FirstGroup Strong Financial Performance, Demonstrating Leadership in Sustainable Transport

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FirstGroup Plc (LON:FGP), a prominent provider of transportation services, has reported strong financial performance driven by growth in its First Bus and First Rail open access operations. The company has surpassed expectations with its impressive results for FY 2023:

Group adjusted attributable profit more than doubled, reaching £82.1 million, compared to £36.2 million in FY 2022.
Adjusted earnings per share (EPS) for continuing operations stood at 10.6p, a significant increase from 1.6p in FY 2022.
The year-end adjusted net cash amounted to £109.9 million, surpassing expectations.

Strategy and Capital Deployment:

FirstGroup remains dedicated to continuous improvement in operational delivery, ongoing investment in growth opportunities, delivering value to shareholders, and playing a leading role in the decarbonization of UK public transport. The company has strategically deployed capital, including:

Approximately £37 million invested in value-accretive acquisitions in First Bus.
Accelerated investment in First Bus decarbonization, resulting in around £43 million gross investment in electric buses and depot infrastructure.
Recommendation of a final dividend of 2.9p, in line with progressive growth and dividend policy.
Launch of a £75 million on-market share buyback program in December 2022, with £52.6 million completed as of June 7, 2023.
Proposal for an additional buyback of £115 million following the receipt of proceeds from the North America exit.

First Bus Highlights:

Daily passenger journeys increased to 1.1 million (FY 2022: 0.9 million), with 168 million service miles operated in FY 2023 (FY 2022: 185 million).
Passenger volumes witnessed a 20% increase compared to FY 2022, with commercial and concessionary volumes up 21% and 19% respectively.
Total passenger revenue rose to £660.0 million (FY 2022: £570.0 million), more than offsetting the reduction in government funding.
Improvement in operating margin in H2 2023 to 7.9% despite ongoing inflationary pressures, attributed to increased passenger demand, improved driver availability, operational improvements, network and fare realignments, and regional management restructuring.
Key acquisitions include Ensignbus in Essex, Airporter in Northern Ireland, and the Metrobus service in Bristol.
Disposal of First Scotland East and closure of Southampton-based operations.
Accelerated investment in the electrification of the fleet and infrastructure, including the delivery of 83 electric buses and installation of 58 ultra-fast chargers.

First Rail Highlights:

263 million passenger journeys in FY 2023 (FY 2022: 201 million), comprising 261 million for TOCs and 2.2 million for open access.
Strong performance of open access operations, driven by robust leisure volumes.
Management-fee based contracts displayed financial performance in line with expectations, with a focus on operational delivery across all services.
Great Western Railway awarded a National Rail Contract until June 2025, extendable to June 2028 at the discretion of the Department for Transport (DfT).
South Western Railway contract extended until May 2025.
West Coast Partnership (including Avanti West Coast) contract extended until October 2023, with ongoing discussions with the DfT on a National Rail Contract for WCP.
Transfer of TPE operations to the Operator of Last Resort on May 28, 2023, as the TPE contract was not extended by the DfT.

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Corporate Highlights:

Delivered approximately £5 million in annual central cost savings as previously guided.
Realized £122 million from the sale of nearly all remaining legacy Greyhound properties.
First Transit earnout crystallized with estimated proceeds of approximately $89 million anticipated in H1 FY 2024.
£32 million of the £75 million on-market share buyback program completed by the year-end.
Repurchased £15.7 million of the Group’s 2024 6.875% bonds in a Bank of England bond auction.

Current Trading and FY 2024 Outlook:

Despite the challenging economic and industrial relations backdrop, FirstGroup’s current trading and outlook for FY 2024 are in line with expectations. Key expectations and initiatives include:

First Bus: Anticipated sequential progress in FY 2024 with further productivity improvements, enhanced revenues, lower operating costs due to smart efficiency initiatives and newer fleet, full-year contribution of recent acquisitions, and supportive government policies driving demand.
First Rail: Financial performance expected to meet expectations, with open access and rail additional services delivering at least in line with FY 2023, and management fee-based operations forecasted to perform broadly in line with management expectations.
Adjusted net cash position expected to be in the range of £10-20 million at the end of FY 2024, following investments in decarbonization and capital returns to shareholders.
FirstGroup will continue to evaluate value-accretive inorganic growth opportunities.

CEO Graham Sutherland commented on the results, highlighting the company’s strong financial performance, success in service objectives, leadership in decarbonization, and commitment to long-term shareholder value and sustainability goals.

FirstGroup’s leading positions in bus and rail, along with its robust balance sheet, position the company to deliver essential services, innovation, and value to stakeholders while striving to achieve sustainability and economic objectives.