2019 Annual Report
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FirstGroup plc Annual Report and Accounts 2019 Putting our customers first FirstGroup plc Annual Report and Accounts 2019 We provide easy and convenient mobility, improving quality of life by connecting people and communities. FirstGroup is a leading provider of transport services in the UK and North America. Whether for business, education, health, social or recreation – we get our customers where they want to be, when they want to be there. We create solutions that reduce complexity, making travel smoother and life easier. Easy and convenient mobility Our businesses are constantly evolving, harnessing the latest technology and innovation from inside and outside the sector to ensure that customers have the most convenient travel experience possible. Running successful transport networks can be complex, but we aim to ensure that our customers have smooth journeys and easy interactions with our systems and our people. Read more on page 3. Strategic report Improving quality of life Contents STRATEGIC REPORT We give our customers greater choice and freedom Chairman’s statement 04 in where to go and how to Financial summary 06 get there, so that they have Chief Executive’s report 07 more opportunities and time to Our markets 10 spend on the things that matter. Our business model 12 Through this, our transport services support economic Business review 14 growth and vibrancy, and, Financial review 25 working in partnership with Our stakeholders 30 our stakeholders, we help Key performance indicators 38 to improve both congestion and air quality. Principal risks and uncertainties 42 Read more on page 51. GOVERNANCE Board of Directors 52 About the Board 55 Our governance framework 56 Corporate governance report 57 Directors’ remuneration report 76 Directors’ report and additional 98 disclosures Directors’ responsibility statement 102 FINANCIAL STATEMENTS Connecting Consolidated income statement 104 Consolidated statement of 105 people and comprehensive income Consolidated balance sheet 106 communities Consolidated statement of changes 107 in equity We provide transport to get Consolidated cash flow statement 108 more and more people where Notes to the consolidated financial 109 they want to be – whether it’s statements business, leisure, seeing friends Independent auditor’s report 168 and family, or travelling to new Group financial summary 178 places or new experiences. Company balance sheet 179 Our services are vital links for Statement of changes in equity 180 our communities, forming part of the fabric of life for millions Notes to the Company financial 181 statements of commuters, schoolchildren and shoppers every day. Shareholder information 186 Financial calendar 187 Read more on page 103. Glossary 188 FirstGroup Annual Report and Accounts 2019 01 Group overview Our North American divisions Our UK divisions Each of our three North America-based divisions operate throughout We generated the other half of revenues in 2019 from our rail operations the continent and together generated half of our revenues in 2019. and First Bus services throughout the UK. Student journeys per year Passenger journeys per year 900m 566m First Student Yellow school buses First Bus Vehicles The largest provider of student One of the largest bus operators in transportation in North America – the UK with a fifth of the market twice the size of the next largest 42,500 outside London, serving two thirds of 5,700 competitor. the UK’s 15 largest conurbations. See page 14 See page 20 Passenger journeys per year Passenger journeys per year 324m 345m First Transit Vehicles owned or operated First Rail New carriages introduced First Transit is one of the largest One of the UK’s largest and most over current franchises private sector providers of public experienced rail operators, carrying transit management and contracting 12,900 345m passengers almost nine billion in North America. miles last year across our three franchises and open access operation. 1,800 See page 16 See page 22 Passenger journeys per year 16m Greyhound Vehicles Greyhound is the only national operator of scheduled intercity coaches in the US and Canada, 1,500 with an iconic brand and a unique network of 2,400 destinations. See page 18 Aberdeen Puerto Rico Stirling Puerto Rico Glasgow Edinburgh Newcastle Belfast AlaskaAlaska York Bradford Leeds Hull Dublin Manchester Sheffield Stoke-on-Trent Leicester Norwich Worcester Cork First Student Ipswich Swansea First Transit South Western Railway Reading Chelmsford Bristol Cardiff London Greyhound network Great Western Railway Weston-super-Mare Greyhound Express Hull Trains Bath Southampton Brighton Greyhound Canada TransPennine Express Weymouth Affiliated Greyhound carriers in Mexico Plymouth First Bus operations Penzance 02 FirstGroup Annual Report and Accounts 2019 Strategic report Strategic report Strategic report Chairman’s statement 04 Financial summary 06 Chief Executive’s report 07 Our markets 10 Our business model 12 Business review 14 Financial review 25 Innovation in Our stakeholders 30 autonomous vehicles Key performance indicators 38 Principal risks and uncertainties 42 First Transit are leading the way in the design, safe operation, and management of shared autonomous vehicles (SAVs) to enhance the future of mobility for our customers and communities. June 2019 sees the launch of our eighth initiative to date with our long term strategic partner Houston Metro, part of a city mobility plan also incorporating other transport modes including First Transit fixed route and paratransit operations. Easy and convenient mobility Show and go on Greyhound Greyhound’s customers have embraced the speed and convenience of its new e-tickets. Launched last year, the platform allows customers to buy tickets online up until boarding time – drivers scan tickets in a fast, seamless and simple boarding process. We have received strong customer feedback on e-tickets. In less than a year, take-up has soared to 55% of all fares bought online. FirstGroup Annual Report and Accounts 2019 03 Chairman’s statement The actions we are taking will enable us to American self-insurance reserve, and costs associated with Greyhound’s withdrawal from focus on providing easy and convenient Western Canada. As a result of these adjusting mobility for our customers. items, the Group recorded a statutory operating profit of £9.8m this year (2018: loss of £196.2m), and statutory EPS was (5.5)p (2018: (24.6)p). Strategy The management has taken a number of actions to streamline and focus the business of the divisions in the year, with acquisitions and new business wins, property sales and business disposals as well as withdrawals from certain markets to refocus investment on more attractive opportunities elsewhere. We are also becoming more operationally efficient, driving the divisions to innovate for customers while maximising efficiencies in our North American and UK operations. We have continued to strengthen the Group by using the cash generated after disciplined investment in our services to reduce leverage and for targeted growth. Although our balance sheet is now less of a constraint on our structural options than previously, our pension deficit and other long term liabilities remain important considerations for the risk profile of the Group, and we continue to actively Wolfhart Hauser manage them. Chairman The progress that has been made in our businesses, and the changes seen in our markets, means the time is now right to rationalise the portfolio and initiate plans to develop our market-leading North American FirstGroup is a diverse portfolio of Our vision contract businesses. As explained in more market leading transport businesses, Our guiding principle must be customers, and detail in the Chief Executive’s review (see with half of its revenues underpinned during the year we have stepped up our focus page 8), our plans provide a clear strategy and by multi-year contracts with national on delivering modern customer convenience. place the Group’s future emphasis on First or local government bodies. We believe We are embedding throughout the Group our Student and First Transit, our core North each of the Group’s businesses has a new vision to provide easy and convenient American contracting businesses, where significant platform to deliver long term mobility, improving quality of life by we see the greatest potential to generate sustainable value. Easy and convenient connecting people and communities. long-term sustainable value and growth, with public transportation services are further innovation in modern mobility services. increasingly important, reflecting Results The overall trading performance for the Group The creation of a focused portfolio, based demographic changes, growing was ahead of our expectations this year. on our strong profitable platform in the North congestion and the rising importance Group revenue increased by 5.7% in constant American mobility services market, is the of climate change mitigation. There is currency and adjusting for the 53 weeks of most appropriate means for us to accelerate considerable long-term value in each trading in the Road divisions and the start of the creation of substantially increased value of the Group’s businesses, particularly the South Western Railways (SWR) franchise. going forward. as platforms to become future leaders On the same basis adjusted operating profit in mobility services. The Board recognises that dividends are an increased by 10.5%. Adjusted EPS increased important component of total shareholder