation could result in a
fine or penalty being imposed on that business, as well as
potential ancillary claims rooted in non-compliance.
The inquest relating to the death of seven passengers in the
Croydon tram incident in November
2016 concluded in July 2021.
The tram was operated by Tram Operations Limited (‘TOL’), a
subsidiary of the Group, under a contract with a Transport for
London (‘TfL’) subsidiary. TOL
provides the drivers and management to operate the tram services,
whereas the infrastructure and trams are owned and maintained by a
TfL subsidiary. The Office of Rail & Road (‘ORR’) announced on
24 March 2022 that it had taken the
decision to prosecute TfL, the driver of the tram and TOL for
breaches of Health and Safety law. While TOL has indicated a guilty
plea to the charge laid against it, the Company cannot yet
accurately determine the quantum or timing of any financial
penalties or related costs which may arise from these
proceedings.
22
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. A separate set of proceedings has
been issued against London &
South Eastern Railway Limited (‘LSER’) in respect of the operation
of other rail services. The two sets of proceedings are being heard
together. The class representative (‘CR’) alleges that FSWT, SSWT
and LSER breached their obligations under UK competition law by not
making boundary fares sufficiently available for sale, and/or by
failing to ensure that customers were aware of the existence of
boundary fares and/or bought an appropriate fare in order to avoid
being charged twice for part of a journey.
A collective proceedings order (‘CPO’) was made by the CAT in
January 2022 and following an
unsuccessful appeal by FSWT, SSWT and LSER, the proceedings will
now proceed with the next key step for FSWT, SSWT and LSER being to
file their substantive defences. A trial date has not yet been set.
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. At present the Company cannot accurately
determine the likelihood, quantum or timing of any damages and
costs which may arise from these proceedings.
23
Related
party transactions
There are no related party transactions or changes since the
Group’s 2022 Annual Report which could have a material effect on
the Group’s financial position or performance of the Group in the
26 weeks to 24 September 2022.
24 Post
balance sheet events
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 earnout
consideration to be around $85m
(£78.2m). The Group considered this to be an adjusting event and
therefore it was reflected in the fair value of the contingent
consideration receivable for the earnout at 24 September 2022. In the first half of the year
this gives rise to a non-cash, adjusting charge of £27.9m relative
to the carrying value of the earnout of £106.1m at 26 March 2022.
In light of the liquidity problems encountered by several UK
defined benefit pension schemes which have resulted from recent
rapid and significant movements in government bond yields,
FirstGroup provided a short-term loan of £95m to the Bus Pension
Scheme so that it could continue to maintain its current level of
risk management during the uncertain times as the Bank of
England support in the market is
withdrawn, and to allow its asset portfolio to be rebalanced in an
orderly manner. The Company utilised the Limited Partnership that
was created following the sale of the North American business to
support the Scheme funding strategy as the source of funds for the
loan.
In October we agreed with DfT an extension of the current
contractual arrangements for the West Coast Partnership to
March 2023. Discussions are ongoing
with DfT regarding the longer-term National Rail Contract for the
West Coast Partnership.
On 28 October 2022, the Group
announced that its Aircoach business had agreed a deal to purchase
the Northern Ireland-based
transport firm Airporter.
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 26 weeks and their impact on the half yearly results, and a
description of the principal risks and uncertainties for the
remaining 26 weeks of the financial year; and
- material related-party transactions in the first 26 weeks and
any material changes in the related-party transactions described in
the last annual report.
The Directors of FirstGroup plc are listed on the Group's
website at www.firstgroupplc.com.
Graham
Sutherland
Ryan Mangold
Chief Executive
Officer
Chief Financial Officer
9 November
2022
9 November 2022
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 26 week period ended
24 September 2022 (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 24 September 2022;
- 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. 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 this ISRE.
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
9 November 2022