Firstgroup Plc Annual Report and Accounts 2018 Our Vision Is to Provide Solutions for an Increasingly Congested World
Total Page:16
File Type:pdf, Size:1020Kb
FirstGroup plc Annual Report and Accounts 2018 FirstGroup plc Annual Report and Accounts 2018 Our vision is to provide solutions for an increasingly congested world... keeping First Bus One of the largest bus operators in the UK, transporting 1.6m passengers people moving and a day, with a fifth of the market outside London. communities prospering. Passengers per day 1.6m FirstGroup plc is a leading transport operator in the Buses in operation UK and North America. With £6.4 billion in revenue and around 100,000 employees, we transported 2.1 billion 5,800 passengers last year. Each of our five divisions is a leader in its field: See page 18 First Student The largest provider of student transportation in North America – twice the size of the next largest competitor. Student journeys per day 5m Number of yellow buses 42,000 First Transit First Transit is one of the largest private sector providers of See page 12 public transit management and contracting in North America. Vehicles owned or operated 12,600 Passengers transported a year 340m See page 14 Greyhound First Rail Greyhound is the only national One of the UK’s largest and most operator of scheduled intercity experienced rail operators, carrying coaches in the US and Canada, more than 260m passengers last with a unique nationwide network year across our three franchises and iconic brand. and open access operation. Vehicles Passenger miles 1,600 7.4bn Journey destinations Franchise payments to Government 4,000 £227m See page 16 See page 20 Our North American divisions Contents Strategic report Our three North America-based divisions First Student, First Transit and Greyhound generated 55% of our revenues in 2018. Strategic report Chairman’s statement 04 Puerto Rico Puerto Rico Chief Executive’s report 06 Our markets 08 Our strategy and business model 10 Business review 12 Alaska Alaska Corporate responsibility 23 Key performance indicators 30 Principal risks and uncertainties 34 Financial review 40 First Student First Transit Governance Greyhound Greyhound Express Board of Directors 46 Affiliated Greyhound carriers in Mexico About the Board 48 Governance framework 49 Our UK divisions Corporate governance report 50 With three First Rail franchises, our open access rail operation and our local First Bus operations, we offer services throughout the country. Directors’ remuneration report 68 Directors’ report and additional disclosures 95 Directors’ responsibility statement 98 Aberdeen Stirling Financial statements Glasgow Edinburgh Consolidated income statement 100 Newcastle Consolidated statement of comprehensive income 101 Belfast Consolidated balance sheet 102 York Bradford Leeds Hull Dublin Manchester Consolidated statement of changes in equity 103 Sheffield Stoke-on-Trent Consolidated cash flow statement 104 Leicester Norwich Worcester Notes to the consolidated financial statements 105 Cork Ipswich Hull Trains Swansea Reading Chelmsford Bristol Independent auditor’s report 157 Great Western Railway Cardiff London Weston-super-Mare TransPennine Express Bath Southampton Group financial summary 167 Brighton South Western Railway Weymouth First Bus operations Plymouth Company balance sheet 168 Penzance Statement of changes in equity 169 Notes to the Company financial statements 170 Shareholder information 174 Financial calendar 175 Glossary 176 FirstGroup Annual Report and Accounts 2018 01 Financial summary of the year ■■ Group revenue +1.0% in constant ■■ Net cash inflow of £110.5m (2017: Revenue currency excluding benefit of new £147.2m including proceeds from sale (as % of Group) South Western Railway (SWR) franchise of a Greyhound terminal) before First Rail and 53rd week start of franchise cash flows, and £199.0m after SWR start of franchise cash flows ■■ Adjusted1 operating profit decreased by of £88.5m 10.4% in constant currency excluding SWR and 53rd week, reflecting Greyhound ■■ Reported net debt: EBITDA improved to long haul challenges, severe weather 1.5 times (2017: 1.9 times); Rail ring-fenced effects on both sides of the Atlantic in cash adjusted net debt: EBITDA improved the final quarter and ongoing US driver to 2.1 times (2017: 2.3 times) shortages, partially offset by good ■■ Statutory loss before tax £326.9m performances in UK divisions in the year (2017: profit of £152.6m), reflecting First Student 27% First Transit 17% ■■ Balance sheet strengthened by net cash £277.3m Greyhound goodwill and other Greyhound 11% flow of £199.0m and bond refinancing asset impairments, £106.3m TransPennine First Bus 14% Express (TPE) onerous contract provision ■■ Stable adjusted EPS in constant currency, First Rail 31% and other adjusting items reflecting lower finance costs and change to US tax rates ■■ Statutory EPS was (24.6)p (2017: 9.3p) Adjusted operating profit4 (as % of Group) Change in constant Change currency2 Change Adjusted revenue Statutory revenue £6,398.4m +13.2% +14.0% £6,398.4m +13.2% 2017: £5,653.3m 2017: £5,653.3m 1 Adjusted operating profit Statutory operating (loss)/profit First Student 45% First Transit 17% 5 £317.0m (6.5)% (4.3)% £(196.2)m n/m Greyhound 7% 2017: £339.0m 2017: £283.6m First Bus 14% Adjusted1 operating profit margin Statutory (loss)/profit before tax First Rail 17% 5.0% (100)bps (90)bps £(326.9)m n/m5 2017: 6.0% 2017: £152.6m Number of employees (as % of Group) Adjusted1 profit before tax Statutory EPS £197.0m (4.8)% (1.2)% (24.6)p n/m5 2017: £207.0m 2017: 9.3p Adjusted1 EPS 12.3p (0.8)% +3.4% 2017: 12.4p Net debt3 £1,070.3m (17.0)% (15.5)% First Student 48% 2017: £1,289.9m First Transit 19% Greyhound 6% First Bus 16% 1 ‘Adjusted’ figures throughout this document are before Greyhound goodwill impairment, TPE onerous contract provision, other intangible asset amortisation charges and certain other items as set out in note 4 First Rail 11% to the financial statements. 2 Changes ‘in constant currency’ throughout this document are based on retranslating 2017 foreign currency amounts at 2018 rates. 3 Net debt is stated excluding accrued bond interest, as explained on page 43. 4 Central costs allocated by adjusted profit contribution. 5 Not meaningful. 02 FirstGroup Annual Report and Accounts 2018 Strategic report Strategic report In this section, we review our performance in the year and our strategy and prospects going forward. We summarise our business model, the markets in which we operate, and how we performed against our key performance indicators. We also set out the key risks that may affect our business and strategy. Strategic report Chairman’s statement 04 Chief Executive’s report 06 Our markets 08 Our strategy and business model 10 Business review 12 Corporate responsibility 23 Key performance indicators 30 Principal risks and uncertainties 34 Financial review 40 FirstGroup Annual Report and Accounts 2018 03 Chairman’s statement FirstGroup has a diverse portfolio of Strategy market leading transport businesses, The Board is examining all appropriate means with half of revenues underpinned by to mobilise the considerable value inherent in multi-year contracts with national or the Group. Initial actions from its evaluation are local authorities. The Group has the underway, including: long-standing bidding and operational ■■ a full external review of Greyhound’s expertise that is critical to success in business model and future prospects, its markets and it is investing to create which will conclude in the coming months a customer experience where improved passenger convenience helps to drive ■■ growth opportunities in First Student future growth. We are now a more stable ■■ greater operational efficiency and a more resilient enterprise, with a growing ability to capitalise on the ■■ partnering opportunities to provide leading positions we have in our markets. new solutions Wolfhart Hauser ■■ investment in modern However, this year’s results fell short of Chairman customer convenience. our ambitions – we are disappointed that we did not make the further progress we As we do so, we will continue to strengthen intended, based on the trends we saw at the Group by using the sustained cash the end of the previous financial year. generated after disciplined investment in our The Group has leading services to reduce leverage further and for market positions in each targeted growth. Although our balance sheet Results is less of a constraint on our structural options of its five divisions and has Overall, Group revenue increased by 13.2% than previously, our pension deficit clearly considerable opportunities and adjusted operating profit decreased by remains an important consideration for the 6.5%. In constant currency excluding the risk profile of the Group, and we continue for value creation, but this benefit of the new SWR franchise and 53 year’s results fell short of to actively manage it. Overall we see weeks of trading in the Road divisions, revenue considerable opportunity to create its potential. increased by 1.0% and adjusted operating shareholder value in a sustainable way profit decreased by 10.4%. Adjusted EPS was while enhancing the services we provide broadly stable, reflecting lower finance costs to our customers and communities. A clear focus on the due to the improving balance sheet and the challenges and opportunities US tax reforms enacted in December 2017. The Board recognises that dividends are an of each of the businesses important component of total shareholder It is encouraging, however, that the Group was return for many investors. We remain will mobilise more of the able to deliver a net cash inflow of £110.5m committed