FirstGroup plc (LON:FGP) today reported an update on trading since the half-year results for the 26 weeks to 24 September 2022, published in November 2022.
- First Bus improved performance driven by higher passenger volumes in H2 2023 and driver resource pressures easing in certain locations
- First Rail open access operations benefiting from stronger than anticipated passenger demand over the winter months
- Acquisition of Ensign Bus Company Limited (‘Ensignbus’) completed
- Sale of First Transit by EQT Infrastructure completed with final earnout consideration anticipated later in 2023
Recent First Bus passenger volumes have increased to 83% of 2020 equivalent levels, with commercial and concessionary volumes at 87% and 75% respectively. The increase in demand has partially resulted from the £2 bus fare cap scheme introduced in England in January 2023, recently extended to the end of June 2023, and the Scottish Government’s funding for free bus travel for all under-22s that has been in place since January 2022.
First Bus has also benefited from improved driver resources in certain locations, with increased recruitment largely due to a number of initiatives introduced across the business, with more drivers completing their training and lower rates of attrition.
In addition, we welcomed the Government’s extension of the Bus Recovery Grant in February 2023, which will help protect vital services for passengers for a further three months. We continue to work with our government and industry partners on long-term funding arrangements for the sector.
Our open access operations Lumo and Hull Trains, which are the only segment of the First Rail division where the Group takes full passenger revenue risk, have experienced stronger than anticipated passenger demand throughout H2 2023. The First Rail division has also benefited from the settlement of one-off claims relating to prior reporting periods.
FY 2023 Guidance
As a result of the factors detailed above, the Group anticipates that the FY 2023 Group adjusted operating profit and Group adjusted attributable profit will be ahead of the Group’s previous expectations. The Group’s expectations for FY 2024 remain unchanged.
The Group expects to report its results for the year ended 25 March 2023 on 8 June 2023.
Completion of acquisition of Ensignbus
Following the conclusion of a customary regulatory review, the Group completed the acquisition of Ensignbus on 9 March 2023. The Ensignbus business includes commercial bus operations in Essex, a vehicle refurbishment and re-sale operation, and a high value depot. The acquisition of this long-established, high-performing business will not only provide a number of synergies and value accretive growth opportunities in the B2B and bus vehicle dealership markets, but it will also enhance the Group’s local commercial bus operations in Essex.
Update on First Transit Earnout
Further to the Group’s announcement on 26 October 2022, the Group notes that EQT Infrastructure’s sale of First Transit to Transdev North America, Inc. has now completed.
FirstGroup is entitled to an earnout consideration which is calculated as a percentage of the realised equity value on the disposal and contemplating the cash flows generated by First Transit since March 2021 to completion. As previously announced, the Group currently estimates the earnout consideration to be approximately £74m. The Group anticipates confirmation of the earnout consideration and subsequent receipt of proceeds later in 2023.
Graham Sutherland, FirstGroup Chief Executive Officer, said:
“I am pleased by the Group’s progress in the second half of our 2023 financial year, which has been driven by increased passenger volumes and improved operational performance in bus and stronger than anticipated demand for our open access operations in rail. We remain committed to working closely with our partners to deliver successful bus and rail networks that serve the needs of our customers and communities and to playing a central role in achieving many of society’s economic, social and environmental aims.”