TIDMFGP
Embargoed until 07:00hrs on Wednesday 23 May 2012
FIRSTGROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR TO 31 MARCH 2012
Overall trading for the Group in 2011/12 in line with our expectations; net
cash inflow of GBP119.2m
* First Student - now well set on path to recovery; plan delivering in line
with targets, stabilised operating margin in H2
* First Transit - continued good returns from low capital requirements and
established credentials
* Greyhound - business is now transformed, strong growth with operating
profit more than doubled over last 2 years
* UK Rail - solid performance; entering transition period for UK rail, only
operator shortlisted for all four of the current competitions
* UK Bus - steady performance during year; expect margins in 2012/13 to be
significantly affected by deteriorating economic conditions particularly in
the North of England and Scotland and reduced funding to the industry;
executing comprehensive plan to reposition the portfolio and restore
performance
* Dividend increase of 7.0% in line with current policy
2012 2011 Change
Continuing operations1: Restated 2
Revenue GBP6,678.7m GBP6,416.7m +4.1%
Adjusted EBITDA3 GBP742.9m GBP768.9m (3.4)%
Operating profit GBP448.0m GBP308.6m +45.2%
Adjusted operating profit4 GBP428.5m GBP456.7m (6.2)%
Profit before tax GBP279.9m GBP126.5m +121.3%
Adjusted profit before tax4 GBP271.4m GBP274.3m (1.1)%
Basic EPS 42.7p 20.0p +113.5%
Adjusted basic EPS4 40.0p 41.1p (2.7)%
Full year dividend 23.67p 22.12p +7.0%
Net debt5 GBP1,837.5m GBP1,949.4m (5.7)%
1 For all businesses excluding UK Rail this year includes 53 weeks compared to
52 weeks last year.
2 Restated to exclude discontinued operations and incorporating a revised
calculation of EBITDA as explained in note 1 to the preliminary results
announcement.
3 Adjusted operating profit less capital grant amortisation plus depreciation.
4 Before amortisation charges, ineffectiveness on financial derivatives,
exceptional items, profit/(loss) on disposal of properties and discontinued
operations. All references to `adjusted' figures throughout this document are
defined in this way.
5 Net debt is stated excluding accrued bond interest.
Commenting, FirstGroup's Chief Executive, Tim O'Toole said:
We have a fundamentally strong and diverse portfolio of operations with four
out of five of our divisions performing in line with our expectations and
actions we have taken will lead to improved growth and returns.
Notwithstanding the steady performance from our UK Bus division in 2011/12 we
have seen a further deterioration of economic conditions particularly in our
urban operations in Scotland and the North of England. As result, we do not
expect revenue growth and cost efficiencies in 2012/13 to be sufficient to
offset the impact of reduced government subsidies and funding to the industry,
which are more acute than originally estimated, and increased fuel costs. In
response we are accelerating a comprehensive plan that will deliver sustainable
growth in revenue and patronage and improved returns. This includes
repositioning our UK Bus portfolio through a programme of business and asset
disposals to focus on those areas where the greatest potential for growth
exists.
Our North American operations continue to progress and we believe that
improving trends in the US economy will be positive for our businesses. First
Student is now well set on the path to recovery with our plan to reform the
business delivering in line with our expectations. First Transit delivers good
returns from typically low capital investment which is underpinned by its
established credentials and strong track record. Greyhound's enhanced
performance from a transformed operating model demonstrates our ability to
implement the necessary actions to deliver strong growth and margin
improvement.
The UK rail market is in a period of transition with eight franchises due to be
let by the Government over the next two years. We are the only operator to have
pre-qualified for all four of the rail franchises that have come to the market
so far and we believe we are well placed to progress opportunities from the
refranchising programme.
The combined effect of the outlook for trading together with the actions to
reposition the UK Bus portfolio is expected to result in the Group's net cash
flow being broadly neutral in 2012/13.
Our market leading positions in a sector that is a key enabler of economic
growth together with the actions we are taking to strengthen the business give
the Board confidence that the Group has good prospects to deliver long term
value for shareholders. Therefore, reflecting our longer term view, the Board
remains committed to its current policy of dividend growth of 7.0% through to
the end of the financial year 2012/13.
Contacts:
FirstGroup plc:
Tim O'Toole, Chief Executive
Nick Chevis, Acting Finance Director
Tel: +44 (0) 20 7291 0512
Rachael Borthwick, Corporate Communications Director
Tel: +44 (0) 20 7291 0508 / +44 (0) 7771 945432
Brunswick Group:
Mike Harrison, Tel: +44 (0) 20 7404 5959
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Chairman's statement
The Group, which has grown rapidly through a programme of acquisitions over the
past 20 years, is going through an important phase in its development. Under
the leadership of Tim O'Toole there is a resolute focus to drive greater
operating performance and discipline; increase management capability and to
harness our vast knowledge and expertise to attract customers in ever greater
numbers through the consistent and reliable provision of high quality, value
for money services.
During the year our portfolio continued to provide diversity with separate
businesses moving at different stages through the economic cycle. While
addressing the challenges of the current trading environment in certain markets
in which we operate, management has a clear focus to create a stronger business
and is taking the necessary action to ensure the Group is firmly placed to
deliver sustainable growth for the longer term. We continue to prioritise cash
generation to support capital investment, debt reduction and dividend growth.
Notwithstanding the period of transition in UK Rail and the impact of the
current weak economic environment and reduced Government funding to the
industry on our UK Bus business, the Group maintains market leading positions
and across our operations we are taking action to strengthen our businesses for
the future. We are the only operator to have pre-qualified for all four of the
rail franchises that have come to the market so far and believe that we are
well placed to develop these and future opportunities from refranchising.
Therefore, at this time and reflecting our longer term view, the Board remains
committed to its current policy of dividend growth through to the end of the
financial year 2012/13. The Board has proposed a final dividend per share,
subject to approval by shareholders, of 16.05p, an increase of 7.0% making a
full year payment of 23.67p. The dividend is covered 1.7 times by adjusted
basic EPS and will be paid on 17 August 2012 to shareholders on the register at
13 July 2012.
On 14 May 2012 we announced the appointment of Chris Surch as Group Finance
Director replacing Jeff Carr, who left the Group in November to take up the
role of Chief Financial Officer of Royal Ahold NV based in the Netherlands.
Chris joins us from Shanks Group plc where he has been Group Finance Director
since May 2009. Prior to joining Shanks he held senior financial roles at
Smiths Group plc and TI Group plc. He began his career at
PricewaterhouseCoopers where he qualified as an accountant. Together with a
strong track record of financial leadership and budgetary planning, he has
extensive operational, strategic and international experience. I am delighted
to welcome Chris to the Board of FirstGroup and I am confident that his
considerable experience and record of achievement will be of great benefit to
the Group. It is anticipated that he will join the Group on 1 September 2012.
We are grateful to Nick Chevis for his support and valuable contribution as
Acting Finance Director.
We are reviewing Board composition and a formal international search process is
underway to recruit additional fully independent Non-Executive Directors to
further strengthen the Board and support the Group through this important stage
of its development.
During the year the following Board changes took place. Sid Barrie, Commercial
Director, retired at the end of March. Having joined the Board in 2005 he had a
long association with the Group, in an advisory capacity, going back to the
original employee buy-out of GRT Bus Group PLC and played a significant part in
the success of the Group over many years. We thank him for his contribution and
wish him a long and happy retirement.
Audrey Baxter, Independent Non-Executive Director, stepped down from the Board
on 31 December 2011. We thank Audrey for her support and advice since she
joined the Board in 2006 and we wish her every success for the future.
Mick Barker joined the Board on 1 January 2012 as Non-Executive Employee
Director, replacing Martyn Williams who retired from the role at the end of his
term on 31 December 2011. We thank Martyn for his important contribution and
also welcome Mick to his new role. I am confident that he will continue to
provide the valuable input to the Board on behalf of the Group's employees.
Finally on behalf of the Board I would like to extend our sincere thanks and
gratitude to our employees across the UK and North America. Their
professionalism and ongoing commitment to serving the 2.5 billion passengers
that we transport each year is vital to our success now and for the future.
Notwithstanding the prolonged period of economic uncertainty and the impact of
challenging trading conditions in certain areas in which we operate, the Group
has leading positions in its core markets. With experienced management that is
focused on creating a stronger business for the future, the Board is confident
that the Group is well positioned to deliver sustainable long term value for
shareholders.
Martin Gilbert
Chairman
23 May 2012
* Operating profit referred to throughout this document refers to operating
profit before amortisation charges, ineffectiveness on financial derivatives,
exceptional items,profit/(loss)on disposal of properties and discontinued
operations. EBITDA is operating profit less capital grant amortisation plus
depreciation.
Operating and Financial review
Against the backdrop of continued economic uncertainty and the impact of weaker
economic conditions in certain markets in which we operate, we have taken
action to address specific issues, improve performance and strengthen the
business.
* In First Student, which faced substantial pressure on its operating margin
driven by constraints on school board budgets, we have implemented a
comprehensive programme to reform the operating model and the business is
now well set on the path to recovery.
* As a result of actions we took to transform the business and strengthen the
operating model, Greyhound is now delivering strong growth and improved
returns, with operating profit more than doubled over the last two years.
* First Transit continues to generate good returns from low capital
investment across a range of business segments and is established in a
sector that depends on proven credentials and a strong track record.
* In UK Rail, as we transition to a new generation of rail franchises, we are
encouraged to be the only operator to have pre-qualified for all four
franchises that the Government has tendered so far. We look forward to
submitting competitive proposals which meet the requirements of customers
and taxpayers and provide an economic return for shareholders.
* Notwithstanding the steady performance from our UK Bus division in 2011/12
we have seen a further deterioration of economic conditions particularly in
our urban operations in Scotland and the North of England and, as a result,
we do not expect revenue growth and cost efficiencies in 2012/13 to be
sufficient to offset the impact of reduced government subsidies and funding
to the industry, which are more acute than originally estimated, and
increased fuel costs. New management in our UK Bus division has a clear
strategy and is executing a detailed plan to recover performance and equip
the business to achieve increased revenue and patronage growth. This will
include repositioning our UK Bus portfolio which, together with a
transformed approach to the management of our operations, will create a far
more robust base from which to generate improved returns and sustainable
growth.
* The Group is committed to its public investment grade credit rating which
it has maintained since 2002. Since March 2009 we have consistently driven
down leverage, reducing our net debt: EBITDA ratio from 3.2 times at March
2009 to 2.5 times at March 2012. We are focused on further leverage
reduction to increase financial flexibility. The Group has significant
levels of liquidity headroom and maintains prudent levels of headroom under
its financial covenants.
Group revenue increased by 4.1% to GBP6,678.7m (2011: GBP6,416.7m), or 2.9%
excluding the extra week of trading. Operating profit was GBP428.5m (2011: GBP
456.7m) reflecting the expected reduction in First Student and UK Bus profits
partly offset by higher profits in Greyhound and UK Rail. All of our operating
divisions experienced higher fuel costs during the year, which amounted to an
additional GBP31.8m compared to prior year. Statutory operating profit increased
to GBP448.0m (2011: GBP308.6m) reflecting lower levels of net exceptional items
compared to last year. Adjusted basic EPS was 40.0p (2011: 41.1p) a reduction
of 2.7% with the reduction in operating profit partially offset by lower net
finance costs due to lower interest rates on US Dollar denominated debt.
The net cash inflow for the year was GBP119.2m (2011: GBP209.8m). As expected, the
net debt to EBITDA ratio was 2.5 times, in line with last year. The average
debt duration at 31 March 2012 was 5.5 years (2011: 6.1 years) and headroom
under the committed revolver facility was GBP631.8m (2011: GBP526.7m) and free cash
balances were GBP164.0m (2011: GBP89.4m).
Year to 31 Year to 31
March 20121 March 2011
4
Operating Operating Operating Operating
Revenue profit2 margin2 Revenue profit2 margin2
Divisional results GBPm GBPm % GBPm GBPm %
First Student 1,567.2 107.1 6.8 1,594.4 128.3 8.0
First Transit 778.6 55.8 7.2 57.2
771.5 7.4
Greyhound 50.6 7.7 40.2
657.2 634.6 6.3
UK Bus 1,157.2 134.4 11.6 1,137.5 148.8 13.1
UK Rail 2,506.1 110.5 4.4 2,269.8 108.7
4.8
Group3 12.4 (29.9) (26.5)
- 8.9 -
Total Group 6,678.7 428.5 6.4 6,416.7 456.7
7.1
1For all businesses excluding UK Rail this year includes 53 weeks compared to
52 weeks last year.
2Adjusted.
3Tram operations, central management and other items.
4 Restated to exclude discontinued operations.
First Student
In First Student our plan to address performance and strengthen the operating
model is delivering in line with our expectations and we are pleased with the
good progress made so far. The annual cost savings as a result of our recovery
plan are now expected to be around $100m, exceeding our original target of $65m
per annum.
Trading has developed in line with our expectations with revenue of $2,497.9m
or GBP1,567.2m (2011: $2,480.2m or GBP1,594.4m), an increase of 0.7% in US Dollars
but a reduction of 1.7% in Sterling terms. Adjusting for the extra week US
Dollar revenues were reduced by 1.3% year on year. Operating profit was $169.5m
or GBP107.1m (2011: $200.2m or GBP128.3m). The reduction in operating profit
included additional one-time costs including, as anticipated, a field
management coaching programme supporting the good momentum in the recovery
plan. The US Dollar operating margin in the second half of the year was 11.5%
compared with 11.4% for the corresponding period last year, indicating a
stabilisation in line with our expectations.
Pressure on school board budgets continues to present challenges although we
are encouraged by signs of wider economic recovery in the US. During the
current bid season we have continued to see more rational bidding behaviour in
the marketplace. Our strategy to strengthen our commercial team, focus on
contract retention and reduce contract churn in our portfolio continues to
deliver a performance in line with our plan and we are on track to achieve our
target retention rate of over 90%.
During the year we started new contracts to operate more than 1,000 buses, one
third of which came from conversions, where operations are transferred to the
outsourced market for the first time. Conversion interest continues to increase
during the current bid season and we are seeing record levels of activity.
However, as the pace of conversions industry-wide remains slow, we continue to
focus our activity in those areas where there is greatest potential.
As part of the recovery programme we have introduced improvements in working
practices and culture across many areas of the business, helping us to deliver
on our objectives and embed a standard way of operating across our business. As
we harmonise best practices across almost 600 locations we are delivering a
more agile and sustainable operating model. We have removed a layer of
organisational management, providing closer links between the local operations
and central management team, and continue to streamline systems to reduce
bureaucracy. Through this period of change we were pleased to receive a record
number of responses to our annual customer survey with an increase in overall
satisfaction scores.
A key goal within our transformation of the business is the improvement in
labour productivity. Across all our locations we are driving full adoption of a
range of initiatives to ensure greater efficiency, accuracy and fairness. For
example, applying best practices to the pre-trip inspections performed by
drivers has reduced time taken and saved on average five minutes per driver,
per location, per day throughout the business, achieving a cost reduction of
$2m for each minute saved.
We have enhanced our FOCUS software system to enable greater productivity
savings. This proprietary system, which links on-board data with engineering,
payroll and back office systems, allows us to manage standard driving hours
more accurately as well as eliminate excess miles and reduce non-driving time.
We will also be utilising GPS software to help us to encourage improved driving
behaviour and practices; reduce fuel usage and provide customers with direct
access to real time information and performance metrics.
We are also driving efficiency improvements across the business. In the key
areas of engineering and maintenance we have worked with our technicians to
reorganise our workshop layouts for maximum efficiency. Two lean reference
workshops have now been created in each of our operating regions with training
to support a unified direction with more efficient and consistent practices. As
a result we are now saving on average 12 minutes per preventative maintenance
inspection, of which we perform over 200,000 a year. Initiatives such as lean
practices will increase our productivity by more than 10% and our best
performing locations have demonstrated that these types of improvements are
capable of producing ongoing cost efficiencies.
First Student is now positioned to leverage its scale as the market leader. Our
recovery programme is restoring performance and is demonstrating marked
improvement across many areas. There is some way to go but our steady progress,
consistent with our plan, gives us confidence that we will create a sustainable
competitive advantage for the future.
First Transit
First Transit continues to develop in line with our expectations. Revenue was
$1,242.6m or GBP778.6m (2011: $1,199.0m or GBP771.5m), an increase of 3.6% and 0.9%
in US Dollar and Sterling terms respectively. Adjusting for the extra week US
Dollar revenues were up 2.0% year on year. Operating profit was $89.1m or GBP
55.8m (2011: $89.5m or GBP57.2m). During the year we invested in DriveCam
technology which will allow us to offer customers a system to manage their
fleets more efficiently.
With typically low capital investment required, this business depends on
established credibility and a solid track record. We have successfully
demonstrated our strong credentials in this market which has helped us succeed
in working collaboratively with our customers to help improve their transport
offering. We have a solid core of experienced transport managers with an
unrivalled reputation for professionalism and innovation.
First Transit is the leading operator in its field and we operate a wide and
diverse mix of different size and types of transport services across
approximately 360 different contracts. In each of the core business segments -
fixed route, paratransit, shuttle, transport call centres and municipal fleet
maintenance services - we are the largest, or near largest, operator and
consequently are able to bring to bear our scale and expertise to clients
looking for transport solutions. We continue to seek out and stimulate further
conversion opportunities and actively encourage and promote outsourcing by
demonstrating the benefits of partnership and the range of solutions we can
offer prospective clients.
During the year we continued to win new business including contracts to provide
fixed route services for Foothill Transit in Arcadia, California; services in
Fort Bend County, Texas and the city of Rochester, Minnesota. We were also
awarded contracts to provide paratransit services in Louisville, Kentucky, in
Yamhill County, Oregon and in Hunterdon County, New Jersey.
Our shuttle bus business delivered a strong performance during the year and we
were awarded the contract for the consolidated rental car centre at Chicago's
Midway Airport. We continue to be the largest provider of university shuttle
bus services and during the year extended our portfolio with new business added
for universities including Yale, Southern Connecticut State and Kennesaw State.
We also continue to pursue further growth in the transportation call centre
market and were pleased to be awarded contracts in Colorado, Louisiana and
Illinois during the year.
We have been able to successfully utilise our reputation and strong client
relationships in one area of First Transit to win business for another. For
example we were able to expand our vehicle maintenance work with the
Williamsburg Area Transit Authority in Virginia through cross marketing our
fixed route and fleet maintenance expertise.
Similarly in Fort McMurray, Alberta, our expertise and flexibility were the
primary reasons we were initially awarded a contract to provide transportation
during the first construction phase of a large industrial complex. Since then
we have built on our strong business relationships in the area to complement
this work as well as add several other oil industry related transportation
contracts.
First Transit continues to develop opportunities that enable our clients to
become as efficient as possible. We have partnered with DriveCam to implement
their innovative product across a number of locations. By combining video data
with real-time driver feedback this gives our customers access to information
that can help to manage their fleet more effectively, improve fuel efficiency
and lower emissions.
Greyhound
Greyhound is an iconic business that is synonymous with affordable
long-distance travel.
We are delivering strong growth and improved performance, as a result of the
actions we took to reform the operating model and transform the business, with
operating profit that has more than doubled over the last two years.
Revenue was $1,049.3m or GBP657.2m (2011: $985.0m or GBP634.6m), an increase of
6.5% and 3.6% in US Dollar and Sterling terms respectively. Like-for-like
revenue growth for the year was 4.1%. Operating profit was $81.0m or GBP50.6m
(2011: $62.3m or GBP40.2m), an increase of 30% and 25.9% in US Dollar and
Sterling terms respectively. Encouraging passenger revenue growth, including
the successful expansion of Greyhound Express, supported the improvement in
operating profit which was partly offset by higher fuel costs during the year.
The most significant development for Greyhound in recent times is the launch of
Greyhound Express. As well as transforming our customer proposition, the
service is attracting passengers back to bus travel and encouraging a new
demographic of passenger. Customers are able to travel non-stop on high
quality, new or refurbished coaches on high volume routes between major cities
and take advantage of yield managed fares and reserve guaranteed seats online.
During the year Greyhound Express went from strength to strength. In addition
to the two original Greyhound Express networks serving the Midwest and
Northeast, we expanded services to the Southeast from a hub in Atlanta in the
autumn, from where the network now reaches into Florida. As a result we now
serve the vast majority of the east coast from Massachusetts to Miami. Heading
west, Greyhound Express connects the main cities in Texas and from May 2012 the
network is being rolled out into California.
Since its launch in December 2010, Greyhound Express has grown rapidly and now
represents more than 20% of Greyhound's business. We have converted some
schedules on high frequency lanes between urban locations to Greyhound Express
services, with other schedules remaining as the traditional service. The strong
feeder traffic from Greyhound's national network allows us to create
sustainable new services, while minimising the cost of operating additional
miles across the network, which also helps Greyhound Express routes achieve
profitability quickly following the launch.
Our traditional Greyhound business is also seeing the benefits of a transformed
operating model. We introduced ticket kiosks at ten of our locations which gave
customers greater choice from a self-service alternative with additional
options such as checking luggage, as well as helping to reduce our cost of
sale. These kiosks proved very popular with over 60% of sales transacted
through them. As a result we will be rolling out further ticket kiosks to ten
additional locations in the coming months.
Our highly successful BoltBus service, serving city pairs in the Northeast, is
offering customers a high quality, viable alternative to rail services. From
May 2012 we will be expanding into the Pacific Northwest, introducing routes
between Seattle and Portland.
During the year we added more than 80 new vehicles to our fleet, including 14
for our operations which serve the Hispanic market domestically and
internationally along and across the southwest border with Mexico. Our
refurbishment programme completed over 220 coaches in the year, bringing the
total to almost 350 so far, significantly improving the passenger experience.
As we continue to make Greyhound a more modern and efficient network we are
delivering improved service quality at the same time. `On Time Performance' has
increased from 79.8% to 89.1% over the last five years. New and refurbished
coaches along with improvements in maintenance processes have also contributed
to this improvement.
We are reviewing our terminals and, where appropriate, taking up opportunities
to right-size and relocate Greyhound's properties to more appropriate,
accessible and convenient sites for passengers across the network. So far we
have right-sized or relocated around 50% of our US locations. During the year
we completed the sale of our Washington DC terminal and will relocate our
services to the multimodal hub at the city's Union Station by early 2013.
In November 2011 we launched a national initiative with another household name,
7-Eleven, and PayNearMe which has been highly successful and opened up online
fares and discounts to a new market. Customers, including those without access
to credit cards, can now order their tickets online and pay in cash at one of
6,400 7-Eleven stores nationwide and we are encouraged by the strong volume of
daily transactions already achieved through this new sales channel. PayNearMe
has concluded a deal with ACE Cash Express, which has 1,650 outlets, to start
offering the same payment option from summer 2012 and we are in negotiations
with several retailers across the US to continue to increase the breadth of our
sales footprint.
Greyhound in Canada is undergoing a transformation and network modernisation
programme, drawing on the positive changes we have already made in the US. Part
of our strategy is to work with the provincial governments to reduce
uneconomic, predominantly rural, routes. As a result we were pleased that
Greyhound Canada returned to profitability during the year. Greyhound Express
was also launched in four of the largest cities in Alberta during November 2011
and we are developing further opportunities to expand the service in Ontario
and Quebec. Our redesigned Canadian website provides more options and a better
online experience, and consequently we have seen Canadian web sales up by over
40% since its launch in September 2011.
UK Bus
Our UK Bus division delivered a steady performance during the year. Revenue was
GBP1,157.2m (2011: GBP1,137.5m), an increase of 1.7%. Like-for-like passenger
revenues grew by 1.6%. Operating profit was GBP134.4m (2011: GBP148.8m), a decrease
of 9.7% principally due to challenging trading conditions in certain major
urban areas where we operate, as well as increased fuel costs.
Notwithstanding the stable performance in 2011/12, we recognised the need to
reform the operating model in UK Bus in order to achieve sustainable growth.
During the year a new management team was brought in and, following a root and
branch review of our operations, initiated a detailed plan to deliver a
consistent, efficient and effective service across all of our networks and
equip the business to generate sustainable growth and improved returns.
As a result of a further deterioration in economic conditions during the year
our capacity to absorb the reductions in Government funding, which are now
expected to be more acute than originally estimated, through revenue growth and
cost efficiencies is significantly reduced. As a consequence we currently
expect UK Bus operating margin to be approximately 8% in 2012/13.
In response we have accelerated our comprehensive plan to reform the operating
model and restore performance which is focused around three main areas:
* Repositioning and rebalancing our portfolio of operations
* Driving increased passenger revenue and patronage growth
* Improving operating discipline and efficiencies
We have a very strong platform from which to grow in UK Bus. The vast majority
of our bus operations generate good growth and returns with opportunities to
improve further. However, there is scope to reposition our portfolio to
concentrate on those areas with the greatest potential.
In February we announced the sale of our bus operations in North Devon and at
the end of March 2012 we completed the sale of our Northumberland Park depot in
North East London. This followed the sales of our King's Lynn operations in
April 2011 and our German bus subsidiary in September last year. We also
announced our withdrawal from depots in Bury St Edmunds and Dalkeith, as well
as scaling back our operations in Musselburgh.
In addition to these small asset and business disposals we are now accelerating
our plans to significantly reposition and rebalance our UK Bus operations in
the coming year to restore operating margins and help to facilitate improved
growth and returns.
A comprehensive plan that will stimulate growth in revenue and patronage is
being rolled out across our networks. Centred on five core elements it
encompasses service quality and delivery; network design; pricing and
ticketing; tailored local market solutions and building more effective
partnerships with stakeholders.
In January we launched our new customer brand promise, Better Journeys for
Life. Setting out our plans for greater engagement with customers, employees
and stakeholders, it is supported by ongoing customer satisfaction reviews,
commissioned internally and also by Passenger Focus.
One of the first visible signs will be a new livery, which establishes greater
local identities, and is now being rolled out on our buses across the UK. This
is the first stage in a fleet modernisation programme including the investment
of GBP160m in approximately 1,000 new vehicles together with a GBP4m refurbishment
programme for our mid-life vehicles. This will deliver a step change to our
profile and incorporates a complete refresh of our interior and exterior
designs developed from extensive customer feedback.
We are also investing GBP27m in new ticketing technology. This equipment which
will be rolled out further during the year provides us an ITSO smartcard
platform. Looking ahead, the technology will also enable us to offer customers
"touch in, touch out" contactless payment using their bank cards. Helping to
reduce the barriers to bus travel, this next-generation ticketing will not only
reduce both cash transactions and boarding times but will enable us to offer a
wide range of ticket products including the ability to cap daily and weekly
fares. The equipment also has the capability to accept payment by mobile phone.
Creating more effective partnerships with our stakeholders is a key focus. It
is essential that we work closely with Local Authorities and stakeholders
across our networks to create successful relationships that will realise
maximum efficiencies and greater benefits for customers particularly through
reduced journey times.
Through our joint partnership proposals we were successful in 12 out of the 24
awards made by the Department for Transport (DfT) from the Better Bus Area
Fund. We also secured support from the DfT's Green Bus Fund for a second round
of 40 hybrid vehicles to be deployed in Berkshire, Essex and Bath; in addition
to the original 40 buses being introduced on services in Leeds, Manchester and
Glasgow. Initial reactions to these vehicles have been very positive and we
continue to expand our knowledge and experience of this type of technology.
During the year in the Bristol area, where the level of tendered work has
reduced as a result of reductions in Local Authority funding, we reinvested the
mileage saved to enhance frequencies on our key corridors which have the
potential for further strong growth. Fare promotions have also been introduced
and, alongside the delivery of highway infrastructure improvements by our Local
Authority partners, we have seen an encouraging increase in patronage to date.
Similarly, in South Yorkshire we introduced a new service linking Rotherham and
Barnsley which has seen over 1 million customer journeys in 11 months.
There is considerable opportunity to increase efficiency through the rolling
out of best practices and standardisation in areas such as maintenance and
engineering. For example, the operational effectiveness of our fleet is being
reviewed following a successful pilot in Oldham to reduce unproductive hours.
In addition, our engineering teams are introducing lean management practices in
workshops as well as examining ways to improve service and repair processes.
This work was supported by further investment in depots including a GBP6m
replacement site in Wigan which opened in August 2011.
In London, where we provide contracted services on behalf of Transport for
London (TfL) we do not take revenue risk and consequently operating margins are
lower than in our deregulated bus business. We continue to be encouraged by our
operational performance which is achieving better than the network average and,
across a number of measures, is near the top of TfL performance league tables.
Further contract wins in West London will see us take over routes 70, 206 and
266 in early summer 2012. We are pleased that TfL awarded us funding to
purchase 22 hybrid buses for route 23 and the vehicles came into service in
April 2012.
We look forward to the London 2012 Games where we will be the main provider of
spectator transport. We are providing the buses for shuttle services at Games
venues and Park & Ride services from sites around the edge of London to the
Olympic Park as well as those for the sailing venue in Weymouth, the rowing
venue in Eton Dorney and the football stadia in Glasgow, Manchester and
Coventry. We will also be operating a network of express coach services from
across the country to the Olympic Park and Weymouth. The contract includes a
reservation and ticketing system as well as support staff at all bus and coach
locations to assist passengers.
We were pleased that the Competition Commission's report on the industry,
published in December 2011, recognised that no fundamental change to the
structure or regulation of the industry was required. The Commission supported
many of the innovations that we are already developing across the country,
including partnerships with local authorities and multi-operator ticketing. In
March 2012 the Government published its response to the Commission's report.
This wide-ranging policy statement puts emphasis on the importance of greater
partnership between operators and transport authorities.
We have a core of fundamentally strong networks. Our comprehensive recovery
plan is being executed from an established and diversified platform with market
leadership in territories where propensity for bus travel is high. We are
confident that the actions we are taking will equip the business to deliver
sustainable growth and improved returns from a stronger, more robust
foundation.
UK RAIL
Our rail businesses continued to enjoy strong demand during the year with
revenue increased by 10.4% to GBP2,506.1m (2011: GBP2,269.8m). In a year which saw
historic high numbers of passengers on the UK rail network like-for-like
passenger revenue growth across our franchises was 8.4%. Operating profit was GBP
110.5m (2011: GBP108.7m), an increase of 1.7%. First TransPennine Express made a
significant contribution during the year as a result of continued strong
trading. However, as previously indicated, this franchise has now entered the
extension period with margins closer to the industry average.
The year marked the start of a period of transition in the UK rail market, with
eight franchises due to be re-let by the Government over the next two years. We
were pleased to be the only operator to pre-qualify for all four of the rail
franchises that have been tendered so far (InterCity West Coast, Great Western,
Thameslink and Essex Thameside) demonstrating the depth of our strength and
expertise in the rail market. As the current operator of two of these
franchises - First Great Western and First Capital Connect - we have a strong
track record of delivery and investment in our rail operations. We look forward
to submitting competitive proposals which meet the requirements of customers
and taxpayers and provide an economic return for shareholders.
During the year Vernon Barker was appointed Managing Director of the UK Rail
division. Vernon's proven track record in railway management, most recently as
Managing Director of First TransPennine Express, and strong focus on customer
service will be invaluable as we develop our existing and new rail interests.
First Capital Connect
The focus for First Capital Connect during the year has been the preparation
for and delivery of the major change programmes by continuing to drive further
improvement across the business. Improved engagement and communication with our
staff, customers and stakeholders has helped us deliver improvements in
customer satisfaction and employee engagement (both achieving record results).
Our operating performance also improved with the Public Performance Measurement
(PPM) of reliability and punctuality at 90.0% on a Moving Annual Average (MAA)
basis.
A significant highlight last year was the successful delivery of the initial
stage of the Thameslink Programme providing the first 12-carriage services on
the Thameslink route in December 2011. Refurbishment and transformation work
was ongoing at various stations along the route, as part of the programme of
upgrades. We worked together with Network Rail and TfL to successfully reopen
Blackfriars station, the first ever cross-river hub with a new link to London
Underground and an exit on the South Bank. Transport Minister Theresa Villiers
joined us in opening a dedicated ticket hall and longer 12-car platforms at
Farringdon station in December, and we also supported the introduction of a new
station at West Hampstead. On the Great Northern route, where we have
significantly increased capacity, we added a further 2,200 seats on weekdays
through our `More Seats for You' initiative. We introduced 12-car services on
the route and in March 2012 our customers began using the impressive new
concourse at London King's Cross station.
During the year the DfT announced that the end date for the First Capital
Connect franchise has been bought forward to September 2013. This provides the
best opportunity in the major Thameslink transformation programme to allow an
effective transition to a potential new franchisee, particularly in relation to
the introduction of new rolling stock which will be completed after the end
date of the current franchise. Our unrivalled knowledge and experience of
managing this major project gives us a strong foundation to continue to help
deliver this important programme in the future.
First Great Western
We continue to drive further improvements in performance across our network.
Punctuality during the year has been improving, with our PPM MAA at 90.6%, and
we continue to challenge Network Rail to reduce infrastructure failures.
We are committed to delivering further improvements for passengers and in
December 2011 we agreed a major GBP28.9m deal with the DfT for 48 new carriages
to be added to our High Speed Train fleet, providing an extra 4,500 seats for
customers on peak services into and out of London. As part of this agreement we
leased five Class 180 trains to replace Turbo services on the Cotswold line
between London Paddington and Hereford providing a more comfortable journey on
this long-distance route.
We continue to introduce further capacity across our network. In the West of
England we worked with the DfT to secure extra trains and carriages which will
provide an additional 924 seats on Bristol peak services, while customers in
Torbay and between Truro and Falmouth will see almost 650 additional seats on
peak weekday services and 1,275 at weekends.
There have also been major improvements to stations along the route. The GBP10m
redevelopment of Bath Spa station has continued and Exeter Central station has
received a refresh, bringing the original ticket hall back into use and
improving the station as a focal point. Slough station has had a complete
overhaul costing GBP1m, as a result of a joint project with Network Rail and the
local council ahead of this summer when the station will also serve the Olympic
rowing venue.
First ScotRail
Our PPM score rallied strongly towards the end of the year, to finish at 94.8%
after the severe weather affecting the country's rail infrastructure impacted
First ScotRail and Network Rail's ability to achieve acceptable levels of
operating performance at certain points during the year. Following the
introduction of further improvement plans in the autumn and minor timetable
changes made in December 2011, we have seen performance start to exceed planned
levels.
First ScotRail signed one of the first alliance agreements between a train
operating company and Network Rail to better align overall objectives and
provide more cost effective ways of delivering rail services. The agreement
allows more efficient and effective management through a closer working
relationship to deliver improvements in quality for passengers and other
stakeholders. Under the agreement a joint Board of First ScotRail and Network
Rail members has been established. We are confident that long term cost savings
for the industry and the Scottish Government will be achieved.
Successful marketing and promotions activity has helped to stimulate further
demand for our services. Offering customers great value for money through
initiatives such as our popular Club 55 tickets providing discount travel for
the over 55's, continued to prove highly successful during the year.
Strong partnerships with Passenger Transport Executives and Local Authorities
have led to station improvements across Scotland including the installation of
innovative solar powered customer information screens into Highland stations in
partnership with Highland & Island Regional Transport Partnership.
First TransPennine Express
First TransPennine Express achieved record performance this year with PPM MAA
above the national average at 93.3%.
We were delighted that the DfT took the decision during the year to extend the
current franchise. We will operate First TransPennine Express for a further
three years from February 2012 at an operating margin closer to the industry
average. Since we commenced operation of the franchise in 2004 we have worked
hard to deliver consistent improvements for customers, including the
introduction of a GBP260m new train fleet, and during that time passenger numbers
have risen from 13m to 24m a year.
We will work closely with the DfT and our stakeholders on the route over the
remaining life of the franchise to progress plans for the future of rail in the
North of England and to further develop our Anglo-Scottish services. We
successfully negotiated for 10 new build Class 350 trains to be brought into
service from December 2013. These will provide an 80% increase in customer
capacity between Manchester and Scotland and will allow for a 30% increase in
seat availability across the rest of the network.
We launched a suite of technology solutions during the year, including a mobile
website with geo-location technology providing customers with detailed
information about station facilities. We also released a smartphone ticketing
app with purchasing and mobile ticket display facilities and were also the
first train operator in the UK to launch a customer service based Twitter
account which is operated by front line employees.
First Hull Trains
During the year work commenced on an overhaul of the fleet which will help to
significantly improve reliability and punctuality. We are working with
business, councils and planners to help better integrate our services with
wider transport operations along the East Coast Main Line, as well as with
other train operating companies and Network Rail to improve performance and
interconnectivity along the route.
Outlook
We have a fundamentally strong and diverse portfolio of operations with four
out of five of our divisions performing in line with our expectations and
actions we have taken will lead to improved growth and returns.
Notwithstanding the steady performance from our UK Bus division in 2011/12 we
have seen a further deterioration of economic conditions particularly in our
urban operations in Scotland and the North of England. As result, we do not
expect revenue growth and cost efficiencies in 2012/13 to be sufficient to
offset the impact of reduced government subsidies and funding to the industry,
which are more acute than originally estimated, and increased fuel costs. In
response we are accelerating a comprehensive plan that will deliver sustainable
growth in revenue and patronage and improved returns. This includes
repositioning our UK Bus portfolio through a programme of business and asset
disposals to focus on those areas where the greatest potential for growth
exists.
Our North American operations continue to progress and we believe that
improving trends in the US economy will be positive for our businesses. First
Student is now well set on the path to recovery with our plan to reform the
business delivering in line with our expectations. First Transit delivers good
returns from typically low capital investment which is underpinned by its
established credentials and strong track record. Greyhound's enhanced
performance from a transformed operating model demonstrates our ability to
implement the necessary actions to deliver strong growth and margin
improvement.
The UK rail market is in a period of transition with eight franchises due to be
let by the Government over the next two years. We are the only operator to have
pre-qualified for all four of the rail franchises that have come to the market
so far and we believe we are well placed to progress opportunities from the
refranchising programme.
The combined effect of the outlook for trading together with the actions to
reposition the UK Bus portfolio is expected to result in the Group's net cash
flow being broadly neutral in 2012/13.
Our market leading positions in a sector that is a key enabler of economic
growth together with the actions we are taking to strengthen the business give
the Board confidence that the Group has good prospects to deliver long term
value for shareholders. Therefore, reflecting our longer term view, the Board
remains committed to its current policy of dividend growth of 7.0% through to
the end of the financial year 2012/13.
EXCEPTIONAL ITEMS AND AMORTISATION CHARGES
2012 2011
GBPm GBPm
UK Bus Pension Scheme changes 73.3 -
UK Rail bid costs (10.2) (2.7)
UK Bus depot sales and closures (10.7) -
Competition Commission costs (1.9) (1.4)
UK Rail claim - 22.5
UK Rail First Great Western contract - (59.9)
provision
First Student recovery plan - (39.5)
First Transit goodwill impairment and - (16.6)
contract provision
UK Rail joint venture provision - (1.8)
UK Bus restructuring costs - (1.0)
Other exceptional items (1.1) (0.4)
Total exceptional items 49.4 (100.8)
Amortisation charges (30.9) (42.9)
Profit/(loss) on disposal of properties 1.0 (4.4)
Operating profit credit/(charge) 19.5 (148.1)
Ineffectiveness on financial derivatives 0.3
(11.0)
Profit/(loss) before tax credit/(charge) 8.5 (147.8)
Tax credit 4.4 43.0
(Loss)/profit on disposal of discontinued (9.2) 6.7
operations
Net exceptionalitems for the year 3.7 (98.1)
UK Bus Pension Scheme changes
During the year we took actions to de-risk the UK Bus Pension Scheme, the most
significant of which is that pension increases will be linked to consumer price
inflation (CPI) rather than retail price inflation (RPI). In addition a
pensionable pay cap was introduced along with lower pension accrual rates. As a
result of these changes future pension liabilities have decreased and a one-off
exceptional gain of GBP73.3m (2011: GBPnil) was realised.
UK Rail bid costs
We are now entering a transition period for UK Rail with eight franchises
expected to be retendered in the next two years. Bid costs of GBP10.2m (2011: GBP
2.7m) were incurred during the year. These costs covered the preparation of the
Intercity West Coast bid which was submitted on 4 May 2012. They also include
the cost of pre-qualification for three further rail franchises - Great
Western, Thameslink, and Essex Thameside. We are the only operator to
pre-qualify for all the franchises that are currently out to bid.
UK Bus depot sales and closures
As part of our programme to rebalance our portfolio in UK Bus operations we
have taken the decision to sell or close certain operations. Net losses of GBP
8.2m were incurred during the year comprising GBP6.7m of operating losses for the
year and GBP1.5m of closure costs. In addition a loss on the disposal of the
Northumberland Park depot in North East London of GBP2.5m was recorded in the
year representing gross proceeds of GBP14.2m less the carrying value of net
assets including GBP5.2m of goodwill as well as transaction costs. The proceeds
of the disposal were received in the first week of 2012/13.
Competition Commission costs
During the year we incurred a further GBP1.9m (2011: GBP1.4m) of costs responding
to and representing our position to the Competition Commission investigation
into the UK Bus market. The Competition Commission issued their final report in
December 2011 and since the start of the investigation we have incurred total
costs of GBP7.1m.
Other exceptional items
Costs of GBP1.1m were incurred principally on effecting the changes to the UK Bus
Pension Scheme as described above.
Amortisation charges
The charge for the year was GBP30.9m (2011: GBP42.9m) with the reduction mainly due
to the write off of the remaining balance of the First Great Western franchise
intangible asset (GBP7.6m) in the previous year.
Profit/(loss) on disposal of properties
During the year we realised GBP40.3m (2011: GBP10.1m) on the disposal of selected
properties predominantly in Greyhound operations. These resulted in a net
profit on disposal of GBP1.0m (2011: loss of GBP4.4m).
Ineffectiveness on financial derivatives
Due to the ineffective element and undesignated fair value movements on
financial derivatives there was a GBP11.0m non-cash charge (2011: GBP0.3m credit)
to the income statement during the year. The principal component of this
non-cash charge relates to fixed interest rate swaps which do not qualify for
hedge accounting but do provide a cash flow hedge against variable rate debt
from 2012 to 2015. It is anticipated that the charge in respect of these swaps
will reverse over their contractual term.
Tax on exceptional items and amortisation charges
The tax credit as a result of these exceptional items was GBP0.4m (2011: GBP41.3m).
In addition there was a one-off deferred tax credit of GBP4.0m (2011: GBP1.7m) as a
result of the reduction in the UK corporation tax rate from 26% to 24% (2011:
28% to 26%).
FINANCE COSTS AND INVESTMENT INCOME
Net finance costs, before exceptional items, were GBP157.1m (2011: GBP182.4m) with
the reduction principally due to lower interest rates on US Dollar denominated
debt.
PROFIT BEFORE TAX
Adjusted profit before tax was GBP271.4m (2011: GBP274.3m). An overall credit of GBP
8.5m (2011: GBP147.8m charge) for exceptional items and amortisation charges
resulted in a substantial increase in profit before tax to GBP279.9m (2011: GBP
126.5m).
TAX
The tax charge, on adjusted profit before tax, for the year was GBP54.5m (2011: GBP
59.7m) representing an effective rate of 20.1% (2011: 21.8%). There was a tax
credit of GBP0.4m (2011: GBP41.3m) relating to amortisation charges and exceptional
items. There was also a one-off credit adjustment of GBP4.0m (2011: GBP1.7m) to the
UK deferred tax liability as a result of the reduction in the UK corporation
tax rate from 26% to 24% (2011: 28% to 26%) which will apply from April 2012.
This resulted in a total tax charge of GBP50.1m (2011: GBP16.7m) on continuing
operations. The actual tax paid during the year was GBP17.7m (2011: GBP25.0m).
North American cash tax remains low due to tax losses brought forward. We
expect the North American cash tax rate to remain low for the near term. The UK
cash tax for the year was lower than last year principally due to higher cash
pension payments in UK Bus.
DISCONTINUED OPERATIONS
A loss on disposal of GBP9.2m arose on the sale of FirstGroup Deutschland GmbH
representing gross consideration of GBP5.5m less the carrying value of net
assets, including goodwill, and transaction costs. This, as well as the
operating loss after tax to the date of disposal of GBP0.3m (2011: profit of GBP
0.6m), has been classified within discontinued operations in the consolidated
income statement.
DIVIDENDS
In line with our stated commitment the Board has proposed a final dividend per
share, subject to approval by shareholders, of 16.05p (2011:15.0p), an increase
of 7.0%, making a full year payment of 23.67p (2011: 22.12p). It will be paid
on 17 August 2012 to shareholders on the register at 13 July 2012. The dividend
is covered 1.7 times (2011: 1.9 times) by adjusted basic EPS.
EPS
The adjusted basic EPS was 40.0p (2011: 41.1p), a reduction of 2.7%. Basic EPS
was 42.7p (2011: 20.0p), an increase of 113.5% due to a significant reduction
in net exceptional items compared to last year.
EBITDA
EBITDA by division is set out below:
Year to 31 Year to 31
March 20121 March 20113
Revenue EBITDA2 EBITDA2 Revenue EBITDA2 EBITDA2
GBPm GBPm % GBPm GBPm %
First Student 1,567.2 255.8 16.3 1,594.4 278.1 17.4
First Transit 778.6 8.4 66.3 8.6
65.3 771.5
Greyhound 12.2 68.7
657.2 80.1 634.6 10.8
UK Bus 1,157.2 17.9 1,137.5 220.0 19.3
207.1
UK Rail 2,506.1 6.5 2,269.8 158.6 7.0
163.5
Group 12.4 (28.9) (22.8)
- 8.9 -
Total Group 6,678.7 11.1 6,416.7 768.9 12.0
742.9
1For all businesses excluding UK Rail this year includes 53 weeks compared to
52 weeks last year.
2Adjusted operating profit less capital grant amortisation plus depreciation.
3Restated to exclude discontinued operations and incorporating a revised
calculation of EBITDA as explained in note 1 to the preliminary results
announcement.
CASH FLOW
The net cash inflow for the year was GBP119.2m (2011: GBP209.8m). This contributed
to a net debt reduction of GBP111.9m (2011: GBP332.1m) as detailed below:
Year to Year to
31 March 2012 31 March 2011
GBPm GBPm
EBITDA (including discontinued
operations) 742.6 770.7
Exceptional items 49.4 (100.8)
Impairment charges - 19.5
Other non-cash income statement items 9.8 11.4
Working capital excluding FGW 20.5 75.2
provision movement
Working capital - FGW provision 48.7 11.2
movement
FGW provision movement (48.7) 48.7
Movement in other provisions (29.1) (48.3)
Pension payments in excess of income (87.1) (43.5)
statement charge
Non-cash RPI to CPI pension gain (73.3) -
Cash generated by operations 744.1
632.8
Capital expenditure and acquisitions (293.6) (283.6)
Disposal proceeds 57.7 21.8
Interest, tax and other (155.4) (183.6)
Dividends payable to Group (108.8) (101.4)
shareholders
Dividends payable to non-controlling (19.0) (11.8)
minority shareholders
Proceeds from sale of businesses
5.5 24.3
Net cash inflow 119.2 209.8
Foreign exchange movements
(7.7) 129.2
Other non-cash movements in relation
to financial instruments 0.4 (6.9)
Movement in net debt in year
111.9 332.1
The principle adverse movements compared to last year were as follows:
* Higher pension payments in excess of income statement charge of GBP43.6m
principally due to additional deficit cash contributions in Greyhound and
UK Bus. In addition there was a one-off non-cash benefit of GBP73.3m in
relation to the UK Bus pension scheme changes.
* The FGW provisions put up last year has been transferred to creditors due
within one year, resulting in a movement on provisions of GBP97.4m.
* EBITDA of GBP742.6m was GBP28.1m lower than last year.
* No impairment charges in 2011/12.
* Proceeds from sale of business represents Germany at GBP5.5m this year
compared to GBP24.3m for GB Railfreight last year.
* Working capital excluding FGW provision movement for last year of GBP75.2m
included the benefit of the timing of certain UK Rail payments as well the
First Student recovery plan provision and the First Transit contract
provision. This year working capital is still positive at GBP20.5m despite
the reversal of the UK Rail payment timing and the expected usage of the
Student and Transit provisions.
* Higher dividend payments to Group shareholders of GBP7.4m and non-controlling
minority shareholders of GBP7.2m.
* Higher capital expenditure and acquisitions of GBP10.0m.
Partly offset by:
* Lower net exceptional items and impairment charges of GBP150.2m as explained
above.
* Lower interest, tax and other payments of GBP28.2m principally due to lower
interest rates on US Dollar denominated debt.
* Favourable movement in other provisions of GBP19.2m mainly due to lower
insurance claims payments compared to last year.
* Disposal proceeds of GBP57.7m (property GBP40.3m and non-property, mainly
buses, GBP17.4m) compared to GBP21.8m (property GBP10.1m and non-property GBP11.7m)
last year with the increase principally due to the Washington DC property
sale in Greyhound.
NET DEBT
The Group's net debt at 31 March 2012 was GBP1,837.5m (2011: GBP1,949.4m) and
comprised:
31 March 31 March
2012 2011
Fixed Variable Total Total
Analysis of net debt GBPm GBPm GBPm GBPm
Sterling bond (2013)1 298.5 298.5 298.0
-
Sterling bond (2018)2 325.1 325.1 325.9
-
Sterling bond (2019)2 249.4 249.4 273.4
-
Sterling bond (2021)3 331.5 331.5 331.1
-
Sterling bond (2024)1 199.0 199.0 199.0
-
US Dollar bank loans 369.8 369.8 506.3
-
Canadian Dollar bank loans 113.9 113.9 113.1
-
Euro and other bank loans 11.7 11.7 29.0
-
HP contracts and finance 260.6 74.7 335.3 251.9
leases
Senior unsecured loan notes 93.3 - 93.3 -
Loan notes 8.7 1.0 9.7
9.7
Cash (164.0) (164.0) (89.4)
-
UK Rail ring-fenced cash and (323.2) (323.2) (283.8)
deposits -
Other ring-fenced cash and (12.5) (12.5) (14.8)
deposits -
Interest rate swaps 368.6 (368.6)
- -
Total 1,885.3 (47.8) 1,837.5 1,949.4
1 excludes accrued interest.
2 stated excluding accrued interest, swapped to US Dollars and adjusted for
movements on associated derivatives.
3 stated excluding accrued interest, partially swapped to US Dollars and
adjusted for movements on associated derivatives.
Under the terms of the UK Rail franchise agreements, cash can only be
distributed by the train operating companies either up to the lower amount of
their retained profits or the amount determined by prescribed liquidity ratios.
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.
The level of ring-fenced cash at 31 March 2012 is higher than would normally be
expected due to the timing of government receipts at FSR and the temporary
impact of liquidity ratios at FCC. Accordingly the balance at 31 March 2011 is
more indicative of the expected level of ring-fenced cash.
Maintaining our investment grade status is a key priority and we have
consistently reduced leverage to support this. The net debt:EBITDA ratio has
reduced from 3.2 times at 31 March 2009 to 2.5 times at 31 March 2012 (2011:
2.5 times).
CAPITAL EXPENDITURE AND ACQUISITIONS
Cash capital expenditure and acquisitions was GBP293.6m (2011: GBP283.6m) and
comprised First Student GBP115.6m (2011: GBP117.2m), First Transit GBP31.9m (2011: GBP
6.8m), Greyhound GBP44.1m (2011: GBP45.0m), UK Bus GBP33.6m (2011: GBP66.7m), UK Rail GBP
63.4m (2011: GBP46.7m) and Group items GBP5.0m (2011: GBP1.2m).
In addition during the year we entered into operating leases for passenger
carrying vehicles in UK Bus with a capital value of GBP43.4m (2011: GBP23.6m).
FUNDING AND RISK MANAGEMENT
The Group continues to have strong liquidity. At 31 March there was GBP795.8m
(2011: GBP616.1m) of committed headroom and free cash comprising GBP631.8m (2011: GBP
526.7m) of headroom under the committed revolving bank facility and free cash
balances of GBP164.0m (2011: GBP89.4m). Largely due to seasonality in the North
American school bus business, committed headroom typically reduces during the
financial year up to October and increases thereafter. Treasury policy requires
a minimum of GBP250m of committed headroom at all times.
The Group's main revolving bank facility expires in December 2015. The average
debt maturity was 5.5 years (2011: 6.1 years).
The Group does not enter into speculative financial transactions and uses only
authorised financial instruments for certain risk management purposes only.
Interest rate risk
The Group reduces exposure by using a combination of fixed rate debt and
interest rate derivatives to achieve an overall fixed rate position over the
medium term of between 75% and 100% of net debt. At 31 March 2012 100% (2011:
87%) of net debt was fixed and in excess of 85% of net debt is fixed for the
next two years.
Fuel price risk
We manage the commodity price risk on fuel through a progressive forward
hedging policy.
In the UK, 86% of crude oil costs were hedged at an average rate of $88 per
barrel during the year. At the end of the year we have hedged 83% of our "at
risk" UK crude requirements for the year to 31 March 2013 (2.5m barrels p.a.)
at $103 per barrel and 46% of our requirements for the year to 31 March 2014 at
$105 per barrel.
In North America 59% of crude oil costs were hedged at an average rate of $95
per barrel during the year. At the end of the year we have hedged 69% of the
"at risk" volume for the year to 31 March 2013 (1.7m barrels p.a.) at $94 per
barrel. In addition we have hedged 40% of "at risk" volumes for the year to 31
March 2014 at $95 per barrel.
Foreign currency risk
With regard to balance sheet translation risk, the Group hedges part of its
exposure to the impact of exchange rate movements on translation of foreign
currency net assets by holding currency swaps and net borrowings in foreign
currencies. At 31 March 2012 foreign currency net assets were 47% (2011: 62%)
hedged.
Group policies on foreign currency risk affecting cash flow, profits and net
assets are maintained to minimise exposures to the Group by using a combination
of natural hedge positions and derivative instruments where appropriate.
Translation risk relating to US Dollar earnings arising in the US is largely
offset by US Dollar denominated costs incurred in the UK, principally UK fuel
costs, US Dollar interest and tax costs, so that exposure to EPS on a year to
year basis is not significant.
FOREIGN EXCHANGE
The most significant exchange rates to Sterling for the Group are as follows:
Year to 31 Year to
March 2012 31 March
2011
Closing Effective Closing Effective
Rate rate rate Rate
US Dollar 1.59
1.60 1.60 1.56
Canadian Dollar
1.60 1.59 1.57 1.56
The US Dollar rate was slightly higher in the year to 31 March 2012 compared to
last year. This resulted in the Sterling equivalent of North American US Dollar
revenues being approximately 3% lower than last year. Similarly this also
resulted in a small reduction in North American operating profit but this was
more than offset by lower US Dollar denominated fuel costs in the UK and lower
US Dollar denominated interest costs.
SHARES IN ISSUE
As at 31 March 2012 there were 481.6m shares in issue (2011: 480.8m), excluding
treasury shares and own shares held in trust for employees of 0.5m (2011:
1.3m). 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) was 481.4m (2011: 480.4m).
INVESTMENT IN DSBFIRST
The funding of the joint venture of rail operations in Sweden and Denmark was
agreed with DSB during the year and a further GBP4.2m was invested by the Group.
As a result of this the guarantees issued by the Group reduced to GBP7.0m.
Subsequently the Swedish franchise was transferred to another operator in
December 2011.
BALANCE SHEET
Net assets have decreased by GBP69.9m since the start of the year. The principal
reasons for this are actuarial losses on defined benefit pension schemes (net
of deferred tax) of GBP134.0m, dividends payments of GBP127.8m, unfavourable
hedging reserve movements (net of deferred tax) of GBP22.9m, and unfavourable
translation reserve movements of GBP10.9m partly offset by the retained profit
for the year of GBP220.3m.
GOODWILL
The carrying value (net assets including goodwill but excluding intercompany
balances) of each cash generating unit (CGU) was tested for impairment during
the year and there continues to be sufficient headroom in all of the CGUs.
Headroom on the UK Bus business has reduced to GBP512m (2011: GBP796m) reflecting
the reduction in projected operating profits and margins compared to this time
last year. The First Student recovery plan is progressing in line with
expectations and as a result the headroom on this business is in line with last
year.
PENSIONS
The Group has updated its pension assumptions as at 31 March 2012 for the
defined benefit schemes in the UK and North America.
The net pension deficit of GBP243m at the beginning of the year has increased to
GBP268m at the end of the year principally due to changes in actuarial
assumptions, in particular lower discount rates than last year, partly offset
by the one-off benefit of de-risking the UK Bus Pension Scheme described above
and higher cash payments into the schemes.
The main factors that influence the balance sheet position for pensions and the
sensitivities to their movement at 31 March 2012 are set out below:
Movement Impact
Discount rate +0.1% Reduce deficit by GBP
25m
Inflation +0.1% Increase deficit by GBP
18m
SEASONALITY
The First Student business generates lower revenues and profits in the first
half of the year than in the second half of the year as the school summer
holidays fall into the first half. Greyhound operating profits are typically
higher in the first half of the year due to demand being strongest in the
summer months.
GOING CONCERN
The Group has established a strong balanced portfolio of businesses with
approximately 50% of Group revenues secured under medium-term contracts with
government agencies and other large organisations in the UK and North America.
The Group has a diversified funding structure with average debt duration at 31
March 2012 of 5.5 years (2011: 6.1 years) and which is largely represented by
committed medium to long term unsecured bond debt and finance leases. The Group
has a $1,250m committed revolving banking facility of which $1,011m was undrawn
at the year end. This facility expires in December 2015.
The Directors have carried out a detailed review of the Group's budget for the
year to 31 March 2013 and medium-term plans, with due regard for the risks and
uncertainties to which the Group is exposed, the uncertain economic climate and
the impact that this could have on trading performance. Based on this review,
the Directors believe that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, the
financial statements have been prepared on a going concern basis.
Tim O'Toole
Chief Executive
Nick Chevis
Acting Finance Director
23 May 2012
Consolidated income statement
For the year ended 31 March
20121 2011
Adjusted Adjusted Total
results2 Adjustments3 Total results2 Adjustments3 restated4
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 6,678.7 6,678.7 6,416.7 - 6,416.7
-
Operating costs before
profit/(loss) on disposal (6,250.2) 18.5 (6,231.7) (5,960.0) (143.7) (6,103.7)
of properties
Operating profit before
profit/(loss)on disposal 428.5 18.5 447.0 456.7 (143.7) 313.0
of properties
Amortisation charges (30.9) (30.9) (42.9) (42.9)
- -
Exceptional items 49.4 49.4 (100.8) (100.8)
- -
18.5 18.5 (143.7) (143.7)
- -
Profit/(loss) on disposal 1.0 1.0 (4.4) (4.4)
of properties - -
Operating profit 428.5 19.5 448.0 456.7 (148.1) 308.6
Investment income 2.0 2.0 1.9 1.9
- -
Finance costs (159.1) (11.0) (170.1) (184.3) 0.3 (184.0)
Profit before tax 271.4 8.5 279.9 274.3 (147.8) 126.5
Tax (54.5) 4.4 (50.1) (59.7) 43.0 (16.7)
Profit for the yearfrom
continuing operations 216.9 12.9 229.8 214.6 (104.8) 109.8
Discontinued operations
(Loss)/profit for the year
from discontinued 3 (0.3) (9.2) (9.5) 0.6 6.7 7.3
operations
Profit for the year 216.6 3.7 220.3 215.2 (98.1) 117.1
Attributable to:
Equity holders of the 192.3 3.9 196.2 198.0 (94.8) 103.2
parent
Non-controlling interests 24.3 (0.2) 24.1 17.2 (3.3) 13.9
216.6 3.7 220.3 215.2 (98.1) 117.1
Earnings per share
Continuing operations
Basic 4 40.0p 2.7p 42.7p 41.1p (21.1)p 20.0p
Diluted 4 39.8p 2.7p 42.5p 40.7p (20.9)p 19.8p
Continuing and
discontinued operations
Basic 4 39.9p 0.9p 40.8p 41.2p (19.7)p 21.5p
Diluted 4 39.7p 0.8p 40.5p 40.9p (19.6)p 21.3p
Dividends of GBP108.8m (2011: GBP101.4m) were paid during the year. Dividends of GBP
77.2m (2011: GBP72.1m) are proposed for approval in respect of the year.
1For all businesses excluding UK Rail this year includes 53 weeks compared to
52 weeks last year.
2Adjusted trading results before items noted in 2 below.
3Amortisation charges, ineffectiveness on financial derivatives, exceptional
items, profit/(loss) on disposal of properties and discontinued operations and
tax thereon.
4Restated to exclude discontinued operations as explained in note 1.
Consolidated statement of comprehensive income
Year ended 31 March
2012 2011
GBPm GBPm
Profit for the year 220.3 117.1
Other comprehensive income/(expense)
Derivative hedging instrument movements (36.1) 193.4
Deferred tax on derivative hedging instrument 13.2 (44.0)
movements
Exchange differences on translation of foreign (10.9) (143.9)
operations
Unrealised losses on executive deferred - (0.1)
compensation plans
Actuarial losses on defined benefit pension (185.8) (55.5)
schemes
RPI to CPI change in defined benefit pension - 84.9
arrangements
Deferred tax on actuarial losses and RPI to CPI 51.8 (5.9)
change on defined benefit pension schemes
Other comprehensive (expense)/incomefor the (167.8) 28.9
year
Total comprehensive income for the year 52.5 146.0
Attributable to:
Equity holders of the parent 28.4 132.6
Non-controlling interests 24.1 13.4
52.5 146.0
Consolidated balance sheet
Year ended 31 March
2012 2011 2010
Notes GBPm GBPm GBPm
Non-current assets
Goodwill 5 1,599.3 1,608.0 1,754.9
Other intangible 6 318.8 348.6 415.9
assets
Property, plant and 7 2,006.3 2,082.9 2,284.1
equipment
Deferred tax assets 15 43.3 30.0 30.4
Retirement benefit 25.2 30.7 3.1
assets
Derivative 14 72.6 58.1 33.0
financial
instruments
Investments 7.2 3.2 4.8
4,072.7 4,161.5 4,526.2
Current assets
Inventories 8 91.0 91.4 92.7
Trade and other 9 601.9 555.5 602.5
receivables
Cash and cash 499.7 388.0 335.0
equivalents
Assets held for 3.7 4.6 3.9
sale
Derivative 14 43.5 65.1 32.1
financial
instruments
1,239.8 1,104.6 1,066.2
Total assets 5,312.5 5,266.1 5,592.4
Current liabilities
Trade and other 10 1,261.0 1,129.9 1,120.0
payables
Tax liabilities 21.8 49.0 36.1
Financial - bank loans 11 69.3 93.5 -
liabilities
- bonds 11 73.6 73.3 73.3
- obligations under
HP contracts and 12 52.4 42.8 34.6
finance leases
- loan notes 13 - -
0.8
Derivative 14 17.1 38.5 85.2
financial
instruments
1,495.2 1,427.0 1,350.0
Net current 255.4 322.4 283.8
liabilities
Non-current
liabilities
Financial - bank loans 11 426.0 554.9 896.0
liabilities
- bonds 11 1,441.0 1,417.1 1,414.1
- obligations under
HP contracts and 12 282.9 209.1 192.8
finance leases
- loan notes 13 9.7 9.7 9.7
- senior unsecured 13 93.3 - -
loan notes
Derivative 14 50.1 29.7 121.1
financial
instruments
Retirement benefit 293.1 273.9 333.9
liabilities
Deferred tax 15 97.7 93.0 63.9
liabilities
Provisions 16 242.5 300.8 300.4
2,936.3 2,888.2 3,331.9
Total liabilities 4,431.5 4,315.2 4,681.9
Net assets 881.0 950.9 910.5
Equity
Share capital 17 24.1 24.1 24.1
Share premium 676.4 676.4 676.4
Hedging reserve 12.5 35.4 (114.0)
Other reserves 4.6 4.6 4.6
Own shares (1.1) (5.0) (6.5)
Translation reserve 145.7 156.6 300.0
Retained earnings (3.6) 41.5 10.2
Equity attributable
to equity holders 858.6 933.6 894.8
of the parent
Non-controlling 22.4 17.3 15.7
interests
Total equity 881.0 950.9 910.5
Consolidated statementof changes in equity
Non-controlling
Share Share Hedging Other Own Translation Retained interests Total
capital premium reserve reserves shares reserve earnings Total equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 24.1 676.4 (114.0) 4.6 (6.5) 300.0 10.2 894.8 15.7 910.5
April 2010
Total
comprehensive - - 149.4 - - (143.4) 126.6 132.6 13.4 146.0
income for
the year
Dividends - - - (101.4) (101.4) (11.8) (113.2)
paid - - -
Movement in - - - - 1.5 - (1.7) (0.2) - (0.2)
EBT and
treasury
shares
Share-based - - - -
payments - - - 7.7 7.7 7.7
Deferred tax - - - - - - 0.1 0.1 -
on 0.1
share-based
payments
Balance at 31 24.1 676.4 35.4 4.6 (5.0) 156.6 41.5 933.6 17.3 950.9
March 2011
Total
comprehensive - - (22.9) - - (10.9) 62.2 28.4 24.1 52.5
income for
the year
Dividends - - - (108.8) (108.8) (19.0) (127.8)
paid - - -
Movement in - - - - 3.9 - (3.9) - - -
EBT and
treasury
shares
Share-based - - - 6.0 -
payments - - - 6.0 6.0
Deferred tax
on - - - - - - (0.6) (0.6) - (0.6)
share-based
payments
Balance at 31 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4
March 2012 881.0
Consolidated cash flow statement
Year ended 31 March
2012 2011
Note GBPm GBPm
Net cash from operating activities 18 475.4 555.7
Investing activities
Interest received 2.0 1.7
Proceeds from disposal of property, 57.7 21.8
plant and equipment
Purchases of property, plant and (170.9) (210.3)
equipment
Disposal of subsidiary 5.5 24.3
Acquisition of businesses (3.4) (3.1)
Net cash used in investing activities (109.1) (165.6)
Financing activities
Monies received on exercise of share - 3.1
options
Dividends paid (108.8) (101.4)
Dividends paid to non-controlling (19.0) (11.8)
shareholders
Proceeds from senior unsecured loan
notes 90.2 -
Proceeds from bank facilities 2.5 124.1
Repayment of bank debt (179.8) (307.7)
Repayments under HP contracts and (35.2) (35.9)
finance leases
Repayment of loan notes - (0.8)
Fees for bank facility amendments and (2.1) (6.3)
bond issues
Net cash flow from financing (252.2) (336.7)
activities
Net increase in cash and cash 114.1 53.4
equivalents before foreign exchange
movements
Cash and cash equivalents at 388.0 335.0
beginning of year
Foreign exchange movements (2.4) (0.4)
Cash and cash equivalents at end of 499.7 388.0
year per consolidated balance sheet
Cash and cash equivalents are included within current assets on the
consolidated balance sheet.
Note to the consolidated cash flow statement -
reconciliation of net cash flow to movement in net debt
2012 2011
GBPm GBPm
Net increase in cash and cash equivalents in year 114.1 53.4
Decrease in debt and finance leases 122.3 220.3
Inception of new HP contracts and finance leases (119.3) (70.2)
Fees capitalised against bank facilities and bond 2.1 6.3
issues
Net cash flow 119.2 209.8
Foreign exchange movements (7.7) 129.2
Other non-cash movements in relation to financial 0.4 (6.9)
instruments
Movement in net debt in year 111.9 332.1
Net debt at beginning of year (1,949.4) (2,281.5)
Net debt at end of year (1,837.5) (1,949.4)
Net debt includes the value of derivatives in connection with the bonds
maturing in 2018, 2019 and 2021 and excludes all accrued interest. These bonds
are included in non-current liabilities in the consolidated balance sheet.
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 year ended 31 March 2012 or 2011, but is derived
from those accounts. Statutory Accounts for 2011 have been delivered to the
Registrar of Companies and those for 2012 will be delivered following the
Company's Annual General Meeting. The auditors have reported on both sets of
accounts; their reports were unqualified and did not contain statements under
section 498 (2), (3) or (4) 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 financial information has been prepared on the basis of
the accounting policies as set out in the Statutory Accounts for 2011.
Copies of the Statutory Accounts for the year ended 31 March 2012 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.
Restatement of prior years numbers
The income statement and segmental amounts for the year to 31 March 2011 have
been restated to show the results of FirstGroup Deutschland GmbH, which was
sold during the year, within discontinued operations. The results of
discontinued operations are set out in note 3.
The calculation of adjusted EBITDA has been revised to exclude capital grant
amortisation whereas previously EBITDA was calculated as adjusted operating
profit plus depreciation. As a result of this EBITDA for the year to 31 March
2011 has been restated as follows:
GBPm
EBITDA as previously stated 778.2
Discontinued operations
(1.3)
Capital grant amortisation (8.0)
EBITDA as restated 768.9
2 BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION
For management purposes, the Group is organised into five operating divisions -
First Student, First Transit, Greyhound, UK Bus and UK Rail. These divisions
are managed separately in line with the differing services that they provide
and the geographical markets which they operate in. The principal activities of
these divisions are described in the operating and financial review.
The segment results for the year to 31 March 2012 are as follows:
First First Group
Student Transit Greyhound UK Bus UK Rail Items1 Total2
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,567.2 778.6 657.2 1,157.2 2,506.1 17.7 6,684.0
Discontinued operations - - (5.3) (5.3)
- - -
Revenue continuing 1,567.2 778.6 657.2 1,157.2 2,506.1 12.4 6,678.7
operations
EBITDA3 255.8 65.3 80.1 207.1 163.5 (28.9) 742.9
Depreciation (148.7) (9.5) (29.5) (73.2) (66.2) (1.0) (328.1)
Capital grant amortisation - - - 0.5 13.2 - 13.7
Segment results3 107.1 55.8 50.6 134.4 110.5 (29.9) 428.5
Amortisation charges (20.1) (4.3) (3.1) (3.4) (30.9)
- -
Exceptional items - - 60.7 (10.2) (1.1) 49.4
-
Profit/(loss) on disposal (0.3) 5.0 (3.7) - 1.0
of properties - -
Operating profit 86.7 51.5 52.5 191.4 96.9 (31.0) 448.0
Investment income
2.0
Finance costs (159.1)
Ineffectiveness on
financial derivatives (11.0)
Profit before tax 279.9
Tax (50.1)
Profit for the period from
continuing operations 229.8
Discontinued operations
(9.5)
Profit after tax and 220.3
discontinued operations
The segment results for the year to 31 March 2011 are as follows:
First First Group
Student Transit Greyhound UK Bus UK Rail Items1 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,594.4 771.5 634.6 1,137.5 2,279.7 21.4
6,439.1
Discontinued operations - (9.9) (12.5) (22.4)
- - -
Revenue continuing operations 1,594.4 771.5 634.6 1,137.5 2,269.8 8.9 6,416.7
EBITDA3 278.1 66.3 68.7 220.0 158.6 (22.8) 768.9
Depreciation (149.8) (9.1) (28.5) (71.7) (57.4) (3.7) (320.2)
Capital grant amortisation - - - 0.5 7.5 - 8.0
Segment results3 128.3 57.2 40.2 148.8 108.7 (26.5)
456.7
Amortisation charges (20.4) (4.7) (3.1) (14.7) (42.9)
- -
Exceptional items (39.5) (16.6) (2.4) (41.9) (0.4) (100.8)
-
Loss on disposal of (0.1) (1.2) (3.1) (4.4)
properties - - -
Operating profit 68.3 35.9 35.9 143.3 52.1 (26.9)
308.6
Investment income
1.9
Finance costs (184.3)
Ineffectiveness on financial
derivatives 0.3
Profit before tax
126.5
Tax (16.7)
Profit for the period from continuing 109.8
operations
Discontinued operations
7.3
Profit after tax and 117.1
discontinued operations
1Group items comprise Tram operations, central management and other items.
2For all businesses excluding UK Rail this year includes 53 weeks compared to
52 weeks last year.
3Adjusted.
3 DISCONTINUED OPERATIONS
On 28 May 2010 FirstGroup plc disposed of GB Railfreight and on 30 September
2011 the Group disposed of FirstGroup Deutschland GmbH. As a consequence the
results of these businesses have been classified as discontinued operations, as
detailed below.
2012 2011
GBPm GBPm
Revenue 5.3 22.4
Operating costs (5.6) (21.4)
(Loss)/profit before tax (0.3) 1.0
Attributable tax expense - (0.4)
(Loss)/profit for the period from discontinued (0.3) 0.6
operations
(Loss)/profit on disposal of discontinued (9.2) 6.7
operations
Net (loss)/profit attributable to discontinued (9.5) 7.3
operations
4 EARNINGS PER SHARE (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders of
GBP196.2m (2011: GBP103.2m) by the weighted average number of ordinary shares of
481.4m (2011: 480.4m). The numbers 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.
2012 2011
Number Number
m m
Weighted average number of share used in basic 481.4 480.4
calculation
SAYE share options 0.3 0.5
Executive share options 2.4 3.7
484.1 484.6
The adjusted basic EPS is intended to highlight the recurring results of the
Group before amortisation charges, ineffectiveness on financial derivatives,
exceptional items and loss on disposal of properties. A reconciliation is set
out below:
2012 2011
GBPm EPS(p) GBPm EPS (p)
Basic profit/EPS from continuing 205.7 42.7 95.9 20.0
operations
Basic profit/EPS from discontinued (9.5) (1.9) 7.3 1.5
operations
Basic profit/EPS 196.2 40.8 103.2 21.5
Amortisation charges¹ 30.7 6.4 42.7 8.9
Ineffectiveness on financial derivatives 11.0 2.2 (0.3) (0.1)
Exceptional items (49.4) (10.3) 100.8 21.0
Non-controlling interests on exceptional - - (3.1) (0.6)
items
(Profit)/Loss on disposal of properties (1.0) (0.2) 4.4 0.9
Business disposals 9.2 1.9 (6.7) (1.4)
Tax effect of above adjustments (0.4) (0.1) (41.3) (8.6)
Deferred tax credit due to change in UK (4.0) (0.8) (1.7) (0.4)
corporation tax rate
Adjusted profit/EPS 192.3 39.9 198.0 41.2
Adjusted profit/EPS from discontinued 0.3 0.1 (0.6) (0.1)
operations
Adjusted profit/EPS from continuing 192.6 40.0 197.4 41.1
operations
1Amortisation charges of GBP30.9m per note 14 less GBP0.2m (2011: GBP42.9m less GBP
0.2m) attributable to equity non-controlling interests.
2012 2011
Diluted EPS pence pence
Continuing operations
Basic 42.5 19.8
Adjusted 39.8 40.7
Continuing and discontinued operations
Basic 40.5 21.3
Adjusted 39.7 40.9
2012 2011 2010
5 GOODWILL GBPm GBPm GBPm
Cost
At 1 April 1,613.0 1,754.9 1,820.0
Additions 2.9 2.3 -
Disposals (11.3) (14.2) -
Foreign exchange movements (0.3) (130.0) (65.1)
At 31 March 1,604.3 1,613.0 1,754.9
Accumulated impairment losses
At 1 April 5.0 - -
Impairment losses for the year - 5.0 -
At 31 March 5.0 5.0 -
Carrying amount
At 31 March 1,599.3 1,608.0 1,754.9
Greyhound Rail
Customer brand and franchise
contracts trade agreements Total
name
6OTHER INTANGIBLE ASSETS GBPm GBPm GBPm GBPm
Cost
At 1 April 2010 407.6 66.0 56.3 529.9
Foreign exchange movements (26.1) (4.1) - (30.2)
At 31 March 2011 381.5 61.9 56.3 499.7
Additions - - 1.4 1.4
Foreign exchange movements (0.3) (0.1) - (0.4)
At 31 March 2012 381.2 61.8 57.7 500.7
Amortisation
At 1 April 2010 70.6 8.3 35.1 114.0
Charge for year 25.1 3.1 14.7 42.9
Foreign exchange movements (5.6) (0.2) - (5.8)
At 31 March 2011 90.1 11.2 49.8 151.1
Charge for year 24.3 3.2 3.4 30.9
Foreign exchange movements (0.1) - - (0.1)
At 31 March 2012 114.3 14.4 53.2 181.9
Carrying amount
At 31 March 2012 266.9 47.4 4.5 318.8
At 31 March 2011 291.4 50.7 6.5 348.6
At 31 March 2010 337.0 57.7 21.2 415.9
Passenger Other
Land and carrying plant and
buildings vehicle equipment Total
fleet
7PROPERTY PLANT & EQUIPMENT GBPm GBPm GBPm GBPm
Cost
At 1 April 2010 555.2 2,644.3 549.9 3,749.4
Subsidiary undertakings acquired - 1.0 - 1.0
Subsidiary undertakings disposed of (2.8) (2.3) (4.0) (9.1)
Additions in the year 27.3 145.8 89.5 262.6
Disposal (15.2) (59.5) (30.8) (105.5)
Transfers (8.5) - 8.5 -
Reclassified as held for sale - (56.1) - (56.1)
Foreign exchange movements (19.5) (108.0) (16.4) (143.9)
At 31 March 2011 536.5 2,565.2 596.7 3,698.4
Subsidiary undertakings disposed of (2.8) (4.0) (0.6) (7.4)
Additions in the year 15.6 202.7 105.2 323.5
Disposals (41.6) (72.1) (23.8) (137.5)
Transfers - 11.3 (11.3) -
Reclassified as held for sale - (77.6) - (77.6)
Foreign exchange movements (0.4) (1.8) 0.1 (2.1)
At 31 March 2012 507.3 2,623.7 666.3 3,797.3
Accumulated depreciation and impairment
At 1 April 2010 68.5 1,130.9 265.9 1,465.3
Subsidiary undertakings disposed of (1.2) (2.3) (1.8) (5.3)
Charge for year 14.1 228.4 78.5 321.0
Impairment - 13.3 - 13.3
Disposals (4.3) (47.7) (27.3) (79.3)
Reclassified as held for sale - (46.4) - (46.4)
Foreign exchange movements (2.1) (44.6) (6.4) (53.1)
At 31 March 2011 75.0 1,231.6 308.9 1,615.5
Subsidiary undertakings disposed of (0.3) (2.0) (0.4) (2.7)
Charge for year 12.0 220.3 95.8 328.1
Disposals (3.1) (70.1) (14.5) (87.7)
Transfers - (24.0) 24.0 -
Reclassified as held for sale - (61.6) - (61.6)
Foreign exchange movements (0.1) (0.5) - (0.6)
At 31 March 2012 83.5 1,293.7 413.8 1,791.0
Carrying amount
At 31 March 2012 423.8 1,330.0 252.5 2,006.3
At 31 March 2011 461.5 1,333.6 287.8 2,082.9
At 31 March 2010 486.7 1,513.4 284.0 2,284.1
2012 2011 2010
8 INVENTORIES GBPm GBPm GBPm
Spare parts and consumables 90.6 91.1 91.5
Property development work in progress 0.4 0.3 1.2
91.0 91.4 92.7
2012 2011 2010
9 TRADE AND OTHER RECEIVABLES GBPm GBPm GBPm
Amounts due within one year
Trade receivables 421.5 408.7 462.2
Provision for doubtful receivables (4.5) (7.5) (6.5)
Other receivables 72.8 53.4 57.3
Other prepayments and accrued income 112.1 100.9 89.5
601.9 555.5 602.5
2012 2011 2010
10TRADE AND OTHER PAYABLES GBPm GBPm GBPm
Amounts falling due within one year
Trade payables 397.6 312.2 288.9
Other payables 169.1 113.9 145.1
Accruals and deferred income 626.2 640.5 627.5
Season ticket deferred income 68.1 63.3 58.5
1,261.0 1,129.9 1,120.0
2012 2011 2010
11FINANCIAL LIABILITIES - BORROWING GBPm GBPm GBPm
Current financial liabilities
Short-term bank loans 69.3 93.5 -
69.3 93.5 -
Bond 6.875% (repayable 2013) - accrued 20.3 20.2 20.2
interest
Bond 8.125% (repayable 2018) - accrued 12.9 12.8 12.8
interest
Bond 6.125% (repayable 2019) - accrued 3.0 3.0 3.0
interest
Bond 8.75% (repayable 2021) - accrued 30.2 30.1 30.1
interest
Bond 6.875% (repayable 2024) - accrued 7.2 7.2 7.2
interest
73.6 73.3 73.3
HP contracts and finance leases (note 12) 52.4 42.8 34.6
Loan notes (note 13) - - 0.8
Total current financial liabilities 195.3 209.6 108.7
Non-current financial liabilities
Syndicated and bilateral unsecured bank 426.0 554.9 896.0
loans
426.0 554.9 896.0
Bond 6.875% (repayable 2013) 298.5 298.0 297.4
Bond 8.125% (repayable 2018) 296.7 296.4 296.2
Bond 6.125% (repayable 2019) 299.7 276.7 274.8
Bond 8.75% (repayable 2021) 347.1 347.0 346.8
Bond 6.875% (repayable 2024) 199.0 199.0 198.9
1,441.0 1,417.1 1,414.1
HP contracts and finance lease (note 12) 282.9 209.1 192.8
Loan notes (note 13) 9.7 9.7 9.7
Senior unsecured loan notes 93.3 - -
Total non-current financialliabilities 2,252.9 2,190.8 2,512.6
Total liabilities 2,448.2 2,400.4 2,621.3
Gross borrowings repayment profile
Within one year or on demand 195.3 209.6 108.7
Between one and two years 407.0 216.0 607.4
Between two and five years 564.9 796.1 720.4
Over five years 1,281.0 1,178.7 1,184.8
2,448.2 2,400.4 2,621.3
12 HP CONTRACTS AND FINANCE LEASES
The Group had the following obligations under HP contracts and finance leases
as at the balance sheet dates:
2012 2011 2010 Present
2012 Present 2011 present 2010 value of
Minimum value of Minimum value of minimum payments
payments payments payments payments payments
GBPm GBPm GBPm GBPm GBPm GBPm
Due in less than one year 54.0 52.4 42.8 40.2 34.6
48.8
Due in more than one year 54.8 51.9 48.3 43.2 42.7 37.8
but not more than two
years
Due in more than two years 173.9 154.7 116.6 106.3 97.2 86.9
but not more than five
years
Due in more than five 92.6 76.3 62.0 59.6 71.6 68.1
years
375.3 335.3 275.7 251.9 251.7 227.4
Less future financing (40.0) - (23.8) - (24.3)
charges -
335.3 335.3 251.9 251.9 227.4 227.4
13 LOAN NOTES
The Group had the following loan notes issued as at the balance sheet dates:
2012 2011 2010
GBPm GBPm GBPm
Due in less than one year - - 0.8
Due in more than one year but not more than two 9.7 9.7 9.7
years
9.7 9.7 10.5
2012 2011 2010
14DERIVATIVE FINANCIAL INSTRUMENTS GBPm GBPm GBPm
Derivativesdesignated and effective as hedging
instruments carried at fair value
Non-current assets
Cross currency swaps (net investment hedge) 23.2 22.2 13.3
Coupon swaps (fair value hedge) 43.8 21.0 15.7
Fuel derivatives (cash flow hedge) 5.6 14.9 4.0
72.6 58.1 33.0
Current assets
Cross currency swaps (net investment hedge) 4.3 4.6 3.6
Coupon swaps (fair value hedge) 9.5 6.7 10.6
Currency forwards (cash flow hedge) - 1.2 -
Fuel derivatives (cash flow hedge) 29.7 52.6 15.7
43.5 65.1 29.9
Current liabilities
Interest rate derivatives (cash flow hedge) 8.0 15.0 42.9
Cross currency swaps (net investment hedge) 1.2 23.3 2.9
Fuel derivatives (cash flow hedge) 3.5 0.1 39.4
12.7 38.4 85.2
Non-current liabilities
Interest rate derivatives (cash flow hedge) 13.7 1.5 10.7
Cross currency swaps (net investment hedge) 27.1 28.2 91.9
Fuel derivatives (cash flow hedge) 0.9 - 18.5
41.7 29.7 121.1
Derivatives classified as held for trading
Current assets
Cross currency swaps - - 2.2
Current liabilities
Interest rate swaps 4.4 0.1 -
Non-current liabilities
Interest rate swaps 8.4 - -
Total non-current assets 72.6 58.1 33.0
Total current assets 43.5 65.1 32.1
Total assets 116.1 123.2 65.1
Total current liabilities 17.1 38.5 85.2
Total non-current liabilities 50.1 29.7 121.1
Total liabilities 67.2 68.2 206.3
15 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 Other
tax temporary
depreciation differences Tax Total
losses
GBPm GBPm GBPm GBPm
At 1 April 2010 309.8 (16.1) (260.2) 33.5
(Credit)/charge to income (30.0) (21.7) 31.7 (20.0)
Charge to equity - 49.8 - 49.8
Disposal of subsidiary - 1.6 - 1.6
Foreign exchange movements (14.9) (3.9) 16.9 (1.9)
At 31 March 2011 264.9 9.7 (211.6) 63.0
Charge/(credit) to income (36.9) 61.0 31.3 55.4
Credit to equity - (64.4) - (64.4)
Foreign exchange movements 0.7 0.1 (0.4) 0.4
At 31 March 2012 228.7 6.4 (180.7) 54.4
Certain deferred tax assets and liabilities have been offset. The following is
the analysis of the deferred tax balances for financial reporting purposes:
2012 2011 2010
GBPm GBPm GBPm
Deferred tax assets (43.3) (30.0) (30.4)
Deferred tax liabilities 97.7 93.0 63.9
54.4 63.0 33.5
2012 2011 2010
16PROVISIONS GBPm GBPm GBPm
Insurance claims 218.4 221.0 243.9
Legal and other 19.9 26.4 51.4
FGW contract provision - 48.7 -
Pensions 4.2 4.7 5.1
Non-current liabilities 242.5 300.8 300.4
FGW
Insurance Legal contract
claims and provision Pensions Total
other
GBPm GBPm GBPm GBPm GBPm
At 1 April 2011 340.5 37.6 59.9 4.7 442.7
Charged to the income statement 139.0 7.5 - - 146.5
Utilised in the year (162.8) (21.1) (3.0) (0.5) (187.4)
Notional interest 18.9 - - - 18.9
Foreign exchange movements 0.4 0.1 - - 0.5
At 31 March 2012 336.0 24.1 56.9 4.2 421.2
Current liabilities 117.6 4.2 56.9 - 178.7
Non-current liabilities 218.4 19.9 - 4.2 242.5
At 31 March 2012 336.0 24.1 56.9 4.2 421.2
Current liabilities 119.5 11.2 11.2 - 141.9
Non-current liabilities 221.0 26.4 48.7 4.7 300.8
At 31 March 2011 340.5 37.6 59.9 4.7 442.7
Current liabilities 131.3 5.4 - - 136.7
Non-current liabilities 243.9 51.4 - 5.1 300.4
At 31 March 2010 375.2 56.8 - 5.1 437.1
2012 2011 2010
17SHARE CAPITAL GBPm GBPm GBPm
Allotted, called up and fully paid:
482.1m Ordinary shares of 5p each 24.1 24.1 24.1
Number GBPm
m
At 31 March 2010, 31 March 2011 and 31 March 2012 482.1 24.1
2012 2011
18NET CASH FROM OPERATING ACTIVITIES GBPm GBPm
Operating profit before loss on disposal of 447.0 313.0
properties
Operating profit of discontinued operations (0.3) 1.0
Adjustments for:
Depreciation charges 328.1 321.0
Capital grant amortisation (13.7) (8.0)
Amortisation charges 30.9 42.9
Impairment charges - 19.5
Share-based payments 6.0 7.7
Loss on disposal of property, plant and equipment 3.8 3.7
Operating cash flows before working capital 801.8 700.8
Decrease/(increase) in inventories 0.6 (3.2)
Decrease in receivables 34.0 25.9
Increase in payables 34.6 63.7
(Decrease)/increase in provisions (77.8) 0.4
Defined benefit pension payments in excess of (160.4) (43.5)
income statement charge
Cash generated by operations 632.8 744.1
Tax paid (17.7) (25.0)
Interest paid (130.9) (155.2)
Interest element of HP contracts and finance (8.8) (8.2)
leases
Net cash from operating activities 475.4 555.7
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 year ending 31 March 2012. Certain parts
thereof are not included within this announcement.
We confirm to the best of our knowledge:
* the Company and Group financial statements, prepared in accordance with UK
GAAP and IFRS respectively, give a true and fair view of the assets,
liabilities, financial position and profit of the Company and Group taken
as a whole; and
* the Directors Report contained in the Annual Report includes a fair review
of the development and performance of the business and the position of the
Company and the Group taken as a whole, together with a description of the
principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on 23 May
2012 and was signed on its behalf by:
Tim O'Toole Nick Chevis
Chief Executive Acting Finance Director
END
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