FirstGroup plc Full year results

Transcription

1 FirstGroup plc Full year results For the twelve months to 31 March 2017 Thursday 1 June 2017

2 Tim O'Toole Chief Executive 2

3 Overview Significant improvement in operating results and substantial cash generation delivered as planned Maintained our consistent and disciplined approach to bidding for future business throughout the Group Continuing to invest in technology to drive growth by simplifying our services for customers, while deepening our understanding of their needs Results demonstrate progress made in repositioning FirstGroup to create sustainable value, commensurate with our market positions and scale Stable platform allows us to take advantage of our opportunities, despite the mixed trading environment in our markets 3

4 Matthew Gregory Chief Financial Officer Financial review 4

5 Financial overview Revenue 5,653.3m (2016: 5,218.1m), +8.3% driven mainly by currency Adjusted operating profit 339.0m (2016: 300.7m) reflects several factors: 250bps improvement in First Student margin Rebased First Rail margin under new contracts Significant currency effects, with favourable translation of North American profits offset by higher costs for fuel in UK Adjusted EPS +20.4% Net cash inflow improved by 111.2m to 147.2m Net debt to EBITDA reduced to 1.9x (2016: 2.3x) At constant exchange rates, Group ROCE increased by 60bps to 7.3% 5

6 Financial summary m Mar 2017 Mar 2016 Change Change in constant currency 1 Revenue 5, , % (0.5)% Adjusted 2 - Operating profit % +2.3% - Margin % 6.0% 5.8% +20bps +20bps - Net finance costs (132.0) (132.4) (0.3)% - Profit before tax % - Effective tax rate % 26.0% 23.0% +300bps - Attributable profit % - EPS p 12.4p 10.3p +20.4% Net debt 3 1, ,410.2 (8.5)% (11.2)% 1 Change in constant currency throughout this document is based on retranslating FY 2016 foreign currency amounts at FY 2017 rates 2 Before amortisation charges and certain other items 3 Net debt is stated excluding accrued bond interest 6

7 Mar 2016 revenue Currency Mar 2016 constant currency First Student First Transit Greyhound First Bus First Rail Group items Mar 2017 revenue Revenue performance Growth in First Transit and First Rail (like-for-like), with First Student flat Decreases in Greyhound and First Bus First Rail reported revenue affected by TPE remapping and end of subsidy Significant benefit from currency translation Mar 2017 revenue m Change (constant fx) First Student 1,780.3 (0.4)% First Transit 1, % Greyhound (2.0)% First Bus (1.4)% First Rail 1,268.8 (3.0)% Group items 15.8 Total 5,653.3 (0.5)% Reported total +8.3% ,681.4 (7.2) 44.1 (13.8) (12.0) (39.6) 0.4 5, ,

8 Mar 2016 operating profit Currency Mar 2016 constant currency First Student First Transit Greyhound First Bus First Rail Group items Mar 2017 operating profit Operating performance Group margin +20bps in constant currency Significant improvement in First Student margin; Rail margin rebased under new contracts Challenging market conditions and higher UK fuel costs affecting both UK businesses Mar 2017 operating profit 1 m FY 2017 margin 1 Margin change (constant fx) First Student % +250bps First Transit % +10bps Greyhound % +30bps First Bus % (170)bps First Rail % (140)bps Group items (38.8) Total % +20bps Reported total +20bps (15.8) (19.1) (6.4) Figures include fx impact on UK fuel costs of: - First Bus (11.5)m - First Rail (8.3)m 1 Before amortisation charges and certain other items 8

9 Income statement continued m Mar 2017 Mar 2016 Change Adjusted 1 Operating profit % Net finance costs (132.0) (132.4) Profit before tax % Tax (53.8) (38.7) - Effective tax rate % 26.0% 23.0% +300bps Non-controlling interests (3.8) (6.1) Broadly flat, principally bonds P&L tax rate to increase further Rail minority Attributable profit % EPS p 12.4p 10.3p +20.4% 1 Before amortisation charges and certain other items 9

10 EBITDA Road divisions capex First Rail capex Disposal proceeds Insurance and other provisions Working capital / other Operating cash flow Pensions charge in excess of P&L Interest and tax Net cash inflow Net cash flow ( m) Operating cash flow / cash conversion 1 : Mar 2017: 301.1m / 89% Mar 2016: 192.0m / 64% (323.9) (80.4) (30.6) (37.6) (116.3) Cash capex (404.3) 1 Operating cash flow divided by Group adjusted operating profit 10

11 Financial position Strong liquidity and stable financing position with net debt of 1,289.9m Headroom under committed facilities plus free cash: 941.1m (Mar 2016: 940.2m) Net debt: EBITDA ratio 1.9x (Mar 2016: 2.3x) Long term facilities in place average maturity 3.6 years (Mar 2016: 4.4 years) Ratings from Standard & Poor's and Fitch currently BBB- and stable outlook Bank debt amended and extended in March; next bank refinancing July 2021 $50m private placement notes repaid Oct 2016 Next bond maturity Sep 2018 Expect cash interest to remain broadly unchanged until bonds start to mature Pension deficit 358.5m (Mar 2016: 270.9m) due to lower real discount rates 11

12 Guidance Mixed trading environment with opportunities for steady progress in the North American divisions but continued economic uncertainty in the UK Further progress expected from the Road divisions, with First Rail margin reducing; continued free cash generation expected after disciplined investment to support our customers and communities needs Road divisions cash capex broadly flat in 2018; expect increased Rail capex in 2018 and 2019 (mainly funded through franchise agreements) Interest costs broadly flat until bonds come due P&L tax rate to continue increase over time (US earnings) Inclusion of South Western rail franchise from August /30 partnership with MTR minority accounted Estimated 90m working capital inflow Year to March 2018 will be a 53 week year for Road divisions 12

13 Tim O'Toole Chief Executive Business review 13

14 First Student Significant margin improvement despite ongoing driver shortages Benefiting from our market leadership position and unique scale Cost efficiency: best practice sharing and standardised processes, First Transit management of maintenance Pricing strategy: smaller but higher returning contract portfolio Technology: Focus GPS, safety, real-time bus location information for customers Looking ahead Bid strategy continues; contract retention increasing, moderating pricing given portfolio turnover delivered over last three years Potential for bolt-on M&A, organic growth 14

15 First Transit Team returned the business to growth and maintained margin in the year Making the most of our transit management expertise and track record Continuous bid discipline and rigorous execution Sustained, attractive margins given modest capital employed Flexible approach to market opportunities oil sands, Panama, India Looking ahead Continue to enhance efficiency and offer compelling value to customer Market growth: commuter rail (leveraging UK rail expertise), private fleet maintenance, international Ridesharing and technology partnerships 15

16 Greyhound Passenger volumes down for year but evidence of stability in second half Increasing ability to take advantage of unique nationwide network and iconic brand Flexible cost base, responsive to passenger demand patterns Real-time pricing, yield management, online and mobile Greyhound setting our pace in customer communications Point-to-point product continues to outperform the market Looking ahead Further enhancing customer experience online, in terminal, on board, and post-trip to build loyalty and reach new demographics Mexico expansion 16

17 First Bus Industry conditions impeding overall volume growth (congestion, high street retail trends, funding cuts, modal shift) Portfolio of local businesses each requiring a varying mix of actions to restore overall profitable growth Fares, networks and tickets, fleet investment, local partnerships Cost reductions and service improvements Collaborating with rest of Group on multimodal journey information, tickets, apps and online, productivity and reliability Looking ahead Continue rebuilding customer patronage: simplicity, reliability, efficiency Plans tailored to local conditions in each of our businesses; investment/consolidation 17

18 First Rail Short term challenges but well positioned for the long term Continue to deploy our breadth of rail expertise and experience for our passengers, notwithstanding market slowdown GWR direct award providing continuity through infrastructure upheaval TPE growth driven by introduction of new trains from 2018/19 South Western award based on quality not price Looking ahead Delivering our franchise commitments South Western mobilisation Continued disciplined approach to bidding 18

19 Summary Significant improvement in operating results and substantial cash generation delivered as planned Maintained our consistent and disciplined approach to bidding for future business throughout the Group Continuing to invest in technology to drive growth by simplifying our services for customers, while deepening our understanding of their needs Results demonstrate progress made in repositioning FirstGroup to create sustainable value, commensurate with our market positions and scale Stable platform allows us to take advantage of our opportunities, despite the mixed trading environment in our markets 19

20 FirstGroup plc Full year results For the twelve months to 31 March 2017 Thursday 1 June 2017

21 Appendices 21

22 Financial results m Mar 2017 Mar 2016 Change Revenue 5, , % EBITDA % EBITDA margin % 12.1% 11.8% +30bps Operating profit % Operating profit margin % 6.0% 5.8% +20bps Net finance costs (132.0) (132.4) (0.3)% Profit before tax % Non-GAAP adjustments (54.4) (54.8) (0.7)% Profit before tax % Tax (36.5) (17.1) % Profit after tax % Basic EPS p 9.3p 7.5p +24.0% Adjusted EPS p 12.4p 10.3p +20.4% 1 Adjusted operating profit less capital grant amortisation plus depreciation 2 Before amortisation charges and certain other items 22

23 Divisional performance Revenue Operating profit 1 Operating margin 1 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 m First Student 1, , % 7.2% First Transit 1, % 6.9% Greyhound % 5.9% First Bus % 6.0% First Rail 1, , % 5.6% Group items (38.8) (32.4) Total 5, , % 5.8% $m 2 First Student 2, , % 7.1% First Transit 1, , % 7.0% Greyhound % 6.0% North America 4, , % 6.8% 1 Before amortisation charges and certain other items 2 US dollar amounts include Canadian Dollars converted at the exchange rates prevailing in either year 23

24 First Student $m Mar 2017 Mar 2016 Change Revenue 2, ,332.7 (0.4)% Operating profit % Margin % 9.6% 7.1% +250bps $m Revenue Operating profit 1 Mar , Operating days Weather (25.3) (13.9) Fuel rate (3.4) 12.2 Pricing above inflation Net growth (93.3) (7.4) Pay above inflation - (15.8) Management cost initiatives Inflation / FX / other Mar , Before amortisation charges and certain other items 24

25 First Transit $m Mar 2017 Mar 2016 Change Revenue 1, , % Operating profit % Margin % 7.0% 7.0% flat $m Revenue Operating profit 1 Mar , Growth / new business Driver costs - (6.1) Inflation / FX / other Mar , Before amortisation charges and certain other items 25

26 Greyhound $m Mar 2017 Mar 2016 Change Revenue (2.2)% Operating profit % Margin % 6.2% 6.0% +20bps $m Revenue Operating profit 1 Mar Revenue (19.4) (19.4) Fuel cost savings rate Management actions Cost inflation - (17.0) FX / other (0.6) (3.7) Mar Before amortisation charges and certain other items 26

27 First Bus m Mar 2017 Mar 2016 Change Revenue (1.1)% Operating profit (28.8)% Margin % 4.3% 6.0% (170)bps m Revenue Operating profit 1 Mar Revenue (4.4) (4.4) Inflation / pension - (17.9) Fuel cost savings rate Fuel FX - (11.5) Depot closures and actions (9.7) 14.2 Other 4.9 (9.4) Mar Before amortisation charges and certain other items 27

28 First Rail m Mar 2017 Mar 2016 Change Revenue 1, ,308.4 (3.0)% Operating profit (26.2)% Margin % 4.2% 5.6% (140)bps 1 Before amortisation charges and certain other items 28

29 First Rail passenger revenue growth Mar 2017 Mar 2016 Great Western Railway (GWR) 0.3% 6.1% TransPennine Express (TPE) 5.9% 6.0% Hull Trains 5.8% 15.8% Total 1.3% 6.3% Like-for-like volume increased by 0.7% 29

30 Non-GAAP adjustments m Mar 2017 Mar 2016 Amortisation charges (60.2) (51.9) Gain on disposal of property Restructuring and reorganisation costs (16.8) - Ineffectiveness on financial derivatives 1.0 (0.4) Pensions past service gain Insurance reserve - (10.5) First Bus depot sales and closures - (1.8) Legal claims - (1.0) Other non-gaap adjusting items 5.8 (2.9) During the year the sale of a Greyhound terminal in San Jose, California was completed for which resulted in a gain on sale of 21.6m There was a charge of 16.8m in the year for restructuring and reorganisation costs across the Group relating to the business turnarounds Total non-gaap adjustments (54.4) (54.8) 30

31 Current diesel hedge position Year to 31 March UK North America 2017/ / / / / /20 Annual volume (barrels 'm) % hedged 89% 55% 15% 57% 28% 18% Crude rate ($/barrel) $60.14 $55.31 $47.97 $57.25 $49.76 $49.59 Diesel rate ($/barrel) $74.63 $72.71 $67.58 $76.71 $70.05 $70.50 Equivalent cost per litre 36.1p 35.2p 32.7p First Bus First Rail First Student First Transit Greyhound Annual volume (barrels 'm) Total Prices include crude and refining cost but exclude delivery margins, duty, taxes and BSOG Equivalent cost per litre assumes a constant FX rate of $1.30 : 1.00 North America annual volume excludes c.2.0m barrels provided by customers or protected by contract escalators The decrease in expected annual volume consumption in 2019/20 reflects the end of the minimum GWR franchise term 31

32 Foreign exchange Lower US Dollar compared to prior year balance sheet date: 31 Mar Mar 2016 Closing rate for the balance sheet US$ $1.25 $1.41 Closing rate for the balance sheet CAN$ $1.67 $1.87 Lower US Dollar compared to prior year effective rate: Year to 31 Mar 2017 Year to 31 Mar 2016 Effective rate US$ earnings $1.29 $1.49 Effective rate CAN$ earnings $1.74 $1.93 "Certain and "highly probable" foreign currency transaction exposures may be hedged at the time the exposure arises for up to two years at specified levels, or longer if there is a very high degree of certainty. The Group does not hedge the translation of earnings into the Group reporting currency (pounds Sterling), but accepts that reported Group earnings will fluctuate as exchange rates against pounds Sterling fluctuate for the currencies in which the company does business. During the year, the net cash generated in each currency may be converted by Group Treasury into pounds Sterling by way of spot transactions in order to keep the currency composition of net debt broadly constant 32

33 Foreign exchange m Mar 2016 Translation impact Mar 2016 constant currency UK fuel impact Noncurrency Mar 2017 Revenue 5, , (28.1) 5, North American divisions 3, , , UK divisions 2, , (51.6) 2, Group items Operating profit (19.8) North American divisions UK divisions (19.8) (15.1) Group items (32.4) - (32.4) - (6.4) (38.8) Margin 1 5.8% 5.8% 6.0% - North American divisions 6.9% 6.8% 8.2% - UK divisions 5.7% 5.8% 4.3% 1 Before amortisation charges and certain other items 33

34 Net finance costs and taxation Net finance costs, m Mar 2017 Mar 2016 Bonds Bank borrowings Loan notes Senior unsecured loan notes Finance lease interest Notional interest on long term provisions Notional interest on pensions Investment income (1.2) (1.4) Net finance costs Taxation, m Mar 2017 Mar 2016 Current tax (4.3) 21.1 Deferred tax 40.8 (4.0) Tax charge Tax paid Tax rate on adjusted profit before tax 26.0% 23.0% 34

35 EBITDA by division Revenue EBITDA 1 EBITDA margin 1 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 m First Student 1, , % 17.1% First Transit 1, % 8.6% Greyhound % 11.5% First Bus % 13.0% First Rail 1, , % 9.4% Group items (36.7) (30.7) Total 5, , % 11.8% $m 2 First Student 2, , % 17.0% First Transit 1, , % 8.6% Greyhound % 11.6% North America 4, , % 13.5% 1 Adjusted operating profit less capital grant amortisation plus depreciation 2 US dollar amounts include Canadian Dollars converted at the exchange rates prevailing in either year 35

36 Total capital expenditure m Cash Fixed asset/software additions Mar 2017 Mar 2016 Mar 2017 Mar 2016 First Student First Transit Greyhound First Bus First Rail Group items Total In addition during the year we entered into operating leases for new vehicles in First Transit with capital value 8.0m (2016: 1.3m) 36

37 Capital expenditure m Mar 2017 Mar 2016 Passenger carrying vehicles (PCV) IT including transformation & software Facilities and depot development Equipment Road divisions capital investment First Rail Total capital investment Net creditor movement 46.7 (6.8) Funded by operating lease (8.0) (1.3) Gross cash capex Disciplined reinvestment in passenger carrying fleet and IT upgrade programmes continue Cash capital investment at 290m for Road divisions in FY2016/17 Capital allocation decisions focused increasingly on maintenance of existing asset portfolio and selected growth opportunities with good returns on incremental capital Expect increased First Rail capex in 2018 and 2019, largely funded through franchise agreements 37

38 First Rail ring-fenced cash and bonds First Rail ring-fenced cash, m Mar 2017 Mar 2016 GWR FTPE Total First Rail bonds, m Mar 2017 Mar 2016 GWR performance bond GWR season ticket bond FTPE performance bond TPE performance bond TPE season ticket bond TPE parent company support bond Total Season ticket bond monies are included within First Rail ring-fenced cash Performance bonds are non-cash items 38

39 H1 17/18 FY 17/18 H1 18/19 FY 18/19 H1 19/20 FY 19/20 H1 20/21 FY 20/21 H1 21/22 FY 21/22 H1 22/23 FY 22/23 H1 23/24 FY 23/24 H1 24/25 FY 24/25 Debt profile 300m 200m 100m 300m 8.125% Sept 2018 bond 250m 6.125% Jan 2019 bond 1 350m 8.75% Apr 2021 bond 1 325m 5.25% Nov 2022 bond 200m 6.875% Sept 2024 bond 0m Lease finance Private placement notes Bonds Loan notes Headroom under committed facilities plus free cash: 941.1m (Mar 2016: 940.2m): 800m (Mar 2016: 800m) of undrawn under committed bank revolver expiring July 2021 Free cash of 141.1m (Mar 2016: 140.2m) excludes First Rail and other ring-fenced cash and deposits of 259.8m (Mar 2016: 219.9m) Average debt maturity 3.6 years (Mar 2016: 4.4 years) 1 The 2019 and 2021 bonds have been swapped to floating rates and hence have a lower effective rate net of these swaps 39

40 Pensions Deficit Cash contributions P&L charge 1 m Mar 2017 Mar 2016 Mar 2015 Mar 2017 Mar 2016 Mar 2015 Mar 2017 Mar 2016 Mar 2015 North America (216.7) (212.5) (184.8) First Bus (139.8) (57.5) (53.5) First Rail (2.0) (0.9) (1.1) Total (358.5) (270.9) (239.4) Group deficit increased by 88m principally due to lower net discount rates in the UK and North America 1 Service costs excluding interest for defined benefit schemes 40

41 ROCE Group ROCE Road divisions ROCE As at 31 March % 5.1% Foreign exchange (0.5)% (0.1)% ROCE at constant currency 6.7% 5.0% Rail portfolio (0.2)% Road divisions trading 0.8% 0.8% Tax rate / other (0.1)% As at 31 March % 5.7% 41

42 Disclaimer Certain statements included or incorporated by reference within this presentation may constitute forward looking statements" in respect of FirstGroup plc's operations, performance, prospects and/or financial condition. Such statements are based on our current expectations and beliefs concerning future events and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. Such statements are also based on numerous assumptions regarding our present and future strategy and the environment in which we operate, which may not transpire. We undertake no obligation to update any forward looking statements contained in this presentation or any other forward looking statements we may make. Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotions in the UK Financial Services and Markets Act In making this presentation available, FirstGroup plc makes no recommendation to buy, sell or otherwise deal in shares of FirstGroup plc or in any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of any such investment activity. 42