FirstGroup : FY 2024 Results Presentation

FirstGroup

FY 2024 Results

Tuesday 11 June 2024

Agenda

1. Overview
2. Financial review
3. Business review
4. Summary

2

Strong delivery against our strategy

We are delivering value-accretive sustainable growth, underpinned by our strong balance sheet and disciplined capital allocation policy - adjusted EPS up 44% to 16.7p

Deliver, day in day out

Drive modal shift

Lead in environmental and

social sustainability

Diversify our portfolio

• First Bus Adj. operating profit margin of 9.4% in H2 2024
• First Rail DfT TOCs FY 2023 variable fee awards c.£13m ahead of expectations
• West Coast Partnership (incorporating Avanti West Coast) National Rail Contract awarded Sep 2023

• First Bus revenue up 12% (+£110m); mainly due to 7% increase in passengers
• First Bus Adjacent Services revenue up 26% (+£45m)
• Lumo and Hull Trains revenue up 41% (+£29m)
• Hull Trains capacity increased by 14% creating growth opportunity

• c.13% of the First Bus fleet now zero emissions with three fully electric depots in England
• B2B and B2C charging underway at a number of First Bus depots
• Joined UN Global Compact and only UK bus and train company listed in S&P Sustainability Yearbook

• First Bus acquisition of York Pullman and awarded TfGM Rochdale franchise contracts
• First Rail awarded TfL London Cable Car contract
• Formal applications submitted for two new open access services, extension of some Lumo services to Glasgow and additional paths on Hull Trains and Lumo

3 11 June 2024 | Results for 53 weeks to 30 March 2024

Agenda

1. Overview
2. Financial review
3. Business review
4. Summary

4

Material increase in profit driven by excellent progress in both First Bus and First Rail

£m (from continuing	FY 2024	FY 2023	Change %
operations)
Revenue	4,715.1	4,755.0	(1)%
Adjusted operating profit1	204.3	161.0	+27%
Adjusted profit before tax1	139.0	104.2	+33%
Adjusted earnings2	110.7	85.6	+29%
Adjusted earnings per	16.7p	11.6p	+44%
share p2,3
Dividend per share p	5.5p	3.8p	+45%
Adjusted net cash4	64.1	109.9	(42)%

1Before net adjusting items

2'Adjusted earnings' are shown before net adjusting items and excludes IFRS 16 impacts in First Rail management fee operations

3 'Adjusted EPS' based on weighted average number of shares in the period of 662.9m (FY 2023: 739.5m) reflecting the current year and prior year share buybacks

4 'Adjusted net cash' is bonds, bank and other debt net of free cash (i.e. excludes IFRS 16 lease liabilities and ring-fenced cash)

• Strong increase in margins in FY 2024
• Invested in landmark £100m strategic decarbonisation Hitachi joint venture (capex savings of £20m in FY 2024)
• Innovative £150m Green Hire Purchase Finance Facility secured to further support First Bus electrification
• Remaining First Transit proceeds of £65.3m received
• Final dividend of 4.0p proposed in line with progressive dividend policy
• £118m returned to shareholders in FY 2024 via the
  Group's buyback programme; £19.3m outstanding as at 10 June 2024
• c.£1bn pensions liabilities discharged or insured
• £88.0m of the Group's Sep 2024 bonds repurchased
  (£96.2m outstanding)

5 11 June 2024 | Results for 53 weeks to 30 March 2024

▪ Partially offset by inflationary pressures; costs increased by 6% (average driver pay settlement +c.8%; total fuel price +9%)

▪ Fuel and electricity hedging programmes to mitigate cost inflation are evolving as we transition the First Bus fleet to zero emissions

▪ ROCE of 11.5% reflects improvement in adjusted operating profit, partially offset by accelerated investment

First Bus: on track to achieve 10% margin target during FY 2025

£m	FY 20241	FY 2023	Change
Revenue	1,012.2	902.5	109.7
Adj. operating profit1,2	83.6	58.4	25.2
Margin	8.3%	6.5%	180bps
Return on Capital Employed3	11.5%	8.3%	320bps

• Revenue up 12% due to 9% higher passenger volumes, further performance improvements and lower lost mileage, offsetting a c.£40m reduction in funding
• Adjusted operated profit margin of 9.4% achieved in H2 2024 (FY 2024: 8.3%; FY 2023: 6.5%) despite ongoing inflationary pressures
• Adjacent services revenue of £219.8m reflects contract wins and extensions and contribution of Airporter and Ensignbus
• Pricing changes of c.£53m and network and operational efficiencies of c.£21m in FY 2024

		1	FY 2024 has one extra week (+c.£1.4m EBIT)	in decarbonisation
6	11 June 2024 | Results for 53 weeks to 30 March 2024	2	Before net adjusting items
3 Return on Capital Employed is a measure of capital efficiency and is calculated by dividing adjusted operating profit after tax by average year-

end assets and liabilities excluding debt items

First Rail: continued outperformance in open access

Significant increase across the First Rail portfolio, adjusted operating profit up £18.5m vs. FY 2023

£m	FY 2024	FY 2023	Change
GWR adj. op profit	56.2	47.2	9.0
SWR adj. op profit	22.0	14.5	7.5
WCP (incorporating Avanti) adj. op profit	22.3	18.8	3.5
TPE adj. op profit	5.1	12.8	(7.7)
Adj. operating profit from DfT TOCs	105.6	93.3	12.3
Open access adj. op profit	30.0	19.6	10.4
Additional services adj. op profit	7.7	11.9	(4.2)
Adj. op profit from open access and additional	37.7	31.5	6.2
services
Total First Rail adjusted operating profit1	143.3	124.8	18.5
£m	FY 2024	FY 2023	Change
Reconciliation to attributable net income
Adj. operating profit from TOCs1	105.6	93.3	12.3
Less IFRS 16 impact	(44.6)	(39.3)	(5.3)
Less tax and non-controlling interests	(21.5)	(15.3)	(6.2)
Attributable net income from DfT TOCs	39.5	38.7	0.8

• DfT TOCs Adjusted operating profit up £12.3m due mainly to higher than accrued final variable fee payments for FY 2023 (c.£13m uplift)
• Open access financial performance reflects strong demand and continued improvement in yield in FY 2024 partially offset by inflationary cost pressures
• Revenue from open access and Additional Services increased by £42.4m to £233.2m in FY 2024
• Additional Services businesses delivered adjusted operating profit of £7.7m in FY 2024 reflecting stronger performance across the affiliate businesses offset by business development costs and evo-rail restructuring costs
• Attributable net income from DfT TOCs up £0.8m despite end of TPE contract in May 2023

7	11 June 2024 | Results for 53 weeks to 30 March 2024	Before net adjusting items
1

Substantial increase in Group adjusted earnings

Strong financial performance in FY 2024 as we continue to grow and diversify our earnings

• First Bus improvement due to passenger revenue and volume growth, operational efficiencies partially offset by reduced funding and inflationary pressures
• DfT TOC net attributable earnings in line due to higher than accrued FY 2023 fees, offset by TPE NRC ending and higher UK tax rate

• Open access and additional rail services increase due to strong passenger revenue growth partially offset by development and evo-rail restructuring costs
• Interest benefited from partial bond buyback and higher interest received
• Higher tax charge due to higher profit before tax, the capital expenditure super-deduction ending and UK tax rate increasing to 25%

8	11 June 2024 | Results for 53 weeks to 30 March 2024	1 Management-fee based Rail: Pre-IFRS 16 basis net of tax and non-controlling interests (MTR is 30% shareholder of
	SWR, Trenitalia is 30% shareholder in WCP).

Significant cash generation before investments and returns

£143.7m of cash generated

from operations

• Post tax management fee from DfT TOCs received a year in arrears
• Working capital includes outflow of c.£10m relating to changes in bus funding arrangements. The remaining outflow is timing differences, primarily VAT on capex and receivables due from government bodies.
• Capex principally on the electrification of buses and depots net of
  funding. First Bus average fleet age currently just below 9 years (FY 2023: 9.1 years)
• Acquisition of York Pullman in February 2024, investment in Hitachi JV and buyout of Leicester City First Bus non-controlling interest

• Disposal proceeds includes depots sales and battery sales to the Hitachi JV
• LGPS pension net return from terminating participation
• Tax received £6.8m including DfT TOC group relief offset by net interest paid of £5.8m
• First Transit Earnout completed during FY 2024
• Other includes Employee Benefit Trust share purchases of £16.5m and North American cash flows of £7.4m offset by non-cashshare-based payments of £15.3m
• £41m of the total £190m share buyback remained as at 30 March 2024

9	11 June 2024 | Results for 53 weeks to 30 March 2024	Numbers shown on pre-IFRS 16 basis
		'Adjusted net cash' is bonds, bank and other debt net of free cash (i.e. excludes IFRS 16 lease liabilities and ring-fenced cash)

Strong progress on managing our pension liabilities

We have materially reduced our pension exposure by removing or fully insuring c.£1bn of gross pension liabilities without requiring any cash from the Group

• Group pension liabilities reduced to £1.4bn from £2.3bn during FY 2024 following:
• • First Bus Local Government Pension Schemes (LGPS) (c.£700m)
  • USA: cash settlement and buying out around 30% of the legacy Greyhound pension obligations in the US (c.£120m in aggregate)
  • Canada: pension liabilities currently valued at c.£150m fully insured
• Termination of participation in two First Bus LGPS schemes effective 31 October 2023, resulting in net cash inflow of c.£17m net of costs and cost savings of c.£2m pa from FY 2025
• Merger of First Bus and Group pensions schemes completed after year-end to drive further efficiencies
• c.£24m paid to the First Bus Scheme from the Limited Partnership (escrow) in FY 2024, linked to £500m capital return to shareholders
• Group Scheme (now comprising Group and First Bus sections) triennial funding valuation, as at 5 April 2024, has commenced and will be finalised in FY 2026
• • the valuation outcome will determine how the £77m currently held in the First Bus Scheme Limited Partnership will be distributed, with the £23m held in the Group Scheme Limited Partnership to be determined by the 2030 funding valuation

10 11 June 2024 | Results for 53 weeks to 30 March 2024