FirstGroup PLC Trading Update

 
TIDMFGP 
 
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. GBP14m 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          YTD 
                                                          - Jan 2018 
 
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 GBP300m 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 GBP800m 
committed bank facility (which was undrawn as at 30 September 2017). These 
refinancing activities will incur an exceptional make-whole cost of 
approximately GBP11m in the current financial year, and interest savings of an 
estimated GBP14m 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 [phone] 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: [phone] 
 
Contacts at Brunswick PR: 
Andrew Porter / Alison Kay, Tel: [phone] 
 
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 GBP5.7 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. 
 
 
 
END 
 

(END) Dow Jones Newswires

February 21, 2018 02:00 ET (07:00 GMT)