FirstGroup : FY 2024 Results Press Release

FIRSTGROUP PLC

RESULTS FOR THE 53 WEEKS TO 30 MARCH 2024

Material increase in Group profit driven by continued progress in both First Bus and First Rail further underpinning the Group's strong balance sheet:

• Significant increase in Group adjusted operating profit to £204.3m (FY 2023: £161.0m) includes extra week of trading and receipt of higher than accrued FY 2023 variable fees in First Rail (c.£13m)
• Adjusted EPS of 16.7p (FY 2023: 11.6p) enhanced by repurchases of 80.6m shares during FY 2024
• Final dividend of 4.0p per share recommended; FY 2024 total: 5.5p, a 45% increase vs. FY 2023
• c.£118m returned to shareholders via buyback programmes in FY 2024
• Strong balance sheet position, with adjusted year-end net cash of £64.1m

Successful execution of the Group's refreshed strategy:

• Continued focus on operational delivery and driving modal shift:
• • First Bus on track to achieve 10% adjusted operating profit margin having grown to 9.4% in H2 2024
  • West Coast Partnership awarded National Rail Contract to October 2032 with core three-year term
  • Lumo has now carried more than 2.5m passengers since launch and Hull Trains has added 14% more capacity over the last year, creating growth opportunity
• Enhancing the Group's sustainability credentials and progressing decarbonisation in First Bus:
• • landmark strategic joint venture with Hitachi, Green Hire Purchase Finance Facility and successful applications for £16m of Zero Emission Bus Regional Area (ZEBRA) 2 scheme co-funding
  • c.300 electric buses delivered in FY 2024 and more than 300 charger outlets installed
  • Great Western Railway conducting industry-firstfast-chargebattery-only train trial
  • joined United Nations Global Compact and First Bus achieved Real Living Wage employer status
• Further growth and diversification of the Group's portfolio:
• • York Pullman acquisition and new Adjacent Services contracts in First Bus
  • formal applications submitted for two new open access operations, the extension of some of Lumo's services to Glasgow, and for additional return services on both Hull Trains and Lumo, to more than double capacity, subject to approval
  • First Rail awarded London Cable Car contract and qualified to bid for Elizabeth Line contract

			FY 2024				FY 2023
			(£m)				(£m)
	Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,715.1	-	4,715.1	4,755.0	4.0	4,759.0
Adjusted1 operating profit/(loss)	204.3	(1.9)	202.4	161.0	(6.6)	154.4
Adjusted operating profit margin	4.3%		4.3%	3.4%		3.2%
Adjusted profit/(loss) before tax	139.0	(2.2)	136.8	104.2	(6.3)	97.9
Adjusted EPS 2	16.7p	(0.3)p	16.4p		11.6p	(0.9)p	10.7p
Dividend per share			5.5p				3.8p
Adjusted net cash3			64.1				109.9
			FY 2024				FY 2023
			(£m)				(£m)
Statutory	Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,715.1	-	4,715.1	4,755.0	4.0	4,759.0
LGPS pension settlement and related charges	(146.9)	-	(146.9)		-	-	-
Other operating (costs)/income	(4,521.7)	(5.3)	(4,527.0)	(4,601.1)	27.3	(4,573.8)
Operating profit/(loss)	46.5	(5.3)	41.2	153.9	31.3	185.2
(Loss)/profit before tax			(24.4)				128.7
Total comprehensive income/(loss) for the year			49.0				(7.4)

11 June 2024
EPS2	(2.4)p	11.8p
Net debt	1,144.8	1,269.1
- Bonds, bank and other debt net of (cash)	(313.7)	(479.5)
- IFRS 16 lease liabilities	1,458.5	1,748.6

'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.

FY 2024 statutory loss before tax of £(24.4)m includes predominantly non-cash charges of £146.9m relating to the Group's termination of its participation in two Local Government Pension Schemes during the year with an offsetting £161.0m gain in the Condensed Consolidated Statement of Comprehensive Income.

Key developments

First Bus:

• 1.14m passenger journeys a day (FY 2023: 1.07m); 167m service miles operated (FY 2023: 168m)
• Passenger volumes (excluding extra week in FY 2024) increased 7% vs. FY 2023 supported by £2 fare cap in England and free travel for under-22s in Scotland
• Total revenue of £1,012.2m (FY 2023: £902.5m):
• • total passenger revenue increased 16.5% to £769.1m (FY 2023: £660.0m)
  • Adjacent Services revenue increased to £219.8m (FY 2023: £175.1m) driven by First Travel Solutions, new contract wins and the contribution of Airporter and Ensignbus acquired in FY 2023
• Adjusted operating profit margin increased to 9.4% in H2 2024 and 8.3% for the full year (FY 2023: 6.5%) with increased passenger volumes, improved driver availability and data-led operational and commercial improvements more than offsetting ongoing inflationary pressures and lower funding
• Acquisition of York Pullman Bus Company, a high-performing business with five well-established coach services brands, completed in February 2024
• Awarded Transport for Greater Manchester (TfGM) Rochdale franchise contracts in July 2023; unsuccessful in other TfGM bids
• Further progress in electrification of fleet and infrastructure:
• • c.300 electric buses delivered in FY 2024 and more than 300 charger outlets installed; we now have c.600 electric buses (c.13% of our fleet), over 600 charging outlets, three fully electric depots in England with six further depots across the UK partially electrified
  • third-partyB2B charging underway at four depots and B2C charging recently launched at Cornwall depot
  • solar panels now installed at 24 depots to reduce costs and demands on local grids
  • successfully converted Oldham depot to electric infrastructure on behalf of TfGM, demonstrating our leading capabilities in fleet and infrastructure electrification
  • worked with Local Authorities in four of our regions to secure £16m of ZEBRA 2 co-funding for FY 2025, to support bus and fleet decarbonisation

First Rail:

• 274m passenger journeys in FY 2024 (FY 2023: 263m); DfT-contracted Train Operating Companies
  (DfT TOCs): 272m and open access 3m
• Open access operations performed ahead of expectations underpinned by strong demand and effective yield management; Lumo has now carried more than 2.5m passengers since its launch in October 2021
• DfT TOCs financial performance was ahead of expectations due to higher than accrued final variable fee awards for FY 2023; focus remains on operational delivery for passengers across all our services
• Nine-yearNational Rail Contract awarded to West Coast Partnership (incorporating Avanti West Coast) with a minimum core three-year term to 18 October 2026, with a further six years to 17 October 2032 subject to DfT approval; the Avanti team, and everyone connected with the TOC, are all working hard with an emphasis on delivering the service that customers expect
• Open access applications to more than double capacity submitted to Office of Rail and Road for a new Hull Trains service between London King's Cross and Sheffield, a new Lumo Rochdale-London service, for the extension of some of Lumo's services to Glasgow, for an additional London-Hull service on Hull Trains and an additional London-Newcastle Lumo return service, all subject to approval
• First Rail awarded eight-year London Cable Car contract by Transport for London and selected as one of four bidders, alongside partner Keolis SA, to bid for upcoming Elizabeth Line contract
• Great Western Railway successfully commenced innovative fast-chargebattery-only train trial

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11 June 2024

Corporate:

• up to £10m investment committed to landmark £100m strategic joint venture with Hitachi and pioneering £150m Green Hire Purchase Finance Facility signed with syndicate of three banks to support electrification of First Bus fleet
• Remaining First Transit earnout proceeds of £65.3m received
• £75m on-market share buyback programme completed and subsequent £115m programme launched in August 2023; £19.3m outstanding as at 10 June 2024
• £88.0m of the Group's September 2024 6.875% bonds repurchased (£96.2m remain outstanding as at 10 June 2024)
• Gross pension liabilities (excluding contract rail which revert to government at contract end) reduced to £1.4bn, (£2.3bn at the start of the period), reflecting removal of obligations in Local Government Pension Schemes, resulting in cash inflow of c.£17m net of costs, and partial buyout of legacy Greyhound pension obligations in the USA;

FY 2025 outlook

• Current trading and the Group's outlook for FY 2025 remain in line with the Group's expectations
• First Bus: we expect to achieve progressive growth in FY 2025 vs. FY 2024, with steady progression towards a 10% adjusted operating profit margin that we anticipate in H2 2025 driven by:
• • management actions delivering further productivity improvements
  • lower operating costs as a result of smart efficiency initiatives, electrification benefits and the division's newer fleet
  • further Adjacent Services contract wins and extensions
  • government policies and demographics driving demand
• First Rail: the division's financial performance in FY 2025 is anticipated to be in line with our expectations, including growth in open access and a normal level of variable fee awards in the DfT TOCs (c.two thirds of the maximum available)
• Adjusted net cash position expected to be in the range of £40-50m at the end of FY 2025 reflecting strong cash generation, investment in decarbonisation, completion of the current share buyback programme and before any deployment of growth capital
• We continue to evaluate a pipeline of value-accretive inorganic growth opportunities in line with the Group's disciplined capital allocation policy

Commenting, Chief Executive Officer Graham Sutherland said:

"We have made considerable progress in our financial and operational performance in FY 2024 as we continue to transform and grow our leading First Bus and First Rail businesses. This is testament to the resilience and capability of our people across the Group and leaves us well positioned to grow and create further value for all our stakeholders."

"Our focus remains on working with government and all our stakeholders to deliver for our customers and drive modal shift. We will continue to lead in environmental and social sustainability, including building out our adjacent electrification opportunities in First Bus, and investing to grow and diversify our portfolio to ensure our business remains profitable and resilient in the long-term."

Contacts at FirstGroup:	Contacts at Brunswick Group:
Marianna Bowes, Head of Investor Relations	Andrew Porter / Simone Selzer
Stuart Butchers, Head of Corporate Communications	Tel: [phone]
[e-mail]
Tel: [phone]
Contacts at Liberum Capital Limited:	Contacts at RBC Capital Markets:
Nicholas How / John Fishley	James Agnew / Jack Wood
Tel: [phone]	Tel: [phone]

A presentation and webcast for investors and analysts will be held at 09:00 (BST) today in London. To register to join in person or to request the webcast details, please email [e-mail]. 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 earnings' are shown before net adjusting items and excludes IFRS 16 impacts in First Rail management fee operations. For definitions of alternative performance measures and other key terms, see the definitions section on pages 24-25

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2 'Adjusted EPS' and 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.

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

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

About FirstGroup

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.7 billion in revenue and around 30,000 employees, we transported almost 2m passengers a day in FY 2024. 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. Each of our divisions is a leader in its field: First Bus is one of the largest regional bus operators in the UK, serving more than 20% of the population in the UK with a fleet of around c.4,800 buses, and carrying more than a million passengers a day. First Rail is one of the UK's largest rail operators, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of c.3,700 locomotives and rail carriages through three DfT contracted train operating companies: WCP (incorporating Avanti West Coast and West Coast Partnership Development), GWR and SWR) and two open access routes (Hull Trains and Lumo). We are formally committed to operating a zero-emission First Bus fleet by 2035, and First Rail will help support the UK Government's goal to remove all diesel-only trains from service by 2040. During FY 2024 FirstGroup was named as one of the world's cleanest 200 public companies for the fifth consecutive year and achieved Industry Top-Rated status for the first time with Sustainalytics. We provide easy and convenient mobility, improving quality of life by connecting people and communities. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on X.

Chief Executive Officer review

Four Strategic Pillars to drive growth

I am extremely proud of what has been achieved during my first two years as Chief Executive Officer, as we continue to transform our businesses and deliver for our stakeholders. We have maintained our strong balance sheet, and have considerable scope to grow further in First Bus and First Rail open access. To achieve this, we have set out four key strategic pillars that will drive the Group forward. These are:

1. Deliver day in day out
2. Drive modal shift
3. Lead in environmental and social sustainability
4. Grow and diversify our portfolio.

Looking first at delivery, operational excellence is at the heart of our strategy. We must continue to strive to ensure the best possible customer experience, consistently deliver reliability and cost efficiency and implement price strategies to enhance customer value, drive demand and improve yield. This will enable us to continue to win key contracts in both First Bus and First Rail to maintain our positive earnings trajectory and encourage more people to use our services.

To drive a step change from car and air travel to bus and rail we plan to add capacity in First Rail's open access operations, continue to position the First Bus customer proposition to drive demand, with a focus on encouraging people to make the switch from private cars.

Leading in environmental and social sustainability has long been a priority for the Group. We are committed to the safety of our customers, our employees and all third parties in contact with our businesses. We are delivering on our decarbonisation commitments, and we will always seek to support prosperity, growth and green jobs in the communities that we serve. We see this as a key differentiator of FirstGroup's proposition and increasingly a driver of growth going forward.

Finally, the Group's considerable balance sheet capacity provides us with flexibility to take advantage of value accretive opportunities to further grow and diversify our portfolio. In First Bus, we will pursue franchising and partnership opportunities, expand our Adjacent Services businesses and continue to evaluate a pipeline of complementary inorganic growth opportunities. In First Rail, we are actively working to grow our open access businesses, scale our Additional Services businesses, bidding for non-DfT contracts and monitoring opportunities for new open access contracts.

We have a huge wealth of experience and expertise within our divisions, and I believe FirstGroup has a very exciting future.

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11 June 2024

FY 2024 financial highlights

Looking now at our financial performance, I am pleased to report another excellent set of results for our 2024 financial year despite continued economic and industrial relations challenges.

Our divisions have performed well during the year which together with the positive impact of the extra week of trading in FY 2024 and the receipt of higher than accrued final FY 2023 variable fee awards in the DfT TOCs has resulted in a significant increase in our Adjusted Earnings per share, from 11.6p in FY 2023 to 16.7p in FY 2024.

We have also maintained our strong balance sheet, ending the year with adjusted net cash of £64.1m, having committed investment of over £100m to the electrification of our bus fleet and infrastructure, invested into our landmark strategic decarbonisation joint venture with Hitachi, acquired York Pullman and returned almost £118m to shareholders via our buyback programmes.

First Bus highlights

First Bus has continued to grow its revenues and profit in FY 2024 as a result of further growth in passenger volumes, improvements in our operational and cost performance, lower lost mileage and an increased contribution from our Adjacent Services businesses, leaving us on track to reach our 10% adjusted operating profit margin target in H2 2025. Total revenue for the year was £1,012.2m (FY 2023: £902.5m) reflecting strong growth across the business.

In February 2024 we completed the acquisition of York Pullman, a high-performing operator of coaches and buses. The integration of the York Pullman into First Bus is progressing well and its addition to the First Bus portfolio will enhance our operational footprint in the North Yorkshire region and provide profitable growth opportunities in the contracted and commercial services markets. The adjacent bus services market in the UK is considerable, and we are actively reviewing a pipeline of opportunities to grow the business and win further contracts.

First Bus decarbonisation

Aided by our strong balance sheet we are committing significant investment in decarbonisation as we progress towards our target of a zero emission fleet by 2035. The electrification of our fleet and infrastructure will further transform our business and provide a number of value accretive adjacent revenue streams.

We now have almost 600 electric buses, about 13% of our fleet, three fully electric bus depots in England with six further depots across the UK partially electrified.

We have over 600 charger outlets and are making use of smart charging software to optimise our energy use and increase battery efficiency and potentially extend battery life. We are also making our charging infrastructure available to third parties, with successful arrangements underway with DPD, Openreach and public services providers at four of our depots. We have also recently opened a purpose-built hub at our Summercourt depot in Cornwall, providing direct access for the public to eight rapid chargers.

Whilst electric vehicles result in operational improvements that lower the service delivery costs relative to diesel, the initial capital investment for electrification is still considerable. In addition to working with our local authority partners to secure government co-funding and committing Group capital, we are forming strategic partnerships and securing innovative financing. This is allowing us to purchase electric buses and batteries with increased efficiency and greater visibility of our financial commitment and our strategic joint venture with Hitachi will also allow us to retain much of the residual value in the batteries as they are replaced.

Looking ahead, in March 2024 we announced that we had worked successfully with our local authority partners to secure £16m through the UK Government's ZEBRA 2 co-funding scheme to support bus and fleet decarbonisation across four of our regions.

Following the completion of our latest ongoing electrification projects, we will operate more than 800 zero- emissions vehicles, c.18% of our fleet. We have also bought power connections to another 15 of our depots and construction works are underway. This is a remarkable achievement and is establishing us as leaders in bus fleet and infrastructure decarbonisation.

First Bus - partnerships and franchising

We have decades worth of expertise and knowledge in delivering transport solutions for our customers across the public transport sector and work closely with local authorities across the UK in partnerships that are delivering change for customers quickly and effectively.

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We have seen this to full effect in Leicester where, in partnership with Leicester City Council and the city's other bus operators, in under a year we have achieved multi-operator ticketing, streamlined timetabling of services for all operators, improved real time information for passengers, increased reliability, and introduced electric bus fleets and infrastructure.

A number of cities outside London have expressed an interest in franchising, including some where we do not currently have operations. In areas where authorities choose to progress with franchising, we are confident that we will be able to use our extensive experience to support them. Despite not winning any of the larger contracts, we are pleased to be working with Transport for Greater Manchester (TfGM) as the selected operator of their new Bee Network in Rochdale, maintaining our overall position in Manchester. We have also supported TfGM with the electrification of their Oldham depot due to our expertise in this field.

Our landscape is always evolving and getting more people to use the bus is a key part of the modal shift pillar of our strategy. We will continue to adapt our business to deliver great value, shape networks to suit where and when people want to travel, to serve communities and grow local economies in a sustainable way.

Regardless of the model, close partnerships with local government stakeholders are essential for the thriving local bus networks we all want to see, and we are committed to working with our partners locally and nationally to achieve this.

First Rail highlights

In First Rail, we continue to demonstrate our capabilities and deep sector knowledge to bring value to our passengers and to the taxpayer, as we strive to improve customer experience and to reduce the level of rail subsidies.

Despite continued industrial relations challenges during the year, our DfT TOCs have reported an increase in adjusted operating profit, to £105.6m (FY 2023: £93.3m) which included an uplift of c.£13m as a result of the variable fee payments agreed with the DfT for FY 2023 being ahead of the amounts accrued in the Group's FY 2023 financial statements. This achievement demonstrates how hard our teams are working to deliver day in day out, in a challenging environment.

In May 2023 the DfT announced its decision not to exercise its option to extend TPE's National Rail Contract ('NRC'). The loss of the contract was a huge disappointment for our team who all worked extremely hard to improve services and to successfully recruit and train more drivers than ever before. We supported the DfT's Operator of Last Resort in ensuring a smooth transition for passengers, partners and employees. We anticipate that we will receive all remaining amounts due to be paid to the Group in FY 2025, and our First Rail affiliate services also continue to support TPE.

We were very pleased to have been awarded a nine-year National Rail Contract for the West Coast Partnership ('WCP') in September 2023. The NRC has a minimum three-year core term to October 2026.

Our open access operations have outperformed expectations again in FY 2024 and have consistently recorded some of the lowest levels of operator related cancellations in the industry. Lumo continues to offer competitive fares and value to customers and has now carried more than two and a half million customers since its launch, many of whom would otherwise have flown between London and Newcastle or Edinburgh at a far greater environmental cost. Its revenues increased by 42% in FY 2024, driven by effective yield and demand management, and seat capacity utilisation has grown from 71% to 75%.

Hull Trains also had a very strong year, with revenues up 40%, thanks to increased leisure demand and significantly improving business customer volumes. In response to increasing demand, the team has added 14% more capacity since December 2022, running ten-car trains (typically a five-car service) at peak demand times. Seat capacity utilisation improved from 59% in FY 2023 to 69% in FY 2024.

First Rail portfolio diversification and growth

The huge success of our open access operations has provided further evidence that we have the experience and entrepreneurial spirit to resolve challenges and innovate in the rail sector for the future, adding capacity and encouraging passengers back to the railway.

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We are actively pursuing opportunities to build on the success of Hull Trains and Lumo through rolling stock efficiency improvements, adding capacity to existing services and identifying new routes, opportunities and markets where there is capacity and demand. We recently submitted applications to the Office of Rail and Road ('ORR') for a new Hull Trains London-Sheffield service, a new Lumo Rochdale-London service, for the extension of a number of Lumo's daily services to and from Glasgow, for an additional, eighth return service on Hull Trains between London and Hull and for an additional, sixth return Lumo service between London and Newcastle. These applications, if successful, will more than double our open access capacity.

We also continue to make use of our in-house expertise to grow our First Rail Additional Services businesses and GWR are conducting an industry-first trial of a fast-chargebattery-only train, which included setting a UK distance record for a battery train without recharging earlier this year.

Our Additional Services businesses include First Rail Consultancy, our bespoke contact centre First Customer Contact, Mistral Data and evo-rail. They delivered an 11% increase in gross revenue, to £133.5m in FY 2024, compared to £120.0m in FY 2023.

We are also identifying and participating in other UK opportunities. In March 2024 we announced that we have been awarded the contract to operate the London Cable Car by Transport for London and we have been shortlisted with our bid partner Keolis SA to bid for the Elizabeth Line contract. We look forward to submitting a compelling bid that demonstrates our collective experience and breadth of capabilities.

Corporate activity and dividends

We have now received final First Transit earnout proceeds of £65.3m and have continued to opportunistically repurchase the Group's September 2024 6.875% bonds, of which £96.2m remains outstanding as at 10 June 2024. We have also significantly reduced or insured the Group's gross pension liabilities (excluding contract rail which reverts to government at contract end), from £2.3bn at the start of the year, to £1.4bn.

In light of the Group's financial performance in FY 2024 and in line with our progressive dividend policy, the Board has proposed a final dividend of 4.0p per share. Subject to shareholder approval at the Company's 2024 AGM, a final dividend payment of c.£24.3m, will be paid on 23 August 2024 to shareholders on the register at 19 July 2024. The total dividend for the year paid and proposed is 5.5p per share (FY 2023: 3.8p per share), an increase of 45%.

Leading in environmental and social sustainability

I am pleased to report that we have seen further recognition of the Group's sustainability credentials in FY 2024. In addition to joining the UN Global Compact, we were once again included in the S&P Global Sustainability Yearbook, were one of only eight UK companies to be included in the 2024 Clean200 list of top publicly listed companies worldwide by clean revenue and were included in Sustainalytics' 2024 ESG Top- Rated Companies List.

Our employees and customers remain at the heart of everything we do. In FY 2024 we successfully launched First Connections, a personal development programme aimed at female and ethnically diverse employees and First Bus became the UK's largest national bus operator to become an accredited Real Living Wage employer. In FY 2024, the Group raised c.£200,000 for its charity partners, Samaritans, Railway Children, and Macmillan, while our DfT TOCs supported almost 100 community funding projects, worth over £2 million.

Looking ahead

Current trading and the Group's outlook for FY 2025 is in line with our expectations.

Positive free cash generation after c.£120m of net cash capital expenditure in First Bus is expected to result in a year-end adjusted net cash position in the range of £40-50m. This includes the anticipated capex saving resulting from the Hitachi joint venture, the completion of the current share buyback programme and is before investing in any potential inorganic growth opportunities.

In First Bus, we expect to achieve progressive growth in FY 2025 against FY 2024. We will continue to benefit from the actions we have taken to transform the business and drive further growth in Adjacent Services, making steady progression towards a 10% adjusted operating profit margin, which we anticipate we will achieve in H2 2025.

The transformation of the First Bus business is delivering stronger foundations with a simplified, more efficient operating model. We are set to benefit from electrification efficiencies and adjacent revenue

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streams, and from potential franchising, partnership and inorganic growth opportunities. This provides scope for sustained earnings growth. Underpinning this, we believe that despite short-term economic challenges, government policy, favourable demographics and environmental and societal trends will support growth in the regional bus sector.

In First Rail, we expect the division's financial performance to be broadly in line with our expectations in FY 2025, including growth in open access and a normal level of variable fee awards in the DfT TOCs (c.two thirds of the maximum available).

Looking beyond FY 2025, despite political uncertainty surrounding National Rail Contracts, we will maintain our focus on delivery and will capitalise on opportunities to make use of our extensive experience and expertise to grow our UK open access business, scale our Additional Services businesses and participate in other UK opportunities.

If approved, the applications we have recently submitted for new and extended open access services could more than double our open access capacity over the next three to five years. If our application for the new Hull Trains service between London King's Cross and Sheffield is successful, we anticipate that services could commence in calendar year 2026, subject to stakeholder agreement, and for the Lumo Rochdale- London service, we currently anticipate a start date in calendar year 2027.

Both Conservative and Labour parties have put forward proposals for the future of the UK rail industry. Although there are significant differences, both parties are promoting the development of a 'guiding mind' industry body, named as Great British Railways in the Government's Plan for Rail. Labour have said that if elected they will "fold existing private passenger rail contracts into the new body as they expire." Looking at the industry as a whole, the huge growth in passengers and significant improvements to stations and rolling stocks that private train companies delivered under franchise agreements before the pandemic, including those under our stewardship, demonstrates that the UK rail industry works best as a public-private partnership. Furthermore, companies such as ours bring private investment and focus on cost control to an industry that needs it; our businesses have saved more than £230m for the DfT in the last two years alone.

We have been one of the largest UK rail operators for more than 25 years, during which we have worked successfully with a wide range of partners under various forms of contract types and delivered a number of significant rail infrastructure and fleet upgrade projects. We know that growth and innovation are key for the future of the railway and are committed to working with our government partners to provide competitive, sustainable and improved services for all passengers and communities.

We will also continue to monitor developments in the European rail market where, as the market opens up for competition, there are opportunities for new open access entrants with similar regulatory models to the UK.

When assessing any opportunity for the Group, we have a disciplined capital allocation policy and a strict set of criteria. We will always seek to ensure that any opportunities we explore are complementary to our existing portfolio and the Group's strategy, thoroughly assessed for risks and opportunities and operated with a familiar contractual, political and regulatory environment with an appropriate balance of risk and reward.

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Conclusion

FY 2024 has been another very successful year for the Group, reinforcing our leading positions and deep expertise in bus and rail. Our strong results for the year are also great testament to the dedication, expertise and resilience of our employees at all levels across the Group and I am extremely proud and grateful to all of our colleagues for their continued hard work in support of our customers and communities.

Looking ahead, we have much more to do. We will continue to transform our businesses, build out adjacent electrification efficiencies and revenue streams in First Bus and grow and diversify our portfolio to deliver further sustainable growth and support the UK's social, economic and environmental ambitions.

The Group's strong balance sheet and cash generative businesses provide considerable flexibility and optionality for growth and potential further capital returns to shareholders, which will continue to be kept under review by the Board.

Graham Sutherland

Chief Executive Officer

11 June 2024

Business Review

First Bus

		£m
	FY 2024	FY 2023		Change
Revenue	1,012.2	902.5	109.7
Adjusted operating profit	83.6	58.4	25.2
Adjusted operating margin	8.3%	6.5%		180bps
EBITDA	148.1	120.9	27.2
Adjacent Services revenue	219.8	175.1	44.7
Passenger volumes (m)	424.4	390.0	+9%
Operational mileage (m)	166.5	168.2	(1%)
Revenue per mile (£)	6.08	5.36	+13%
Net operating assets	580.2	511.9	68.3
Net capital expenditure	129.4	121.8	7.6
Return on Capital Employed1	11.5%	8.3%		320bps

1 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 Bus revenue increased by 12% to £1,012.2m (FY 2023: £902.5m), mainly due to higher passenger volumes, further performance improvements and increased driver numbers resulting in lower lost mileage. This offsets a c.£40m reduction in funding. Total passenger revenue increased to £769.1m (FY 2023: £660.0m), with revenue per mile up by 13%.

Despite ongoing inflationary pressures, adjusted operating profit increased by £25.2m to £83.6m (FY 2023: £58.4m), achieving an adjusted operating profit margin of 9.4% in H2 2024, and 8.3% for the full year (FY 2023: 6.5%). The division's financial results for FY 2024 include an extra week which added c.£1.4m of adjusted operating profit.

Revenue from Adjacent Services increased to £219.8m in FY 2024 (FY 2023: £175.1m), reflecting a number of contract extensions and the contribution of Airporter and Ensignbus which were acquired by the Group in FY 2023.

Excluding the extra week in FY 2024, passenger volumes increased by 7% compared with the prior period, with total mileage down 2.9%. Volumes in FY 2024 benefited from improvements in service reliability, the free travel for under-22s scheme in Scotland and the £2 fare cap in England which has grown patronage, mostly in markets with longer journey fares that were typically much more expensive previously.

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11 June 2024

The £2 fare cap in England was extended until 31 December 2024 to provide further support for customers and encourage more people to travel by bus. Under the scheme, operators agree a reimbursement schedule in advance with the DfT based on the projected cost to the operator for charging a flat £2 fare for journeys that would otherwise have cost more. Under the Scottish Government's under-22s scheme, operators are reimbursed a proportion of the cost of a full adult fare.

The return on capital employed increased to 11.5% in the year (FY23: 8.3%). This reflects improvement in adjusted operating profit, partially offset by the accelerated investment in the decarbonisation of the fleet that is anticipated to increase future profitability due to lower operating costs and the benefits of adjacent revenue streams.

Operational delivery

Our focus in FY 2024 has remained on using our industry-leading data tools to deliver better quality mileage by aligning services to demand, implement smarter fares and drive operational and cost efficiencies to offset lower government funding and the high inflationary environment.

During the year we continued our efforts to widen and enhance our recruitment reach and training processes, launching various apprenticeship schemes including our first ever such scheme for bus drivers, and we continue to invest in our workforce to improve working conditions and provide enhanced benefits. We are also making significant investment in upskilling and developing our engineers to maintain our zero emission fleet and infrastructure. We recruited c.600 new drivers during the year (a net increase of just over 6% compared to last year) which contributed to us running an improved 98.6% of our scheduled mileage (FY 2023: 97.4%).

Inflationary pressures continued in FY 2024. Costs increased due to inflation by c.6%, principally in wages where there was an 8% average increase in driver pay awards, but these cost increases were more than offset by fare pricing changes of c.£53m and network and operational efficiencies of c.£21m. We were proud to be the UK's largest national bus operator to become an accredited Real Living Wage employer in April 2024, meaning that more than a thousand employees across the UK will benefit from a rise in wages.

We have fuel and electricity hedging programmes in place to mitigate in-year cost inflation and overall volatility of fuel and energy costs and these programmes continue to evolve as we transition the First Bus fleet to zero emissions.

Using industry-leading data and tools to transform our service delivery and customer offering

Using real-time, granular data, we are now able to better understand our customers and their journeys. As a result, we can make commercial decisions which continuously improve our networks and timetables and to introduce new ticketing options that better match demand and customer preferences. First Bus was also the first nationwide operator to offer contactless, Tap On Tap Off payment on all our buses and c.80% of our ticket transactions are now digital.

We are also using data and software tools to improve our service delivery. During FY 2024 we rolled out Prospective, an AI platform, to all of our local business units. The platform enables automated, data-led timetables, allowing us to accurately predict congestion and journey times and plan reliable timetables based on granular data. Drivers and the control centre teams can also communicate in real time to rectify and address issues as they unfold before implementing contingencies to alleviate pinch points around the network in certain scenarios. We have prioritised routes where improvements would have the greatest effects, and where we have made use of the platform, customers are seeing an immediate increase in punctuality and reliability, with the added benefit of reduced lost mileage with fewer journeys needing to be adjusted.

In addition to Prospective, we are using Optibus to optimise our bus schedules and driver rosters. Alongside our on-bus technology, data feeds into our operational systems, our customer apps and real time screens, informs our drivers and provides tracking information that allows us to analyse and improve performance. In addition, with Optibus, we have developed a module that allows us to optimise our schedules when we have a mixed fleet of diesel and electric vehicles, further reducing diesel mileage.

More people are using the bus than ever before. Our aim is to encourage these new customers to make more trips by bus, whilst also increasing bus use overall, and we will continue to develop our insight-driven customer centric strategy to achieve this.

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