Trading Statement
Embargoed until 7:00am on Thursday 3 October 2013
3 October 2013
FIRSTGROUP PLC
PRE-CLOSE TRADING UPDATE
FirstGroup plc ("FirstGroup" or the "Group") reports the following trading
update for the six months to 30 September 2013 ("the period" or "the first
half"), ahead of our half-yearly results due to be announced on Wednesday 6
November 2013.
Summary
• Overall trading in line with management's expectations
• First Student continues to make progress in reforming the operating model
• Continued good performance by First Transit, with strong growth in shuttle
and paratransit businesses
• US economic conditions continue to affect core Greyhound customers though
trends improved in Q2, continued focus on cost management. Successful expansion
of Greyhound Express continues
• UK Bus transformation plan on track
• UK Rail delivered further solid passenger revenue growth
• First Great Western franchise agreement to September 2015 signed with
Department for Transport. Negotiations to extend First Capital Connect are
underway
First Student
We continue to work through our recovery plan for First Student, and the
process of improving our efficiency and implementing uniform practices across
our operations throughout North America continues to deliver incremental margin
improvements. Like-for-like US Dollar revenue growth for the period, which is
expected to be 1.2%, is likely to moderate through the second half, as we
continue to focus on winning or retaining only those contracts that meet our
returns criteria. We continue to expect margins for the first half of the year
to be ahead of the equivalent period last year.
First Transit
First Transit delivered a good first half trading performance, with US Dollar
revenues expected to increase by 8.4% on a like-for-like basis (as adjusted for
the disposal of FSS). Contract retention rates were maintained at over 90%, and
we were particularly pleased with several significant retentions including two
paratransit contracts in Kansas and Wisconsin, a shuttle bus contract for BWI
Airport in Baltimore, and several new business wins which included a call
centre contract award for the Chicago Regional Transportation Authority.
Greyhound
Greyhound's core market continued to feel the effects of the prolonged US
economic downturn, with like-for-like revenue expected to be down 2.4% for the
six month period. However, trading during the recent summer months has shown
tentative signs of improvement, although we remain focused on cost control. We
continue to work to optimise our Greyhound Canada network and cost base to
deliver a commercially viable service across the country. Greyhound Express
continues to grow robustly, and will shortly add new routes or increase
frequencies from major markets in Illinois, Tennessee, Georgia and Florida, and
launch services in new markets in Arkansas. We are continuing to invest to
ensure the experiences gained from Greyhound Express and BoltBus support the
modernisation and improve the yield management capability of the traditional
Greyhound service.
UK Bus
During the period, like-for-like passenger revenue in the division is expected
to increase by 1.6%, with particularly positive results from those operations
furthest along the transformation programme. While the pace and approach being
taken to fares and network changes is deliberately tailored to local market
conditions, it is pleasing that overall the division is expected to report
passenger volume growth, of 0.6%, for the first six month period in several
years. Where changes to our commercial proposition have been in place longest
or have changed most significantly, such as in Sheffield, Rotherham, Doncaster
and Manchester, we are seeing particularly pleasing increases in commercial
passenger volumes. A number of our local markets continue to face challenging
economic conditions, and there remains considerable work to be done to meet our
medium-term objective of double digit margins for the division, but as we
progress through our transformation plans, our confidence continues to
increase.
UK Rail
UK Rail achieved another solid performance in the period, with like-for-like
passenger revenue expected to increase by 5.7%. During the period the
invitations to tender for the Essex Thameside and the Thameslink, Southern and
Great Northern franchises were issued by the Department of Transport (DfT). As
a shortlisted bidder on both processes, we look forward to submitting
competitive bids that deliver for passengers, taxpayers and shareholders. We
continue to challenge Network Rail on infrastructure failures and are working
with them to ensure they deliver on their plans to minimise major disruption
and the impact this has on our passengers' journeys.
We have signed an agreement with the DfT to operate the First Great Western
franchise for a further 23 months to 20 September 2015, securing continuity of
rail services for passengers and retaining our experience in managing the
impact of the multi-billion pound investment programme already underway on the
network. We will also work with the DfT on delivery of a fleet of electric
trains for the Thames Valley routes, the roll out of Wi-Fi, enhanced capacity
for the Night Riviera sleeper and there is scope for us to discuss further
improvements. In addition we will continue working toward the introduction of
the new InterCity Express fleet from 2017.
Outlook
Commenting, Tim O'Toole, Chief Executive said:
"I am pleased to report overall trading for the first half of the year is in
line with our expectations, despite continued economic headwinds in some of our
markets. While it is still early days, we are on track with our plans to return
the Group to a position of strength. The foundations have been laid for a more
robust company, and we intend to continue the hard work and relentless focus
that is needed to improve our operating performance, deliver enhanced growth
and drive sustainable returns over the medium term.
"Today's agreement with the Department for Transport is good news for First
Great Western passengers, taxpayers and our shareholders as it provides
continuity and consistency, building on the improvements our experienced team
has already made over the last franchise period. We have seen significant
improvements in customer satisfaction and punctuality, and working with the DfT
we have delivered additional capacity on the busiest morning peak trains. We
will work closely with stakeholders and partners along the route to explore
further ways to support our local communities. As the UK's largest and most
experienced rail operator we remain committed to maintaining a leading position
in the market, and look forward to the rail re-franchising programme gathering
pace in the coming months.
We have a fundamentally attractive portfolio of market leading transport
businesses, and our unrivalled scale and breadth gives us significant
opportunities to share best practice and expertise, to deliver outstanding
services to our customers and to create long term, sustainable value for our
shareholders."
A conference call for analysts and investors will be held at 9:00am today.
Please call +44 20 7291 0507 in advance of the call to register and to receive
joining details.
Contacts at FirstGroup:
Rachael Borthwick, Group Corporate Communications Director
Stuart Butchers, Group Media Relations Manager
Faisal Tabbah, Group Investor Relations Manager
Tel: +44 20 7291 0507 / 0508
Contacts at Brunswick PR: Michael Harrison/Andrew Porter, Tel: +44 20 7404 5959
Indicative restated prior period comparatives due to adoption of IAS 19
(revised) and the rights issue
The tables below show restated prior period comparative figures for the
divisions and for the Group for the six months to 30 September 2012 and the
financial year ended 31 March 2013. The restatement reflects (a) the
retrospective adjustment from the adoption of the changes in IAS 19 Employee
Benefits (revised), and (b) the retrospective adjustment of earnings per share
figures as required by IAS 33 Earnings Per Share, reflecting the rights issue
completed in June 2013.
(a) IAS 19 (revised)
IAS 19 (revised) applies to financial years beginning 1 January 2013 or later.
It is adopted by the Group as of the financial year 2014. The key impact on the
Group from the revised standard will be to remove the separate assumptions for
expected return on plan assets and discounting of scheme liabilities and
replace them with one single discount rate for the net deficit. The actual
benefits and the cash contributions for these plans are not impacted by IAS 19
(revised).
(b) Rights issue
Pursuant to the rights issue, On 10 June 2013, 722,859,586 new ordinary shares
of 5 pence each were issued, with three new ordinary shares issued for every
two existing ordinary shares held. As a result the total issued share capital
increased to 1,204.9m ordinary shares. The weighted average number of shares
for the six months to 30 September 2013 is expected to be approximately 916m
shares, and the weighted average number of shares for full year to 31 March
2014 is expected to be approximately 1,060m shares. For the calculation of
earnings per share, the number of shares held prior to 10 June 2013 has been
increased by a factor of 1.227 to reflect the bonus element of the rights
issue.
6 months Year to
to 30 Sep 31 March
2012 2013
Underlying Reported Impact Impact Unaudited Reported Impact Impact Unaudited
continuing of IAS of restated of IAS of restated
results1: 19 rights 19 rights
issue issue
£m £m £m £m £m £m £m £m
First Student 5.2 - 5.2 109.9 - 109.9
First Transit 28.8 - 28.8 49.1 - 49.1
Greyhound 33.5 1.3 34.8 52.0 2.5 54.5
UK Bus 39.6 (18.6) 21.0 90.7 (37.2) 53.5
UK Rail 35.4 (11.6) 23.8 63.2 (25.2) 38.0
Group items (13.8) - (13.8) (29.5) - (29.5)
Underlying 128.7 (28.9) 99.8 335.4 (59.9) 275.5
operating
profit
Net finance (80.0) (0.1) (80.1) (163.0) (0.2) (163.2)
costs
Underlying 48.7 (29.0) 19.7 172.4 (60.1) 112.3
profit before
tax
Tax (9.8) 5.8 (4.0) (34.7) 12.1 (22.6)
Underlying 38.9 (23.2) 15.7 137.7 (48.0) 89.7
profit for the
year
Attributable
to:
Equity holders 34.5 (23.2) 11.3 129.4 (48.0) 81.4
of the parent
Non-controlling 4.4 - 4.4 8.3 - 8.3
interests
38.9 (23.2) 15.7 137.7 (48.0) 89.7
Weighted 481.6 - 109.1 590.7 481.7 - 109.1 590.8
average number
of shares
Underlying 7.2p (4.8)p (0.5)p 1.9p 26.9p (10.0) (3.1)p 13.8p
earnings per p
share (p)
Adjustments2:
Amortisation (13.6) - (13.6) (52.0) - (52.0)
charges
Exceptionals, (26.7) - (26.7) (83.2) - (83.2)
property
disposals, etc.
Tax credit 13.9 - 13.9 45.3 - 45.3
thereon
Discontinued - - - - - -
operations
Non-controlling 0.1 - 0.1 (4.5) - (4.5)
interests
Basic profit 8.2 (23.2) (15.0) 35.0 (48.0) (13.0)
for the year
Basic EPS (p) 1.7p (4.8)p 0.6p (2.5)p 7.3p (10.0) 0.5p (2.2)p
p
1 Underlying
trading results
before items
noted in 2
below.
2 Amortisation
charges,
ineffectiveness
on financial
derivatives,
exceptional
items, (loss)/
profit on
disposal of
properties and
discontinued
operations and
tax thereon.
The financial and other information provided in this update is preliminary and
has not been reviewed by the Group's auditors.
FirstGroup plc (LSE: FGP.L) is the leading transport operator in the UK and
North America. With revenues of more than £6 billion and around 120,000
employees, we transport more than 2.5 billion passengers every year. Each of
our five divisions is a leader in its field: First Student is the largest
provider of student transportation in North America with a fleet of around
50,000 yellow school buses, First Transit is one of the largest providers of
outsourced transit management and contracting services in the US, while
Greyhound is the only national operator of scheduled intercity coach services
across North America. In the UK, FirstGroup is one of Britain's largest bus
operators running a fleet of some 6,500 buses, and we operate approximately a
quarter of the UK passenger rail network, carrying over 310 million passengers
a year. Our vision is to provide solutions for an increasingly congested world…
keeping people moving and communities prospering. Visit our website at:
www.firstgroup.com