Post close trading update

FirstGroup plc ('FirstGroup' or the 'Group') today provides a post close update on trading for the 27 weeks to 30 September 2023.

First Rail

Demand for the division’s open access operations (Lumo and Hull Trains) has been stronger than anticipated due to increased leisure travel during the summer period. In addition, the final variable fee payments due for the division’s management fee-based contracts for the FY 2023 fiscal year have now been agreed with the Department for Transport (‘DfT’) at a rate ahead of the amounts accrued in the Group’s FY 2023 financial statements. As a result of these factors, the division’s FY 2024 adjusted operating profit is expected to be £12-15m ahead of expectations.

First Bus

Despite ongoing inflationary pressures, the division has traded slightly ahead of expectations during the first six months of FY 2024, due to strong passenger volumes and productivity improvements resulting from the management actions we have taken to transform the business.

In September 2023, First Bus concluded a period of consultation with regards to its two Local Government Pension Funds and will subsequently terminate its participation in these funds on 31 October 2023, with affected employees enrolled into the First Bus Retirement Savings Plan. As a result of the termination, the Group anticipates a c.£2-3m annualised cost saving for the First Bus division, with an estimated saving of c.£1m in FY 2024. The settlement of the pension obligations, to be determined on the termination date, is expected to result in an estimated Group net cash inflow of up to £15m after costs.

Corporate

Since June 2023, the Group has bought in the Greyhound Canada pension scheme at a cost in line with IAS19 and has bought out and settled c.$75m (£c.62m) of the Greyhound USA pension liabilities at no cost. The balance of the Greyhound USA pension plan remains well hedged, and the Group continues to make progress towards exiting the remaining liability.

During the period, the Group has opportunistically purchased £12.2m of its 2024 6.875% bonds. As a result, £172.1m of the 2024 bonds remain outstanding.

FY 2024 Guidance

Due to the factors referenced above, the Group anticipates that its FY 2024 Group adjusted operating profit and Group adjusted attributable profit will be ahead of the Board’s previous expectations by c.£14-20m and c.£7-10m respectively.

The cash return from the First Bus pension scheme is anticipated in the second half of FY 2024. As a result, the Group expects to end the financial year in an adjusted net cash position of £20-30m, assuming the completion of the current £115m share buyback programme and before deployment of potential growth capital.

The Group will report its interim results for the 27 weeks to 30 September 2023 on 23 November 2023.

Graham Sutherland, FirstGroup Chief Executive Officer, said:

“Over the last few months, we have successfully built on the strong financial performance we reported at our full year results in June. Our updated outlook for FY 2024 reflects a strong performance in our First Rail division, which is testament to the hard work and capabilities of our teams. In First Bus, we are delivering sustainable revenue growth as passenger volumes increase and we continue to benefit from the actions we have taken to transform the business.”

Definitions

Adjusted operating profit is defined as operating profit from continuing operations excluding items which management has determined as not being relevant to an understanding of the Group’s underlying business performance.

Group attributable adjusted profit is defined as First Bus and First Rail adjusted operating profit from open access and additional services, plus First Rail attributable net income from management fee-based operations, minus central costs, minus cash interest, minus proforma tax.

Adjusted net cash/(debt) excludes ring-fenced cash and IFRS 16 lease liabilities from net cash/(debt).