Trading Statement
2 April 2014
FIRSTGROUP PLC
PRE-CLOSE TRADING UPDATE
FirstGroup plc ("FirstGroup" or the "Group") reports the following update on
trading for its financial year ended 31 March 2014 ("the period" or "the
year"), ahead of preliminary results due to be announced on 21 May 2014.
Summary
• Overall operating profit in line with expectations for the year, excluding
£14m impact of unprecedented weather conditions on First Student and Greyhound
in the fourth quarter
• First Student progressing plans to improve contract portfolio pricing,
returns and deliver further cost savings
• First Transit maintains its record of growth and margin performance
• Greyhound - underlying improvement in demand and profitable expansion of
Greyhound Express continues
• UK Bus - transformation plan progressing and delivering sustainable
improvements in key metrics
• UK Rail delivering solid revenue growth underpinned by continued passenger
volume increases
• As previously indicated, net cash flow expected to be broadly flat for the
year (excluding the proceeds of the rights issue)
First Student
First Student's performance was adversely impacted by the abnormal weather
conditions which swept across North America from December and continued into
March. US Dollar revenue is expected to be reduced by 1.8% for the year as
widespread snow storms, coupled with record low temperatures, led to an
unprecedented amount of school closures. Most of our operations were affected
with over 4,000 school days lost across 75% of our territory, and we incurred
higher associated operating costs. As a consequence, our operating margin for
the year is expected to be approximately 1% below the levels previously
indicated in our Q3 interim management statement. As detailed at our investor
day in January, we are working through our programme to meet our medium term
targets, which includes addressing contract portfolio pricing, focusing on
higher returning opportunities and driving further cost efficiencies through
the business.
First Transit
First Transit delivered another year of strong trading, with like-for like US
Dollar revenue growth expected to be over 7% and margins in line with
expectations. Our strong credentials and expertise in delivering efficiencies
for customers continue to be rewarded with new business wins and a contract
retention rate of around 95%.
Greyhound
Greyhound's overall US Dollar revenue is expected to be 2.9% lower for the
year, reflecting the impact of severe weather which caused significant
disruption to the network. Excluding weather, like-for-like revenue in the
fourth quarter of the financial year is expected to be approximately 2.1%
higher, in part reflecting modestly improving economic conditions. Greyhound
Express continues to perform well with anticipated like-for-like revenue
increasing by over 10% for the year. We are on track with our investment
programme, which will transform our offering principally through greater yield
management, real-time pricing and more consumer friendly ticketing. This
focused investment, together with the continued growth of our successful
point-to-point products, gives us confidence in achieving our medium term
margin target of 12%.
UK Bus
Like-for-like passenger revenue growth is expected to be 1.8% for the year,
with good passenger volume growth. This encouraging performance is despite the
continued challenges posed by economic conditions in some of our local markets.
We continue with our step-by-step plan to reposition the business through
network design and fares structure improvements, further cost optimisation, and
investment in fleets and technology. Over the medium term, this repositioning
will allow us to raise margins to double digit levels. We were pleased to
receive validation by Passenger Focus of our efforts to improve the quality and
value-for-money of our services in their recent survey of bus passengers across
the UK.
UK Rail
UK Rail continued to perform well during the year, with like-for-like passenger
revenue expected to increase by 5.9%, underpinned by continued strong volume
growth across all of our train operating companies. We worked closely with our
industry partners to mitigate the effects of severe weather and flooding on
parts of our network and ensure that services resumed as quickly as possible.
In March, the Department for Transport commenced a review in respect of a
longer direct award with First Great Western, to cover the significant
programme of works taking place across the network over the coming years.
Exceptional items
The Group has reviewed its treatment of exceptional items, in particular costs
associated with UK Rail bids and certain property disposals. As a result, we
will include these items in our measure of underlying results in the financial
statements for the year ended 31 March 2014.
Commenting, Tim O'Toole, Chief Executive said:
"We have made satisfactory progress on our key priorities in the year, with
good performances in four of our divisions partially offset by slower progress
in First Student, where we have a detailed programme underway to reposition the
contract portfolio, increase returns and drive further cost efficiencies. We
will deliver earnings growth this year, albeit suppressed by the historically
severe weather, particularly in North America. We are broadly on track to
achieve our medium term targets and while we are encouraged by the progress
made so far, there remains a significant amount of work ahead. Our priorities
are clear and plans are underway to build on our market-leading positions and
ensure the Group delivers sustainable cash generation and value creation over
the plan period and beyond."
A conference call for analysts and investors will be held at 8:00am today.
Please call +44 20 20 7725 3354 in advance of the call to register and to
receive joining details.
Contacts at FirstGroup:
Rachael Borthwick, Group Corporate Communications Director
Faisal Tabbah, Group Investor Relations Manager
Stuart Butchers, Group Media Relations Manager
Tel: +44 20 7725 3354
Contacts at Brunswick PR:
Michael Harrison/Andrew Porter, Tel: +44 20 7404 5959
The information provided in this trading 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