FIRSTGROUP PLC - Final Results

FIRSTGROUP PLC

RESULTS FOR THE 52 WEEKS TO 26 MARCH 2022

			FY 2022 (£m)				FY 2021 (£m)				Change (£m)
	Cont.	Disc.	Total		Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,591.1	996.9	5,588.0		4,318.8	2,526.0	6,844.8		+272.3	(1,529.1)	(1,256.8)
Adjusted1 operating profit	106.7	120.1	226.8		112.2	108.0	220.2		(5.5)	+12.1	+6.6
Adjusted1 operating profit margin	2.3%	12.0%	4.1%		2.6%	4.3%	3.2%		(30)bps	+770bps	+90bps
Adjusted1 profit/(loss) before tax	24.8	108.6	133.4		(29.7)	79.9	50.2		+54.5	+28.7	+83.2
Group adjusted attributable profit2	36.2	-	36.2		19.9	-	19.9		+16.3	-	+16.3
Adjusted1 EPS3	1.6p	8.6p	10.2p		(2.8)p	6.1p	3.3p		+4.4p	+2.5p	+6.9p
Adjusted cash flow4			1,008.9				258.9				+750.0
Adjusted Net Debt5			3.9				1,438.7				(1,434.8)
			FY 2022 (£m)				FY 2021 (£m)
Statutory	Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,591.1	996.9	5,588.0		4,318.8	2,526.0	6,844.8
Operating profit	122.8	683.3	806.1		171.0	114.8	285.8
Profit before tax			654.1				115.8
EPS			60.2p				6.5p
Net debt			619.0				2,625.8
- Bonds, bank and other debt net of (cash)			(464.2)				775.8
- IFRS 16 lease liabilities			1,083.2				1,850.0

'Cont.' refers to the Continuing operations comprising First Bus, First Rail and Group items. 'Disc.' refers to discontinued operations, being First Student, First Transit and Greyhound US. Statutory operating profit from discontinued operations of £683.3m includes the gains on sale of First Student, First Transit and Greyhound US.

Overview

• FY 2022 adjusted operating profit from continuing operations and adjusted net debt⁵ ahead of expectations; Group adjusted attributable profit² increased to £36.2m (FY 2021: £19.9m)

• A transformed business – delivered on our commitments to simplify and refocus the business while releasing value to shareholders:
  • Three North American businesses sold for full strategic value
  • Balance sheet deleveraged and de-risked, with UK pension deficit payments no longer required
  • £500m returned to shareholders through tender offer
  • Evolution of Board complete and new CEO Graham Sutherland in place

• Encouraging progress in realising further sources of value:
  • Greyhound legacy assets and liabilities management ahead of plan: expect to exceed $155m value realisation target from FY 2023 onwards following insurance risk transfer agreements and in advanced stage of a potential portfolio sale of the remaining properties
  • First Transit maximum earnout potential increased to $290m ($140m carrying value)
  • Up to £117m potential escrow release and other cash returns from UK pensions over medium term

• Resilient earnings base established, with First Bus more agile and longer term visibility for First Rail:
  • First Bus now delivering data-driven network realignment, pricing and cost efficiency actions more flexibly in response to evolving passenger demand and the broader inflationary environment
  • Multi-year National Rail Contract for GWR close to being awarded; DfT expected to conclude Avanti's in autumn 2022 – longer term contractual income streams being secured in First Rail alongside established additional services income streams
  • Inflection point for government support of public transport in the UK, with significant funding for ambitious strategies to increase patronage and enhance modal shift from cars in the coming years
  • Additional earnings opportunities added in both divisions, including new B2B contracts and buyout of SPS joint venture partner in First Bus, and successful Lumo open access launch in First Rail

• Solid foundations in place for sustainable, long term value creation: strong financial position and outlook underpins a balanced capital allocation policy including the start of annual dividends:
  • While some uncertainty remains around the pace of recovery in light of the pandemic and broader economic backdrop, current trading is in line with our expectations, with the Group expected to make significant further progress in FY 2023
  • First Bus investment to meet zero emission fleet commitments well covered by divisional cash generation and government co-funding to facilitate the decarbonisation agenda
  • Actively developing further organic and inorganic opportunities for value creation in the UK and elsewhere
  • Progressive annual dividends to begin with final dividend of 1.1p per share proposed
  • Potential for further additional distributions to shareholders over time

Financial summary

• Total Group adjusted operating profit increased by £6.6m as pandemic effects on travel begin to recede and passenger volumes build:
  • Adjusted operating profit from continuing operations ahead of expectations at £106.7m (FY 2021: £112.2m), with a stronger First Rail performance than expected at start of year and central cost reductions ahead of plan following the North American sales, with First Bus in line
  • Discontinued operations adjusted operating profit was £120.1m (FY 2021: £108.0m), with part-year contributions from the North American operations, now sold, offset by no depreciation being charged to the income statement under the accounting rules once they became classed as held for sale
• £122.8m statutory operating profit from continuing operations (FY 2021: £171.0m) includes £16.1m credit from net adjusting items (FY 2021: £58.8m)
• £563.2m credit from net adjusting items in discontinued operations (FY 2021: £6.8m) principally reflects gains on sale of the North American businesses and the resulting uses of proceeds
• Group adjusted attributable profit² (which adjusts First Rail earnings to align to the cash fees attributable to the Group from the management fee-based operations) increased to £36.2m (FY 2021: £19.9m)  
• Underlying operational cash flow was ahead of expectations due to better business performance and timing of certain working capital flows
• £3.9m adjusted net debt⁵ (FY 2021: £1,438.7m), with more than £530m of undrawn committed liquidity
• Final dividend of 1.1p per share proposed resulting in a total dividend of £c.8.1m, in line with announced policy of 3x cover based on Group adjusted attributable profit²; payable on 19 August 2022 subject to approval of shareholders at the 2022 AGM  

Current trading and FY 2023 outlook for the ongoing Group

• While some uncertainty remains around the pace of recovery in light of the pandemic and the broader macroeconomic backdrop, current trading is in line with our expectations, with the Group expected to make significant further progress in FY 2023
• First Bus passenger volume has reached 76% of the equivalent 2019 period recently. Although clearly sensitive to the broader consumer spending outlook, we expect First Bus volumes to continue to increase in the current financial year with performance weighted to H2 2023, reflecting our increasing ability to adapt operations to passenger demand and the inflationary environment once recovery funding tapers off in the autumn
• First Rail's four management fee-based operations (which have no passenger revenue risk and limited cost risk) continue to deliver performance metrics in line with management expectations, and with our open access operations currently trading ahead of plan as a result of strong leisure demand, First Rail's performance in FY 2023 is expected to reflect a positive contribution from these businesses
• On track to realise a further c.£5m in previously announced central cost savings (exceeding £10m p.a. target over FY 2021)
• Positive free cash generation after c.£90m cash capital expenditure on First Bus zero-emission fleet expected, resulting in a small adjusted net cash⁵ position at end of current financial year (before any further sources of value which may be received)

Commenting, Executive Chairman David Martin said:

"We have delivered on our commitments this year to refocus the business, de-risk the balance sheet and unlock value for shareholders. As a cash generative business with a strong balance sheet, FirstGroup is well placed to invest in the services our passengers want, to sustain our path to a zero-emission bus fleet, and to actively consider additional value creation opportunities to leverage our market leading public transport expertise. The Board's confidence in the prospects for the Group is reflected in the decision to commence dividend payments."

Commenting, Chief Executive Officer Graham Sutherland said:

"The transformed Group has momentum and we expect to make significant further progress in the year to March 2023. With leading positions in bus and rail, a strong balance sheet and a clear purpose, FirstGroup has many opportunities ahead to deliver sustainable shareholder value creation while delivering the vital services that are key to achieving society’s sustainability and economic goals.”

Contacts at FirstGroup: Investor relations: Faisal Tabbah Media: Stuart Butchers [e-mail] Tel: [phone]

Contacts at Brunswick PR: Andrew Porter / Simone Selzer Tel: [phone]

A webcast for investors and analysts will be held at 9:00am today – attendance is by invitation. Please email [e-mail] in advance of the webcast to receive joining details. To access the presentation to be discussed on the webcast, together with a pdf copy of this announcement, go to www.firstgroupplc.com/investors. A playback facility will also be available there in due course.

Notes

¹        ‘Adjusted’ figures throughout this document are before the gains on sale of the North American divisions, partial reversal of impairment charges on Greyhound and certain other items as set out in note 4 to the financial statements.

²     For definitions of alternative performance measures and other key terms, see the definitions section from page 24.

³     Adjusted EPS based on weighted average number of shares in the year of 1,057.5m reflecting the tender offer completed in December 2021; pro forma adjusted EPS for the continuing group at the current number of shares in issue is 2.2p.

⁴     ‘Adjusted cash flow’ is described in the table on page 21.

⁵     'Adjusted Net Debt/Cash' excludes ring-fenced cash and IFRS 16 lease liabilities from net debt as shown in the table on page 22.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 1.1.

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.6 billion in revenue and more than 30,000 employees, our UK divisions transported nearly 1.5m passengers a day in the last financial year. First Bus is the second largest regional bus operator in the UK, serving two-thirds of the UK’s 15 largest conurbations with a fleet of c.4,900 buses. First Rail is the UK’s largest rail operator, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of c.3,800 rail vehicles through four management fee-based train operating companies (Avanti, GWR, SWR, TPE) and two open access routes (Hull Trains and Lumo). We create solutions that reduce complexity, making travel smoother and life easier. Our businesses are at the heart of our communities and the essential services we provide are critical to delivering wider economic, social and environmental goals. We are formally committed to operating a zero-emission First Bus fleet by 2035 and to cease purchasing further diesel buses after 2022; and First Rail will help support the UK Government’s goal to remove all diesel-only trains from service by 2040. In 2022 FirstGroup was named as one of the world's cleanest 200 public companies for the third consecutive year by sustainable business media group Corporate Knights in partnership with US not-for-profit organisation, As You Sow. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.

Review of the year

In the last financial year we have transformed FirstGroup by delivering on our commitments. Through consistent execution, we have simplified and refocused the Group, unlocked substantial value for shareholders, strengthened the balance sheet and accelerated our sustainability progress, all while continuing to play our part in connecting people and communities throughout the pandemic. FirstGroup is now a resilient and robust platform from which to develop and maximise the opportunities that exist for growth. The transformed FirstGroup has a clear and increasingly well-recognised role to play at the heart of our communities and economies, is cash-generative, well-capitalised, and able to invest in a low carbon future while supporting progressive dividends to shareholders. There are challenges ahead to be sure, with passenger demand growing but not yet restored to pre-pandemic levels and an increasingly inflationary environment to contend with, but we believe FirstGroup is very well placed to create substantial, and sustainable, shareholder value in future.

Since September 2021 I have carried out the role of interim Executive Chairman while the Board Nomination Committee conducted a thorough search process to appoint a Chief Executive Officer. Shortly after the end of the financial year we were pleased to appoint Graham Sutherland to the role. Graham has held a number of senior leadership positions in organisations that provide critical services to consumer, business and public sector customers across the UK, and I am confident that he is ideally suited to take the Group forward. I resume the role of Non-Executive Chairman from 1 July 2022 after a short handover period.

Protecting our passengers and employees

Our first priority since the start of the coronavirus outbreak has been the health and safety of our passengers, employees and communities. As the pandemic has evolved, we have followed all relevant public health authority guidance for our businesses and worked closely with our suppliers to ensure we have the appropriate equipment in place. We continue to follow and also develop best practice in all matters relating to the safety of our passengers and people.

Corporate activity, balance sheet and future sources of value

As noted at the half year, in the short term our financial results are complex, reflecting the sale of the three North American divisions for a combined enterprise value of $4.6bn, c.£2.3bn of debt repayments and de-risking of pensions and other liabilities, the £500m cash return to shareholders and other corporate activity which took place during the financial year.

Going forward, the Group's financial position becomes progressively simpler. In February 2022 the Group concluded a reinsurance risk transfer agreement that de-risks c.$147m of Greyhound's legacy self-insurance liabilities with a leading non-life global speciality insurance company at a lower cash cost to the Group than budgeted for, as well as a subsequent de-risking of other legacy workers' compensation liabilities for $14m. These agreements reduce the Group's exposure to Greyhound's legacy self-insurance liabilities to c.$12m of claims not covered by the risk transfer agreements or recently settled, primarily relating to the Canadian operations that formally closed in May 2021 having ceased operating at the start of the pandemic. The Greyhound legacy pension obligations have also been de-risked, with the accounting deficit reduced to £10.9m (FY 2021: £104.7m).

Following the £220m cash contribution made during the year, the First Bus and Group defined benefit pension schemes in the UK are currently in surplus on an accounting basis, and are progressing to self-sufficiency on a funding valuation basis. As a result, the Group is anticipating no deficit reduction payments will be required going forward, compared to the annual deficit recovery payment of £30.0m in FY 2021. The Local Government Pension Schemes (LGPS) that First Bus participates in are also very well capitalised, and shortly after the balance sheet date, £11.8m of excess funding was returned to the Group by a Local Government Pension Scheme in Scotland. Assuming asset and liability performance in line with our expectations, our overall pension position would support a potential release of up to £117m that was paid into escrow by agreement with the First Bus and Group pension trustees over the coming triennial valuations.

The Group is also ahead of plan to realise the previously guided c.$155m in net value from the Greyhound assets and liabilities in the US and Canada from FY 2023 onwards, supported by the legacy liability de-risking noted above and the ongoing strengthening of valuations in the US commercial property market, with a further $38.9m received in FY 2022 from properties sold since the business disposal. The Group is in the advanced stage of a potential portfolio sale of the remaining Greyhound properties. Collections of CARES and ARP funding and the deferred consideration (see discontinued operations below) continue in line with expectations.

The earnout that was included as part of the sale of the First Transit business continues to be considered to have a carrying value of $140m in the accounts, although the maximum potential value has increased to $290m following post-closing contractual amendments agreed with the buyer.

The Group's main debt facility is now a £300m sustainability-linked Revolving Credit Facility (RCF), which is undrawn, £35.5m in finance leases and our remaining £200m bond which we expect to hold to maturity in September 2024, at which point we would expect to repay it or to refinance at substantially lower cost.

Capital allocation and dividends

As a result of the recent corporate activity, the Group is in a strong financial position, is expected to generate positive free cash flow after the sustained capital investment to deliver our commitment of a 100% zero emission bus fleet by 2035, and has an increasing degree of confidence in the delivery of the future sources of value noted above. As such, the Group is in a strong position to pursue a balanced capital allocation policy in the years ahead.

The Board is therefore proposing that regular, progressive dividends begin with a final dividend of 1.1p per share for FY 2022, in accordance with our previously articulated policy of an annual payout around three times covered by Group adjusted attributable profit. The Group is actively reviewing investment in some of the substantial organic and inorganic opportunities that exist adjacent to its existing portfolio in the UK and elsewhere, where it is confident this will create value for shareholders, and notes the capacity to increase gearing over time towards our target leverage ratio of less than two times adjusted net debt: Group EBITDA adjusted for First Rail management fees, as end market conditions and hence business performance continue to improve. The Board also remains committed to reviewing the potential for further additional distributions to shareholders over time.

The Board is proposing that a final dividend of 1.1p per share, resulting in a total dividend payment of c.£ 8.1m, be paid on 19 August 2022 to shareholders on the register at 15 July 2022, subject to approval of shareholders at the 2022 AGM.

Inflection point for public transport

In addition to our transformational transactions, the year in review has also been an important inflection point in the operating environment for public transport companies in the UK, and in particular for their prospects for sustainable growth in the medium term. More than £1bn in funding was allocated in April 2022 in support of the Government's National Bus Strategy in England, with First Bus operating areas set to benefit significantly from these ambitious strategies to increase bus patronage and enhance modal shift from passenger cars in the coming years.

Moreover, passenger volumes across our businesses have increased this year, as our economies, working and social lives continue to adapt to the aftershocks of the pandemic restrictions. Based on our increasingly granular understanding of our passengers' travel patterns, enabled by our industry-leading customer data tools and analytics, we remain confident in the long-term passenger growth potential of our First Bus operations. As we continue to focus on the application of data and technology to volume and yield management, operating efficiency and cost performance, First Bus is becoming a more agile business, well placed to deliver significant operating leverage as patronage increases over time. 

The Government is also progressing the transition of the UK passenger rail industry to a lower risk, long-term model with delivery of quality services for passengers at its centre. With this process continuing, we have an increasing degree of visibility on the long-duration nature of the fees to be earned by our four incumbent management fee-based rail operations.

The Group has also begun to develop a number of growth opportunities adjacent to its market leading UK bus and rail operations. Revenue significantly increased this year from both Business-to-Business (B2B) contracts in First Bus and in First Rail's activities outside of the management-fee based train operating companies, including our open access operations, and we expect these to become increasingly important contributors to the Group's earnings in the coming years.

Operational highlights – First Bus

First Bus passenger volumes increased year-on-year by 91%, reflecting the increasing propensity to travel as pandemic restrictions were reduced, notwithstanding the reimposition of guidance to avoid travel where possible due to the Omicron variant for a period during the second half of the financial year.

Passenger revenue was up 49% reflecting improving volumes and yields, partly mitigated by lower pandemic-related funding, as operations in England and Scotland moved from broadly 'cost-plus' recovery schemes to block subsidy-style schemes in September 2021 and April 2022 respectively. Wales continues to operate under a cost-plus scheme until the end of July 2022. Commercial passenger volumes are increasing faster than concessions, with customer analytics suggesting most commercial customers are travelling again, but not as often as before the pandemic.

Meanwhile, our new data-driven pricing strategy has begun rolling out across our networks, including yield-enhancing changes to the construction of our fares baskets in each local area. We modestly reduced scheduled mileage in April 2022, and will continue to refine our networks and timetables based on our enhanced customer analytics capability as travel patterns evolve. We anticipate the next major milestone in this regard will be in the autumn of 2022, when the remaining recovery funding in England and Scotland is expected to come to an end.

With industry-wide driver shortages ongoing, we continue to focus on our driver recruitment and retention programmes, and on managing our multi-year pay deals with local unions. Our fuel hedging programme, under which we are 87% hedged for the remainder of the current financial year, provides some time and flexibility to respond to global fuel price changes. We expect to offset some of the impact of higher utility costs, engineering and other materials costs, through our fare and yield management processes.

In the year our B2B revenue increased, reflecting the buyout of our SPS joint venture and new contracts, including a major multi-site employee shuttle contract with a large online distributor. We are continuing to invest to capture more of the growing pipeline of activity we see in this area. In addition we see a number of potential opportunities as more of our fleets are electrified, for example in third party electric vehicle charging at our depots.

Buses have a central role to play in achieving many of society’s objectives. The UK Government's Levelling Up White Paper, published in February 2022, reinforced the importance of public transport connectivity. Meanwhile in the announcement of Bus Service Improvement Plans allocations in April 2022, local authorities in our operating areas received nearly a quarter of the funding made available to accelerate delivery of better, more reliable services for passengers in line with the ambitions of the National Bus Strategy.

Operational highlights – First Rail

In First Rail, our four management fee-based operations recorded profits in line with the fixed fees plus actual or accrual of two thirds of the performance fees, based on expected performance scoring against their contractual metrics, with GWR and TPE slightly ahead as a result of final settlement of certain prior-period contractual claims. Under the new contract structures the 53% increase in like-for-like passenger journeys from these operations had no impact on our fee income, although clearly it is encouraging for the long-term prospects of the industry.

First Rail's open access operations also made good progress during the year, with lower than previously guided losses as a result of strong leisure demand since the Omicron-related restrictions were reduced and the successful launch of Lumo in October 2021. Both are performing well in the current financial year. Our additional services businesses in First Rail also had a good year, with Mistral Data, London Trams, First Customer Contact and consulting ahead of prior year partially offset by start-up costs of evo-rail.

Discontinued operations

With the completion of the sale of First Student and First Transit on 21 July 2021, the financial results of these two divisions were reported as discontinued operations. The transaction was structured on a 'locked box' basis as of 27 March 2021, with all economic benefits or costs for the buyer's account from that date.

The sale of Greyhound Lines Inc was completed on 21 October 2021. Greyhound remains eligible to receive further awards from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and American Rescue Plan (ARP) schemes and, to the extent that such recoveries are made which relate to the period Greyhound was under the Group's ownership, the buyer will pay equivalent amounts to FirstGroup under the terms of the contract. Between completion of the sale and the year end, the Group has received CARES and ARP payments of $9.0m, $3.3m in property rentals from Greyhound as well as $11.3m in deferred consideration with $21m still outstanding at year end. Furthermore, $38.9m has been received in property sales proceeds and $16.5m has been paid in further de-risking of the Greyhound pension schemes. C.$12m has been incurred in other contractual settlements since disposal and costs incurred for the closure of the Canadian operations.

Strong financial performance with continuing operations ahead of expectations

Revenue from continuing operations (comprising First Bus, First Rail and Group items) increased to £4,591.1m (FY 2021: £4,318.8m), principally reflecting improving First Bus passenger volumes partially offset by lower pandemic-related funding receipts, and significant revenue growth in First Rail.

Adjusted operating profit from continuing operations was ahead of expectations at £106.7m (FY 2021: £112.2m), with First Bus in line, a stronger First Rail performance than expected at start of year, and central cost reductions ahead of plan. Central costs were c.£6.2m lower than in the prior year, reflecting changes to the corporate structure implemented following the North American disposals during the year. Adjusted EPS from continuing operations was 1.6p (FY 2021: (2.8)p).

Discontinued operations contributed £996.9m (FY 2021: £2,526.0m) in revenue and £120.1m in adjusted operating profit (FY 2021: £108.0m) to the Group, reflecting part year contributions from the North American operations, now sold, as well as there being no charge for depreciation and amortisation under IFRS 5 from the point that the assets are classified as Held for Sale.

Statutory operating profit from continuing operations of £122.8m (FY 2021: £171.0m) reflects £16.1m credit from net adjusting items (FY 2021: £58.8m credit), and statutory EPS from continuing operations was (1.1)p (FY 2021: 0.9p).

Impact of First Rail fee income

The Group's accounts continue to consolidate the Train Operating Companies which manage the four management-fee based operations, including their substantial ring-fenced cash balances and right of use liabilities under IFRS 16, which primarily relate to the leased rolling stock used to operate these contracts. Both ring-fenced cash and the IFRS 16 liabilities are excluded from the Group's Adjusted Net Debt measure.

Last year the Group introduced two new alternative profit performance measures, which focus on the contractually agreed net fees available to be distributed up to the parent company from the management fee-based operations (as described in more detail on pages 18 and 19) rather than their earnings, which management believes is helpful to aid understanding of the Group's underlying performance. The first of these, Group adjusted attributable profit, increased by £16.3m in the year to £36.2m (FY 2021: £19.9m) principally due to higher earnings in First Bus and lower central costs. Meanwhile the Group's EBITDA adjusted for First Rail management fees was £98.6m (FY 2021: £87.1m), an increase of £11.5m. As previously noted, these metrics define our leverage and dividend policies going forward, as set out on page 17.

Substantial adjusted cash flow in period, ahead of expectations

The Group's adjusted cash flow of £1,008.9m (FY 2021: £258.9m) in the year reflects positive operational cash flow from the continuing divisions as well as the disposal proceeds, offset by the repayment of debt and de-risking of certain retained liabilities. Underlying operational cash flow under IFRS 16 before capital expenditure and lease payments in the year was £263.4m (FY 2021: £1,358.7m), ahead of expectations due to better business performance and timing of certain working capital flows.

At year end, the Group had Adjusted Net Debt of £3.9m (FY 2021: £1,438.7m). IFRS 16 lease liabilities (predominantly First Rail rolling stock leases in the management fee-based operations where the Group takes no risk) decreased to £1,083.2m (FY 2021: £1,850.0m), while ring-fenced cash was £468.1m (FY 2021: £662.9m). Taken together, reported net debt including IFRS 16 lease liabilities and ring-fenced cash decreased to £619.0m (FY 2021: £2,625.8m).

Looking ahead

While there remains some uncertainty around the pace of recovery in light of the evolving nature of the pandemic and the broader macroeconomic backdrop, current trading is in line with our expectations, and the Group is expected to make significant further progress in FY 2023 (as set out in more detail in the divisional business reviews). This will be supplemented by a further c.£5m in previously announced central cost reductions as we expect to exceed our target of £10m per annum in savings compared with FY 2021 levels. Positive free cash generation after c.£90m cash capital expenditure on First Bus zero-emission fleet is expected to result in a small adjusted net cash position at the end of the current financial year (before any further sources of value which may be received).

Looking further ahead, in addition to delivering our 10% margin target and passenger volume and yield growth, First Bus will continue to actively develop our pipeline of growth opportunities in B2B, and will assess other adjacent areas, to drive profitable growth in the medium term. In First Rail we expect a broadly consistent level of contribution from First Rail's four management fee-based operations, with further growth from open access and additional rail services in the medium term. As indicated, the Group is also actively reviewing investment in some of the organic and inorganic opportunities adjacent to the existing portfolio in the UK and elsewhere, where this will create value for shareholders.

Sustainability developments

Our commitment to transforming our bus fleet to 100% zero emissions by 2035 continues to be well-supported, with £38m and £19m in co-funding announced from Westminster and Holyrood governments respectively during the year, supporting our investment in more than 260 state-of-the-art, zero emission buses. 

The Group began implementing the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations in 2021, a year ahead of the regulatory mandate, and has built on this during the FY 2022 reporting cycle. At the Group level, we have now set a science-based target aligned with a 1.5°C ambition to reduce Scope 1 and 2 emissions, and are completing the development of our Scope 3 target for validation by the Science Based Target initiative.

We have strengthened our climate-related governance processes, including the establishment during the year of the Board Responsible Business Committee to oversee the Group's practices and performance with respect to health, safety and sustainability, including our transition to net-zero. We have also worked with Marsh to complete an in-depth risk scenario analysis and quantitative financial impact assessment of our most material risks.

We continue to work to create a more diverse and inclusive business in what has been a ‘traditional’ industry. Our women’s development programmes are going from strength to strength, supporting women in frontline roles to transition into their first supervisory role; and from junior managerial roles to move into middle management. FirstGroup has also signed up to the ‘Change the Race Ratio’ programme, which commits the Group to taking action to increase our racial and ethnic diversity and create an inclusive culture. First Rail is now in the second year of programmes which support the career progression of employees from minority ethnic groups, and First Bus is now considering a similar approach. Since 2018, we have been making steady progress on attracting and hiring more employees from ethnically diverse backgrounds. We increased the proportion of applicants and hires from minority ethnic groups for the fourth successive year, with both now comparing positively to the ethnic diversity of the UK population.

The Group entered into a £300m sustainability-linked RCF in the year, under which the interest rate varies with the Group’s leverage and its performance against two sustainability KPIs, being the level of Scope 1, 2 and 3 carbon emissions per £m of revenue from its First Bus and First Rail operations, and the relative growth of its zero emission bus fleet in the UK.

During the year the Remuneration Committee also reviewed the role of sustainability and climate-related measures within the Group’s remuneration approach. Accordingly, our annual and long-term incentive plans are now linked to carbon intensity and the electrification of our transport services, reinforcing our commitment to incorporating climate-related issues into core business decisions.

Board changes

Last year we committed to an orderly and appropriate evolution of the Board in order to ensure it has the right balance of skills, experience and diversity for the Group's future needs.

As noted above, Graham Sutherland joined the Board as an Executive Director and took up the role of Chief Executive Officer in May 2022. Graham has a strong track record in the delivery of critical services and in creating value for shareholders in rapidly evolving regulatory and technological environments, including as Chief Executive Officer of KCOM Group plc, a LSE-listed telecommunications company, and in senior executive roles within BT Group PLC over 12 years. Graham has an established record in strategic development, as well as delivering enhanced financial and operational performance and engaging a diverse range of stakeholders including consumer, business and public sector customers. I look forward to working with him to maximise the opportunities that exist for growth and sustainable value creation.

We also welcomed Myrtle Dawes and Claire Hawkings to the Board as independent Non-Executive Directors in 2022, building on the appointments of Peter Lynas and Jane Lodge in June 2021 as outlined in the Group's report and accounts last year. Myrtle's background in managing complex, safety critical engineering projects, as well as her wealth of knowledge and experience in both the energy transition and improving customer service through technology, will be of significant value to the Group. Claire is a qualified environmental scientist and an experienced environmental, social and governance (ESG) professional with expertise in a range of issues, including sustainability strategy, governance, business transformation, commercial transactions, performance management, and energy transition. Claire chairs FirstGroup's recently established Responsible Business Committee and is a member of the Audit Committee. Myrtle is a member of the Responsible Business Committee.

David Robbie stood down from the Board as a Director in June 2021 and Martha Poulter, Matthew Gregory and Steve Gunning stood down from the Board in September 2021. Warwick Brady and Julia Steyn have decided not to seek re-election at the 2022 AGM and will therefore retire as Non-Executive Directors at the conclusion of the meeting. I would like to thank them all for the significant contributions they have each made to the Board and the company. Following the Board changes over the last 12 months, the Board is now Hampton-Alexander and Parker Review-compliant.

Our people

The dedication and resilience of our employees has been vividly demonstrated throughout the last two years and I am extremely proud of all of our employees who have more than risen to the challenges in support of our customers and communities. We are deeply saddened by the loss of employees due to the pandemic, and on behalf of the Board and all employees at FirstGroup, I offer our heartfelt condolences and support to their families, friends and colleagues.

Conclusion

FirstGroup has a clear purpose to provide vital transport services that connect communities. Our services offer efficient, cost effective and convenient travel options for passengers, both within and between the UK’s towns and cities. As critical long-term green infrastructure, public transport is fundamental to resolving the challenges of climate change, as well as air quality and congestion. The connections we offer are critical enablers of vibrant local economies and will play an important role in the UK’s ‘levelling up’ agenda and society's wider sustainability goals. I am confident that the actions we have taken have created a focused and resilient Group, with a strong platform from which to drive value for all our stakeholders.

David Martin

Chairman (Interim Executive Chairman September 2021 – 30 June 2022)

14 June 2022

Divisional review

First Bus

		£m		£m, change in constant currency1
52 weeks to 26 March	FY 2022	FY 2021
Revenue	789.9	698.9		+91.1
Adjusted operating profit	45.2	36.6		+8.5
Adjusted operating margin	5.7%	5.2%		+40bps
EBITDA	104.4	100.8		+3.5
Net operating assets	626.4	328.1
Capital expenditure	63.2	24.0

¹        Based on retranslating FY 2021 foreign currency amounts at FY 2022 rates.

First Bus reported revenue of £789.9m (FY 2021: £698.9m), principally reflecting a 49% increase in like-for-like passenger revenue as volumes recovered following the easing of pandemic travel restrictions, offset by lower levels of government support.

For the full year, overall passenger volumes increased by 91% compared with the prior year, including the temporary reduction in volumes following the emergence of the Omicron coronavirus variant. Commercial passenger volumes for shopping and leisure trips, discretionary travel, and journeys to and from school and university (which together made up more than half of our patronage pre-pandemic), have recovered well, although this is partially offset by the increase in working from home and a slower recovery in concessionary volumes. Overall the pace of recovery in concessionary and peak-time commuter travel has therefore been slower, with commercial passenger volumes at 68% and concessions at 59% of 2019 equivalent levels for the year.

For a substantial portion of FY 2022 First Bus and other regional bus operators effectively provided their assets and expertise to operate a government-funded bus system on a broadly cash break-even basis to ensure continuity of service during the pandemic. Under these arrangements, called the Covid Bus Service Support Grant-Restart (CBSSG-R) programme in England, operators were paid the costs of operation, less revenue received from customers and other public sector monies. Recoverable costs included all reasonable operational costs, including depreciation and allocated debt finance, together with any pension deficit funding.

Despite the temporary reduction in mileage in December and January due to higher numbers of employees self-isolating due to Omicron, First Bus operated an average of c.85% of the service mileage in FY 2022 compared with the equivalent period in 2019.

The division reported adjusted operating profit of £45.2m (FY 2021: £36.6m) in the year, reflecting the improvement in passenger volumes and changes in funding models noted above, partly offset by higher service levels and increasing utility costs. Statutory operating profit was also £45.2m (FY 2021: £30.8m).

Continued Government support as volumes rebuild

The CBSSG-R programme in England formally came to an end on 1 September 2021, and since that time delivery of local bus services across England has been reinforced by the DfT's £226.5m Bus Recovery Grant (BRG) package, which was allocated to regional bus operators based on mileage and volumes. In March 2022, as travel restrictions were eased and passenger volumes continued to rebuild, the DfT announced a further £150m in transitional funding for regional bus and light rail operators to run until September 2022. A condition of the transitional funding announced in March 2022 requires bus operators in England to undertake full network reviews and determine further network changes to help local authorities and other stakeholders understand the viability of all routes once the funding ends in the autumn.  

In early February, the Scottish Government announced a new £94m bus grant scheme, which includes an additional £40m to support passenger volume recovery. The scheme, which contains a profit sharing mechanism above a certain margin, started from 1 April, replacing the existing pandemic support arrangements and runs until the autumn 2022. The cost-plus recovery grant scheme in Wales is currently funded to the end of July 2022.

Digital innovation

First Bus is at the forefront of the digital transformation of the bus industry, thanks to our investment in real-time passenger volume data capture, GPS functionality and ticketing. We now have significantly more actionable data than in the past, transforming our ability to understand and assess passenger flows and make commercial decisions more efficiently. We are able to accurately observe how passenger demand patterns are evolving, which is allowing us to optimise our networks, timetables and pricing strategies to align with passenger needs and attract new customers. We modestly reduced scheduled mileage from 89% to 84% of pre-pandemic levels in April 2022 in part reflecting local driver shortage challenges, and will continue to refine our networks and timetables based on our new customer analytics capabilities as travel patterns evolve.

In addition, we continue to introduce new ticketing options to customers, making use of our real-time, granular data which allows us to match our pricing strategy to demand and customer preferences more effectively. These measures have also included daily and weekly contactless capping fares in Leicester, Stoke-on-Trent, Bristol and West Yorkshire in recent months, with more areas to follow.

We also continued the roll out of innovative functionality to our customers during FY 2022, building on our award-winning mobile app. This included successfully launching 'tap on tap off' payment technology and ticketing options on our buses in West Yorkshire and Glasgow. This payment technology is now installed on half of our fleet. During the year, 70% of our ticket transactions were completed using contactless, mobile or other digital payment methods including our app. Not only does this deepen our knowledge of customers' needs and enable us to structure our pricing models more efficiently, but it also improves our overall yield by offering flexible tickets driven by customers’ needs.

As well as investing in our data capture capability and mobile app, we are partnering with a specialist data company to roll out their scheduling platform across a number of our operations over the coming year. This follows successful trials which delivered significant improvements in punctuality throughout the day and more resource efficient operations, resulting in lower lost mileage and positive passenger and driver feedback.

Margin improvement

In addition to the operating leverage to volume growth and the realignment of our networks and pricing, we continued to progress the cost reduction and operational efficiency programmes in FY 2022. To date, these have delivered annualised savings of c.£20m since 2019, with further engineering savings expected. In FY 2022 increases in a number of key input costs, including fuel and utility costs, were largely offset by our fuel hedge programme which provides flexibility to respond to changes in prices over time. We currently have 87% of our FY 2023 exposure hedged at 37.5p per litre and FY 2024 is currently 53% hedged at 43.3p per litre.

As a major employer, the recruitment, training and management of our employees is a continuous focus. In FY 2022 we rolled out a number of changes to ensure that we continue to offer an attractive and competitive employee proposition both for our existing dedicated team and also for new and prospective employees, as industry-wide driver shortages remain elevated. In FY 2022 we concluded wage agreements for nearly two-thirds of our operations, a number of which are multi-year agreements, with others anticipated to be concluded in the next few months.

National Bus Strategy and other policy updates

Buses have a central role to play in achieving many of society’s objectives. For example, in February 2022 the UK Government published its Levelling Up White Paper which reinforced the central role public transport plays in delivering economic growth and helping to create connected, vibrant and sustainable communities. This was followed in April 2022 by the DfT’s announcement of more than £1bn of Bus Service Improvement Plan (BSIP) funding for 31 counties, city regions and unitary authorities throughout England. Local areas where First Bus has a presence received nearly a quarter of the funding commitments. We welcome this funding which will help local authorities and bus operators accelerate the delivery of better, more reliable services for passengers, in line with the ambitions of the National Bus Strategy.

We worked collaboratively with our local authority partners in England on their BSIP bids. The BSIP development process highlighted – and in some cases extended – the level of local ambitions and aspirations to work in partnership with innovative, experienced operators to improve bus services. The bids were bespoke to the local needs of each area and focused on actions to improve bus priority measures including bus lanes, funded fares reductions for certain groups of passengers, frequency and network enhancements on key routes, and further 'capped' period ticketing schemes. The vast majority of these measures are to be delivered in First Bus local areas through Enhanced Partnerships (rather than franchising).

In March 2022, the Mayor of Greater Manchester announced an accelerated roll out of a bus franchising scheme in the city region (4% of First Bus divisional revenue in FY 2022 was in the area). As an experienced operator with activities in a number of regions across the UK, we will assess and consider all business models as long as we can generate value for shareholders and good services for our customers. 

In FY 2022 the Scottish Government committed to funding free bus travel for all under-22s from 31 January 2022, which we expect should also enhance passenger volumes over time.

Fleet decarbonisation

As leaders in sustainable mobility, we are fully aligned and working closely with central and local governments across the UK to support the delivery of national decarbonisation ambitions and commitments, including zero emission bus fleets. In 2020 we announced our commitments to operate a fully zero emission fleet by 2035 and not to order any new diesel buses after 2022. As an early mover in the sector, and an operator who strives to deliver innovation for customers, we are leading the industry in trialling and deploying various modes of vehicles and technologies across our fleet and at our depots, including electric, hydrogen and bio-methane solutions.

In electrification, we are partnering with a number of suppliers including new bus suppliers to the market, such as Arrival, as well as working with other longstanding partners including Alexander Dennis, Wrightbus, Yutong, Switch, and others. We are also looking at opportunities for new sources of revenue created by the transition of our fleet and depot infrastructure to electricity.

In FY 2022 we continued to be successful in securing government funding assistance for more than 260 zero emission vehicles which will more than double our zero emission fleet. In October 2021, we were awarded £13m in co-funding to support 68 new electric vehicles (EVs) in Leicester as part of the first 'fast-track' round of Zero Emission Buses Regional Area (ZEBRA) funding under the NBS. Subsequently, in March 2022, the UK Government announced further ZEBRA funding which included £25.2m towards a total of 125 EVs in four of our areas; York, Leeds, Norfolk and Portsmouth. First Bus has committed to invest a further £46m to help fulfil these projects over the course of the next two years, to deliver a total of 193 new EVs in England. First Bus will convert depots and install the necessary infrastructure to operate these vehicles in partnership with the local electricity distribution network operators and local authorities.

In Scotland, First Glasgow and First Aberdeen were awarded a combined £18.6m in Transport Scotland’s Scottish Zero Emission Bus (ScotZEB) funding in March 2022, to deliver 74 new EVs and related infrastructure across both cities by spring 2024, with First Bus committing to invest a further £16.4m. This new investment will see First Glasgow adding to the 126 new EVs that are being delivered to its Caledonia depot, taking the total number of First Bus EVs operating in Glasgow to 200 by the end of FY 2024, and accounting for more than 40% of the total buses operating out of the two First Glasgow city depots. First Aberdeen will have 24 new EVs, meaning its fleet will be made up of 30% zero emission vehicles. In 2021 First Aberdeen launched the world’s first hydrogen powered double decker buses into service in partnership with Aberdeen City Council, and an additional ten vehicles are currently being introduced into the fleet.

During FY 2022 our Glasgow Caledonia depot continued its transformation into the largest electric vehicle charging hub in the UK. By the end of the financial year all of the chargers had been installed and 95 EVs were in operation. In November 2021, First Bus selected Hitachi Europe as prime strategic partner for the decarbonisation programme at the Caledonia depot, under which Hitachi will provide bus batteries 'as a service' for First Glasgow’s electric fleet, smart charging software and will collaborate on other low carbon technology such as solar panels and battery energy storage solutions for the site. The depot held a joint event with Hitachi for delegates of the UN COP26 Climate Change Conference, during which we hosted over 1,000 visitors. First Glasgow also recorded over 137,000 delegate trips on board our new EV fleet as a key part of the conference’s official shuttle service.

In order to support our ambitious decarbonisation targets, we have created a strategy to attract and retain talent and grow the future skills we know the industry will need. As part of First Bus’ apprenticeship programme, we have partnered with Reaseheath College in Cheshire to establish the UK’s first bus and coach engineering academy delivering tailored training to First Bus apprentice engineering technicians in the maintenance of next generation, zero emission transport vehicles.

B2B and Aircoach

As an experienced operator that transports large volumes of passengers on a daily basis, First Bus is well placed to make use of our assets and capabilities to develop and grow our share of the B2B bus services market. In FY 2022 we successfully grew these operations and we have further contracts in the pipeline.

In October 2021, we acquired the 50% shareholding we did not already own in Somerset Passenger Solutions (SPS), which operates the contract to provide passenger transport for the construction workers employed at the EDF Hinkley Point C nuclear power station in Somerset, for a consideration of up to £10m. SPS employs around 450 people running a 145 vehicle operation, delivering shuttle services seven days a week to and from the HPC site, with annual revenues of c.£37m. In addition, First Bus was awarded significant multi-site contracts in October 2021 to operate passenger transport services for a major distribution centre customer.

In Ireland, we are seeing patronage numbers recovering at our Aircoach service, following the easing of travel restrictions. We have successfully repositioned the business for growth, increasing its network of intercity routes, launching a new route from Galway to Dublin, implementing new digital pricing and securing a multi-year car park contract at Dublin airport.

Looking ahead

Although clearly sensitive to the broader consumer spending outlook, we expect First Bus volumes to continue to increase in the current financial year with performance weighted to H2 2023, reflecting our increasing ability to adapt operations to passenger demand and manage the inflationary environment once recovery funding tapers off. When the current funding scheme comes to an end in England in the autumn, we expect to implement a further round of network realignments to ensure that our services are aligned with evolving passenger patterns.

Looking further ahead, in addition to delivering our 10% margin target and passenger volume and yield growth, First Bus will continue to actively develop our pipeline of growth opportunities in B2B, and will assess other adjacent areas including potentially some inorganic opportunities in the UK and internationally, to drive profitable growth in the medium term.

First Rail

		£m
Twelve months to 31 March	FY 2022	FY 2021		£m, change
Revenue from management fee-based operations	3,762.2	3,596.7		+165.5
Revenue from open access and additional services	119.2	69.8		+49.4
Inter-divisional eliminations	(80.2)	(46.6)		(33.6)
First Rail revenue	3,801.2	3,619.9		+181.3
Attributable net income from management fee-based operations1	45.5	42.3		+3.2
Gross up for tax, minorities and IFRS 16	52.0	76.2		(24.2)
Adjusted operating (loss) from open access and additional services	(9.7)	(10.4)		+0.7
First Rail adjusted operating profit	87.8	108.1		(20.3)

¹     Represents the Group's share of the management fee income available for dividend distribution from the GWR, SWR, TPE and WCP (incorporating Avanti) contracts with DfT on a pre-IFRS 16 basis net of tax and minority interests as described in more detail on pages 18 and 19. See also note 4 to the financial statements for a reconciliation to the segmental disclosures.

The First Rail division’s total revenue increased modestly in FY 2022 to £3,801.2m (FY 2021: £3,619.9m). Under the contractual arrangements in place for our four management fee-based Train Operating Companies (TOCs), changes in passenger revenue no longer impact our financial performance during the year and going forward. As a result, although like-for-like passenger revenues increased relative to FY 2021, there was an offsetting reduction in income received from the DfT.

Passenger volumes increased in FY 2022 following the easing of travel restrictions in England from spring 2021 and again in February 2022, when the restrictions implemented by Government in response to the Omicron variant were eased. In the leisure market, volumes have recovered particularly well, with demand on some flows higher than before the pandemic. We continue to work closely with the DfT on appropriate service provision, with services running at c.87% of 2019 equivalent levels on average during the year. We experienced some temporary shortages of employees during FY 2022, resulting from increased self-isolation, but this did not materially impact our financial performance. Open access and additional services contributed £119.2m in gross revenue in the year (FY 2021: £69.8m) before interdivisional eliminations.

In FY 2022 the four management fee-based operations delivered overall passenger and other performance metrics in line with our expectations and accordingly, have recorded actual performance fees and accrued for the fixed fees plus two-thirds of the performance fees as a result.

Adjusted operating profit was £87.8m (FY 2021: £108.1m), which principally reflects the earnings associated with the management fee-based contracts and final agreement on contractual matters related to settlements of claims under GWR's Direct Award and settlements at TPE relating to the pre-Emergency Measures Agreement period. Open access losses were less than expected on start-up of the new Lumo open access service and at Hull Trains due to stronger than anticipated passenger demand, while the adjusted operating profit contribution from additional services increased, with Mistral Data, London Trams, First Customer Contact and consultancy ahead of the prior year, partially offset by start-up costs of evo-rail. The division reported a statutory operating profit of £91.8m (FY 2021: £203.8m) reflecting a £4.0m final credit adjustment in relation to TPE and SWR franchise termination sums.

Rail attributable net income from management fee-based operations – being the Group's share of the management fee income available for dividend distribution from the GWR, SWR, TPE and WCP (incorporating Avanti) contracts with the DfT – was £45.5m (FY 2021: £42.3m). The Group receives an annual dividend from the TOCs reflecting the post-tax net management and performance fees. These dividends are available to be paid after September following the completion of the TOC audited accounts, and dividends received by the Group from these operations in the year was £51.5m, representing attributable net earnings up to 31 March 2021.

Transition to National Rail Contracts

At the start of the financial year all our First Rail contracts were being operated under the terms of the emergency arrangements put in place by the UK Government in response to the pandemic. In May 2021, SWR and TPE were the first TOCs to transition to the Government’s new National Rail Contracts (NRCs). Under the NRCs, the DfT retains substantially all revenue and cost risk (including for fuel and wage increases). There is a fixed management fee and the opportunity to earn an additional performance fee. The punctuality and other operational targets required to achieve the maximum level of performance fee are designed to incentivise service delivery for customers. The NRCs achieve a more appropriate balance of risk and reward between operators and the Government and carry no significant contingent capital risk. SWR and TPE continue to be fully consolidated in the Group accounts with the net cost of operations and capital expenditure to be funded in advance by the DfT. The SWR and TPE NRCs will run to May 2023 with potential extensions to May 2025.

In March 2022 the DfT issued a Prior Information Notice which provides for a NRC for TPE starting in Spring 2023 with a minimum core term of four years with up to a further four years at the DfT’s discretion.

Discussions are ongoing with DfT regarding NRCs for our other two management fee-based operations, GWR and West Coast Partnership (incorporating Avanti). The West Coast Partnership NRC that will follow the current Emergency Recovery Measure Agreement (which runs to October 2022) is expected to be awarded by the DfT in autumn 2022 with a duration of up to 10 years. This is expected to incorporate continuing as the shadow operator for HS2 before transitioning to operating passenger services on the route when it opens in the late 2020's. GWR's is expected to last up to six years to June 2028. In addition to the NRCs, in FY 2022 TPE was awarded additional work to assist in the Transpennine Route Upgrade project to upgrade railways in the North of England, worth c.£5m in fees over two years. The work on this industry change project further demonstrates our expertise in rail, as well as our ability to generate earnings from additional services to the wider industry.

Beyond the NRCs, the Government have begun engaging with rail operators about the next generation of Passenger Service Contracts which will focus private sector operators on continuing to run services efficiently and providing reliable and high-quality services for passengers, under the auspices of the planned new Great British Railways organisation.

Open access operations

Our two open access operations Lumo and Hull Trains primarily serve leisure passengers, which as a segment has seen a strong recovery in passenger demand, in some areas reaching higher levels than before the pandemic. As a result of this recovery in demand, both operations made good progress in FY 2022 and are on target to deliver a profit in FY 2023. This follows a combined £16.6m loss in FY 2022 as a result of the start-up costs for Lumo and a period of intermittent suspensions for Hull Trains due to pandemic-related travel restrictions, when open access operations were not eligible for emergency pandemic support from the DfT. Having restarted operations following the ending of lockdown restrictions in the spring, Hull Trains has seen encouraging passenger volumes due to the strong leisure demand referenced above.

Our Lumo open access service was successfully launched in October 2021. Its all-electric leased fleet provides a value for money and sustainable way to travel between London, Newcastle and Edinburgh, all routes where a significant number of passengers still travel by air. Lumo is currently outperforming initial expectations as a result of the successful start-up, which has delivered strong passenger bookings and positive yields.

Customer experience

Our operations continue to make use of their industry knowledge and expertise to work collaboratively with industry partners and stakeholders to enhance our service offering. During FY 2022 flexible season tickets were introduced across the country and we have continued to develop our suite of mobile ticketing and customer apps. New functionality includes the ability for SWR passengers to check car park capacity and a customer loyalty scheme. On 1 November 2021, SWR reopened the Isle of Wight’s railway following a £26m investment into trains, stations and infrastructure, funded by the DfT, Isle of Wight Council, and Solent Local Enterprise Partnership. In March 2022 Avanti became the first UK TOC to offer an additional class of travel as part of its services, Standard Premium, which gives customers a greater choice of facilities; and have launched a seat picker service in the year. On 20 November 2021, GWR reopened the Dartmoor Line in partnership with Devon County Council and Network Rail, the first to be reinstated under the DfT’s ‘Restoring your Railway’ initiative.

Innovation and adjacent rail opportunities

During the year we continued to develop, market and deploy our additional rail customer, industry and technology tools and services. Most of these were initially developed to strengthen our offering to passengers on our large passenger rail operations, but are increasingly being marketed to third party operators.

Our innovative evo-rail track-to-train superfast rail-5G technology uses trackside poles to provide a connectivity solution that we expect will improve the passenger experience and help to encourage modal shift towards rail. The evo-rail technology is generating strong interest, and following successful trials on the Isle of Wight, it is being deployed on the SWR network. The business is also conducting trials in Northern Spain, with further negotiations in progress in the UK and abroad.

Mistral Data, our analytics business, now has 13 software systems in operation, built on native cloud technology, allowing them to be quickly deployed and scaled up. They range from revenue management and business intelligence, to single views of train operations and customer transactions that enable real-time integration and the sharing of complex data. This is enabling our teams to identify and resolve problems before they arise, using real-time data pulled from several systems. The software also provides information to our customers via website and mobile app channels on the formation and facilities available on each train, allowing them to plan their journey with confidence.

At First Customer Contact, our passenger service centre, which was built based on scalability and the latest technology, we further developed and integrated a variety of customer-facing and back office functions including ticket refund and revenue protection capability. The shared passenger service centre operates at a lower cost than our previous outsourcing arrangements and provides a single service for customer queries across several First Rail operations. 

We have also continued to provide our consultancy expertise as ‘shadow operator’ to the HS2 infrastructure project during FY 2022. During the last financial year we completed more than 36 deliverables on time and in budget. These included technical and financial baseline reviews of operational plans for HS2, further analysis of the travel market on the West Coast corridor to support HS2’s objective for local economic growth, and input into the HS2 rolling stock procurement, which was awarded to a Hitachi/Alstom joint venture in December 2021.

London Trams operated a full service throughout the year. During FY 2022 TFL’s five year periodic funding review was completed in line with expectations.

Fleet upgrades

First Rail has an important contribution to make in meeting the challenges of climate change, and we are working with our partners to reduce carbon emissions through a number of initiatives including the introduction of electric trains to replace diesel where possible. Our expertise and capability will help the Government deliver its ambition to remove all diesel-only trains from service in the UK by 2040.

GWR have taken delivery of the UK’s first tri-mode train which can use overhead wires, third rail or diesel power. New suburban rolling stock for SWR is expected to enter service this year and a new depot at Feltham was completed in the year to stable this fleet. New all-electric and bi-mode trains will also be introduced by Avanti in FY 2023 alongside the refurbishment of the operator’s electric Pendolino fleet through a £117m investment programme financed by the fleet owners Angel Trains; the first fully refurbished Avanti Pendolino entered service in April 2022 with the upgrade programme expected to run until 2024.  

We are also working to increase connectivity with other transport modes, with new, secure bike spaces, bus connections and car parking introduced across our networks in the period. These included investment in a new multi-storey car park and station forecourt upgrade completed at Taunton station in 2021, the completion of a cycle hub at Newbury Station with 360 enclosed cycle spaces, the roll out of secure cycle parking at ten of Avanti’s stations and agreeing plans to construct a new £7m cycle path in Cheltenham.

Rail policy

We have long advocated for a more sustainable balance of risk and reward for all parties which would underpin a longer-term approach to the railway with passengers at its centre. We welcomed the Government's Williams-Shapps Plan for Rail in May 2021, which aims to put the expertise, innovation and experience of private sector rail operators at the heart of the new model for providing efficient, reliable and high quality services for passengers in the coming years. We look forward to the enabling legislation which is expected in the next Parliament.

The rail sector is embarking on a period of reform necessary to modernise industry practices and secure the long-term future of the industry. A number of trade unions have announced plans for industrial action at train operating companies across the UK and at Network Rail. Notwithstanding the fact that under the management fee-based contracts operators bear no revenue risk and limited cost risk, prolonged industrial action presents enormous challenges for everyone, and most importantly for our passengers who rely on these services to go about their daily lives. We will work closely with our industry partners to do all that we can to minimise the effects of disruption for our passengers.

First Rail has on average operated 20% of the UK passenger rail market by revenue since 2007, and currently has a c.27% market share. As a result, we have a strong track record of delivery on major projects such as fleet introductions, capital projects on behalf of Network Rail, customer service innovations and managing the impact of significant infrastructure changes, from network electrification through to route upgrades, and through our experience as a ‘shadow operator’ on the HS2 infrastructure project. We believe this unrivalled knowledge and expertise stands us in good stead as the industry structure in the UK continues to evolve.

As the UK’s largest operator we are well placed both to drive increased patronage and to generate resilient and consistent returns for shareholders as the UK passenger rail industry continues its evolution to a more customer-focused and sustainable railway system that works better for all parties.

Looking ahead

In FY 2023 we expect the four management fee-based operations to continue to deliver performance metrics in line with management expectations, and with our open access operations currently trading ahead of plan as a result of strong leisure demand, First Rail's performance in FY 2023 is expected to reflect a positive contribution from these businesses.

Looking further ahead, we expect a broadly consistent level of contribution from First Rail's four management fee-based operations, with further growth from open access and additional rail services in the medium term.

Discontinued operations – First Student, First Transit and Greyhound US

As noted elsewhere, the sale of First Student and First Transit to EQT Infrastructure completed on 21 July 2021, and the sale of Greyhound Lines Inc to a subsidiary of FlixMobility GmbH on 21 October 2021.

First Student revenue was $669.5m or £479.5m (FY 2021: $1,617.7m or £1,226.2m) in the period prior to completion of the sale on 21 July 2021, reflecting the reopening of more schools compared with the prior period. At the adjusted operating level, profit increased significantly to $123.4m or £88.2m (FY 2021: $78.1m or £55.8m) as a result of the increased activity levels, and no depreciation charge in the current year due to the division being classed as held for sale. Statutory profit of £73.4m (FY 2021: £62.1m) reflects a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims and also a one-off charge for accelerated state and federal employment taxes.

First Transit recorded revenue of $417.7m or £299.7m (FY 2021: $1,277.4m or £977.0m) in the period prior to completion of the sale on 21 July 2021, with a high level of service continuing to be maintained despite the pandemic, as it provides essential transportation options for passengers. Adjusted operating profit was $22.1m or £15.6m (FY 2021: $69.1m or £51.7m) up to the sale, including no depreciation charge in the current period due to the division being classed as held for sale. The division continued to win new business in the period, and remains well positioned for further growth. Statutory profit of £9.1m (FY 2021: £20.5m) reflects a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims.

Greyhound’s US operations generated revenue of $301.4m or £217.7m (FY 2021: $422.3m or £322.8m) in the period prior to completion of the sale on 21 October 2021, reflecting an improvement in passenger demand as pandemic restrictions eased, partially offset by lower CARES Act receipts in the period. Through continued cost management, federal funding receipts and other actions Greyhound was able to increase adjusted operating profit to $23.0m or £16.3m (FY 2021: $2.0m or £0.5m) in the period prior to sale. Statutory profit of £44.6m (FY 2021: £62.7m) reflects the partial reversal of prior year impairments of Greyhound, gain on disposal of properties, impairment of certain properties as well as a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims prior to the reinsurance risk transfer agreement.

Financial review

FY 2023 financial outlook and financial policy framework

The financial outlook and financial policy framework for the ongoing Group for the financial year ending in March 2023 (FY 2023) and beyond can be summarised as follows:

FY 2023 outlook	While some uncertainty remains around the pace of recovery in light of the pandemic and broader macroeconomic backdrop, current trading is in line with our expectations, with the Group expected to make significant further progress First Bus: although sensitive to the broader consumer spending outlook, expect volumes to continue to increase with performance weighted to H2 2023, reflecting our increasing ability to adapt operations to passenger demand and manage the inflationary environment once recovery funding tapers off in the autumn First Rail: expect the four management fee-based operations to continue to deliver performance metrics in line with management expectations, with a positive contribution from our open access operations Other: on track to realise further c.£5m in previously announced central cost savings (exceeding £10m p.a. saving target over FY 2021); interest including expected NRC award for GWR c.£70m (of which c.30% cash); 19% UK corporation tax Cash flow: Positive free cash generation expected, resulting in a small adjusted net cash position at end of current financial year (before any further sources of value which may be received)
Investment	First Bus: c.£90m per annum in net cash capex, principally transition of bus fleet to 100% zero emissions by 2035 First Rail: continues to be cash capital-light, with any capital expenditure required by the four management fee-based operations fully funded under the new contracts Growth: actively reviewing adjacent organic and inorganic opportunities in the UK and elsewhere, where this creates value for shareholders
Balance sheet	Less than 2.0x Adjusted Net Debt: rail management fee-adjusted EBITDA1 target in the medium term Significant balance sheet strength
Returns for shareholders	Dividends: regular annual dividends to begin ahead of plan: final dividend of 1.1p per share proposed Targeting progressive dividend 3x covered by Group adjusted attributable profit2 going forward Cash returns: potential for further additional distributions to shareholders over time

¹ First Bus and First Rail EBITDA from open access and additional services, plus First Rail attributable net income from management fee-based operations, minus central costs (see also page 19).

²   First Bus and First Rail adjusted operating profit from open access and additional services, plus First Rail attributable net income from management fee-based operations, minus central costs, minus cash interest, minus tax (see also page 18).

Revenue

Revenue from continuing operations increased to £4,591.1m (FY 2021: £4,318.8m), principally reflecting improving passenger volumes in First Bus partially offset by lower receipts from pandemic-related government grant funding and increased revenue in First Rail.

Revenue from discontinued operations was £996.9m (FY 2021: £2,526.0m), reflecting the trading results of First Student and First Transit in the stub period of FirstGroup's ownership to 21 July 2021 and Greyhound's US operations in the stub period of FirstGroup's ownership to 21 October 2021. Overall, total revenue reduced to £5,588.0m (FY 2021: £6,844.8m), principally reflecting the stub year contributions from discontinued operations.

	52 weeks to 26 March 2022				52 weeks to 27 March 2021
	Revenue £m	Adjusted operating profit1 £m	Adjusted operating margin1 %	Revenue £m		Adjusted operating profit1 £m	Adjusted operating margin1 %
First Bus	789.9	45.2	5.7	698.9		36.6	5.2
First Rail	3,801.2	87.8	2.3	3,619.9		108.1	3.0
Group items2	-	(26.3)		?		(32.5)
Continuing operations	4,591.1	106.7	2.3	4,318.8		112.2	2.6
First Student	479.5	88.2	18.4	1,226.2		55.8	4.6
First Transit	299.7	15.6	5.2	977.0		51.7	5.3
Greyhound US	217.7	16.3	7.5	322.8		0.5	0.2
Discontinued operations	996.9	120.1	12.0	2,526.0		108.0	4.3
Total	5,588.0	226.8	4.1	6,844.8		220.2	3.2
North America in USD	$m	$m	%	$m		$m	%
First Student	669.5	123.4	18.4	1,617.7		78.1	4.8
First Transit	417.7	22.1	5.3	1,277.4		69.1	5.4
Greyhound US	301.4	23.0	7.6	422.3		2.0	0.5
Total North America (discontinued operations)	1,388.6	168.5	12.1	3,317.4		149.2	4.5

^{1   ‘}Adjusted’ figures throughout this document are before the gains on sale of the North American businesses, partial reversal of impairment charges on Greyhound and certain other items as set out in note 4 to the financial statements. The statutory operating profit including discontinued operations for the year was £806.1m (FY 2021: £285.8m) as set out in note 3.

²  Central management and other items.

Adjusted operating performance

Adjusted operating profit from continuing operations was ahead of expectations at £106.7m (FY 2021: £112.2m), with the impact of the Omicron-related restrictions on First Bus in the second half more than offset by a stronger First Rail performance than was expected at the start of the year and central cost reductions ahead of plan. Westminster and the devolved governments continued to procure service capacity from First Bus through CBSSG-R for most of H1 2022 in England and for the whole year in Scotland and Wales, while fee income from the new low-risk management contracts and final settlement of certain prior-period contractual claims in First Rail were partially offset by open access rail losses, as previously indicated. The net impact of the add-back under IFRS 16 in the year was £37.3m (FY 2021: £34.8m) reflecting the currently relatively short durations of the rolling stock leases which broadly align to the management fee-based contracts in First Rail.

Adjusted operating profit from discontinued operations of £120.1m (FY 2021: £108.0m) relates to the part year contributions from the North American operations, which experienced an increased volume of travel activity compared with equivalent period in FY 2021, ongoing receipt of grant funds by Greyhound and no depreciation being charged to the income statement in the period with the divisions classed as held for sale under accounting rules. Overall Group adjusted operating profit increased by £6.6m to £226.8m (FY 2021: £220.2m).

The Group's adjusted attributable profit alternative performance measure is calculated as follows and increased considerably in the year:

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
First Bus adjusted operating profit	45.2	36.6
Attributable net income from First Rail management fee-based operations1 – Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts	45.5	42.3
First Rail adjusted operating profit from open access and additional services	(9.7)	(10.4)
Group central costs (operating profit basis)	(26.3)	(32.5)
Cash interest2	(20.7)	(21.3)
Tax3	2.2	5.2
Group adjusted attributable profit	36.2	19.9

¹     A reconciliation to the segmental disclosures is set out in note 4.

²     Pro forma interest charge excluding notional interest, lease interest on IFRS 16 Right of Use assets and interest on discontinued operations.

³     Pro forma taxation at 19%.

A reconciliation of the Group's adjusted attributable profit measure to adjusted earnings after tax is shown below:

	FY 2022 Group adjusted attributable profit £m	Movements			FY 2022 Adjusted earnings after tax £m
		Adjusted First Rail earnings to IFRS 16 basis £m	Gross up tax and minority interests £m	Actual interest and tax £m
First Bus adjusted operating profit	45.2	-	-	-	45.2
Attributable net income from First Rail management fee-based operations1	45.5	34.0	18.0	-	97.5
First Rail adjusted operating profit from open access and additional services	(9.7)	-	-	-	(9.7)
Group central costs (operating profit basis)	(26.3)	-	-	-	(26.3)
Subtotal	54.7	34.0	18.0	-	106.7
Cash interest2	(20.7)	(33.1)	-	(28.1)	(81.9)
Tax3	2.2	-	(12.4)	7.5	(2.7)
Minority interest	-	-	(5.6)	-	(5.6)
Total	36.2	0.9	-	(20.6)	16.5

¹     A reconciliation to the segmental disclosures is set out in note 4.

²     Pro forma interest charge excluding notional interest, lease interest on IFRS 16 Right of Use assets and interest on discontinued operations.

³     Pro forma taxation at 19%.

The Group's EBITDA adjusted for First Rail management fees performance measure is calculated as follows and also increased year-on-year:

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
First Bus EBITDA1	87.6	84.5
Attributable net income from First Rail management fee-based operations2 – Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts	45.5	42.3
First Rail EBITDA from open access and additional services1	(9.7)	(8.9)
Group central costs (EBITDA basis1)	(24.8)	(30.8)
Group EBITDA adjusted for First Rail management fees	98.6	87.1

1     IAS 17 basis.

2     A reconciliation to the segmental disclosures is set out in note 4.

Reconciliation to non-GAAP measures and performance

Note 4 to the financial statements sets out the reconciliations of operating profit/(loss) and loss before tax to their adjusted equivalents.

The principal adjusting items in relation to the continuing business are as follows:

Gain on disposal of Greyhound Canada properties

An overall gain of £13.8m was realised on the disposal of Greyhound Canadian properties, the largest of which was the disposal of the Toronto site.

Greyhound Canada closure

£1.7m in relation to Greyhound Canada restructuring and closure costs were incurred during the period.

First Rail termination sums

£4.0m credit representing final adjustments of residual matters regarding the TPE and SWR termination sums.

The principal adjusting items in relation to the discontinued operations are as follows:

Other intangible asset amortisation charges

The amortisation charge for the year was £0.4m.

Gain on sale of First Student and First Transit

As a result of the disposal of First Student and First Transit, a gain on sale of £501.1m was realised. This includes a gain of £450.6m as a result of the unrealised translation reserves that have been realised on the disposal of First Student and First Transit. This represents the cumulative foreign currency gains on these businesses since date of original acquisition and arises primarily from the Laidlaw acquisition in 2007 when the US Dollar rate was approximately $2.00:£1. See note 14 for more details.

Other costs associated with the disposal of First Student and First Transit

£32.7m of costs were incurred in the year associated with the disposal of First Student and First Transit that were not directly attributable to the sale. These costs are therefore not included in the gain on disposal calculation. These comprise IT and other separation related costs, certain management bonuses and incentives triggered by the disposal, premium on hedging costs in relation to disposal proceeds, lease termination and certain other costs.

Gain on sale and partial reversal of prior year impairments of Greyhound

As a result of the terms of the disposal of the Greyhound US business, there was a gain on disposal of £109.0m (including £92.8m of historic foreign currency gains on this business) and a credit of £55.4m representing the partial reversal of the prior years’ impairment charges on tangible fixed assets and intangible assets which was recorded at the half year.

Other costs associated with the disposal of Greyhound

During the period there was a charge of £11.1m relating to the sale of Greyhound comprising principally legal and professional costs and certain other costs written off prior to disposal.

Employment taxes relating to First Student and First Transit

There was a charge of £6.6m during the period due to a one-off charge for accelerated state and federal employment taxes in relation to First Student and First Transit.

North American insurance provisions

During the period there was a charge of £31.5m for insurance costs comprising £11.4m in relation to First Student and First Transit due to a deterioration in respect of prior years’ claims, and a charge of £20.1m for additional provisions required in Greyhound also due to a deteriorating insurance position on prior year claims.

In addition there was a charge of £19.3m for the de-risking of legacy Greyhound insurance liabilities representing the premium paid to de-risk these compared to the book value of the liabilities.

Gain on disposal of properties and impairment of land and buildings

An overall gain on disposal of Greyhound US properties of £6.5m was realised during the year.

An impairment charge of £7.2m was made on the Greyhound Miami and Pleasantville properties as the market value of these properties was less than the book value. It is anticipated that these properties will be disposed of in 2022 as part of a portfolio sale of the remaining Greyhound properties.

The adjusting items in relation to finance cost adjustments – continuing operations are as follows:

Total make-whole costs (bonds and facilities)

Costs of £50.0m comprise a charge of £30.4m for the early repayment of the $275m US Private Placement (USPP) and a charge of £19.6m for the early repayment of the £325m 2022 bond.

Write-off of unamortised bridge, bond and facility costs

There was a charge of £8.6m for unamortised fees which had been capitalised and were being amortised over the terms of the £325m 2022 bond, the $275m USPP and various bank facilities, including the £800m RCF and bridge facilities which were cancelled on completion of the sale of First Student and First Transit.

Discontinued operations

With the completion of the sale of First Student and First Transit to EQT Infrastructure on 21 July 2021, the financial results of the disposal group have been classified as discontinued operations on the face of the income statement and the balance sheet and cash flow statement adjusted accordingly. The transaction was structured on a 'locked box' basis as of 27 March 2021, with all economic benefits or costs for the buyer's account from that date onwards, albeit these will continue to be disclosed as discontinued operations up to the point of transaction completion.

On 21 October 2021 the Group announced the sale of Greyhound lines Inc. to a wholly owned subsidiary of FlixMobility GmbH. Accordingly, Greyhound US is also classified as discontinued operations and the retained assets and liabilities as held for sale as at the balance sheet date. Greyhound Canadian operations were not sold but were permanently closed in May 2021. Comparatives for this business are included within continuing operations albeit non-core activities.

Group statutory operating profit

Statutory operating profit from continuing operations was £122.8m (FY 2021: £171.0m) reflecting the £16.1m credit from net adjusting items compared with £58.8m credit in net adjusting items in FY 2021.

Finance costs and investment income

Net finance costs were £152.0m (FY 2021: £170.0m) with the decrease principally due to lower finance costs following the repayment of leases and debt after receipt of the First Student and First Transit disposal proceeds partly offset by debt make-whole costs of £50.0m in total in relation to the early settlement of the £325m 2022 bond and the $275m US Private Placement (USPP).

Profit before tax

Statutory loss before tax was £(17.7)m (FY 2021: profit of £29.1m). Adjusted profit before tax as set out in note 4 to the financial statements was £133.4m (FY 2021: £50.2m) including discontinued operations. An overall credit of £520.7m (including £58.6m of adjusting items in net finance costs) (FY 2021: £65.6m) for adjustments principally reflecting the profit on sale of the North American businesses and partial reversal of impairment charges on Greyhound, resulted in a total profit before tax of £654.1m (FY 2021: £115.8m).

Tax

The tax charge, on adjusted profit before tax including discontinued operations for the year was £20.4m (FY 2021: £4.2m), representing an effective tax rate of 15.3% (FY 2021: 8.4%). The increase in effective rate is due to a significant increase in the adjusted profit before tax in the current year, mainly due to a reduction in adjusted finance costs, resulting in the reconciling items that reduce the tax charge (which were of a similar value to the previous year) having a lower impact in percentage terms in the current year. There was a tax credit of £21.8m (FY 2021: charge of £30.6m) relating to adjusting items and a tax charge of £13.5m (FY 2021: credit of £10.1m) from adjustments to deferred tax. The total tax charge, including tax on discontinued operations, was £12.1m (FY 2021: £24.7m). The actual tax paid during the year was £21.4m (FY 2021: £4.5m).

The ongoing Group's effective tax rate is expected to be broadly in line with UK corporation tax levels (currently 19% and increasing to 25% from 1 April 2023).

EPS

Total adjusted EPS was 10.2p (FY 2021: 3.3p). Basic EPS was 60.2p (FY 2021: 6.5p).

Shares in issue

476.2m shares were acquired in December 2021 pursuant to the tender offer and cancelled. As at 26 March 2022 there were 740.7m shares in issue (FY 2021: 1,206.4m), excluding treasury shares and own shares held in trust for employees of 9.5m (FY 2021: 15.4m). The weighted average number of shares in issue for the purpose of basic EPS calculations (excluding treasury shares and own shares held in trust for employees) in the period was 1,057.5m (FY 2021: 1,203.6m).

Dividend

The Board is proposing that a final dividend of 1.1p per share, resulting in a total dividend payment of c.£8.1m, be paid on 19 August 2022 to shareholders on the register at 15 July 2022, subject to approval of shareholders at the 2022 AGM.

Adjusted cash flow

The Group's adjusted cash flow of £1,008.9m (FY 2021: £258.9m) in the year reflects positive operational cash flow from the continuing divisions as well as the disposal proceeds, offset by the repayment of debt and de-risking of certain retained liabilities. Underlying operational cash flow under IFRS 16 before capital expenditure and lease payments in the year was £263.4m (FY 2021: £1,358.7m), ahead of expectations due to better business performance and timing of certain working capital flows. The adjusted cash flow is set out below:

			52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
EBITDA			862.1	1,178.9
Other non-cash income statement charges			3.8	9.6
Working capital			(11.6)	156.7
Movement in other provisions			(27.4)	72.7
Increase in financial assets/contingent consideration receivable			(223.1)	-
Pension payments in excess of income statement charge			(340.4)	(59.2)
Cash generated by operations			263.4	1,358.7
Capital expenditure and acquisitions			(262.9)	(391.0)
Proceeds from disposal of property, plant and equipment			23.1	119.0
Net proceeds from disposal of businesses			2,320.0	-
Interest and tax			(196.6)	(152.1)
Share buy back resulting from tender offer			(506.0)	-
Lease payments now in debt/other			(632.1)	(675.7)
Adjusted cash flow			1,008.9	258.9
Foreign exchange movements			(3.8)	78.5
Inception of new leases			184.1	(210.2)
Lease payments now in debt			609.8	669.3
Other non-cash movements			207.8	(161.4)
Movement in net debt in the period			2,006.8	635.1

Capital expenditure

Non-First Rail cash capital expenditure was £194.3m (FY 2021: £112.0m) and comprised First Student £72.6m (FY 2021: £50.6m), First Transit £21.8m (FY 2021: £16.2m), Greyhound £37.1m (FY 2021: £14.9m), First Bus £61.1m (FY 2021: £30.1m) and Group items £1.7m (FY 2021: £0.2m). In the year, the First Bus average fleet age was 10.1 years (FY 2021: 9.9 years). First Rail capital expenditure was £57.3m (FY 2021: £116.5m) and is typically matched by receipts from the DfT under current contractual arrangements or other funding.

In addition, during the year leases in the non-First Rail divisions were entered into with capital values in First Student of £8.4m (FY 2021: £37.5m), First Transit of £1.7m (FY 2021: £17.0m), Greyhound of £0.2m (FY 2021: £9.0m) and First Bus of £11.3m (FY 2021: £4.6m) and Group items £0.8m (FY 2021: £0.3m). During the year First Rail entered into leases with a capital value of £8.7m (FY 2021: £105.2m).

Gross capital investment (fixed asset and software additions plus the capital value of new leases) was £374.8m (FY 2021: £516.1m) and comprised First Student £96.1m (FY 2021: £211.5m), First Transit £13.5m (FY 2021: £37.2m), Greyhound £37.2m (FY 2021: £14.7m), First Bus £74.5m (FY 2021: £28.6m), First Rail £147.6m (FY 2021: £223.8m) and Group items £5.9m (FY 2021: £0.3m). The balance between cash capital expenditure and gross capital investment represents new leases, creditor movements and the recognition of additional right of use assets in the year.

Funding

During the year, the Group sold First Student and First Transit to EQT Infrastructure in July for net cash proceeds of $3,123m and has subsequently reorganised and repaid the majority of the Group's debt arrangements. On 31 August 2021, the Group announced it had signed a new multi-year £300m sustainability-linked RCF with a group of its relationship banks, which contains customary financial covenants of Net Debt/EBITDA and EBITDA/Net Interest, all as defined within the credit agreement. The new RCF replaced all the Group's former committed syndicated and bilateral banking facilities, which have been repaid and cancelled. The Group also repaid the UK Government's Covid Corporate Financing Facility (CCFF) commercial paper, all of its Private Placement debt and redeemed the £325m bonds due November 2022.The £200m September 2024 bond remains outstanding.

During the second half of FY 2022, the Group completed the tender offer which returned £500m to shareholders in December 2021 and sold Greyhound Lines, Inc. to FlixMobility GmbH in October 2021 for initial cash proceeds of £100.9m, received cash proceeds from four Greyhound property sales, recovered funding awards from CARES and ARP relating to losses incurred while Greyhound was under the Group's ownership during the pandemic, as well as rental income and the first tranches of the deferred consideration.

As at the year end, the Group had £532.1m of undrawn committed headroom and free cash, being £300m (FY 2021: £346.1m) of committed headroom and £232.1m (FY 2021: £784.5m) of net free cash after offsetting overdraft positions.

Net debt

The Group’s Adjusted Net Debt as at 26 March 2022, which excludes the effect of IFRS 16 and the capitalisation of Right of Use Assets and ring-fenced cash was £3.9m (FY 2021: £1,438.7m). Reported net debt was £619.0m (FY 2021: £2,625.8m) after IFRS 16 and including ring-fenced cash of £468.1m (FY 2021: £662.9m), as follows:

	26 March 2022	27 March 2021
Analysis of net debt	Total Group £m	Cont. £m	Disc. £m	Total Group £m
Sterling bond (2021)	-	349.9	-	349.9
Sterling bond (2022)	-	323.4	-	323.4
Sterling bond (2024)	199.9	199.8	-	199.8
CCFF	-	298.2	-	298.2
Bank loans and overdrafts	87.5	620.1	-	620.1
Supplier financing	-	-	159.2	159.2
Lease liabilities	1,083.2	1,722.6	127.4	1,850.0
Asset backed financial liabilities	35.5	61.8	61.1	122.9
Senior unsecured loan notes	-	198.8	-	198.8
Loan notes	0.6	0.7	-	0.7
Gross debt excluding accrued interest	1,406.7	3,775.3	347.7	4,123.0
Cash	(319.6)	(784.6)	(49.7)	(834.3)
First Rail ring-fenced cash and deposits	(440.4)	(638.5)	-	(638.5)
Other ring-fenced cash and deposits	(27.7)	-	(24.4)	(24.4)
Net debt excluding accrued interest	619.0	2,352.2	273.6	2,625.8
IFRS 16 lease liabilities – rail	1,031.2	1,601.4	-	1,601.4
IFRS 16 lease liabilities – non-rail	52.0	121.2	127.4	248.6
IFRS 16 lease liabilities – total	1,083.2	1,722.6	127.4	1,850.0
Net (cash)/debt excluding accrued interest (pre-IFRS 16)	(464.2)	629.6	146.2	775.8
Adjusted Net Debt (pre-IFRS 16 and excluding ring-fenced cash)	3.9	1,268.1	170.6	1,438.7

Under the terms of the First Rail contractual agreements with the DfT, cash can only be distributed by the TOCs either up to the lower amount of their retained profits or the amount determined by prescribed liquidity ratios. £51.5m has been paid in dividends from the TOCs after finalisation of their statutory accounts to the Group during the year. The ring-fenced cash represents that which is not available for distribution or the amount required to satisfy the liquidity ratio at the balance sheet date.

Interest rate risk

We seek to manage our exposure to floating interest rates by ensuring that at least 50% (but at no time more than 100%) of the Group's gross debt is fixed rate for the medium term.

Based on the current adjusted net debt profile, the variable rate RCF is undrawn with only finance leases and the 2024 6.875% £200m fixed rate bond outstanding.

Fuel price risk

We use a progressive forward hedging programme to manage commodity risk. As at June 2022, 87% of our ‘at risk’ UK crude requirement for FY 2023 (94m litres, which is all in First Bus) were hedged at an average rate of 37.5p per litre, and 53% of our requirements for the year to the end of March 2024 at 43.3p per litre.

Foreign currency risk

‘Certain’ and ‘highly probable’ foreign currency transaction exposures including fuel purchases for the UK divisions may be hedged at the time the exposure arises for up to two years at specified levels, or longer if there is a very high degree of certainty. The Group does not hedge the translation of earnings into the Group reporting currency (pounds Sterling) but accepts that reported Group earnings will fluctuate as exchange rates against pounds Sterling fluctuate for the currencies in which the Group does business, although this exposure is materially reduced following the sales of the North American divisions. During the year, the net cash generated in each currency may be converted by Group Treasury into pounds Sterling by way of spot transactions in order to keep the currency composition of net debt broadly constant.

Foreign exchange

The most significant exchange rates to pounds Sterling for the Group are as follows:

	52 weeks to 26 March 2022		52 weeks to 27 March 2021
	Closing rate	Effective rate	Closing rate	Effective rate
US Dollar	1.32	1.40	1.38	1.39
Canadian Dollar	1.64	1.73	1.74	1.75

Pensions

We have updated our pension assumptions as at 26 March 2022 for the defined benefit schemes in the UK and North America. The net pension deficit (comprising continued and discontinued operations) of £296m at the beginning of the year moved to a net surplus of £186.7m at the end of the year. The movement is principally due to cash contributed to the schemes following the sale of the North American divisions, and movements in the impacts of actuarial assumptions driven by the financial markets. The disposal of the FirstGroup America pension plan as part of the First Student and First Transit transaction has also contributed to the net surplus. The main factors that influence the balance sheet position for pensions and the principal sensitivities to their movement at 26 March 2022 are set out below:

	Movement	Impact
Discount rate	+0.1%	Increase surplus by £26.9m
Inflation	+0.1%	Decrease surplus by £19.5m
Life expectancy	+1 year	Decrease surplus by £68.9m

The cash contributed to the legacy Greyhound pension plans has enabled us to accelerate our de-risking of these plans, and we are developing plans for purchasing annuities and ultimately removing these plans from the balance sheet.

We have agreed the valuation results with the Trustees of the Group Pension Scheme, and expect shortly to agree the results with the trustees of the First Bus Pension schemes. We have agreed strategies with each trustee for reaching a self-sufficiency funding target. We expect that the schemes should be able to reach the funding target without any further contributions (this compares with pension deficit reduction payments of c.£30.0m in FY 2021). A total of £117m of assets were invested in Limited Partnerships following the sale of the North American divisions, of which £95m relates to the Bus scheme and £22m relates to the Group scheme, although we do not expect all the funds will be required to be paid into the schemes following the triennial valuation at April 2024 and 2030 respectively.

Shortly after the balance sheet date, £11.8m of excess funding was returned to the Group by a Local Government Pension Scheme in Scotland. This had been made possible by the transfer of assets and liabilities held within the Strathclyde Pension Fund into the North East Scotland Pension Fund and a subsequent annuity purchase.

Balance sheet

Net assets have decreased by £269.0m since 27 March 2021. The principal reasons are the capital return of £500m to shareholders in December 2021 partly offset by the profit for the year and actuarial gains in the pension schemes.

Balance sheets – Net assets/(liabilities)			As at 26 March 2022 £m	As at 27 March 2021 £m
First Bus			626.4	328.1
First Rail			597.3	925.6
Greyhound			33.7	(54.5)
Discontinued operation – First Student			-	2,381.1
Discontinued operation – First Transit			-	298.0
Divisional net assets			1,257.4	3,878.3
Group items			245.8	(48.1)
Net debt			(619.0)	(2,625.8)
Taxation			0.9	(50.3)
Total			885.1	1,154.1

Legacy North American assets and liabilities on balance sheet

As part of the disposal of First Transit to EQT, FirstGroup are entitled to an ‘earnout’ consideration of up to $290m (c.£220m). The earnout is for a period of three years from 21 July 2021 and is calculated as a percentage of the realised equity value on disposal of the First Transit business by EQT or an arm's length valuation as at the third anniversary of the sale (21 July 2024) if not disposed by this point. The earnout was fair valued at 26 March 2022 using stochastic modelling of discounted cash flows and assumes EQT does not dispose of the business by the third anniversary. Fair value was $140m (c.£106m) as at 26 March 2022.

Greyhound is carried as available for sale at a book value of $50.8m with expected net cash proceeds in excess of $155m principally made up of real estate, deferred consideration and CARES/ARP collections offset by final exits of c.$12m in legacy outstanding insurance liabilities and c.$15m in pension liabilities.

Post-balance sheet events

• On 31 March, received £11.8m from the Aberdeen Local Government Pension Scheme for a refund of a surplus
• Agreed additional finance leases on a pre-IFRS16 basis totalling £9.9m
• Received CARES and ARP payments totalling $4.7m

Going concern

The Board carried out a review of the Group’s financial projections for the 18 months to 30 September 2023 and having regard to the risks and uncertainties to which the Group is exposed, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the 12 month period from the date on which the financial statements were approved. Accordingly, they continue to adopt a going concern basis of accounting in preparing the consolidated financial statements in this full year report. No consideration has been given to the unsolicited, conditional proposals in relation to a possible offer for the Group by I Squared Capital Advisors (UK) LLP as announced to the market on 26 May 2022, or any other offer for the Group that may arise, in the preparation of the accounts.

Definitions

Unless otherwise stated, all financial figures for the 52 weeks to 26 March 2022 (the 'year' or 'FY 2022') include the results and financial position of the First Rail business for the year ended 31 March 2022 and the results of all other businesses for the 52 weeks ended 26 March 2022. The figures for the 52 weeks to 27 March 2021 2021 (the 'prior year' or 'FY 2021') include the results and financial position of the First Rail business for the year ended 31 March 2021 and the results and financial position of all other businesses for the 52 weeks ended 27 March 2021. Results for the 52 weeks to 25 March 2023 ('FY 2023') will include the results and financial position for First Rail for the year ending 31 March 2023 and the results and financial position of all the other businesses for the 52 weeks ending 25 March 2023.

'Cont.' or the 'Continuing operations' refer to First Bus, First Rail and Group items.

'Disc.' or the 'Discontinued operations' refer to First Student, First Transit and Greyhound US.

References to 'adjusted operating profit', 'adjusted profit before tax', and 'adjusted EPS' throughout this document are before the gains on sale of the North American businesses, partial reversal of impairment charges on Greyhound and certain other items as set out in note 4 to the financial statements.

'EBITDA’ is adjusted operating profit less capital grant amortisation plus depreciation.

The Group's 'EBITDA adjusted for First Rail management fees' is First Bus and First Rail EBITDA from open access and additional services, plus First Rail attributable net income from management fee-based operations, minus central costs.

'Group adjusted attributable profit' is First Bus and First Rail adjusted operating profit from open access and additional services, plus First Rail attributable net income from management fee-based operations, minus central costs, minus cash interest, minus tax.

'Net debt' is the value of Group external borrowings excluding the fair value adjustment for coupon swaps designated against certain bonds, excluding accrued interest, less cash balances.

'Adjusted Net Debt' excludes ring-fenced cash and IFRS 16 lease liabilities from net debt.

References to ‘like-for-like’ revenue adjust for changes in the composition of the divisional portfolio, holiday timing, severe weather and other factors, for example engineering possessions in First Rail, that distort period-on-period trends in our businesses.

Forward-looking statements

Certain statements included or incorporated by reference within this document may constitute ‘forward-looking statements’ with respect to the business, strategy and plans of the Group and our current goals, assumptions and expectations relating to our future financial condition, performance and results. By their nature, forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors that cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No statement in this document should be construed as a profit forecast for any period. Shareholders are cautioned not to place undue reliance on the forward-looking statements.

Except as required by the UK Listing Rules and applicable law, the Group does not undertake any obligation to update or change any forward-looking statements to reflect events occurring after the date of this document.

David Martin                                                             Ryan Mangold

Chairman                                                                   Chief Financial Officer

14 June 2022                                                             14 June 2022

Consolidated income statement

For the 52 weeks ended 26 March

Continuing Operations	Notes	2022 £m	2021 (restated) £m
Revenue	2	4,591.1	4,318.8
Operating costs		(4,468.3)	(4,147.8)
Operating profit		122.8	171.0
Investment income	5	1.1	1.8
Finance costs	5	(141.6)	(143.7)
(Loss)/profit before tax		(17.7)	29.1
Tax	6	11.9	(6.3)
Loss/(profit) from continuing operations		(5.8)	22.8
Profit from discontinued operations	14	647.8	68.3
Profit for the year		642.0	91.1
Attributable to:
Equity holders of the parent		636.4	78.4
Non-controlling interests		5.6	12.7
		642.0	91.1
Earnings per share
Earnings per share for (loss)/profit from continuing operations attributable to the ordinary equity holders of the company
Basic earnings per share		(1.1)p	0.9p
Diluted earnings per share		(1.1)p	0.9p
Earnings per share for profit/(loss) attributable to the ordinary equity holders of the company
Basic earnings per share	7	60.2p	6.5p
Diluted earnings per share	7	60.2p	6.4p
Adjusted results (from continuing operations)1
Adjusted operating profit	4	106.7	112.2
Adjusted profit/(loss) before tax		24.8	(29.7)
Adjusted EPS	7	1.6p	(2.8)p
Adjusted diluted EPS		1.5p	(2.8)p

1                      Adjusted for certain items as set out in note 4.

Prior year restatements are detailed in note 1.

The accompanying notes form an integral part of this consolidated income statement.

Consolidated statement of comprehensive income

52 weeks ended 26 March

		2022 £m	2021 (restated) £m
Profit for the year		642.0	91.1
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes		122.3	(49.3)
Deferred tax on actuarial losses on defined benefit pension schemes		(22.1)	15.5
		100.2	(33.8)
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements		43.9	16.4
Deferred tax on derivative hedging instrument movements		(10.8)	(3.6)
Exchange differences on translation of foreign operations - continuing operations		(5.6)	1.3
Exchange differences on translation of foreign operations - discontinued operations		0.3	(112.2)
Non-controlling interests share of loan waived		35.4	–
Reclassification of foreign currency translation reserve on discontinued operations (see note 14)		(543.4)	–
		(480.2)	(98.1)
Other comprehensive loss for the year		(415.4)	(131.9)
Total comprehensive income/(loss) for the year		262.0	(40.8)
Attributable to:
Equity holders of the parent		221.0	(53.5)
Non-controlling interests		41.0	12.7
		262.0	(40.8)
Total comprehensive income/(loss) for the year attributable to owners of FirstGroup Plc arises from:
Attributable to:
Continuing operations		149.1	(49.3)
Discontinued operations		112.9	8.5
		262.0	(40.8)

Prior year restatements are detailed in note 1.

The accompanying notes form an integral part of this consolidated statement of comprehensive income.

Consolidated balance sheet

As at 26 March

	Notes	2022 £m	2021 £m
Non-current assets
Goodwill	8	93.5	83.9
Other intangible assets	9	12.4	16.2
Property, plant and equipment	10	1,692.7	2,443.7
Contingent consideration receivable	12	106.1	–
Deferred tax assets	19	36.1	35.0
Retirement benefit assets		203.0	52.9
Derivative financial instruments	18	4.2	1.2
Financial asset		117.0	–
Investments		2.2	8.3
		2,267.2	2,641.2
Current assets
Inventories	11	28.9	29.4
Trade and other receivables	12	682.3	676.7
Current tax assets		3.1	0.4
Cash and cash equivalents		787.7	1,438.9
Derivative financial instruments	18	26.2	14.9
		1,528.2	2,160.3
Assets held for sale – continuing operations		–	11.9
Assets held for sale – discontinued operations	14	38.5	3,479.5
Total assets		3,833.9	8,292.9
Current liabilities
Trade and other payables	13	1,245.1	1,587.6
Tax liabilities – Current tax liabilities		–	14.4
– Other tax and social security		38.3	34.6
Borrowings	15	677.0	1,326.2
Derivative financial instruments	18	–	11.8
Provisions	20	114.6	74.4
Current liabilities		2,075.0	3,049.0
Liabilities held for sale - discontinued operations	14	–	1,136.6
		2,075.0	4,185.6
Net current liabilities		(546.8)	(888.7)
Non-current liabilities
Borrowings	15	736.8	2,492.0
Derivative financial instruments	18	–	1.2
Retirement benefit liabilities		16.3	324.5
Provisions	20	120.7	135.5
		873.8	2,953.2
Total liabilities		2,948.8	7,138.8
Net assets		885.1	1,154.1
Equity
Share capital	21	37.5	61.1
Share premium		692.8	689.6
Hedging reserve		19.3	(3.4)
Other reserves		22.4	4.6
Own shares		(9.0)	(9.0)
Translation reserve		(24.0)	524.7
Retained earnings/(deficit)		137.6	(89.6)
Equity attributable to equity holders of the parent		876.6	1,178.0
Non-controlling interests		8.5	(23.9)
Total equity		885.1	1,154.1

The accompanying notes form an integral part of this consolidated balance sheet.

Ryan Mangold

14 June 2022

Consolidated statement of changes in equity

52 weeks ended 26 March

	Share capital (note 21) £m	Share premium £m	Hedging reserve £m	Other reserves £m	Own shares £m	Translation reserve £m	Retained earnings £m	Total £m	Non- controlling interests £m	Total equity £m
Balance at 29 March 2020	61.0	688.6	(28.3)	4.6	(10.2)	635.6	(141.5)	1,209.8	(33.1)	1,176.7
Profit for the year	–	–	–	–	–	–	78.4	78.4	12.7	91.1
Other comprehensive income/(loss) for the year	–	–	12.8	–	–	(110.9)	(33.8)	(131.9)	–	(131.9)
Total comprehensive (loss)/income for the year	–	–	12.8	–	–	(110.9)	44.6	(53.5)	12.7	(40.8)
Shares issued	0.1	1.0	–	–	–	–	–	1.1	–	1.1
Derivative hedging instrument movements transferred to balance sheet (net of tax)	–	–	15.2	–	–	–	–	15.2	–	15.2
Reserves reclassification	–	–	(3.1)	–	–	–	3.1	–	–	–
Dividends paid/other	–	–	–	–	–	–	(1.6)	(1.6)	(3.5)	(5.1)
Movement in EBT and treasury shares	–	–	–	–	1.2	–	(6.1)	(4.9)	–	(4.9)
Share-based payments	–	–	–	–	–	–	11.9	11.9	–	11.9
Balance at 27 March 2021	61.1	689.6	(3.4)	4.6	(9.0)	524.7	(89.6)	1,178.0	(23.9)	1,154.1
Balance at 28 March 2021	61.1	689.6	(3.4)	4.6	(9.0)	524.7	(89.6)	1,178.0	(23.9)	1,154.1
Profit for the year	–	–	–	–	–	–	636.4	636.4	5.6	642.0
Other comprehensive income/(loss) for the year	–	–	33.1	–	–	(548.7)	100.2	(415.4)	35.4	(380.0)
Total comprehensive income/(loss) for the year	–	–	33.1	–	–	(548.7)	736.6	221.0	41.0	262.0
Shares issued	0.2	3.2	–	–	–	–	–	3.4	–	3.4
Shares bought back and cancelled	(23.8)	–	–	17.8	–	–	(500.0)	(506.0)	–	(506.0)
Derivative hedging instrument movements transferred to balance sheet (net of tax)	–	–	(10.4)	–	–	–	–	(10.4)	–	(10.4)
Disposal of non-controlling interest in First Transit	–	–	–	–	–	–	–	–	(0.7)	(0.7)
Dividends paid/other	–	–	–	–	–	–	2.0	2.0	(7.9)	(5.9)
Movement in EBT and treasury shares	–	–	–	–	–	–	(16.8)	(16.8)	–	(16.8)
Share-based payments	–	–	–	–	–	–	5.4	5.4	–	5.4
Balance at 26 March 2022	37.5	692.8	19.3	22.4	(9.0)	(24.0)	137.6	876.6	8.5	885.1

The accompanying notes form an integral part of this consolidated statement of changes in equity.

Consolidated cash flow statement

52 weeks ended 26 March

	Notes	2022 £m	2021 (restated) £m
Cash generated by operations	22	263.4	1,358.7
Tax paid		(21.4)	(4.5)
Interest paid		(176.6)	(149.8)
Net cash from operating activities	22	65.4	1,204.4
Investing activities
Interest received		1.4	2.0
Proceeds from disposal of property, plant and equipment		23.1	119.0
Purchases of property, plant and equipment		(241.9)	(416.5)
Purchases of software		(9.7)	(4.1)
Net proceeds from disposal of subsidiaries (net of cash disposed)1		2,320.0	–
Acquisition of businesses		(11.3)	(1.4)
Net cash used in investing activities		2,081.6	(301.0)
Financing activities
Shares purchased by Employee Benefit Trust		(23.5)	(4.7)
Shares issued		2.9	0.5
Shares bought back and costs directly associated with tender offer		(506.0)	–
(Repayment of)/proceeds from CCFF		(298.2)	298.2
Repayment of bonds		(674.4)	–
Repayment of senior unsecured loans		(200.0)	–
Drawdowns from bank facilities		–	117.7
Repayment of bank facilities		(579.3)	(89.6)
Repayment of loan notes		–	(8.7)
Repayment of lease liabilities		(600.4)	(685.0)
(Repayment of)/proceeds from asset backed financial liabilities		(9.4)	46.8
Fees for finance facilities		(1.7)	(2.1)
Net cash flow used in financing activities		(2,890.0)	(326.9)
Net (decrease)/increase in cash and cash equivalents before foreign exchange movements		(743.0)	576.5
Cash and cash equivalents at beginning of year		1,443.4	886.5
Foreign exchange movements		(0.2)	(19.6)
Cash and cash equivalents at end of year		700.2	1,443.4

¹ £2,320.0m comprises cash consideration of £2,478.7m less cash and cash equivalents sold of £158.7m per note 14 (b) and (c).

FY 2021 comparatives have been restated as follows.  'Purchases of property, plant and equipment' have increased by £31.0m, 'Repayments of lease liabilities' have decreased by £15.8m and 'Proceeds from financial liabilities' have increased by £46.8m. See note 2 for further details.

The line Purchases of property, plant and equipment includes cash flows from both purchased assets and purchased assets from within a disposal group previously classified as assets held for sale.

Cash flows of discontinued operations are shown on note 14.

		2022 £m	2021 £m
Reconciliation to cash flow statement
Cash and cash equivalents – Balance Sheet		787.7	1,438.9
Cash and cash equivalents – Held for Sale		–	58.3
Cash and cash equivalents – total operations		787.7	1,497.2
Bank overdraft		(87.5)	(53.8)
Cash and cash equivalents at end of year per consolidated balance sheet		700.2	1,443.4

Note to the consolidated cash flow statement – reconciliation of net cash flow to movement in net debt

		2022 £m	2021 (restated) £m
Net (decrease)/increase in cash and cash equivalents in year		(743.0)	576.5
Decrease/(increase) in debt excluding leases		1,751.9	(317.6)
Adjusted cash flow		1,008.9	258.9
Payment of lease liabilities		609.8	669.3
Net inception of new leases		184.1	(210.2)
Fees capitalised against bank facilities and bond issues		–	2.1
Foreign exchange movements		(3.8)	78.5
Other non-cash movements		207.8	(163.5)
Movement in net debt in year		2,006.8	635.1
Net debt at beginning of year		(2,625.8)	(3,260.9)
Net debt at end of year		(619.0)	(2,625.8)

Prior year restatements are detailed in note 1.

Other non-cash movements consist of movements in supplier financing of £159.2m (2021: £(159.2)m), transfer of asset backed financial liabilities of £61.0m (2021: £nil) on sale of disposal First Student and First Transit, amortisation of debt issue fees of £12.4m (2021: £(3.2)m) and other non-cash movements of £nil (2021: £(1.1)m).

Supplier Financing are amounts due to the principal supplier of school buses in the US and Canada for deliveries of vehicles. As the ageing of these payables exceed 6 months interest starts to be charged and they are subsequently transferred from trade payables to borrowings. On completion of the sale of First Student & First Transit, this liability was transferred to EQT Infrastructure (EQT).

Management considers that adjusted cash flow is an appropriate measure for assessing the Group cash flow as it is the measure that is used to assess both Group and divisional cash performance against budgets and forecasts. Adjusted cash flow is stated prior to cash flows in relation to debt excluding leases. This is a change and a restatement from the treatment reported in the financial statement for the 52 weeks to 27 March 2021 when adjusted cashflow was stated prior to cash flows in relation to debt and to finance leases.

The accompanying notes form an integral part of this consolidated cash flow statement.

Notes to the consolidated financial statements

1   General information

The financial information set out above does not constitute the Company’s Statutory Accounts for the 52 weeks ended 26 March 2022 or 27 March 2021, but is derived from those accounts. Statutory Accounts for 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered following the Company’s Annual General Meeting. The auditors have reported on both sets of account; their reports were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not in itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in June 2022. Copies of the Statutory Accounts for the 52 weeks ended 26 March 2022 will be available to all shareholders in June and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.

Basis of accounting

The financial statements have been prepared in accordance with IFRSs in conformity with the requirements of the Companies Act 2006 (IFRS) and the applicable legal requirements of the Companies Act 2006. In addition to complying with international accounting standards in conformity with requirements of the Companies Act 2006.

The consolidated financial statements of FirstGroup plc comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006. These financial statements are also prepared in accordance with IFRSs’ as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRSs as issued by the IASB for the periods presented. There were no unendorsed standards effective for the period ended 26 March 2022 affecting these consolidated and separate financial statements.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, and on a going concern basis.

The Group has undertaken detailed reviews of the potential impact of recovery from coronavirus using financial outlook modelling. Based on their review of the financial forecasts and having regard to the risks and uncertainties to which the Group is exposed, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for at least a twelve-month period from the date on which the financial statements were approved. Accordingly, the financial statements have been prepared on a going concern basis.

The financial statements for the 52 weeks ended 26 March 2022 include the results and financial position of the First Rail business for the year ended 31 March 2022 and the results and financial position of all the other businesses for the 52 weeks ended 26 March 2022. The financial statements for the 52 weeks ended 27 March 2021 include the results and financial position of the First Rail businesses for the year ended 31 March 2021 and the results and financial position of all the other businesses for the 52 weeks ended 27 March 2021.

Restatements

During the year the Financial Reporting Council (FRC) enquired about certain sale and leaseback transactions and certain lease buy outs which occurred in the 52 weeks ended 27 March 2021. As a result of this enquiry, management reassessed the accounting treatment adopted for these transactions. Since the leasing arrangements included buy-back options, management concluded that they did not constitute sale and lease-back transactions. Rather these arrangements should have been accounted for as financing transactions in which the underlying assets were not derecognised. In the FY 2021 consolidated cash flow statement, the proceeds of these transactions had been incorrectly netted off purchases of PPE (£46.8m). The liabilities associated with these assets were classified as lease liabilities as at 27 March 2021 whereas they should have been classified as asset backed financial liabilities. The investment income and finance costs note (note 5), borrowings note (note 15) and the liabilities note (note 16) have been updated to reclassify these balances accordingly. The other Impacts of this change in accounting treatment have been assessed to be immaterial.

In addition, certain lease buy outs of £15.8 m had been incorrectly included in purchases of PPE rather than as a repayment of lease liabilities.

Accordingly, the comparatives for FY 2021 consolidated cash flow statement and balance sheet notes to the accounts for borrowings notes have been restated. In the consolidated cash flow statement "purchases of property, plant and equipment" have increased by £31.0m, "repayments of lease liabilities" have Increased by £15.8m and a new line "proceeds from asset backed financial liabilities" of £46.8m is presented.

The results for the 52 weeks to 27 March 2021 have been restated since they have been split into the results for the continuing operations and the results for the discontinued operations.  Discontinued operations now include Greyhound entities which were sold in the year.

Adoption of new and revised standards

The accounting policies adopted are consistent with those of the previous financial year except for the changes arising from new standards and amendments to existing standards which have been adopted in the current year. Adoptions in the current year include amendments to IAS 1 ‘Presentation of Financial Statements’, amendments to IFRS3 ‘Business Combinations’ and Phase 2 of the ‘Interest Rate Benchmark Reform’. There has been no material change as a result of applying these amendments and no significant impact is expected from any of the future standards and amendments that are visible.

2   Revenue

	2022 £m	2021 (restated) £m
Services rendered	2,537.0	967.3
First Rail contract subsidy receipts	1,662.1	2,905.9
Other revenues	392.0	445.6
Revenue from continuing operations	4,591.1	4,318.8
Discontinued operations	996.9	2,526.0
Revenue	5,588.0	6,844.8

The results for the 52 weeks to 27 March 2021 have been restated since they have been split into the results for the continuing operations and the results for the discontinued operations.  Discontinued operations now includes Greyhound entities which were sold in the year.

3   Business segments and geographical information

For management purposes, the Group was organised into five operating divisions – First Student, First Transit, Greyhound, First Bus and First Rail. First Student and First Transit were categorised as Discontinued Operations at 27 March 2021 and the sale of these completed on 21 July 2021. Greyhound was categorised as Discontinued Operations at 25 September 2021 and the sale of this completed on 21 October 2021.The divisions are managed separately in line with the differing services that they provide and the geographical markets which they operate in. There is a clear distinction between each division and no judgement is required to identify each reportable segment. The segment results for the 52 weeks ended 26 March 2022 are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Grey-hound £m	Group items1 £m	Continuing Operations £m	First Student £m	First Transit £m	Grey-hound £m	Group items1 £m	Total £m
Passenger revenue	570.0	1,886.4	–	–	2,456.4	–	–	150.4	–	2,606.8
Contract revenue	80.6	–	–	–	80.6	450.3	203.2	–	–	734.1
Charter/private hire	–	–	–	–	–	21.8	0.1	0.9	–	22.8
Rail contract subsidy receipts	–	1,662.1	–	–	1,662.1	–	–	–	–	1,662.1
Other revenues	139.3	252.7	–	–	392.0	7.4	96.4	66.4	–	562.2
Revenue	789.9	3,801.2	–	–	4,591.1	479.5	299.7	217.7	–	5,588.0
EBITDA2	104.4	649.9	–	(23.1)	731.2	88.2	15.6	27.1	–	862.1
Depreciation	(63.3)	(669.5)	–	(2.6)	(735.4)	–	–	(11.0)	–	(746.4)
Software amortisation	(1.6)	(2.1)	–	(0.6)	(4.3)	–	–	(0.4)	–	(4.7)
Capital grant amortisation	5.7	109.5	–	-	115.2	–	–	0.6	–	115.8
Segment results	45.2	87.8	–	(26.3)	106.7	88.2	15.6	16.3	–	226.8
Other intangible asset amortisation charges	–	–	–	–	–	–	–	(0.4)	–	(0.4)
Other adjustments (note 4)	–	4.0	12.1	–	16.1	(14.8)	(6.5)	28.7	556.2	579.7
Operating profit/(loss)3	45.2	91.8	12.1	(26.3)	122.8	73.4	9.1	44.6	556.2	806.1
Investment income	–	0.6	–	0.5	1.1	–	–	0.4	–	1.5
Finance costs	(2.8)	(37.6)	(1.1)	(100.1)	(141.6)	(7.5)	(0.7)	(3.7)	–	(153.5)
Profit before tax	42.4	54.8	11.0	(125.9)	(17.7)	65.9	8.4	41.3	556.2	654.1
Tax										(12.1)
Profit after tax										642.0

1       Group items comprise central management and other items.

2       EBITDA is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.

3       Although the segment results are used by management to measure performance, statutory operating profit by operating division is disclosed for completeness.

The segment results for the 52 weeks ended 27 March 2021 are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Grey-hound £m	Group items1 £m	Continuing Operations £m	First Student £m	First Transit £m	Grey-hound £m	Group items1 £m	Total £m
Passenger revenue	383.1	537.7	–	–	920.8	–	–	179.1	–	1,099.9
Contract revenue	46.5	–	–	–	46.5	1,191.8	867.1	–	–	2,105.4
Charter/private hire	–	–	–	–	–	18.1	0.6	1.3	–	20.0
Rail contract subsidy receipts	–	2,905.9	–	–	2,905.9	–	–	–	–	2,905.9
Other	269.3	176.3	–	–	445.6	16.3	109.3	142.4	–	713.6
Revenue	698.9	3,619.9	–	–	4,318.8	1,226.2	977.0	322.8	–	6,844.8
EBITDA2	100.8	711.1	–	(29.1)	782.8	282.6	87.1	26.4	–	1,178.9
Depreciation	(68.7)	(607.9)	–	(2.8)	(679.4)	(223.6)	(32.9)	(24.8)	–	(960.7)
Software amortisation	(1.4)	(1.4)	–	(0.6)	(3.4)	(3.2)	(2.5)	(2.2)	–	(11.3)
Capital grant amortisation	5.9	6.3	–	–	12.2	–	–	1.1	–	13.3
Segment results	36.6	108.1	–	(32.5)	112.2	55.8	51.7	0.5	–	220.2
Other intangible asset amortisation charges	–	–	(0.2)	–	(0.2)	(3.0)	–	(0.9)	–	(4.1)
Other adjustments (note 4)	(5.8)	95.7	(20.9)	(10.0)	59.0	9.3	(31.2)	63.1	(30.5)	69.7
Operating profit/(loss)3	30.8	203.8	(21.1)	(42.5)	171.0	62.1	20.5	62.7	(30.5)	285.8
Investment income	–	1.6	–	0.2	1.8	0.2	–	–	–	2.0
Finance costs	(2.6)	(55.7)	(1.1)	(84.3)	(143.7)	(17.8)	(3.4)	(7.1)	–	(172.0)
Profit before tax	28.2	149.7	(22.2)	(126.6)	29.1	44.5	17.1	55.6	(30.5)	115.8
Tax										(24.7)
Profit after tax										91.1

1       Group items comprise central management and other items.

2       Adjusted EBITDA is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.

3       Although the segment results are used by management to measure performance, statutory operating profit by operating division is disclosed for completeness.

4    Reconciliation to non-GAAP measures and performance

In measuring the Group and divisional adjusted operating performance, additional financial measures derived from the reported results have been used in order to eliminate factors which distort year-on-year comparisons. The Group’s adjusted performance is used to explain year-on-year changes when the effect of certain items that are significant, including gains on disposal of businesses (including cumulative foreign currency gains in the businesses), restructuring and reorganisation costs, material property gains or losses, aged legal and self-insurance claims, significant adverse development factors on insurance provisions, onerous contract provisions, impairment charges and pension settlement gains or losses. In addition, management assess divisional performance before other intangible asset amortisation charges as these are typically a result of Group decisions and therefore the divisions have little or no control over these charges. Management consider that this overall basis more appropriately reflects operating performance and provides a better understanding of the KPIs of the business.

Reconciliation of operating profit to adjusted operating profit on a continuing basis	52 weeks ending 26 March 2022 £m	52 weeks ending 27 March 2021 (restated) £m
Operating profit on a continuing basis	122.8	171.0
Adjustments for:
Other intangible asset amortisation charges	–	0.2
Strategy costs	–	(0.9)
Impairment of land and buildings	–	16.6
Rail termination sums net of impairment reversal	(4.0)	(95.7)
(Gain)/loss on disposal of properties	(13.8)	0.7
Greyhound Canada	1.7	20.3
Total operating profit adjustments on a continuing basis	(16.1)	(58.8)
Adjusted operating profit on a continuing basis (note 3)	106.7	112.2

   

Reconciliation of operating profit/(loss) to adjusted operating profit on a discontinued basis	52 weeks ending 26 March 2022 £m	52 weeks ending 27 March 2021 (restated) £m
Operating profit from discontinued operations	683.3
Gain on sale of First Student and First Transit	(501.1)
Gain on sale of Greyhound	(109.0)
Operating profit from discontinued operations (excluding gain on sale of First Student, First Transit and Greyhound)	73.2	114.8
Adjustments for:
Other intangible asset amortisation charges	0.4	3.9
Other costs associated with the disposal of First Student and First Transit	32.7	–
Other costs associated with the disposal of Greyhound	11.1	–
Greyhound insurance de-risking	19.3	–
Employment taxes relating to First Student and First Transit	6.6	–
Partial reversal of prior year impairments of Greyhound	(55.4)	–
Impairment of land and buildings	7.2	–
Strategy costs	–	28.9
Gain on disposal of properties	(6.5)	(71.8)
North America insurance provisions	31.5	32.2
Total operating profit adjustments from discontinued operations (excluding gain on sale of First Student, First Transit and Greyhound)	46.9	(6.8)
Adjusted operating profit from discontinued operations	120.1	108.0

   

Reconciliation of profit/(loss) before tax to adjusted profit before tax and adjusted earnings	52 weeks ending 26 March 2022 £m	52 weeks ending 27 March 2021 (restated) £m
Profit before tax (including discontinued operations)	654.1	115.8
Adjusting operating profit adjustments – continuing operations	(16.1)	(58.8)
Adjusting operating profit adjustments – discontinued operations excluding gain on sale	46.9	(6.8)
Gain on sale of First Student and First Transit	(501.1)	–
Gain on sale of Greyhound	(109.0)	–
Operating profit adjustments – total operations	(579.3)	(65.6)
Adjusting finance cost items – continuing operations	58.6	–
Adjusted profit before tax including discontinued operations	133.4	50.2
Adjusted tax charge	(20.4)	(4.2)
Non-controlling interests1	(5.6)	(6.1)
Adjusted earnings including discontinued operations	107.4	39.9

¹ Statutory non-controlling interests in 2022 principally reflect Avanti West Coast and South Western Railway. Statutory non-controlling interests in 2021 principally reflect Avanti West Coast. Adjusted non-controlling interests of £nil (2021: £6.6m) relate to termination sums and other adjustments at South Western Railway.

The results for the 52 weeks to 27 March 2021 have been restated since they have been split into the results for the continuing operations and the results for the discontinued operations.  Discontinued operations now includes Greyhound entities which were sold in the year.

4   Reconciliation to non-GAAP measures and performance (continued)

Reconciliation of tax charge to adjusted tax charge	52 weeks ending 26 March 2022 £m	52 weeks ending 27 March 2021 £m
Tax charge (note 6)	12.1	24.7
Tax effect of adjusting items (note 7)	21.8	(30.6)
Adjustments attributable to changes in tax rates and laws	1.4	–
Write back of previously unrecognised deferred tax assets (note 7)	25.7	10.1
Write down of previously recognised deferred tax assets (note 7)	(40.6)	–
Adjusted tax charge (including discontinued)	20.4	4.2

The principal adjusting items in relation to the continuing business are as follows:

Gain on disposal of properties

An overall gain of £13.8m (2021: loss of £0.7m) was realised on the disposal of Greyhound Canadian properties, the largest of which was the disposal of the Toronto site.

Greyhound Canada closure

£1.7m (2021: £10.8m) in relation to Greyhound Canada restructuring and closure costs were incurred during the period.

First Rail termination sums net of impairment reversal

£4.0m (2021: £95.7m) credit representing final adjustments of residual matters regarding the TPE and SWR termination sums.

The principal adjusting items in relation to the discontinued operations are as follows:

Other intangible asset amortisation charges

The amortisation charge for the year was £0.4m.

Gain on sale of First Student and First Transit

As a result of the disposal of First Student and First Transit, a gain on sale of £501.1m was realised. This includes a gain of £450.6m as a result of the unrealised translation reserves that have been realised on the disposal of First Student and First Transit. This represents the cumulative foreign currency gains on these businesses since date of original acquisition and arises primarily from the Laidlaw acquisition in 2007 when the US Dollar rate was approximately $2.00:£1. See note 14 for more details.

Other costs associated with the disposal of First Student and First Transit

£32.7m of costs were incurred in the year associated with the disposal of First Student and First Transit that were not directly attributable to the sale. These costs are therefore not included in the gain on disposal calculation. These comprise IT and other separation related costs, certain management bonuses and incentives triggered by the disposal, premium on hedging costs in relation to disposal proceeds, lease termination and certain other costs.

Gain on sale and partial reversal of prior year impairments of Greyhound

As a result of the terms of the disposal of the Greyhound US business, there was a gain on disposal of £109.0m (including £92.8m of historic foreign currency gains on this business) and a credit of £55.4m representing the partial reversal of the prior years’ impairment charges on tangible fixed assets and intangible assets which was recorded at the half year. See note 14 for more details.

Other costs associated with the disposal of Greyhound

During the period there was a charge of £11.1m relating to the sale of Greyhound comprising principally legal and professional costs and certain other costs written off prior to disposal.

Employment taxes relating to First Student and First Transit

There was a charge of £6.6m during the period due to a one-off charge for accelerated state and federal employment taxes in relation to First Student and First Transit.

North American insurance provisions

During the period there was a charge of £31.5m for insurance costs comprising £11.4m in relation to First Student and First Transit due to a deterioration in respect of prior years’ claims, and a charge of £20.1m for additional provisions required in Greyhound also due to a deteriorating insurance position on prior year claims.

In addition there was a charge of £19.3m for the de-risking of legacy Greyhound insurance liabilities representing the premium paid to de-risk these compared to the book value of the liabilities.

Gain on disposal of properties and impairment of land and buildings

An overall gain on disposal of Greyhound US properties of £6.5m was realised during the year.

An impairment charge of £7.2m was made on the Greyhound Miami and Pleasantville properties as the market value of these properties was less than the book value. It is anticipated that these properties will be disposed of in 2022 as part of a portfolio sale of remaining Greyhound properties.

The adjusting items in relation to finance cost adjustments – continuing operations are as follows:

Total make-whole costs (bonds and facilities)

Costs of £50.0m comprise a charge of £30.4m for the early repayment of the $275m US Private Placement (USPP) and a charge of £19.6m for the early repayment of the £325m 2022 bond.

4    Reconciliation to non-GAAP measures and performance (continued)

Write-off of unamortised bridge, bond and facility costs

There was a charge of £8.6m for unamortised fees which had been capitalised and were being amortised over the terms of the £325m 2022 bond, the $275m USPP and various bank facilities, including the £800m RCF and bridge facilities which were cancelled on completion of the sale of First Student and First Transit.

Reconciliation of constant currency from continuing operations	52 weeks ending 26 March 2022 £m	52 weeks ending 27 March 2021
		Reported £m	Effect of foreign exchange £m	Constant Currency £m	% change
Revenue	4,591.1	4,318.8	(0.1)	4,318.7	6.3%
Adjusted operating profit	106.7	112.2	0.1	112.3	(5.0)%
Adjusted profit/(loss) before tax	24.8	(29.7)	0.2	(29.5)	n/m
Adjusted EPS	1.6p	(2.8)p	–	(2.8)p	n/m
Net debt	619.0	2,625.8	43.6	2,669.4	76.8%

1                      ‘Adjusted’ figures throughout this document are before self-insurance reserve charges, strategy costs, impairments, other intangible asset amortisation charges and any other charges which are included in note 4.

2                      Changes ‘in constant currency’ throughout this document are based on retranslating 2021 foreign currency amounts at 2022 rates.

Group adjusted attributable EBITDA and operating profit

First Bus EBITDA comprises:

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
Pre-IFRS16 EBITDA	87.6	84.5
IFRS16 adjustments1	16.8	16.3
First Bus adjusted EBITDA per segmental results table above	104.4	100.8

First Rail EBITDA comprises:

Non-management fees based TOCs pre-IFRS16 EBITDA	(9.7)	(8.9)
Group’s share of management fee income available for dividends (net of tax and minority interest)	45.5	42.3
Tax	12.0	11.8
Minority interest	5.8	7.9
Depreciation relating to contracted TOCs	3.0	26.9
Pre-EMA/ERMA and other adjustments	–	22.6
IFRS16 adjustments1	593.3	608.5
First Rail adjusted EBITDA per segmental results table above	649.9	711.1

Group items EBITDA comprises:

Pre-IFRS16 EBITDA	(24.8)	(30.8)
IFRS16 adjustments1	1.7	1.7
Group items adjusted EBITDA per segmental results table above	(23.1)	(29.1)

First Rail adjusted operating profit comprises:

Non-management fees based TOCs	(9.7)	(10.4)
Tax	12.0	11.8
Minority interest	5.8	7.9
Pre-EMA/ERMA and other adjustments	–	22.6
Group’s share of management fee income available for dividends (net of tax and minority interest)	45.5	42.3
IFRS16 adjustments1	34.2	33.9
First Rail adjusted operating profit per segmental results table above	87.8	108.1

¹     IFRS 16 adjustments to EBITDA principally reflect the add back of operating lease rental costs charged to the income statement before the adoption of IFRS 16. IFRS 16 adjustments to operating profit reflect operating lease rental costs less depreciation charges on Right of Use Assets.

5   Investment income and finance costs

	2022 £m	2021 £m
Investment income
Bank interest receivable	(1.5)	(2.0)
Finance costs
Bonds	22.2	55.8
Bank borrowings	14.1	15.7
Total make-whole costs (bonds and facilities)	50.0	–
Write off of unamortised bridge, bond and facility costs	8.6	–
CCFF funding	0.7	2.0
Supplier financing	1.5	3.0
Senior unsecured loan notes	3.2	9.1
Loan notes	-	0.1
Finance charges payable in respect of lease liabilities1	41.0	69.5
Finance charges payable in respect of asset backed financial liabilities1	2.3	3.6
Interest on long-term provisions	4.9	3.8
Interest on pensions	2.6	9.0
interest – other	2.4	0.4
Total finance costs (including discontinued operations)	153.5	172.0
Total finance costs	153.5	172.0
Investment income	(1.5)	(2.0)
Net finance cost before adjustments	152.0	170.0

   

Split:
Adjusted net finance costs	93.4	172.0
Other adjustments (note 4)	58.6	(2.0)
	152.0	170.0

1       In the prior year these balances were combined and presented as 'finance charges payable In respect of leases', however following a Financial Reporting Council enquiry these balances have now been reclassified – see note 1 for further details.   

Investment income of £0.4m and finance costs of £11.9m relate to discontinued operations (note 14).

6   Tax on profit/(loss) on ordinary activities

	2022 £m	2021 £m
Current tax	2.9	17.2
Adjustments with respect to prior years	1.2	5.5
Total current tax charge (including discontinued operations)	4.1	22.7
Origination and reversal of temporary differences	5.2	27.0
Adjustment in respect of prior years	(10.7)	(14.9)
Adjustments attributable to changes in tax rates and laws	(1.4)	–
Writing down of previously recognised deferred tax assets	40.6	–
Write back of previously unrecognised deferred tax assets	(25.7)	(10.1)
Total deferred tax charge (note 19)	8.0	2.0
Total tax charge (including discontinued operations)	12.1	24.7
Tax charge/(credit) attributable to:
(Loss/)profit from continuing operations	(11.9)	6.3
Profit from discontinued operations	24.0	18.4

7   Earnings per share (EPS)

EPS is calculated by dividing the profit attributable to equity shareholders of £636.4m (2021: profit £78.4m) by the weighted average number of ordinary shares of 1,057.5m (2021: 1,203.6m). The number of ordinary shares used for the basic and diluted calculations are shown in the table below.

The difference in the number of shares between the basic calculation and the diluted calculation represents the weighted average number of potentially dilutive ordinary share options.

	2022 Number m	2021 Number m
Weighted average number of shares used in basic calculation	1,057.5	1,203.6
Executive share options	35.6	27.9
Weighted average number of shares used in the diluted calculation	1,093.1	1,231.5

The adjusted EPS is intended to highlight the recurring operating results of the Group before amortisation charges and certain other adjustments as set out in note 4. A reconciliation is set out below:

		2022		2021 (restated)
	£m	EPS (pence)	£m	EPS (pence)
Basic profit/EPS	636.4	60.2	78.4	6.5
Amortisation charges (note 4)	0.4	–	4.1	0.3
Other adjustments (note 4)	(579.7)	(54.7)	(69.7)	(5.8)
Adjusting finance costs (note 4)	58.6	5.5	–	–
NCI on SWR	–	–	6.6	0.6
Tax effect of above adjustments	(21.8)	(2.1)	30.6	2.5
Adjustments attributable to changes in tax rates and laws	(1.4)	(0.1)	–	–
Write down of previously recognised deferred tax assets	40.6	3.8	–	–
Write back of previously unrecognised deferred tax assets	(25.7)	(2.4)	(10.1)	(0.8)
Adjusted profit and EPS attributable to the ordinary equity holders of the company	107.4	10.2	39.9	3.3
Adjusted profit from discontinued operations	90.9	8.6	73.1	6.1
Adjusted profit/(loss)/EPS from continuing operations	16.5	1.6	(33.2)	(2.8)

   

	2022 pence	2021 (restated) pence
Diluted EPS	60.2	6.4
Adjusted diluted EPS	9.8	3.2

The adjusted EPS on a continuing basis is set out below:

		2022		2021 (restated)
	£m	EPS (pence)	£m	EPS (pence)
Basic profit/EPS	(11.4)	(1.1)	10.9	0.9
Amortisation charges (note 4)	–	–	0.2	–
Other adjustments (note 4)	(16.1)	(1.4)	(59.0)	(5.0)
Adjusting finance costs (note 4)	58.6	5.5	–	–
NCI on SWR	–	–	6.6	0.6
Tax effect of above adjustments	(7.1)	(0.7)	18.2	1.5
Adjustments attributable to changes in tax rates and laws	(1.4)	(0.1)	–	–
Write down of previously recognised deferred tax assets	–	–	–	–
Write back of previously unrecognised deferred tax assets	(6.1)	(0.6)	(10.1)	(0.8)
Adjusted profit/(loss)/EPS from continuing operations	16.5	1.6	(33.2)	(2.8)

   

	2022 pence	2021 (restated) Pence
Diluted EPS	(1.1)	0.9
Adjusted diluted EPS	1.5	(2.8)

The results for the 52 weeks to 27 March 2021 have been restated since they have been split into the results for the continuing operations and the results for the discontinued operations.  Discontinued operations now includes Greyhound entities which were sold in the year.

8   Goodwill

	2022 £m
Cost
At 28 March 2021	347.7
Additions1	9.7
Transfers to held for sale – discontinued operations	(264.6)
Foreign exchange movements	0.7
At 26 March 2022	93.5
Accumulated impairment losses
At 28 March 2021	263.8
Transfers to held for sale – discontinued operations	(264.6)
Foreign exchange movements	0.8
At 26 March 2022	–
Carrying amount
At 26 March 2022	93.5
At 27 March 2021	83.9

1       Additions of £9.7m relate to continuing operations.  Additions also include £1.3m relating to an acquisition by First Student which was subsequently disposed of as part of the First Student disposal in the year therefore this is not included in the above note as First Student was transferred to discontinued operations in the prior year.

Goodwill transferred to held for sale – discontinued operations on 25 September 2021 in relation to Greyhound is shown in the table above.

Goodwill in the above table relates to First Bus and Hull Trains.

9   Other intangible assets

	Customer contracts £m	Greyhound brand and trade name £m	Software £m	Total £m
Cost
At 28 March 2020	501.8	74.2	87.9	663.9
Acquisitions	0.9	–	–	0.9
Additions	–	–	4.1	4.1
Transfers to held for sale - discontinued operations	(460.6)	–	(21.2)	(481.8)
Disposals	–	–	(3.8)	(3.8)
Foreign exchange movements	(42.1)	(5.8)	(6.9)	(54.8)
At 27 March 2021	–	68.4	60.1	128.5
Acquisitions	–	–	0.2	0.2
Additions	–	–	9.7	9.7
Transfers to held for sale – discontinued operations	–	(57.7)	(39.4)	(97.1)
Disposals	–	(14.0)	(0.3)	(14.3)
Foreign exchange movements	–	3.3	1.7	5.0
At 26 March 2022	–	–	32.0	32.0
Accumulated amortisation and impairment
At 28 March 2020	481.3	64.7	66.0	612.0
Charge for year	2.9	1.2	11.0	15.1
Transfers to held for sale – discontinued operations	(443.7)	–	(16.3)	(460.0)
Disposals	–	–	(3.3)	(3.3)
Foreign exchange movements	(40.5)	(5.1)	(5.9)	(51.5)
At 27 March 2021	–	60.8	51.5	112.3
Charge for year	–	0.3	6.1	6.4
Impairment	–	1.6	–	1.6
Impairment reversal	–	(3.4)	(0.8)	(4.2)
Transfers to held for sale – discontinued operations	–	(48.2)	(38.7)	(86.9)
Disposals	–	(14.0)	(0.3)	(14.3)
Foreign exchange movements	–	2.9	1.8	4.7
At 26 March 2022	–	–	19.6	19.6
Carrying amount
At 26 March 2022	–	–	12.4	12.4
At 27 March 2021	–	7.6	8.6	16.2

10 Property, plant and equipment

Owned assets

	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Cost
At 28 March 2020	480.2	3,440.1	876.0	4,796.3
Acquisitions	–	0.6	–	0.6
Additions	4.9	197.4	135.5	337.8
Transfers to right of use assets1	–	(89.2)	–	(89.2)
Transfers from right of use assets1	–	91.7	–	91.7
Disposals	(37.0)	(119.6)	(93.0)	(249.6)
Reclassified as assets held for sale	(14.6)	(110.4)	–	(125.0)
Transferred to held for sale - discontinued operations	(134.2)	(2,150.6)	(251.5)	(2,536.3)
Foreign exchange movements	(23.9)	(233.1)	(32.4)	(289.4)
At 27 March 2021	275.4	1,026.9	634.6	1,936.9
At 28 March 2021	275.4	1,026.9	634.6	1,936.9
Acquisitions3	–	–	–	–
Additions	3.7	92.6	51.7	148.0
Transfers from right of use assets	–	50.8	–	50.8
Disposals	(5.4)	(42.2)	(6.8)	(54.4)
Reclassified as assets held for sale	(47.6)	(10.3)	–	(57.9)
Transfers	10.3	–	16.8	27.1
Transferred to held for sale – discontinued operations	(36.7)	(326.9)	(36.6)	(400.2)
Foreign exchange movements	3.9	8.2	3.1	15.2
At 26 March 2022	203.6	799.1	662.8	1,665.5
Accumulated depreciation and impairment
At 28 March 2020	119.9	1 878.6	678.4	2,676.9
Charge for year	13.5	226.6	51.7	291.8
Transfers to right of use assets1	–	(11.5)	–	(11.5)
Transfers from right of use assets1	–	44.3	–	44.3
Disposals	(8.9)	(103.7)	(86.9)	(199.5)
Impairment2	16.6	–	–	16.6
Reclassified as assets held for sale	(2.7)	(106.5)	–	(109.2)
Transferred to held for sale – discontinued operations	(52.6)	(1,076.6)	(229.0)	(1,358.2)
Foreign exchange movements	(8.3)	(131.0)	(24.3)	(163.6)
At 27 March 2021	77.5	720.2	389.9	1,187.6
At 28 March 2021	77.5	720.2	389.9	1,187.6
Charge for year	6.0	44.2	106.6	156.8
Transfers from right of use assets	–	6.3	–	6.3
Disposals	(2.5)	(42.5)	(4.0)	(49.0)
Impairment2	7.3	(34.8)	(2.6)	(30.1)
Reclassified as assets held for sale	(9.5)	(10.3)	–	(19.8)
Transfers	2.6	–	16.5	19.1
Transferred to held for sale – discontinued operations	(5.8)	(209.6)	(60.3)	(275.7)
Foreign exchange movements	1.3	10.7	1.9	13.9
At 26 March 2022	76.9	484.2	448.0	1,009.1
Carrying amount
At 26 March 2022	126.7	314.9	214.8	656.4
At 27 March 2021	197.9	306.7	244.7	749.3

1       Transfers to right of use assets represents purchased property, plant and equipment that was transitioned to lease shortly after purchase. Transfers from right of use assets represents lease buyouts.

2       The impairment reversal of £37.4m relates to Greyhound (2021: charge of £16.6m in 2021 relates to properties associated with First Bus and Group). The impairment charge of £7.3m relates to retained Greyhound properties, these have subsequently been transferred to assets held for sale.

3       Acquisitions of £nil relate to continuing operations.  Acquisitions also include £1.4m relating to an acquisition by First Student which was subsequently disposed of as part of the First Student disposal in the year therefore this is not included in the above note as First Student was transferred to discontinued operations in the prior year.

10 Property, plant and equipment (continued)

Right of use assets

	Rolling stock £m	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Cost
At 28 March 2020	2,541.4	261.3	332.8	6.8	3,142.3
Additions	102.9	56.6	13.7	0.5	173.7
Transfer to owned assets1	–	–	(91.7)	–	(91.7)
Transfer from owned assets1	–	–	89.2	–	89.2
Disposals	(46.8)	(4.3)	–	–	(51.1)
Transferred to held for sale – discontinued operations	–	(177.0)	(174.3)	(0.4)	(351.7)
Foreign exchange movements	–	(20.9)	(24.7)	–	(45.6)
At 27 March 2021	2,597.5	115.7	145.0	6.9	2,865.1
At 28 March 2021	2,597.5	115.7	145.0	6.9	2,865.1
Additions	93.1	3.2	9.4	1.0	106.7
Transfer to owned assets	–	–	(50.8)	–	(50.8)
Disposals	(105.0)	(3.7)	(1.9)	–	(110.6)
Transferred to held for sale – discontinued operations	–	(62.2)	(42.2)	(0.4)	(104.8)
Foreign exchange movements	–	2.9	0.7	–	3.6
At 26 March 2022	2,585.6	55.9	60.2	7.5	2,709.2
Accumulated depreciation and impairment
At 28 March 2020	652.3	94.0	138.4	2.5	887.2
Transfer to owned assets1	–	–	(44.3)	–	(44.3)
Transfer from owned assets1	–	–	11.5	–	11.5
Charge for period	571.2	52.7	44.7	1.8	670.4
Impairment2	(146.5)	3.5	–	–	(143.0)
Disposals	(17.4)	(1.5)	–	–	(18.9)
Transferred to held for sale – discontinued operations	–	(79.0)	(93.2)	(0.4)	(172.6)
Foreign exchange movements	–	(8.3)	(11.3)	–	(19.6)
At 27 March 2021	1,059.6	61.4	45.8	3.9	1,170.7
At 28 March 2021	1,059.6	61.4	45.8	3.9	1,170.7
Transfer to owned assets	–	–	(6.3)	–	(6.3)
Charge for period	553.2	10.9	17.0	1.6	582.7
Impairment2	–	(10.4)	(3.4)	–	(13.8)
Disposals	(3.1)	(1.6)	(1.0)	–	(5.7)
Transferred to held for sale – discontinued operations	–	(39.9)	(17.3)	(0.4)	(57.6)
Foreign exchange movements	–	2.1	0.8	–	2.9
At 26 March 2022	1,609.7	22.5	35.6	5.1	1,672.9
Carrying amount
At 26 March 2022	975.9	33.4	24.6	2.4	1,036.3
At 27 March 2021	1,537.8	54.3	99.2	3.0	1,694.3

1       Transfers from owned assets represents purchased property, plant and equipment that was transitioned to lease shortly after purchase. Transfers to owned assets represents lease buyouts.

2       The impairment reversal of £13.8m relates to Greyhound (2021: charge of £3.5m relates to First Student, reversal of £146.5m relates to SWR and TPE).

The discounted lease liability relating to the right of use assets included above are shown in note 16.

Owned assets and right of use assets

	Rolling stock £m	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Carrying amount
At 26 March 2022	975.9	160.1	339.5	217.2	1,692.7
At 27 March 2021	1,537.9	252.2	405.9	247.7	2,443.7

The maturity analysis of lease liabilities is presented in note 16.

Amounts recognised in income statement (including discontinued operations)	2022 £m	2021 £m
Depreciation expense on right of use assets	582.7	670.4
Interest expense on lease liabilities	41.0	73.1
Expense relating to short-term leases	–	4.7
Expense relating to leases of low value assets	3.4	3.4
	627.1	751.6

11  Inventories

	2022 £m	2021 £m
Spare parts and consumables from continuing operations	28.9	29.4

On 26 March 2022 inventories of £nil (2021: £19.5m) have been transferred to held for sale – discontinued operations, see note 14.

12 Trade and other receivables

Amounts due after more than one year (from continuing operations)	2022 £m	2021 £m
Contingent consideration receivable	106.1	–
	106.1	–

   

Amounts due within one year (from continuing operations)	2022 £m	2021 £m
Trade receivables	292.1	223.5
Loss allowance	(15.2)	(7.3)
Trade receivables net	276.9	216.2
Other receivables	194.7	162.4
Amounts recoverable on contracts	3.1	23.3
Prepayments	69.4	75.6
Accrued income	138.2	199.2
	682.3	676.7

On 26 March 2022 Trade and other receivables of £nil (2021: £548.4m) have been transferred to held for sale – discontinued operations, see note 14.

13 Trade and other payables

Amounts falling due within one year (from continuing operations)	2022  £m	2021 £m
Trade payables	253.3	182.3
Other payables	165.9	239.5
Accruals	703.2	1,047.0
Deferred income	109.8	112.8
Season ticket deferred income	12.9	6.0
	1,245.1	1,587.6

On 26 March 2022 Trade and other payables of £nil (2021: £325.4m) have been transferred to held for sale – discontinued operations, see note 14.

14 Discontinued operations

First Student and First Transit

The sale of First Student and First Transit was approved by a shareholder majority on 27th May 2021 and was reported as a discontinued operation in the financial statements for the 52 weeks ended 27 March 2021. The sale completed on 21 July 2021. Proceeds net of direct transaction costs/fees were £2,323.3m excluding earn out. First Student and First Transit are therefore reported in the 52 weeks ended 26 March 2022 as discontinued operations. Financial information relating to the discontinued operation for the period to the date of the disposal (21 July 2021) is set out below in (a).

Greyhound

The disposal of Greyhound Lines, Inc to a wholly owned subsidiary of FlixMobility GmbH was announced and completed on 21 October 2021. Greyhound US is reported as a discontinued operation for the 52 weeks to 26 March 2022. The properties relating to the retained Greyhound business have been classified as held for sale and are therefore treated as discontinued as it is anticipated that these properties will be disposed of in 2022 as part of a single plan to sell the remaining portfolio of Greyhound properties.

(a) Financial performance and cash flow information

The financial performance and cash flow information presented are for the 52 weeks ending 26 March 2022, and include the results of First Student and First Transit to the period before disposal on 21 July 2021, and the results of Greyhound to the period before disposal on 21 October 2021.

Discontinued Operations	2022 £m	2021 £m
Revenue	996.9	2,526.0
Operating costs	(313.6)	(2,411.2)
Operating profit	683.3	114.8
Investment income	0.4	0.2
Finance costs	(11.9)	(28.3)
Profit before tax	671.8	86.7
Tax	(24.0)	(18.4)
Profit for the year after tax	647.8	68.3
Attributable to:
Equity holders of the parent	647.8	67.5
Non-controlling interests	–	0.8
	647.8	68.3

   

EPS	2022 pence	2021 pence
Basic EPS	61.3	5.6
Diluted EPS	61.3	5.5
Cash flow	2022 £m	2021 £m
Net cash inflow from operating activities	233.4	256.2
Net cash outflow from investing activities	(286.6)	(126.7)
Net cash outflow from financing activities	(20.3)	(124.6)
Net (decrease)/increase in cash generated	(73.5)	4.9

Other comprehensive income

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
Actuarial (losses)/gains on defined benefit pension schemes	12.1	51.4
Deferred tax on actuarial gains/(losses) on defined benefit pension schemes	–	(4.6)
Hedging instrument movements	2.7	7.6
Deferred tax on hedging instrument movements	(0.7)	(2.0)
Exchange differences on translation of discontinued operations	(5.6)	(112.2)
Total	8.5	(59.8)

14 Discontinued operations (continued)

(b) Details of the sale of First Student and First Transit

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
Consideration received or receivable:
Cash	2,377.3	–
Direct transaction costs/fees	(54.0)	–
Fair value of contingent consideration	101.8	–
Total net disposal consideration	2,425.1	–
Carrying amount of net assets sold	(2,374.6)	–
Gain on sale before tax and reclassification of foreign currency translation reserve	50.5	–
Reclassification of foreign currency translation reserve	450.6	–
Gain on sale of the division before tax	501.1	–
Tax on gain	–	–
Gain on sale of the divisions after tax	501.1	–

As part of the disposal of First Transit, FirstGroup are entitled to an ‘earn out’ consideration of up to $290m (c. £220m). The earn out is for a period of 3 years from 21 July 2021 and is calculated as a percentage of the Realised Equity Value.

The earn out was fair valued at 26 March 2022 using an Income Approach based on discounted cash flows and a Market Approach using earnings multiples and assumes EQT does not dispose of the business by the third anniversary (21 July 2024). Fair value was $140m (c. £106m) at 26 March 2022.

The carrying amounts of assets and liabilities as at the date of sale (21 July 2021) were:

	21 July 2021 £m
Non-current assets
Goodwill	1,448.0
Other intangible assets	23.0
Property, plant and equipment	1,464.3
Investments	26.4
	2,961.7
Current assets
Inventories	21.8
Trade and other receivables	411.9
Assets held for sale	0.5
Cash and cash equivalents	83.9
	518.1
Total assets	3,479.8
Current liabilities
Trade and other payables	361.7
Tax liabilities – Current tax liabilities	2.4
Borrowings	65.1
Provisions	131.2
	560.4
Net current liabilities	(42.3)
Non-current liabilities
Borrowings	194.9
Retirement benefit liabilities	24.4
Deferred tax liabilities	71.3
Provisions	254.2
	544.8
Total liabilities of discontinued operations	1,105.2
Net assets	2,374.6

(c) Details of the sale of Greyhound

	52 weeks to 26 March 2022 £m	52 weeks to 27 March 2021 £m
Consideration received or receivable:
Cash	101.4	–
Direct transaction costs/fees	(17.0)	–
Fair value of contingent consideration	23.3	–
Total net disposal consideration	107.7	–
Carrying amount of net assets sold	(91.5)	–
Gain on sale before tax and reclassification of foreign currency translation reserve	16.2	–
Reclassification of foreign currency translation reserve	92.8	–
Gain on sale of the division before tax	109.0	–
Tax on gain	–	–
Gain on sale of the division after tax	109.0	–

14 Discontinued operations (continued)

The carrying amounts of assets and liabilities as at the date of sale (21 October 2021) were:

	21 October 2021 £m
Non-current assets
Other intangible assets	10.2
Property, plant and equipment	171.7
	181.9
Current assets
Inventories	4.7
Trade and other receivables	39.8
Investments	2.0
Current tax assets	0.3
Cash and cash equivalents	74.8
	121.6
Total assets	303.5
Current liabilities
Trade and other payables	126.4
Tax liabilities – Other tax and social security	1.0
Borrowings	14.8
Provisions	8.6
	150.8
Net current liabilities	(29.2)
Non-current liabilities
Finance lease liabilities	43.3
Retirement benefit liabilities	1.9
Provisions	16.0
	61.2
Total liabilities of discontinued operations	212.0
Net assets	91.5

(d) Assets and liabilities of disposal group classified as held for sale

The following assets and liabilities were reclassified as held for sale in relation to the discontinued operations as at 26 March 2022 in relation to Greyhound and as at 27 March 2021 in relation to First Student and First Transit.

	2022 £m	2021  £m
Non-current assets
Goodwill	–	1,442.0
Other intangible assets	–	21.8
Property, plant and equipment	–	1,357.2
Derivative financial instruments	–	0.5
Investments	–	30.9
	–	2,852.4
Current assets
Inventories	–	19.5
Trade and other receivables	–	548.4
Current tax assets	–	0.4
Derivative financial instruments	–	0.1
Assets held for sale	38.5	0.4
Cash and cash equivalents	–	58.3
	38.5	627.1
Total assets of discontinued operations	38.5	3,479.5
Current liabilities
Trade and other payables	–	325.4
Tax liabilities – current tax liabilities	–	3.5
Derivative financial instruments	–	0.9
Borrowings	–	68.4
Provisions	–	138.6
	–	536.8
Net current assets	38.5	90.3
Non-current liabilities
Borrowings	–	279.3
Derivative financial instruments	–	0.2
Retirement benefit liabilities	–	24.7
Deferred tax liabilities	–	33.6
Provisions	–	262.0
	–	599.8
Total liabilities of discontinued operations	–	1,136.6
Net assets of discontinued operations	38.5	2,342.9

15  Borrowings

	2022 £m	2021 £m
On demand or within 1 year
Lease liabilities (note 16)3,4	573.4	570.7
Asset backed financial liabilities (note 16) 4	9.0	10.7
Bank overdraft	87.5	53.8
CCFF	–	298.2
Bond 8.75% (repayable 2021)1	–	380.1
Bond 5.25% (repayable 2022)2	–	5.6
Bond 6.875% (repayable 2024)2	7.1	7.1
Total current liabilities from continuing operations	677.0	1,326.2
Amounts relating to held for sale – discontinued operations	–	68.4
Total current liabilities (including discontinued operations)	677.0	1,394.6
Within 1-2 years
Syndicated loans	–	116.5
Lease liabilities (note 16)3,4	167.8	561.7
Asset backed financial liabilities (note 16)4	15.7	11.1
Loan notes (note 17)	0.6	0.7
Bond 5.25% (repayable 2022)	–	323.4
	184.1	1,013.4
Within 2-5 years
Syndicated loan facilities	–	449.8
Lease liabilities (note 16)3,4	294.4	541.5
Asset backed financial liabilities (note 16)4	10.5	35.5
Bond 6.875% (repayable 2024)	199.9	199.8
Senior unsecured loan notes	–	72.5
	504.8	1,299.1
Over 5 years
Lease liabilities (note 16)3,4	47.6	48.8
Asset backed financial liabilities (note 16)4	0.3	4.4
Senior unsecured loan notes	–	126.3
	47.9	179.5
Total non-current liabilities at amortised cost from continuing operations	736.8	2,492.0
Amounts related to held for sale – discontinued operations	–	279.3
Total non-current liabilities (including discontinued operations)	736.8	2,771.3

1       Includes accrued interest.

2       Includes accrued interest only.

3       The right of use assets relating to lease liabilities are shown in note 10.

4       The maturity analysis of lease liabilities and asset backed financial liabilities is presented in note 16.  In the prior year these balances were combined and presented as 'leases', however they have now been reclassified. See note 1 for further details.

16  Lease liabilities and asset backed financial liabilities

The Group had the following lease liabilities and financial liabilities at the balance sheet dates excluding liabilities relating to the discontinued operations:

	Lease liabilities1		Asset backed financial liabilities1
Maturity analysis:	2022 £m	2021 £m	2022 £m	2021 £m
Due in less than one year	593.0	621.3	9.3	11.0
Due in more than one year but not more than two years	179.4	581.1	16.6	11.8
Due in more than two years but not more than five years	304.4	566.3	11.9	40.3
Due in more than five years	59.8	66.4	0.5	5.3
	1,136.6	1,835.1	38.3	68.4
Less future financing charges	(53.4)	(112.6)	(2.8)	(6.5)
	1,083.2	1,722.5	35.5	61.9

1       In the prior year these balances were combined and presented as 'lease liabilities', however they have now been reclassified. See note 1 for further details.

On 26 March 2022 lease liabilities of £nil and asset backed financial liabilities of £nil (2021: lease liabilities of £126.5m and asset backed financial backed of £61.0m) have been transferred to held for sale - discontinued operations, see note 14.

Lease liabilities have a fair value of £1,083.2m and asset backed financial liabilities have a fair value of £36.4m (2021: lease liabilities £1,722.6m, asset backed financial liabilities £64.4m).

The total cash outflow for the lease liabilities and asset backed financial liabilities recorded on the balance sheet amounted to £600.4m and £9.4m respectively (2021: £685.0m and £25.1m), this includes cash outflow relating to held for sale - discontinued operations amount to £nil (2021: £124.6m).

The right of use assets related to the lease liabilities is presented in note 10.

17 Loan notes

The Group had the following loan notes issued as at the balance sheet dates relating to continuing operations:

	2022 £m	2021 £m
Due in less than one year	–	–
Due in more than one year but not more than two years	0.6	0.7
	0.6	0.7

18  Financial instruments

Non-derivative financial instruments

	2022 £m	2021 £m
Total non-derivatives
Total non-current assets	117.0	–
Total assets from continuing operations	117.0	–
Amounts relating to held for sale – discontinued operations	–	–
Total assets	117.0	–

Derivative financial instruments

	2022 £m	2021 £m
Total derivatives
Total non-current assets	4.2	1.2
Total current assets	26.2	14.9
Total assets from continuing operations	30.4	16.1
Amounts relating to held for sale – discontinued operations	–	0.6
Total assets	30.4	16.7
Total current liabilities	–	11.8
Total non-current liabilities	–	1.2
Total liabilities from continuing operations	–	13.0
Amounts relating to held for sale – discontinued operations	–	1.1
Total liabilities	–	14.1
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Fuel derivatives (cash flow hedge)	4.0	1.0
Cross currency swaps (net investment hedge)	–	0.3
Currency forwards (cash flow hedge)	0.2	–
	4.2	1.3
Current assets
Fuel derivatives (cash flow hedge)	25.6	1.9
Cross currency swaps (net investment hedge)	–	13.5
Currency forwards (cash flow hedge)	0.6	–
	26.2	15.4
Current liabilities
Fuel derivatives (cash flow hedge)	–	4.8
Currency forwards (cash flow hedge)	–	1.1
Currency forwards (net investment hedge)	–	6.4
	–	12.3
Non-current liabilities
Currency forwards (cash flow hedge)	–	0.6
Fuel derivatives (cash flow hedge)	–	0.8
	–	1.4
Derivatives designated classified as held for trading
Current liability
Fuel derivatives	–	0.4
	–	0.4

19 Deferred tax

The major deferred tax liabilities/(assets) recognised by the Group and movements thereon during the current and prior reporting periods are as follows:

	Accelerated tax depreciation £m	Retirement benefit schemes £m	Other temporary differences £m	Tax loses £m	Total £m
At 28 March 2020	207.3	(30.6)	91.7	(263.2)	5.2
Charge/(credit) to income statement	6.8	6.4	(26.8)	15.6	2.0
Charge/(credit) to other comprehensive income and equity	–	(15.5)	10.0	–	(5.5)
Transferred to held for sale – discontinued operations	(185.8)	6.3	(77.4)	223.3	(33.6)
Foreign exchange and other movements	(17.6)	1.0	(10.8)	24.3	(3.1)
At 27 March 2021	10.7	(32.4)	(13.3)	–	(35.0)
Charge/(credit) to income statement	1.2	39.0	(39.7)	7.5	8.0
Charge to other comprehensive income and equity	–	22.1	5.8	–	27.9
Transferred to held for sale – discontinued operations	(16.6)	20.6	1.3	(43.0)	(37.7)
Foreign exchange and other movements	(1.4)	(0.7)	1.0	1.8	0.7
At 26 March 2022	(6.1)	48.6	(44.9)	(33.7)	(36.1)

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

			2022  £m	2021 £m
Deferred tax assets			(36.1)	(35.0)
Deferred tax liabilities			–	33.6
			(36.1)	(1.4)

19 Deferred tax (continued)

With respect to the total net deferred tax asset of £36.1m, UK net deferred tax assets of £14.4m have been recognised as the Group forecasts sufficient taxable profits in future periods and a deferred tax asset of £21.7m relating to the US is recognised because it is probable that book gains will arise on the Greyhound property portfolio.

No deferred tax has been recognised on deductible temporary differences of £105.1m (2021: £232.2m) and tax losses of £95.6m (2021: £430.4m).

20 Provisions

	2022 £m	2021 £m
Insurance claims	96.2	111.9
Legal and other	23.3	22.8
Pensions	1.2	0.8
	120.7	135.5

On 26 March 2022 provisions of £nil (2021: £400.6m) have been transferred to discontinued operations, see note 14.

	Insurance claims  £m	Legal and other £m	Pensions £m	Total £m
At 27 March 2021	172.2	36.5	1.2	209.9
Charged to the income statement	33.2	55.3	0.1	88.6
Utilised in the year	(43.0)	(14.8)	–	(57.8)
Transferred from accruals	–	9.6	–	9.6
Notional interest	3.0	–	–	3.0
Transferred to held for sale – discontinued operations	(22.6)	(2.0)	–	(24.6)
Foreign exchange movements	5.2	1.4	–	6.6
At 26 March 2022	148.0	86.0	1.3	235.3
Current liabilities	51.8	62.7	0.1	114.6
Non-current liabilities	96.2	23.3	1.2	120.7
At 26 March 2022	148.0	86.0	1.3	235.3
Current liabilities	60.3	13.7	0.4	74.4
Non-current liabilities	111.9	22.8	0.8	135.5
At 27 March 2021	172.2	36.5	1.2	209.9

The insurance claims provision arises from estimated exposures for incidents occurring prior to the balance sheet date. It is anticipated that the majority of such claims will be settled within the next five years although certain liabilities in respect of lifetime obligations of £8.9m (2021: £10.3m) can extend for up to 30 years. The utilisation of £43.0m (2021: £186.0m) represents payments made against the current liability of the preceding year as well as the settlement of certain large aged claims.

The insurance claims provisions, of which £96.0m relates to legacy Greyhound claims, includes £88.5m (2021: £24.7m) which is recoverable from insurance companies and a receivable is included within other receivables in note 12.

Legal and other provisions relate to estimated exposures for cases filed or thought highly likely to be filed for incidents that occurred prior to the balance sheet date. It is anticipated that most of these items will be settled within ten years. Also included are provisions in respect of costs anticipated on the exit of surplus properties which are expected to be settled over the remaining terms of the respective leases and dilapidation, other provisions in respect of contractual obligations under rail franchises and restructuring costs. The dilapidation provisions are expected to be settled at the end of the respective franchise.

The pensions provision relates to unfunded obligations that arose on the acquisition of certain First Bus companies. It is anticipated that this will be utilised over approximately five years.

21 Called up share capital

	Number of shares million	£m
Allotted, called up and fully paid (ordinary shares of 5p each)
Balance as at 28 March 2021	1,221.8	61.1
Shares bought back and cancelled	(476.2)	(23.8)
SAYE/BAYE exercises	4.6	0.2
Balance as at 26 March 2022 (ordinary shares of 5p each)	750.2	37.5

The Company has one class of ordinary shares which carries no right to fixed income.

Following the completion of the sale of First Student and First Transit, the Company announced and completed a tender offer to purchase 476.2m ordinary shares at a price of 105 pence per share, for a total cost of £506.0m, including transaction costs of £6.0m. The shares acquired under the tender offer were immediately cancelled.

During the year 4.6m shares were issued to satisfy principally SAYE and BAYE exercises.

22  Net cash from operating activities

	2022 £m	2021 £m
Operating profit from:
Continuing operations	122.8	224.3
Discontinued operations	683.3	61.5
Total operations	806.1	285.8
Adjustments for:
Depreciation charges	746.4	962.3
Capital grant amortisation	(115.8)	(13.3)
Software amortisation charges	4.7	11.2
Other intangible asset amortisation charges	0.4	4.1
Gain on disposal of subsidiaries and businesses	(66.7)	–
Recycling of translation reserve	(543.4)	–
(Reversal of impairment)/impairment charges	(48.1)	16.6
Share-based payments	5.4	11.9
Profit on disposal of property, plant and equipment	(22.1)	(73.0)
Operating cash flows before working capital and pensions	766.9	1,205.6
(Increase)/decrease in inventories	(6.4)	12.0
Decrease/(increase) in receivables	95.5	(5.9)
(Decrease)/increase in payables due within one year	(52.4)	197.0
Increase in financial assets	(117.0)	–
Increase in contingent consideration receivable	(106.1)	–
Increase/(decrease) in provisions due within one year	36.5	(1.7)
(Decrease)/increase in provisions due over one year	(13.2)	10.9
Defined benefit pension payments in excess of income statement charge	(340.4)	(59.2)
Cash generated by operations	263.4	1,358.7
Tax paid	(21.4)	(4.5)
Interest paid¹	(176.6)	(149.8)
Net cash from operating activities	65.4	1,204.4

1       Interest paid includes £41.0m relating to lease liabilities (2021: £69.5m)

2       Net cash from operating activities is stated after an outflow of £9.1m (2021: outflow of £17.2m) in relation to financial derivative settlements.

Responsibility Statement of the Directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group’s full annual report for the 52 weeks ended 26 March 2022. Certain parts thereof are not included within the announcement.

We confirm to the best of our knowledge:

•    The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

•    The Management Report, which is incorporated into the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

•    The Directors consider that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide information necessary for the shareholders to assess the Company’s and the Group’s position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors and is signed on its behalf by:

Ryan Mangold

Chief Financial Officer

14 June 2022