FIRSTGROUP PLC
TRADING UPDATE
FirstGroup plc (the 'Group'), a leading transport operator in
the UK and North America, today
reports the following update on trading since the half-yearly
results to September 2017.
Summary
-
Bond refinancing underway with $275m raised in US private placement market;
September 2018 bond to be redeemed
before financial year end resulting in approx. £14m in interest
savings from next year
-
US tax changes expected to reduce Group effective tax rate to
mid-20's percentage
-
Reported Group revenue +10.7% year to date; Group revenue in
constant currency1 and excluding the new SWR rail
franchise +1.1% year to date
-
For four of our divisions the trading trends in the period were
similar to the first half. However, Greyhound's long-haul business
was affected by intensifying airline competition, including in the
key holiday season
-
All three North American divisions also encountered extremely
challenging weather conditions in January
-
As a result, the Group's outlook for adjusted EPS is slightly
reduced overall, but there is no change to management's expectation
of substantial cash generation for the year
Increase/(decrease) vs comparable
period, in constant currency1 |
|
End Sept 2017
- Jan 2018 |
YTD |
First Student revenue |
|
+0.3% |
(0.9)% |
First Transit revenue |
|
(0.1)% |
+2.6% |
Greyhound like-for-like revenue |
|
(2.8)% |
(0.4)% |
First Bus like-for-like passenger
revenue |
|
+1.4% |
+0.9% |
First Rail like-for-like passenger
revenue |
|
+3.2% |
+3.2% |
Commenting on today's announcement,
FirstGroup Chief Executive Tim
O'Toole said:
"We reached an important milestone in the period with our
long-dated bond portfolio beginning to mature, allowing us to
significantly reduce our interest burden by starting to refinance
and rebalance the Group's debt. We are pleased by the support shown
in the credit market for our improved financial profile and
disciplined strategy.
"In the period First Bus has made encouraging margin progress as
we benefit from our cost efficiency actions and revenue growth,
while our First Rail franchise portfolio continues to generate
value for the Group despite infrastructure challenges. First
Student’s momentum continues to be tempered by the strength of the
US employment market, with no easing of the driver shortages
experienced in recent years, while First Transit has taken a number
of actions to help restore margins in the second half as planned.
Although Greyhound’s point-to-point business continues to grow,
this was more than offset by significant reductions in long-haul
volumes in the period. Our North American businesses were also
tested by the severe snowstorms which affected the Atlantic
seaboard from Nova Scotia down to
Florida in January 2018. Notwithstanding the mixed trading
picture in the period we continue to expect substantial cash
generation for the year as a whole.”
Balance sheet refinancing
The Group has placed $275m in new
long-term US private placement notes with a weighted average fixed
coupon of 4.25%. The notes have been placed in two tranches, with
$100m due in March 2025 and $175m due in March
2028, and attracting interest costs of 4.17% and 4.29%
respectively. The issue closed on 15
February 2018 and the proceeds will be received by the Group
on 27 March 2018. The Group intends
to redeem the £300m 8.125% coupon bond due September 2018, together with any required
make-whole payments, in full on 28 March
2018, using the proceeds from the new notes, other cash on
hand and our £800m committed bank facility (which was undrawn as at
30 September 2017). These refinancing
activities will incur an exceptional make-whole cost of
approximately £11m in the current financial year, and interest
savings of an estimated £14m per year from the following financial
year.
Divisional update
First Student's revenue in the period began to reflect
the price increases achieved during last summer’s bid season,
although these were partially offset by the school days cancelled
due to the severe snowstorms in early January. Many schools will
make these days up at the end of the academic year, which will fall
into our 2018/19 financial year. With the ongoing strength of the
US employment market driver shortages continue to act as a drag on
the progress we are making through our contract pricing and cost
efficiency programmes.
First Transit’s revenue performance in the period
reflected the timing of contract starts and completions, as well as
further reductions in service volumes in the Canadian oil sands
region. As planned we have taken several actions to improve margins
to more typical levels in the second half, despite employee cost
increases we are experiencing.
Greyhound's like-for-like revenue declined by (2.8)% in
the period, compared with modest growth in the first half. Our
strong growth in the shorter point-to-point markets accelerated in
the period, but this was more than offset by intensifying
challenges in the larger long-haul segment in the face of low-cost
airline competition, which also resulted in a disappointing holiday
season. Given the ongoing increases in fleet maintenance and driver
costs highlighted previously, we are seeking further cost
efficiencies to help mitigate the impact of the deterioration in
long haul volumes, while continuing to improve the passenger
experience.
First Bus delivered an encouraging acceleration in
like-for-like passenger revenue growth to +1.4% in the period, with
a strong start to the academic year for our student-focused
services, positive passenger take-up of new contactless payment
options, and other network and fare optimisation actions across the
division. Like-for-like passenger volumes increased by +0.1% in the
period; we are delivering improving margins from our cost
efficiency actions and continue to target our investment plans on
local markets where our stakeholders are supportive of successful
bus services.
First Rail's like-for-like passenger revenue growth was
stable at +3.2% in the period, and the division continues to
deliver a strong contribution notwithstanding ongoing
infrastructure challenges. GWR continues to roll out the Intercity
Express Train fleet and has started negotiations with the
Department for Transport ('DfT') for a further two-year direct
award to April 2022 (with an
extension option of up to two further years at the DfT's
discretion), as announced in November. In the period TransPennine
Express continued to deliver industry-leading revenue growth, with
even greater growth required as the new fleet starts to be
introduced into service from Autumn 2018. SWR is working to improve
its operational performance for passengers, which has been affected
by ongoing infrastructure challenges since the start of the
franchise last summer.
US tax changes
The Group notes that the Tax Cuts and Jobs Act signed into law
at the end of 2017 reduces the US federal corporate income tax rate
from 35% to 21%. The ultimate impact of this change can only be
determined once certain complex provisions in the Act are
clarified, but we anticipate that the Group's effective tax rate
will reduce to a mid 20's percentage in the current financial year,
and that there will be no substantive impact on our expected cash
tax payments. The Group’s deferred tax assets and liabilities will
be remeasured in light of the Act and the non-cash impact of that
exercise will be reflected in the Group’s balance sheet at year
end.
Investor information
A conference call for investors and analysts will be held at
8:30am today. Please call +44 (0) 20
7725 3354 in advance of the call to register and receive joining
details. A playback facility will be available together with a pdf
copy of this announcement at www.firstgroupplc.com/investors.
The Group is scheduled to announce results for the year to
31 March 2018 on Thursday
31 May 2018.
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor
Relations
Stuart Butchers, Group Head of Media
Tel: +44 (0) 20 7725 3354
Contacts at Brunswick PR:
Andrew Porter / Alison Kay, Tel: +44 (0) 20 7404 5959
Notes
1
Changes 'in constant currency'
throughout this announcement are based on retranslating prior
period foreign currency amounts at current period rates.
Unless otherwise stated, all
financial figures for the 'period' include the results of the First
Rail business for the 16 weeks to 6 January
2018 and the results of all the other businesses for the
four months to 20 January 2018, with
growth compared to the comparable period in the prior year. All
'year to date' or 'YTD' financial figures include the results of
the First Rail business for the 40 weeks to 6 January 2018 and the results of all the other
businesses for the ten months to 20 January
2018, with growth compared to the comparable period in the
prior year. References to ‘like-for-like’ revenue adjust for
changes in the composition of the divisional portfolio, holiday
timing, severe weather and other factors, for example engineering
possessions in First Rail, that distort the period-on-period trends
in our passenger revenue businesses. Full year results for 2018
will include the results and financial position of First Rail for
the year to 31 March 2018 and the
results and financial position of all the other businesses for the
53 weeks ended 31 March 2018.
Figures presented in this
announcement are not audited. Certain statements included or
incorporated by reference within this announcement may constitute
‘forward-looking statements’ with respect to the business, strategy
and plans of the Group and our current goals, assumptions and
expectations relating to our future financial condition,
performance and results. By their nature, forward-looking
statements involve known and unknown risks, assumptions,
uncertainties and other factors that may cause actual results,
performance or achievements of the Group to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Shareholders are
cautioned not to place undue reliance on the forward-looking
statements. Except as required by the UK Listing Rules and
applicable law, the Group does not undertake any obligation to
update or change any forward-looking statements to reflect events
occurring after the date of this announcement.
Legal Entity Identifier
(LEI): 549300DEJZCPWA4HKM93
FirstGroup plc (LSE: FGP.L) is a
leading transport operator in the UK and North America. With £5.7 billion in revenue
and more than 100,000 employees, we transported around two billion
passengers last year. Each of our five divisions is a leader in its
field: in North America, First
Student is the largest provider of student transportation with a
fleet of more than 40,000 yellow school buses, First Transit is one
of the largest providers of outsourced transit management and
contracting services, while Greyhound is the only nationwide
operator of scheduled intercity coaches. In the UK, First Bus is
one of Britain's largest bus
operators, transporting 1.6 million passengers a day, and we are
one of the country's most experienced rail operators, carrying
around 130 million passengers last year.
Our vision is to
provide solutions for an increasingly congested world... keeping
people moving and communities prospering.
Visit our website at
www.firstgroupplc.com and follow us @firstgroupplc on Twitter.