23rd May 2012 07:00
Embargoed until 07:00hrs on Wednesday 23 May 2012
FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2012
Overall trading for the Group in 2011/12 in line with our expectations; net cash inflow of £119.2m
* First Student - now well set on path to recovery; plan delivering in line
with targets, stabilised operating margin in H2
* First Transit - continued good returns from low capital requirements and
established credentials * Greyhound - business is now transformed, strong growth with operating profit more than doubled over last 2 years
* UK Rail - solid performance; entering transition period for UK rail, only
operator shortlisted for all four of the current competitions
* UK Bus - steady performance during year; expect margins in 2012/13 to be
significantly affected by deteriorating economic conditions particularly in
the North of England and Scotland and reduced funding to the industry; executing comprehensive plan to reposition the portfolio and restore performance * Dividend increase of 7.0% in line with current policy 2012 2011 ChangeContinuing operations1: Restated 2 Revenue £6,678.7m £6,416.7m +4.1% Adjusted EBITDA3 £742.9m £768.9m (3.4)% Operating profit £448.0m £308.6m +45.2% Adjusted operating profit4 £428.5m £456.7m (6.2)% Profit before tax £279.9m £126.5m +121.3% Adjusted profit before tax4 £271.4m £274.3m (1.1)% Basic EPS 42.7p 20.0p +113.5% Adjusted basic EPS4 40.0p 41.1p (2.7)% Full year dividend 23.67p 22.12p +7.0% Net debt5 £1,837.5m £1,949.4m (5.7)%
1 For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year.
2 Restated to exclude discontinued operations and incorporating a revised calculation of EBITDA as explained in note 1 to the preliminary results announcement.
3 Adjusted operating profit less capital grant amortisation plus depreciation.
4 Before amortisation charges, ineffectiveness on financial derivatives, exceptional items, profit/(loss) on disposal of properties and discontinued operations. All references to `adjusted' figures throughout this document are defined in this way.
5 Net debt is stated excluding accrued bond interest.
Commenting, FirstGroup's Chief Executive, Tim O'Toole said:
We have a fundamentally strong and diverse portfolio of operations with four out of five of our divisions performing in line with our expectations and actions we have taken will lead to improved growth and returns.
Notwithstanding the steady performance from our UK Bus division in 2011/12 wehave seen a further deterioration of economic conditions particularly in oururban operations in Scotland and the North of England. As result, we do notexpect revenue growth and cost efficiencies in 2012/13 to be sufficient tooffset the impact of reduced government subsidies and funding to the industry,which are more acute than originally estimated, and increased fuel costs. Inresponse we are accelerating a comprehensive plan that will deliver sustainablegrowth in revenue and patronage and improved returns. This includesrepositioning our UK Bus portfolio through a programme of business and assetdisposals to focus on those areas where the greatest potential for growthexists.Our North American operations continue to progress and we believe thatimproving trends in the US economy will be positive for our businesses. FirstStudent is now well set on the path to recovery with our plan to reform thebusiness delivering in line with our expectations. First Transit delivers goodreturns from typically low capital investment which is underpinned by itsestablished credentials and strong track record. Greyhound's enhancedperformance from a transformed operating model demonstrates our ability toimplement the necessary actions to deliver strong growth and marginimprovement.The UK rail market is in a period of transition with eight franchises due to belet by the Government over the next two years. We are the only operator to havepre-qualified for all four of the rail franchises that have come to the marketso far and we believe we are well placed to progress opportunities from therefranchising programme.
The combined effect of the outlook for trading together with the actions to reposition the UK Bus portfolio is expected to result in the Group's net cash flow being broadly neutral in 2012/13.
Our market leading positions in a sector that is a key enabler of economicgrowth together with the actions we are taking to strengthen the business givethe Board confidence that the Group has good prospects to deliver long termvalue for shareholders. Therefore, reflecting our longer term view, the Boardremains committed to its current policy of dividend growth of 7.0% through tothe end of the financial year 2012/13.
Contacts:
FirstGroup plc:
Tim O'Toole, Chief Executive
Nick Chevis, Acting Finance Director
Tel: +44 (0) 20 7291 0512
Rachael Borthwick, Corporate Communications Director
Tel: +44 (0) 20 7291 0508 / +44 (0) 7771 945432
Brunswick Group:
Mike Harrison, Tel: +44 (0) 20 7404 5959
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Chairman's statement
The Group, which has grown rapidly through a programme of acquisitions over thepast 20 years, is going through an important phase in its development. Underthe leadership of Tim O'Toole there is a resolute focus to drive greateroperating performance and discipline; increase management capability and toharness our vast knowledge and expertise to attract customers in ever greaternumbers through the consistent and reliable provision of high quality, valuefor money services.During the year our portfolio continued to provide diversity with separatebusinesses moving at different stages through the economic cycle. Whileaddressing the challenges of the current trading environment in certain marketsin which we operate, management has a clear focus to create a stronger businessand is taking the necessary action to ensure the Group is firmly placed todeliver sustainable growth for the longer term. We continue to prioritise cashgeneration to support capital investment, debt reduction and dividend growth.Notwithstanding the period of transition in UK Rail and the impact of thecurrent weak economic environment and reduced Government funding to theindustry on our UK Bus business, the Group maintains market leading positionsand across our operations we are taking action to strengthen our businesses forthe future. We are the only operator to have pre-qualified for all four of therail franchises that have come to the market so far and believe that we arewell placed to develop these and future opportunities from refranchising.Therefore, at this time and reflecting our longer term view, the Board remainscommitted to its current policy of dividend growth through to the end of thefinancial year 2012/13. The Board has proposed a final dividend per share,subject to approval by shareholders, of 16.05p, an increase of 7.0% making afull year payment of 23.67p. The dividend is covered 1.7 times by adjustedbasic EPS and will be paid on 17 August 2012 to shareholders on the register at13 July 2012.
On 14 May 2012 we announced the appointment of Chris Surch as Group Finance Director replacing Jeff Carr, who left the Group in November to take up the role of Chief Financial Officer of Royal Ahold NV based in the Netherlands.
Chris joins us from Shanks Group plc where he has been Group Finance Directorsince May 2009. Prior to joining Shanks he held senior financial roles atSmiths Group plc and TI Group plc. He began his career atPricewaterhouseCoopers where he qualified as an accountant. Together with astrong track record of financial leadership and budgetary planning, he hasextensive operational, strategic and international experience. I am delightedto welcome Chris to the Board of FirstGroup and I am confident that hisconsiderable experience and record of achievement will be of great benefit tothe Group. It is anticipated that he will join the Group on 1 September 2012.We are grateful to Nick Chevis for his support and valuable contribution asActing Finance Director.We are reviewing Board composition and a formal international search process isunderway to recruit additional fully independent Non-Executive Directors tofurther strengthen the Board and support the Group through this important stageof its development.During the year the following Board changes took place. Sid Barrie, CommercialDirector, retired at the end of March. Having joined the Board in 2005 he had along association with the Group, in an advisory capacity, going back to theoriginal employee buy-out of GRT Bus Group PLC and played a significant part inthe success of the Group over many years. We thank him for his contribution andwish him a long and happy retirement.
Audrey Baxter, Independent Non-Executive Director, stepped down from the Board on 31 December 2011. We thank Audrey for her support and advice since she joined the Board in 2006 and we wish her every success for the future.
Mick Barker joined the Board on 1 January 2012 as Non-Executive EmployeeDirector, replacing Martyn Williams who retired from the role at the end of histerm on 31 December 2011. We thank Martyn for his important contribution andalso welcome Mick to his new role. I am confident that he will continue toprovide the valuable input to the Board on behalf of the Group's employees.Finally on behalf of the Board I would like to extend our sincere thanks andgratitude to our employees across the UK and North America. Theirprofessionalism and ongoing commitment to serving the 2.5 billion passengersthat we transport each year is vital to our success now and for the future.Notwithstanding the prolonged period of economic uncertainty and the impact ofchallenging trading conditions in certain areas in which we operate, the Grouphas leading positions in its core markets. With experienced management that isfocused on creating a stronger business for the future, the Board is confidentthat the Group is well positioned to deliver sustainable long term value forshareholders.Martin GilbertChairman23 May 2012
* Operating profit referred to throughout this document refers to operating profit before amortisation charges, ineffectiveness on financial derivatives, exceptional items,profit/(loss)on disposal of properties and discontinued operations. EBITDA is operating profit less capital grant amortisation plus depreciation.
Operating and Financial review
Against the backdrop of continued economic uncertainty and the impact of weaker economic conditions in certain markets in which we operate, we have taken action to address specific issues, improve performance and strengthen the business.
* In First Student, which faced substantial pressure on its operating margin
driven by constraints on school board budgets, we have implemented a
comprehensive programme to reform the operating model and the business is
now well set on the path to recovery.
* As a result of actions we took to transform the business and strengthen the
operating model, Greyhound is now delivering strong growth and improved
returns, with operating profit more than doubled over the last two years.
* First Transit continues to generate good returns from low capital investment across a range of business segments and is established in a sector that depends on proven credentials and a strong track record.
* In UK Rail, as we transition to a new generation of rail franchises, we are
encouraged to be the only operator to have pre-qualified for all four
franchises that the Government has tendered so far. We look forward to
submitting competitive proposals which meet the requirements of customers
and taxpayers and provide an economic return for shareholders.
* Notwithstanding the steady performance from our UK Bus division in 2011/12
we have seen a further deterioration of economic conditions particularly in
our urban operations in Scotland and the North of England and, as a result,
we do not expect revenue growth and cost efficiencies in 2012/13 to be
sufficient to offset the impact of reduced government subsidies and funding
to the industry, which are more acute than originally estimated, and
increased fuel costs. New management in our UK Bus division has a clear
strategy and is executing a detailed plan to recover performance and equip
the business to achieve increased revenue and patronage growth. This will
include repositioning our UK Bus portfolio which, together with a
transformed approach to the management of our operations, will create a far
more robust base from which to generate improved returns and sustainable
growth.
* The Group is committed to its public investment grade credit rating which
it has maintained since 2002. Since March 2009 we have consistently driven
down leverage, reducing our net debt: EBITDA ratio from 3.2 times at March
2009 to 2.5 times at March 2012. We are focused on further leverage
reduction to increase financial flexibility. The Group has significant
levels of liquidity headroom and maintains prudent levels of headroom under
its financial covenants.
Group revenue increased by 4.1% to £6,678.7m (2011: £6,416.7m), or 2.9%excluding the extra week of trading. Operating profit was £428.5m (2011: £456.7m) reflecting the expected reduction in First Student and UK Bus profitspartly offset by higher profits in Greyhound and UK Rail. All of our operatingdivisions experienced higher fuel costs during the year, which amounted to anadditional £31.8m compared to prior year. Statutory operating profit increasedto £448.0m (2011: £308.6m) reflecting lower levels of net exceptional itemscompared to last year. Adjusted basic EPS was 40.0p (2011: 41.1p) a reductionof 2.7% with the reduction in operating profit partially offset by lower netfinance costs due to lower interest rates on US Dollar denominated debt.The net cash inflow for the year was £119.2m (2011: £209.8m). As expected, thenet debt to EBITDA ratio was 2.5 times, in line with last year. The averagedebt duration at 31 March 2012 was 5.5 years (2011: 6.1 years) and headroomunder the committed revolver facility was £631.8m (2011: £526.7m) and free cashbalances were £164.0m (2011: £89.4m). Year to 31 Year to 31 March 20121 March 2011 4 Operating Operating Operating Operating Revenue profit2 margin2 Revenue profit2 margin2 Divisional results £m £m % £m £m % First Student 1,567.2 107.1 6.8 1,594.4 128.3 8.0 First Transit 778.6 55.8 7.2 57.2 771.5 7.4 Greyhound 50.6 7.7 40.2 657.2 634.6 6.3 UK Bus 1,157.2 134.4 11.6 1,137.5 148.8 13.1 UK Rail 2,506.1 110.5 4.4 2,269.8 108.7 4.8 Group3 12.4 (29.9) (26.5) - 8.9 - Total Group 6,678.7 428.5 6.4 6,416.7 456.7 7.1
1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year.
2Adjusted.
3Tram operations, central management and other items.
4 Restated to exclude discontinued operations.
First Student
In First Student our plan to address performance and strengthen the operatingmodel is delivering in line with our expectations and we are pleased with thegood progress made so far. The annual cost savings as a result of our recoveryplan are now expected to be around $100m, exceeding our original target of $65mper annum.Trading has developed in line with our expectations with revenue of $2,497.9mor £1,567.2m (2011: $2,480.2m or £1,594.4m), an increase of 0.7% in US Dollarsbut a reduction of 1.7% in Sterling terms. Adjusting for the extra week USDollar revenues were reduced by 1.3% year on year. Operating profit was $169.5mor £107.1m (2011: $200.2m or £128.3m). The reduction in operating profitincluded additional one-time costs including, as anticipated, a fieldmanagement coaching programme supporting the good momentum in the recoveryplan. The US Dollar operating margin in the second half of the year was 11.5%compared with 11.4% for the corresponding period last year, indicating astabilisation in line with our expectations.Pressure on school board budgets continues to present challenges although weare encouraged by signs of wider economic recovery in the US. During thecurrent bid season we have continued to see more rational bidding behaviour inthe marketplace. Our strategy to strengthen our commercial team, focus oncontract retention and reduce contract churn in our portfolio continues todeliver a performance in line with our plan and we are on track to achieve ourtarget retention rate of over 90%.During the year we started new contracts to operate more than 1,000 buses, onethird of which came from conversions, where operations are transferred to theoutsourced market for the first time. Conversion interest continues to increaseduring the current bid season and we are seeing record levels of activity.However, as the pace of conversions industry-wide remains slow, we continue tofocus our activity in those areas where there is greatest potential.As part of the recovery programme we have introduced improvements in workingpractices and culture across many areas of the business, helping us to deliveron our objectives and embed a standard way of operating across our business. Aswe harmonise best practices across almost 600 locations we are delivering amore agile and sustainable operating model. We have removed a layer oforganisational management, providing closer links between the local operationsand central management team, and continue to streamline systems to reducebureaucracy. Through this period of change we were pleased to receive a recordnumber of responses to our annual customer survey with an increase in overallsatisfaction scores.A key goal within our transformation of the business is the improvement inlabour productivity. Across all our locations we are driving full adoption of arange of initiatives to ensure greater efficiency, accuracy and fairness. Forexample, applying best practices to the pre-trip inspections performed bydrivers has reduced time taken and saved on average five minutes per driver,per location, per day throughout the business, achieving a cost reduction of$2m for each minute saved.We have enhanced our FOCUS software system to enable greater productivitysavings. This proprietary system, which links on-board data with engineering,payroll and back office systems, allows us to manage standard driving hoursmore accurately as well as eliminate excess miles and reduce non-driving time.We will also be utilising GPS software to help us to encourage improved drivingbehaviour and practices; reduce fuel usage and provide customers with directaccess to real time information and performance metrics.We are also driving efficiency improvements across the business. In the keyareas of engineering and maintenance we have worked with our technicians toreorganise our workshop layouts for maximum efficiency. Two lean referenceworkshops have now been created in each of our operating regions with trainingto support a unified direction with more efficient and consistent practices. Asa result we are now saving on average 12 minutes per preventative maintenanceinspection, of which we perform over 200,000 a year. Initiatives such as leanpractices will increase our productivity by more than 10% and our bestperforming locations have demonstrated that these types of improvements arecapable of producing ongoing cost efficiencies.First Student is now positioned to leverage its scale as the market leader. Ourrecovery programme is restoring performance and is demonstrating markedimprovement across many areas. There is some way to go but our steady progress,consistent with our plan, gives us confidence that we will create a sustainablecompetitive advantage for the future.
First Transit
First Transit continues to develop in line with our expectations. Revenue was$1,242.6m or £778.6m (2011: $1,199.0m or £771.5m), an increase of 3.6% and 0.9%in US Dollar and Sterling terms respectively. Adjusting for the extra week USDollar revenues were up 2.0% year on year. Operating profit was $89.1m or £55.8m (2011: $89.5m or £57.2m). During the year we invested in DriveCamtechnology which will allow us to offer customers a system to manage theirfleets more efficiently.With typically low capital investment required, this business depends onestablished credibility and a solid track record. We have successfullydemonstrated our strong credentials in this market which has helped us succeedin working collaboratively with our customers to help improve their transportoffering. We have a solid core of experienced transport managers with anunrivalled reputation for professionalism and innovation.First Transit is the leading operator in its field and we operate a wide anddiverse mix of different size and types of transport services acrossapproximately 360 different contracts. In each of the core business segments -fixed route, paratransit, shuttle, transport call centres and municipal fleetmaintenance services - we are the largest, or near largest, operator andconsequently are able to bring to bear our scale and expertise to clientslooking for transport solutions. We continue to seek out and stimulate furtherconversion opportunities and actively encourage and promote outsourcing bydemonstrating the benefits of partnership and the range of solutions we canoffer prospective clients.During the year we continued to win new business including contracts to providefixed route services for Foothill Transit in Arcadia, California; services inFort Bend County, Texas and the city of Rochester, Minnesota. We were alsoawarded contracts to provide paratransit services in Louisville, Kentucky, inYamhill County, Oregon and in Hunterdon County, New Jersey.Our shuttle bus business delivered a strong performance during the year and wewere awarded the contract for the consolidated rental car centre at Chicago'sMidway Airport. We continue to be the largest provider of university shuttlebus services and during the year extended our portfolio with new business addedfor universities including Yale, Southern Connecticut State and Kennesaw State.We also continue to pursue further growth in the transportation call centremarket and were pleased to be awarded contracts in Colorado, Louisiana andIllinois during the year.
We have been able to successfully utilise our reputation and strong client relationships in one area of First Transit to win business for another. For example we were able to expand our vehicle maintenance work with the Williamsburg Area Transit Authority in Virginia through cross marketing our fixed route and fleet maintenance expertise.
Similarly in Fort McMurray, Alberta, our expertise and flexibility were theprimary reasons we were initially awarded a contract to provide transportationduring the first construction phase of a large industrial complex. Since thenwe have built on our strong business relationships in the area to complementthis work as well as add several other oil industry related transportationcontracts.First Transit continues to develop opportunities that enable our clients tobecome as efficient as possible. We have partnered with DriveCam to implementtheir innovative product across a number of locations. By combining video datawith real-time driver feedback this gives our customers access to informationthat can help to manage their fleet more effectively, improve fuel efficiencyand lower emissions.Greyhound
Greyhound is an iconic business that is synonymous with affordable long-distance travel.
We are delivering strong growth and improved performance, as a result of theactions we took to reform the operating model and transform the business, withoperating profit that has more than doubled over the last two years.Revenue was $1,049.3m or £657.2m (2011: $985.0m or £634.6m), an increase of6.5% and 3.6% in US Dollar and Sterling terms respectively. Like-for-likerevenue growth for the year was 4.1%. Operating profit was $81.0m or £50.6m(2011: $62.3m or £40.2m), an increase of 30% and 25.9% in US Dollar andSterling terms respectively. Encouraging passenger revenue growth, includingthe successful expansion of Greyhound Express, supported the improvement inoperating profit which was partly offset by higher fuel costs during the year.The most significant development for Greyhound in recent times is the launch ofGreyhound Express. As well as transforming our customer proposition, theservice is attracting passengers back to bus travel and encouraging a newdemographic of passenger. Customers are able to travel non-stop on highquality, new or refurbished coaches on high volume routes between major citiesand take advantage of yield managed fares and reserve guaranteed seats online.During the year Greyhound Express went from strength to strength. In additionto the two original Greyhound Express networks serving the Midwest andNortheast, we expanded services to the Southeast from a hub in Atlanta in theautumn, from where the network now reaches into Florida. As a result we nowserve the vast majority of the east coast from Massachusetts to Miami. Headingwest, Greyhound Express connects the main cities in Texas and from May 2012 thenetwork is being rolled out into California.Since its launch in December 2010, Greyhound Express has grown rapidly and nowrepresents more than 20% of Greyhound's business. We have converted someschedules on high frequency lanes between urban locations to Greyhound Expressservices, with other schedules remaining as the traditional service. The strongfeeder traffic from Greyhound's national network allows us to createsustainable new services, while minimising the cost of operating additionalmiles across the network, which also helps Greyhound Express routes achieveprofitability quickly following the launch.Our traditional Greyhound business is also seeing the benefits of a transformedoperating model. We introduced ticket kiosks at ten of our locations which gavecustomers greater choice from a self-service alternative with additionaloptions such as checking luggage, as well as helping to reduce our cost ofsale. These kiosks proved very popular with over 60% of sales transactedthrough them. As a result we will be rolling out further ticket kiosks to tenadditional locations in the coming months.Our highly successful BoltBus service, serving city pairs in the Northeast, isoffering customers a high quality, viable alternative to rail services. FromMay 2012 we will be expanding into the Pacific Northwest, introducing routesbetween Seattle and Portland.During the year we added more than 80 new vehicles to our fleet, including 14for our operations which serve the Hispanic market domestically andinternationally along and across the southwest border with Mexico. Ourrefurbishment programme completed over 220 coaches in the year, bringing thetotal to almost 350 so far, significantly improving the passenger experience.As we continue to make Greyhound a more modern and efficient network we aredelivering improved service quality at the same time. `On Time Performance' hasincreased from 79.8% to 89.1% over the last five years. New and refurbishedcoaches along with improvements in maintenance processes have also contributedto this improvement.We are reviewing our terminals and, where appropriate, taking up opportunitiesto right-size and relocate Greyhound's properties to more appropriate,accessible and convenient sites for passengers across the network. So far wehave right-sized or relocated around 50% of our US locations. During the yearwe completed the sale of our Washington DC terminal and will relocate ourservices to the multimodal hub at the city's Union Station by early 2013.In November 2011 we launched a national initiative with another household name,7-Eleven, and PayNearMe which has been highly successful and opened up onlinefares and discounts to a new market. Customers, including those without accessto credit cards, can now order their tickets online and pay in cash at one of6,400 7-Eleven stores nationwide and we are encouraged by the strong volume ofdaily transactions already achieved through this new sales channel. PayNearMehas concluded a deal with ACE Cash Express, which has 1,650 outlets, to startoffering the same payment option from summer 2012 and we are in negotiationswith several retailers across the US to continue to increase the breadth of oursales footprint.Greyhound in Canada is undergoing a transformation and network modernisationprogramme, drawing on the positive changes we have already made in the US. Partof our strategy is to work with the provincial governments to reduceuneconomic, predominantly rural, routes. As a result we were pleased thatGreyhound Canada returned to profitability during the year. Greyhound Expresswas also launched in four of the largest cities in Alberta during November 2011and we are developing further opportunities to expand the service in Ontarioand Quebec. Our redesigned Canadian website provides more options and a betteronline experience, and consequently we have seen Canadian web sales up by over40% since its launch in September 2011.
UK Bus
Our UK Bus division delivered a steady performance during the year. Revenue was£1,157.2m (2011: £1,137.5m), an increase of 1.7%. Like-for-like passengerrevenues grew by 1.6%. Operating profit was £134.4m (2011: £148.8m), a decreaseof 9.7% principally due to challenging trading conditions in certain majorurban areas where we operate, as well as increased fuel costs.Notwithstanding the stable performance in 2011/12, we recognised the need toreform the operating model in UK Bus in order to achieve sustainable growth.During the year a new management team was brought in and, following a root andbranch review of our operations, initiated a detailed plan to deliver aconsistent, efficient and effective service across all of our networks andequip the business to generate sustainable growth and improved returns.As a result of a further deterioration in economic conditions during the yearour capacity to absorb the reductions in Government funding, which are nowexpected to be more acute than originally estimated, through revenue growth andcost efficiencies is significantly reduced. As a consequence we currentlyexpect UK Bus operating margin to be approximately 8% in 2012/13.
In response we have accelerated our comprehensive plan to reform the operating model and restore performance which is focused around three main areas:
* Repositioning and rebalancing our portfolio of operations * Driving increased passenger revenue and patronage growth * Improving operating discipline and efficiencies We have a very strong platform from which to grow in UK Bus. The vast majorityof our bus operations generate good growth and returns with opportunities toimprove further. However, there is scope to reposition our portfolio toconcentrate on those areas with the greatest potential.In February we announced the sale of our bus operations in North Devon and atthe end of March 2012 we completed the sale of our Northumberland Park depot inNorth East London. This followed the sales of our King's Lynn operations inApril 2011 and our German bus subsidiary in September last year. We alsoannounced our withdrawal from depots in Bury St Edmunds and Dalkeith, as wellas scaling back our operations in Musselburgh.In addition to these small asset and business disposals we are now acceleratingour plans to significantly reposition and rebalance our UK Bus operations inthe coming year to restore operating margins and help to facilitate improvedgrowth and returns.
A comprehensive plan that will stimulate growth in revenue and patronage is being rolled out across our networks. Centred on five core elements it encompasses service quality and delivery; network design; pricing and ticketing; tailored local market solutions and building more effective partnerships with stakeholders.
In January we launched our new customer brand promise, Better Journeys for Life. Setting out our plans for greater engagement with customers, employees and stakeholders, it is supported by ongoing customer satisfaction reviews, commissioned internally and also by Passenger Focus.
One of the first visible signs will be a new livery, which establishes greaterlocal identities, and is now being rolled out on our buses across the UK. Thisis the first stage in a fleet modernisation programme including the investmentof £160m in approximately 1,000 new vehicles together with a £4m refurbishmentprogramme for our mid-life vehicles. This will deliver a step change to ourprofile and incorporates a complete refresh of our interior and exteriordesigns developed from extensive customer feedback.We are also investing £27m in new ticketing technology. This equipment whichwill be rolled out further during the year provides us an ITSO smartcardplatform. Looking ahead, the technology will also enable us to offer customers"touch in, touch out" contactless payment using their bank cards. Helping toreduce the barriers to bus travel, this next-generation ticketing will not onlyreduce both cash transactions and boarding times but will enable us to offer awide range of ticket products including the ability to cap daily and weeklyfares. The equipment also has the capability to accept payment by mobile phone.Creating more effective partnerships with our stakeholders is a key focus. Itis essential that we work closely with Local Authorities and stakeholdersacross our networks to create successful relationships that will realisemaximum efficiencies and greater benefits for customers particularly throughreduced journey times.Through our joint partnership proposals we were successful in 12 out of the 24awards made by the Department for Transport (DfT) from the Better Bus AreaFund. We also secured support from the DfT's Green Bus Fund for a second roundof 40 hybrid vehicles to be deployed in Berkshire, Essex and Bath; in additionto the original 40 buses being introduced on services in Leeds, Manchester andGlasgow. Initial reactions to these vehicles have been very positive and wecontinue to expand our knowledge and experience of this type of technology.During the year in the Bristol area, where the level of tendered work hasreduced as a result of reductions in Local Authority funding, we reinvested themileage saved to enhance frequencies on our key corridors which have thepotential for further strong growth. Fare promotions have also been introducedand, alongside the delivery of highway infrastructure improvements by our LocalAuthority partners, we have seen an encouraging increase in patronage to date.Similarly, in South Yorkshire we introduced a new service linking Rotherham andBarnsley which has seen over 1 million customer journeys in 11 months.There is considerable opportunity to increase efficiency through the rollingout of best practices and standardisation in areas such as maintenance andengineering. For example, the operational effectiveness of our fleet is beingreviewed following a successful pilot in Oldham to reduce unproductive hours.In addition, our engineering teams are introducing lean management practices inworkshops as well as examining ways to improve service and repair processes.This work was supported by further investment in depots including a £6mreplacement site in Wigan which opened in August 2011.In London, where we provide contracted services on behalf of Transport forLondon (TfL) we do not take revenue risk and consequently operating margins arelower than in our deregulated bus business. We continue to be encouraged by ouroperational performance which is achieving better than the network average and,across a number of measures, is near the top of TfL performance league tables.Further contract wins in West London will see us take over routes 70, 206 and266 in early summer 2012. We are pleased that TfL awarded us funding topurchase 22 hybrid buses for route 23 and the vehicles came into service inApril 2012.We look forward to the London 2012 Games where we will be the main provider ofspectator transport. We are providing the buses for shuttle services at Gamesvenues and Park & Ride services from sites around the edge of London to theOlympic Park as well as those for the sailing venue in Weymouth, the rowingvenue in Eton Dorney and the football stadia in Glasgow, Manchester andCoventry. We will also be operating a network of express coach services fromacross the country to the Olympic Park and Weymouth. The contract includes areservation and ticketing system as well as support staff at all bus and coachlocations to assist passengers.We were pleased that the Competition Commission's report on the industry,published in December 2011, recognised that no fundamental change to thestructure or regulation of the industry was required. The Commission supportedmany of the innovations that we are already developing across the country,including partnerships with local authorities and multi-operator ticketing. InMarch 2012 the Government published its response to the Commission's report.This wide-ranging policy statement puts emphasis on the importance of greaterpartnership between operators and transport authorities.
We have a core of fundamentally strong networks. Our comprehensive recovery plan is being executed from an established and diversified platform with market leadership in territories where propensity for bus travel is high. We are confident that the actions we are taking will equip the business to deliver sustainable growth and improved returns from a stronger, more robust foundation.
UK RAIL
Our rail businesses continued to enjoy strong demand during the year withrevenue increased by 10.4% to £2,506.1m (2011: £2,269.8m). In a year which sawhistoric high numbers of passengers on the UK rail network like-for-likepassenger revenue growth across our franchises was 8.4%. Operating profit was £110.5m (2011: £108.7m), an increase of 1.7%. First TransPennine Express made asignificant contribution during the year as a result of continued strongtrading. However, as previously indicated, this franchise has now entered theextension period with margins closer to the industry average.The year marked the start of a period of transition in the UK rail market, witheight franchises due to be re-let by the Government over the next two years. Wewere pleased to be the only operator to pre-qualify for all four of the railfranchises that have been tendered so far (InterCity West Coast, Great Western,Thameslink and Essex Thameside) demonstrating the depth of our strength andexpertise in the rail market. As the current operator of two of thesefranchises - First Great Western and First Capital Connect - we have a strongtrack record of delivery and investment in our rail operations. We look forwardto submitting competitive proposals which meet the requirements of customersand taxpayers and provide an economic return for shareholders.During the year Vernon Barker was appointed Managing Director of the UK Raildivision. Vernon's proven track record in railway management, most recently asManaging Director of First TransPennine Express, and strong focus on customerservice will be invaluable as we develop our existing and new rail interests.
First Capital Connect
The focus for First Capital Connect during the year has been the preparationfor and delivery of the major change programmes by continuing to drive furtherimprovement across the business. Improved engagement and communication with ourstaff, customers and stakeholders has helped us deliver improvements incustomer satisfaction and employee engagement (both achieving record results).Our operating performance also improved with the Public Performance Measurement(PPM) of reliability and punctuality at 90.0% on a Moving Annual Average (MAA)basis.A significant highlight last year was the successful delivery of the initialstage of the Thameslink Programme providing the first 12-carriage services onthe Thameslink route in December 2011. Refurbishment and transformation workwas ongoing at various stations along the route, as part of the programme ofupgrades. We worked together with Network Rail and TfL to successfully reopenBlackfriars station, the first ever cross-river hub with a new link to LondonUnderground and an exit on the South Bank. Transport Minister Theresa Villiersjoined us in opening a dedicated ticket hall and longer 12-car platforms atFarringdon station in December, and we also supported the introduction of a newstation at West Hampstead. On the Great Northern route, where we havesignificantly increased capacity, we added a further 2,200 seats on weekdaysthrough our `More Seats for You' initiative. We introduced 12-car services onthe route and in March 2012 our customers began using the impressive newconcourse at London King's Cross station.During the year the DfT announced that the end date for the First CapitalConnect franchise has been bought forward to September 2013. This provides thebest opportunity in the major Thameslink transformation programme to allow aneffective transition to a potential new franchisee, particularly in relation tothe introduction of new rolling stock which will be completed after the enddate of the current franchise. Our unrivalled knowledge and experience ofmanaging this major project gives us a strong foundation to continue to helpdeliver this important programme in the future.
First Great Western
We continue to drive further improvements in performance across our network.Punctuality during the year has been improving, with our PPM MAA at 90.6%, andwe continue to challenge Network Rail to reduce infrastructure failures.We are committed to delivering further improvements for passengers and inDecember 2011 we agreed a major £28.9m deal with the DfT for 48 new carriagesto be added to our High Speed Train fleet, providing an extra 4,500 seats forcustomers on peak services into and out of London. As part of this agreement weleased five Class 180 trains to replace Turbo services on the Cotswold linebetween London Paddington and Hereford providing a more comfortable journey onthis long-distance route.We continue to introduce further capacity across our network. In the West ofEngland we worked with the DfT to secure extra trains and carriages which willprovide an additional 924 seats on Bristol peak services, while customers inTorbay and between Truro and Falmouth will see almost 650 additional seats onpeak weekday services and 1,275 at weekends.There have also been major improvements to stations along the route. The £10mredevelopment of Bath Spa station has continued and Exeter Central station hasreceived a refresh, bringing the original ticket hall back into use andimproving the station as a focal point. Slough station has had a completeoverhaul costing £1m, as a result of a joint project with Network Rail and thelocal council ahead of this summer when the station will also serve the Olympicrowing venue.First ScotRailOur PPM score rallied strongly towards the end of the year, to finish at 94.8%after the severe weather affecting the country's rail infrastructure impactedFirst ScotRail and Network Rail's ability to achieve acceptable levels ofoperating performance at certain points during the year. Following theintroduction of further improvement plans in the autumn and minor timetablechanges made in December 2011, we have seen performance start to exceed plannedlevels.First ScotRail signed one of the first alliance agreements between a trainoperating company and Network Rail to better align overall objectives andprovide more cost effective ways of delivering rail services. The agreementallows more efficient and effective management through a closer workingrelationship to deliver improvements in quality for passengers and otherstakeholders. Under the agreement a joint Board of First ScotRail and NetworkRail members has been established. We are confident that long term cost savingsfor the industry and the Scottish Government will be achieved.Successful marketing and promotions activity has helped to stimulate furtherdemand for our services. Offering customers great value for money throughinitiatives such as our popular Club 55 tickets providing discount travel forthe over 55's, continued to prove highly successful during the year.Strong partnerships with Passenger Transport Executives and Local Authoritieshave led to station improvements across Scotland including the installation ofinnovative solar powered customer information screens into Highland stations inpartnership with Highland & Island Regional Transport Partnership.
First TransPennine Express
First TransPennine Express achieved record performance this year with PPM MAA above the national average at 93.3%.
We were delighted that the DfT took the decision during the year to extend thecurrent franchise. We will operate First TransPennine Express for a furtherthree years from February 2012 at an operating margin closer to the industryaverage. Since we commenced operation of the franchise in 2004 we have workedhard to deliver consistent improvements for customers, including theintroduction of a £260m new train fleet, and during that time passenger numbershave risen from 13m to 24m a year.We will work closely with the DfT and our stakeholders on the route over theremaining life of the franchise to progress plans for the future of rail in theNorth of England and to further develop our Anglo-Scottish services. Wesuccessfully negotiated for 10 new build Class 350 trains to be brought intoservice from December 2013. These will provide an 80% increase in customercapacity between Manchester and Scotland and will allow for a 30% increase inseat availability across the rest of the network.We launched a suite of technology solutions during the year, including a mobilewebsite with geo-location technology providing customers with detailedinformation about station facilities. We also released a smartphone ticketingapp with purchasing and mobile ticket display facilities and were also thefirst train operator in the UK to launch a customer service based Twitteraccount which is operated by front line employees.
First Hull Trains
During the year work commenced on an overhaul of the fleet which will help to significantly improve reliability and punctuality. We are working with business, councils and planners to help better integrate our services with wider transport operations along the East Coast Main Line, as well as with other train operating companies and Network Rail to improve performance and interconnectivity along the route.
Outlook
We have a fundamentally strong and diverse portfolio of operations with four out of five of our divisions performing in line with our expectations and actions we have taken will lead to improved growth and returns.
Notwithstanding the steady performance from our UK Bus division in 2011/12 wehave seen a further deterioration of economic conditions particularly in oururban operations in Scotland and the North of England. As result, we do notexpect revenue growth and cost efficiencies in 2012/13 to be sufficient tooffset the impact of reduced government subsidies and funding to the industry,which are more acute than originally estimated, and increased fuel costs. Inresponse we are accelerating a comprehensive plan that will deliver sustainablegrowth in revenue and patronage and improved returns. This includesrepositioning our UK Bus portfolio through a programme of business and assetdisposals to focus on those areas where the greatest potential for growthexists.Our North American operations continue to progress and we believe thatimproving trends in the US economy will be positive for our businesses. FirstStudent is now well set on the path to recovery with our plan to reform thebusiness delivering in line with our expectations. First Transit delivers goodreturns from typically low capital investment which is underpinned by itsestablished credentials and strong track record. Greyhound's enhancedperformance from a transformed operating model demonstrates our ability toimplement the necessary actions to deliver strong growth and marginimprovement.The UK rail market is in a period of transition with eight franchises due to belet by the Government over the next two years. We are the only operator to havepre-qualified for all four of the rail franchises that have come to the marketso far and we believe we are well placed to progress opportunities from therefranchising programme.
The combined effect of the outlook for trading together with the actions to reposition the UK Bus portfolio is expected to result in the Group's net cash flow being broadly neutral in 2012/13.
Our market leading positions in a sector that is a key enabler of economicgrowth together with the actions we are taking to strengthen the business givethe Board confidence that the Group has good prospects to deliver long termvalue for shareholders. Therefore, reflecting our longer term view, the Boardremains committed to its current policy of dividend growth of 7.0% through tothe end of the financial year 2012/13.
EXCEPTIONAL ITEMS AND AMORTISATION CHARGES
2012 2011 £m £m UK Bus Pension Scheme changes 73.3 - UK Rail bid costs (10.2) (2.7)
UK Bus depot sales and closures (10.7)
- Competition Commission costs (1.9) (1.4) UK Rail claim - 22.5
UK Rail First Great Western contract -
(59.9)provision First Student recovery plan - (39.5)
First Transit goodwill impairment and -
(16.6)contract provision
UK Rail joint venture provision -
(1.8) UK Bus restructuring costs - (1.0) Other exceptional items (1.1) (0.4) Total exceptional items 49.4 (100.8) Amortisation charges (30.9) (42.9)
Profit/(loss) on disposal of properties 1.0
(4.4)
Operating profit credit/(charge) 19.5
(148.1)
Ineffectiveness on financial derivatives
0.3 (11.0)
Profit/(loss) before tax credit/(charge) 8.5
(147.8) Tax credit 4.4 43.0
(Loss)/profit on disposal of discontinued (9.2)
6.7operations
Net exceptionalitems for the year 3.7
(98.1)
UK Bus Pension Scheme changes
During the year we took actions to de-risk the UK Bus Pension Scheme, the mostsignificant of which is that pension increases will be linked to consumer priceinflation (CPI) rather than retail price inflation (RPI). In addition apensionable pay cap was introduced along with lower pension accrual rates. As aresult of these changes future pension liabilities have decreased and a one-offexceptional gain of £73.3m (2011: £nil) was realised.
UK Rail bid costs
We are now entering a transition period for UK Rail with eight franchisesexpected to be retendered in the next two years. Bid costs of £10.2m (2011: £2.7m) were incurred during the year. These costs covered the preparation of theIntercity West Coast bid which was submitted on 4 May 2012. They also includethe cost of pre-qualification for three further rail franchises - GreatWestern, Thameslink, and Essex Thameside. We are the only operator topre-qualify for all the franchises that are currently out to bid.
UK Bus depot sales and closures
As part of our programme to rebalance our portfolio in UK Bus operations wehave taken the decision to sell or close certain operations. Net losses of £8.2m were incurred during the year comprising £6.7m of operating losses for theyear and £1.5m of closure costs. In addition a loss on the disposal of theNorthumberland Park depot in North East London of £2.5m was recorded in theyear representing gross proceeds of £14.2m less the carrying value of netassets including £5.2m of goodwill as well as transaction costs. The proceedsof the disposal were received in the first week of 2012/13.
Competition Commission costs
During the year we incurred a further £1.9m (2011: £1.4m) of costs respondingto and representing our position to the Competition Commission investigationinto the UK Bus market. The Competition Commission issued their final report inDecember 2011 and since the start of the investigation we have incurred totalcosts of £7.1m.Other exceptional items
Costs of £1.1m were incurred principally on effecting the changes to the UK Bus Pension Scheme as described above.
Amortisation charges
The charge for the year was £30.9m (2011: £42.9m) with the reduction mainly dueto the write off of the remaining balance of the First Great Western franchiseintangible asset (£7.6m) in the previous year.
Profit/(loss) on disposal of properties
During the year we realised £40.3m (2011: £10.1m) on the disposal of selected properties predominantly in Greyhound operations. These resulted in a net profit on disposal of £1.0m (2011: loss of £4.4m).
Ineffectiveness on financial derivatives
Due to the ineffective element and undesignated fair value movements onfinancial derivatives there was a £11.0m non-cash charge (2011: £0.3m credit)to the income statement during the year. The principal component of thisnon-cash charge relates to fixed interest rate swaps which do not qualify forhedge accounting but do provide a cash flow hedge against variable rate debtfrom 2012 to 2015. It is anticipated that the charge in respect of these swapswill reverse over their contractual term.
Tax on exceptional items and amortisation charges
The tax credit as a result of these exceptional items was £0.4m (2011: £41.3m).In addition there was a one-off deferred tax credit of £4.0m (2011: £1.7m) as aresult of the reduction in the UK corporation tax rate from 26% to 24% (2011:28% to 26%).
FINANCE COSTS AND INVESTMENT INCOME
Net finance costs, before exceptional items, were £157.1m (2011: £182.4m) withthe reduction principally due to lower interest rates on US Dollar denominateddebt.PROFIT BEFORE TAX
Adjusted profit before tax was £271.4m (2011: £274.3m). An overall credit of £8.5m (2011: £147.8m charge) for exceptional items and amortisation chargesresulted in a substantial increase in profit before tax to £279.9m (2011:
£126.5m).TAXThe tax charge, on adjusted profit before tax, for the year was £54.5m (2011: £59.7m) representing an effective rate of 20.1% (2011: 21.8%). There was a taxcredit of £0.4m (2011: £41.3m) relating to amortisation charges and exceptionalitems. There was also a one-off credit adjustment of £4.0m (2011: £1.7m) to theUK deferred tax liability as a result of the reduction in the UK corporationtax rate from 26% to 24% (2011: 28% to 26%) which will apply from April 2012.This resulted in a total tax charge of £50.1m (2011: £16.7m) on continuingoperations. The actual tax paid during the year was £17.7m (2011: £25.0m).North American cash tax remains low due to tax losses brought forward. Weexpect the North American cash tax rate to remain low for the near term. The UKcash tax for the year was lower than last year principally due to higher cashpension payments in UK Bus.DISCONTINUED OPERATIONSA loss on disposal of £9.2m arose on the sale of FirstGroup Deutschland GmbHrepresenting gross consideration of £5.5m less the carrying value of netassets, including goodwill, and transaction costs. This, as well as theoperating loss after tax to the date of disposal of £0.3m (2011: profit of £0.6m), has been classified within discontinued operations in the consolidatedincome statement.DIVIDENDS
In line with our stated commitment the Board has proposed a final dividend pershare, subject to approval by shareholders, of 16.05p (2011:15.0p), an increaseof 7.0%, making a full year payment of 23.67p (2011: 22.12p). It will be paidon 17 August 2012 to shareholders on the register at 13 July 2012. The dividendis covered 1.7 times (2011: 1.9 times) by adjusted basic EPS.
EPS
The adjusted basic EPS was 40.0p (2011: 41.1p), a reduction of 2.7%. Basic EPSwas 42.7p (2011: 20.0p), an increase of 113.5% due to a significant reductionin net exceptional items compared to last year.
EBITDA
EBITDA by division is set out below:
Year to 31 Year to 31 March 20121 March 20113 Revenue EBITDA2 EBITDA2 Revenue EBITDA2 EBITDA2 £m £m % £m £m % First Student 1,567.2 255.8 16.3 1,594.4 278.1 17.4 First Transit 778.6 8.4 66.3 8.6 65.3 771.5 Greyhound 12.2 68.7 657.2 80.1 634.6 10.8 UK Bus 1,157.2 17.9 1,137.5 220.0 19.3 207.1 UK Rail 2,506.1 6.5 2,269.8 158.6 7.0 163.5 Group 12.4 (28.9) (22.8) - 8.9 - Total Group 6,678.7 11.1 6,416.7 768.9 12.0 742.9
1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year.
2Adjusted operating profit less capital grant amortisation plus depreciation.
3Restated to exclude discontinued operations and incorporating a revised calculation of EBITDA as explained in note 1 to the preliminary results announcement.
CASH FLOW
The net cash inflow for the year was £119.2m (2011: £209.8m). This contributed to a net debt reduction of £111.9m (2011: £332.1m) as detailed below:
Year to Year to 31 March 2012 31 March 2011 £m £m
EBITDA (including discontinued
operations) 742.6 770.7 Exceptional items 49.4 (100.8) Impairment charges - 19.5
Other non-cash income statement items 9.8
11.4 Working capital excluding FGW 20.5 75.2provision movement
Working capital - FGW provision 48.7
11.2movement FGW provision movement (48.7) 48.7
Movement in other provisions (29.1)
(48.3)
Pension payments in excess of income (87.1)
(43.5)statement charge
Non-cash RPI to CPI pension gain (73.3)
- Cash generated by operations 744.1 632.8 Capital expenditure and acquisitions (293.6) (283.6) Disposal proceeds 57.7 21.8 Interest, tax and other (155.4) (183.6) Dividends payable to Group (108.8) (101.4)shareholders
Dividends payable to non-controlling (19.0)
(11.8)minority shareholders
Proceeds from sale of businesses
5.5 24.3 Net cash inflow 119.2 209.8 Foreign exchange movements (7.7) 129.2
Other non-cash movements in relation
to financial instruments 0.4 (6.9) Movement in net debt in year 111.9 332.1
The principle adverse movements compared to last year were as follows:
* Higher pension payments in excess of income statement charge of £43.6m
principally due to additional deficit cash contributions in Greyhound and
UK Bus. In addition there was a one-off non-cash benefit of £73.3m in
relation to the UK Bus pension scheme changes.
* The FGW provisions put up last year has been transferred to creditors due
within one year, resulting in a movement on provisions of £97.4m. * EBITDA of £742.6m was £28.1m lower than last year. * No impairment charges in 2011/12. * Proceeds from sale of business represents Germany at £5.5m this year compared to £24.3m for GB Railfreight last year.
* Working capital excluding FGW provision movement for last year of £75.2m
included the benefit of the timing of certain UK Rail payments as well the
First Student recovery plan provision and the First Transit contract
provision. This year working capital is still positive at £20.5m despite
the reversal of the UK Rail payment timing and the expected usage of the
Student and Transit provisions.
* Higher dividend payments to Group shareholders of £7.4m and non-controlling
minority shareholders of £7.2m.
* Higher capital expenditure and acquisitions of £10.0m.
Partly offset by:
* Lower net exceptional items and impairment charges of £150.2m as explained
above.
* Lower interest, tax and other payments of £28.2m principally due to lower
interest rates on US Dollar denominated debt. * Favourable movement in other provisions of £19.2m mainly due to lower insurance claims payments compared to last year. * Disposal proceeds of £57.7m (property £40.3m and non-property, mainly
buses, £17.4m) compared to £21.8m (property £10.1m and non-property £11.7m)
last year with the increase principally due to the Washington DC property
sale in Greyhound. NET DEBTThe Group's net debt at 31 March 2012 was £1,837.5m (2011: £1,949.4m) andcomprised: 31 March 31 March 2012 2011 Fixed Variable Total Total Analysis of net debt £m £m £m £m Sterling bond (2013)1 298.5 298.5 298.0 - Sterling bond (2018)2 325.1 325.1 325.9 - Sterling bond (2019)2 249.4 249.4 273.4 - Sterling bond (2021)3 331.5 331.5 331.1 - Sterling bond (2024)1 199.0 199.0 199.0 - US Dollar bank loans 369.8 369.8 506.3 - Canadian Dollar bank loans 113.9 113.9 113.1 - Euro and other bank loans 11.7 11.7 29.0 - HP contracts and finance 260.6 74.7 335.3 251.9leases Senior unsecured loan notes 93.3 - 93.3 - Loan notes 8.7 1.0 9.7 9.7 Cash (164.0) (164.0) (89.4) - UK Rail ring-fenced cash and (323.2) (323.2) (283.8)deposits - Other ring-fenced cash and (12.5) (12.5) (14.8)deposits - Interest rate swaps 368.6 (368.6) - - Total 1,885.3 (47.8) 1,837.5 1,949.4 1 excludes accrued interest.
2 stated excluding accrued interest, swapped to US Dollars and adjusted for movements on associated derivatives.
3 stated excluding accrued interest, partially swapped to US Dollars and adjusted for movements on associated derivatives.
Under the terms of the UK Rail franchise agreements, cash can only bedistributed by the train operating companies either up to the lower amount oftheir retained profits or the amount determined by prescribed liquidity ratios.The ring-fenced cash represents that which is not available for distribution orthe amount required to satisfy the liquidity ratio at the balance sheet date.The level of ring-fenced cash at 31 March 2012 is higher than would normally beexpected due to the timing of government receipts at FSR and the temporaryimpact of liquidity ratios at FCC. Accordingly the balance at 31 March 2011 ismore indicative of the expected level of ring-fenced cash.Maintaining our investment grade status is a key priority and we haveconsistently reduced leverage to support this. The net debt:EBITDA ratio hasreduced from 3.2 times at 31 March 2009 to 2.5 times at 31 March 2012 (2011:2.5 times).
CAPITAL EXPENDITURE AND ACQUISITIONS
Cash capital expenditure and acquisitions was £293.6m (2011: £283.6m) andcomprised First Student £115.6m (2011: £117.2m), First Transit £31.9m (2011: £6.8m), Greyhound £44.1m (2011: £45.0m), UK Bus £33.6m (2011: £66.7m), UK Rail £63.4m (2011: £46.7m) and Group items £5.0m (2011: £1.2m).
In addition during the year we entered into operating leases for passenger carrying vehicles in UK Bus with a capital value of £43.4m (2011: £23.6m).
FUNDING AND RISK MANAGEMENT
The Group continues to have strong liquidity. At 31 March there was £795.8m(2011: £616.1m) of committed headroom and free cash comprising £631.8m (2011: £526.7m) of headroom under the committed revolving bank facility and free cashbalances of £164.0m (2011: £89.4m). Largely due to seasonality in the NorthAmerican school bus business, committed headroom typically reduces during thefinancial year up to October and increases thereafter. Treasury policy requiresa minimum of £250m of committed headroom at all times.
The Group's main revolving bank facility expires in December 2015. The average debt maturity was 5.5 years (2011: 6.1 years).
The Group does not enter into speculative financial transactions and uses only authorised financial instruments for certain risk management purposes only.
Interest rate risk
The Group reduces exposure by using a combination of fixed rate debt andinterest rate derivatives to achieve an overall fixed rate position over themedium term of between 75% and 100% of net debt. At 31 March 2012 100% (2011:87%) of net debt was fixed and in excess of 85% of net debt is fixed for thenext two years.Fuel price risk
We manage the commodity price risk on fuel through a progressive forward hedging policy.
In the UK, 86% of crude oil costs were hedged at an average rate of $88 perbarrel during the year. At the end of the year we have hedged 83% of our "atrisk" UK crude requirements for the year to 31 March 2013 (2.5m barrels p.a.)at $103 per barrel and 46% of our requirements for the year to 31 March 2014 at$105 per barrel.In North America 59% of crude oil costs were hedged at an average rate of $95per barrel during the year. At the end of the year we have hedged 69% of the"at risk" volume for the year to 31 March 2013 (1.7m barrels p.a.) at $94 perbarrel. In addition we have hedged 40% of "at risk" volumes for the year to
31March 2014 at $95 per barrel.Foreign currency risk
With regard to balance sheet translation risk, the Group hedges part of its exposure to the impact of exchange rate movements on translation of foreign currency net assets by holding currency swaps and net borrowings in foreign currencies. At 31 March 2012 foreign currency net assets were 47% (2011: 62%) hedged.
Group policies on foreign currency risk affecting cash flow, profits and netassets are maintained to minimise exposures to the Group by using a combinationof natural hedge positions and derivative instruments where appropriate.Translation risk relating to US Dollar earnings arising in the US is largelyoffset by US Dollar denominated costs incurred in the UK, principally UK fuelcosts, US Dollar interest and tax costs, so that exposure to EPS on a year toyear basis is not significant.
FOREIGN EXCHANGE
The most significant exchange rates to Sterling for the Group are as follows: Year to 31 Year to March 2012 31 March 2011 Closing Effective Closing Effective Rate rate rate Rate US Dollar 1.59 1.60 1.60 1.56 Canadian Dollar 1.60 1.59 1.57 1.56 The US Dollar rate was slightly higher in the year to 31 March 2012 compared tolast year. This resulted in the Sterling equivalent of North American US Dollarrevenues being approximately 3% lower than last year. Similarly this alsoresulted in a small reduction in North American operating profit but this wasmore than offset by lower US Dollar denominated fuel costs in the UK and lowerUS Dollar denominated interest costs.
SHARES IN ISSUE
As at 31 March 2012 there were 481.6m shares in issue (2011: 480.8m), excludingtreasury shares and own shares held in trust for employees of 0.5m (2011:1.3m). The weighted average number of shares in issue for the purpose of basicEPS calculations (excluding treasury shares and own shares held in trust foremployees) was 481.4m (2011: 480.4m).
INVESTMENT IN DSBFIRST
The funding of the joint venture of rail operations in Sweden and Denmark wasagreed with DSB during the year and a further £4.2m was invested by the Group.As a result of this the guarantees issued by the Group reduced to £7.0m.Subsequently the Swedish franchise was transferred to another operator inDecember 2011.
BALANCE SHEET
Net assets have decreased by £69.9m since the start of the year. The principalreasons for this are actuarial losses on defined benefit pension schemes (netof deferred tax) of £134.0m, dividends payments of £127.8m, unfavourablehedging reserve movements (net of deferred tax) of £22.9m, and unfavourabletranslation reserve movements of £10.9m partly offset by the retained profitfor the year of £220.3m.GOODWILLThe carrying value (net assets including goodwill but excluding intercompanybalances) of each cash generating unit (CGU) was tested for impairment duringthe year and there continues to be sufficient headroom in all of the CGUs.Headroom on the UK Bus business has reduced to £512m (2011: £796m) reflectingthe reduction in projected operating profits and margins compared to this timelast year. The First Student recovery plan is progressing in line withexpectations and as a result the headroom on this business is in line with
lastyear.PENSIONS
The Group has updated its pension assumptions as at 31 March 2012 for the defined benefit schemes in the UK and North America.
The net pension deficit of £243m at the beginning of the year has increased to£268m at the end of the year principally due to changes in actuarialassumptions, in particular lower discount rates than last year, partly offsetby the one-off benefit of de-risking the UK Bus Pension Scheme described aboveand higher cash payments into the schemes.
The main factors that influence the balance sheet position for pensions and the sensitivities to their movement at 31 March 2012 are set out below:
Movement Impact Discount rate +0.1% Reduce deficit by £ 25m Inflation +0.1% Increase deficit by £ 18m SEASONALITYThe First Student business generates lower revenues and profits in the firsthalf of the year than in the second half of the year as the school summerholidays fall into the first half. Greyhound operating profits are typicallyhigher in the first half of the year due to demand being strongest in thesummer months.
GOING CONCERN
The Group has established a strong balanced portfolio of businesses with approximately 50% of Group revenues secured under medium-term contracts with government agencies and other large organisations in the UK and North America.
The Group has a diversified funding structure with average debt duration at 31March 2012 of 5.5 years (2011: 6.1 years) and which is largely represented bycommitted medium to long term unsecured bond debt and finance leases. The Grouphas a $1,250m committed revolving banking facility of which $1,011m was undrawnat the year end. This facility expires in December 2015.The Directors have carried out a detailed review of the Group's budget for theyear to 31 March 2013 and medium-term plans, with due regard for the risks anduncertainties to which the Group is exposed, the uncertain economic climate andthe impact that this could have on trading performance. Based on this review,the Directors believe that the Company and the Group have adequate resources tocontinue in operational existence for the foreseeable future. Accordingly, thefinancial statements have been prepared on a going concern basis.Tim O'TooleChief ExecutiveNick ChevisActing Finance Director23 May 2012
Consolidated income statement
For the year ended 31 March 20121 2011 Adjusted Adjusted Total results2 Adjustments3 Total
results2 Adjustments3 restated4
Notes £m £m £m £m £m £m Continuing operations Revenue 6,678.7 6,678.7 6,416.7 - 6,416.7 - Operating costs before profit/(loss) on disposal (6,250.2) 18.5 (6,231.7) (5,960.0) (143.7) (6,103.7)of properties Operating profit before profit/(loss)on disposal 428.5 18.5 447.0
456.7 (143.7) 313.0of properties Amortisation charges (30.9) (30.9) (42.9) (42.9) - - Exceptional items 49.4 49.4 (100.8) (100.8) - - 18.5 18.5 (143.7) (143.7) - - Profit/(loss) on disposal 1.0 1.0 (4.4) (4.4)of properties - - Operating profit 428.5 19.5 448.0 456.7 (148.1) 308.6 Investment income 2.0 2.0 1.9 1.9 - - Finance costs (159.1) (11.0) (170.1) (184.3) 0.3 (184.0) Profit before tax 271.4 8.5 279.9 274.3 (147.8) 126.5 Tax (54.5) 4.4 (50.1) (59.7) 43.0 (16.7) Profit for the yearfrom continuing operations 216.9 12.9 229.8 214.6 (104.8) 109.8 Discontinued operations (Loss)/profit for the year from discontinued 3 (0.3) (9.2) (9.5) 0.6 6.7 7.3operations Profit for the year 216.6 3.7 220.3 215.2 (98.1) 117.1 Attributable to: Equity holders of the 192.3 3.9 196.2 198.0 (94.8) 103.2parent Non-controlling interests 24.3 (0.2) 24.1 17.2 (3.3) 13.9 216.6 3.7 220.3 215.2 (98.1) 117.1 Earnings per share Continuing operations Basic 4 40.0p 2.7p 42.7p 41.1p (21.1)p 20.0p Diluted 4 39.8p 2.7p 42.5p 40.7p (20.9)p 19.8p Continuing and discontinued operations Basic 4 39.9p 0.9p 40.8p 41.2p (19.7)p 21.5p Diluted 4 39.7p 0.8p 40.5p 40.9p (19.6)p 21.3p
Dividends of £108.8m (2011: £101.4m) were paid during the year. Dividends of £ 77.2m (2011: £72.1m) are proposed for approval in respect of the year.
1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year.
2Adjusted trading results before items noted in 2 below.
3Amortisation charges, ineffectiveness on financial derivatives, exceptionalitems, profit/(loss) on disposal of properties and discontinued operations andtax thereon.
4Restated to exclude discontinued operations as explained in note 1.
Consolidated statement of comprehensive income
Year ended 31 March 2012 2011 £m £m Profit for the year 220.3 117.1
Other comprehensive income/(expense) Derivative hedging instrument movements (36.1)
193.4
Deferred tax on derivative hedging instrument 13.2
(44.0)movements
Exchange differences on translation of foreign (10.9)
(143.9)operations
Unrealised losses on executive deferred -
(0.1)compensation plans
Actuarial losses on defined benefit pension (185.8)
(55.5)schemes
RPI to CPI change in defined benefit pension -
84.9arrangements
Deferred tax on actuarial losses and RPI to CPI 51.8
(5.9)
change on defined benefit pension schemes Other comprehensive (expense)/incomefor the (167.8)
28.9year
Total comprehensive income for the year 52.5 146.0 Attributable to: Equity holders of the parent 28.4 132.6 Non-controlling interests 24.1 13.4 52.5 146.0Consolidated balance sheetYear ended 31 March 2012 2011 2010 Notes £m £m £m Non-current assets Goodwill 5 1,599.3 1,608.0 1,754.9 Other intangible 6 318.8 348.6 415.9assets Property, plant and 7 2,006.3 2,082.9 2,284.1equipment Deferred tax assets 15 43.3 30.0 30.4 Retirement benefit 25.2 30.7 3.1assets Derivative 14 72.6 58.1 33.0financial instruments Investments 7.2 3.2 4.8 4,072.7 4,161.5 4,526.2 Current assets Inventories 8 91.0 91.4 92.7 Trade and other 9 601.9 555.5 602.5receivables Cash and cash 499.7 388.0 335.0equivalents Assets held for 3.7 4.6 3.9sale Derivative 14 43.5 65.1 32.1financial instruments 1,239.8 1,104.6 1,066.2 Total assets 5,312.5 5,266.1 5,592.4 Current liabilities Trade and other 10 1,261.0 1,129.9 1,120.0payables Tax liabilities 21.8 49.0 36.1
Financial - bank loans 11 69.3 93.5 -liabilities - bonds 11 73.6 73.3 73.3 - obligations under HP contracts and 12 52.4 42.8 34.6 finance leases - loan notes 13 - - 0.8 Derivative 14 17.1 38.5 85.2financial instruments 1,495.2 1,427.0 1,350.0 Net current 255.4 322.4 283.8liabilities Non-current liabilities
Financial - bank loans 11 426.0 554.9 896.0liabilities - bonds 11 1,441.0 1,417.1 1,414.1 - obligations under HP contracts and 12 282.9 209.1 192.8 finance leases - loan notes 13 9.7 9.7 9.7 - senior unsecured 13 93.3 - - loan notes Derivative 14 50.1 29.7 121.1financial instruments Retirement benefit 293.1 273.9 333.9liabilities Deferred tax 15 97.7 93.0 63.9liabilities Provisions 16 242.5 300.8 300.4 2,936.3 2,888.2 3,331.9 Total liabilities 4,431.5 4,315.2 4,681.9 Net assets 881.0 950.9 910.5 Equity Share capital 17 24.1 24.1 24.1 Share premium 676.4 676.4 676.4 Hedging reserve 12.5 35.4 (114.0) Other reserves 4.6 4.6 4.6 Own shares (1.1) (5.0) (6.5) Translation reserve 145.7 156.6 300.0 Retained earnings (3.6) 41.5 10.2 Equity attributable to equity holders 858.6 933.6 894.8of the parent Non-controlling 22.4 17.3 15.7interests Total equity 881.0 950.9 910.5
Consolidated statementof changes in equity
Non-controlling Share Share Hedging Other Own Translation Retained interests Total capital premium reserve reserves shares reserve earnings Total equity £m £m £m £m £m £m £m £m £m £m Balance at 1 24.1 676.4 (114.0) 4.6 (6.5) 300.0 10.2 894.8 15.7 910.5April 2010 Total comprehensive - - 149.4 - - (143.4) 126.6 132.6 13.4 146.0income for the year Dividends - - - (101.4) (101.4) (11.8) (113.2)paid - - - Movement in - - - - 1.5 - (1.7) (0.2) - (0.2)EBT and treasury shares Share-based - - - - payments - - - 7.7 7.7 7.7 Deferred tax - - - - - - 0.1 0.1 - on 0.1share-based payments Balance at 31 24.1 676.4 35.4 4.6 (5.0) 156.6 41.5 933.6 17.3 950.9March 2011 Total comprehensive - - (22.9) - - (10.9) 62.2 28.4 24.1 52.5income for the year Dividends - - - (108.8) (108.8) (19.0) (127.8)paid - - - Movement in - - - - 3.9 - (3.9) - - -EBT and treasury shares Share-based - - - 6.0 - payments - - - 6.0 6.0 Deferred tax on - - - - - - (0.6) (0.6) - (0.6)share-based payments Balance at 31 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4 March 2012 881.0
Consolidated cash flow statement
Year ended 31 March 2012 2011 Note £m £m
Net cash from operating activities 18 475.4
555.7 Investing activities Interest received 2.0 1.7
Proceeds from disposal of property, 57.7
21.8plant and equipment
Purchases of property, plant and (170.9)
(210.3)equipment Disposal of subsidiary 5.5 24.3 Acquisition of businesses (3.4) (3.1)
Net cash used in investing activities (109.1)
(165.6) Financing activities
Monies received on exercise of share -
3.1options Dividends paid (108.8) (101.4)
Dividends paid to non-controlling (19.0)
(11.8)shareholders
Proceeds from senior unsecured loan
notes 90.2 -
Proceeds from bank facilities 2.5
124.1 Repayment of bank debt (179.8) (307.7)
Repayments under HP contracts and (35.2)
(35.9)finance leases Repayment of loan notes - (0.8)
Fees for bank facility amendments and (2.1)
(6.3)bond issues Net cash flow from financing (252.2) (336.7)activities Net increase in cash and cash 114.1 53.4
equivalents before foreign exchange
movements Cash and cash equivalents at 388.0 335.0beginning of year Foreign exchange movements (2.4) (0.4)
Cash and cash equivalents at end of 499.7
388.0
year per consolidated balance sheet
Cash and cash equivalents are included within current assets on the consolidated balance sheet.
Note to the consolidated cash flow statement -
reconciliation of net cash flow to movement in net debt
2012 2011 £m £m
Net increase in cash and cash equivalents in year 114.1
53.4
Decrease in debt and finance leases 122.3
220.3
Inception of new HP contracts and finance leases (119.3)
(70.2)
Fees capitalised against bank facilities and bond 2.1
6.3issues Net cash flow 119.2 209.8 Foreign exchange movements (7.7)
129.2
Other non-cash movements in relation to financial 0.4 (6.9)instruments Movement in net debt in year 111.9
332.1
Net debt at beginning of year (1,949.4) (2,281.5) Net debt at end of year (1,837.5) (1,949.4)
Net debt includes the value of derivatives in connection with the bonds maturing in 2018, 2019 and 2021 and excludes all accrued interest. These bonds are included in non-current liabilities in the consolidated balance sheet.
Notes to the consolidated financial statements
1 GENERAL INFORMATION
The financial information set out above does not constitute the Company'sStatutory Accounts for the year ended 31 March 2012 or 2011, but is derivedfrom those accounts. Statutory Accounts for 2011 have been delivered to theRegistrar of Companies and those for 2012 will be delivered following theCompany's Annual General Meeting. The auditors have reported on both sets ofaccounts; their reports were unqualified and did not contain statements undersection 498 (2), (3) or (4) of the Companies Act 2006.Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not in itself contain sufficient information tocomply with IFRSs. The financial information has been prepared on the basis ofthe accounting policies as set out in the Statutory Accounts for 2011.
Copies of the Statutory Accounts for the year ended 31 March 2012 will be available to all shareholders in June and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.
Restatement of prior years numbers
The income statement and segmental amounts for the year to 31 March 2011 have been restated to show the results of FirstGroup Deutschland GmbH, which was sold during the year, within discontinued operations. The results of discontinued operations are set out in note 3.
The calculation of adjusted EBITDA has been revised to exclude capital grantamortisation whereas previously EBITDA was calculated as adjusted operatingprofit plus depreciation. As a result of this EBITDA for the year to 31 March2011 has been restated as follows: £m EBITDA as previously stated 778.2 Discontinued operations (1.3) Capital grant amortisation (8.0) EBITDA as restated 768.9
2 BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION
For management purposes, the Group is organised into five operating divisions -First Student, First Transit, Greyhound, UK Bus and UK Rail. These divisionsare managed separately in line with the differing services that they provideand the geographical markets which they operate in. The principal activities ofthese divisions are described in the operating and financial review.
The segment results for the year to 31 March 2012 are as follows:
First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total2 £m £m £m £m £m £m £m Revenue 1,567.2 778.6 657.2 1,157.2 2,506.1 17.7 6,684.0 Discontinued operations - - (5.3) (5.3) - - - Revenue continuing 1,567.2 778.6 657.2 1,157.2 2,506.1 12.4 6,678.7operations EBITDA3 255.8 65.3 80.1 207.1 163.5 (28.9) 742.9 Depreciation (148.7) (9.5) (29.5) (73.2) (66.2) (1.0) (328.1) Capital grant amortisation - - - 0.5 13.2 - 13.7 Segment results3 107.1 55.8 50.6 134.4 110.5 (29.9) 428.5 Amortisation charges (20.1) (4.3) (3.1) (3.4) (30.9) - - Exceptional items - - 60.7 (10.2) (1.1) 49.4 - Profit/(loss) on disposal (0.3) 5.0 (3.7) - 1.0of properties - - Operating profit 86.7 51.5 52.5 191.4 96.9 (31.0) 448.0 Investment income 2.0 Finance costs (159.1) Ineffectiveness on financial derivatives (11.0) Profit before tax 279.9 Tax (50.1) Profit for the period from continuing operations 229.8 Discontinued operations (9.5) Profit after tax and 220.3discontinued operations
The segment results for the year to 31 March 2011 are as follows:
First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total £m £m £m £m £m £m £m Revenue 1,594.4 771.5 634.6 1,137.5 2,279.7 21.4 6,439.1 Discontinued operations - (9.9) (12.5) (22.4) - - - Revenue continuing operations 1,594.4 771.5 634.6 1,137.5 2,269.8 8.9 6,416.7 EBITDA3 278.1 66.3 68.7 220.0 158.6 (22.8) 768.9 Depreciation (149.8) (9.1) (28.5) (71.7) (57.4) (3.7) (320.2) Capital grant amortisation - - - 0.5 7.5 - 8.0 Segment results3 128.3 57.2 40.2 148.8 108.7 (26.5) 456.7 Amortisation charges (20.4) (4.7) (3.1) (14.7) (42.9) - - Exceptional items (39.5) (16.6) (2.4) (41.9) (0.4) (100.8) - Loss on disposal of (0.1) (1.2) (3.1) (4.4)properties - - - Operating profit 68.3 35.9 35.9 143.3 52.1 (26.9) 308.6 Investment income 1.9 Finance costs (184.3)
Ineffectiveness on financial
derivatives 0.3 Profit before tax 126.5 Tax (16.7)
Profit for the period from continuing
109.8operations Discontinued operations 7.3 Profit after tax and 117.1discontinued operations
1Group items comprise Tram operations, central management and other items.
2For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year.
3Adjusted.3 DISCONTINUED OPERATIONSOn 28 May 2010 FirstGroup plc disposed of GB Railfreight and on 30 September2011 the Group disposed of FirstGroup Deutschland GmbH. As a consequence theresults of these businesses have been classified as discontinued operations, asdetailed below. 2012 2011 £m £m Revenue 5.3 22.4 Operating costs (5.6) (21.4) (Loss)/profit before tax (0.3) 1.0 Attributable tax expense - (0.4)
(Loss)/profit for the period from discontinued (0.3)
0.6operations
(Loss)/profit on disposal of discontinued (9.2)
6.7operations
Net (loss)/profit attributable to discontinued (9.5)
7.3operations 4 EARNINGS PER SHARE (EPS)EPS is calculated by dividing the profit attributable to equity shareholders of£196.2m (2011: £103.2m) by the weighted average number of ordinary shares of481.4m (2011: 480.4m). The numbers of ordinary shares used for the basic anddiluted calculations are shown in the table below.
The difference in the number of shares between the basic calculation and the diluted calculation represents the weighted average number of potentially dilutive ordinary share options.
2012 2011 Number Number m m Weighted average number of share used in basic 481.4 480.4calculation SAYE share options 0.3 0.5 Executive share options 2.4 3.7 484.1 484.6The adjusted basic EPS is intended to highlight the recurring results of theGroup before amortisation charges, ineffectiveness on financial derivatives,exceptional items and loss on disposal of properties. A reconciliation is setout below: 2012 2011 £m EPS(p) £m EPS (p)
Basic profit/EPS from continuing 205.7 42.7 95.9
20.0operations
Basic profit/EPS from discontinued (9.5) (1.9) 7.3
1.5operations Basic profit/EPS 196.2 40.8 103.2 21.5 Amortisation charges¹ 30.7 6.4 42.7 8.9 Ineffectiveness on financial derivatives 11.0 2.2 (0.3) (0.1) Exceptional items (49.4) (10.3) 100.8 21.0 Non-controlling interests on exceptional - - (3.1) (0.6)items (Profit)/Loss on disposal of properties (1.0) (0.2) 4.4 0.9 Business disposals 9.2 1.9 (6.7) (1.4) Tax effect of above adjustments (0.4) (0.1) (41.3)
(8.6)
Deferred tax credit due to change in UK (4.0) (0.8) (1.7) (0.4)corporation tax rate Adjusted profit/EPS 192.3 39.9 198.0 41.2 Adjusted profit/EPS from discontinued 0.3 0.1 (0.6) (0.1)operations
Adjusted profit/EPS from continuing 192.6 40.0 197.4
41.1
operations
1Amortisation charges of £30.9m per note 14 less £0.2m (2011: £42.9m less £ 0.2m) attributable to equity non-controlling interests.
2012 2011 Diluted EPS pence pence Continuing operations Basic 42.5 19.8 Adjusted 39.8 40.7
Continuing and discontinued operations
Basic 40.5 21.3 Adjusted 39.7 40.9 2012 2011 2010 5 GOODWILL £m £m £m Cost At 1 April 1,613.0 1,754.9 1,820.0 Additions 2.9 2.3 - Disposals (11.3) (14.2) - Foreign exchange movements (0.3) (130.0) (65.1) At 31 March 1,604.3 1,613.0 1,754.9
Accumulated impairment losses
At 1 April 5.0 - -
Impairment losses for the year - 5.0
- At 31 March 5.0 5.0 - Carrying amount At 31 March 1,599.3 1,608.0 1,754.9 Greyhound Rail Customer brand and franchise contracts trade agreements Total name 6OTHER INTANGIBLE ASSETS £m £m £m £m Cost At 1 April 2010 407.6 66.0 56.3 529.9 Foreign exchange movements (26.1) (4.1) - (30.2) At 31 March 2011 381.5 61.9 56.3 499.7 Additions - - 1.4 1.4 Foreign exchange movements (0.3) (0.1) - (0.4) At 31 March 2012 381.2 61.8 57.7 500.7 Amortisation At 1 April 2010 70.6 8.3 35.1 114.0 Charge for year 25.1 3.1 14.7 42.9 Foreign exchange movements (5.6) (0.2) - (5.8) At 31 March 2011 90.1 11.2 49.8 151.1 Charge for year 24.3 3.2 3.4 30.9 Foreign exchange movements (0.1) - - (0.1) At 31 March 2012 114.3 14.4 53.2 181.9 Carrying amount At 31 March 2012 266.9 47.4 4.5 318.8 At 31 March 2011 291.4 50.7 6.5 348.6 At 31 March 2010 337.0 57.7 21.2 415.9 Passenger Other Land and carrying plant and buildings vehicle equipment Total fleet 7PROPERTY PLANT & EQUIPMENT £m £m £m £m Cost At 1 April 2010 555.2 2,644.3 549.9 3,749.4
Subsidiary undertakings acquired - 1.0 -
1.0
Subsidiary undertakings disposed of (2.8) (2.3) (4.0)
(9.1) Additions in the year 27.3 145.8 89.5 262.6 Disposal (15.2) (59.5) (30.8) (105.5) Transfers (8.5) - 8.5 - Reclassified as held for sale - (56.1) - (56.1) Foreign exchange movements (19.5) (108.0) (16.4) (143.9) At 31 March 2011 536.5 2,565.2 596.7 3,698.4
Subsidiary undertakings disposed of (2.8) (4.0) (0.6)
(7.4) Additions in the year 15.6 202.7 105.2 323.5 Disposals (41.6) (72.1) (23.8) (137.5) Transfers - 11.3 (11.3) - Reclassified as held for sale - (77.6) - (77.6) Foreign exchange movements (0.4) (1.8) 0.1 (2.1) At 31 March 2012 507.3 2,623.7 666.3 3,797.3
Accumulated depreciation and impairment
At 1 April 2010 68.5 1,130.9 265.9 1,465.3
Subsidiary undertakings disposed of (1.2) (2.3) (1.8)
(5.3) Charge for year 14.1 228.4 78.5 321.0 Impairment - 13.3 - 13.3 Disposals (4.3) (47.7) (27.3) (79.3) Reclassified as held for sale - (46.4) - (46.4) Foreign exchange movements (2.1) (44.6) (6.4) (53.1) At 31 March 2011 75.0 1,231.6 308.9 1,615.5
Subsidiary undertakings disposed of (0.3) (2.0) (0.4)
(2.7) Charge for year 12.0 220.3 95.8 328.1 Disposals (3.1) (70.1) (14.5) (87.7) Transfers - (24.0) 24.0 - Reclassified as held for sale - (61.6) - (61.6) Foreign exchange movements (0.1) (0.5) - (0.6) At 31 March 2012 83.5 1,293.7 413.8 1,791.0 Carrying amount At 31 March 2012 423.8 1,330.0 252.5 2,006.3 At 31 March 2011 461.5 1,333.6 287.8 2,082.9 At 31 March 2010 486.7 1,513.4 284.0 2,284.1 2012 2011 2010 8 INVENTORIES £m £m £m Spare parts and consumables 90.6 91.1 91.5
Property development work in progress 0.4 0.3
1.2 91.0 91.4 92.7 2012 2011 2010 9 TRADE AND OTHER RECEIVABLES £m £m £m Amounts due within one year Trade receivables 421.5 408.7 462.2 Provision for doubtful receivables (4.5) (7.5) (6.5) Other receivables 72.8 53.4 57.3
Other prepayments and accrued income 112.1 100.9
89.5 601.9 555.5 602.5 2012 2011 2010 10TRADE AND OTHER PAYABLES £m £m £m
Amounts falling due within one year
Trade payables 397.6 312.2 288.9 Other payables 169.1 113.9 145.1 Accruals and deferred income 626.2 640.5
627.5
Season ticket deferred income 68.1 63.3 58.5 1,261.0 1,129.9 1,120.0 2012 2011 2010
11FINANCIAL LIABILITIES - BORROWING £m £m
£m
Current financial liabilities
Short-term bank loans 69.3 93.5 - 69.3 93.5 -
Bond 6.875% (repayable 2013) - accrued 20.3 20.2
20.2interest
Bond 8.125% (repayable 2018) - accrued 12.9 12.8
12.8interest
Bond 6.125% (repayable 2019) - accrued 3.0 3.0
3.0interest
Bond 8.75% (repayable 2021) - accrued 30.2 30.1
30.1interest
Bond 6.875% (repayable 2024) - accrued 7.2 7.2
7.2interest 73.6 73.3 73.3
HP contracts and finance leases (note 12) 52.4 42.8
34.6 Loan notes (note 13) - - 0.8 Total current financial liabilities 195.3 209.6
108.7
Non-current financial liabilities Syndicated and bilateral unsecured bank 426.0 554.9 896.0loans 426.0 554.9 896.0 Bond 6.875% (repayable 2013) 298.5 298.0 297.4 Bond 8.125% (repayable 2018) 296.7 296.4 296.2 Bond 6.125% (repayable 2019) 299.7 276.7 274.8 Bond 8.75% (repayable 2021) 347.1 347.0 346.8 Bond 6.875% (repayable 2024) 199.0 199.0 198.9 1,441.0 1,417.1 1,414.1 HP contracts and finance lease (note 12) 282.9 209.1 192.8 Loan notes (note 13) 9.7 9.7 9.7 Senior unsecured loan notes 93.3 - - Total non-current financialliabilities 2,252.9 2,190.8 2,512.6 Total liabilities 2,448.2 2,400.4 2,621.3
Gross borrowings repayment profile
Within one year or on demand 195.3 209.6 108.7 Between one and two years 407.0 216.0 607.4 Between two and five years 564.9 796.1 720.4 Over five years 1,281.0 1,178.7 1,184.8 2,448.2 2,400.4 2,621.3
12 HP CONTRACTS AND FINANCE LEASES
The Group had the following obligations under HP contracts and finance leases as at the balance sheet dates:
2012 2011 2010 Present 2012 Present 2011 present 2010 value of Minimum value of Minimum value of minimum payments payments payments payments payments payments £m £m £m £m £m £m
Due in less than one year 54.0 52.4 42.8 40.2
34.6 48.8
Due in more than one year 54.8 51.9 48.3 43.2 42.7
37.8but not more than two years
Due in more than two years 173.9 154.7 116.6 106.3 97.2
86.9but not more than five years Due in more than five 92.6 76.3 62.0 59.6 71.6 68.1years 375.3 335.3 275.7 251.9 251.7 227.4 Less future financing (40.0) - (23.8) - (24.3) charges - 335.3 335.3 251.9 251.9 227.4 227.413 LOAN NOTESThe Group had the following loan notes issued as at the balance sheet dates: 2012 2011 2010 £m £m £m
Due in less than one year - -
0.8
Due in more than one year but not more than two 9.7 9.7 9.7years 9.7 9.7 10.5 2012 2011 2010
14DERIVATIVE FINANCIAL INSTRUMENTS £m £m
£m
Derivativesdesignated and effective as hedging instruments carried at fair value
Non-current assets
Cross currency swaps (net investment hedge) 23.2 22.2
13.3
Coupon swaps (fair value hedge) 43.8 21.0
15.7
Fuel derivatives (cash flow hedge) 5.6 14.9
4.0 72.6 58.1 33.0 Current assets
Cross currency swaps (net investment hedge) 4.3 4.6
3.6
Coupon swaps (fair value hedge) 9.5 6.7
10.6
Currency forwards (cash flow hedge) - 1.2
-
Fuel derivatives (cash flow hedge) 29.7 52.6
15.7 43.5 65.1 29.9 Current liabilities
Interest rate derivatives (cash flow hedge) 8.0 15.0
42.9
Cross currency swaps (net investment hedge) 1.2 23.3
2.9
Fuel derivatives (cash flow hedge) 3.5 0.1
39.4 12.7 38.4 85.2 Non-current liabilities
Interest rate derivatives (cash flow hedge) 13.7 1.5
10.7
Cross currency swaps (net investment hedge) 27.1 28.2
91.9
Fuel derivatives (cash flow hedge) 0.9 -
18.5 41.7 29.7 121.1
Derivatives classified as held for trading
Current assets Cross currency swaps - - 2.2 Current liabilities Interest rate swaps 4.4 0.1 - Non-current liabilities Interest rate swaps 8.4 - - Total non-current assets 72.6 58.1 33.0 Total current assets 43.5 65.1 32.1 Total assets 116.1 123.2 65.1 Total current liabilities 17.1 38.5 85.2 Total non-current liabilities 50.1 29.7 121.1 Total liabilities 67.2 68.2 206.3 15 DEFERRED TAXThe major deferred tax liabilities/(assets) recognised by the Group andmovements thereon during the current and prior reporting periods are asfollows: Accelerated Other tax temporary depreciation differences Tax Total losses £m £m £m £m At 1 April 2010 309.8 (16.1) (260.2) 33.5 (Credit)/charge to income (30.0) (21.7) 31.7 (20.0) Charge to equity - 49.8 - 49.8 Disposal of subsidiary - 1.6 - 1.6 Foreign exchange movements (14.9) (3.9) 16.9 (1.9) At 31 March 2011 264.9 9.7 (211.6) 63.0 Charge/(credit) to income (36.9) 61.0 31.3 55.4 Credit to equity - (64.4) - (64.4) Foreign exchange movements 0.7 0.1 (0.4) 0.4 At 31 March 2012 228.7 6.4 (180.7) 54.4
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:
2012 2011 2010 £m £m £m Deferred tax assets (43.3) (30.0) (30.4) Deferred tax liabilities 97.7 93.0 63.9 54.4 63.0 33.5 2012 2011 2010 16PROVISIONS £m £m £m Insurance claims 218.4 221.0 243.9 Legal and other 19.9 26.4 51.4 FGW contract provision - 48.7 - Pensions 4.2 4.7 5.1 Non-current liabilities 242.5 300.8 300.4 FGW Insurance Legal contract claims and provision Pensions Total other £m £m £m £m £m At 1 April 2011 340.5 37.6 59.9 4.7 442.7 Charged to the income statement 139.0 7.5 - - 146.5 Utilised in the year (162.8) (21.1) (3.0) (0.5) (187.4) Notional interest 18.9 - - - 18.9 Foreign exchange movements 0.4 0.1 - - 0.5 At 31 March 2012 336.0 24.1 56.9 4.2 421.2 Current liabilities 117.6 4.2 56.9 - 178.7 Non-current liabilities 218.4 19.9 - 4.2 242.5 At 31 March 2012 336.0 24.1 56.9 4.2 421.2 Current liabilities 119.5 11.2 11.2 - 141.9 Non-current liabilities 221.0 26.4 48.7 4.7 300.8 At 31 March 2011 340.5 37.6 59.9 4.7 442.7 Current liabilities 131.3 5.4 - - 136.7 Non-current liabilities 243.9 51.4 - 5.1 300.4 At 31 March 2010 375.2 56.8 - 5.1 437.1 2012 2011 2010 17SHARE CAPITAL £m £m £m
Allotted, called up and fully paid: 482.1m Ordinary shares of 5p each 24.1 24.1 24.1 Number £m m At 31 March 2010, 31 March 2011 and 31 March 2012 482.1 24.1 2012 2011
18NET CASH FROM OPERATING ACTIVITIES £m
£m
Operating profit before loss on disposal of 447.0 313.0properties
Operating profit of discontinued operations (0.3)
1.0 Adjustments for: Depreciation charges 328.1 321.0 Capital grant amortisation (13.7) (8.0) Amortisation charges 30.9 42.9 Impairment charges - 19.5 Share-based payments 6.0 7.7
Loss on disposal of property, plant and equipment 3.8
3.7
Operating cash flows before working capital 801.8
700.8
Decrease/(increase) in inventories 0.6 (3.2) Decrease in receivables 34.0 25.9 Increase in payables 34.6 63.7
(Decrease)/increase in provisions (77.8)
0.4
Defined benefit pension payments in excess of (160.4) (43.5)income statement charge Cash generated by operations 632.8 744.1 Tax paid (17.7) (25.0) Interest paid (130.9) (155.2) Interest element of HP contracts and finance (8.8) (8.2)leases Net cash from operating activities 475.4
555.7
Responsibility Statement of the Directors on the Annual Report
The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 31 March 2012. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
* the Company and Group financial statements, prepared in accordance with UK
GAAP and IFRS respectively, give a true and fair view of the assets,
liabilities, financial position and profit of the Company and Group taken
as a whole; and
* the Directors Report contained in the Annual Report includes a fair review
of the development and performance of the business and the position of the
Company and the Group taken as a whole, together with a description of the
principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on 23 May 2012 and was signed on its behalf by:
Tim O'Toole Nick ChevisChief Executive Acting Finance Director
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