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FirstGroup Plc

FirstGroup Plc Good progress in the first half delivering on plans to strengthen the Group

FirstGroup Plc (LON:FGP), today announce half year results for the six months to 30 September 2018.

Overview

Matthew Gregory appointed as Chief Executive with immediate effect

First half trading in line with plans outlined at start of the financial year; full year outlook unchanged

Road divisions’ constant currency growth +2.0% in revenue and +17.9% in adjusted1 operating profit

Strong bid season and growth in First Student; First Bus margin improvement continues

Greyhound review complete and plan underway; action taken to address Western Canada

Net cash inflow increased in period; net debt reduced compared to prior year

Adjusted1 H1 2018
£m
H1 2017
£m
Change Change in constant
currency2
SWR-adjusted
change, in
constant currency3
Revenue 3,303.3 2,771.3 +19.2% +21.6% +6.0%
Operating profit 92.4 89.4 +3.4% +9.2% +19.7%
Operating profit margin 2.8% 3.2% (40)bps (30)bps +40bps
Profit before tax 42.0 30.5 +37.7% +63.4%
EPS 2.9p 1.9p +52.6% +81.3%
Net debt4 1,047.7 1,179.9 (11.2)% (11.6)%
Statutory H1 2018
£m
H1 2017
£m
Change
Revenue 3,303.3 2,771.3 +19.2%
Operating profit 46.3 57.4 (19.3)%
Loss before tax (4.6) (1.9) (142.1)%
EPS (0.6)p 0.2p n/m5

Financial summary (percentage changes in constant currency unless otherwise stated)

Group revenue +6.0% excluding SWR rail franchise that started towards end of comparable period; Group revenue including SWR was +21.6%

Adjusted1 operating profit +9.2%, with Road divisions +17.9% led by First Student and First Bus partially offset by a decline in Greyhound; the contribution from the Rail division was 5.8% lower, as expected

Adjusted1 profit before tax +63.4% and adjusted1 EPS +81.3%, reflecting higher adjusted1 operating profit, lower finance costs and reduction in US tax rates

Net cash inflow of £50.6m (H1 2017: £21.9m before working capital inflow from the start of SWR franchise)

Statutory loss before tax of £(4.6)m (H1 2017: £(1.9)m) and statutory EPS of (0.6)p (H1 2017: 0.2p), reflecting restructuring and reorganisation costs from withdrawal of Greyhound services in Western Canada

Divisional updates

First Student’s fleet to grow this year following strong bid season: 92% contract retention and new customer wins, with pricing remaining in excess of the cost inflation from driver shortages

First Transit continues to add to business portfolio; margin stabilising reflecting changing contract mix and non-recurrence of prior year costs

Greyhound improvement plan underway, targeting at least mid-single digit margins in the medium term, including recent withdrawal from Western Canada. Long haul markets in particular remain challenging resulting in like-for-like6 revenue (0.7)%

First Bus delivered +1.5% like-for-like6 passenger revenue growth and strong margin momentum, underpinned by increased commercial passenger volumes from our focus on making journeys simpler

First Rail like-for-like6 passenger revenue +5.5%, with solid financial contribution driven by GWR despite infrastructure issues. SWR has experienced challenging trading with issues relating to infrastructure reliability, industrial relations and the effects of the revenue protection mechanisms included in the franchise. We are working with industry partners to resolve our issues

Outlook unchanged for the full year

Our performance in the first half is encouraging although conditions in our markets remain challenging. We make no change to our full year outlook, and continue to expect broadly stable Group operating earnings in constant currency for the full year, with improvement in the Road divisions and a smaller Rail contribution. We also expect broadly stable free cash generation for the full year.

Commenting, Chief Executive of FirstGroup, Matthew Gregory said:

“We have made good progress in the first half delivering on our plans to strengthen the Group, generating sustained cash flow to further reduce leverage and deploy to targeted growth. First Student’s bid season success will see our largest business return to growth as planned, while maintaining our disciplined approach to pricing. In September, First Bus completed the rollout of contactless payment across the UK on schedule, becoming the first of the UK’s principal bus operators to do so. Together with other revenue and cost actions this helped First Bus to achieve strong margin improvement in the period. Meanwhile our First Rail operations continued to focus on improving services for our passengers while maintaining overall profitability in a more challenging industry environment during the period.

“We completed our review of Greyhound and have launched a plan to optimise our smallest business for the challenges it is facing. Having recently addressed our loss-making activities in Western Canada, these further actions will assist in improving Greyhound’s performance going forward.

“In summary, we are getting on with delivering our plans to improve performance in our divisions. Although conditions in our markets remain challenging, our performance to date underpins the confidence we have in our unchanged outlook for the full year.”

Chairman of FirstGroup, Wolfhart Hauser said:

“We are implementing clear divisional strategies across our portfolio to mobilise the considerable value inherent in the Group, and I am encouraged by the progress made in the period. I am confident that with Matthew Gregory as Chief Executive, we have the right person to drive forward our plans at pace, and with the appointment of Steve Gunning as an independent non-executive director, we are strengthening the Board further. In addition, we are developing a more agile business, with its emphasis firmly on a divisional framework. This allows us to make the most of our evolving markets and customer requirements, while maintaining strong stewardship and creating more strategic flexibility at the Group level. We are also driving a strong focus on service throughout the Group, ensuring that we continue to create solutions for our customers that reduce complexity, making travel smoother and life easier.”