FirstGroup plc (LON:FGP) has announced its half yearly report for the 27 weeks to 30 September 2023.
Growth in profit driven by strong performance in both First Bus and First Rail:
| • | Group adjusted operating profit increased to £100.6m (H1 2023: £66.1m) |
| • | Increased Adjusted EPS of 8.1p for continuing operations (H1 2023: 4.6p) |
| • | Increase in declared Interim dividend to 1.5p per share (H1 2023: 0.9p per share) |
| • | c.£67m returned to shareholders during H1 2024 via the Group’s share buyback programme |
| • | Adjusted net cash at period end of £77.1m |
Strategy focused on operational delivery, driving modal shift, targeted investment in adjacent growth opportunities to diversify the Group’s portfolio and playing a leading role in environmental and societal sustainability:
| • | First Bus delivered further margin expansion in H1 2024 to 7.1% from 4.8% in H1 2023 (FY 2023: 6.5%) |
| • | On track to have more than 600 electric buses, over 600 charger heads, and four fully electric depots in England by March 2024 |
| • | Nine-year National Rail Contract awarded to West Coast Partnership following improvement in services |
| • | Landmark £100m strategic decarbonisation joint venture with Hitachi |
| • | Group’s science-based emissions reduction target approved by Science Based Targets initiative |
| • | c.£75.5m remains of the total £190m being returned to shareholders via buyback programmes |
| H1 2024 (£m) | H1 2023 (£m) | ||||||||
| Cont. | Disc. | Total | Cont. | Disc. | Total | ||||
| Revenue | 2,207.0 | – | 2,207.0 | 2,212.4 | 2.7 | 2,215.1 | |||
| Adjusted1 operating profit/(loss) | 100.6 | (2.2) | 98.4 | 66.1 | (8.4) | 57.7 | |||
| Adjusted operating profit margin | 4.6% | 4.5% | 3.0% | 2.6% | |||||
| Adjusted profit/(loss) before tax | 73.5 | (2.2) | 71.3 | 41.0 | (8.1) | 32.9 | |||
| Adjusted EPS 2 | 8.1p | (0.3)p | 7.8p | 4.6p | (1.0)p | 3.6p | |||
| Dividend per share | 1.5p | 0.9p | |||||||
| Adjusted net cash3 | 77.1 | 7.3 | |||||||
| H1 2024 (£m) | H1 2023 (£m) | ||||||||
| Statutory | Cont. | Disc. | Total | Cont. | Disc. | Total | |||
| Revenue | 2,207.0 | – | 2,207.0 | 2,212.4 | 2.7 | 2,215.1 | |||
| Operating (loss)/profit | (41.4) | 0.1 | (41.3) | 62.1 | (28.6) | 33.5 | |||
| (Loss)/profit before tax | (68.5) | 0.1 | (68.4) | 37.0 | (28.3) | 8.7 | |||
| EPS2 | (7.9)p | (0.1)p | |||||||
| Net debt | (1,144.6) | (1,475.0) | |||||||
| – Bonds, bank and other debt net of (cash) | 384.4 | 346.3 | |||||||
| – IFRS 16 lease liabilities | (1,529.0) | (1,821.3) | |||||||
‘Cont.’ refers to the Continuing operations comprising First Bus, First Rail, and Group items. ‘Disc.’ refers to discontinued operations, being First Student, First Transit and Greyhound US.
H1 2024 statutory operating loss of £(41.4)m includes charges of £142.3m relating to the Group’s termination of its participation in two Local Government Pension Schemes.
Key developments
First Bus:
| • | 1.1m passenger journeys a day (H1 2023: 1.0m) and 84m service miles operated in H1 2024 (H1 2023: 87m) | ||
| • | Passenger volumes (excluding the extra week in H1 2024) increased 8% vs. H1 2023 | ||
| • | Total revenue increased to £504.9m (H1 2023: £427.7m), despite a c.£19m reduction in government funding as the industry moves to a more commercial model | ||
| • | Operating margin increased to 7.1% (H1 2023: 4.8%) despite ongoing inflationary pressures and lower funding, due to stronger passenger volumes, improved driver availability and data-led operational and commercial efficiencies | ||
| • | Adjacent Services revenue increased to £116.2m from £65.0m in H1 2023 driven by First Travel Solutions, new contract wins and contribution of Airporter and Ensignbus acquired in FY 2023 | ||
| • | Further progress in electrification of fleet and infrastructure: | ||
| – | 166 electric buses delivered in H1 2024 and over 100 charger heads installed | ||
| – | third-party B2B charging pilots underway at Caledonia, Scotstoun, Aberdeen and Leicester depots | ||
| – | installation of solar panels at 25 depots now completed | ||
First Rail:
| • | 123.4m passenger journeys in H1 2024 (H1 2023: 114.6m) of which TOCs: 122.1m and open access 1.3m |
| • | Open access operations performance ahead of expectations, underpinned by strong leisure volumes during the summer months; Lumo has now carried over 2 million passengers since launch in October 2021 |
| • | Management-fee based contracts financial performance was ahead of expectations due to higher than accrued final fee awards for FY 2023; focus remains on operational delivery for passengers across all our services |
| • | Nine-year National Rail Contract awarded to West Coast Partnership (incorporating Avanti West Coast) with a minimum core three-year term to 18 October 2026, with a further six years until 17 October 2032, subject to ongoing DfT approval |
Corporate:
| • | £10m investment committed to landmark £100m strategic decarbonisation joint venture with Hitachi focusing on increasing bus battery efficiency, to deliver material capital savings through extended battery life and increased residual value | |
| • | Initial First Transit earnout proceeds of £48.9m received in H1; receipt of the balance anticipated in H2 2024 | |
| • | £75m on-market share buyback programme completed and subsequent £115m programme launched in August 2023 | |
| • | £12.2m of the Group’s 2024 6.875% bonds opportunistically repurchased (£172.0m remain outstanding) | |
| • | Total gross pension liability of c.£1bn will be removed from the Group’s balance sheet by H2 2024 following: | |
| – | termination of participation in two First Bus Local Government Pension Schemes on 31 October resulting in an anticipated £2-3m annualised cost saving (c.£1m in FY 2024) and an estimated net cash inflow of £15m after costs | |
| – | Greyhound Canada pension scheme bought in and c.$75m (c.£62m) of Greyhound USA pension liabilities bought out and settled in H1 2024; remaining Greyhound USA pension remains well hedged | |
FY 2024 outlook
| • | Despite the ongoing challenging economic and industrial relations environment, current trading and the Group’s outlook for FY 2024 is in line with our expectations as set out in the Trading Update published on 11 October 2023 | |
| • | First Bus: while clearly sensitive to broader consumer spending and inflation trends, we expect to make some further progress against our expectations in H2 2024, including the impact of the Hitachi JV driven by: | |
| – | management actions taken to transform the business delivering further productivity improvements and enhanced revenues | |
| – | lower operating costs as a result of smart efficiency initiatives and the division’s newer fleet | |
| – | supportive government policies driving increased demand | |
| • | First Rail: the Division’s financial performance in H2 2024 is anticipated to be in line with our expectations | |
| • | Adjusted net cash position expected to be in the range of £40-50m at the end of FY 2024, assuming completion of the £115m buyback programme and before deployment of potential growth capital | |
| • | We will continue to evaluate our pipeline of value-accretive inorganic growth opportunities | |
Commenting, Chief Executive Officer Graham Sutherland said:
“I am pleased to report another set of very strong results for the first half of our 2024 financial year. First Bus is delivering sustainable revenue growth as we continue to transform the business and our First Rail division also performed well. This is testament to the capabilities and continued hard work of all our teams across the Group.
“We are a resilient and profitable business which is well-positioned to create long-term, value-accretive growth. Leveraging our leading positions in bus and rail, supported by our strong balance sheet enables us to continue to play a critical role in supporting governments’ economic, societal and environmental goals.”
A webcast for investors and analysts will be held at 10:30am today – attendance is by invitation. Please email [email protected] 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 earnings’ are shown before net adjusting items and excludes IFRS 16 impacts in First Rail management fee operations. For definitions of alternative performance measures and other key terms, see the definitions section on pages 18-19.
2 ‘Adjusted EPS’ and EPS based on weighted average number of shares in the period of 697.7m (H1 2023: 739.8m) reflecting the current year and prior year share buybacks.
3 ‘Adjusted net cash’ is bonds, bank and other debt net of free cash (i.e.excludes IFRS 16 lease liabilities and ring-fenced cash).
