Mixed results for FirstGroup

FirstGroup financial results for the year ended 31 March 2014 present a mixed picture with only the UK rail division recording an increase in turnover.

Adjusted revenue for the group as a whole  fell by 2.7% to £6.717bn (2013; £6.901bn); EBITDA (earnings before interest, tax, depreciation & amortisation) dropped 1.0% to £579.8m (2013: £585.7m), but operating profit rose 5.5% to £268.0m (2013: £254.1m), and the group operating margin increased from 3.7% to 4.0%.

FG’s balance sheet has been strengthened with the net debt:  EDITBA ratio reduced from 3.4 times to 2.2 times. Net debt has been reduced from £1.979bn to £1.304bn. A new £800m five year revolving credit facility has been agreed, and the paid up share capital has increased from £24.1m to £60.2m. However, no dividend was paid during the year, and none is proposed (2013: £114m).

Unadjusted results are less favourable: if amortisation charges, finance costs, exceptional items and investment income are included (totalling £209.5m,) operating profit before tax plummets from £268.0m to £58.5m. A £28.1m tax credit on adjusted/ exceptional items increased profit after tax to £64.2m.

FirstGroup has five operating divisions, which make the following contributions to group turnover: UK Rail (43%), UK Bus (14%), First Student (22%), First Transit (12%) & Greyhound (9%).

UK Rail: Rail revenue increased to £2.870bn (2013:£2.795bn), operating profit improved to £55.2m (2013: £19.3m), and operating margin to 1.9% (2013: 0.7%). The financial improvement was partly due to the First Great Western franchise moving away from a loss-making position to normal commercial terms under direct award as agreed in October 2013. The results were not as bad as anticipated and £4.6m was released as an exceptional credit due to contractual changes.

Like-for-like passenger growth grew by 5.9% (2013: 7.4%). FG is bidding for four UK franchises, and has also been shortlisted for the tender to operate the Dublin LUAS system.

UK Bus: Revenue fell to £930.2m (2013: £1,128.2m), and operating profit to £44.4m (2013: £50.8m) though this reflected the withdrawal from the London bus market. Operating margin improved slightly to 4.8% (2013: 4.5%) but this is still on the low side and FG aims to return to double-digit margins in the medium term.

Disposal of eight London bus depots brought in £13m.

Like-for-like growth passenger growth was 1.8% up across the business: Passenger volume growth in the north division increased by 2.6%; the first full year of commercial volume growth for a decade. Fare cuts stimulated an additional 150,000 passengers per week to travel in Manchester, and good results have been achieved in Glasgow.

Cost savings have been achieved with vehicle breakdowns down by 25%, and lost mileage reduced by 21%.

North America: the First Student and Greyhound results were adversely affected by ‘historically severe weather’ during the last six months (which depressed group results); First Transit turnover was also down but it recorded growth in all key sectors and improved profitability.

648/May 14

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