Shaping the future
of transport
FirstGroup plc
Annual Report and Accounts 2023
FirstGroup is a leading private sector provider of
public transport. We provide easy and convenient
mobility, improving quality of life by connecting
people and communities. Our services are a
vital part of society – transporting customers for
business, education, health, social and leisure
purposes. Our businesses are at the heart of our
communities, and the essential services we provide
are critical to delivering wider economic, social
and environmental goals.
We are FirstGroup
Shaping
the future
of transport
Introduction
FY 2023 highlights
01
Performance summary
02
Strategic report
A leading UK public transport operator
04
Positioned for the future
05
Chairman’s statement
06
Our markets
10
Business model
12
Chief Executive Officer’s review
14
Business review
19
Financial review
27
Key performance indicators
35
Responsible business
38
Climate‑related financial disclosures
57
Non‑financial information statement
66
Risk management
67
Viability and going concern
76
Our stakeholders
78
Section 172 statement
81
Decisions made during the year
82
Governance report
Governance report
84
Governance at a glance
85
Board
88
Nomination Committee report
96
Audit Committee report
99
Responsible Business Committee report
106
Remuneration Committee report
107
Directors’ report and additional disclosures
135
Directors’ responsibility statement
138
Financial statements
Independent auditors’ report
140
Consolidated income statement
150
Consolidated statement of
comprehensive income
151
Consolidated balance sheet
152
Consolidated statement of changes in equity
153
Consolidated cash flow statement
154
Note to the consolidated cash flow statement
155
Notes to the consolidated financial statements
156
Group financial summary
225
Company balance sheet
226
Company statement of changes in equity
227
Notes to the Company financial statements
228
Shareholder information
233
Glossary
235
Shaping the future
of transport
FirstGroup plc
Annual Report and Accounts 2023
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
01
FY 2023 highlights
This Annual Report and Accounts includes forward‑looking statements with respect to the business, strategy
and plans of FirstGroup and its current goals, assumptions and expectations relating to its future financial
condition, performance and results. Generally, words such as ‘may’, ‘could’, ‘will’, ‘expect’, ‘intend’, ‘estimate’,
‘anticipate’, ‘aim’, ‘outlook’, ‘believe’, ‘plan’, ‘seek’, ‘continue’, ‘potential’, ‘reasonably possible’ or similar
expressions are intended to identify forward‑looking statements.
By their nature, forward‑looking statements involve known and unknown risks, assumptions, uncertainties
and other factors which may cause actual results, performance or achievements of FirstGroup to be
materially different from any future results, performance or achievements expressed or implied by such
forward‑looking statements.
Forward‑looking statements are not guarantees of future performance, and shareholders are cautioned not
to place undue reliance on them. Forward‑looking statements speak only as of the date they are made and
except as required by the UK Listing Rules and applicable law, FirstGroup does not undertake any obligation
to update or change any forward‑looking statements to reflect events occurring after the date of this Annual
Report and Accounts. Nothing in this Annual Report and Accounts is intended as a profit forecast or estimate
for any period.
We have delivered a strong financial
performance in the financial year. In First Rail,
our teams have worked extremely hard
on our service objectives, and the notable
success of our open access operations
is further recognition of the considerable
expertise and ambition of our team. In
First Bus, we are seeing the benefits of
actions we have taken to transform the
business, and we are establishing ourselves
as leaders in decarbonisation as we
accelerate the electrification of our bus fleet
to deliver value not just for FirstGroup but for
all our stakeholders.
Our leading positions in bus and rail,
together with the strength of our balance
sheet will allow FirstGroup to create
long‑term shareholder value while delivering
the vital services and innovation that are
key to achieving society’s sustainability
and economic goals.
Graham Sutherland
Chief Executive Officer
“
■
Strong financial performance driven by
growth in First Bus and First Rail open
access operations:
– Group adjusted attributable profit more
than doubled, to £82.1m ahead of
expectations (FY 2022: £36.2m)
– adjusted EPS of 10.6p for continuing
operations (FY 2022: 1.6p)
– year end adjusted net cash of £109.9m
ahead of expectations
■
Strategy remains focused on continuous
improvement in operational delivery,
continued investment in growth
opportunities, delivering value to
shareholders and playing a leading role in
the decarbonisation of UK public transport
■
In line with this strategy delivered targeted
deployment of capital including:
– c.£37m of capital deployed on value
accretive acquisitions in First Bus before
FY 2024 funding
– accelerated investment in First Bus in
decarbonisation following successful
applications for government co‑funding;
c.£43m gross investment in electric buses
and depot infrastructure before funding
– final dividend of 2.9p recommended in
line with progressive growth and dividend
policy
– launch of £75m on‑market share buyback
programme in December 2022; £52.6m
completed as at 7 June 2023
– additional buyback of £115m proposed
following receipt of proceeds resulting from
North America exit
Cautionary comment concerning forward‑looking statements
Download
Group revenue
(continuing operations)
£4,755.0m
FY 2022: £4,591.1m
Group adjusted operating profit
(continuing operations)
£161.0m
FY 2022: £106.7m
Adjusted earnings per share
(continuing operations)
10.6p
FY 2022: 1.6p
Dividend per share
3.8p
FY 2022: 1.1p
Download here at: firstgroupplc.com/
investors/annual‑report‑2023
Introduction
FirstGroup Annual Report and Accounts 2023
02
FY 2023
(£m)
FY 2022
(£m)
Change
(£m)
Cont.
Disc.
Total
Cont.
Disc.
Total
Cont.
Disc.
Total
Revenue
4,755.0
4.0
4,759.0
4,591.1
996.9
5,588.0
163.9
(992.9)
(829.0)
Adjusted
1
operating profit
161.0
(6.6)
154.4
106.7
120.1
226.8
54.3
(126.7)
(72.4)
Group adjusted
1
attributable profit
82.1
–
82.1
36.2
–
36.2
45.9
–
45.9
Adjusted
1
EPS
10.6p
(0.9)p
9.7p
1.6p
8.6p
10.2p
9.0p
(9.5)p
(0.5)p
Dividend per share
3.8p
1.1p
2.7p
Adjusted
1
Net Cash/(Debt)
109.9
(3.9)
113.8
FY 2023
(£m)
FY 2022
(£m)
Change
(£m)
Statutory
Cont.
Disc.
Total
Cont.
Disc.
Total
Cont.
Disc.
Total
Revenue
4,755.0
4.0
4,759.0
4,591.1
996.9
5,588.0
163.9
(992.9)
(829.0)
Operating profit
153.9
31.3
185.2
122.8
683.3
806.1
31.1
(652.0)
(620.9)
Profit before tax
128.7
654.1
(525.4)
EPS
11.8p
60.2p
(48.4)p
Net debt
1,269.1
619.0
650.1
– Bonds, bank and other debt net of (cash)
(479.5)
(464.2)
(15.3)
– IFRS 16 lease liabilities
1,748.6
1,083.2
665.4
1
Alternative Performance Measure (APM). Reconciliation of APMs to statutory measure can be found in note 4 on pages 168 to 171.
‘Cont.’ refers to the Continuing operations comprising First Bus, First Rail and Group items. ‘Disc.’ refers to discontinued operations, being First Student, First Transit
and Greyhound. Statutory operating profit from discontinued operations of £683.3m includes the gains on sale of First Student, First Transit and Greyhound US.
First Bus
■
1.1m passenger journeys a day (FY 2022: 0.9m); 168m service miles
operated in FY 2023 (FY 2022: 185m)
■
Passenger volumes increased 20% vs. FY 2022 levels, with commercial
and concessionary volumes up 21% and 19%
■
Total passenger revenue increased to £660.0m (FY 2022: £570.0m),
more than offsetting the reduction in government funding, which
decreased by £42.8m to £86.5m
■
Improvement in operating margin in H2 2023 to 7.9% despite ongoing
inflationary pressures due to:
– increased passenger demand
– improved driver availability and operational improvements
– network and fare realignments to better match services to demand
– regional management restructure completed to drive further
operational efficiencies
■
Acquisition of Ensignbus in Essex, Airporter in Northern Ireland and the
Metrobus service in Bristol
■
Disposal of First Scotland East and closure of Southampton‑based
operations
■
Accelerated investment in electrification of fleet and infrastructure:
– gross investment of c.£43m in electric buses and depot infrastructure
before funding
– 83 electric buses delivered in FY 2023 and 58 ultra‑fast chargers
installed
– installation of solar panels at 20 depots completed in FY 2023
– net investment of c.£105m committed in FY 2024 on First Bus
decarbonisation, including the installation of 143 ultra‑fast chargers,
supported by government co‑funding of £82m
First Rail
■
263m passenger journeys in FY 2023 (FY 2022: 201m); TOCs: 261m and
open access 2.2m
■
Open access operations performance ahead of expectations,
underpinned by strong leisure volumes
■
Management‑fee based contracts aggregate financial performance
broadly in line with expectations; focus remains on operational delivery
for passengers across all our services
■
Great Western Railway awarded National Rail Contract to June 2025
with an option for the DfT to extend it to June 2028
■
South Western Railway contract extended to May 2025
■
West Coast Partnership (incorporating Avanti West Coast) contract
extended October 2023
■
TPE contract not extended by DfT; operations were handed to the
Operator of Last Resort on 28 May 2023
Corporate
■
Delivered a further c.£5m in annual central cost savings as previously
guided
■
£122m realised from sale of almost all remaining legacy
Greyhound properties
■
First Transit earnout crystallised following completion of sale of First
Transit business by EQT Infrastructure in March 2023 with estimated
proceeds of c.$89m anticipated in H1 FY 2024
■
£32m of the £75m on‑market share buyback programme completed by
year end
■
£15.7m of the Group’s 2024 6.875% bonds repurchased in Bank of
England bond auction
Key developments
Performance summary
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
03
Strategic
report
London
York
Aberdeen
Edinburgh
Newcastle
Hull
York
Leeds
Sheffield
Leicester
Ipswich
Slough
Basildon
Portsmouth
Glasgow
Cork
Galway
Belfast
Bristol
Manchester
Bradford
Stoke-on-Trent
Worcester
Penzance
Dublin
Weymouth
Plymouth
Crewe
Weston-super-Mare
Swansea
Cardiff
Truro
Bath
Norwich
Chelmsford
London
Birmingham
Southampton
Oxford
Avanti West Coast (Avanti)
Great Western Railway (GWR)
South Western Railway (SWR)
TransPennine Express (until 28 May 2023)
Hull Trains
Lumo
First Bus operations
Strategic report
FirstGroup Annual Report and Accounts 2023
04
First Bus
First Rail
A leading UK public
transport operator
FirstGroup is a leading private sector provider of public transport. We provide easy and
convenient mobility, improving quality of life by connecting people and communities.
1.1m
passenger journeys
a day in FY 2023
Fleet of more than
4,500
buses operated
51
depots and outstations
12,800
employees
Approximate First Bus
market share of UK market
outside of London (%)
First Bus
20%
Others
80%
772,000
passenger journeys
a day in FY 2023
Fleet of more than
3,500
locomotives and
rail carriages operated
408
stations
17,500
employees
Passenger revenue base of
First Rail operations (%)
Leisure
64%
Business
16%
Commuter
20%
Business split
Revenue (as % of Group)
First Bus
18%
First Rail
82%
Adjusted operating profit
(as % of Group)
First Bus
32%
First Rail
68%
First Bus is the second largest
regional bus operator in the
UK, transporting hundreds
of thousands of passengers
a day.
We serve two‑thirds of the UK’s
15 largest conurbations, with
a fifth of the market outside
London. We are a leading
operator in the majority of
our local areas, including major
urban centres such as Glasgow,
Bristol and Leeds.
Read more about First Bus on
page 19
First Rail is the UK’s largest
rail operator, with a track record
in running all types of passenger
rail: long‑distance, commuter,
regional and sleeper services.
We have three Department
for Transport‑contracted
operations: West Coast
Partnership (WCP) which
includes Avanti West Coast
(Avanti), Great Western Railway
(GWR), South Western Railway
(SWR), and two open access
routes: Hull Trains and Lumo.
Read more about First Rail on
page 23
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
05
Positioned for the future
We are a focused and resilient business,
with a strong platform to grow as the partner of
choice for innovative and sustainable transport.
We have a clear purpose, a strong balance sheet, and a robust position from which
to deliver long‑term, sustainable value for all of our stakeholders based on:
Leading positions
alongside our depth of experience and
proven expertise in bus and rail transport
Current inflection point for
growth in public transport as
a critical enabler of society’s
sustainability goals
underpinned by supportive governments,
social policies and investment
Read more about sustainability on page 38
Digital innovation
enabling us to attract more
customers and enhance
business efficiency, flexibility
and profitability
First Bus:
a more agile business, ready
to complete trajectory to
10% margin
Read more about First Bus
on page 19
First Rail:
well placed for lower risk,
long‑term, cash generative
rail operations with the
increasing contribution of
open access and additional
service revenues
Read more about First Rail
on page 23
Accelerating our investment in decarbonisation
to deliver value to all of our stakeholders
and maximise the opportunities for our business in the transition to a low‑carbon economy
Read more about decarbonisation on page 43
Strategic report
FirstGroup Annual Report and Accounts 2023
06
Chairman’s statement
FirstGroup has a clear purpose to
provide vital transport services that
connect communities, which are
critical to ensuring local economies
are, and remain, vibrant and robust.
David Martin
Chairman
In last year’s annual report I highlighted that the
actions we had taken to divest the Group of its North
American assets would create a focused and resilient
business, with a strong platform to drive value for all
our stakeholders. I am pleased to say that the 2023
financial year has seen FirstGroup further consolidate
the significant evolutionary steps of the last two years,
resulting in a strong financial performance, driven
by growth in First Bus and First Rail open access
operations, despite ongoing industry wide economic
and industrial relations challenges.
Among the highlights from the year that you can read
about elsewhere in this annual report, I am particularly
pleased that our close partnerships, working with
governments at all levels, is leading to the introduction
of 600 zero emission buses by March 2024 as First
Bus accelerates the trend to zero emission vehicles
by 2035.
Both commercial and concessionary First Bus
passenger volumes have increased by more than
20% compared to last year’s levels, and we are
seeing improved driver availability and operational
improvements, as well as network and fare
realignments to better match services to demand.
We have deployed capital in First Bus on targeted
growth acquisitions in Northern Ireland and Essex,
and we have been successful in developing our
pipeline of adjacent bus businesses.
In First Rail, we were able to secure a new National
Rail Contract for GWR and extensions to our WCP
and SWR contracts, although we were disappointed
to learn recently that the contract for TPE would not
be extended. The rail industry is entering a period
of change and we welcome recent Government
comments that the private sector will have an
enhanced role to play in the sector’s recovery
after some very challenging years. We urge the
Government to engage with the market on the steps
that can be taken, without primary legislation, in order
to achieve this.
Industrial action at train operating companies and
Network Rail has been a feature of this year. The
industry’s focus remains on reaching a fair deal
which both rewards our people with a pay rise, and
delivers the reforms needed to improve reliability and
punctuality across the network. Rail trade unions
RMT, TSSA and Aslef have called a number of strikes
or other action throughout the year, primarily over
pay issues, which has led to significant disruption for
everyone, especially our passengers. We have worked
alongside other rail operators as part of the umbrella
trade body the Rail Delivery Group (RDG) to negotiate
and attempt to reach solutions to these disputes,
putting fair and reasonable offers to all three. Notably,
TSSA members were able to vote on the proposals,
accepted the deal and have ended their dispute. In
recent discussions with the RMT, the RDG put forward
an industry‑wide resolution proposal agreed with their
negotiating team, which would have resolved this
dispute and given our lowest paid staff a rise of up to
13%. Yet the leadership of both the RMT and Aslef
unions refuse to put the offer to a democratic vote so
that members can have their say.
In the meantime, we have collaborated closely with
government and our industry partners to do all that
we can to minimise the effects on our customers and
provide as many trains as possible.
With rail industry‑wide passenger volumes and
revenues still below pre‑pandemic levels and many
travel patterns changing, the industry as a whole
needs to deliver long overdue and much needed
workforce reforms, focused on enabling a responsive
railway and improving passenger experience on
every day of the week. The railway industry considers
these vital and long‑overdue changes to working
arrangements necessary to fund a reasonable pay
deal and secure the sustainable future of the sector
without placing pressure on public finances.
“
FirstGroup has further
consolidated the
significant evolutionary
steps of the last two
years, resulting in a
very strong financial
performance, driven
by growth in First Bus
and First Rail open
access, despite ongoing
industry wide economic
and industrial relations
challenges.
“
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
07
A real success story for us has been the sustained
popularity of our open access businesses Hull Trains
and Lumo. The latter saw its one millionth passenger
in the year and helped to push rail’s market share on
the key flow between London and Edinburgh above
50% for the first time.
Away from the UK, we took our final significant steps
in leaving the North American market, with the sale of
Greyhound’s legacy properties and the crystallisation
of the First Transit earnout occurring during the year.
Our Purpose
FirstGroup has a clear purpose to provide vital
transport services that connect communities.
Public transport is an environmentally‑friendly sector
critical to resolving some of society’s most pressing
challenges, including climate change, air quality and
congestion. The Group’s bus and rail operations
offer value for money, easy and convenient choices
for customers, within and between some of the UK
and Ireland’s largest towns and cities. The services
we offer are critical to ensuring local economies
are, and remain, vibrant and robust and play an
important role in supporting national development
and sustainability aims.
Capital allocation and dividend
Following the completion of the sale of the North
American divisions, in FY 2022 the Board authorised
the de‑risking of the balance sheet through a
substantial contribution of £337m to the UK pension
deficit (including £117m in escrow), reduced debt
including repayment of the Covid Corporate Financing
Facility to the UK Government, and addressed other
longstanding liabilities. The Board subsequently
looked at options for the appropriate capital structure
and distribution policy for the Group going forward.
The Board concluded that a well‑capitalised, de‑risked
balance sheet will provide FirstGroup with flexibility
to withstand economic uncertainty, to adapt to new,
post‑pandemic travel patterns, pursue its growth
strategy and support a progressive annual dividend
as described in more detail below.
As a result of these considerations the Group has
adopted a balanced capital allocation policy, including
commitments to decarbonise the First Bus fleet,
maintain its progressive dividend policy and to review
targeted investment in strategically and financially
accretive growth opportunities.
In December, we completed the sale of all but two in
the portfolio of our legacy US Greyhound properties,
with net proceeds of £122m. Accordingly, following the
receipt of these proceeds, and in line with our balanced
capital allocation policy, we began a £75m on‑market
share buyback programme and also announced
that £15.7m of the Group’s 2024 bonds had been
repurchased in a Bank of England bond auction.
Following the crystallisation of most of the residual
values from the North American divisions, combined
with the well‑capitalised balance sheet and cash
generative business, the Board has recommended
an additional share buy back programme of £115m
that is subject to renewal of authority at the Group’s
Annual General Meeting.
In the context of a competitive process to seek the most
attractive proposal for the sale of the North American
divisions, an earnout structure was previously agreed
for the First Transit business, which would benefit
shareholders in the Group. EQT Infrastructure’s sale
of First Transit to Transdev North America completed
during FY 2023 and as such, the Group is entitled
to an earnout consideration which is calculated as a
percentage of the realised equity value on the disposal
and contemplating the cash flows generated by First
Transit since March 2021 to completion. The Group
currently anticipates receipt of the First Transit earnout
consideration estimated at $89m in H1 2024.
Final dividend
2.9p
per share
proposed by Board
Strategic report
FirstGroup Annual Report and Accounts 2023
08
Chairman’s statement
continued
In light of the Group’s financial performance for
FY 2023 and in line with its policy of an annual payout
around three times covered by Group adjusted
attributable profit, the Board has proposed a final
dividend of 2.9p per share, resulting in a total dividend
payment of c.£20m, to be paid on 18 August 2023 to
shareholders on the register at 14 July 2023, subject
to approval of shareholders at the 2023 AGM.
The Board and corporate activity
We were very pleased to appoint Graham Sutherland
to the role of Chief Executive Officer from 16 May 2022.
Graham has an established record in strategic
development, as well as engaging a diverse range
of stakeholders including consumer, business and
public sector customers, which he has continued
since joining the Group. The Board and I have worked
closely with Graham to identify the key drivers and
means to enhance our businesses, and to consider
opportunities that exist for growth to maximise
the potential for future value creation. Shortly after
Graham’s appointment, the interim period during
which I acted as Executive Chairman came to an end
and I resumed the role of Non‑Executive Chairman.
From May 2022 the Company received a series of
unsolicited, conditional proposals from I Squared
Capital Advisors (UK) LLP in relation to a possible
offer to acquire the entire issued, and to be issued,
share capital of the Company. The unsolicited
offers from I Squared resulted in a final proposal
of 135p per FirstGroup share together with further
contingent value from the First Transit earnout. The
Board, having carefully evaluated the proposals
together with its advisers, concluded that the cash
component significantly undervalued FirstGroup’s
continuing operations and its future prospects, and
the contingent value did not provide shareholders with
sufficient certainty. Following this, I Squared told us in
August 2022 that it did not intend to make a firm offer
for FirstGroup.
After a review of the Board’s oversight of environment,
social and governance commitments to shareholders,
we established the Board’s Responsible Business
Committee to oversee the Group’s practices and
performance with respect to health, safety, diversity
and inclusion and sustainability, including our transition
to net‑zero. We have seen good progress in these
areas during the year. The new Committee held
its inaugural meeting in May 2022 and reports to
shareholders for the first time in this report.
The Group is committed
to creating a more
diverse and inclusive
business in what has
long been seen as a
‘traditional’ sector.
“
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
09
Sustainability
FirstGroup is a major employer in all UK regions
and also in Ireland, with one third of the Group’s
employment falling within the 25% of UK local
authority districts that have the highest rates of
unemployment. The Group is committed to creating
a more diverse and inclusive business in what has
long been seen as a ‘traditional’ sector. Our recently
launched Senior Women’s Leadership programme is
designed to accelerate the readiness of women for
senior leadership roles across FirstGroup by building
advanced leadership capabilities and personal
confidence. Our Step Up/Step Forward and Reach
Up/Reach Forward programmes continue to make a
significant contribution in our drive to promote better
gender and ethnic minority representation across
our senior and middle management populations and
of the current population that have gone through
these programmes, around a third have either been
promoted or given a development role.
We have been making steady progress on attracting
and hiring more women and employees from ethnically
diverse backgrounds into the business. For the roles
advertised over the last year, we have again increased
the proportion of applications from women and ethnic
diverse backgrounds and from those hired, more than
a fifth were women and more than a fifth were from an
ethnically diverse background.
FirstGroup began implementing the Task Force
on Climate‑Related Financial Disclosures (TCFD)
recommendations in 2021, a year ahead of the
regulatory mandate, and has built on this during
the FY 2023 reporting cycle. At the Group level, we
have set a science based emissions reduction target
aligned with a 1.5°C ambition for Scope 1 and 2, as
well as emissions reduction and supplier engagement
targets for Scope 3. Our targets have recently been
approved by the Science Based Targets initiative.
We also continue to strengthen our sustainability
governance processes. During FY 2023 we have
commenced work with a leading global consulting firm
to facilitate further integration of climate considerations
into our business processes through a series of
tailored workshops and briefing sessions with key
functions across the Group as well as the Board. We
are also developing a Group‑wide transition plan, in
line with the upcoming Transition Plan Taskforce (TPT)
recommendations and I look forward to reporting
further progress in this regard.
Following the Remuneration Committee’s review of
the role of sustainability and climate‑related measures
within the Group’s remuneration approach in FY 2022,
our annual and long‑term incentive plans are now
linked to carbon intensity and the electrification of our
transport services. This, of course, further reinforces
our commitment to incorporating sustainability issues
into core business decisions.
The future of the Group
Bus and rail networks are critical long‑term green
infrastructure and play a key role in our communities.
Public transport connections offered by the Group’s
services are essential for vibrant local economies and
governments at all levels across the country. Transport
is the largest contributor to our domestic greenhouse
gas emissions, accounting for more than a quarter
of the UK’s total, and private cars are the source for
more than half of the transport sector’s emissions. It
is incumbent on the sector to redouble efforts to get
people out of those cars and planes onto buses and
trains. For FirstGroup and other transport operators,
this means doing everything we can to provide
customer‑friendly, reliable and accessible services,
to make buses and trains a convenient choice for
everyone, whether they are regular passengers or
not. As for the Government, they are backing the
importance of public transport and encouraging more
people to use buses and trains, and they are putting
in funding to support this call. Longer‑term funding
strategies are crucial for all bus and rail operators, as
the industry adapts to new travel patterns and works
to improve and grow public services in the UK.
In addition to the Group’s services being a critical
enabler for society meeting its broader environmental,
social and governance objectives, as a transport
operator, the Group’s commitment to a zero‑emission
trajectory for its vehicle fleets is of vital importance.
The supportive UK policy backdrop and the growing
focus on innovation for the benefit of our customers
and the sustainability of our business gives us
encouragement for the Group’s growth potential.
Our people
During the year the Group’s 30,000 employees have
seen a considerable change from the post‑pandemic
situation into something approaching a new normal,
as passengers have been returning in numbers. There
has also been a very challenging environment due to
inflationary pressures and sustained industrial action.
Our people are at the heart of our business and we are
continuing to look for ways in which we can support
them, particularly those most affected by the current
cost of living crisis. I would like to thank all of our
employees, on behalf of the Board, for continuing to
support our customers and communities during this
difficult period.
Conclusion
Transport is an important part of everyday life, and
people travel for a huge variety of business and
leisure reasons, all of which are essential to the
economy. The vital role of public transport in the
UK was made clear during the pandemic and the
subsequent recovery, and governments at all levels
understand the importance of the sector. FirstGroup
is a cash generative, well capitalised business with
a healthy and de‑risked balance sheet and leading
positions in our core UK bus and rail markets. The
Group has a strong platform both for delivery and
to maximise organic and inorganic opportunities
that exist for growth, including the development of
ancillary businesses in adjacent markets. The Board is
confident the transformation of the Group undertaken
in the last two years is delivering and will continue to
deliver significant value for FirstGroup shareholders.
There are an enormous number of opportunities
ahead of us as a leader in public transport and I, and
my fellow Board members, are very positive about the
Group’s future.
David Martin
Chairman
8 June 2023
30,000
people employed
by the Group in the
UK and Ireland
Strategic report
FirstGroup Annual Report and Accounts 2023
10
Our markets
As a market leader in the UK
bus and rail sectors, we are
well placed to work closely with
government and our partners
across the industry to deliver
the vital bus and rail services
that connect people and
communities and to respond to
megatrends including the net
zero and environmental agenda,
digitalisation and social inclusion.
The market
In a typical year, around 2.6bn passenger
journeys are made on bus services outside
London, generating approximately £4.3bn in
revenue.
Local bus services (with the exception of
London, Manchester and Northern Ireland)
have been deregulated since the 1980s,
with most services provided by private
operators. For the majority of local bus
services, operators set timetables and fares
on a commercial basis. A proportion of local
services are operated for local authorities on
a tendered basis. The market is competitive,
and, during a typical year, a number of
operators will enter and leave the market.
Customers
A significant proportion of customers use
local bus services to commute to work or
education and for shopping and leisure
purposes. As customer trips recover from
the lows seen during the pandemic, travel
habits have changed. Individual customers
are travelling less frequently while an
increasing number of younger customers are
using buses.
Megatrends
There is significant Government recognition
of the critical role played by the bus industry
in economic, social and environmental
agendas for a sustainable future. A range
of emergency and recovery Government
funding schemes were put in place to
support the continued operation of regional
bus services during the period of pandemic
travel restrictions and the subsequent return
of demand. Funding has also been allocated
to schemes aimed at stimulating passenger
demand, including free travel for Under 22s
in Scotland and the £2 fare cap in England
(rising to £2.50 from November 2023 to
November 2024).
Partnerships between operators and
local authorities are a core principle
to support service delivery, minimise
congestion, improve local economies and
drive innovation and investment. This was
demonstrated by the National Bus Strategy
announced in March 2021, which included
a multi‑billion pound funding package to
support simpler fares, improved services
and thousands of new green buses via local
authority‑led enhanced partnerships or
franchising.
In support of the decarbonisation agenda,
Westminster and the devolved governments
also have a number of co‑funding grant
schemes that are aiding the industry’s
investment in low and zero emission buses.
We expect these trends to continue in the
coming years.
Read more about sustainability megatrends in
the Responsible business section on page 38
First Bus
We are the second largest
regional bus operator in the
UK, serving two‑thirds of
its largest conurbations.
Market attractions
■
Bus services are the quickest and most
cost‑effective mechanism to achieve modal
shift from private car use to lower emissions
and improve congestion in towns and cities
■
Bus travel is relatively low cost per user
journey and therefore an important underpin
for social inclusion policies and the levelling
up agenda
■
Using enhanced data there is increasing
visibility of large numbers of customers who
are regular but infrequent bus users enabling
the development of new propositions
to stimulate bus use. This includes
opportunities in the youth demographic
where car ownership is falling and
customers are increasingly environmentally
aware
■
Growing digital capabilities provide
significant opportunities to optimise pricing,
improve service delivery, and create more
efficient operations.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
11
Open access operators run services on a
different model. Track access agreements
with Network Rail set out where and how
often they run trains; with agreements
approved by the Office of Rail and Road.
Open access routes are typically awarded
where there is a clear business case that the
route will promote competition for the benefit
of rail users and will generate sufficient new
revenue.
Rail track and infrastructure (signalling and
major stations) are owned and managed by
Network Rail. TOCs typically lease rolling
stock from leasing companies and stations
from Network Rail. On some passenger
routes there is competition from other
rail services and, to a lesser extent, from
long‑distance coach services and airlines.
Customers
Rail is generally categorised into three
sectors: London and South East commuter
services, regional, and long distance.
Certain networks also offer sleeper services.
Parts of Great Western Railway fall into all
four categories. South Western Railway’s
customers are largely commuters. Avanti
West Coast is mainly a long distance intercity
operation, while Hull Trains and Lumo cater
to mainly long distance and leisure travellers.
Megatrends
The UK Government has a goal to remove all
diesel‑only trains from service by 2040 and
a number of operators now have bi‑mode
trains in service which can run under both
electric and diesel power, as well as fully
electric trains, including Lumo’s all electric
fleet.
Open access operators who retain all
revenue and cost risk and opportunity, are
benefiting from leisure passenger volumes
and have not only encouraged passengers
to travel by train as opposed to flying on
some routes, but they have also increased
demand on some of the TOCs’ routes.
The UK Government has provided significant
support to the rail industry through one of
the most challenging periods in its history as
it adapts to post pandemic travel patterns
and continued industrial action. The private
rail sector has an important role to play
alongside the Government, in reinvigorating
the rail industry, driving innovation and
attracting more customers to the railway.
Community rail is important to foster relations
within the communities that we serve. Our
local partnerships have helped to improve
stations as well as encourage rail use.
Read more about sustainability megatrends in
the Responsible business section on page 38
Market attractions
■
Rail is a fundamental part of the UK’s
transport infrastructure, supporting critical
commuting and leisure passenger flows
■
The market offers more than £9bn of
contract‑backed passenger revenue in
a typical year through around 17 major
contract opportunities
■
New contracts have no revenue risk and
clear performance‑based fee opportunities,
with low capital intensity
■
The environment is regulated, with limited
cost risk protected by annual budgeting.
First Rail
We are the UK’s largest
passenger rail operator,
with a track record in running
all types of railway service.
The market
Passenger rail services are primarily provided
by private Train Operating Companies (TOCs)
through contracts awarded by the relevant
authority. They may also be provided on an
open access basis. There are currently 17
TOCs on contracts awarded by government
bodies and four open access operations
in the UK. The majority of the service
elements the TOCs provide to customers are
mandated as part of their contracts. First Rail
bids for contracts against other current UK
rail operators and public transport operators
from other countries.
At the start of the pandemic the Government
moved the contracted part of the industry to
a fee‑for‑delivery based model, rather than
the previous system under which operators
were required to take considerable revenue
and cost risk. The contracting system is
currently undergoing a transition to a new
structure intended to formalise this change
going forward, with operators more heavily
incentivised to improve passenger service
metrics, and a lower risk/lower reward
financial profile.
Strategic report
FirstGroup Annual Report and Accounts 2023
12
Business model
Our business model is designed to deliver value to a wide range of stakeholders by providing the vital
services and innovation that are key to achieving society’s social, economic and environmental goals.
Key strengths and resources
Our business
Our people
Our 30,000 employees are at the heart
of our business and have the skills,
expertise and knowledge to drive our
future success.
Vehicle fleets and depots
We operate more than 4,500 buses
and more than 3,500 locomotives
and rail carriages across the UK.
Reputation for safe and reliable
transport services
Our commitment to our customers,
employees and others on safety and
reliability is an unwavering focus for
the Group.
Relationships with key
local authority and national
government stakeholders
Our long‑established relationships
and deep engagement with government
and decision makers at all levels are
essential to our success.
A stable financial platform
Our business is cash generative,
and we maintain an investment grade
credit rating to enable long‑term
service continuity.
Mobility
Beyond
Today
C
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e
s
Mobility
Beyond
Today
O
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y
We act in accordance with our strategic
Mobility Beyond Today sustainability
framework which drives innovation for
customers and ensures we meet our
societal commitments.
The framework is aligned to
six United Nations Sustainable
Development Goals.
Setting the highest
standards
Dedicated
to safety
Our efforts are underpinned by our vision and values
We provide easy and convenient mobility, improving
quality of life by connecting people and communities.
Supportive
of each other
Committed to
our customers
Accountable
for performance
Under the terms of the
concession‑based National Rail
Contracts that have replaced
the previous UK passenger rail
franchising structure, the TOCs bear
no revenue risk and very limited cost
risk under an annual budget agreed
with the DfT. They earn an annual
management fee for service delivery,
with the opportunity to earn additional
performance‑based incentives. Open
access operators retain all revenue and
cost opportunity and risk.
First Rail
Revenues are principally derived from
fares comprising passenger ticket
sales and concessionary fare schemes
(reimbursements by local authorities for
passengers entitled to free or reduced
fares); and funding revenue, which
includes recovery funding and Bus
Service Operators Grant (‘BSOG’) fuel
reimbursement payments. Revenue is
also generated through tendered local
bus services and bespoke contracts for
businesses or one‑off events, as well as
tendered services for local authorities
such as Park & Ride schemes.
First Bus
Read more about our sustainability
framework on page 39
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
13
Progress in FY 2023
Value creation for stakeholders
Section 172 statement
Stakeholders
The Board is responsible for promoting
the success of the Company over
the long term, having due regard for
all stakeholders
We interact with a huge range of
stakeholders every day.
1. Customers
Delivering safe, reliable, value for money
and easy‑to‑use travel services for millions
of passengers each year.
In a challenging inflationary environment, in First Bus we worked with local authority
and government partners to ensure that our ticketing and fare options remain
affordable, take advantage of the latest technology, and are better matched to
evolving travel patterns. In First Rail we introduced new fleets, trialled low‑cost flexible
fares, and put in place a number of tools to improve accessibility and support all of
our customers on our trains and at our stations.
390m bus passenger journeys and 263m rail passenger journeys recorded
in FY 2023.
2. Investors
We aim to deliver sustainable financial
performance and long‑term value creation,
with a capital allocation policy balanced between
investment, growth, and shareholder returns.
In line with our disciplined capital allocation policy, in FY 2023 we declared a full year
dividend of 3.8p per share, launched a £75m on‑market share buyback programme,
made a strategically and financially accretive acquisition in Bus and, following
successful co‑funding applications, we accelerated investment in the decarbonisation
of the bus fleet and infrastructure.
c.£32m of £75m buyback programme completed in FY 2023.
Announced proposed further additional buyback of £115m.
3. Government
Operating efficient and reliable transport services
that help to meet wider policy objectives such as
levelling up, decarbonisation and air quality.
We worked closely with the Westminster and devolved governments, as well as with
local authorities across the country, to introduce zero emission fleets at First Bus and
progress government funding initiatives to encourage passengers to return to bus
travel. In First Rail, despite the challenging industrial relations environment, we worked
with government and industry partners to encourage passengers to return to our
networks through a variety of service improvements and ticketing initiatives.
In March 2023 we joined a group of leading Scottish businesses to launch
the Climate Action Hub to support local SMEs to better understand climate
risk and develop decarbonisation plans.
4. Employees
Many thousands of our employees work in
depots, stations and offices. They are the face of
FirstGroup, delivering great service to our millions
of passengers.
We have established two groups to drive our equality, diversity and inclusion agenda
and the Board’s Responsible Business Committee reviews our practices in supporting
our people. Our Step Up/Forward and Reach Up/Forward programmes continue
to make a significant contribution in our drive to promote better gender and ethnic
minority representation across our management populations. We have once again
increased the number of apprentices training in our industry leading programmes.
Over 850 apprentices at the end of March 2023.
5. Communities
Supporting stronger economies and local
communities by enhancing our engagement
activities, improving our services and
supporting social inclusion.
We have continued to support our communities through partnerships and initiatives
with local community groups and charities. Following an employee vote, First Bus
chose Macmillan as the division’s charity partner for the next three years. In First Rail,
our TOCs worked alongside the Department for Transport on local community rail
programmes. During the year our rail TOCs supported the allocation of funds to over
sixty community rail partnerships and worked with community partners to ensure the
successful delivery of their initiatives.
We invested £617,00 in our local communities in FY 2023.
6.
Strategic partners and suppliers
Building long‑term relationships, optimising value,
mitigating risk and increasing sustainability and
ethical standards throughout our supply chain.
During FY 2023 we significantly increased engagement with our largest suppliers
to support carbon reporting and decarbonisation initiatives in order to set Science
Based Targets. We expect to continue broader and more regular engagement with
key suppliers on sustainability going forward.
Read more on page 78
Read more on page 81
Strategic report
FirstGroup Annual Report and Accounts 2023
14
Revenue (as % of Group)
First Bus
18%
First Rail
82%
Chief Executive Officer’s review
Performance in FY 2023 in the face of the ongoing
industry wide challenges has demonstrated the value
and increasing diversity of our revenue streams,
which together with our strong balance sheet and
breadth of capabilities underpin our robust platform
to deliver further growth and value.
Graham Sutherland
Chief Executive Officer
Introduction
I am pleased to report a strong financial performance
by the Group in FY 2023, despite the ongoing
economic and industrial relations challenges. Growth
in First Bus in the second half of the year and the
outperformance of our open access rail operations
have resulted in the Group more than doubling its
adjusted attributable profit for the year, to £82.1m.
We ended the year with adjusted net cash of £109.9m,
after deploying growth capital of £37m and capital
expenditure of £94m in First Bus, and launching a
£75m on‑market share buyback programme. Both of
these are in line with our strategy of investing in growth
and decarbonisation in Bus and returning value to our
shareholders. The Board is also recommending a final
dividend of 2.9p (FY 2022: 1.1p) resulting in a full year
dividend of 3.8p (FY 2022: 1.1p).
In First Bus, as the regional bus market gradually
returns to a more commercial model and we continue
the transformation of the business, our performance
in the second half of FY 2023 has reinforced our
confidence in the scope for significant earnings growth
and margin enhancement over time, and we are
working hard to deliver this.
Our First Rail open access operations have reported
excellent progress during the year, with both Hull
Trains and Lumo delivering revenue and profits ahead
of our expectations, underpinned by strong leisure
passenger demand. In its first year of operation,
Lumo carried more than a million customers, many of
whom would otherwise have flown between London
and Edinburgh at a far greater environmental cost.
The notable success of our open access operations
has reinforced that, as the largest private sector
rail operator in the UK, we have the experience
and entrepreneurial spirit to resolve challenges and
innovate in the rail sector for the future and encourage
passengers back to the railway.
The DfT management fee‑based contracts
experienced significant industrial relations challenges,
most notably at Avanti and TPE. Our teams have
worked extremely hard to address the issues they have
faced and deliver their agreed plans to restore services
to the levels that our passengers rightly expect.
The past three years have been among the most
challenging in the history of the UK’s rail industry,
with it adapting to post pandemic travel patterns
and continued industrial action which has caused
significant disruption for rail passengers and
businesses across the country. We welcomed the
recent position articulated by the Secretary of State
highlighting that going forward, there will be an
enhanced role for the private sector, to reinvigorate
the rail industry, drive innovation and attract more
customers to the railway and we urge the Government
to engage with the industry on the steps that can be
taken, without primary legislation, in order to achieve
this. First Rail has been a market leader in UK rail
for many years and we will play a significant role in
the industry as it evolves; we remain committed to
working closely with government and our partners to
deliver a successful railway that serves the needs of
our customers and communities.
Operational highlights – First Bus
The overall performance of our First Bus business
is predicated on running better quality mileage by
using our enhanced data to align services to demand,
implement smarter fares, and drive efficiencies across
our operations. The division’s strong performance in
FY 2023 has demonstrated that we are achieving this.
The division’s total revenue increased significantly in
FY 2023, to £902.5m, from £789.9m in FY 2022. Total
passenger revenue increased by £90.0m to £660.0m,
more than offsetting the reduction in government
funding, which decreased by £42.8m to £86.5m.
The division reported an adjusted operating profit
of £58.4m for the full year (FY 2022: £45.2m) and its
operating margin of 7.9% in the second half of the
year was well ahead of our full year margin of 5.7%
in FY 2022.
“
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
15
Total passenger volumes increased by 20%
from FY 2022 levels during the year. The £2 fare
cap scheme in England that was introduced
in January 2023 and recently extended to
November 2024, with an increase in the cap to £2.50
from November 2023, and the free travel for Under
22s scheme in Scotland, in place since January 2022,
have both positively impacted volumes.
We have also benefited from improved driver
recruitment in many of our locations, the yield
and pricing actions we made during the year as
permitted under the continued government funding,
further realignment of our network to better align
services to demand and the implementation of our
regional management structure to deliver further
operational efficiencies.
Our enhanced data and digital capabilities are a key
part of the transformation of our business. They are
providing unprecedented granular insight that is now
driving our commercial decisions, allowing us to
deliver our pricing strategy and to have more informed
conversations with our local authority partners. Around
80% of our ticket transactions are now digital and
we recently became the first major UK bus operator
to install ‘tap on tap off’ technology on an entire bus
fleet, allowing for improved customer convenience and
distance‑based fares, as well as enhanced data for
the business.
We have also successfully diversified and increased
our revenues from our adjacent services. These
businesses reported a good financial performance
in FY 2023, aided by the first full year of our 100%
ownership of Somerset Passenger Solutions (‘SPS’)
and the acquisition of Airporter in Northern Ireland in
October 2022. The adjacent bus services market in
the UK is considerable, and we are actively reviewing
a pipeline of opportunities to increase our presence
in the market, including the recent award of additional
contracts for a large logistics provider and for East
Midlands Airport and of course, through the recently
completed acquisition of Ensignbus.
Regional bus operators have welcomed the DfT’s
recent two‑year funding settlement for operators
in England, demonstrating a strong recognition
of the value of buses to the economy and to local
communities. It will also enable bus operators and
local authorities to plan, promote and grow services
with greater confidence and with an extended period
of clarity. The Scottish Government has also recently
announced the launch of a second phase of zero
emissions funding for bus operators and, in Wales, the
Government continues to work with bus operators and
local authorities on a detailed strategy to deliver on its
long‑term ambitions for bus to support climate change
and economic strategy.
80%
of our First Bus
ticket transactions
are now digital
How our Caledonia bus depot works
Having completed its transformation in May 2022,
our Caledonia depot in Glasgow is the UK’s largest
electric bus depot, with 150 new buses supported
by the Scottish ultra‑low emission bus scheme and
£48m of our own investment.
We selected Hitachi as a prime strategic partner
to support the transformation of the depot. Hitachi
provides batteries through a leasing arrangement
and is also responsible for the maintenance
and effective utilisation of the batteries, as
well as providing charging software and other
decarbonisation technology.
Our electric buses, which were purchased from
Scottish manufacturer ADL, are plugged into one
of our 150 charging points situated at Caledonia,
normally charging overnight once they have been
cleaned. All the chargers on site are ultra‑rapid
chargers with some reaching full charge within
four hours.
Maintenance activities on these buses are conducted
in the same space as our diesel vehicles with the
addition of some specialist tooling and chargers within
the maintenance bays. Our engineers receive specific
electric vehicle technical familiarisation and training.
Our smart charging software ensures there is
sufficient electricity in the grid to charge the electric
buses. It also optimises charging when electricity is
at its cheapest, as well as making sure the amount
we receive does not exceed capacity.
Our buses are not charged at the depot while they
are in service during the day, and we currently have a
number of pilot schemes in progress where a number
of local businesses, including delivery firm DPD, are
using our ultra‑rapid chargers to charge their electric
vehicles during the day.
To power our depot we receive electricity from a local
primary substation which is a fully renewable energy
source. We are in the process of building a substation
which will allow for an additional 200 vehicles to be
charged, both for use by our own fleet as well as other
third parties from around the city who want to utilise
the facility.
150
electric charging points
in our Caledonia depot
Strategic report
FirstGroup Annual Report and Accounts 2023
16
Chief Executive Officer’s review
continued
There is no doubt that First Bus is a more agile
business today, and following its outperformance in
the second half of FY 2023 we remain confident that
we will deliver further, sustainable revenue growth and
continue our progression towards a 10% operating
margin in bus as the business returns to a more
commercial model.
Accelerating our investment in our
bus fleet and infrastructure
As a major UK regional bus operator, we have a key
role to play in the decarbonisation of public transport
in the UK and we are rapidly establishing ourselves as
a leader in bus fleet and infrastructure electrification as
we progress towards our commitment of a 100% zero
emission bus fleet by 2035.
The electrification of bus fleets and infrastructure
requires close co‑operation between operators and
local authorities, and funding from both parties.
We have committed net investment of c.£105m
in FY 2024, supported by government co‑funding
of £82m.
In FY 2023 we took delivery of 83 electric buses and
we have c.400 electric buses on order for delivery
in FY 2024, which means that we will have over 600
zero emission vehicles by March 2024, as well as
four fully electric depots, in York, Leicester, Norwich
and Hampshire, the first outside of London. As part
of our bus depot infrastructure decarbonisation and
cost cutting initiatives, we are installing solar panels at
our depots. We made good progress in this regard in
FY 2023, installing panels at 20 of our depots.
The electrification of our bus fleet and depots will also
create significant opportunities for the creation of
adjacent revenue streams and sustainable value for all
of our stakeholders. We are already conducting trials
with third party businesses making use of our ultra‑fast
chargers when our buses are in service during the day
at our Caledonia depot in Glasgow and in Aberdeen
and we plan to replicate this at other depots in
the future.
Lumo – our green open access success
Launched in October 2021, Lumo is our open
access rail service between London and Edinburgh
that uses electric trains on every service. Offering
customers five services a day each way at an
affordable price, Lumo carried a million passengers
within its first year.
Travelling by Lumo is 40 times greener than flying.
Between April and August 2022, for the first time,
over half (57%) the journeys between Edinburgh
and London were by rail, compared to 35%
pre‑pandemic. This has helped take the equivalent
of more than 2,500 flights out of the air. In July 2022,
around 63% of travellers between Edinburgh and
London chose rail over domestic flights, suggesting a
modal shift that is here to stay. We are also proud to
be supporting green jobs as we deliver the transition
to zero emission public transport, with Lumo alone
creating more than 100 jobs at its Newcastle
headquarters.
Open access operators run services on a different
model from other train operating companies. They
have track access agreements with Network Rail that
set out where and how often they run trains; these
agreements must also be approved by the Office
of Rail and Road. Open access routes are awarded
where there is a clear business case that the route
will promote competition for the benefit of rail users
and will generate sufficient new revenue without
taking it from current operators.
Lumo’s services operate along the East Coast Main
Line connecting London, Newcastle, and Edinburgh.
Lumo’s proposition focuses on providing a greener
rail alternative to air travel between the two capitals,
as well as stops at Morpeth and Stevenage to give
customers an alternative to using Newcastle and
Luton airports. Lumo came to the market at the right
time, offering a unique product, with no equivalent rail
service and at a price competitive to budget airlines to
encourage a modal shift from air travel to rail.
Having demonstrated how Lumo would offer the
greatest benefit and growth for the rail market and
once Network Rail upgrades had taken place to
support the new route, the rights were awarded
in May 2021. While the pandemic impacted both
of FirstGroup’s open access routes in terms of
passenger volumes and revenue, as well as causing
delays in training and manufacturing, it was felt the
leisure customers who would use Lumo would return
post pandemic. Lumo launched in October 2021
starting out with four services a day, increasing to ten
a day over time by April 2022.
While the Lumo business incurred significant start‑up
costs, we have seen significant growth over the past
year. This is thanks to passenger demand beating our
initial forecasts, with leisure travel returning strongly post
pandemic as well as increased advertising and digital
ticket purchasing channels. The autonomy on pricing is
a significant advantage of the open access model.
To emphasise Lumo’s green credentials we are
launching a carbon calculator that measures Lumo’s
carbon emissions, giving us data that we can then utilise
to highlight to stakeholders the benefit of rail over air
travel as well as with customers when they buy tickets.
40%
Travelling by Lumo
is 40% greener
than flying
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
17
Operational highlights – First Rail
The management fee based operations reported
revenue of £3,805.6m in FY 2023 (FY 2022: £3,762.2m
and adjusted operating profit of £93.3m (FY 2022:
£97.5m).
In June 2022 we were awarded a National Rail
Contract for GWR to June 2025 with an option for the
DfT to extend it to June 2028. As well as working on
the introduction of three new stations on the network
that are due to open in FY 2024, GWR introduced a
new timetable in May this year that has resulted in a
5% increase in train services a day.
In February, we welcomed the DfT’s decision to
exercise the option to continue the current contractual
arrangements for SWR for the full two year extension
period. The NRC will now run until 25 May 2025 and
will allow the SWR team to build on its achievements
during the first two years of the contract, and to
continue to improve the customer offering on the
network, with a new fleet of Arterio trains starting to
be introduced in H2 FY 2024.
We subsequently announced in March 2023 that we
had agreed an extension of the current contractual
arrangements for WCP with the DfT, to 15 October 2023
and we continue discussions with the DfT regarding a
longer‑term NRC for WCP. The agreement to extend the
contract has allowed our team to continue their focus
on delivering their robust plans to improve services for
our customers, including further progress on our train
upgrade and refurbishment programme, and we also
continue to work closely with HS2 Limited in our role
as shadow operator. Performance at Avanti is much
improved. Since the introduction of the new timetable in
mid‑December, the number of services has increased
by more than 40% compared to last summer, with
more seats and better frequencies, and during the most
recent period Avanti operated around 98% of scheduled
services. We have also continued to roll out the £117m
refurbishment programme of the Pendolino fleets with all
trains being fully refurbished this year.
In May 2023 the DfT announced its decision not to
exercise its option to extend TPE’s NRC and its Operator
of Last Resort has now taken over the delivery of
passenger services on the network. The decline in TPE’s
service levels was due to circumstances largely out of
our control, mainly the challenging industrial relations
environment including the withdrawal of longstanding
industry‑standard overtime arrangements when
TPE was undertaking unprecedented driver training
requirements due to infrastructure upgrades. The loss
of the contract was a huge disappointment for our team
which has worked extremely hard to improve services
and to successfully recruit and train more drivers than
ever before. We had also worked closely with the DfT
and Transport for the North on an agreed recovery plan,
which had led to a c.40% reduction in cancellations in
May 2023. The decision has not altered our belief in the
important role of private rail operators in the delivery of
vital, environmentally friendly transport for customers
and communities across the UK.
Our open access operations Lumo and Hull Trains
had a very successful year and performed ahead
of our expectations, supported by high leisure
passenger volumes.
For FY 2023 they delivered an adjusted operating
profit of £19.6m compared to a loss of £(16.6)m in
FY 2022 (which reflected Hull Trains’ recovery from the
pandemic and the start up costs for Lumo). This is a
remarkable achievement and reinforces our belief in the
ability of the private operators to provide the expertise,
innovation and investment to bring more passengers
back to rail and deliver profitable operations.
Our additional services businesses, including Mistral
Data, evo‑rail and First Customer Contact delivered
adjusted operating profit of £11.9m in FY 2023, up
from £6.9m in the prior year.
Corporate activity
We have made significant progress in monetising
the contingent values from exiting North America. In
December 2022 the Group received net proceeds
of £122m from the sale of all but two of its remaining
Greyhound US properties. Following the receipt of
these funds we launched a £75m on‑market share
buyback programme on 19 December 2022 and by
the end of FY 2023 we had completed £32m of the
programme. We were also able to buy back £15.7m
of our 6.785% September 2024 bonds as part of the
Bank of England’s bond auction in November 2022.
In March, EQT Infrastructure completed the sale of
First Transit and we anticipate receipt of the First
Transit earnout consideration currently estimated at
$89m in H1 FY 2024.
In line with our strategy of investing in value accretive
growth opportunities, in First Bus we have deployed
growth capital of c.£37m on a number of acquisitions in
FY 2023, most notably Ensignbus in Essex and Airporter
in Northern Ireland. The acquisition of Ensignbus,
a long‑established, high‑performing business, will
not only provide a number of synergies and value
accretive growth opportunities in adjacent services
contracts and the bus vehicle dealership market, but it
will also enhance our local commercial bus operations
in Essex. The addition of Airporter has expanded our
footprint in Ireland and created an enhanced service.
Capital allocation and dividends
In light of the Group’s financial performance for
FY 2023 and in line with its progressive dividend
policy, the Board has proposed a final dividend of
2.9p per share, resulting in a final dividend payment of
c.£20m, be paid on 18 August 2023 to shareholders
on the register at 14 July 2023, subject to approval
of shareholders at the 2023 AGM. The total dividend
for the year paid and recommended is 3.8p per share
(FY 2022: 1.1p per share). We have also announced
today that the Board has proposed an additional
buyback of £115m, subject to renewal of the usual
buyback authority at the AGM and following the
receipt of the proceeds from exiting North America.
Progressing our sustainability credentials
and social value contributions
I am very pleased to report that for the fourth
consecutive year, we have been included in the
Clean200 Report, which ranks the world’s largest
publicly listed companies by their total clean
energy revenues from products and services that
provide solutions for the planet and define a clean
energy future.
Open access delivered
an operating profit of
£19.6m
£122m
received from sale of
portfolio of Greyhound
properties
Strategic report
FirstGroup Annual Report and Accounts 2023
18
We have also received the Green Economy Mark on
the London Stock Exchange in recognition of our
contribution to the global green economy. We were
also the only UK public transport operator to be
included in the 2022 S&P Sustainability Yearbook and
our score improved to B on the Carbon Disclosure
Project (‘CDP’) global disclosure programme this year.
In addition, we were ranked third out of the world’s
90 most influential transport companies in the World
Benchmarking Alliance’s recently published Transport
Benchmark that uses publicly available information
to assess companies on their progress towards
decarbonisation and their contributions to a just
transition and social transformation.
The Group has worked hard over many years to
establish its safety culture and our focus remains
on our commitment to the safety of our customers
and employees. In FY 2023 we continued to invest
in technology systems and introduced a number
of initiatives and awareness campaigns to reduce
incidents and to effectively monitor and manage our
performance.
In September 2022 we published our first social value
report, working with the Centre for Economics and
Business Research to identify in a clear, robust and
evidence‑based way how exactly we add value, and
how much we contribute in a given year. We create
social value by supporting prosperity, growth and jobs
in the communities we serve, for example through
local employment (direct and in our supply chain),
local procurement and community engagement
programmes. We also play a critical role in reducing
congestion on the roads, improving air quality and
facilitating the transition to a zero‑carbon world. The
report highlighted that during FY 2022 we generated
£1.44bn of gross value added (‘GVA’) contribution
to the UK economy and spent £2.44bn on goods
and services provided by UK firms. Our bus and
rail services were estimated to have saved the UK
economy £1.3bn in congestion costs in FY 2022 and
in terms of employment benefits, for every 10 jobs
directly generated by FirstGroup in the UK, a further
13.1 jobs are supported in the wider economy and our
aggregate employment compensation was £2.9bn
for the year.
Looking ahead
Whilst the broader economic and industrial relations
backdrop remains challenging, current trading is in
line with our expectations and the Group anticipates
financial performance in line with our expectations
for FY 2024. Positive free cash generation after
investment of c.£130m principally in the electrification
of the First Bus fleet and infrastructure, as well as
capital returns to shareholders, is expected to result in
an adjusted net cash position in the range of £10‑20m
at the end of FY 2024, assuming the completion of
the returns to shareholders and before investing in
potential inorganic growth opportunities.
Although clearly sensitive to broader consumer
spending and inflation trends, we do expect sequential
progress in First Bus in FY 2024 as we continue to
benefit from the actions we have taken to transform
the business as well as the first full year contribution of
both Airporter and Ensignbus.
In First Rail, financial performance is expected to be
in line with our expectations despite the TPE contract
not being extended by the DfT. We expect profit from
our open access operations to be at least in line with
FY 2023, with continued strong passenger demand
offsetting increased electricity prices and track
access costs. We expect our management fee‑based
operations to deliver aggregate financial performance
broadly in line with management expectations.
Looking further ahead, it is anticipated that First Bus
will deliver further earnings growth as it continues
its transition to a more commercial and efficient
model, and from the targeted deployment of growth
capital in both commercial and adjacent services
opportunities, including over time, additional revenue
streams resulting from the electrification of our fleet
and infrastructure.
In First Rail, we expect a broadly consistent level
of contribution from the management fee‑based
operations, and we anticipate further growth from
both our open access and rail additional services as
we look at ways to expand our customer offering,
and our additional services businesses. We also
continue to actively review a broad pipeline of growth
opportunities where we can make use of our extensive
experience and expertise.
In line with its disciplined capital allocation policy, the
Board remains committed to its progressive dividend
policy as well as reviewing the potential for further
additional distributions to shareholders over time.
Conclusion
Our performance in FY 2023 in the face of the ongoing
industry wide challenges has demonstrated the value
and increasing diversity of our revenue streams, which
together with our strong balance sheet and breadth
of capabilities underpin our robust platform to deliver
further growth and value. It is also testament to the
expertise, dedication and resilience of our employees
at all levels across the Group, and I am extremely proud
and grateful to all of our employees for their hard work in
support of our customers and communities especially
during the cost of living crisis.
I look forward to working with all of our teams to
capitalise on the considerable opportunities that
lie ahead for FirstGroup to create substantial and
sustainable value for all of our stakeholders and support
the UK’s social, economic and environmental ambitions.
Graham Sutherland
Chief Executive Officer
8 June 2023
Chief Executive Officer’s review
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
19
“
Business review
First Bus is a more agile
business today, and its
outperformance in the second
half of FY 2023 has given us
increased confidence that we
will deliver further revenue
growth and a 10%
operating margin in bus
in the medium term.
Average number
of employees
12,800
FY 2022: 13,500
Adjusted
operating profit
£58.4m
FY 2022: £45.2m
First Bus
The overall performance of our
business is predicated on running
better quality mileage by using our
enhanced data to align services to
demand, implement smarter fares
and stimulate demand, and drive
efficiencies across our operations.
Revenue
£902.5m
FY 2022: £789.9m
Adjusted operating margin
6.5%
FY 2022: 5.7%
Janette Bell
Managing Director, First Bus
52 weeks to 25 March
£m
FY 2023
£m
FY 2022
£m
change
Revenue
902.5
789.9
+112.6
Revenue per mile £
5.36
4.27
+1.09
Adjusted operating profit
58.4
45.2
+13.2
Adjusted operating margin
6.5%
5.7%
+80bps
EBITDA
120.9
104.4
+16.5
Passenger volumes
390.0
323.8
+66.2
Operated mileage
168.2
185.1
16.9
Net operating assets
511.9
626.4
(114.5)
Capital expenditure
121.8
63.2
+58.6
First Bus reported revenue of £902.5m
(FY 2022: £789.9m) principally due to a 15.8%
increase in passenger revenue, mainly reflecting
increased passenger volumes in the second half
of the year. Total passenger revenue increased to
£660.0m (FY 2022: £570.0m), more than offsetting the
£42.8m decrease in government funding. Our adjacent
services revenue increased to £175.1m from £120.9m
in the prior year.
Adjusted operating profit increased to £58.4m
(FY 2022: £45.2m). Statutory operating profit was
£51.4m (FY 2022: £45.2m) with £7.0m of adjusting
charges relating to the restructuring of the business
including the sale of First Scotland East and the
closure of our Southampton‑based operations.
Overall passenger volumes increased by 20%
in FY 2023 relative to FY 2022 equivalent levels,
with commercial passenger volumes up 21%
and concessions up 19%. Passenger volumes
have benefited from the £2 fare cap scheme in
England, and the free travel for under‑22s scheme
in Scotland that has already funded over 50 million
free bus journeys since its launch in January 2022.
By stimulating passenger demand these schemes
have both encouraged a modal shift to bus travel
and increased social mobility. Under the £2 fare cap
scheme in England, operators agree a reimbursement
schedule in advance with the DfT based on the
projected cost to the operator for charging a flat
£2 fare for journeys that would otherwise have cost
more. In Scotland, under the free travel for under‑22s
scheme, operators are reimbursed a proportion of the
cost of a full adult fare.
25%
Revenue per mile
increased by 25%
in FY 2023, to
£5.36 per mile.
Strategic report
FirstGroup Annual Report and Accounts 2023
20
“
Business review
continued
First Bus operated 168 million service miles in FY 2023
compared with 185 million miles in the equivalent
period in FY 2022 on a like for like basis following the
network changes implemented in FY 2023 to better
align services to demand.
Since September 2021, the delivery of local bus
services across England has been reinforced by the
DfT’s £226.5m Bus Recovery Grant (‘BRG’) package
which was allocated to regional bus operators
based on mileage and volumes. The scheme was
extended from April to July 2023 with £80m to
support bus services through operators and local
transport authorities, and £70m to support the £2 fare
cap scheme.
In May 2023, bus operators and local authorities
welcomed the DfT’s announcement of a two‑year
funding settlement for operators in England which
includes £300m of further funding to protect bus
services until 2025, and £200m funding to extend the
£2 fare cap until the end of October 2023 and then
at £2.50 until November 2024. Currently, just over
three quarters of First Bus commercial revenue is
covered by the £2 fare cap scheme which reimburses
operators using a shadow fare that includes an uplift
in line with CPI. The new funding package will support
passenger volume growth and provide increased
certainty for us, and importantly, an extended period
of clarity for us to plan the business around.
Optimising our business and delivering
increased margins
The actions we have taken over the last few years to
transform our business have resulted in a significant
improvement in revenue and profit margins in the
second half of FY 2023. These included net fare
increases, initiatives to improve driver availability, as
well as operational improvements, cost efficiencies
and network realignments to better align services
to demand. Revenue per mile increased by 25% in
FY 2023, to £5.36 per mile.
We have also continued to successfully develop our
pricing and yield management strategy, focused on
the implementation of shorter term products such as
lower entry single and return fares and updated weekly
and monthly discounts. Having been prohibited from
doing so under the earlier pandemic funding regime,
we implemented fare increases in October 2022 and
have since made further interventions within the CPI
cap permitted under current funding schemes. These
increases have been designed to better match our
new ticketing products to evolving travel trends, whilst
at the same time recognising the potential impact of
the cost of living crisis on discretionary passenger
journeys by retaining low single fares.
We have a clear focus on delivering data‑led, smart
efficiency initiatives across our operations. We have
delivered annualised cost savings of c.£20m since 2019
and we continue to identify and progress additional
efficiency initiatives through the further modernisation
of our business processes. In H2 2023 our driver
recruitment, retention and training initiatives resulted in
an easing of driver resource pressures and increased
operational efficiencies. Higher than anticipated inflation
impacted a number of our key input costs during the
year, including pay, fuel and utility costs. The vast
majority of our local wage agreements (a number of
which are multi‑year) were concluded in FY 2023,
broadly in line with CPI. Our fuel hedge programme
has allowed us to offset higher fuel costs; we currently
have 85% of our FY 2024 exposure hedged at 46p per
litre and FY 2025 is currently 55% hedged at 50p per
litre. We also have an electricity hedge programme in
place, with 69% of our consumption (based on current
consumption forecasts) hedged for FY 2024 at £172/
MWh and 60% for FY 2025 at £146/MWh.
We have also continued to implement energy
efficiency measures during the year, such as aligning
electricity usage with building occupancy, awareness
campaigns to encourage behavioural change and we
are accelerating our investment in the self‑generation
of power. This has included the installation of new
energy efficient lighting, bus washes and energy
management systems, and the installation of solar
panels. To date, we have installed panels at 20 of our
depots generating c.2million kWh of electricity, partially
offsetting energy usage.
As part of our initiatives to address underperforming
locations and optimise our portfolio, we completed the
sale of our First Scotland East operations to McGill’s
Group in September 2022 and in February 2023
we closed our Southampton‑based operations. We
have also completed a reorganisation of our regional
management structure in the period to deliver further
operational efficiencies.
We have a clear focus
on delivering data
led, smart efficiency
initiatives across our
operations.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
21
“
Digital innovation
First Bus remains at the forefront of the digital
transformation of the bus industry, thanks to our
investment in real‑time passenger volume data
capture, GPS functionality and ticketing. We
have significantly more actionable data which is
transforming our ability to understand and assess
passenger flows and make commercial decisions
more efficiently. We are now able to accurately
observe how passenger demand patterns are
evolving, which is allowing us to optimise our
networks, timetables and pricing strategies to align
with passenger needs, improve our overall yield and
attract new customers.
Ticket sales using digital payment methods now
account for around 80% of our ticket transactions,
and we recently became the first regional bus operator
in the UK to install ‘tap on tap off’ capped payment
technology on its entire fleet. This will allow for
improved customer convenience and distance‑based
fares, as well as enhanced data for the business.
We are also successfully using data to increase our
operational performance and efficiencies. In FY 2023
we rolled out the Prospective data‑led timetabling
and scheduling platform at a number of our operating
companies. The software allows us to predict journey
times and plan our schedules based on granular data.
We have already seen significant improvements in
punctuality and service reliability throughout the day
and more resource efficient operations resulting in
lower lost mileage and positive feedback from both
customers and drivers.
Adjacent Services
Our adjacent services reported an increase in overall
revenue to £175.1m in FY 2023 (FY 2022: £120.9m),
aided by the first full year contribution of our 100%
ownership of SPS and the acquisition of Airporter
during the year. Prior year revenue of £120.9m reflects
adjacent revenues adjusted for the impact of inter
division trading.
Having acquired the 50% of SPS we did not already
own in FY 2022, in H1 2023 we agreed a five‑year
extension to our contract to provide passenger
transport for the construction workers employed
at the EDF Hinkley Point C nuclear power station.
SPS employs around 450 staff running a 145 vehicle
operation, delivering shuttle services seven days a
week to and from the Hinkley Point site, with annual
revenues of c.£31m.
The addition of Northern Ireland‑based Airporter to our
business in October 2022 has expanded our footprint
in Ireland and increased our daily routes to seven
with the new route connecting the North‑West to
Belfast International Airport, Dublin Airport and Dublin
city centre.
The acquisition of Ensignbus, with two high performing
complementary business segments that include rail
replacement and private hire contract operations has
also boosted our complementary businesses portfolio.
In addition, the business has a young vehicle fleet
that will require limited capital expenditure for several
years and its vehicle refurbishment and re‑sale division
will provide synergies for First Bus as it sells its older
fleet and replaces them with zero emission vehicles.
The wider UK bus industry will also benefit, as the
oldest, most polluting diesel buses are taken out of
service. It is anticipated that the market for the resale
of lower emission used diesel vehicles will continue
to remain robust in the medium term, followed by the
emergence of a similar market for the resale of zero
emission vehicles.
During the period we have also been active with
regards to bus franchising opportunities. First West
of England took over the running of the m1 metrobus
service in Bristol, a rapid transit contract serving more
than 50,000 passengers a week and we continue to
participate in the bidding for. franchise operations in
Greater Manchester.
The adjacent services market in the UK is
considerable and we continue to actively review a
pipeline of opportunities to increase our presence in
the market, including a recent contract win for East
Midlands Airport.
First Bus remains at the
forefront of the digital
transformation of the
bus industry
Strategic report
FirstGroup Annual Report and Accounts 2023
22
The electrification of our
bus fleet and depots
will create significant
opportunities for the
creation of adjacent
revenue streams and
sustainable value for all
of our stakeholders.
Business review
continued
Fleet decarbonisation
We are a leader in sustainable mobility and are
fully aligned and working closely with central and
local governments and our local authority partners
across the UK to support the delivery of national
decarbonisation ambitions and commitments,
including zero emission bus fleets. In 2020 we
announced our commitment to operate a fully zero
emission fleet by 2035.
As an early mover in the sector, and an operator who
strives to deliver innovation for customers, we are
leading the industry in trialling and deploying various
modes of vehicles and technologies across our fleet
and at our depots.
The electrification of bus fleets and infrastructure
requires close co‑operation between operators and
local authorities and funding from both parties.
To date, we have worked with our local authority
and government partners to secure government
co‑funding assistance for 552 zero emission vehicles
and associated infrastructure under the Zero
Emission Buses Regional Area (ZEBRA) funding in
England, and Transport Scotland’s Scottish Zero
Emission Bus Phase 1 (ScotZEB) funding scheme,
alongside committed net investment from the Group
of £105m in FY 2024. We have welcomed the
recent announcement by the Scottish Government
regarding the launch of the second phase of its
ScotZEB fund, through which up to £58m of funding
to be made available to fund zero emission buses
and infrastructure, reinforcing its commitment
to drive forward a fully decarbonised future for
Scotland’s buses.
In FY 2023 we took delivery of 83 electric buses and
we now have a total of 58 ultra‑fast charging sockets
already installed and fully operational. We anticipate
that four of our depots (York, Leicester, Norwich and
Hampshire) will be operating a fully electric fleet by the
end of March 2024.
The electrification of our bus fleet and depots will also
create significant opportunities for the creation of
adjacent revenue streams and sustainable value for all
of our stakeholders. We are already conducting trials
with third party businesses, including courier company
DPD and a number of public service vehicles, making
use of our ultra‑fast chargers at our Caledonia depot in
Glasgow and our Aberdeen depot when our buses are
out in service during the day. We plan to replicate this
at other depots in the future.
In order to support our ambitious decarbonisation
targets, we are also working to attract and retain
talent and grow the future skills we know the industry
will need. As part of First Bus’s apprenticeship
programme, we have partnered with Reaseheath
College in Cheshire to establish the UK’s first bus and
coach engineering academy delivering tailored training
to First Bus apprentice engineering technicians in
the maintenance of next generation, zero emission
transport vehicles.
Looking ahead
The overall performance of our First Bus business
is predicated on running better quality mileage
by using our enhanced data to align services to
demand, implement smarter fares and stimulate
passenger demand, and drive efficiencies across our
operations. The division’s performance in FY 2023 has
demonstrated that the management actions we have
taken to transform the business have achieved this, and
we are confident that this is sustainable going forward.
Although clearly sensitive to broader consumer
spending and inflation trends, we expect further
sequential progress in FY 2024. This will result from
further data‑led efficiencies and network optimisation,
lower operating costs as we reduce the average age of
the fleet, continued improvement in driver resources,
as well as the full year contribution of both Airporter
and Ensignbus.
We will continue to invest in decarbonisation and to
deploy growth capital, including to create additional
revenue streams from the electrification of our fleets
and depots and to develop our adjacent services
businesses, including participation in franchising
opportunities. First Bus is a more agile business today,
and following its outperformance in the second half
of FY 2023 we remain confident that we will deliver
further revenue growth and continue our progression
towards a 10% operating margin in bus.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
23
The First Rail division reported total revenue of
£3,893.2m in FY 2023 (FY 2022: £3,801.2m), with
increased passenger volumes offset by lower funding
in the management fee‑based operations. The
division’s open access operations contributed £70.8m
in revenue for the period (FY 2022: £26.6m). Additional
services including Mistral Data, evo‑rail and First
Customer Contact delivered gross revenue of £120.0m
(FY 2022: £92.6m) before inter‑divisional eliminations
in the period and adjusted operating profit of £11.9m
(FY 2022: £6.9m).
The management fee‑based operations have delivered
overall performance metrics broadly in line with
our expectations in FY 2023 and have accordingly
recorded actual performance fees and accrued for
the remaining performance fees, that comprise fixed
and variable elements, as a result. From FY 2024,
performance fee metrics have been updated to
place a greater weighting on quantified, rather than
qualitative measures that don’t rely on a subjective
assessment of an operator’s performance. The Group
does not anticipate a material impact on net income as
a result of these changes. Rail attributable net income
from management fee‑based operations – being
the Group’s share of the management fee income
available for distribution from the GWR, SWR, TPE and
WCP (incorporating Avanti West Coast) contracts with
the DfT – was £38.7m (FY 2022: £45.5m). The Group
receives an annual inter‑company remittance from the
TOCs reflecting the post‑tax net management and
performance fees from the prior year. These become
payable up to the Group in the second half of the
financial year following completion of the TOC audited
accounts.
Average number
of employees
17,500
FY 2022: 17,500
Adjusted operating
profit
£124.8m
FY 2022: £87.8m
With approximately a quarter of the
UK rail market, First Rail will play
a significant role in the industry
as it evolves, and the success of
our open access operations has
further reinforced that we have the
experience and entrepreneurial
spirit to resolve challenges, fix
problems and innovate for the
future, encouraging passengers
back to the railway whilst also
growing our business.
Revenue
£3,893.2m
FY 2022: £3,801.2m
Adjusted operating margin
3.2%
FY 2022: 2.3%
Steve Montgomery
Managing Director, First Rail
First Rail
Twelve months to 31 March
£m
FY 2023
£m
FY 2022
£m
change
Revenue from management fee‑based
operations
3,805.6
3,762.2
+43.4
Revenue from open access and additional
services
190.8
119.2
+71.6
Inter‑divisional eliminations
(103.2)
(80.2)
(23.0)
First Rail revenue
3,893.2
3,801.2
+92.0
Attributable net income from management
fee‑based operations
1
38.7
45.5
(6.8)
Gross up for tax, minorities and IFRS 16
54.6
52.0
+2.6
Adjusted operating profit / (loss) from open
access and additional services
31.5
(9.7)
+41.2
First Rail adjusted operating profit
124.8
87.8
+37.0
Passenger journeys (m) – management
fee‑based operations
261
200
+61
Passenger journeys (m) – open access
operations
2.2
0.9
+1.3
Passenger journeys (m) – Total
263
201
+62
1
Represents the Group’s share of the management fee income available for dividend distribution
from the GWR, SWR, TPE and WCP (incorporating Avanti) contracts with DfT on a pre‑IFRS 16
basis net of tax and minority interests as described in more detail on page 171. See also note 4
to the financial statements for a reconciliation to the segmental disclosures.
“
In the medium to longer
term, we anticipate further
growth from our open access
operations, as we look
at ways to expand our
customer offering, and
from our additional rail
services businesses
£124.8m
The First Rail
division’s adjusted
operating profit
increased to £124.8m
(FY 2022: £87.8m)
Strategic report
FirstGroup Annual Report and Accounts 2023
24
Business review
continued
Our two open access operations Lumo and Hull
Trains primarily serve leisure passengers, which as a
segment has seen good demand throughout FY 2023.
As a result of high volumes of passenger bookings
and positive yield management including inflationary
increases in fares, both operations performed ahead
of expectations in FY 2023, delivering an adjusted
operating profit of £19.6m compared to a loss of
£(16.6)m in FY 2022 (which reflected Hull Trains’
recovery from the pandemic and the start up costs for
Lumo.
To address energy cost inflation, our train operating
companies are members of industry buying groups
in order to mitigate the long‑term impact of electricity
costs. For our open access operations, electricity costs
represent a material proportion of their total costs,
and these are expected to increase in FY 2024 before
reducing in line with reductions in energy prices.
The First Rail division’s adjusted operating profit
increased to £124.8m (FY 2022: £87.8m), which
principally reflects the increase in open access
contribution, the settlement of one‑off claims relating
to prior reporting periods, as well as higher impact
from IFRS 16 following the award of the new GWR
contract in June 2022, which increased adjusted profit
by £8.8m in FY 2023. The division reported a statutory
operating profit of £124.8m (FY 2022: £91.8m).
Transition to longer‑term National Rail
Contracts
Under the NRCs, the DfT retains substantially all
revenue and cost risk (including for fuel, energy and
wage increases). There is a fixed management fee and
the opportunity to earn an additional performance fee.
The punctuality and other operational targets required
to achieve the maximum level of performance fee
under the contracts are designed to incentivise service
delivery for customers.
In June 2022 GWR was awarded an NRC with a core
three‑year term to 21 June 2025, with an option for
the DfT to extend it by up to three further years to
June 2028. The NRC also includes the operation of
the Heathrow Express service.
In February we announced that the DfT had exercised
their option to continue the current contractual
arrangements for SWR for the full two year extension
period. The NRC will now run until 25 May 2025 and
will allow the SWR team to build on their achievements
during the first two years of the contract, and to
continue to improve the customer offering on
the network.
In March we agreed an extension of the current
contractual arrangements for WCP with the DfT,
to 15 October 2023. The WCP contract comprises
operation of Avanti West Coast and acting as shadow
operator to the HS2 programme. The agreement
to extend the contract has allowed our team to
continue their focus on delivering their robust plans
to enhance services for our customers, including
further progress on our £117m train upgrade and
refurbishment programme. Performance at Avanti is
much improved. Since the introduction of the new
timetable in mid‑December, the number of services
has increased by more than 40% compared to last
summer, with more seats and better frequencies, and
during the most recent period Avanti operated around
98% of scheduled services. Discussions with the DfT
regarding a longer‑term NRC for WCP continue.
In May 2023 the DfT announced their decision
not to exercise its option to extend TPE’s NRC
and the Operator of Last Resort has now taken
over the delivery of passenger services on the
network. The decline in TPE’s service levels
was due to circumstances largely outside of our
control, mainly the challenging industrial relations
environment including the withdrawal of longstanding
industry‑standard overtime arrangements whilst
undertaking unprecedented levels of driver training
due to infrastructure upgrades. The loss of the
contract was a huge disappointment for our team who
have worked extremely hard to improve services, and
to successfully recruit and train more drivers than ever
before. We had also worked closely with the DfT and
Transport for the North on an agreed recovery plan,
which had led to a c.40% reduction in cancellations in
May 2023.
Innovation and adjacent rail opportunities
During the year we continued to develop, market
and deploy our additional rail customer, industry
and technology tools and services. Most of these
were initially developed to strengthen our offering to
passengers on our large passenger rail operations
but are increasingly being marketed to third party
operators.
Our evo‑rail track‑to‑train superfast rail‑5G technology
uses trackside poles to provide a connectivity solution
that we expect will improve the passenger experience
and help to encourage modal shift towards rail. The
evo‑rail technology is generating interest, and the
installation of the technology across the SWR main line
continues, with the first of six sections now completed
and the remaining sections due in the second half
of 2023. A number of trials and negotiations are also
underway in the UK and abroad.
Mistral Data, our analytics business, was launched in
2021 and now has 14 software systems in operation
built on native cloud technology, allowing them to be
quickly deployed whilst also ensuring security and
scalability. They include revenue and operational
analysis and reporting tools that enable real‑time
£19.6m
Lumo and Hull Trains
delivered an adjusted
operating profit of
£19.6m compared to
a loss of £(16.6)m in
FY 2022
Read more about Lumo
on page 16
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
25
60%
New trains have
reduced Hull Trains
fleet’s CO
2
emissions
by almost 60%.
integration and the sharing of complex data needed
to operate services. This is enabling our teams to
identify and resolve problems before they develop
further, using live data pulled from several systems.
The software also provides real‑time information and
messaging to our customers via website and mobile
app channels on the formation and facilities available
on each train, as well as any changes their train times
in advance, allowing them to plan their journey with
confidence. Also in FY 2023, a new Mistral safety
application was successfully developed and deployed
on the SWR network, to identify areas of potentially
low rail‑wheel adhesion, based on real‑time wheel slip
reported data.
Our First Customer Contact passenger service
centre was established in 2019 and built based on
scalability and the state‑of‑the‑art customer service
and data analytics systems appropriate for servicing
rail customers. In FY 2023 the centre supported
customers, processing delay repay claims and
passenger assistance bookings, with quick turnaround
times. The shared passenger service centre operates
at a lower cost than our previous outsourcing
arrangements and provides a single service for
customer queries across several First Rail operations.
Our WCP Development team continued to support
the HS2 infrastructure project during FY 2023.
We worked closely with HS2 Ltd, the DfT, Network
Rail, Avanti West Coast, our stakeholders and
customers to drive consistent, high‑quality delivery
of the programme and maximise the benefits of the
Government’s very significant HS2 infrastructure
investment. We completed more than 35 project
deliverables on time and within budget, led by our
technical leadership team.
Customer experience
Our operations continue to make use of their industry
knowledge and expertise to work collaboratively with
industry partners and stakeholders to enhance our
service offering and ensure that our services are as
accessible as possible for all passengers. In FY 2023
we introduced a number of accessibility tools;
these included the launch of My Station View and
GoodMaps Explore on TPE and Travel Companion
on Avanti. A number of innovative ticketing schemes
were also introduced in FY 2023. Avanti introduced a
low‑cost Superfare for flexible travel, with fares fixed
by destination and starting from £12 for a one‑way
ticket between London and Birmingham and GWR
launched a Long Weekender leisure ticket in response
to changing customer habits, offering savings of more
than 60% on a number of routes. Ticket sales for
Avanti’s Standard Premium service which celebrated
two years in May 2023, have exceeded expectations,
with our 1.5 million tickets already sold.
Fleet upgrades
First Rail has an important contribution to make in
meeting the challenges of climate change, and we
are working with our partners to reduce carbon
emissions through a number of initiatives including
the introduction of electric trains to replace diesel
where possible.
Avanti will be taking delivery of its first new Hitachi
trains following an investment of £350m in ten
electric‑only trains and 13 bi‑mode trains that can
run under both electric and diesel power. The
new trains are set to replace Avanti’s diesel‑only
Voyager trains, leading to a 61% reduction in carbon
emissions as well as providing a quieter and roomier
service, more reliable Wi‑Fi, wireless charging and
a real‑time customer information system. The first
trains are expected to enter service later in FY 2024.
In FY 2023 Avanti also continued the refurbishment of
its electric Pendolino fleet through a £117m investment
programme financed by the fleet owners Angel Trains.
The first fully refurbished Avanti Pendolino entered
service in April 2022 and the upgrade programme will
be completed in CY 2024.
SWR have taken delivery of 400 Alstom Class 701
trains and it is anticipated that a phased introduction of
the trains into operation will commence in H2 FY 2024.
In 2019 five Hitachi Class 802 Paragon trains were
introduced into passenger service at Hull Trains,
following a £60m investment programme, resulting in
a growth in revenue thanks to more seats and better
reliability. A recent report has also shown that the
new trains have reduced the Hull Trains fleet’s CO
2
emissions by almost 60%.
In February, GWR completed the purchase of a
number of assets from emission‑free battery and
hybrid trains manufacturer Vivarail, which entered
into administration in December 2022. GWR had
been working closely with Vivarail for some time and
the purchase of assets has secured the future of the
planned trials of the technology between West Ealing
and Greenford in London.
Strategic report
FirstGroup Annual Report and Accounts 2023
26
During FY 2023 GWR has been working on the
introduction of three new stations (Reading Green
Park, Marsh Barton in Exeter and Portway Park
and Ride in Bristol) to better serve its communities.
These stations are all due to open in FY 2024. We
have also continued to work to improve our station
facilities and deliver increased connectivity with other
transport modes in FY 2023. More than 500 additional
bike parking spaces and 30 electric bike spaces
were completed at various SWR stations and in
FY 2024 SWR plan to create a 700 space Cycle Hub
at Richmond station, adding almost 500 additional
spaces to existing facilities. GWR completed 72 bike
parking spaces at Bristol Parkway and an additional
56 spaces across Avonmouth, Severn Beach and
Truro stations and Avanti introduced secure bike
shelters at ten stations during the year.
Rail policy
The Government’s plans for rail published in May 2021
set out their aims to put the expertise, innovation and
experience of private sector rail operators at the heart
of the new model for the industry in the coming years.
We welcomed the recent position articulated by the
Secretary of State highlighting that going forward,
there will be an enhanced role for the private sector,
to reinvigorate the rail industry, drive innovation and
attract more customers to the railway. We urge the
Government to engage with the sector on the steps
that can be taken, without primary legislation, in order
to achieve this. This could include activating revenue
incentives in current contracts, working with the sector
to finalise the form new Passenger Service Contracts
will take and setting out a timeline and framework for
bringing those contracts to markets, including those
currently operated by the public sector.
The UK’s rail sector is embarking on a period of
reform necessary to modernise industry practices
and secure the long‑term future of the industry, after
some of the most challenging years in its history. A
number of trade unions continue to stage industrial
action at train operating companies across the UK;
notwithstanding the fact that under the management
fee‑based contracts operators bear no revenue risk
and limited cost risk, prolonged industrial action
presents enormous challenges for everyone, and
most importantly for our passengers who rely on
these services to go about their daily lives. We are
working closely with our industry partners to do all that
we can to minimise the effects of disruption for our
passengers.
With approximately a quarter of the UK rail market,
First Rail will play a significant role in the industry
as it evolves, and the success of our open access
operations has further reinforced that we have the
experience and entrepreneurial spirit to resolve
challenges, fix problems and innovate for the future,
encouraging passengers back to the railway whilst
also growing our business.
Looking ahead
Financial performance is expected to be in line with
our expectations in FY 2024 despite the TPE contract
not being extended by the DfT. We expect profits from
our open access operations to be at least in line with
FY 2023 despite increased electricity prices and the
reversal of positive effect of one‑off settlement claims
in FY 2023. We anticipate a broadly consistent level
of financial contribution from First Rail’s management
fee‑based operations in FY 2024 despite the ongoing
industrial relations challenges.
In the medium to longer term, we anticipate further
growth from our open access and rail additional
services, as we look at ways to expand our customer
offering, and from our additional rail services
businesses. We also continue to actively review a
broad pipeline of growth opportunities where we can
make use of our extensive experience and expertise.
Business review
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
27
Financial review
Strong growth in First Bus in the second half of
the year and the outperformance of our open
access rail operations have resulted in the Group
more than doubling its adjusted attributable profit
in FY 2023 to £82.1m.
Ryan Mangold
Chief Financial Officer
“
FY 2024 financial outlook and financial policy framework
The financial outlook and financial policy framework for the ongoing Group for the financial year ending in March 2024 (FY 2024) and beyond
can be summarised as follows:
FY 2024 outlook
■
Although the economic and industrial relations backdrop remains challenging, current trading for FY 2024 is in line
with expectations
■
First Bus: although clearly sensitive to broader consumer spending and inflation trends, we expect further sequential
progress in FY 2024 through continued passenger volume recovery and as management actions taken to transform
the business, as well as the full year contribution of both Airporter and Ensignbus, will deliver further productivity
improvements and increased revenues
■
First Rail: despite the loss of the TPE contract, we expect profit from our open access and additional rail services to be
at least in line with FY 2023 despite increased costs and the reversal of the positive effect of one‑off settlement claims
in FY 2023. The management fee‑based operations (which have no passenger revenue risk and limited cost risk) are
forecast to deliver aggregate financial performance broadly in line with management expectations despite ongoing
industrial relations challenges
■
Adjusted net cash
1
position expected to be in the range of £10m to £20m at the end of FY 2024, following investment
of c.£130m, principally in the electrification of the First Bus fleet and infrastructure and assuming the completion of
announced capital returns to shareholders
■
The TPE National Rail Contract expired on 28 May 2023. TPE had ring‑fenced cash of £41.8m at the year end and
its IFRS 16 lease liability on the Group’s balance sheet at year end was £10.1m. Fees for the period April 2022 to end
of May 2023 will be paid to FirstGroup through the normal mechanism following completion of the audited accounts
(expected in H2 FY 2024 and H1 FY 2025)
Investment
■
First Bus: c.£130m in net cash capex, principally transition of bus fleet to 100% zero emissions by 2035
■
First Rail: continues to be cash capital‑light, with any capital expenditure required by the management fee‑based
operations fully funded under the new contracts
■
Growth: actively reviewing adjacent organic and inorganic opportunities where this creates value for shareholders and
exceeds the Group’s pre‑tax WACC
Balance sheet
■
Less than 2.0x Adjusted Net Debt: rail management fee‑adjusted EBITDA
2
target in the medium term
■
Significant balance sheet strength
Returns for
shareholders
■
Dividends: final dividend of 2.9p per share proposed
■
Targeting progressive dividend 3x covered by Group adjusted attributable profit
3
■
Additional £115m buyback programme proposed
1
‘Adjusted Net Debt/Cash’ excludes ring‑fenced cash and IFRS 16 lease liabilities from net debt as shown in the table on page 32.
2
First Bus and First Rail EBITDA from open access and additional services, plus First Rail attributable net income from management fee‑based operations, minus central
costs (see also page 29).
3
First Bus and First Rail adjusted operating profit from open access and additional services, plus First Rail attributable net income from management fee‑based
operations, minus central costs, minus cash interest, minus tax (see also page 29).
Strategic report
FirstGroup Annual Report and Accounts 2023
28
Revenue
Revenue from continuing
operations increased to £4,755.0m
(FY 2022: £4,591.1m), principally reflecting
improving passenger volumes in First
Bus partially offset by lower receipts from
government grant funding and increased
revenue in First Rail.
Adjusted operating performance
Adjusted operating profit from continuing
operations was £161.0m (FY 2022: £106.7m).
First Bus benefited from the improving
passenger volumes and yields, which were
partly offset by lower grant receipts and the
impact of inflationary cost headwinds. In First
Rail, management fee‑based operations saw
adjusted operating profits below the prior
year as a result of lower performance fee
expectations, although these were more than
offset by the outperformance in open access
(Hull Trains and Lumo) as they transitioned
from loss to profit.
Central costs were lower than the prior
year, reflecting the actions to resize the
organisation following the North American
disposals. The net impact to operating
profit of IFRS 16 in the year was £41.9m
(FY 2022: £37.3m), further improving the
reported result.
The Group’s adjusted attributable profit alternative performance measure is calculated as follows and more than doubled in the year, mainly
as a result of the strong operational performance across the business:
52 weeks to
25 March
2023
£m
52 weeks to
26 March
2022
£m
First Bus adjusted operating profit
58.4
45.2
Attributable net income from First Rail management fee‑based operations
1
– Group’s share of the
management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts
38.7
45.5
First Rail adjusted operating profit from open access and additional services
31.5
(9.7)
Group central costs (operating profit basis)
(22.2)
(26.3)
Treasury interest
2
(14.1)
(20.7)
Tax
3
(10.2)
2.2
Group adjusted attributable profit
82.1
36.2
1
A reconciliation to the segmental disclosures is set out in note 4.
2
Interest charge excluding notional interest and IFRS 16 lease interest.
3 Pro forma taxation at 19%.
52 weeks to 25 March 2023
52 weeks to 26 March 2022
Revenue
£m
Adjusted
operating
profit
1
£m
Adjusted
operating
margin
1
%
Revenue
£m
Adjusted
operating
profit
1
£m
Adjusted
operating
margin
1
%
First Bus
902.5
58.4
6.5
789.9
45.2
5.7
First Rail
3,893.2
124.8
3.2
3,801.2
87.8
2.3
Group items/eliminations
2
(40.7)
(22.2)
–
(26.3)
Continuing operations
4,755.0
161.0
3.4
4,591.1
106.7
2.3
Discontinued operations
4.0
(6.6)
n/a
996.9
120.1
12.0
Total
4,759.0
154.4
3.2
5,588.0
226.8
4.1
1
‘Adjusted’ figures throughout this document are before list adjusting and certain other items as set out in note 4 to the financial statements. The statutory operating profit
including discontinued operations for the year was £185.2m (FY 2022: £806.1m) as set out in note 5.
2
Includes elimination of intra‑group trading between Bus and Rail divisions. Prior year elimination was immaterial. Central management and other items.
Financial review
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
29
A reconciliation of the Group’s adjusted attributable profit measure to adjusted earnings after tax is shown below:
Movements
FY 2023
Group
adjusted
attributable
profit
£m
Adjusted
First Rail
earnings to
IFRS 16
basis
£m
Gross up
tax and
minority
interests
£m
Actual
interest
and tax
£m
FY 2023
Adjusted
earnings
after tax
£m
First Bus adjusted operating profit
58.4
–
–
–
58.4
Attributable net income from First Rail management fee‑based operations
1
38.7
39.3
15.3
–
93.3
First Rail adjusted operating profit from open access and additional services
31.5
–
–
–
31.5
Group central costs (operating profit basis)
(22.2)
–
–
–
(22.2)
Subtotal
106.4
39.3
15.3
–
161.0
Treasury interest
2
(14.1)
(50.6)
–
7.9
(56.8)
Tax
3
(10.2)
–
(10.2)
–
(20.4)
Minority interest
–
–
(5.1)
–
(5.1)
Total
82.1
(11.3)
–
7.9
78.7
1
A reconciliation to the segmental disclosures is set out in note 4.
2
Pro forma interest charge excluding notional interest and IFRS 16 lease interest.
3 Pro forma taxation at 19%.
The Group’s EBITDA adjusted for First Rail management fees performance measure also increased materially year‑on‑year and is calculated
as follows:
52 weeks to
25 March
2023
£m
52 weeks to
26 March
2022
£m
First Bus EBITDA
1
105.0
87.6
Attributable net income from First Rail management fee‑based operations
2
– Group’s share of the
management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts
38.7
45.5
First Rail EBITDA from open access and additional services
1
32.5
(9.7)
Group central costs (EBITDA basis
1
)
(21.2)
(24.8)
Group EBITDA adjusted for First Rail management fees
155.0
98.6
1 IAS 17 basis.
2
A reconciliation to the segmental disclosures is set out in note 4.
Strategic report
FirstGroup Annual Report and Accounts 2023
30
Financial review
continued
Reconciliation to non‑GAAP
measures and performance
Note 4 to the financial statements sets out
the reconciliations of operating profit/(loss)
and profit/(loss) before tax to their adjusted
equivalents.
The principal adjusting items in the year are
as follows:
First Bus restructuring
As part of the restructuring of the First Bus
division to exit loss‑making markets and to
align networks with post‑pandemic demand,
the Group completed the sale of its First
Scotland East business in September 2022,
realising a loss on disposal of £(3.7)m, and
closed the Southampton depot resulting
in closure costs and a release of prior
impairment for a net credit of £2.3m. In line
with this transition plan, the Group also
incurred costs of £(5.6)m relating to surplus
vehicle write‑downs and other reorganisation
charges in the division.
Strategic items
A final net credit of £1.4m was recognised,
being costs incurred in relation to the Group’s
central functions as part of its ongoing cost
efficiency initiatives, offset by the release
of accruals following the disposal of North
America and the execution of the strategy.
Greyhound Canada
Net restructuring and closure costs of £1.5m
relating to the continued winding down of
Greyhound Canada operations were incurred
during the year.
Adjusting items
– discontinued operations
First Transit earnout
Following the announcement on
26 October 2022 of EQT Infrastructure’s
agreement to sell First Transit to Transdev
North America, Inc., the Group now
estimates its earnout consideration to
be around $89m (c.£72m) based on the
information received on the sale by EQT. This
gives rise to a non‑cash, adjusting charge of
£33.8m relative to the carrying value of the
earnout of £106.1m as at 26 March 2022.
Gain on disposal of properties
A gain of £71.4m arose on the completion
of the sale of the majority of the
remaining Greyhound US properties in
December 2022.
In the prior year, the principal adjusting items
in relation to the continuing business were
as follows:
Gain on disposal of properties
An overall gain of £13.8m was realised in
the prior year on the disposal of Greyhound
Canadian properties.
Greyhound Canada closure
£1.7m in relation to Greyhound Canada
restructuring and closure costs were
incurred during the prior year.
First Rail termination sums net of
impairment reversal
A £4.0m credit was recognised in the prior
year, representing final adjustments of
residual matters regarding the TPE and SWR
termination sums.
The principal adjusting items in relation to
the discontinued operations for 2022 were
as follows:
Other intangible asset
amortisation charges
The amortisation charge for the prior year
was £0.4m.
Gain on sale of First Student and
First Transit
As a result of the disposal of First Student
and First Transit, a gain on sale of £501.1m
was realised in the prior year.
Other costs associated with
the disposal of First Student
and First Transit
£32.7m of costs were incurred in the
prior year associated with the disposal of
First Student and First Transit that were
not directly attributable to the sale and
were therefore not included in the gain on
disposal calculation.
Gain on sale and partial reversal of prior
year impairments of Greyhound
As a result of the terms of the disposal of
the Greyhound US business, there was a
gain on disposal in the prior year of £109.0m
and a credit of £55.4m representing
the partial reversal of the prior years’
impairment charges.
Other costs associated with the
disposal of Greyhound
There was a charge of £11.1m in the prior
year principally comprising legal and
professional costs.
Employment taxes relating to First
Student and First Transit
There was a charge of £6.6m during the prior
year for a one‑off charge for accelerated
state and federal employment taxes.
North American insurance provisions
and Greyhound insurance de‑risking
There was a prior year charge of £31.5m
for insurance costs due to deteriorations
in respect of prior years’ claims, and
for the de‑risking of legacy Greyhound
insurance liabilities.
Gain on disposal of properties and
impairment of land and buildings
An overall gain on disposal of Greyhound US
properties of £6.5m was realised in the prior
year. There was also an impairment charge
of £7.2m for properties where market value
was less than the book value.
The adjusting items in relation to finance cost
adjustments – continuing operations for 2022
were as follows:
Total make‑whole costs (bonds and
facilities)
Costs of £50.0m in the prior year comprised
a charge of £30.4m for the early repayment
of the $275m US Private Placement (USPP)
and a charge of £19.6m for the early
repayment of the £325m 2022 bond.
Write‑off of unamortised bridge, bond
and facility costs
There was a charge of £8.6m in the prior
year for unamortised fees for various facilities
which were cancelled on completion of the
sale of First Student and First Transit.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
31
Discontinued operations
In FY 2023, the Group’s residual Greyhound
US activities are disclosed as discontinued
operations. The Group completed the sale
of First Student and First Transit to EQT
Infrastructure on 21 July 2021, and the
sale of Greyhound Lines Inc. to a wholly
owned subsidiary of FlixMobility GmbH on
21 October 2021. All three are reported as
discontinued operations in the prior year.
Group statutory operating profit
Statutory operating profit from continuing
operations was £153.9m (FY 2022: £122.8m).
Finance costs and
investment income
Net finance costs from continuing operations
were £56.8m (FY 2022: £140.5m) with the
decrease principally due to the adjusting
finance costs in the prior year (£58.6m),
lower finance costs on bonds and bank
borrowings following the deleveraging in
FY 2022 resulting from the sale of First
Student and First Transit in July 2021, and
increased interest income on cash deposits.
IFRS 16 interest costs were £50.6m
(FY 2022: £41.0m) and increased mainly in
Rail due to new leases for the management
fee‑based operations.
Profit before tax
Statutory profit before tax was £97.1m
(FY 2022: loss before tax of £(17.7)m.
Adjusted profit before tax as set out in note 4
to the financial statements was £97.9m
(FY 2022: £133.4m) including discontinued
operations. In the prior year there was an
overall credit of £520.7m (including £58.6m
of adjusting items in net finance costs) for
adjustments principally reflecting the profit
on sale of the North American businesses
and partial reversal of impairment charges on
Greyhound, resulted in a total profit before
tax of £654.1m.
Tax
The tax charge, on adjusted profit before tax
on continuing operations for the year was
£20.4m (FY 2022: £2.7m), representing an
effective tax rate of 19.6% (FY 2022: 10.9%).
The rate has increased in the current year
because the significant increase in profit
before tax in the current year leads to certain
reconciling items having less of an impact
on the rate. The total tax charge, including
tax on discontinued operations, was £33.4m
(FY 2022: £12.1m). The actual tax paid during
the year was £1.0m (FY 2022: £21.4m).
The ongoing Group’s effective tax rate
is expected to be broadly in line with UK
corporation tax levels being 25% from
1 April 2023.
Adjusted cash flow
The Group’s adjusted cash flow of £28.0m (FY 2022: £1,008.9m) in the year reflects positive operational cash flow from the continuing
divisions as well as the disposal proceeds from Greyhound properties and collection of deferred consideration and other receivables,
offset by the repayment of debt and de‑risking of certain retained liabilities. Underlying operational cash flow under IFRS 16 before capital
expenditure and lease payments in the year was £644.8m (FY 2022: £185.8m), ahead of expectations due to better business performance
and timing of certain working capital flows. The adjusted cash flow is set out below:
52 weeks to
25 March
2023
£m
52 weeks to
26 March
2022
£m
EBITDA
755.8
862.1
Other non‑cash income statement charges
10.9
3.8
Working capital
(101.3)
(89.2)
Movement in other provisions
(33.0)
(27.4)
Increase in financial assets/contingent consideration receivable
–
(223.1)
Settlement of foreign exchange hedge
(1.2)
–
Pension payments in excess of income statement charge/LGPS refund
13.6
(340.4)
Cash generated by operations
644.8
185.8
Capital expenditure and acquisitions
(208.5)
(262.9)
Proceeds from disposal of property, plant and equipment
147.8
23.1
Proceeds from capital grant funding
144.2
77.6
Net proceeds from disposal of businesses
2.0
2,320.0
Interest and tax
(64.6)
(196.6)
Shares purchased for Employee Benefit Trust
(15.3)
(23.5)
Share repurchases from buyback programme including costs (FY 2022: tender offer)
(31.6)
(506.0)
Dividends paid including to non‑controlling interests
(20.8)
–
Settlement of foreign exchange hedge
(12.5)
–
Lease payments now in debt/other
(557.5)
(608.6)
Adjusted cash flow
28.0
1,008.9
Foreign exchange movements
(4.0)
(3.8)
Net (inception)/termination of leases
(1,231.8)
184.1
Lease payments now in debt
557.5
609.8
Other non‑cash movements
0.2
207.8
Movement in net debt in the period
(650.1)
2,006.8
Strategic report
FirstGroup Annual Report and Accounts 2023
32
Financial review
continued
EPS
Total adjusted EPS from continuing
operations was 10.6p (FY 2022: 1.6p). Basic
EPS was 11.8p (FY 2022: 60.2p).
Shares in issue
29.5m shares had been repurchased
by year‑end, as part of the £75m share
buyback programme announced on
16 December 2022. As at 25 March 2023
there were 707.8m shares in issue
(FY 2022: 740.7m), excluding treasury shares
and own shares held in trust for employees
of 42.8m (FY 2022: 9.5m). The weighted
average number of shares in issue for the
purpose of basic EPS calculations (excluding
treasury shares and own shares held in trust
for employees) in the period was 739.5m
(FY 2022: 1,057.5m).
Dividend
The Board is proposing that a final dividend
of 2.9p per share, resulting in a total
dividend payment of c.£20m, be paid on 18
August 2023 to shareholders on the register
at 14 July 2023, subject to approval of
shareholders at the 2023 AGM.
Capital expenditure
Non‑First Rail cash capital expenditure was
£121.3m (FY 2022: £194.3m), comprising
First Bus £120.3m and Group items
£1.0m FY 2022: £194.3m, comprising
First Bus £61.1m, Group items £1.7m,
First Student £72.6m, First Transit £21.8m
and Greyhound £37.1m). In the year, the
First Bus average fleet age was 9.1 years
(FY 2022: 10.1 years). First Rail capital
expenditure was £56.6m (FY 2022: £57.3m)
and is typically matched by receipts from the
DfT under current contractual arrangements
or other funding.
During the year asset‑backed financial
liabilities were entered into leases in First
Bus of £19.3m (FY 2022: £22.4m comprising
First Bus £11.3m, Group items £0.8m, First
Student £8.4m, First Transit £1.7m and
Greyhound £0.2m).
In addition, during the year the Group
entered into leases with a right of use
value of £1,219.0m comprising First Rail
£1,213.8m, First Bus £4.2m and Group items
£1.0m (FY 2022: £116.6m, comprising First
Rail £94.6m, First Bus £11.3m, Group items
£0.8m, First Student £8.4m, First Transit
£1.3m and Greyhound £0.2m).
Gross capital investment (fixed asset
and software additions plus rights of
use asset additions) was £1,426.9m
(FY 2022: £374.8m) and comprised
First Bus £154.3m, First Rail £1,270.5m
and Group items £2.1m (FY 2022: First Bus
£74.5m, First Rail £147.6m, Group items
£5.9m, First Student £96.1m, First Transit
£13.5m and Greyhound £37.2m). The
balance between cash capital expenditure
and gross capital investment represents
new leases, creditor movements and the
recognition of additional right of use assets
in the year.
Net cash/(debt)
The Group’s adjusted net cash as at 25 March 2023, which excludes IFRS 16 lease liabilities and ring‑fenced cash was £109.9m
(FY 2022: adjusted net debt of £(3.9)m). Reported net debt was £(1,269.1)m (FY 2022: reported net debt of £619.0m) after IFRS 16 and
including ring‑fenced cash of £369.6m (FY 2022: £468.1m), as follows:
25 March
2023
26 March
2022
Analysis of net debt/(cash)
Total Group
£m
Total Group
£m
Sterling bond (2024)
184.2
199.9
Bank loans and overdrafts
82.9
87.5
Lease liabilities
1,748.6
1,083.2
Asset backed financial liabilities
44.2
35.5
Loan notes
0.6
0.6
Gross debt excluding accrued interest
2,060.5
1,406.7
Cash
(421.8)
(319.6)
First Rail ring‑fenced cash and deposits
(364.2)
(440.4)
Other ring‑fenced cash and deposits
(5.4)
(27.7)
Net debt excluding accrued interest
1,269.1
619.0
IFRS 16 lease liabilities – rail
1,711.2
1,031.2
IFRS 16 lease liabilities – non‑rail
37.4
52.0
IFRS 16 lease liabilities – total
1,748.6
1,083.2
Net (cash)/debt excluding accrued interest (pre‑IFRS 16)
(479.5)
(464.2)
Adjusted net (cash)/debt (pre‑IFRS 16 and excluding ring‑fenced cash)
(109.9)
3.9
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
33
Funding
During the second half of FY 2023, the
Group completed the sale of its Greyhound
property portfolio for net proceeds of £122m.
Following the receipts of these proceeds, the
Group announced a £75m share buyback
programme, and the repurchase of £15.7m of
its 2024 6.875% bonds. At 25 March 2023,
the Group had repurchased £29.5m shares
for an amount of £31.6m (including costs)
under the share buyback programme.
As at the year end, the Group had £638.9m
of undrawn committed headroom and free
cash, being £300.0m (FY 2022: £300.0m)
of undrawn committed RCF and £338.9m
(FY 2022: £232.1m) of net free cash after
offsetting overdraft positions.
Under the terms of the First Rail contractual
agreements with the DfT, cash can only
be distributed by the TOCs either up to the
lower amount of their retained profits or the
amount determined by prescribed liquidity
ratios. £48.7m has been paid in dividends
from the TOCs after finalisation of their
statutory accounts to the Group during the
year. The ring‑fenced cash represents that
which is not available for distribution or the
amount required to satisfy the liquidity ratio
at the balance sheet date.
Interest rate risk
We seek to manage our exposure to floating
interest rates by ensuring that at least
50% (but at no time more than 100%) of
the Group’s gross debt is fixed rate for the
medium term.
Based on the current adjusted net debt
profile, the variable rate RCF is undrawn with
only finance leases and the 2024 6.875%
£184.2m fixed rate bond outstanding.
Fuel and electricity price risk
We use a progressive forward hedging
programme to manage commodity risk.
As at June 2023, 85% of our ‘at risk’ UK
crude requirement for FY 2024 (81.4m litres,
which is all in First Bus) was hedged at an
average rate of 46p per litre, and 55% of
our requirements for the year to the end of
March 2025 at 50p per litre. We also have
an electricity hedge programme in place,
with 69% of our consumption (based on
current consumption forecasts) hedged for
FY 2024 at £172/MWh and 60% for FY 2025
at £146/MWh.
Foreign currency risk
‘Certain’ and ‘highly probable’ foreign
currency transaction exposures including
fuel purchases for the UK divisions may be
hedged at the time the exposure arises for
up to two years at specified levels, or longer
if there is a very high degree of certainty.
The Group does not hedge the translation of
earnings into the Group reporting currency
(pounds Sterling) but accepts that reported
Group earnings will fluctuate as exchange
rates against pounds Sterling fluctuate for
the currencies in which the Group does
business, although this exposure is materially
reduced following the sales of the North
American divisions. During the year, the net
cash generated in each currency may be
converted by Group Treasury into pounds
Sterling by way of spot transactions in order
to keep the currency composition of net debt
broadly constant.
Foreign exchange
The most significant exchange rates to pounds Sterling for the Group are as follows:
52 weeks to 25 March 2023
52 weeks to 26 March 2022
Closing rate
Effective rate
Closing rate
Effective rate
US Dollar
1.22
1.11
1.32
1.40
Canadian Dollar
1.68
1.76
1.64
1.73
Following the exceptional gilt yield
movements in FY 2023, the Group agreed
to make £95m from the Limited Partnership
created following the sale of the North
American divisions (the escrow) available
to the Bus Pension Scheme to assist with
liquidity management. The loan was repaid
in February 2023. The funding shortfall
(the basis which will determine the final
distribution of funds from the escrow
following the next triennial valuation) remains
materially lower than it was at the beginning
of the period. The Company has now started
the formal process of removing the legacy
North American pension obligations from the
balance sheet by giving notice of its intention
to terminate the pension plan in Canada.
During FY 2023, £11.8m of excess funding
was returned to the Group by a Local
Government Pension Scheme in Scotland.
This had been made possible by the transfer
of assets and liabilities held within the
Strathclyde Pension Fund into the North East
Scotland Pension Fund and a subsequent
annuity purchase.
On an agreed low‑dependency funding
basis, Bus and Group Scheme shortfalls are
in aggregate c.£60m lower than at the start
of the year, to c.£146m at year‑end (with
£117.6m remaining in escrow).
Pensions
We have updated our pension assumptions
as at 25 March 2023 for the defined benefit
schemes in the UK and North America.
The net pension surplus of £186.7m at the
beginning of the year moved to a net surplus
of £27.8m at the end of the year.
The movement is principally due to the
impacts of the high yield environment. Whilst
the significant increase in discount rates was
the main contributor to gains from changes
in financial assumptions, the corresponding
reduction in the value of bond and
liability‑matching assets, together with a
modest fall in the value of growth‑seeking
assets and higher than expected inflation
led to an overall loss. The main factors that
influence the balance sheet position for
pensions and the principal sensitivities to
their movement at 25 March 2023 are set
out below:
Movement
Impact
Discount rate
+1.0%
Increase surplus by £202m
Inflation
+1.0%
Decrease surplus by £151m
Life expectancy
+1 year
Decrease surplus by £52m
Strategic report
FirstGroup Annual Report and Accounts 2023
34
Financial review
continued
Balance sheet
Net assets have decreased by £134.3m since 26 March 2022. The principal reasons are the impact of the profit for the year, which is more
than offset by the reduction in the pension surplus, as well as the share buyback programme.
Balance sheets – Net assets/(liabilities)
As at 25 March 2023
£m
As at 26 March 2022
£m
First Bus
511.9
626.4
First Rail
1,368.3
597.3
Greyhound
(21.8)
33.7
Divisional net assets
1,858.4
1,257.4
Group items
162.1
245.8
Net debt
(1,275.6)
(619.0)
Taxation
5.3
–
Greyhound – Held for sale
0.6
0.9
Total
750.8
885.1
Legacy North American assets and
liabilities on balance sheet
As part of the disposal of First Transit to
EQT, FirstGroup was entitled to an ‘earnout’
consideration of up to $290m (c.£220m).
On 26 October 2022, EQT Infrastructure
announced its agreement to sell First Transit
to Transdev North America, Inc., and as
a result the Group currently estimates the
earnout consideration to be c.$88.5m
(£72.3)m). During the year this gave rise to
a non‑cash, adjusting charge of £33.8m
relative to the carrying value of the earnout of
£106.1m at 26 March 2022.
Post‑balance sheet events
■
On 11 May 2023, the Department for
Transport (DfT) confirmed that it would not
exercise its option to extend the existing
arrangements for FirstGroup’s TransPennine
Express (TPE) National Rail Contract, which
was due to expire on 28 May 2023. On that
date the DfT appointed its Operator of Last
Resort to take over delivery of passenger
services on the TPE network.
■
The sale of the Bus division’s depot at
Empress Road, Southampton, which was
disclosed as held for sale at 25 March 2023,
completed on 3 April 2023 with proceeds in
line with the held for sale valuation.
■
First Transit earnout crystallised following
completion of sale of First Transit business
by EQT Infrastructure in March 2023, with
estimated proceeds of c.$89m anticipated
in H1 FY 2024.
■
In May 2023, the DfT announced a two‑year
funding settlement for bus operators in
England which includes £300m of further
funding to protect bus services until 2025,
and £200m funding to extend the £2 fare
cap until the end of October 2023 and then
at £2.50 until November 2024.
Going concern
The Board carried out a review of the
Group’s financial projections for the 18
months to 30 September 2024 and having
regard to the risks and uncertainties to
which the Group is exposed, the Directors
have a reasonable expectation that the
Group has adequate resources to continue
in operational existence for at least the
12‑month period from the date on which
the financial statements were approved.
Accordingly, they continue to adopt a going
concern basis of accounting in preparing the
consolidated financial statements in this full
year report.
Definitions
Unless otherwise stated, all financial figures
for the 52 weeks to 25 March 2023 (the
‘year’ or ‘FY 2023’) include the results and
financial position of the First Rail business
for the year ended 31 March 2023 and
the results of all other businesses for the
52 weeks ended 25 March 2023. The
figures for the 52 weeks to 26 March 2022
(the ‘prior year’ or ‘FY 2022’) include the
results and financial position of the First Rail
business for the year ended 31 March 2022
and the results and financial position of all
other businesses for the 52 weeks ended
26 March 2022. Results for the 53 weeks
to 30 March 2024 (‘FY 2024’) will include
the results and financial position for First
Rail for the year ending 31 March 2024 and
the results and financial position of all the
other businesses for the 53 weeks ending
30 March 2024.
‘Cont.’ or the ‘Continuing operations’ refer
to First Bus, First Rail and Group items.
‘Disc.’ or the ‘Discontinued operations’
refer to First Student, First Transit and
Greyhound US.
References to ‘adjusted operating profit’,
‘adjusted profit before tax’, and ‘adjusted
EPS’ throughout this document are before
the adjusting items as set out in note 4 to the
financial statements.
‘EBITDA’ is adjusted operating profit less
capital grant amortisation plus depreciation.
The Group’s ‘EBITDA adjusted for First
Rail management fees’ is First Bus and
First Rail EBITDA from open access and
additional services on a pre‑IFRS 16 basis,
plus First Rail attributable net income from
management fee‑based operations, minus
central costs.
‘Group adjusted attributable profit’ is First
Bus and First Rail adjusted operating profit
from open access and additional services,
plus First Rail attributable net income from
management fee‑based operations, minus
central costs, minus cash interest, minus tax.
‘Net debt/(cash)’ is the value of Group
external borrowings, excluding accrued
interest, less cash balances.
‘Adjusted net debt/(cash)’ excludes
ring‑fenced cash and IFRS 16 lease liabilities
from net debt/(cash).
Ryan Mangold
Chief Financial Officer
8 June 2023
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
35
1
Alternative Performance Measure (APM). Reconciliation of APMs to statutory measure can be found in note 4 on pages 168 to 171.
Key performance indicators
The Group and our divisions focus on a range of financial and non‑financial KPIs to measure
progress and evaluate performance over time. KPIs linked to remuneration are marked
Read more about remuneration in the Remuneration Committee report on pages 107 to 134.
Group revenue (£m)
Continuing operations
£4,755.0m
Group revenue reflects the overall size and
health of the business driven by passenger
volumes and funding receipts.
4,591.1
4,755.0
4,318.8
4,021.8
3,542.8
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
TOC
Non-TOC
Bus
Revenue from continuing
operations increased to
£4,755.0m (FY 2022: £4,591.1m),
principally reflecting improving
passenger volumes in First Bus
partially offset by lower receipts
from government grant funding
and increased revenue in First
Rail.
Group adjusted operating profit
1
(£m)
Continuing operations
£161.0m
Group adjusted operating profit is a
measure of our ability to extract value from
our revenue and manage costs.
106.7
161.0
112.2
81.3
91.7
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
First Bus benefited from
improving passenger volumes
and yields, which were partly
offset by lower grant receipts
and the impact of inflationary
cost headwinds. In First Rail,
operating profit for management
fee‑based operations was
down primarily due to the
result of lower performance fee
expectations, although these
were more than offset by a
strong performance in open
access (Hull Trains and Lumo).
Adjusted earnings per share
1
(pence)
Continuing operations
10.6p
Adjusted EPS summarises the overall
financial performance of the Group
and profit attributable to shareholders.
1.6
10.6
(3.4)
(3.4)
13.3
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
Adjusted EPS for the continuing
business has increased from
1.6p to 10.6p due to strong
growth in First Bus and First
Rail open access EBIT as well
as a significant reduction in
net finance costs following the
deleveraging in FY 2022 and
benefits of capital deployed on
the share buyback programme.
Businesses which are now discontinued cannot be disaggregated for the purposes of EPS beyond the comparative year. FY 2020 includes
Greyhound and FY 2019 includes Greyhound, First Student and First Transit.
Adjusted net cash/(debt)
1
(£m)
£109.9m
The level of net cash/(debt) in the business
influences our ability to invest and finance
the business.
250
0
-250
-500
-750
-1,000
-1,500 -1,250
(3.9)
109.9
(1,414.3)
(1,490.9)
(1,429.0)
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
Adjusted net cash/(debt) has
improved by £114m due to
strong EBITDA in First Bus and
First Rail open access operations
in addition to proceeds from
the sale of legacy US properties
offset by investment in First
Bus fleet and infrastructure,
acquisitions and the buyback
programme.
Financial KPIs
Strategic report
FirstGroup Annual Report and Accounts 2023
36
1
Punctual is defined by Network Rail as arriving at the final destination within five minutes of the planned timetable for London and South East, Regional and Scotland
operators, or within ten minutes for long distance operators. The moving annual average (MAA) reflects the proportion of trains on time in the past 12 months.
Customer performance
First Bus total operated mileage
96.3%
This measures bus miles operated as
a percentage of timetabled bus miles.
It is an important indicator of service to
customers and contract fulfilment.
96.7
96.3
99.2
98.4
98.4
185.1m
168.2m
164.9m
215.3m
219.8m
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
60%
70%
80%
90%
50%
100%
There has been an improved
performance in H2 FY 2023.
This is driven by increased
passenger volumes, improved
driver availability and the
implementation of other
efficiency measures.
First Rail Public Performance Measure
This measures % of passenger trains
punctual at final destination
1
by financial
period and moving annual average (MAA).
Punctual is defined as arriving at the
final destination within five minutes of the
planned timetable for London and South
East, Regional and Scottish operators,
or within ten minutes for long distance
operators. Source: Network Rail
Avanti West Coast
Great Western Railway
South Western Railway
UK average
Lumo
TransPennine Express
Hull Trains
2019
2023
2022
2021
2020
95
100
90
85
80
75
70
65
60
55
50
45
Safety
Our two safety KPIs measure the success of our Dedicated to Safety value, our duty of care to our customers, and our commitment to
providing a safe place to work for our employees.
Read more about safety on page 51
Employee Lost Time Injury Rate
8.7
Measures the number of lost time injuries
per 1,000 employees per year.
9.5
8.7
7.7
10.7
12.1
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
The lost time injury rate has
reduced by 9% due to significant
reductions in severity of injuries
across both First Bus and First
Rail. Ensuring a safe working
environment for all colleagues is
paramount and we continue to
strive to eliminate all injuries in
the workplace.
Passenger injury rate
per million journeys
4.5
Historical data is restated annually to
incorporate the most accurate information
for the last 36 months.
4.8
4.5
4.7
5.1
5.3
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
Passenger injuries have gone
down by 7%, a reduction
mirrored in both the bus and rail
divisions. We have implemented
several strategies to help our
passengers travel safely on
our vehicles and trains through
educational campaigns, process
improvements, and technology.
Non‑financial KPIs
Key Performance Indicators
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
37
Non‑financial KPIs
continued
Environment
See page 45 for our full environmental disclosures
Scope 1&2 emissions
749,831
tCO
2
e
Measures the success of our actions
to combat climate change and improve
local air quality by delivering low and zero
emission mobility solutions and infrastructure
for our customers and communities.
Scope 1
Scope 2
821,289
749,831
774,399
917,789
1,119,395
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
Scope 1 and 2 emissions have
slightly decreased from FY 2022
to FY 2023. This is partly due to
improved emission factors and
progress on bus electrification as
well as strike action significantly
impacting First Rail service levels
over the last year.
Carbon intensity
167
tCO
2
e/£m
Normalised measure of our Scope 1, 2,
3 (limited) and out‑of‑scope emissions,
calculated as tonnes of carbon dioxide
equivalent per £m of revenue. Also linked
to the Group’s Revolving Credit Facility.
188
167
187
236
293
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
Carbon intensity per £m revenue
has improved due to ongoing
decarbonisation efforts across
the business, indicating a
de‑coupling of GHG emissions
from business growth.
Zero emission buses
6.0%
of bus fleet
Indicates the speed of investment in
decarbonising our bus fleet. Also linked to
the Group’s Revolving Credit Facility.
3.3
6.0
1.1
0.3
0.0
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
The number of zero emission
buses in our fleet continues to
increase in line with our ambition
to achieve a 100% zero emission
bus fleet by 2035.
Community investment
Read more about community involvement on page 53
£617,000
Measures the Group’s contribution to
local communities using the London
Benchmarking Group (LGB) model which
tracks direct cash contributions, employee
volunteering time, in‑kind support, and
leverage including employee, customer
and supplier contributions.
Cash
Time
1.58
0.62
1.32
2.91
3.07
In-kind
Leverage
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
This year we contributed over
£617,000 to the communities
we serve. We transitioned
from a Group charity partner
to divisional charity partners
this year. While this was being
implemented, our programme
of gifting advertising space was
put on pause for several months,
resulting in a temporary drop.
Explanation of changes to KPIs
ROCE has been removed from the KPIs. The majority of the capital deployed by the Group is in First Bus, given the very low capital
requirement in First Rail in line with the terms of the management‑fee based contracts. When we assess growth capital deployment in First
Bus, we use a Weighted Average Cost of Capital (‘WACC’) measure, adjusted for risk.
We have included Adjusted net cash/(debt). We use adjusted performance metrics which adjust for the nature of the management‑fee based
rail contracts where we bear no revenue and cost risk, to measure the performance of our business.
Strategic report
FirstGroup Annual Report and Accounts 2023
38
Responsible business
Our ambition is to be the partner of choice for innovative and sustainable
transport, accelerating the transition to a zero carbon world.
We are committed to building a business for the long
term, and our sustainability agenda goes to the heart
of who we are and what we do as an organisation. We
have a critical role in creating a connected, healthy,
zero carbon world, contributing to local prosperity and
growth, reducing congestion on the roads, improving
air quality and helping to reduce carbon emissions.
Our newly formed Responsible Business Committee
reports to our Board and oversees all our responsible
business activities.
Climate leadership
We have recently set a science‑based emissions
reduction target aligned with a 1.5°C ambition and
approved by the Science Based Targets initiative
(SBTi). Climate‑related KPIs are embedded into the
variable remuneration of our senior leaders to support
achievement of this target. We were the first public
transport operator in the UK to officially support the
Task Force for Climate‑related Financial Disclosures
(TCFD) and publish our third TCFD report this year.
Social value
We create jobs in many UK regions. We are committed
to increasing the diversity of our workforce and
building their skills for the future, all of which generates
social value, alongside our support for communities.
Stakeholder engagement
We review our strategic priorities through robust
materiality assessments and extensive dialogue
and consultation with both internal and external
stakeholders. We recognise this is a process that
will continually evolve and so too will our work, with
the needs and perspectives of our stakeholders
continuing to inform our plans. See pages 78‑80 for
more information on our stakeholder engagement
throughout FY 2023.
The business continues
to make progress on our
sustainability agenda,
with performance and
future priorities overseen
by the Responsible
Business Committee.
London Stock Exchange
Green Economy Mark
“
Claire Hawkings
Chair, Responsible
Business Committee
Our performance on ESG indices
We continue to be recognised as a leader by third
party evaluations, ratings, and rankings of corporate
ESG performance. We have been included in the
Clean200 Report for a fourth consecutive year,
which ranks the world’s largest publicly‑listed
companies by their total clean energy revenues from
products and services that provide solutions for the
planet and define a clean energy future.
We were the only UK transport operator included
in the 2022 S&P Sustainability Yearbook and our
score improved to B on the CDP global disclosure
programme this year. We also ranked third out of
the world’s 90 most influential transport companies
in the World Benchmarking Alliance’s new
2022 Transport Benchmark, making us the top
performing UK transport company in the category.
Further recognition during the year includes:
■
Green Economy Mark on the London Stock
Exchange and recognised for our contribution to
the global green economy
■
ranked as the top performing bus and rail operator
in our sector in the FTSE4Good Index
■
‘Low Risk’ rating on the Sustainalytics Index and
ranked in the 94th percentile in our sector
■
‘Prime’ status on the ISS ESG Index and ranked in
the top decile in our sector
■
‘AA’ ranking on the MSCI ESG Index for the sixth
year running
Mobility
Beyond
Today
C
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Mobility
Beyond
Today
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Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
39
Mobility Beyond Today
Our strategic framework for driving sustainability
Our three priority areas
drive our sustainability ambitions
Our foundations
underpin our framework
Innovating for
our customers
Our innovative solutions ensure we
deliver the transport of choice for
our customers, passengers, and
communities
Read more on pages 40‑42
Being the partner
of choice for low
and zero emission
transport
Our business delivers low
and zero emission transport
solutions to help combat
climate change and improve
local air quality
Read more on pages 43‑46
Supporting
our people
Our workforce is diverse,
healthy, supported,
engaged and has the skills
required now and in the
future
Read more on pages 47‑50
Foster continuous
improvement in
safety
towards our
goal of zero harm
Read more on pages 51‑52
Embed
environmental
management
to reduce our
impact on the environment
Read more on page 55
Form genuine, enduring
local relationships with the
communities
we serve
Read more on pages 53‑54
Hold the
highest
ethical
standards
Read more on page 56
Underpinned by our Vision and Values
We provide easy and
convenient mobility,
improving quality of life
by connecting people
and communities.
Committed to
our customers
Dedicated
to safety
Setting the
highest standards
Supportive
of each other
Accountable
for performance
Strategic report
FirstGroup Annual Report and Accounts 2023
40
Responsible business
continued
Providing alternative modes of travel
We play a critical role in reducing congestion on our
roads, improving air quality and helping to lower
carbon emissions. Transport remains the largest
element of the UK’s carbon footprint. Government
statistics also show that bus and coach transport
accounts for only 2.2% and rail just 1.5% of
greenhouse gas emissions produced within the
transport sector, compared with 52% from cars.
Rail journeys emit up to 80% less carbon and bus
journeys over 30% less carbon than journeys by car.
We are focused on helping more people to make the
shift to our bus and rail services, leading to fewer car
journeys being made. Not only is this desirable for the
UK to meet its Net Zero goals, but public transport
is also vitally important for social inclusion, acting as
a leveller for access to education, jobs and health
facilities, reducing congestion and supporting social
mobility and cohesion.
Our fully electric rail operator Lumo has achieved two
major milestones in its first year, having attracted a
million passengers and (alongside other rail operators)
seen rail overtake air travel to become the preferred
mode of transport between Edinburgh and London.
Between April and August 2022, for the first time over
half (57%) of journeys between Edinburgh and London
were by rail. The sustainable rail operator carried its
millionth passenger in November 2022 having run
more than 2,500 services, the equivalent of around
4,125 full flights* each carrying 180 people.
First Bus welcomed the DfT’s new £2 fare cap
scheme, which came into effect in England in January
2023. The aim is to help the sector encourage greater
bus use, whilst supporting customers at a time when
the cost of living has increased. We welcomed the
extension of the scheme until the end of November
2024 at £2.50, having seen more than five million
passengers already utilise the £2 fare scheme on First
Bus services since it began.
We have also been supporting the Scottish
government’s scheme to provide free bus travel for
under‑22s, which came into effect in January 2022.
We launched a new marketing campaign called
#FreeToExplore to promote this scheme in 2023.
Simplifying end‑to‑end journeys and
supporting active travel
To reduce journeys made by private car, we strive to
improve and simplify end‑to‑end passenger journeys,
and to increase the integration of active travel,
including cycling and walking, into our networks.
This year, our rail businesses have continued to install
hundreds of secure bike spaces to allow even more
people to choose a sustainable way of getting to and
from the station. As an example, we opened a new
cycle hub at Salisbury station with 74 cycle parking
spaces and an e‑bike docking station.
Innovating for
our customers
We are focused on providing
services that have innovation, ease,
convenience, and sustainability at their
core, in order to have more people
than ever travelling on our bus and rail
services and taking cars off the road.
Our aims
Enabling the shift
Helping more people to use bus and
rail services, increasing ridership and
leading to fewer car journeys being
made.
Driving innovation
Embracing new technologies and
ways of working to deliver easy,
convenient and sustainable mobility
solutions for our customers.
Using our influence
Collaborating and partnering with
stakeholders to shape the sustainable
communities of the future.
Read more about Lumo
on page 16
*
Estimated using Airbus A320
with seating capacity of
180 people.
Just over a year after
GWR’s Dartmoor Line
reopened to regular
passenger trains,
journey numbers on the
line passed 250,000,
exceeding the demand
levels originally forecast.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
41
Combining excellent customer service
with innovation
To encourage more people to use bus and rail
services, we continue to invest in innovations
to improve customer service, delivering more
convenience, smarter, easier and more flexible
ticketing, better real‑time information and improved
on‑board amenities.
We have now launched ‘tap on tap off’ payment
technology and ticketing options on our buses in
various UK regions including Aberdeen, Glasgow,
Cornwall, West Yorkshire and Leicester. This payment
technology is now installed on all our fleet. It allows
customers to pay by contactless for the journey they
make – calculated from the point they ‘tap on’ to the
point they ‘tap off’. It also helps speed up boarding
times and journeys.
Using our influence
Transport is public facing, often the topic of public and
political debate and subject to significant interaction
with government at local, regional and national
level. Our goals are to advocate for innovation and
investment in sustainable mobility, and to make the
case for transport infrastructure decisions that help
reduce congestion, enhance customer experience and
decrease journey times. We achieve this by engaging
with a wide range of stakeholders and policymakers.
With government
At Group level, we have long‑established and strong
relationships with government officials and
departments, as well as positive engagement with
ministers. We work with both government and
opposition policy teams and advisers, as well as
Parliamentary committee members, and MPs and
councillors who are local to our businesses.
We engage with policymakers and seek to influence
the development of policy both directly, and through
the membership of sector trade organisations in
the UK, who in turn engage with government and
regulators to promote a positive policy environment
for private sector transport. We welcome the
government’s recent announcement on the launch
of a Bus Centre of Excellence in partnership with the
Chartered Institute of Highways and Transportation
(CIHT) to upskill, recruit and retain a new generation of
bus professionals, and we look forward to engaging
proactively following its launch in the spring.
Improving accessibility
We are committed to making our services accessible
and we make every effort to support customers with
disabilities or restricted mobility.
We recognise that access to public transport
services is often fundamental to such customers’
independence. We work with both national and local
disability groups and continue to invest in making our
services more accessible. We put in place a number of
technological enhancements to improve accessibility
on our services this year.
Avanti has launched a dedicated communications
channel to provide disabled customers with instant
help during their journey in a first for the UK rail
industry. Called ‘Travel Companion’, the channel
utilises WhatsApp, to connect passengers to
accessible travel experts who can offer specialist
support while travelling. To support blind or
partially‑sighted people Avanti has also included within
this channel, Be My Eyes – a free app offering video
support at a moment’s notice from sighted volunteers
and professionals who lend their eyes to solve tasks.
Travellers who are deaf or have hearing loss often
struggle to hear station announcements and
communicate with staff, which can make it harder
to plan and carry out journeys. Both SWR and TPE
have trialled Artificial Intelligence technology at
various stations this year which translates live journey
information into British Sign Language (BSL). This is
displayed through a figure on digital totem screens,
giving them more confidence on their journeys.
Our project to deploy
superfast on‑board
5G Wi‑Fi for SWR
customers between
Basingstoke and
Earlsfield is underway.
Engineers for the project
by evo‑rail and SWR,
in partnership with
Network Rail, have now
installed the first series
of rail‑5G poles on the
line between the stations
on the South West
Main Line. It will be the
first railway line in the
mainland UK to deploy
the industry‑leading
rail‑5G technology for
customer use. With over
100 trains already fitted
to accommodate the
solution, the technology
will cover 70km of the
SWR network.
Strategic report
FirstGroup Annual Report and Accounts 2023
42
Responsible business
continued
With our industry
In the UK, we engage with, and are members of,
a number of business advocacy organisations,
sustainability lobby groups and public transport
campaigns. By working through these alliances, we
amplify our influence on policy.
Our Group Engineering Director continues to chair
the Industry Sustainable Rail Leadership Group and
attends the industry wide Sustainable Rail Executive.
In addition to this, representatives from First Rail
and our train operating companies chair the Rail
Environment Forum, the Air Quality Working Group
and the Noise Working Group. We are also active
members of other industry working groups. Along with
other industry members we have been heavily involved
in development of the Sustainable Rail Blueprint, led
by the Rail Safety and Standards Board (RSSB). This
sets out the industry‑wide blueprint for sustainable rail.
First Bus is a proactive member of the Confederation
of Passenger Transport. This year we have worked
together to successfully develop the case to
government for revenue support for bus operators as
we adapt to changing travel patterns post pandemic
and position ourselves for growth.
We comply with the Lobbying (Scotland) Act 2016
regulations and key personnel are registered with
the UK Lobbying Register. FirstGroup’s gifts and
hospitality policy is strictly adhered to when engaging
with stakeholders at all levels.
As company policy, we do not make political
donations. More information on our stakeholder
engagement strategies can be found on pages 78‑80.
With local authorities
In First Bus we work closely with our local authority
partners to pursue partnerships which help us deliver
better services through measures which reduce road
congestion and give priority to buses.
In First Rail, we deploy Regional Development
Managers within our operating companies who liaise
with local and regional government, local businesses,
user groups and others.
This commitment to, and experience of, effective local
and regional partnerships, underpins our approach to
the partnership options set out in the government’s
National Bus Strategy, as well as our engagement with
the devolved nations, to ensure that the experience
and expertise of private operators remains central
to the delivery of public transport services. This year
we were delighted to successfully secure further
funding with our local authority partners which we
supplemented with our own investment for further
electric buses in Norwich, Leicester, York, Bramley
(Leeds) and Hoeford (Portsmouth) depots. Read more
on page 43.
We have worked in strong collaboration with a
number of local transport and combined authorities.
For example, in Leeds with the West Yorkshire
Combined Authority (WYCA) and Leeds City Council
we exceeded our Enhanced Partnership target to
implement 75% Euro VI vehicles in the authority,
instead reaching 82% Euro VI. Wider collaboration
with West Yorkshire operators and WYCA has enabled
tap on tap off capping across all operators, with
First Bus having invested £600,000 to ensure rapid
implementation.
We’re very grateful
for the contribution of
sustainability leaders
from First Rail to drive
forward progress across
GB rail. They bring
practical experience,
innovation and are
fully committed to
tackling industry‑wide
challenges.
George Davies,
Director of Sustainable
Development, RSSB
“
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
43
The vital role of public transport in helping to address
the challenges of climate change has never been
clearer. We are committed to delivering a more
sustainable future for the communities we serve.
We actively manage our greenhouse gas emissions
across our business and are working to eliminate the
carbon emissions associated with our operations.
Zero carbon
We have set a near‑term science‑based emissions
reduction target, approved by the SBTi and aligned
with the ambition of the Paris Agreement to limit
annual average temperature increase to 1.5°C above
pre‑industrial levels. Our target is to reduce Scope
1 and 2 GHG emissions 63% by FY 2035 from a FY
2020 base year. We also commit to reduce absolute
Scope 3 GHG emissions from fuel and energy related
activities 20% by FY 2028 from a FY 2020 base year,
and that 75% of our suppliers by emissions, covering
purchased goods and services and capital goods,
will have science‑based targets by FY 2028. More
information on our Scope 1, 2 and 3 emissions can be
found in the table on page 45.
In FY 2023, we have seen a 8% decrease in our
carbon emissions compared with FY 2022, partly due
to strike action affecting service levels in First Rail.
We expect service levels to stabilise from FY2024
onwards, with continued growth driven by modal shift.
First Bus is at the forefront of the industry in the
operation of low and zero emission vehicles and in
2020 announced a commitment to achieving a fully
zero emission fleet by 2035. During FY 2023, First Bus
and our local authority partners have been successful
in securing government co‑funding to boost their
existing Zero Emission Bus Regional Area (ZEBRA)
projects in four locations.
This means we are co‑funding an additional
328 electric buses over the next year across our York
and Bramley depots in West Yorkshire, our Leicester
depot, one of our Norwich depots in Norfolk and the
Hoeford depot in Hampshire, with 58% of the funding
provided by First Bus and the remaining 42% from
the UK Government’s ZEBRA scheme. This brings
the total investment across all ZEBRA projects that
First Bus is delivering to £105m, alongside ZEBRA
funding of £82m. At the conclusion of these ZEBRA
projects in March 2024, First Bus will have over 600
zero‑emission buses in its fleet.
Four of our depots will operate fully electric fleets by
March 2024, with Hampshire, Leicester, York and
Norwich set to become the UK’s first bus depots
outside of London to reach this milestone. In Leicester,
First Bus will invest £6.6m to bring this project to
fruition, alongside additional DfT funding of £2.9m
secured in partnership with Leicester City Council. An
additional 86 electric buses will arrive in Leicester by
March 2024.
We also completed the transformation of our
Caledonia depot this year, with 160 state‑of‑the art,
rapid‑charging EV points now installed.
Being the partner
of choice for low
and zero emission
transport
We are taking action to combat climate
change and improve local air quality
by delivering low and zero emission
mobility solutions for our customers.
We are focused on eliminating
carbon emissions associated with
our operations in line with the latest
climate science and our goal is for our
operations to be net zero by 2050.
Our aims
Zero carbon
Eliminating the carbon emissions
associated with our operations.
Air quality
Improving local air quality in our towns
and cities through our cleaner fleets.
Climate resilience
Incorporating climate adaptation
measures to improve the resilience of
our services.
600
zero emission buses by
end of FY 2024
We are thrilled
to announce the
completion of our
Caledonia depot. It’s
a landmark moment
on our journey to an
entirely zero emission
fleet and a vital step
in decarbonising the
local environment and
improving air quality.
Duncan Cameron,
Managing Director
at First Bus Scotland
“
Read more about our
Caledonia depot on
page 15
Strategic report
FirstGroup Annual Report and Accounts 2023
44
Responsible business
continued
While our total rail km powered by electric traction
have remained the same as last year at 73%, we
expect this to increase as the UK rail network gets
progressively electrified.
To continue to eliminate carbon emissions from our
operations it is critical that we continue to work with
the UK and devolved governments, the Great British
Railways Transition Team and other key stakeholders
to support further electrification of the UK network.
TPE continued to effectively support the route upgrade
and electrification of the 72‑mile York to Manchester
route in support of its decarbonisation roadmap. Work
progressed well in FY 2023 with nearly 20% of the
route expected to be electrified by the end of 2024
and the significant remodelling at Stalybridge station
successfully completed after a 26 day closure.
Where full electrification is not going to be possible,
we support the case for other low or zero carbon
alternatives to diesel trains. In Avanti, we achieved a
key milestone in our project to replace old diesel trains
with new electric and bi‑mode trains, by commencing
testing of two trains on the West Coast Main Line
for the first time. The new fleet will be a mix of ten
seven‑carriage electric trains and 13 five‑carriage
bi‑mode trains, with the ability to switch seamlessly
between electric and diesel power. The new fleet is
scheduled to enter service on the West Coast Main
Line in 2023.
Over the past four years, Hull Trains has replaced four
older diesel trains with five new bi‑mode trains on the
route from Hull into London. This has led to a 57%
reduction in Hull Trains’ carbon emissions between FY
2019 and FY 2023.
This year, GWR completed the purchase of assets
from emission‑free battery and hybrid trains
manufacturer Vivarail, which went into administration.
Through this deal, we have bought intellectual
property, rolling stock and equipment relating to
the development of high‑performance battery
technology designed to support wider introduction of
battery‑powered trains on the UK’s rail network.
Sustainability is a key focus in all of the DfT rail
contracts and we expect and support carbon‑related
metrics in future contracts and negotiations.
Air quality
Air quality has a significant impact on the health of our
communities, and many cities and towns are already
working to place restrictions on the most polluting
vehicles and prioritise public transport. An important
aspect of improving local air quality is to encourage
modal shift away from car journeys, and to invest in
convenient and cost‑effective low emission public
transport networks.
Alongside our long‑term commitment to transition
our business to become net‑zero, we also have
programmes in place to reduce the emissions of air
pollutants from our existing fleet. Through the process
of contract renewal, new contracts and planned
fleet replacement, we are replacing our older, higher
emission fleet with new models.
We have taken over as chair of the rail industry’s Air
Quality Steering Group. We continue to be part of the
first ever Air Quality Monitoring Network across 105
stations in England and Wales. Our rail businesses
have installed diffusion tubes and other monitoring
equipment at various stations to monitor nitrogen
oxide, nitrogen dioxide and particulate matters. We
will use this data to inform air quality improvement
plans where necessary. We are part of the industry
idling reduction project which seeks to overcome the
technical and operational barriers to reduce idling and
improve air quality.
In First Bus, 77% of our diesel fleet has now achieved
the equivalent of Euro VI low emission standards this
year. As part of this, we continue to retrofit Exhaust
After‑Treatment Systems (EATS) to older diesel
vehicles and we now have more than 1,600 retrofitted
vehicles in our fleet. The growth of electric buses in
our fleet will also continue to reduce our air quality
impacts over time.
Climate resilience
To ensure the success of our business for the long
term, we are not only focused on climate change
mitigation but also climate resilience – understanding
the physical and transition impacts climate change
can have on our business over the short, medium
and long term, and taking action to mitigate the risks
and leverage the opportunities. Climate change is
managed and reported as one of our principal risks
and these considerations have been an integral part of
our risk management framework for many years.
Following a qualitative review of climate‑related risks
and opportunities in FY 2021, and a quantitative
scenario analysis and financial impact assessment in
FY 2022, this year we have worked closely with key
internal functions to understand how these risks and
opportunities are being addressed and what further
actions can be put in place as part of a broader,
Group‑wide transition plan. Our TCFD update on
pages 57‑65 provides more details on how we are
assessing and managing these risks.
73%
rail distance powered by
electric traction
5
new bi‑mode trains in
Hull Trains replacing
older diesel trains over
the past four years
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
45
Greenhouse gas (GHG) emissions
The Group’s overall carbon emissions decreased by
8% from FY 2022 to FY 2023. This is partly due to
strike action significantly impacting First Rail service
levels over the last year, as well as improved emission
factors and progress on bus electrification. We are
continuing to pursue our goal to become a net‑zero
business by 2050 or sooner.
The primary factors affecting our FY 2023
performance are:
■
First Rail have decreased service levels compared to
FY 2022 due to strike action
■
The use of bi‑mode trains to, where possible, switch
train operations from diesel to electric
■
First Rail driver training and other energy efficiency
initiatives
■
Increased use of low emission and zero emission
buses
■
A reduction in carbon emission factors for electricity
purchased
For a more detailed analysis and an understanding
of our Group carbon performance please see
FirstGroup’s Environmental Performance Report 2023.
(at www.firstgroupplc.com)
First Bus brought into service 83 zero emission buses
during FY 2023. This has helped to increase our zero
emission vehicles proportion to 6% (3.3% in FY 2022).
Energy efficiency initiatives
FirstGroup tracks and monitors energy‑saving
initiatives to ensure we continue to focus on energy
efficiency alongside switching to low and zero carbon
energy choices. The following are examples of
significant, approved initiatives in the short to medium
term which will be driving continuous improvement in
our energy and carbon performance:
■
Great Western Rail (GWR) is trialling fast‑charging
battery technology to help bring regular battery‑only
rail services a step closer. The battery is currently
being trialled from West Ealing to Greenford in
north‑west London
■
The completion of the Caledonia depot with the
introduction of a significant number of electric vehicles
and associated charging infrastructure
■
First Bus is investing £2.5m in more than 6,000 solar
panels to help power 20 of its depots
Methodologies and calculations
Our carbon and energy reporting approach is
prepared in accordance with the following standards
and guidelines:
■
Greenhouse Gas Protocol (GHG Protocol) for
Corporate Accounting and Reporting Standard
■
UK Government Streamlined Energy and Reporting
(SECR) Guidelines
FirstGroup has an operational control boundary
covering 100% of its business activities with a
materiality reporting threshold of 5%.
Tonnes of carbon dioxide equivalent (tCO
2
e):
Total by emission scope
2023
2022
2021
2020
2019
Scope 1:
Direct emissions from
road and rail vehicle fuel, heating
fuel, fleet fuel and fugitive refrigerant
gas emissions
545,054
599,869
534,555
696,771
802,118
Scope 2:
Indirect emissions from the
generation of electricity purchased for
buildings and to power electric road
or rail vehicles (location‑based)
204,777
221,420
239,844
221,018
217,277
Scope 3:
Other indirect emissions
inclusive of business travel, water
use and downstream waste
treatment and disposal
8,784
9,192
10,399
12,220
16,472
Out of Scope:
Indirect emissions
from biogenic content of our liquid
and gas fuels
33,752
30,848
23,819
21,460
8,988
Total
All scopes
792,367
861,330
808,617
951,469
1,044,855
% change YOY
‑8%
7%
‑15%
‑9%
7%
% change (2019 baseline)
‑24%
‑21%
‑23%
‑9%
N/A
Adjusted
1
Total
All scopes
792,367
861,330
808,617
1,083,002
1,246,614
% change YOY
‑8%
7%
‑25%
‑13%
‑1%
% change (2019 baseline)
‑36%
‑45%
‑35%
‑13%
N/A
Per £m revenue (tCO
2
e/£m)
167
188
187
236
293
1
Adjusted total provides like‑for‑like comparison of our carbon emissions by adjusting for major changes in rail (inclusion of Avanti and
SWR). Please see more detail in our methodologies section below.
6%
of our bus fleet
now made up of
zero emission vehicles
Strategic report
FirstGroup Annual Report and Accounts 2023
46
Responsible business
continued
The term ‘carbon emissions’ in this report refers to
GHG emissions as required for a GHG inventory. This
includes carbon dioxide alongside six other GHGs
calculated in mass of carbon equivalent (CO
2
e).
Our GHG inventory is reported in four categories or
‘scopes’, listing our direct and indirect emissions in
accordance with the GHG Protocol:
Scope 1: Direct emissions from road and rail vehicle
fuel, heating fuel and fugitive refrigerant gas emissions
Scope 2: Indirect emissions from the generation
of electricity purchased for buildings and to power
electric road or rail vehicles (location‑based)
Scope 3: Other indirect emissions inclusive of
business travel, waste disposal, water supply and
water treatment
Out of Scope: relating to the combustion of biofuels
Our reported total carbon figure is inclusive of our
reported ‘Scope 3’ and ‘Out of scope’ emissions.
Our gross carbon emissions are also provided with
an adjusted total to account for the incorporation of
SWR and Avanti in previous reported years. It applies
the equivalent emissions of these businesses to prior
reported years to better compare our performance
free from the impacts of major business change. This
is calculated in accordance with Appendix E of the
GHG Protocol.
Our UK carbon and energy emissions are calculated
using Government‑issued emission factors:
■
UK Government GHG conversion factors for company
reporting: BEIS, 2022
There are limited examples where emission factors
have been developed as ‘bespoke’.
To calculate underlying energy use, liquid and gaseous
fuels have been converted from a volume to kWh
(Gross Calorific Value). The following sources have
been used to derive fuel energy properties for these
calculations:
■
UK Government GHG conversion factors for company
reporting: BEIS, 2022.
A detailed understanding of our calculation
methodologies is available within FirstGroup’s
Environmental Performance Report 2023, which can
be found on our website at www.firstgroupplc.com.
Monitoring our underlying energy use ensures we are
focusing on energy efficiency as well as switching to
low and zero carbon energy choices. The underlying
energy use which affects our carbon footprint has
decreased 16% since last year.
This year the proportion of renewable energy we used
was 6%, impacted by the relative use of electric versus
diesel vehicles in our fleet. For a more detailed analysis
and understanding of our Group energy performance
please see FirstGroup’s Environmental Performance
Report 2023.
Group revenues increased 4% compared to FY 2022.
This, coupled with a 8% decrease in carbon emissions
and an 16% decrease in energy use, has led to a 11%
decrease in our carbon per £m revenue and a 19%
decrease in our energy per £m revenue.
Total energy use (kWh)
Kilowatt‑hours of energy (kWh HHV): Total by
energy source and renewable content
2023
2022
2021
2020
2019
Non‑renewable sources
2,934,638,964
3,378,894,410
3,102,497,653
3,499,209,894
3,763,697,692
Renewable energy sources
172,559,038
309,115,330
304,782,436
627,153,709
80,185,975
Total All
3,107,198,003
3,688,009,740
3,407,280,089
4,126,363,602
3,843,883,667
% change (year‑on‑year)
‑16%
8%
‑17%
7%
8%
% change (2019 baseline)
‑19%
‑4%
‑11%
7%
N/A
Per £m revenue
(MWh/£m)
653
803
789
1,021
1,080
First Bus
Percentage of low and zero emission passenger
fleet – First Bus
2023
2022
2021
2020
Low emission buses
(defined as diesel or biomethane powered
buses with a 15% or greater carbon saving
from a standard alternative)
30.8%
23.4%
21.6%
20.2%
Zero emission buses
(electric or hydrogen powered)
6.0%
3.3%
1.1%
0.3%
Total passenger fleet
4,591
4,974
5,189
5,619
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
47
Diversity and inclusion
To better understand and meet the needs of the
diverse customers and communities we serve, we
are committed to increasing the diversity of our
workforce. We continue to recognise that attracting
and retaining people with different backgrounds
and experience requires an inclusive culture where
everyone feels valued and respected. While we are
proud of the progress being made in many areas, we
do acknowledge there is still more to do in order to
create an inclusive workplace for everyone.
Governance
In the past year we have established two separate
bodies to help us drive our equality, diversity and
inclusion (ED&I) agenda. Internally we have an ED&I
working group where we share learnings across the
business and develop strategy. Within this group we
are also setting ED&I targets, for all of our operating
companies, and are using strategic workforce
planning to help us achieve them.
The Responsible Business Committee – a new
committee of the Board, met for the first time in
FY 2023 and one of its main duties is to review the
practices and performance of the Group in supporting
our people, and in particular our progress towards
meeting the Group’s goals and objectives with regard
to ED&I.
As an organisation, we want our workforce to be
reflective of the communities we serve. The four
gender commitments we set out in 2017 remain a key
focus, namely to:
■
increase the number of female applicants for all roles
■
encourage more women to stay and progress their
careers with the company
■
support and develop more women into higher paying
roles
■
ensure men are aware of the role they play in creating
an inclusive workplace that is welcoming to women
Our aspiration is to have half of all the roles we
recruit for, to be filled by women. We also aspire to
be representative of the communities we serve from
an ethnicity perspective, including within our senior
management populations. We are also reviewing
additional internal targets around specific roles to
help us make positive progress against our respective
pay gaps.
Transparency in our approach is important to us. We
are already signatories to Change the Race Ratio,
First Bus are now signatories to the Business in the
Community Race at Work Charter and this is the
second year that we have voluntarily published our
ethnicity pay gap.
70%
of employees have
shared their ethnicity
vs 65% in FY 2022
Ethnicity – FY 2023
White
58.8%
Ethnic minority group
11.3%
Unknown
29.9%
Workforce
breakdown
Overall, this year the
proportion of women in
the Group has increased
to 20.8% (2022:
20.3%). The proportion
of women in senior
management positions
has also increased
since the last report
from 20.5% to 23.5%
and 44% of our Board
members are women.
In terms of ethnicity,
11.1% of our workforce
are from an ethnically
diverse background
(2022: 9.8%) and 2.7%
(up from 2022: 0.9%) of
our workforce consider
themselves as having a
disability.
Ethnicity – FY 2022
White
55.6%
Ethnic minority group
9.8%
Unknown
34.6%
Supporting
our people
We employ around 30,000 people in
depots, stations and offices, providing
vital services which connect people
and communities. Our people are at
the heart of our business, and we are
extremely proud of the way they keep
our customers moving.
Our aims
Diversity and inclusion
We value diversity and inclusion,
and our workforce represents the
communities we serve, increasing
effective participation and equal
opportunities.
Skills for the future
Our people have the skills, expertise
and knowledge to drive the transition
to a sustainable future.
Wellbeing
Our culture means that our
employees are supported towards
good mental and physical wellbeing.
Strategic report
FirstGroup Annual Report and Accounts 2023
48
Responsible business
continued
We recognise the importance data brings in driving
progress on our ED&I programmes and we are
working hard to encourage our employees to share
their personal information with us. First Bus have been
conducting a census that is enabling them to get a
more accurate view of their workforce. Across the
whole of FirstGroup, we now have over 70% of our
employees who have shared their ethnicity with us,
compared to 51% two years ago. We have also started
to ask for more detailed disability information from our
colleagues to better understand their requirements
and to be able to better accommodate their needs.
Development programmes
We have launched a Senior Women’s Leadership
programme, which is designed to accelerate the
readiness of women for senior leadership roles
across FirstGroup by building advanced leadership
capabilities and personal confidence. Our ‘Step
Up’/’Step Forward’ and ‘Reach Up’/ ‘Reach
Forward’ programmes continue to make a significant
contribution in our drive to promote better gender
and ethnic minority representation across our senior
and middle management populations. Of the current
population that have gone through these programmes,
31.3% have either been promoted or given a
development move.
Claire Weston of GWR a former attendee of Step
Forward said “The Step Forward program has played
a really key part in my development. It was a fantastic
opportunity to meet some likeminded women from
all across FirstGroup and made me reflect on how I
could forge the path for myself and shape my career
development. In 2021 I made the move over to GWR
as the Head of Driver Training and in October 2022 I
was promoted into the Head of Drivers position, the
role that I had always aspired to achieve. The Step
Forward program has achieved everything it set out to
and was one of the best courses I have been on. I am
looking forward to the Senior Leadership course to
help me further progress my career.”
Recognition
First Bus won praise from Scottish advocacy
organisation Close the Gap in its latest report into
gender‑equality progress in the workplace, highlighting
the actions across recruitment, progression and
promotion for women. They have introduced a Gender
Balance Inclusion Network and recently launched
two programmes to support and accelerate their
journey towards gender inclusivity, a reverse mentoring
programme and an Intentional Allyship Programme.
GWR and the corporate functions have achieved
the Bronze standard from Clear Assured, a globally
recognised standard awarded to businesses that have
shown that diversity and inclusion are reflected across
all policies and processes.
At the 2023 Rail Business Awards, TPE won the
Diversity and Inclusion award after being recognised
for its data‑led and evidence‑based approach to
diversity and inclusion and for demonstrating a full
understanding of the issues. SWR were also highly
commended in this category and recently received
Inclusive Employers Standard silver accreditation,
recognising the progress that has been made since
launching its first inclusion and diversity strategy
in 2021.
Attraction and recruitment
We have been making steady progress on attracting
and hiring more women and employees from ethnically
diverse backgrounds into the business. For the roles
advertised over the last year, we have again increased
the proportion of applications from women and ethnic
diverse backgrounds and from those hired, 21.6%
were women and 20.6% were from an ethnically
diverse background.
SWR have introduced ‘Have a Go Days’ for women
to experience engineering and driver roles in order to
increase the number of internal applications into these
roles. Those who have participated have subsequently
expressed an interest in applying for roles.
We want to continue to create a diverse pipeline
of future applicants, so have launched specific
engagement programmes in schools to promote our
job opportunities in areas with high ethnic minority
populations. We are utilising specialist recruitment
portals such as Vercida, who showcase organisations
that are looking to recruit diverse talent and we
continue to update our careers website and social
media channels to showcase examples of colleagues
from under‑represented groups.
42%
of employees have
shared their ability status
vs 37.5% in 2022
Disability status
– FY 2023
Not disabled
39.5%
Disabled
2.7%
Unknown
57.8%
Disability status
– FY 2022
Not disabled
36.6%
Disabled
0.9%
Unknown
62.5%
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
49
A new mural at Euston station
With the aim of encouraging more women to
consider working in rail as a career, a mural that
commemorates Katie Harrison – one of the UK’s first
female train drivers, was unveiled at London Euston
station. The mural was due to be on display until
the end of Avanti West Coast’s driver recruitment
campaign, but due to its success which has seen
record numbers of women applicants it will now
remain permanently in place.
Daisy Hawker Wallace, Head of PR at Avanti said
“With her feisty determination and impish good
humour, Karen Harrison fought for women’s rights
and the rights of other minorities in rail. But she was
no ‘poster girl’ for the railway. She was willing to be
a public figure when others were not, believing in the
courage of her convictions.
“At Avanti, we want to embrace equity. Women like
me would not have senior positions in rail, if it were
not for Karen’s achievements paving the way. It’s
easy to forget how hard this would have been for a
woman in the 1970s, but the female experience then
was quite different to what it is today.
“By working with Network Rail to ensure
the longevity of this mural, not only are we
commemorating her legacy, we want to continue to
inspire other women to work in rail.”
Our gender breakdown
FY 2023
1
FY 2022
Women
Men
Total
Women
Men
Total
Number
%
Number
%
Number
%
Number
%
Total population
6,540
20.8
24,937
79.2
31,477
6,298
20.3
24,766
79.7
31,064
Senior management
2
12
23.5
39
76.5
51
8
20.5
31
79.5
39
Board
4
44.4
5
55.6
9
4
44.4
5
55.6
9
1
Excludes 28 colleagues who have not disclosed their gender.
2 Hampton‑Alexander definition.
Skills for the future
Each of our divisions provides training to enable our
employees to deliver great service for our customers,
and invests in the skills we need for the future. The
changing nature of transport and mobility, particularly
new vehicle technologies and energy transition,
requires us to adapt the way we develop, operate and
maintain our services. To deliver that change, we need
a healthy, engaged, agile and diverse workforce with
the skills and expertise for a zero carbon economy,
equipped to innovate and deliver mobility for the future.
Our apprenticeship programmes are an important way
of growing the engineering and operational skills which
are vital to our business. We are running industry
leading programmes that are fully integrated into the
fabric of our organisation, working in key areas of the
business such as Engineering, Human Resources,
Customer Service and Business Administration.
This year we have once again increased the number
of apprentices in training across First Bus and First
Rail to a total of more than 850 as at the end of March
2023, with 32.4% of apprentices recruited over the last
year being female, an increase of 0.9% from last year.
In First Bus, our partnership with Reaseheath
College, Cheshire entered its second year. There
are 82 apprentices currently learning at the UK’s
first engineering academy for the next generation of
zero emission coaches and buses, specialising in
mechanical and electrical engineering, coachbuilding
and stores.
Earlier this year GWR received gold accreditation
as part of the Investors in People ‘We invest in
Apprentices’ programme with one of the apprentices
also earning the accolade of Higher Apprentice of the
Year from Exeter College.
850
apprentices across bus
and rail in FY 2023
Strategic report
FirstGroup Annual Report and Accounts 2023
50
Recognition for our apprentices
Ekaterina Cherkasenko, winner of the Higher
Apprentice of the Year award at Exeter College on
what the benefits of an apprenticeship
“I chose to do an apprenticeship as it’s an
opportunity to develop myself personally for the
things that I aspire to do as part of my job and
hopefully help to better GWR in the future.
“It’s an opportunity to speak to some like‑minded
people at GWR. It’s an opportunity to prove so
many people wrong and an opportunity to achieve
something for yourself, rather than just as part of
your job.
“There’s a lot of change happening and I want to
be as equipped as I can to help people want to
stay with GWR. Embrace the change and embrace
the opportunity.”
Responsible business
continued
Commitment to the Schools Engagement Strategy
through FY 2024 will continue to promote the rail
sector and apprenticeships to younger people and
also those from under‑represented groups.
Shannon Pilkington on her experiences since joining
TPE as apprentice from school: “I’m currently
working as a customer information controller in the
control team, a role that I have thoroughly enjoyed
so far. A highlight of the apprenticeship scheme is
the opportunity to learn different skills and build my
knowledge to start my career on the railway. There
are many different opportunities which I didn’t realise
before starting the apprenticeship and I’m looking
forward to experiencing more of them.”
To attract and retain the skills we need, we offer a
competitive wage reflecting local market demands and
conditions. Avanti, TPE and Tram Operations Ltd. are
accredited Living Wage Employers and pay the Real
Living Wage (RLW) to employees and to third‑party
contractors working directly for the company in
accordance with the Living Wage Foundation rates
of pay. GWR and SWR also pay the RLW to directly
employed colleagues. Almost 98% of employees in
First Bus, are paid at or over the RLW.
Wellbeing
The wellbeing of our employees remains a key
priority for FirstGroup. Our employees have various
wellbeing resources available to them through the
Wellbeing Hub, accessed through our intranet. We
have introduced webinars on neurodiversity and stress
awareness, and marked Stress Awareness Month. We
continue to offer training for colleagues who may wish
to take up a future role as a Mental Health First Aider
around the organisation.
GWR along with the DfT, have commissioned the
charity Samaritans to lead a new research study
on mental health and wellbeing support for the
rail industry, in partnership with Mental Health
at Work. The study will provide good practice
recommendations for mental health provision, so that
the industry can raise awareness for their staff and
support those experiencing mental illness. It will aim
to highlight existing barriers, as well as encourage a
culture shift to destigmatise conversations around
mental health.
SWR were recognised for building a supportive
and inclusive workplace by winning the Wellbeing
in Rail award at the 2023 Rail Business Awards.
The judges praised their ‘very honest’ assessment,
which has led to the introduction of a diverse range
of mental and physical health initiatives. These
included the introduction of wellbeing pods which
have helped more than 1,600 colleagues, training
up 140 colleagues as mental health first aiders
and encouraging over 250 colleagues to be more
physically active by participating in the Million Metre
challenge.
In the wake of the ongoing cost of living situation
across the UK, First Bus have launched a
comprehensive wellbeing guide that has been sent
to each colleague within the division helping them be
more aware of how to support their own wellbeing.
They have also been working with an organisation
called Better with Money, offering all First Bus
colleagues the opportunity to attend webinars that
offer financial support.
Employee engagement
All our businesses carry out regular Your Voice surveys
giving employees the opportunity to share their views
on the way they are managed, and how likely they
are to recommend FirstGroup as an employer. These
surveys are anonymous and managed by an external
specialist company to encourage candid feedback.
Surveys from across our businesses conducted
in 2023 have shown an improvement both in
response rates in engagement levels. In February,
First Bus conducted their latest survey, this showed
a year‑on‑year increase of 16% in the response
rate and an 8% increase in engagement. From the
recent surveys conducted in March, within the open
access train operators, Hull Trains and Lumo both
have engagement levels above 80% and within the
corporate functions, engagement was at 90%. The
other Train operating companies, will be conducting
their surveys later in the year.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
51
Every day our trains, buses and trams carry more
than 1.8 million customers and we are responsible for
almost 30,000 employees. By its nature, the transport
industry involves safety risk, and therefore we take
seriously our duty of care to ensure that our customers
and other stakeholders can use our services safely
and that our employees have a safe place to work. We
continually strive to seek innovative safety mitigations
to ensure the wellbeing of our people.
We maintain robust safety management systems
throughout the Group, with a clear focus on ensuring
compliance with legislation, policies, processes, and
procedures.
Alongside this, we continue to invest in sophisticated
technology solutions to assist our teams in delivering
first class safety, reducing incidents, and monitoring
and managing performance. We are proud of the
safety culture we have worked hard over many years
to establish.
Be Safe
Be Safe is our Group‑wide approach to embed safety
as a personal core value for all colleagues through the
positive reinforcement of safe behaviours.
The principal elements of Be Safe include daily
conversations (touchpoints) to reinforce good safety
behaviours, as well as reward and recognition for
safe working. Leadership set the tone from the top by
conducting site safety tours throughout the year and
Near Miss reporting is actively encouraged at sites to
share learnings that improve workplace safety.
Safety leadership and governance
Strong leadership from the top is a key feature of our
safety culture. Our Responsible Business Committee,
involving the CEO, members of the Group Executive
team, together with First Bus and First Rail senior
leadership teams, oversee the Group’s safety strategy
and the performance, procedures, and practices
across all operating companies.
Safety
Dedicated to safety, always front
of mind – safety is our way of life
Our commitment to the safety of
our customers, our employees, and
all third parties interacting with our
businesses remains unwavering and
is articulated though our Dedicated
to Safety value which applies in
everything we do.
8.7
Employee Lost Time Injury Rate
(per 1,000 employees per year)
12.1
Passenger Injury Rate
(per million miles)
Strategic report
FirstGroup Annual Report and Accounts 2023
52
Responsible business
continued
our driving standards database, provides them
with support until they gain the relevant experience.
This early period is crucial in shaping their driving
performance standards, and the support we provide
also reduces potential attrition rates.
First Rail
Our approach across each of our rail businesses is
firmly dependent upon:
■
A comprehensive safety management system
focused on risk avoidance that is continually reviewed
and updated in light of new legislation, audits and
recommendations from accidents and incidents
■
A dedication to employee health and safety that is
shared through induction, training, communication,
briefings, line management, peer review and sharing
of best practice
■
An internal openness and accountability in identifying
health and safety issues, which includes partnership
working between employees and trade unions to
ensure a safe workplace. Alongside this, we work
closely with other rail industry partners to ensure we
keep abreast of best practice and lessons learned.
During the year we continued to prioritise reductions in
customer injuries on our trains and stations where we
know slips, trips and falls are the most common cause
of injury. Our station staff are focused on identifying and
assisting vulnerable customers where possible. This
applies especially for leisure trips and elderly customers
and those who travel less frequently. Innovative publicity
campaigns were developed that were themed around
known risks such as not using handrails, minding gaps
between trains and platforms and not rushing.
The elimination of Signals Passed at Danger (SPAD)
risk continues to be at the forefront of our safety
activities, with monitoring arrangements rigidly
applied to both supporting performance metrics and
the implementation of safety plans. We have many
ongoing workstreams focused on mitigating SPAD
incidents such as localised risk reduction plans,
driver focused communications, and an engagement
campaign called ‘Respect the Red’.
First Bus
This year we achieved ISO 45001 certification across
the division, and we will be audited every year against
this standard by an independent United Kingdom
Accreditation Service (UKAS) approved body to
ensure we continuously improve our health and safety
management system.
We have been aligning with the broader ED&I
programme underway in the bus division this year. We
have rewritten our safety policies and procedures to
ensure they are simpler and more easily applied by
our people. We have also partnered with an external
provider to translate our documentation into a variety
of languages to aid understanding and mirror the
diverse nature of our workforce.
We are creating a bespoke qualification for our
managers and supervisors which will be accredited by
the Institute of Occupational Safety and Health (IOSH).
This will be unique and relevant to the road passenger
transport sector, and we have redesigned course
content to ensure better applicability to road transport
incidents as well as more interactive learning through
bite size content. Our commitment is to support
and equip our employees to offer a safer and more
comfortable journey to customers.
Approximately a quarter of our customer and employee
injuries happen each when they are getting on or off
our buses. Therefore, we strengthened our existing
campaign called ‘Hold, Look, Land’ to encourage safer
behaviours to reduce slips, trips and falls, sharing the
message with customers through onboard signage
and our employees by embedding the message
in local campaigns and messaging via the winter
guidance documents and employee app.
Bus collisions with low bridges remain a risk and
we continue to use learnings from the study we
commissioned last year with the Institute of Transport
Studies (ITS) at Leeds University. The study highlighted
mental workload as a human factor into why bridge
strikes might occur, and although technology to alert
the driver to low bridge risk using GPS is currently in
place, we have an opportunity to look at how we can
reduce the mental workload of a driver so they can
concentrate more on their awareness of road signs
and immediate hazards. We are also exploring route
navigation systems to achieve this and are running
a trial of such technology in Aberdeen to test the
effectiveness of the system and how our drivers feel
about it.
Driver recruitment has been a challenge for the bus
sector over the past year. Our data shows us that
new starter drivers have a higher risk of incidents and
therefore need additional support as we welcome
them into the organisation. Our support programme
called Thru‑Care continues to support new drivers
through their first year with us. Special rosters to
ensure they are not overwhelmed, phasing their
learnings, and tracking their performance through
Six Golden Rules
We launched our Six Golden Rules awareness
campaign during Rail Safety Week in June 2022.
The campaign publicised simple safety rules that
could be easily and readily adopted by employees
across all our rail businesses. A new rule was
publicised each month up to December 2022,
with topics ranging from situational awareness to
communication. The campaign was promoted with
videos from leadership teams, animations, posters
and social media activities, and garnered positive
employee involvement.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
53
Strong community engagement is at the heart of
what we do. This year we supported hundreds of
community causes and charitable organisations
through volunteering, corporate donations and gifts
in kind. These included donating advertising space
and vehicle hires, event sponsorships and providing
spaces at our stations.
Supporting local needs
First Bus launched two Go Greener Funds for local
communities this year. The campaign was aimed
at businesses in York and Bradford, offering ten
businesses in each city a £2,000 cash injection to help
them make greener, more sustainable choices and to
encourage eco‑friendly high street spending. Funds
were awarded to a wide range of businesses including
fashion retail, food and drink, artisan products,
community projects and pharmacies.
Avanti has helped a Cumbrian community restore its
Post Office with a new pop‑up counter at Oxenholme
station two years after it was deprived of its only
service. The local community now has access to
outreach Post Office services on set weekdays. It is
believed to be the first of its kind on the West Coast
Main Line and one of only a few Post Offices operating
at a railway station in the UK.
Two of our rail businesses have been providing
discounted rail tickets enabling young people to travel
beyond their local areas. Hull Trains has worked with
the Hull and East Yorkshire Children’s University
charity for over ten years. In the past year, 2,089
children and 692 adults have boarded Hull Train
services to London. This helps them understand the
world that exists outside their community and to build
their aspirations and confidence.
Communities
Enduring relationships
with local communities
We are proud to support the
communities in which we operate. We
use our skills, reach and influence to
make a positive impact and help those
causes that can make a difference,
both locally and nationally.
£617,000
invested this year in local communities
2,089
young people from Hull have been supported to
travel beyond their local area in partnership with the
Hull and East Yorkshire Children’s University charity
Community use spaces
SWR expanded its programme of providing
redundant spaces in stations for community use
this year. It has spaces such as old waiting rooms
and ex‑retail units available at 14 different stations
along its network and they are being utilised by a
variety of community groups. A redundant room at
Havant station has become the home of a thriving
new community asset, after SWR agreed to hand the
space over to local Community Interest Company,
Solent Remade. The space is now being used as a
hub for resource repair, reduce or reuse projects.
14
stations with
community use space
Strategic report
FirstGroup Annual Report and Accounts 2023
54
Responsible business
continued
Avanti also launched its Feel Good Field Trips initiative
this year. The campaign is giving schoolchildren the
chance to travel by train to destinations across the
West Coast Main Line for hands‑on learning, fun
and culturally diverse days out. Avanti is partnering
with 30 schools to offer up to 5,000 pupils previously
unattainable field trip experiences.
New collaborations
SWR and GWR have both become accredited White
Ribbon UK organisations and unveiled trains with
new livery, as a way of raising awareness about male
violence against women both in their business and
the wider rail industry. The White Ribbon trains will
travel across the GWR and SWR networks spreading
the message of their commitment to supporting the
education of men and boys to prevent violence against
women.
TPE also partnered with the British Transport Police
(BTP) to promote the new Railway Guardian app which
has been developed by BTP and provides information
on what to do if you witness or are a victim of
harassment or sexual offences. To support the launch,
TPE issued a series of four videos showing real‑life
situations faced by customers on the network and the
difference rail users can make in keeping people safe
from problematic behaviour.
Lumo launched a new partnership this year with The
People’s Kitchen. The charity provides meals for
vulnerable people in Newcastle and Lumo plans to
deliver volunteering days to support the efforts of the
kitchen.
First Bus chose Macmillan as its first ever charity
partner through a staff vote and plans to organise a
range of fundraising activities across its depots over
the next three years.
FirstGroup made a corporate donation to the
Turkey‑Syria appeal of the Disasters Emergency
Committee and match‑funded donations made by our
employees. In total, FirstGroup and our employees
donated £617,000 during FY 2023, as measured
by the London Benchmarking Group model for
community impact. See page 37 for a more detailed
breakdown of our contribution.
For information on how we engage with our
communities to improve our services and incorporate
their feedback into our decision‑making processes,
see page 79 and our Section 172 statement on
page 81.
Community Rail
Community Rail Partnerships (CRPs) are
not‑for‑profit organisations that help to further
connect the railway with the communities they serve.
All over the country, CRPs work with communities to
promote social inclusion and sustainable travel,
champion economic development and bring stations
back to life. These partnerships are attuned to local
needs and their work is varied but driven by
passionate volunteers. Each partnership has a
steering group made up of local stakeholders, who
agree on an activity plan of work.
Each year, our franchised rail businesses (Avanti,
GWR, SWR, TPE) provide DfT funding to the various
CRPs that exist along their networks and their
community projects. In FY 2023, we supported over
60 CRPs around the UK and allocated over £1.3m in
funding. Our rail businesses are actively involved with
each CRP, working in partnership with them to
deliver outcomes that benefit as many people locally
as possible.
Community rail promotes understanding and
confidence around rail and removes barriers to travel,
and most community rail partnerships have achieved
success in helping to attract passengers. As an
example, The Worcestershire CRP work alongside
GWR, and local communities to improve stations in
the county and encourage rail use. It has produced
four ‘Line Guides’ that showcase great places to visit
and developed a set of rail trails that links local
walking routes with railway stations.
6
Community Rail
Partnerships
supported this year
Introduction
Governance report
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Financial statements
FirstGroup Annual Report and Accounts 2023
55
FirstGroup is committed to environmental protection
and compliance, where we strive to reduce our
environmental impact across the business. A robust
environmental management system allows FirstGroup
to consider the environmental impact of our services
at the early stages of planning and monitoring.
This allows FirstGroup to implement continuous
improvement in our approach and operation.
We operate in accordance with BS EN ISO 14001
environmental management systems (EMS) across
nearly all of our First Rail and First Bus operations.
FirstGroup operates a localised approach to
developing and implementing EMS systems. This
allows our businesses divisions to adapt EMS systems
to their specific needs allowing for a diverse portfolio
of transport services.
An EMS allows the business to assess all
environmental matters associated with a business,
ranging from biodiversity, energy, carbon, water, waste
management, circular economy, supply chain and
community engagement. FirstGroup’s environment
policy outlines requirements for the Group and its
divisions to reduce the impact of our operations
and ensure legal compliance with regards to the
environment. Supporting the environmental policy
are internal standards for incidents and complaints,
internal audit, carbon and energy reporting to provide
more clarity on our governance and assurance of
environmental management.
The implementation of an EMS has led to several
improvements during FY 2023, such as:
■
Zero environmental penalties issued to FirstGroup.
■
First Bus investing £2.5m in more than 6,000 solar
panels to help power 20 of its depots.
■
SWR teaming up with the Royal Society for the
Protection of Birds to create biodiversity gardens at
five of its stations.
Please see our 2023 Environmental Performance
Report on our website, which expands upon
the information provided in here. It provides key
metrics that track our material issues in relation to
carbon, energy and our environmental impacts,
alongside comprehensive information on our
calculation approach.
Environmental
management
Reducing our impact on the
environment
We have a robust framework in place
for environmental management that
supports continuous improvement.
98%
of operations (by revenue) covered by ISO 14001
Environmental Management System
6,000
solar panels being installed by First Bus to help
power 20 of its depots
Across the UK, we
are either certified or
conform with ISO 14001
across nearly 100% of
our activities, and are
certified to ISO 50001
in nearly all First Rail
operating companies.
Strategic report
FirstGroup Annual Report and Accounts 2023
56
Responsible business
continued
Our Values and ethical commitment shape not
only what we do, but also how we do it. We invest
time and effort to put in place the right processes,
policies, governance structures and Board oversight
to ensure we meet these high standards of integrity
and professionalism.
Our policy framework
Adhering to an ethical framework is a vital part of our
commitment to our customers and stakeholders and
helps to ensure that our Vision and Values are at the
heart of everything we do at FirstGroup. Our Code
of Ethics, which is available at www.firstgroupplc.com/
responsibility, makes sure that all of our businesses
are performing to the highest ethical standards and
are accountable for their performance. The Code
of Ethics is supported by detailed policies and
procedures which apply across the Group and, along
with the Code of Ethics itself, are implemented and
managed by the senior management team in each
of our divisions, including anti‑slavery, anti‑fraud
and anti‑bribery policies, as well as policies on data
privacy, competition laws and other areas of legal and
ethical compliance.
Human rights
We are committed to recognising human rights
on a global basis and recognise that we have a
responsibility to ensure that FirstGroup operates
in a way that respects, protects and champions
the human rights of all those who come into
contact with our operations. This includes a
commitment to the prevention of modern slavery
and human trafficking in all its forms both within
our own businesses and in our supply chains. This
commitment extends to all business dealings and
transactions in which we are involved, regardless of
location or sector. We have a zero‑tolerance approach
Ethics
Hold the highest
ethical standards
In line with our Values and the
expectations of our customers
and partners, we are committed to
conducting our business in an open
and ethical manner, including in all of
our interactions with our customers,
employees and other stakeholders.
to any violations within our company or by business
partners. Our Modern Slavery and Human Trafficking
Statement, which is updated annually, sets out our
policies and the steps we take to address risks in our
business and our supply chains and can be found at
www.firstgroupplc.com. In line with our commitment
to improving our performance by sharing best practice
across the Group, our statement applies to all of our
businesses, including those which are not legally
required to make a statement under the Modern
Slavery Act or equivalent legislation, regardless of their
location, size or turnover.
We have a zero‑tolerance approach to fraud in any
form, including the facilitation of tax evasion and
bribery. We never offer or accept any form of payment
or incentive intended to improperly influence a
business decision. Equally, we support free and open
competition, gaining our competitive advantage by
providing the highest level of service, not through
unethical or illegal business practices. Similarly, we
respect and protect the privacy of our customers,
employees and stakeholders, and are committed
to conducting our business in accordance with
all applicable data protection legislation, including
the UK’s Data Protection Act 2018 and the UK and
EU General Data Protection Regulations. We have
internal control systems and procedures in place to
counter bribery and corruption, and to ensure that
we comply with data privacy, competition and trade
laws. These systems and procedures are kept under
regular review, to ensure that we continue to adopt
appropriate defences and mitigations to ethical and
legal risks that are faced by our businesses.
We have also mandated centrally a set of minimum
requirements for training, testing and policy attestation
across a range of ethical and compliance topics,
including those referred to above. All non‑frontline
staff are required to complete an annual attestation
confirming that they understand and comply with
each of the policies. In addition, senior managers and
higher risk individuals are required to complete training
and pass tests annually. Compliance with these policy
and training requirements is monitored regularly by
the senior management team and at Board level. The
minimum requirements are reviewed and updated as
appropriate to address new or evolving risks.
Divisional management teams are responsible
for ensuring that these core requirements are
implemented and adhered to within their respective
businesses. They are also responsible for assessing
whether stricter or additional requirements are
appropriate to the particular ethical and legal
compliance risks faced by their respective businesses,
and implementing such further measures as are
deemed necessary to mitigate those risks.
We have an externally
managed whistleblowing
service for colleagues
available across
the Group with a
helpline (online and
phone‑based) for the
anonymous reporting of
suspected wrongdoing
or dangers at work.
The hotline is actively
communicated to
colleagues via a number
of channels, as well
as being available via
the Code of Ethics and
other policy and training
materials. All reported
issues or concerns to
the hotline are taken
seriously and structures
are in place to process
reports and, where
appropriate, investigate
concerns and implement
necessary mitigating
steps, ensuring
that confidentiality
is respected at all
times. The Board also
receives reports on the
operation of and any
matters reported to this
whistleblowing hotline.
Introduction
Governance report
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Financial statements
FirstGroup Annual Report and Accounts 2023
57
Climate‑related financial disclosures
Following a qualitative review of climate related risks
and opportunities in FY 2021, and a quantitative
scenario analysis and financial impact assessment in
FY 2022, this year we have worked with key internal
functions to build further understanding of climate risks
and opportunities, how they are being addressed, and
what further actions can be put in place as part of a
broader, Group‑wide transition plan. We have also
completed an extensive assessment of our Scope
3 emissions to improve our understanding of these
emissions and strengthen our Scope 3 data.
This TCFD update therefore provides a summary of
the key, climate‑related risks and opportunities already
reported in our ARA 2022 (at www.firstgroupplc.com,
pages 62‑64), and an overview of what we are doing
to continue to reduce our carbon footprint and build
climate resilience. We report against the four pillars
of TCFD – Governance, Strategy, Risk Management,
Metrics & Targets – and the individual requirements
underneath (see table on page 58 for the location of
relevant disclosures). In line with the UK Listing Rules,
we confirm that disclosures are consistent with the
TCFD Recommendations. However, we recognise that
climate‑related risk assessments are subject to data
availability, trend projections and underlying business
assumptions. It is therefore important to continue to
monitor climate‑related risks and how they evolve
over time, and we will periodically assess the need to
update our 2022 impact assessment to account for
any significant changes in key parameters.
Finally, we look at our TCFD work not just as a vital
mechanism to build long‑term business resilience,
but also as an important step towards increased
transparency around climate as well as broader
sustainability‑related risks and opportunities, in
line with recommendations by the International
Sustainability Standards Board. We will continue to
be open and transparent with our progress on climate
change issues and to publicly disclose decision‑useful
information. Through this report, we aim to keep
stakeholders informed on our progress towards
our net‑zero goals, as well as our management of
climate‑related risks and opportunities.
Our commitments, actions and focus areas
Our ambition is to be the partner of choice for
innovative and sustainable transport, accelerating
the transition to a zero‑carbon world by eliminating
carbon emissions from our operations and supporting
a modal shift to public transport, while building climate
resilience across our business.
We are working towards some ambitious goals. First
Bus has a target to operate a zero‑emission fleet by
2035. To achieve this, we are focused on replacing
existing diesel buses with electric or hydrogen powered
vehicles. First Rail is supporting the UK government’s
target to remove all diesel‑only trains from service by
2040 and deliver a net‑zero railway network by 2050.
Currently, 73% of our First Rail vehicle kilometres are
powered by electricity and we are working with key
industry partners to drive further electrification and trial
alternative technologies to help achieve zero emission
rail services.
We were the first UK public transport operator to
support the Task force for Climate‑related Financial
Disclosures (TCFD) and to sign the UN’s Business
Ambition for 1.5°C pledge to reach net‑zero value
chain GHG emissions by no later than 2050. As part
of this, we have developed a near‑term science‑based
emissions reduction target aligned with a 1.5
0
C
ambition and approved by the Science Based Targets
initiative. Our target is to reduce Scope 1 and 2 GHG
emissions by 63% by FY 2035 from a FY 2020 base
year. We also commit to reduce absolute Scope 3
GHG emissions from fuel and energy related activities
by 20% by FY 2028, from a FY 2020 base year, and
that 75% of our suppliers by emissions, covering
purchased goods and services and capital goods, will
have science‑based targets by FY 2028.
These goals and activities focus on climate change
mitigation – reducing our carbon footprint and
supporting the UK’s transition to net‑zero through
modal shift. To ensure the success of our business
for the long term, we are equally focused on climate
change adaptation and resilience – understanding
the physical and transition impacts climate change
can have our business over the short, medium and
long term, and taking action to mitigate the risks
and capture the opportunities. Climate change is
managed and reported as one of our principal risks
and has been an integral part of our risk management
framework for many years.
Strategic report
FirstGroup Annual Report and Accounts 2023
58
TCFD recommendations
Subheading
Page
Governance
a)
Describe the Board’s oversight of climate‑related risks and opportunities.
Board oversight
59
b)
Describe management’s role in assessing and managing climate‑related
risks and opportunities.
Management’s role
59
Strategy
a)
Describe the climate‑related risks and opportunities the organisation has identified
over the short, medium, and long term.
Climate‑related risks and
opportunities and scenario analysis
60
b)
Describe the impact of climate‑related risks and opportunities on the organisation’s
businesses, strategy, and financial planning.
Impact on strategy and
financial planning
61
c)
Describe the resilience of the organization’s strategy, taking into consideration different
climate‑related scenarios, including a 2°C or lower scenario.
Strategy resilience
62
Risk management
a)
Describe the organisation’s processes for identifying and assessing climate‑related risks.
Approach to risk management
63
b)
Describe the organisation’s processes for managing climate‑related risks.
Risk mitigation actions
63
c)
Describe how processes for identifying, assessing, and managing climate‑related risks are
integrated into the organisation’s overall risk management.
Approach to risk management
63
Metrics and targets
a)
Disclose the metrics used by the organisation to assess climate‑related risks and
opportunities in line with its strategy and risk management process.
Metrics and targets
65
b)
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions,
and the related risks.
Greenhouse gas emissions table
45
c)
Describe the targets used by the organization to manage climate‑related risks and
opportunities and performance against targets.
Metrics and targets
65
Climate‑related financial disclosures
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
59
Climate‑related matters are also embedded into
FirstGroup’s remuneration approach, with our long‑term
incentive plan including specific targets driving the
electrification of our bus fleet and a reduction in our
Scope 1 and 2 carbon emissions (see pages 124‑125).
Performance against these targets is reviewed
half‑yearly by the Remuneration Committee of
the Board.
Management’s role
The Executive Committee provides leadership and
direction for the Group on sustainability matters,
including climate change, with material issues
presented by the Group Corporate Responsibility and
Finance teams for discussion and decision‑making as
they arise throughout the year. Executive responsibility
for sustainability matters is held by the CEO. Executive
responsibility for climate‑related financial risks and
opportunities is held by the CFO, who represents
these matters at Board level.
At divisional level, First Bus and First Rail have
executive management individuals responsible
for driving environmental sustainability across
the divisions, leading on the development and
implementation of decarbonisation strategies and risk
mitigation actions. In FY 2023, First Bus appointed a
new Chief Sustainability and Compliance Officer to
oversee this agenda and set up a cross‑functional
Decarbonisation Forum that meets monthly to set
policy, drive action and review progress. Similarly,
First Rail established a new Sustainability Leadership
Group, including senior leaders from Finance,
Operations and Engineering who meet quarterly
to discuss climate‑related matters as part of a
broader sustainability strategy for Rail. The Executive
Committee receives regular divisional updates from
the MDs of Bus and Rail.
This year, we have worked with our divisions to run a
series of in‑depth TCFD and TPT planning workshops
with key functions, from Commercial to Engineering, to
expand governance around this agenda and facilitate
further integration of climate considerations into
business processes and decision‑making.
To strengthen ownership and accountability,
climate related KPIs are embedded into our variable
remuneration practices. For example, our Long Term
Incentive Plan (LTIP) awards, made to the CEO, CFO
and other senior leaders, include two environmental
measures – one related to the number of zero
emission vehicles in our bus fleet, and one linked to
a reduction in our absolute Scope 1 and 2 emissions
(see pages 124‑125 for more details).
Governance
TCFD recommendation:
Disclose the organisation’s governance
around climate‑related risks
and opportunities
Management of climate‑related risks is aligned with
the robust corporate governance frameworks and
processes in place throughout the Group. The Board,
Executive Committee and our individual bus and
rail divisions regularly review climate‑related risks
in accordance with the Group’s risk management
framework and consider broader sustainability
matters in line with duties included in the Corporate
Governance Code and section 172 (see page 81).
Board oversight
The Board is responsible for promoting the Company’s
long‑term sustainable success for the benefit of its
shareholders. This aim extends to the setting of our
strategy and approach to climate‑related risks and
opportunities and our net‑zero ambitions, which
form a key part of our broader sustainability strategy,
‘Mobility Beyond Today’, outlined on page 39.
Our Responsible Business Committee of the Board
meets four times a year to review the practices and
performance of FirstGroup, its companies and joint
ventures, with respect to health and safety, our
people and communities, the environment and our
transition to net‑zero. The Committee comprises
several Board members with specific climate‑related
expertise, described in more detail on pages 88‑90.
At each meeting, the Committee receives a detailed
performance update from Bus and Rail against
specific commitments and targets, and discusses
strategic priorities going forward. Over the last year,
the Committee reviewed and guided for example
FirstGroup’s plans for further embedding the TCFD
recommendations across the business and our
approach to Scope 3 emissions.
To further support Board level oversight of climate‑
related matters, in FY 2023 we ran an in‑depth
briefing session for the Board covering key risks and
opportunities for the business, as well as evolving
reporting requirements such as the recommendations
of the Transition Planning Taskforce (TPT).
In addition, the Audit Committee supports the Board
in the management of risk, including climate‑related
risks, and is responsible for reviewing the effectiveness
of risk management and internal control processes.
The Audit Committee reviews climate‑related risks as
relevant in relation to going concern, viability statement
and the assessment of impairment. See page 85 for
more information on Board Committees and how
our Board operates, and page 67 for more detail on
how risks are reviewed and considered in strategic
business decisions.
Strategic report
FirstGroup Annual Report and Accounts 2023
60
Climate‑related financial disclosures
continued
The medium‑ to long‑term scenarios align with First
Bus’s target of a zero emissions fleet by 2035 and the
UK’s net‑zero goal by 2050.
Transition risks
Our analysis of transition risks considered potential
impacts on our business from changes in policy
(such as carbon pricing), technology (additional
capital expenditure required to meet more stringent
environmental standards), brand reputation (customer
expectations and FirstGroup’s environmental
credentials and ability to meet carbon reduction goals),
and capital markets (investor expectations and impact
on funding access/costs).
Given our industry, we also expect growing
opportunities over the coming years to counteract
some of these risks, mainly linked to a more rapid
modal shift supported by customers’ increasing
climate consciousness and more stringent climate
policy and market incentives. We are working with our
Bus and Rail divisions to understand how the pace at
which we electrify our fleet and progress towards our
net‑zero goals could affect our ability to capture these
opportunities.
Our modelling work identified impacts from policy,
technology, investor and customer behaviour as the
most material to our business over the next five years,
as outlined in Table 2. It is important to note that these
potential impacts focus on direct risks to FirstGroup,
recognising that under the current National Rail
Contracts some of the wider risks and opportunities
for our Rail operations would be shared with or
transferred to third parties.
Physical Risks
When looking at physical risks, we considered the
potential impacts of acute climate events, such as
more frequent and more severe floods, storms, rainfall,
heatwaves, and droughts, as well as the impacts of
more chronic and long‑term changes such as rising
sea levels and a global increase in temperatures.
Financial impacts from these events range from
operational disruptions and asset damage to health
and safety risks, insurance costs and revenue loss.
For example, the increased likelihood and severity of
flooding could lead to an increased risk of connective
infrastructure damage, causing disruption to electricity
supply and digital connectivity. It could lead to an
increase in vehicle accidents and route closures, and
cause health and safety risks to our employees and
passengers.
Strategy
TCFD recommendation:
Disclose the actual and potential impacts of
climate‑related risks and opportunities on
the organisation’s businesses, strategy, and
financial planning where such information
is material
Climate change is managed as one of our principal
risks and is a core consideration in business strategy
and decision‑making. Physical risks include more
intense precipitation and extreme temperatures, while
transition risks include changes in policy, technology,
customer and investor expectations. Alongside
potential risks, we view a shift in customer preferences
towards lower carbon alternatives and strong
governmental and regulatory support for transport
decarbonisation and modal shift as key business,
environmental and social opportunities.
Climate‑related risks and opportunities and
scenario analysis
In FY 2022, we worked with a specialist consultancy
to model potential physical and transition risks and
opportunities to our business over the short, medium,
and long term, and to estimate cumulative Enterprise
Value at Risk over a five‑year period (2022‑2027). With
no significant change to key business parameters and
underlying assumptions since our 2022 assessment,
this TCFD update provides a summary of impact areas
already reported last year, and an overview of what we
are doing to continue to reduce our carbon footprint
and build climate resilience across our operations.
Using a digital twin of FirstGroup, we modelled
impacts across five different climate scenarios, from a
world where there is little to no climate policy in place
and global temperatures increase by a catastrophic
4°C, to a world where there is rapid transition to a low
carbon economy and global temperature increase is
limited to 1.5°C above pre‑industrial levels. See Table 1
and refer to our ARA 2022 (at www.firstgroupplc.com,
pages 61‑63) for more details on individual scenarios.
While in some of our modelling we considered five
individual scenarios, this report focuses on the two
most extreme ones and the ‘Stated Policy’ scenario,
to consolidate some of the findings, but still illustrate
the full range of estimated impacts. Across these
scenarios, we looked at potential transition and
physical impacts to our business from 2022 until 2027
(short term), 2035 (medium term) and 2050 (long term).
Table 1: Climate scenarios considered in risk modelling
Policy Pathway
No
Policy
Current
Policy
Stated
Policy
Paris
Agreement
Paris
Aspiration
Global temperature increase
>4°C
3°C
2.5°C
2°C
1.5°C
Global emissions reduction target
0%
by 2100
‑50%
by 2100
‑75%
by 2100
Net‑Zero
by 2070
Net‑Zero
by 2050
Introduction
Governance report
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Financial statements
FirstGroup Annual Report and Accounts 2023
61
Table 2: Transition Risks – potential Enterprise Value at Risk, cumulative over five‑year period,
assessed against different emissions pathways scenario
Transition
risks/opportunities
No Policy
Stated Policy
Paris Aspiration
Policy
Action by central
government/regulators,
including carbon pricing
Low impact
Expected carbon price of ~£2 per
tonne by 2025 in some regions
Low emission zones leading to some
route constraints
Medium impact
Expected carbon price of ~£30 per
tonne by 2025 across the UK
Zero emission zones leading to further
route constraints and potential loss of
licence to operate
Medium impact
Expected carbon price of ~£65 per
tonne by 2025 across the UK
Zero emission zones leading to
significant route constraints and
potential loss of licence to operate
Technology
Cost and availability of
new technology to support a
lower‑carbon economy
Low impact
Potential impairment of
carbon‑intensive vehicles
Ongoing investment in zero‑emission
fleet to meet current commitments
Medium impact
Increasing impairment of
carbon‑intensive vehicles
Some investment in zero emission fleet
ahead of current schedule
Some increase in cost of zero carbon
vehicles and green electricity
High impact
Significant investment in zero‑emission
fleet ahead of schedule
Substantial increase in cost of
zero carbon vehicles and green
electricity, due to demand outstripping
supply
Investors
Financing influenced by
environmental credentials
Low impact
Low focus from investors
on green credentials
Medium impact
Moderate focus by investors
More favourable interest rates for green
companies
High impact
Significant focus by investors
Expected green covenants in financing
Customers
Demand driven by sustainability
of products and services, leading
to increased modal shift towards
public transport
Limited opportunity
Small shift to public transport, due to
increasing environmental impacts and
customers’ climate awareness
No transport policy to encourage
modal shift to public transport
Medium opportunity
Increasing shift to public transport
due to customers’ growing climate
consciousness
Some transport policy to encourage
modal shift to public transport
High opportunity
Substantial shift to public transport
due to customers’ high climate
consciousness
Substantial transport policy
to encourage modal shift
Low impact = <£20m
Limited opportunity = <£20m
Medium impact = £20m – £50m
Medium opportunity = £20m – £50m
High impact = >£50m
High opportunity = >£50m
exposure to flood risks in the short term and estimated
potential financial impacts, cumulative over the next
five years, to range from £20m in a 4°C world to £4m
in a 1.5°C world.
Our assessment focused on potential impacts
to assets that we own, lease or manage, but our
exposure to climate risks critically also depends on
assets that are owned and managed by third parties,
such as rail tracks owned and managed by Network
Rail. In FY 2023, we have therefore connected on
this agenda with key stakeholders across the rail
industry, as part of a TCFD working group convened
by Network Rail, to start sharing our approach to
climate risks and facilitate closer collaboration on risk
mitigation and climate adaptation.
Impact on strategy and financial planning
As a leading private sector provider of public transport,
we create value for a range of stakeholders from our
people, customers and communities to government
and investors (see pages 12‑13 for more details).
First Bus’s business strategy focuses on driving
year‑on‑year growth in passenger volume and yield,
achieving a 10% margin target for investors and
transitioning to a zero‑emission bus fleet by 2035,
while continuing to actively develop its pipeline of
adjacent opportunities and implementing renewable
energy solutions across its operations.
It could also damage our depots and vehicles, leading
to depreciation and stranded assets, as well as
impacting insurance costs and insurability of assets.
Similarly, heatwaves could impact on passengers,
employees and driver wellbeing and create an
increased need for cooling. Other potential impacts
include vehicle overheating, service disruption or
increased vehicle damage from heat damaged roads
and railway networks. These events would not only
lead to higher building repair and maintenance costs
but could also potentially challenge the implementation
of new technologies and negatively affect revenues,
due to a disruption in service and a temporary
decrease in demand for public transport due to
extreme weather conditions.
Our analysis identified flooding as one of our most
immediate, material risks and we therefore carried
out a separate, in‑depth flood modelling exercise
covering riverine, surface water and coastal flooding.
The model considered the top 240 most critical assets
owned, leased or managed by FirstGroup or our
subsidiary companies and assessed the maximum
metres of flooding expected at these locations over
different timeframes. The purpose of this exercise
was to identify assets at high risk of flooding, assess
potential financial impact and strengthen mitigation
measures going forward. The model showed that the
majority of FirstGroup owned assets have limited/low
Strategic report
FirstGroup Annual Report and Accounts 2023
62
Climate‑related financial disclosures
continued
Our year‑on‑year progress and our roadmaps for
achieving these targets, coupled with third party
recognition of our decarbonisation efforts (see
page 38), all help to build strategy resilience against
potential transition risks from for example carbon taxes
and sustainability driven customers and investors. In
terms of physical risks, these are addressed within our
asset management strategy and business continuity
plans, with winter and summer preparedness plans in
place across the Group and setting out actions and
procedures in the case of severe weather events.
To continue building understanding of these risks
and strategy resilience across our operations, during
FY 2023 we have worked with our divisions to run a
series of in‑depth TCFD and TPT planning workshops
with key functions including Finance, Commercial,
Operations, Engineering, Property and Procurement,
to facilitate further integration of climate considerations
into strategy development, decision‑making and
financial planning. This forms part of a broader
programme of work to pull together divisional
decarbonisation strategies and risk mitigation actions
into a Group‑wide transition plan to net‑zero.
Furthermore, considering our business model and
some of the critical interdependencies between us
as a public transport provider and local authorities,
DfT, Network Rail and our supply chain partners, a
strong approach to decarbonisation, partnership and
advocacy is key in building strategy resilience and
future‑proofing our business. It enables us to inform
policy developments, accelerate decarbonisation
efforts, mitigate our exposure to climate‑related risks
and capture business opportunities as they arise.
For example, see page 43 for details on funding
secured over the last year by First Bus to accelerate its
transitions to a zero carbon fleet.
Our strong approach to partnership also facilitates
collaboration across our industry for a more systemic
and effective approach to climate change mitigation
and adaptation. We work with national, devolved,
and local governments, industry bodies, supply chain
partners and other key stakeholders to enable the right
conditions to drive the net‑zero transition. We actively
engage with DfT on its Transport Decarbonisation
Plan, advocating for more measures to facilitate modal
shift to public transport, while highlighting any financial
and policy constraints to a rapid decarbonisation
of our fleets and infrastructure. We are members of
the rail industry Climate Change Adaptation Working
Group, seeking to work with industry partners to
make the rail network more resilient to climate change.
During FY 2023, we also came together with Network
Rail and other train operating companies to form a
TCFD working group to help align the rail industry’s
approach to this agenda. See page 41‑42 for more
information on our partnerships.
Given the nature of our business, climate‑related
risks and opportunities affect all areas of our First
Bus strategy, including vehicle and infrastructure
investment, operations and service delivery, business
development and growth. Transitioning to a 100%
zero emission bus fleet involves significant capital
expenditure and potential impairment costs, which
are both factored into long term business strategy and
financial planning cycles of the Group. In addition, our
TCFD work highlighted a potential increase in future
costs from, for example, new environmental regulatory
requirements (such as carbon pricing) or technology
and supply chain challenges (such as an increase
in the cost of zero emission vehicles and green
electricity if demand outstrips supply). These factors
are considered in our going concern and viability
statement (see pages 76‑77).
Further impacts on our financial planning include our
sustainability‑linked £300m Revolving Credit Facility
(RFC), signed in FY 2022, which includes targets
around the % of zero emission buses in our fleet and
carbon efficiency across both bus and rail operations.
We also evaluate climate‑related risks associated with
potential mergers and acquisitions and the impacts of
such activities on our progress towards net‑zero.
First Rail’s business strategy focuses on delivering
services as outlined in National Rail Contracts (NRCs)
with local authorities and funded by the Department
for Transport (DfT), as well as working with key industry
partners to minimise service disruptions and improve
passenger journeys. Business growth is expected from
open access and additional rail services, while helping
to achieve the UK Government’s target to remove all
diesel‑only trains from service by 2040 and deliver a
net‑zero railway network by 2050.
With most rail service elements and investments
mandated as part of our management fee‑based
contracts with DfT, and rail tracks and infrastructure
owned and managed by Network Rail, any exposure to
climate‑related risks is shared with these third parties.
Any approach to mitigation actions therefore requires
close industry collaboration as well as funding approval
in annual business planning processes with DfT.
Strategy resilience
Our business strategy includes clear decarbonisation
goals, from running a 100% zero emission bus fleet by
2035 to reducing our overall Scope 1 and 2 emissions
from bus and rail by 63% by the same year (from a
2020 base year and in line with a
1.5°C
science‑based
carbon reduction pathway).
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
63
Policy risks
Risk mitigation actions
More stringent climate policy could result in increased carbon taxes,
road pricing in low‑emission zones, policy‑driven compliance costs
and enhanced emissions reporting requirements. An increase in
carbon pricing is expected to drive increases in energy, facility, and
material costs. This would be exacerbated by increasing mandates
on the carbon intensity of our fleet and a diminishing secondary
market for legacy diesel vehicles. At the same time, transport policies
such as road pricing could support an accelerated modal shift from
private cars to public transport and create key opportunities for our
business.
We have set ambitious decarbonisation goals, including achieving a
zero‑emission bus fleet and a
1.5°C
aligned science‑based carbon
reduction target for FirstGroup as a whole, with clear progress
reported year‑on‑year. See page 65 for more details.
We continue to work closely with governments, industry bodies and
other stakeholder groups to monitor regulatory developments, affect
and foresee policy changes, and pro‑actively respond to evolving
conditions. First Bus regularly liaises with local authority partners to
drive increased modal shift towards public transport.
First Rail are strongly represented on the Sustainable Rail Executive,
convened by RSSB and including DfT, and also chair RSSB’s
Sustainable Rail Leadership Group. As part of this engagement,
during FY 2023 First Rail has supported the development of the first
industry‑wide Rail Sustainability Blueprint to provide guidance and
drive alignment across the industry.
Technology risks
Risk mitigation actions
As we move towards a ‘Paris Aspiration’ scenario (in which policies
are put in place to limit global temperature increase to 1.5°C above
pre‑industrial levels), the transformation to net‑zero operations
would have to be significantly accelerated, leading to potential
write‑offs, asset impairments and/or early retirement of existing
fossil fuel‑related infrastructure and vehicle assets. There could also
be additional supply chain challenges and costs if the transport
sector starts competing for the same technology and specialist
resources and demand outstrips supply. On the other hand, prices
of green hydrogen and battery packs are expected to fall thanks
to continuous innovation and increasing economies of scale. In
addition, with an increasing number of businesses looking to
decarbonise their operations, our investments in EV and charging
infrastructure create significant B2B opportunities.
Careful planning is taking place to ensure an efficient and effective
conversion of our existing infrastructure to one powered by electricity
and hydrogen. While there is competition for government funding
and emerging influence from disruptors in the sector, our experience
as a transport operator is unparalleled in the UK, across both bus
and rail services, and we have already started a cost competitive
transition to net zero. See pages 21‑22 for examples of technology
innovation in bus and page 25 for rail.
Our property plans, infrastructure investments and increased access
to energy supplies for EVs are all key to our fleet decarbonisation
strategy. As part of this, during FY 2023 we have installed solar
panels at 20 bus depots. We are also focused on capturing new
opportunities from the net‑zero transition, establishing partnerships
to leverage our EV charging infrastructure to support wider
community electrification needs.
We are supporting knowledge and skills development for our people
to drive this transition, and are working with vehicle manufacturers,
energy partners, professional associations and others to create low
and zero emission mobility solutions. See page 49 for more details.
Risk management
TCFD recommendation:
Disclose how the organisation
identifies, assesses and manages
climate‑related risks.
Approach to risk management
We take a holistic approach to risk management, first
building a picture of the principal risks at divisional
level, then consolidating these alongside Group‑level
risks into a Group‑wide view (see page 67). The
Board assesses the effectiveness of the Group’s risk
management system and receives reports on principal
risks, including climate change. It also reviews the
external risk environment, scrutinises assessment of
key risks and determines strategic action points.
The Group’s sustainability and public affairs teams
provide regular ESG updates and insights on market
developments to relevant stakeholders and functions
across the Group. Climate change is managed as
a principal risk, with the aspects below identified as
most material. Further mitigation actions and timelines
are being defined as we develop our Group‑wide
transition plan.
Strategic report
FirstGroup Annual Report and Accounts 2023
64
Climate‑related financial disclosures
continued
Customer and investor risks
Risk mitigation actions
Growing awareness of climate change amongst the public is
expected to drive demand for more sustainable travel options,
while climate‑related risks and opportunities may increasingly affect
investors’ priorities and access to capital funds. For our industry, this
creates key opportunities to grow our customer base as well as the
volume of transport services delivered to our existing customers,
subject to the pace of our fleet electrification and the perception
of the sustainability of our brand and services in relation to other
operators and transport alternatives.
Our progress towards our public decarbonisation goals and the
third‑party recognitions achieved over the last year (see page 38),
demonstrate our sustainability commitments to customers, investors,
and regulators. In addition, we are developing a carbon calculator
specific to our rail routes to help passengers understand the carbon
savings rail travel can provide versus other modes of transport.
The UK government’s plan to fully implement a ‘Green Taxonomy’
sends a strong signal that capital could become cheaper for
companies able to demonstrate clear pathways to net‑zero. We
anticipate that with the continuing decarbonisation of our bus and rail
operations and the critical role we play in helping to reduce carbon
emissions through modal shift to public transport, our business will
be considered increasingly ‘green’ under any future taxonomy. We
started embedding this into our financing strategy with the signing of
a sustainability‑linked £300m revolving credit facility in FY 2022.
Physical risks
Risk mitigation actions
Acute and chronic weather events can affect our infrastructure
and operations. More frequent extreme weather events could
increase disruption to our services, affecting customer satisfaction
and potentially longer‑term customer inclination to use bus or rail
services. Potential costs include loss of revenue, compensation for
disrupted services, increased asset repair and maintenance costs
as well as insurance costs for infrastructure and vehicles. Severe
weather events could also pose risks to the health, safety and
wellbeing of our employees and customers.
Robust business continuity plans are in place across the Group to
manage the risks from severe weather conditions, including frost
and flooding. In addition to our winter preparedness plans, during
FY 2023 we have developed summer preparedness plans to set out
actions and procedures in the case of heat waves.
In First Bus, while physical risks to assets might be limited and
buses can be rerouted to avoid road blockages, extreme weather
conditions can significantly increase driver absences due to sickness
or inability to reach depots. Our weather preparedness plans
therefore include both operational as well as behavioural guidance to
help employees stay safe and cope with extreme weather events.
In First Rail, severe weather events such as storms and heat waves
can impact the tracks and overhead lines and cause significant
service disruption. We work closely with Network Rail, who own and
manage the tracks, to resolve disruptions as effectively as possible.
We have also started to carry out site specific impact assessments
at individual rail stations to better understand the impacts, physical
risks and develop focused mitigation plans.
Introduction
Governance report
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Financial statements
FirstGroup Annual Report and Accounts 2023
65
During FY 2023, we have developed a near‑term
science‑based emissions reduction target aligned with
a 1.5
0
C ambition and approved by the Science Based
Targets initiative. Our target is to reduce Scope 1 and
2 GHG emissions by 63% by FY 2035 from a FY 2020
base year. We also commit to reduce absolute
Scope 3 GHG emissions from fuel and energy related
activities by 20% by FY 2028, from a FY 2020 base
year, and that 75% of our suppliers by emissions,
covering purchased goods and services and capital
goods, will have science‑based targets by FY 2028.
As part of setting our science‑based target, we have
worked with a specialist consultancy to complete a
full Scope 3 emissions assessment and identify all
material Scope 3 emissions. This has been recently
validated by the SBTi and will enhance our Scope 3
disclosures in FY 2024.
We are modelling 1.5°C trajectories to 2035 to inform
our transition plans and interim targets and over the
last year have formed a Sustainable Procurement
Working Group to develop a more targeted approach
to promoting carbon reductions in our value chain.
Our absolute carbon footprint has reduced by
17% from a FY 2020 base year, and emissions per
£m revenue have reduced by 29% over the same
period. We report our Scope 1, Scope 2 and limited
Scope 3 greenhouse gas emissions in line with the
GHG Protocol methodology (see page 45). Our
Scope 3 emissions currently include rail replacement,
business travel, waste disposal, water supply and
water treatment, but we are preparing to report on all
material Scope 3 categories in FY 2024, in line with our
SBT commitments.
Please see our Environmental Performance Report
2023 (at www.firstgroupplc.com) for a more
detailed update on our key environmental metrics,
performance trends and progress against targets. As
we continue to further embed the recommendations
of the TCFD and start preparing for disclosures in
line with guidance from the Transition Plan Taskforce
(TPT), this will inform the development of additional
metrics and targets around both climate change
mitigation and adaptation.
Metrics and targets
TCFD recommendation:
Disclose the metrics and targets used to
assess and manage relevant climate‑related
risks and opportunities where such
information is material.
When looking at the results of our 2022 financial
impact assessment of climate related risks and
opportunities, the key metric used was Enterprise
Value at Risk (EVR), as the measure of the total
estimated financial impact of a given scenario over
a five‑year period, discounted to 2022 values. This,
in turn, was affected by other metrics such as our
greenhouse gas emissions, used to assess our
potential exposure to carbon pricing.
We have been measuring and reporting our energy
and carbon performance for many years. Please see
details of these metrics on pages 45‑46, including:
■
our absolute carbon footprint and carbon intensity
(tCO2e per £m revenue)
■
our energy consumption and the proportion of
renewables in our energy mix
■
our progress against our target of operating a
zero‑emission bus fleet by 2035
The above KPIs give an indication of our exposure
to policy risks such as carbon taxes, as well as
technology risks related to electric vehicles. They
also strengthen our sustainability credentials with
customers and investors, enabling us to capture
opportunities from modal shift and green financing.
To strengthen ownership and accountability,
climate‑related KPIs are embedded into our variable
remuneration practices. For example, our Long Term
Incentive Plan (LTIP) awards, made to the CEO, CFO
and other senior leaders, include targets linked to
the number of zero emission vehicles in our bus fleet
and the reduction in our absolute Scope 1 and 2
emissions. See more details on pages 124‑125.
Strategic report
FirstGroup Annual Report and Accounts 2023
66
Non‑financial information statement
Introduction
The EU Non‑Financial Reporting Directive applies to the Group, and the tables below summarise where further information on each
of the key areas of disclosure required by the Directive can be found.
Further disclosures, including our Group policies and non‑financial targets and performance data, can be found on our website,
and in our Environmental Performance Report 2023, at www.firstgroupplc.com.
Reporting requirement
Relevant section of this report
1. Description of our business model
■
Our business model – pages 12‑13
2. The main trends and factors likely to affect the future development,
performance and position of the Group’s business
■
Our markets – pages 10‑11
■
Business review – pages 19‑26
3. Description of the principal risks and any adverse impacts
of business activity
■
Principal risks and uncertainties – pages 69‑75
4. Non‑financial key performance indicators
■
Customer performance – page 36
■
Safety – page 36
■
Greenhouse gas emissions and zero emission buses
– page 37
■
Community investment – page 37
Reporting
requirement
Policies, processes and
standards which govern
our approach*
Risk management
Embedding, due diligence,
and outcomes of our approach,
and additional information
5. Environmental
matters
■
Group‑wide strategic framework
for sustainability – page 39
■
Environmental Policy
■
Environmental management
systems around the Group, certified
to ISO 14001 standard in much of
our UK business
■
Certified ISO 50001 systems
in some of our TOCs
■
Climate‑related risk – page 71
■
Task Force on Climate‑related
Financial Disclosures (TCFD) –
pages 57‑65
■
Regulatory compliance – page 74
■
Our markets – pages 10‑11
■
Business review – pages 19‑26
■
Group‑wide strategic framework for
sustainability – page 39
■
Suppliers – page 80
■
Greenhouse gas emissions and energy
data – pages 45‑46
6. Employees
■
HR Policy framework
■
Code of Ethics
■
Gifts and Hospitality Policy
■
Whistleblowing Policy and
Procedure
■
Health and Safety Policy
■
Group‑wide strategic framework
for sustainability – page 39
■
Human resources risk – page 75
■
Safety risk – page 73
■
Task Force on Climate‑related
Financial Disclosures (TCFD) –
pages 57‑65
■
Safety – pages 51‑52
■
Diversity and inclusion – pages 47‑49
■
Employee engagement and representation
– page 50
■
Board‑level Employee Directors – page 89
■
Skills for the future – pages 49‑50
■
Health and wellbeing – page 50
7. Social and
community
matters
■
Community engagement and
community investment frameworks
■
Code of Ethics
■
Payroll Giving
■
Matched Giving Guidelines
■
LBG impact measurement
■
Health and Safety Policy
■
Group‑wide strategic framework
for sustainability – page 39
■
Safety risk – page 73
■
Business review – pages 19‑26
■
Supporting communities – pages 53‑54
■
Safety – pages 51‑52
■
Accessible journeys – page 41
■
Government engagement – pages 41‑42
■
Working with charities – pages 53‑54
■
Community investment – page 54
8. Human rights
■
Code of Ethics
■
Supplier Code of Conduct
■
Code of Conduct on Anti‑Slavery
and Human Trafficking Prevention
■
Modern Slavery Statement 2021
■
Health and Safety Policy
■
Regulatory compliance – page 74
■
Safety – pages 51‑52
■
Ethics – page 56
9. Anti‑corruption
and anti‑bribery
■
Anti‑Bribery Policy and
steering committee
■
Code of Ethics
■
Conflicts of Interest Policy
■
Regulatory compliance – page 74
■
Ethics – page 56
*
Some policies, processes and standards shown here are not published externally
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
67
Risk management
Managing the risks and opportunities our business
faces is a crucial part of achieving long-term success.
Our risk management approach
We take a holistic approach to risk management,
first building a picture of the principal risks at the
divisional level, then consolidating those principal
risks alongside Group risks into a Group view. During
the year we introduced regular meetings for the
Executive Committee focused entirely on risk. During
these sessions outputs from the consolidation of the
principal risks, and from the identification and analysis
of emerging risks are considered and approved before
being presented to the Audit Committee and Board
for review and approval. The objective of this process
is to ensure all key risks to the Group are reviewed
regularly, are actively monitored, and mitigating
controls are put in place to ensure that the risk impact
on the organisation is managed within the risk appetite
and tolerance levels set by the Board.
The Group has set its strategic goals around
sustainable development and shareholder value. A
crucial part to achieving our long-term success is
our ability to manage the risks and opportunities our
business faces. Our risk management framework
holistically considers the impacts of both the changing
transport market and our UK-focused operations. We
keep ahead of potential risks by scanning the horizon
for emerging risks, training our people and investing
in awareness campaigns and external advice. Our
principal risks and uncertainties are detailed on pages
69 to 75.
Responsibility
The Board has overall responsibility for the Group’s
systems of internal control and their effectiveness.
The Audit Committee has a specific responsibility to
review and validate the systems of risk management
and internal control.
Process
The Board reviews and
confirms Group and
divisional risks and
the Audit Committee
reviews the Group’s risk
management process.
The Executive Committee acts as Executive Risk
Committee and reviews the Group’s risk management
processes. Internal Audit provides assurance on the
key risk mitigating controls and ensures that the audit
plan is appropriately risk-based.
The Executive
Committee meet
quarterly to review
and challenge Group
and divisional risk
submissions.
The divisions and Corporate Functions management
teams have responsibility for the identification,
assessment and management of risks, developing
appropriate mitigating actions and the maintenance of
risk registers.
Divisional and Group
risk champions
maintain and update
risk registers for their
function or division.
Risks and mitigating
actions are monitored
through normal
business management
processes.
Divisions
Executive
Committee
Internal
Audit
Board and Audit Committee
Read more about our risk
management processes in
the Governance report on
page 102
Strategic report
FirstGroup Annual Report and Accounts 2023
68
Risk management
continued
Our risk management
framework and structure
Whilst some risks such as financial resource risk are
managed at a Group level, all our businesses are
responsible for identifying, assessing and managing
the risks they face with appropriate assistance, review
and challenge from the Group functions.
We seek to continue to improve the quality of risk
management information generated by our divisions.
The Group has developed a risk appetite framework
which informs the business about the Board’s appetite
for certain risks and informs the risk assessment.
Our risk management framework is shown in the
below diagram. Our current risk management
structure is shown in the opposite table.
Emerging risks
Our risk management approach and methodology
includes review and identification of risks which
may develop or already exist that may be difficult to
quantify, but may lead to a significant impact on the
Group. Emerging risks are reported to the Executive
Committee and the Board to consider whether to
establish them as principal risks. To identify and
assess emerging risks we conduct risk workshops,
run deep dive sessions with risk owners, engage
specialists and perform scenario analysis.
Risk management framework
Execute strategic actions
Report on key risk indicators
Regular meeting dedicated to risk
management to identify principal
and emerging risks
Direct delivery of strategic actions in line with
risk appetite and tolerance levels
Monitor key risk indicators and provide
direction for risks mitigating activities
Top down
Strategic risk management
Bottom up
Operational risk management
Review external environment
Robust assessment of principal
and emerging risks
Set risk appetite and parameters
Determine strategic action points
Board/Audit
Committee
Executive
Committee
Divisions
Assess effectiveness
of risk management system
Report on principal and
emerging risks and uncertainties
Report current and emerging risks
Identify, evaluate and mitigate operational risks
recorded in risk register
Consider completeness of identified risks
and adequacy of mitigating actions
Consider aggregation of risk exposure
across the business
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
69
Key
FY 2023 risk is stable
FY 2023 risk is increasing
Severity
(Impact x Likelihood x Velocity)
Low
High
FY 2023 risk is decreasing
External risks
Economic conditions
Geopolitical
Climate change
Strategic risks
Contracted business
Growth within the sector
Operational risks
Financial Resources
Safety
Pension scheme funding
Regulatory compliance
Data security and consumer privacy, including cyber-security
Human resources
How to use this scale:
During execution of the review and placement of the principal risks on the above table, management considered financial impacts to the
divisions and the Group. Specifically, the ‘High’ end of the scale represents a combination of a catastrophic financial impact of greater than
£50m and the ‘Low’ end considers financial impacts less than £10m.
Risks associated with climate change
We continue to disclose our performance against
TCFD recommendations, how effectively we are
managing climate-related risks and opportunities
and how this may affect our operations and delivery
of our strategy. We continue to explore the specific
impact our business might face from such risks and
opportunities, and how the business needs to adapt
to ensure we have adequate risk mitigating activities.
Through applying our risk management framework,
we identify, assess and report climate related risks
and opportunities as part of our principal risks. Key
activities include:
■
Embedding climate change within our risk
management framework, both at Group level and
within divisional risk registers to ensure that risks are
recorded and reported across the business.
■
Driving commitment for managing and monitoring
climate related risks by aligning our responsible
business and sustainability targets with the
recommendations of the TCFD and TPT.
■
Challenging our strategy to make sure we mitigate
risks and maximise opportunities from the transition to
a low-carbon economy.
Principal risks and uncertainties
We outline our principal risks below and on the
following pages with an overview of the associated
existing mitigation activities, and corresponding
movement of the risk. The Board defines the risk
appetite for each of these principal risks. The overall
risk appetite for the Group is balanced between risk
averse for safety, security and regulatory compliance
risks to neutral or risk accepting for areas that can
drive future growth for the Group.
Our risk management methodology continues to aim
at identifying the principal and emerging risks that
could:
■
adversely impact the safety or security of the Group’s
employees, customers and assets
■
have a material impact on the financial or operational
performance of the Group
■
impede achievement of the Group’s strategic
objectives and financial targets
■
adversely impact the Group’s reputation or
stakeholder expectations
Principal risks
The following table provides an overview of our principal risks, their risk direction and severity using individually assessed impact, likelihood
and velocity scores. Understanding these risk parameters aids effective risk management and delivery of our strategy.
Read more about
climate‑related risks on
pages 44, 63 and 71
Strategic report
FirstGroup Annual Report and Accounts 2023
70
Risk management
continued
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
External risks
Economic conditions
The Group’s success depends on adapting to
economic fluctuations which may negatively
impact performance through increased costs,
changing customer needs, declining passenger
demand, reduced operations due to industrial
actions and/or reduced opportunities for
growth. Globally, the economic outlook is
less certain, and the Group specifically has
experienced increased industrial relations
activity, higher fuel costs due to the macro-
economic environment. All these market
changes have the potential to decrease the
Group’s financial performance and available
financial resources to invest capital in innovative
solutions that drive demand.
Whilst passenger demand in our key markets
has been stable and is continuing to improve
from the impact of the pandemic, there is no
certainty of passenger volumes continuing to
recover and the funding regimes that apply
remain uncertain in the medium term.
■
We work with our key stakeholders, Government
departments and sector bodies to ensure an
acceptable level of passenger services are
delivered whilst at the same time designing and
running our operations based on current demand
levels.
■
We continue to be customer-focused and to
provide innovative transport solutions, by adapting
to market uncertainties and to drive demand.
■
We continue to utilise our fuel and energy hedging
processes to offset temporary economic impacts
driven by inflation and supply chain challenges.
■
In First Bus we have commenced a programme to
install photovoltaic panels to generate electricity for
partially covering depot electricity demands.
■
We continue to focus on developing new
innovative service offerings to our customers to
diversify the business through unstable economic
conditions.
Although it is not yet clear the
impacts of other macro-economic
factors, the Group has continued
to hedge exposure to foreign
exchange and fuel fluctuations to
minimise material cost impacts and
fare baskets are normally increased
in line with inflation to help offset
cost pressures. This has allowed for
a certain level of visibility that can be
built into the business forecasting
models.
Geopolitical
The Group operates in a political landscape that
is constantly changing. This has the potential to
cause instability where the Group’s operations
have some reliance on government policy and
funding to support public transport operators.
Significant industry reform and changes in
government transport policies, an inability to
maintain or participate in bus and rail contracts
and/or participate in public transportation
funding available may result in the reduction or
elimination of bus services and rail contracts.
Further, failure to attract and retain resources
with the knowledge and skills necessary to
maintain/develop government partnerships for
rail operations and local government for bus
contracts, may result in adverse financial impact
for the Group.
Developments in international affairs, such
as international tensions, including the
conflict in Ukraine and changes in regulations
in Europe and UK following Brexit, may
impact the Group’s commitments to deliver
decarbonisation capex investments, or impact
the Group’s supply chain, resulting in financial
loss and potential reputational damage.
■
Whilst the Group collaborates with industry
bodies to help anticipate government policy and/
or funding regime changes in order to adjust
operations, the Group is an apolitical organisation
and does not have the ability to control or
substantially influence government policy.
■
The Group has been able to mitigate resourcing
challenges by partnering with third-party
consultants to help further drive the change
portfolio and ensure the Group has the requisite
skills and capabilities to leverage national funding.
■
The Group deploys hedging techniques to
counterbalance potential negative impact on
certain costs due to adverse developments in
international affairs.
Both national and local
governments in the UK continue
to support public transport service
providers. Passenger volumes and
profitability continue to recover,
underpinning the investment to
strengthen bus networks for the
longer term.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
71
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
Climate change
Businesses globally continue to come under
increasing pressure from all stakeholders,
particularly policy makers and investors,
to demonstrate strong progress on their
climate-related commitments and performance.
Inadequate attention to our climate-related
risks and opportunities, as well as emerging
technologies, could negatively impact the
Group’s performance, reputation and growth.
The UK government has set a legally binding
target for net-zero greenhouse gas emissions
by 2050. All companies that operate in the UK
or are owned by UK-based companies will
be substantially impacted by decarbonisation
policies introduced to meet this target.
As a result, the Group is under increased
pressure and scrutiny from both investors and
government bodies to provide evidence of
our strategic plans in place to mitigate climate
change risks.
Climate change poses both physical and
transition risks to our business, from weather
events impacting our assets, operations, service
delivery and customer demand, to changes
in policy, technology and market expectations
impacting our capital and operational costs,
our reputation, and access to funding. Delays
in implementing our strategic plans to mitigate
climate-related risks, including transitioning
our fleets to zero emissions, could result in
lost business, reduced revenue, reputational
impacts and reduced opportunities from
modal shift.
■
Climate change has been an integral part of our
risk management framework for many years and,
through our strategic framework for sustainability
‘Mobility Beyond Today’, has become an integral
part of business strategy.
■
Our ‘Mobility Beyond Today’ framework sets out
the Group’s ambition to be the partner of choice
for innovative and sustainable transport.
■
FirstGroup was the first bus and rail operator in
the UK to formally commit to setting an ambitious
science-based target aligned with limiting global
warming to 1.5°C and reaching net-zero emissions
by 2050 or earlier. During FY2023, we completed
our submission of a science-based target and
had our target formally approved by the SBTi. Our
target is to achieve a 63% reduction in our Scope
1 and 2 emissions by FY 2035 from a FY 2020
base year. It also includes the following Scope 3
commitments – to reduce emissions from FERA by
20% by FY 2028, from a FY 2020 base year, and
that 75% of our suppliers by emissions covering
purchased goods & services and capital goods
will have science-based targets by FY 2028.
■
We are modelling 1.5°C trajectories to 2035 to
inform our transition plans and interim targets, and
are developing a supply chain engagement plan to
promote carbon reductions in our value chain.
■
As part of our decarbonisation goals, First Bus has
set a target to operate a zero emissions fleet by
2035. We continue to increase the percentage of
zero emission buses in our fleet year on year.
■
First Rail is supporting the UK Government’s target
to remove all diesel-only trains from service by
2040. We continue to work with government and
industry partners to support further electrification
of Britain’s rail network, shift to bi-modes trains
where full electrification is not possible, and
implement alternative technologies such as battery
power to help achieve zero emission trains.
■
We continue to embed the TCFD
recommendations to assess and mitigate impacts
from climate change onto our business and build
long-term climate resilience across our operations.
More details on our climate-related performance
can be found in the non-financial KPI section
(page 37), our Mobility Beyond Today update
(page 39), our 2023 TCFD report (pages 57 to 65)
and Environmental Performance Report (at www.
firstgroupplc.com)
The Group recognises the
continued pressure and opportunity
to create a more sustainable world
and maintains our commitment
to invest in new technologies
and collaborate with partners
to create a cleaner future. Our
TCFD implementation work, the
climate-related commitments we
have made and the strategies
we are developing to meet them
will ensure we are managing our
climate transition risks effectively
and continue to build business
resilience for the long term. We have
also started work on a Group-wide
transition plan in line with upcoming
TPT recommendations.
While recognising the risks, as a
public transport provider we are
also focused on the opportunities
from modal shift and the vital role
we play in reducing congestion
on the roads, improving air quality
and facilitating the transition to a
zero-carbon world.
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72
Risk management
continued
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
Strategic risks
Contracted business
The Group’s contracted businesses are
dependent on the ability to secure and renew
contracts on profitable terms, manage affiliate
contracts effectively, deliver in accordance
with contract terms and avoid termination.
Additionally, the ability of the Group to achieve
performance targets is dependent on our ability
to exceed performance metrics laid out in rail
contracts.
Failure to do so would result in reduced revenue
and profitability and/or negative impact on
delivering the Group’s strategic objectives.
The rail contract structure is now concession-
based with a fixed management fee plus
performance incentives resulting in a far better
balance of risk and reward.
A National Rail Contract (or ‘An NRC’) was
negotiated and concluded for GWR in June 2022.
The SWR NRC was extended on existing terms in
February 2023 and now runs until May 2025. The
Secretary of State announced on 11 May that the
TPE NRC would expire at the end of the core term
on 28 May. The West Coast Partnership ERMA
arrangement was given two six-month extensions
in the year and now runs until October 2023.
Negotiations remain ongoing for the WCP National
Rail Contract award to commence at the end of the
ERMA period based on the DfT’s Prior Information
Notice which covers the period to 2032.
We have the extensive operational expertise
needed to meet requirements for the contract
performance incentives. Negotiations with
the DfT take place at a First Rail level, and the
teams ensure that future and ensure that future
commitments to UK rail will have an appropriate
balance of potential risks and rewards for
shareholders.
In First Bus, there has been an increase in
contracted and tendered business in the B2B
market, as well as the acquisitions of Ensign Bus
and Airporter.
The transition from the previous
franchising regime to National
Rail Contracts (with only the West
Coast partnership now outstanding
of FirstGroup’s rail businesses)
has led to a better balance of risk
and reward via reduced revenue
risk, minimal cost and contingent
capital risk, and will continue to
provide more consistent cash
generation each year. As the largest
rail operator in the UK by revenue,
the Group has the operational
structure and expertise to exceed
passenger delivery against
performance targets and to build
on our base business. Additionally,
future contracts and are expected
to be longer allowing for better
financial and portfolio planning, as
per the Prior Information Notices
allowing for better financial portfolio
planning.
Growth within the sector
The Group’s operational success from both
organic and inorganic growth is dependent on
effectively responding to customer demand
and identifying and executing acquisitions and
transactions. The Group faces additional risk
of continued industry consolidation, specifically
within the bus sector.
Failure to identify and/or execute acquisitions
and other transactions in a timely manner,
along with the failure to complete transactions
in accordance with agreed terms, could result
in negative impact on business operations
(contracts, employee retention, etc.), negative
reputational impacts, and the inability to meet
financial goals and obligations.
■
The Group actively seeks out and reviews mergers
and acquisitions (M&A) opportunities that would
be beneficial to our portfolio.
■
We continue active dialogue with our shareholders
and investors and gather insights from our
strategic advisors and contacts within the
business to evaluate potential transactions.
General economic and political
environment remains uncertain,
preventing the risk direction from
decreasing.
The Group releases regulatory
announcements on material
acquisitions and other material
transactions. The Group engages
with shareholders on significant
issues.
Introduction
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73
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
Operational risks
Financial resources
The ability of the Group to service its current
debt or other financial obligations relies on its
capability to refinance debt as it becomes due
and the capital allocation policy being applied.
The Group is investment grade credit rated by
Standard & Poor’s and Fitch. A downgrade
in the Group’s credit ratings to below current
investment grade may lead to increased
financing costs and other consequences and
affect the Group’s ability to obtain financing if
required to invest in its operations.
The Group’s banking arrangements contain
financial and other covenants with financial
covenants tested semi-annually on 30
September and 31 March. In the event a
covenant test level is breached the Group may
not be able to negotiate sufficient debt capacity
to allow it to continue to trade.
■
The Group monitors our leverage ratios and overall
liquidity consistently to ensure we remain within
our target range and have adequate financial
resources on a two to three year period looking
forward.
■
As at year end the Group has adjusted net cash
of £110m and an undrawn £300m committed
revolving credit facility that matures in 2026.
The Group maintains strong bank
relationships, with good awareness
and understanding of debt market
trends.
We have experience in raising
material amounts of credit facilities,
ensuring we plan alternative
solutions to mitigate liquidity risk
in the event of wider refinancing
requirements.
Safety
The Group is committed to fostering and
maintaining a culture of safety. However, public
transport inherently includes safety related
risks, many of which are out of our control.
These risks include terrorism, adverse weather,
human error and increased traffic/congestion
on public roads. A safety incident, or a threat
of an incident, could be caused by mechanical
failures and/or human error and result in
adverse financial impact, reputational damage
through reduced public confidence in public
transportation and potentially reduce demand
for our services.
■
In order to promote and maintain our culture of
safety, all divisions have extensive safety plans and
safety training for our drivers and employees.
■
Access to vehicles and trains is controlled to
prevent against malicious access.
■
Mechanical safety controls (speed monitoring,
cameras, etc.) are implemented across our fleet of
vehicles and trains.
■
Further, we follow the regulatory regime and
comply with statutory inspections and monitoring.
■
Whilst the Group has implemented preventative
safety measures and procedures, we recognise
that certain incidents are ultimately out of our
control and do at times result in legal claims. As
a result, the Group has dedicated departments,
utilising third party experts when needed,
to analyse and maintain effective insurance
structures and levels.
The Group continues to assess,
update and implement safety
procedures across our businesses,
and mitigating activities to reduce
safety incidents from occurring
continue to be a focus.
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74
Risk management
continued
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
Pension scheme funding
The Group sponsors or participates in several
significant defined benefit pension schemes.
Within the schemes, the Group’s future cash
contributions and funding requirements are
dependent on investment performance,
movements in discount rates, expectations of
future inflation and life expectancy, and relevant
regulatory requirements.
In order to maintain adequate cash funding
and prevent adverse financial impacts
or reputational damage, the Group must
monitor the performance of our pension
fund investments and movements in other
contributing factors (e.g. discount rates, life
expectancy, etc.).
■
The Group’s pension schemes are well funded
and have active programmes to either fully de-
risk (North American legacy schemes) or meet
the objective of low dependency in the short to
medium term (UK Bus and Group schemes).
■
The Group uses third party experts to advise on
investment strategies and liability management,
monitor movements in discount rates, mortality
and inflation expectations, with increased hedging
techniques applied to mitigate these risks.
■
We continue to replace our defined benefit
schemes with defined contribution arrangements
where possible.
■
We are also focusing on diversifying asset classes
and reallocating riskier investments to investments
that better match the characteristics of the
liabilities as funding levels improve.
■
Under the First Rail contracting arrangements,
the Group’s train operating companies are not
responsible for any residual deficit at the end of
a franchise contract with no cost risk during the
contract.
The natural reduction of the size
and volatility of the pension funding
risk continues, following the Group’s
closure of most of its defined benefit
schemes in its divisions to future
accrual several years ago.
We continue to maintain a £117m
escrow arrangement for the Group
and Bus schemes following the sale
of the North American business
in 2021. The cash in this account
could be returned to the Group in
certain scenarios depending on the
achievement of low dependency
funding levels, such as the 2024
and 2030 valuation for the First
Bus and FirstGroup schemes
respectively.
Regulatory compliance
The Group’s operations are subject to a wide
range of legislation and regulation. Complying
with such legislation and regulations may
increase the Group’s operating costs, and
non-compliance could lead to financial
penalties, investigation expenses, legal costs or
reputational damage. The Group’s corporate
governance, which is recognised by external
ESG ratings as strong and well aligned with
stakeholder interests, supports our ability to
respond to, and prepare for, financial and ESG
laws and regulations.
The main regulatory compliance risks specific to
the Group that are not covered in other principal
risks include workplace compliance (employee
wages and other terms and conditions of
employment etc.), workplace health and safety
compliance and competition and anti-bribery
legislation.
■
To help the Group comply with all applicable
legislative and regulatory requirements, we have
an in-house legal function and a number of
dedicated subject matter experts, who help to
ensure relevant national and international laws and
regulations are followed.
■
Our in-house team is supported by external legal
experts where necessary.
■
We have a comprehensive suite of Group-wide
policies and procedures, which are implemented
and managed locally. These include anti-bribery
and competition law policies, and are supported
by regular training on these and other compliance
topics.
■
We provide a confidential reporting hotline for
employees and third parties to report concerns –
the hotline is operated by an independent third
party to ensure objectivity and anonymity.
Although our legislative and
regulatory environment continues to
change, the Group maintains our
commitment to assess and adapt
not only our insurance structure but
also our policies and procedures to
detect and prevent non-compliance.
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75
Key
FY 2023 risk is stable
FY 2023 risk is increasing
FY 2023 risk is decreasing
Risk description
Mitigation
Developments in the
risk profile during the year
Data security and consumer privacy, including cyber‑security
The Group continues to see an increase of
mobile and internet passenger ticket sales
across all divisions. These sales channels
gather large amounts of data which require
safeguards in order to protect our customer
data and comply with applicable data privacy
legislation, including the Data Protection Act
2018 and the UK and EU General Data
Protection Regulation (GDPR). Customer data is
processed by multiple suppliers and vendors of
technological solutions used across the Group.
The data is also processed by multiple Group
business divisions and employees. Suppliers of
technology solutions are often targeted by
cyber threat actors which can include criminal
cartels, whose motivation is financial gain. On
the 19 April 2023 the National Cyber Security
Centre (NCSC) warned the UK of a heightened
alert of a cyber-attack threat from state-aligned
groups against critical national infrastructure.
The majority of ransomware attacks are
delivered as the result of a successful phishing
attack. Such incidents could disrupt our
operations and impair our ability to protect
consumer data, and/or compromise our
confidential business information. This may lead
to long-term financial and reputational damage
with significant costs to recover, including
penalties, and an adverse impact on consumer
confidence in the Group.
■
To protect our data and comply with all data
privacy regulations, the Group has implemented
IT infrastructure controls across the company.
■
The Group administers a training programme to
employees, communicating their role in protecting
and preventing unauthorised access to
sensitive data.
■
We have a dedicated compliance officer in each
division with responsibility for ensuring the
completion of training.
■
Business continuity plans continue to evolve and
are updated as the transition to greater
dependency on technology continues in order to
minimise the impact of cyber-attacks and the
potential impact on the continuity of our
operations.
■
We have ransomware procedures and have tested
our incident response across Group businesses in
response to a ransomware attack.
■
We have a suite of data protection and information
security procedures in place.
■
Robust due diligence is performed for new
suppliers, with data protection and information
security obligations as a prerequisite to be
included in third-party contracts.
The risk of a cyber-attack for all UK
companies remains high. The
official UK government ‘Cyber
Security Breaches Survey 2022’
reported 39% of UK business were
subject to a cyber-attack in 2022.
83% of these instances were
phishing attacks, and around one in
five (21%) of the respondents
identified a more sophisticated
attack type such as a denial of
service, malware, or ransomware
attack. A ransomware attack is
more business impacting typically
than a denial-of-service attack.
Businesses who are hit with
ransomware often risk regulatory
fines if personal data has been
compromised in the attack.
We continue to be vigilant and
diligent in evaluating and
implementing enhanced techniques
to protect our systems and data
from threats.
Human resources
Employee costs represent the largest
component of the Group’s operating costs.
These costs include expenses related to
recruitment, retention and talent development.
The costs are impacted by changes in
employment markets, regulatory requirements
and diversity and inclusion programmes.
A failure to effectively recruit and retain a diverse
and talented workforce could have adverse
financial, reputational and operational impacts.
The employment market for drivers and
engineering technicians remains challenging
under an increasing consumer travel demand.
Our employee turnover has also been impacted
by current wider economic circumstances,
particularly rising inflation and wider labour
availability.
■
We continue to focus on improving communication
with employees, implementing a new people
strategy and investing in employee development
through compelling employee value, diversity
and inclusion propositions linked with market
competitive wages and benefits.
■
We have an ongoing programme for monitoring
KPIs, including leveraging exit interview data in
designing recruitment activity.
■
Employee engagement survey results are reviewed
to develop actions to address low performing
metrics to further help retain our top talent.
We continue to focus on our bus
driver recruitment and retention
programmes, and on managing
our multi-year pay deals with local
unions.
We have developed new
programmes to have effective
and engaging communications
with employees to impact our
recruitment, retention, diversity and
development strategies.
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76
Viability and going concern
Climate change
The Board has also considered how climate risks
could impact the Group’s viability. More detail on the
Group’s assessment of risks and opportunities from
climate change is contained in our TCFD disclosures
on pages 57 to 65. The key conclusions relating to
the viability assessment were that given the Group’s
geographic diversity across the UK, the financial
impact of extreme weather events over the three-year
viability period was not judged to be material.
Transitional risks, related to changes to the
government’s decarbonisation policy, were unlikely
to cause any material adverse impact over the
viability period given that, whilst the vast majority of
the Group’s emissions are from vehicles, the Group
is already targeting industry-leading timescales for
transitioning its vehicles to zero emission.
Corporate planning processes
The Group’s corporate planning processes include
completion of a strategic review for the Rail and Bus
divisions, preparation of a medium-term business plan
and a quarterly re-forecast of current year business
performance. The plans and projections prepared
as part of these corporate planning processes
consider the Group’s cash flows, committed funding
and liquidity positions, forecast future funding
requirements, banking covenants and other key
financial ratios, including those relevant to maintaining
the Group’s existing investment grade status. It also
considers the ability of the Group to deploy capital.
A key assumption underpinning these corporate
planning processes is that credit and asset-backed
financing markets will be sufficiently available to
the Group to put additional new facilities in place,
if required.
Viability statement
Based on the results of the analysis explained above,
including scenario testing, the Directors confirm that
they have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities
as they fall due over the period to 31 March 2026 and
that the likelihood of extreme scenarios which would
lead to a breach of covenant is remote.
The Board confirms that in making this statement
it carried out a robust assessment of the principal
and emerging risks facing the Group, including
those that would threaten its business model, future
performance, solvency and/or liquidity.
Viability
Time horizon
The Directors have assessed the viability of the
Group over a three-year period. This period reflects
the Group’s corporate planning processes and is
considered appropriate for a fast-moving competitive
environment such as passenger transport. Beyond
three years, forecasts may be affected by changes in
government transport policy and/or major contract
wins and losses.
Scenario testing
In making their assessment, the Directors have taken
into account the potential financial and operational
impacts, in severe but plausible scenarios, of the
principal and emerging risks which might threaten
the Group’s viability during the three-year period to
31 March 2026 and the likely degree of effectiveness
of current and available mitigating actions that could
be taken to avoid or reduce the impact or occurrence
of such risks (details of the risks and mitigating actions
are set out on pages 69 to 75). The assessment of the
available mitigating actions include the Group’s ability
to manage its cost base and capital expenditure.
The broad details of the scenarios that were
considered in the assessment are:
1) a protracted period of weak passenger volumes
comprising reductions of up to 10% in First Bus and
20% in non-contracted Rail and 50% lower than
budgeted performance fees on NRC rail contracts;
2) heightened operational and environmental pressures
including increased inflation up to 3% higher
than budgeted levels, additional Governmental
decarbonisation policy of £2m per annum and the
loss of a number of First Rail contracts with operating
profit impact increasing to £37m per annum in
FY 2026;
3) one-off safety, regulatory non-compliance or
technology incidents leading to short-term reduced
revenue and/or additional costs of £15m, and a one-
off climate-related event impacting profit by £10m; and
4) inability of the Group to negotiate additional new
credit facilities on acceptable terms leading to
a reduction in facility headroom of £200m from
September 2024 and delayed payment of the Transit
earn out due in FY 2024.
In making their assessment, the Directors have
made the assumption that the Group will retain the
£184.2m bond expiring in September 2024, and will
have access to debt markets to negotiate additional
new credit facilities if required. The results of this
scenario testing showed that the Group would be
able to remain viable and maintain liquidity over the
assessment period.
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77
Going concern
The Board carried out a review of the Group’s financial
projections for the 18 months to 30 September 2024
and evaluated whether it was appropriate to prepare
the full year results on a going concern basis. In
doing so the Board considered whether any material
uncertainties exist that cast doubt on the Group’s and
the Company’s ability to continue as a going concern
over the going concern period.
Consistent with prior years, the Board’s going concern
assessment is based on a review of future trading
projections, including whether banking covenants
are likely to be met and whether there is sufficient
committed facility headroom to accommodate future
cash flows for the going concern period.
Divisional management teams prepared detailed,
bottom-up projections for their businesses reflecting
the impact of a post-pandemic operating environment,
including assumptions on passenger volume recovery
and government support arrangements.
Base case scenario
The Board considered the annual budget to
31 March 2024 and medium-term plan to be the
base case scenario for the purpose of the going
concern assessment for the FY 2023 year end. These
projections were the subject of a series of executive
management reviews and were used to update the
base case scenario that was used for the purposes
of the going concern assessment at the FY 2023 year
end. The base case assumes a continuing recovery
in passenger volumes and yields in FY 2024, but that
passenger volumes remain below pre-pandemic levels
in the going concern assessment period. The base
case also reflected the expiry and non-renewal of the
TransPennine Express contract in May 2023. The
macro projections in the updated base case assume
that the UK operates in a recovering coronavirus
economy. The annual budget and medium-term
plan also capture the expected financial impact of
the actions required to support the Group’s climate-
related targets and ambitions.
Downside scenario
In addition, a downside case was also modelled which
assumes a more protracted post-pandemic recovery
profile. In First Bus the downside case assumes
a reduction in passenger volumes driving a 25%
reduction in Bus profitability. In First Rail, the downside
case assumes TOC performance fee awards at 50%
of expected levels; revenue reduction in Hull Trains and
Lumo of 20%; and loss of one National Rail Contract
at the end of its current term. The downside scenario
also assumes a delay in receipt of final Greyhound
property proceeds until after the going concern
period; a lower realised value for the First Transit
earnout; and a £10m impact of a significant climate-
related event.
Mitigating actions
If the performance of the Group were to be more
adversely impacted than assumed in the base case
or downside case scenarios, the Group would reduce
and defer planned growth capex spend and further
reduce costs in line with a lower volume operating
environment to the extent that the essential services
we operate in First Bus are not required to be run for
the governments and communities we support.
Going concern statement
Based on the review of the financial forecasts for
the period to September 2024 and having regard
to the risks and uncertainties to which the Group is
exposed, the Directors have a reasonable expectation
that the Group has adequate resources to continue
in operational existence for at least the 12-month
period from the date on which the financial statements
were approved. Accordingly, they continue to adopt
a going concern basis of accounting in preparing
the consolidated financial statements in this full
year report.
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78
Our stakeholders
We interact with a huge range of stakeholders every single day. Building strong relationships with
them involves listening and working in collaboration.
Engaging with our stakeholders
See page 81 for our Section 172 statement and page 82 for decisions taken by the Board during the year.
1. Customers
The needs of our customers are unique to each journey and requirements constantly evolve. Listening, identifying future needs and being
able to respond quickly is critical. Our teams use a variety of channels and approaches to engage with customers and passengers,
assessing satisfaction and gathering feedback.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
We engage them in order to respond to
feedback and improve customer experience
and satisfaction. Longer term this enables
us to continuously be aware of and adapt
to changing customer needs and build
long‑lasting and trusted relationships.
■
Regular customer and passenger
satisfaction surveys to identify what we do
well and where we can improve
■
Robust customer feedback processes
through online and traditional channels
■
Customer panels and events
■
Ongoing dialogue with customer
representative groups
■
Regular customer updates by the Chief
Executive Officer to the Board
Introduced a number of technology
enhancements to improve accessibility
this year, including new facilities to support
disabled, blind and deaf customers
Installed ‘tap on tap off’ payment technology
on all our bus fleet, allowing customers to
pay by contactless for the journey they make
Worked with partners to introduce robust
recovery plans in our Avanti and TPE
businesses, resulting in a reduction in
cancellations compared to summer 2022
2. Investors
We welcome open, meaningful discussion with shareholders on all matters. Being fully aware of the range of views of our shareholders
is a key aspect of good corporate governance and supports our commitment to ensuring that we promote the success of the Company
for the long‑term benefit of our members as a whole. We proactively engage throughout the year with institutional, private and employee
shareholders on a range of matters.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
We keep investors informed of key business
activities and decisions and we listen and
respond to concerns and questions in order
to build the long‑term success of the Group.
■
Presentations from Executive Directors
■
Annual report, website and regulatory
statements
■
Ongoing dialogue and individual
engagement with shareholders by the
Directors, including Chairman
■
Engagement via the Investor Relations
function with potential and existing investors
and other market participants
■
Onboarding of new CEO and introduction to
investors
■
Consultation with investors following Board’s
recommendation against unsolicited
approach from I Squared Capital
■
Return of value to shareholders by way of
£75m on‑market share buyback programme
following receipt of proceeds of £122m
following completion of Greyhound property
portfolio sale
■
Investment in growth acquisitions in
First Bus and accelerated investment in
electrification of bus fleet and infrastructure
■
Declaration and payment of FY 2022 full
year and FY 2023 half year dividends
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79
3. Government
Strong engagement with Government at all levels is essential to our businesses to advocate for policy solutions which ensure optimal
operation of public transport by private operators. At Group and operational level, we have long‑established relationships with local and
national Government officials.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
We are focused on achieving policy solutions
that that support sustainable economic
growth and social mobility.
Engaging with government ensures clear
communication and understanding of the
consequences of policy decisions at different
levels of Government and aids effective
delivery of public transport at the operational
level.
■
Direct engagement with policymakers
■
Links with national, devolved, regional, and
local Governments
■
Regular surveys of political stakeholders
■
Membership of UK and international sector
trade bodies, who in turn engage with
government and regulators to promote a
positive policy environment for private sector
public transport
■
Played a leading role in the Rail Delivery
Group and the Confederation of Passenger
Transport discussions on the future direction
of the rail and bus sectors
■
We engage with, and are members
of, a number of business advocacy
organisations, lobby groups and public
transport campaigns, particularly to raise
awareness of sustainability issues
4. Employees
Read more about our employees on pages 47 to 50
Many thousands of FirstGroup employees work in depots, stations and offices. They are the face of FirstGroup, delivering great service to
our millions of passengers. We have a broad range of mechanisms through which our employees have the opportunity to make their voices
heard and inform the direction and governance of our business.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
We will achieve success by maximising the
benefits of the expertise and experience
of our employees in delivering our services
and improving customer experience and
satisfaction.
We engage to ensure our people have the
skills and knowledge needed to deliver our
services now and in the future; to create
a safe and inclusive working environment
for all of our employees; and to increase
participation and equal opportunities.
■
Regular ‘Your Voice’ employee engagement
surveys
■
Dialogue with employee representatives,
including Employee Directors and trade
unions
■
Inductions, onboarding sessions and
employee handbooks
■
Multiple internal communications channels,
including our intranet, briefings, newsletters
and our employee mobile apps
■
Individual performance reviews and
development discussions
■
Board and Executive Committee visits to
operational sites, and opportunities for direct
discussions with employees
■
Established two separate groups to help
us drive our equality, diversity and inclusion
agenda
■
Established the Responsible Business
Committee, a new committee of the Board,
and one of its main duties is to review the
practices and performance of the Group in
supporting our people
■
First Bus are now signatories to the
Business in the Community Race at Work
Charter and this is the second year that we
have voluntarily published our ethnicity pay
gap information
■
Further progress on the four gender
commitments we set out in 2017. Our
aspiration is to have half of all the roles we
recruit for, to be filled by women.
5. Communities
Read more about our communities on pages 53 to 54
We are at the heart of our communities and we need to understand community needs in order to improve our services. We have
well‑developed mechanisms in place to help us listen to and understand the needs of our communities, and we incorporate their feedback
into our decision‑making processes.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
We engage with our communities to support
social inclusion and respond to local needs.
■
We conduct regular surveys to help us
understand a range of views and enhance
our engagement activities
■
We also commit our time, skills and
resources to help those charitable causes
important to our communities, both locally
and nationally
■
FirstGroup and our employees donated
£617,000 during FY 2023 as measured by
the London Benchmarking Group model for
community impact. See page 37 for a more
detailed breakdown of our contribution.
Strategic report
FirstGroup Annual Report and Accounts 2023
80
6. Strategic partners and suppliers
We work with more than 4,500 suppliers globally driving innovation, expertise and value for money from our supply chain to provide the
goods and services required to meet and exceed the expectations of our customers and shareholders. Our suppliers range from small,
independent companies to global corporations, and we have dedicated teams of procurement specialists centrally, and within our divisions,
who develop and maintain strong relationships with this supply chain driving value and reducing risk.
Why we engage them
How we engage with them
Our response to matters raised
and key activities
Engaging with suppliers and strategic
partners builds long‑term relationships and
enables us to identify, manage and mitigate
risks and raise environmental and ethical
standards in our supply chain.
■
Key suppliers are engaged through
collaborative relationship management
systems to provide us with clear,
consistently applied processes to track
performance and generate additional value
■
Regular supplier relationship meetings
and business reviews held to strengthen
relationships and identify and manage risks
■
Core principles shared across the entire
supply chain in the FirstGroup Supplier
Code of Conduct
■
ISO 44001:2017 certification and Strategic
Supplier Management: Continuing to
expand the programmes operated
under ISO44001 certification as well our
in‑house developed supplier management
approach collaborating on a variety of
value improvement projects focused on
value delivery to both parties in availability,
capacity, customer satisfaction, technology
and innovation.
■
Supply chain risk processes continue to be
strengthened and developed. Working with
internal stakeholders and in collaboration
with external partners we continue to
expand our insight of compliance and drive
sustainable procurement principles. This
includes enhanced reporting and capturing,
monitoring and mitigating risk increasing
supply chain maturity.
Our stakeholders
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
81
Section 172 statement
The Directors are obliged under Section 172 to
promote the success of the Company over the
long‑term for the benefit of shareholders as a whole
and having due regard to a range of other key
stakeholders. The Directors take their duties under
Section 172 of the Companies Act very seriously not
only because it is a legal requirement to do so but the
obligations make very good business sense. If the
decisions taken do not adequately take account of the
views of each of the stakeholder groups, the Company
is unlikely to be sustainable in the medium to long
term.
The details of engagement with key stakeholders is set
out on pages 78 to 80.
The Board is mindful of the matters set out in Section
172 of the Companies Act in all of its discussions and
decision‑making processes including:
The likely consequence of any decision
in the long term
The Board realise that the consequence of strategic
decisions are likely to impact the long‑term future
and direction of the Company and the Board had a
particular focus on the longer term when considering
strategy. The Board was also mindful of the long‑term
impact of the approach from I Squared as opposed
to an immediate realisation of value for shareholders.
The long‑term investment decisions in zero emission
buses and the impact on the environment over time
are another example of the long‑term time horizons
that the Board considers.
Foster business relationships with suppliers,
customers and others
The Board through the Responsible Business
Committee has a clear understanding of the
nature of the relationships with key suppliers and
customers. The Head of Procurement presented
to the Responsible Business Committee in March
2023 to help ensure that they have a detailed and
clear understanding of the different perspectives
of suppliers as a backdrop when taking decisions.
Interest of the Company’s employees
Ant Green the Group Employee Director helps the
Board to understand the views from the front line of
our workforce. Ant spends much of his time visiting
different parts of the business to understand the views
of the workforce and presents a report to the Board on
his activities since the last meeting. Ant still continues
to drive buses in Essex and on average drives one
day each week. This helps him to keep in touch with
front line employees who find it easier to approach
someone they see as a peer rather than a Board
Director. By driving regularly Ant is also in touch with
the views of customers and remains close to one of
the communities in which we operate.
Impact of the Company’s operations on the
Community and the environment
The Company provides key services to the
Community providing public transport and
employment in the communities in which we operate.
The Board is mindful of the impact of its operations on
local communities and these issues were considered
in detail when contemplating the closure of the
Company’s Bus operations in Southampton.
The environmental impact of the Company’s
operations are at the forefront of the Board’s mind.
The capital expenditure decisions to invest in electric
buses (with support from the ZEBRA funding) and to
install photovoltaic panels (solar panels) on 20 depots
significantly reducing the need to draw energy from
the grid to power the depot operations.
The desirability of the Company maintaining
a reputation for high standards of business
conduct
The Company recognises the importance of
maintaining high standards of conduct. The Board
has oversight of the Company’s values and the code
of ethics. The Board has oversight of the training
programmes led by the legal team covering business
ethics which includes anti‑bribery policies, gifts and
entertainment.
In May and November, matters reported to the
confidential whistleblowing hotline together with
investigation findings and action taken were presented
to the Board.
The need to act fairly between members of
the Company
The Executive Directors lead our engagement with
shareholders with support from the Investor Relations
team. The meetings give investors the opportunity
to share their views on the Company’s operations,
capital allocation policies and strategies. These are
important views that are reported to the Board so that
they understand the context for the decision‑making
process. The Chairman and the Committee Chairs
are available to meet with shareholders as required
from time to time. In FY 2023, the Chairman met a
number of shareholders following the publication of
the Group’s annual results in June 2022.
Strategic report
FirstGroup Annual Report and Accounts 2023
82
Decisions made during the year
The following are a number of key decisions made during the year with some commentary demonstrating how the interests of key
stakeholders have been considered in the decision‑making process
Decision
Commentary
Stakeholders
Recommencement of
dividend payments
The Board was keen to return to paying dividends and at the Board meeting
in May debated the merits of doing this in either August with a final dividend in
respect of FY 2022 or waiting until later in the year and starting with an interim
dividend in respect of FY 2023. The Board considered the views of the Company’s
shareholders and took advice from the Company’s brokers recognising that if the
decision was made too early or too late it was likely to have a detrimental effect in
the long‑term. On balance the Board concluded that a final dividend in respect of
FY 2022 was the most appropriate course of action.
Investors
Response to
unsolicited approach
from I Squared Capital
Following the unsolicited approach from I Squared Capital, the Board was required
to consider the inevitable impact on all stakeholders had such a transaction been
recommended to shareholders. Whilst ultimately a matter for shareholders, the
Directors believed the final proposal from I Squared significantly undervalued
FirstGroup’s continuing operations and its future prospects, and the contingent
value did not provide shareholders with sufficient certainty and accordingly, the
approach was rejected. Had the offer been at a level where the Board was minded
to recommend it to shareholders the Board would have considered in greater detail
the impact on employees, customers together with the views of Government.
Investors, Employees,
Customers, Government
Launch of share
buyback programme
Following the successful sale of the legacy Greyhound property portfolio and
subsequent receipt of funds totalling £122m, in line with its balanced capital
allocation policy, the Board approved the launch of a £75m on‑market share
buyback programme. Given the value, and in accordance with the maximum
level of share purchases mandated at the Company’s 2022 AGM, the buyback
programme was identified as the most appropriate and beneficial way to return
money to shareholders.
Investors
Investment in
First Bus to
enhance the
business and
accelerate
electrification
Following the launch of the share buyback programme, the Board also approved
the acquisition of Ensign Bus, a high‑performing, long established business based
in Essex. The Board believed that the acquisition would allow First Bus to both
grow its B2B business and enhance its operational footprint in Essex. The business
also has an interesting vehicle refurbishment and re‑sale operation and a high
value depot. The Board also approved the allocation of an additional £35m in the
electrification of the First Bus fleet and infrastructure. This followed successful
applications made in partnership with local authority partners for £25m of
government co‑funding. The accelerated electrification programme has a positive
impact on the communities we serve who benefit from zero emission busses and
cleaner air.
Customers, Government,
Communities
Sale of First Bus
Scotland East
business and closure
of Southampton
operations
When considering the Company’s operations in Scotland East and Southampton
in light of evolving customer demand and ensuring the First Bus business has
the optimal network, the Board decided that the best approach was to sell the
Scotland East business and close its operations in Southampton. The Board were
mindful of the impact on employees in Southampton and the opportunities they
would have for alternative employment either within the Group or outside and all
employees were offered alternative employment within a reasonable commuting
distance.
Employees
The Strategic report was approved on behalf of the Board on 8 June 2023.
Graham Sutherland
Chief Executive Officer
8 June 2023
395 King Street, Aberdeen, AB24 5RP
Governance
report
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
83
David Martin
Chairman
Dear Shareholder,
I am delighted to introduce the corporate
governance report for FY 2023.
In my Chairman’s statement starting on
page 06 I have commented on a number of
significant developments and events during
the year. This report focuses on governance
and makes reference to those key events
and how they were addressed from a
governance perspective.
Your Board has been very busy this year
considering the approach from I Squared
Capital Advisors (UK) LLP ‘I Squared’,
managing the tail end of the disposal of our
North American businesses and returning
some of those proceeds to shareholders.
The executive team have performed very
well, and the Board members have been
busy providing oversight for all stakeholders.
The report is set out below and on the
pages that follow you will find an introductory
letter from the Chair of each of the Board
Committees followed by the report on that
Committee.
I welcome your comments on this Corporate
Governance Report and on the 2023 Annual
report more generally.
I’d like to thank my colleagues on the Board
and all the employees of FirstGroup for
their ongoing commitment and for their
achievements in the past year.
David Martin
Chairman
8 June 2023
Governance
We have complied with the Provisions of the
UK Corporate Governance Code (the ‘Code’)
throughout the year with the following
exceptions:
■
Provision 9 – The role of the Chairman
and Chief Executive was not split from
1 April 2022 until 16 May 2022.
■
Provision 21 – The Board conducted an
internal rather than an external evaluation
review notwithstanding it was three years
since the last external review.
Regarding Provision 9, as explained last
year when Matthew Gregory stepped down
from the Board in September 2021 it was
agreed that David Martin would become
Interim Executive Chairman pending the
appointment of a new Chief Executive
Officer. The explanation regarding the
decision on Provision 21 is set out on page
95.
Corporate Governance report
Compliance with the UK Corporate
Governance Code
In this Annual Report we have introduced
commentary in grey boxes running
throughout the Governance Report that
summarises how we have complied with the
UK Corporate Governance Code and guides
shareholders to sections of the report to help
access information quickly. The Principles
are represented by letters and the Provisions
by numbers. Both the Principles and the
Provisions are paraphrased in the interests of
space – full details of each can be found on
the Financial Reporting Council’s website at
www.frc.org.
A
Led by an effective Board
The Board’s effectiveness review
(details of which are set out on page
95) indicate that the Board has
operated effectively during the period
under review.
B
Purpose, values and strategy
This is covered throughout the
Strategic report. The Values are on the
website and are set out in the Culture
section of this Corporate Governance
report.
Governance report
FirstGroup Annual Report and Accounts 2023
84
Remuneration
Committee
Audit
Committee
Nomination
Committee
Responsible
Business
Committee
Board of FirstGroup
Disclosure Committee
The Board is responsible for promoting the
long‑term success of the Company for the
benefit of its shareholders and stakeholders.
The matters reserved to the Board are
set out in writing and cover the most
important decisions that will be taken
within the Group. These include strategy,
capital structure/allocation, financial
reporting and controls, risk appetite and risk
management, stakeholder engagement,
board membership, remuneration, corporate
governance and key policies. The Board
Committees assist by reviewing certain
matters before recommendations are put to
the Board for approval.
Overview
The illustration below shows the Board level governance structure and the primary standing committees that have been established to
effectively run the business in compliance with the UK Corporate Governance Code.
The Board of FirstGroup is led by its
Chairman, David Martin who also chairs the
Nomination Committee, Jane Lodge chairs
the Audit Committee, Claire Hawkings chairs
the Responsible Business Committee and
Sally Cabrini is Chair of the Remuneration
Committee. There is a separate report
covering the work of each of these
committees on the pages that follow. The
terms of reference of these four committees
are available on the Group’s website.
In addition to these four committees the
Board has a Disclosure Committee to identify
inside information and to oversee the timely
and accurate disclosures when required.
The Board may delegate other matters to an
ad hoc committee established for a specific
purpose.
The matters not reserved to the Board are
delegated to the Chief Executive Officer
with the Board retaining responsibility for
oversight and holding management to
account.
The split of responsibilities between the
Chairman and Chief Executive Officer are set
out in writing.
The Chief Executive Officer has formed an
Executive Committee, which is not a Board
Committee, to assist him in the day‑to‑day
running of the Company. The Executive
Committee meets monthly and, its main
responsibilities include:
■
Developing, implementing and monitoring
operational plans
■
Reviewing financial performance, forecasts
and targets
■
Prioritising initiatives and allocating
resources
■
Developing strategy for submission to the
Board
■
Overseeing risk management including
identifying risks and developing risk
mitigation strategies
■
Developing and monitoring the internal
control strategies
■
Leading the Group’s culture and safety
programme.
Members of the Executive Committee are set
out on page 90.
Governance at a glance
Corporate governance framework
The corporate governance framework, comprising clearly defined responsibilities and accountabilities, is set out below:
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
85
Board and Committee attendance
Chairman
Non‑Executive Directors
Employee
Director
Executive Directors
Director
David
Martin
Sally
Cabrini
Myrtle
Dawes
Claire
Hawkings
Jane
Lodge
Peter
Lynas
Ant
Green
Graham
Sutherland
Ryan
Mangold
Board
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
Short‑notice Board
4/4
3/4
3/4
4/4
4/4
4/4
3/4
4/4
4/4
Audit
–
–
–
4/4
4/4
4/4
–
–
–
Remuneration
–
4/4
–
4/4
4/4
4/4
–
–
–
Nomination
3/3
2/2
2/2
2/2
2/2
3/3
2/2
–
–
Responsible Business
–
3/4
4/4
4/4
–
4/4
4/4
–
–
Overall
13/13
18/20
15/16
24/24
20/20
25/25
15/16
10/10
10/10
David Martin served as Executive Chairman from September 2021 until 30 June 2022.
Warwick Brady and Julia Steyn served as Directors until the AGM on 27 July 2022 and attended two out of two and one out of two scheduled
meetings respectively.
Board composition
As shareholders can see from the biographies on pages 88 to 90, we have diverse experiences on the Board which always gives rise to
interesting and informative discussions on Board business.
Independence
Gender
Board balance
Chairman
1
Male
5
Chairman
1
Non‑independent
3
Female
4
Executive Directors
2
Independent
5
Non‑Executive Directors
5
Group Employee Director
1
How the Board spends its time
Strategy and Strategic Transactions
40%
Business Monitoring and Updates
30%
Stakeholders
20%
Governance/other
10%
Board skills
5
5
8
8
8
Transport/travel
Government/regulators
Accounting/audit
Corporate finance/M&A
ESG/safety
People/remuneration
9
Governance at a glance
continued
Governance report
FirstGroup Annual Report and Accounts 2023
86
Roles and responsibilities
The Board has agreed a clear division of responsibilities between the Chairman and the Chief Executive Officer, and these roles, as well as
those of other Directors and the Company Secretary are clearly defined so that no single individual has unrestricted powers of decision.
Chairman
David Martin
■
Leads and manages the business of
the Board
■
Provides advice, support and constructive
challenge to the Chief Executive Officer
■
Provides direction and focus and ensures
sufficient time is allocated to promote
effective debate and sound decision‑making
■
Promotes the highest standards of integrity
and probity and ensures effective
governance
■
Manages Board composition, performance and
succession planning
■
Maintains effective communication with shareholders
and ensures their views are understood by the Board
■
Facilitates effective and constructive relationships
and communications between Executive and
Non‑Executive Directors
Chief Executive Officer
Graham Sutherland
■
Provides leadership to the executive and
senior management team in the day‑to‑day
running of the Group’s businesses
■
Develops the Group’s objectives and
strategy for consideration and approval by
the Board, taking in to account the interests
of shareholders and stakeholders
■
Implements the agreed strategy
■
Promotes a safe working environment and a
safety‑focused culture across the Group
■
Maintains an active dialogue with shareholders and other
stakeholders
■
Responsible for implementing effective internal controls
and ensuring risk management systems are in place
Chief Financial Officer
Ryan Mangold
■
Responsible for the financial stewardship of
the Group’s resources
■
Responsible for the Group’s finance, tax,
treasury, insurance, risk management and
internal control functions
■
Supports the Chief Executive Officer in providing
executive leadership and developing strategy
■
Supports the Chief Executive Officer to implement
the agreed strategy
■
Reports to the Board on operational and financial
performance of the businesses
Senior Independent Director
Peter Lynas
■
Acts as an additional point of contact for
shareholders to discuss matters of concern
■
Provides a sounding board for the Chairman
and serves as an intermediary for the other
Directors
■
Leads the annual review of the Chairman’s performance
taking in to account the views of the Non‑Executive
Directors and Executive Directors
Group Employee Director
Anthony Green
■
Brings insight into employee engagement
and perspectives from the front line to Board
deliberations
■
Chairs the Employee Director’s Forum
■
Promotes employee involvement and participation in the
affairs of the Group through share ownership, employee
surveys and other means of employee involvement
■
Promotes the Group’s policies and procedures amongst
employees, in particular those related to safety, diversity
and inclusion, and business ethics
Non‑Executive Directors
(NEDs)
Sally Cabrini
Myrtle Dawes
Claire Hawkings
Jane Lodge
Peter Lynas
■
Provide a strong independent element
to the Board and collectively provide a broad
range of experience, knowledge and
individual expertise
■
Constructively support and challenge
management
■
Review management’s performance in meeting agreed
objectives and deliverables
■
Review the integrity of financial information and
determine whether internal controls and systems of risk
management are robust
Company Secretary
David Blizzard
(not a Board member)
■
Provides advice and support to the Board,
its Committees, the Chairman and other
Directors individually as required, primarily
in relation to legal and corporate
governance matters
■
Responsible, with the Chairman, for setting the agenda
for Board and Committee meetings and for high quality
and timely information and communication between the
Board and its Committees and the Executive Directors
and senior management
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
87
David Martin
N
M
Chairman
Appointed:
15 August 2019
Key areas of expertise:
Surface
Transportation, Business Turnaround,
Performance Improvement, International
Transport Contract Businesses, Strategic
Transactions
Skills and experience:
David is the former
Chief Executive of Arriva, which he joined
in 1998 as board member responsible for
international development before taking
over the leadership of the company in 2006.
During his tenure, Arriva was transformed
into a multinational transport services group
through a number of key strategic mergers
and acquisitions. In September 2010 the
company was purchased by Deutsche
Bahn, one of the world’s leading passenger
transport and logistics companies. David
remained as Chief Executive throughout this
period, before stepping down in
January 2016. He remained on the Arriva
Board advising on a range of issues until
May 2017. He was formerly a Non‑Executive
Director at Ladbrokes plc and previously
held roles at British Bus plc, where he was
responsible for development of strategy and
M&A, at shipping company Holyhead Group
and at business services group Initial
Services PLC. David is a chartered
management accountant.
External appointments:
Member of the
advisory board at Nottingham Business
School; member of the steering committee
at Nottingham Trent University.
Nationality:
British
Graham Sutherland
E
Chief Executive Officer
Appointed:
16 May 2022
Key areas of expertise:
Business Strategy,
Performance Improvement, Government
Contracting, Engineering and Infrastructure,
Digital Transformation, Corporate Finance/
M&A, Governance
Skills and experience:
Graham has
a strong track record in the delivery of
critical services and in creating value for
shareholders in rapidly evolving regulatory
and technological environments. Previously
he was Chief Executive Officer of KCOM
Group plc, a LSE‑listed telecommunications
company. Prior to this, Graham held a
number of senior executive roles within BT
Group PLC over twelve years. These included
as Chief Executive Officer of the BT Business
and Public Sector division, where he was
responsible for profitable growth and led the
integration of EE’s Business unit, creating a
division with £4.6bn in annual revenues and
13,000 employees. Graham was also Chief
Executive of BT Ireland where he was
responsible for all consumer, business and
network activities. Prior to that he was Chief
Executive of NTL Ireland and has also held
senior financial roles including at Bombardier.
Graham has an established record in
strategic development, as well as delivering
enhanced financial and operational
performance and engaging a diverse
range of stakeholders including consumer,
business and public sector customers.
Nationality:
British
Ryan Mangold
E
Chief Financial Officer
Appointed:
31 May 2019
Key areas of expertise:
Corporate
Finance/M&A, Turnaround, Pensions,
Governance
Skills and experience:
Ryan was
appointed as CFO in May 2019, having
previously been Group Finance Director of
Taylor Wimpey Plc for eight years. Ryan has
a strong track record of building financial
discipline in the organisations he has worked
at. During his time at Taylor Wimpey,
Ryan played a leading and integral role in
strengthening the balance sheet, driving
operational improvements, rebuilding the
business post the financial crisis (to become
a constituent of the FTSE 100), the sale of
the North American business and the
improvement of its pensions position.
Ryan was previously at the Anglo American
group of companies, where he was Group
Financial Controller at Mondi and played
a significant role in its demerger from
Anglo American in 2007. Ryan is a chartered
accountant and has recent and relevant
financial experience.
Nationality:
South African/British
Board
Key
A
Audit Committee
B
Responsible Business Committee
R
Remuneration Committee
E
Executive Committee
N
Nomination Committee
Chair
Governance report
FirstGroup Annual Report and Accounts 2023
88
Sally Cabrini
R
B
N
Independent Non‑Executive Director
Appointed:
24 January 2020
Key areas of expertise:
HR, IT,
Transformation
Skills and experience:
Sally brings
valuable experience of a number of sectors
including UK regulated utilities, services
and manufacturing. She has expertise in
delivering significant business transformation
programmes often including internal
restructuring or divestment, pension
changes and both cultural and significant
technological changes. As Transformation,
IT and People Director at Interserve Group
Limited she had a strong focus on effective
operational delivery and led a major
transformation programme which had
significant financial and strategic challenges
and prior to that she was a senior executive
at FTSE 100 constituent United Utilities for
nine years, including four years as Business
Services Director with responsibility for
information technology, cyber security
and human resources in a regulated CNI
environment. Sally was also a Non‑Executive
Director and Chair of the Remuneration
Committee at Lookers plc from
January 2016 to 2020.
Sally is a fellow of the Chartered Institute of
Personnel and Development.
Nationality:
British
Myrtle Dawes
B
N
Independent Non‑Executive Director
Appointed:
1 April 2022
Key areas of expertise:
Engineering,
Safety, Technology and Digital Transformation,
Project Management and Energy Transition
Skills and experience:
Myrtle is an
established leader with extensive experience
in the energy sector both in the UK and
internationally. A chartered Chemical
Engineer, she has held a number of senior
safety and engineering project management
roles in the offshore oil and gas industry,
including for BP and BHP Petroleum.
Moving to Centrica in 2009, Myrtle
performed a number of senior executive
roles encompassing engineering, project
management, technology and digital
transformation including leading the team
responsible for safety‑critical, customer‑
facing residential assignments. She holds
a Masters in Chemical Engineering and
Chemical Technology from Imperial College.
External appointments:
Solution Centre
Director for the Net‑Zero Technology Centre;
Non‑executive board member of the Centre
for Process Innovation; member of the
Technology Leadership Board; Fellow of the
Institution of Chemical Engineers, the Energy
Institute, the Forward Institute and Honorary
Fellow of the Association for Project
Management.
Nationality:
British
Anthony Green
B
N
Group Employee Director
Appointed:
15 September 2020
Key areas of expertise:
Transportation,
Employee Engagement, Safety, Learning
and Development
Skills and experience:
Ant is a bus driver
and a trainer for First Bus. He has been the
Employee Director of First Essex Buses Ltd
since 2014, a company he joined in 2009.
In 2015, he was seconded to roll out Be Safe
the Group’s safety behavioural change
programme. Since then Ant has trained
more than 1,900 colleagues and coached
leaders on the implementation of successful
safety techniques. Prior to joining First Essex,
he worked at retailer Homebase for 16 years
including in several managerial positions,
and also volunteered at St John Ambulance.
Nationality:
British
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
89
Claire Hawkings
A
B
N
Independent Non‑Executive Director
Appointed:
21 January 2022
Key areas of expertise:
Sustainability
Strategy, Business Transformation,
Governance, Commercial Transactions,
Performance Management and
Energy Transition
Skills and experience:
Claire has more
than 30 years’ business experience,
principally in the energy sector, and has held
UK and international leadership positions,
most recently with Tullow Oil plc, and prior
to that with BG Group plc and British Gas
plc. Claire is an environmental scientist and
an experienced environmental, social and
governance (ESG) professional and holds
a degree in Environmental Studies awarded
by Northumbria University and an MBA
from Imperial College Management School.
She is also a Fellow of the Energy Institute.
External appointments:
Non‑Executive
Director and Chair of the ESG Committee
of Ibstock plc, a Non‑Executive Director
of James Fisher and Sons plc and a
Non‑Executive Director of Defence
Equipment and Support, a bespoke trading
entity and arm's length body of the Ministry
of Defence.
Nationality:
British
Peter Lynas
A
R
B
N
Senior Independent Non‑Executive Director
Appointed:
30 June 2021
Key areas of expertise:
Defence and
Aerospace, Government Contracting,
Turnaround, Corporate Finance/M&A,
Pensions, Governance
Skills and experience:
Peter was group
finance director of BAE Systems plc (and
a director of BAE Systems, Inc.) from 2011
until his retirement in 2020, having previously
served in increasingly senior financial and
M&A roles since joining the company in
1999. Peter’s early career was spent at
De La Rue Systems, which he joined as a
trainee accountant, and then GEC Marconi
from 1985 to 1999, where he became
finance director of Marconi Electric Systems.
In addition to his strong strategic and
financial background Peter brings to the
Board extensive experience in heavily
regulated industries with significant
contractual relationships with government.
External appointments:
Non‑executive
director and audit committee chair of
SSE plc since 2014.
Nationality:
British
Jane Lodge
A
R
N
Independent Non‑Executive Director
Appointed:
30 June 2021
Key areas of expertise
: Transportation/
Travel/Engineering and Infrastructure,
Corporate Finance/M&A, Governance
Skills and experience:
Jane spent her
executive career with Deloitte, where
she spent more than 25 years advising
multinational companies including
businesses in transport, leisure, consumer
and technology sectors. Since 2012 she has
served as a non‑executive director and audit
committee chair at several UK public
companies in a range of sectors. Previous
roles include non‑executive director of Sirius
Minerals plc (2015‑2020, when the company
was acquired by Anglo American plc),
Costain Group plc and of Devro plc
(2012‑2020) and non‑executive director and
audit committee chair of DCC plc
(2012‑2022). In addition to broad international
experience in a range of sectors, Jane brings
substantial audit, risk and audit committee
expertise to the Board.
External appointments:
Non‑executive
director and audit committee chair of
Bakkavor Group plc; Non‑executive
director and remuneration committee
chair of Glanbia plc; Non‑executive director
and audit committee chair of TI Fluid
Systems plc.
Nationality:
British
Board
continued
Former Directors who served for part of the year:
Warwick Brady
Independent Non‑Executive
Director
Julia Steyn
Independent Non‑Executive
Director
Warwick and Julia stepped down from the Board following the AGM
on 27 July 2022.
Executive Committee members
Graham Sutherland
Chief Executive Officer
David Blizzard
Group Company Secretary
Ryan Mangold
Chief Financial Officer
Rachael Borthwick
1
Group Corporate Services Director
Janette Bell
Managing Director, First Bus
Steve Montgomery
Managing Director, First Rail
1
Stepped down from Executive Committee at the end of July 2022.
Governance report
FirstGroup Annual Report and Accounts 2023
90
Directors
Myrtle Dawes joined the Company as a
Non‑Executive Director on 1 April 2022
and Graham Sutherland joined as Chief
Executive on 16 May 2022. Having been
Executive Chairman since September of
2021 and, after a short handover of the
executive responsibilities to Graham, I
was very pleased to return to my role as
(non‑executive) Chairman.
Warwick Brady and Julia Steyn stepped
down from the Board at the AGM on
27 July 2022 and I would formally like to
record my thanks to both Warwick and Julia
on behalf of shareholders for their support
and counsel throughout their time on the
Board.
The Company has formal procedures to
review and if appropriate authorise conflicts
of interest and these have operated
effectively throughout the year.
The Board carries out an annual review
of the independence of its Non‑Executive
Directors. All the Non‑Executive Directors
are considered to have the appropriate skills,
knowledge, experience and character to
bring independent and objective judgment
and valuable insights to the Board’s
deliberations. The Chairman was considered
to be independent on appointment.
Ant Green has served as an Employee
Director throughout the year and has
continued to act as an effective channel to
put the voice and sentiment of the workforce
into the Boardroom. Ant Green and the
Executive Directors are not considered to be
independent.
The biographies of all the current Board
members are set out starting on page 88.
Following a recommendation from
the Nomination Committee the Board
recommends that all Directors are
reappointed at the AGM where they will offer
themselves for re‑election.
As noted above, the Board has documented
a split of responsibilities between the
Chairman and the Chief Executive Officer,
and we have agreed responsibilities for
the Committee chairs, Senior Independent
Director and Non‑Executive Directors. The
Board reviewed and reconfirmed these
arrangements in March 2023 and they are
summarised on page 87 and available in full
on our website.
Commitment
All Directors are expected to attend each
Board meeting and each Committee meeting
for which they are members, unless there
are exceptional reasons preventing them
from attending. The attendance levels were
excellent in FY 2023.
The Nomination Committee adopted an
over‑boarding policy in early 2022 to make
sure Directors had sufficient time to fulfil
their obligations and has applied this when
reviewing additional appointments for
existing Board members. All Directors are
within the limits set by the policy. Further
detail is provided below in the report of the
Nomination Committee.
Culture
FirstGroup is Values‑based and has five
values:
■
Committed to customers
■
Dedicated to safety
■
Supportive of each other
■
Accountable for performance
■
Setting the highest standards
These Values underpin decisions taken at
all levels of the organisation and are wholly
consistent with the duties of Directors. The
Board monitors culture in a variety of ways
receiving information from many sources
to enable them to understand and monitor
the culture of the organisation. The primary
sources are:
■
Regular updates from the CEO and CFO
within their reports to the Board
■
The reports from the Group Employee
Director
■
The results from engagement surveys
■
Review of calls to the confidential
whistleblowing hotline
■
People sections of reports to Responsible
Business Committee
■
Meeting people when the Board visits the
Group’s operating locations
Additionally, the Board receives updates on
adherence with the Ethics and Compliance
training programmes that require employees
to complete a regular programme of training
that is relevant to their role and includes
IT Security training, Anti‑bribery, modern
slavery and competition law training.
We formed the Responsible Business
Committee at the start of FY 2023, the
Committee has met four times and
considered a range of very important topics.
The Committee has covered employee
welfare, environmental matters and
community engagement. We are pleased
to have set a science‑based emissions
reduction target, consistent with limiting
global warming to 1.5°C, that has recently
been approved by the SBTi. Read more
about this on page 43. The Committee
has had oversight of the matters set out in
the Responsible business section of the
Strategic report starting on page 38. The
governance of the Responsible Business
Committee is within this Report on page 106.
Compliance with the UK Corporate
Governance Code
1
Basis on which the company
generates and preserves value
This is covered in the Strategic report
on pages 03 to 82.
2
The Board should assess and
monitor culture
As set out on this page the Board
monitors culture through a variety of
sources throughout the year.
3
Engagement with major
shareholders
The regular engagement with
shareholders is led by Executive
Directors and regular roadshow events
with our larger shareholders following
the publication of results.
The Chairman, Committee chairs and
the Senior Independent Director are
available to shareholders on request
and if there is a matter requiring
shareholder input the most appropriate
Director will engage with shareholders.
4
Action if 20% of shareholders vote
against a proposal
Not applicable in FY 2023 – all
proposals at the 2022 AGM received
over 80% support from shareholders.
If this had not been the case then
the Board would expect to engage
with shareholders and provide the
necessary explanations as required
under the Code.
5
Views of key stakeholders and
S172 statement
A comprehensive section 172
statement is set out on page 81 within
the Strategic Report. The Company
has appointed Ant Green, a Director
from the workforce who updates his
fellow Directors on the views from the
workforce to each Board meeting.
Introduction
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Financial statements
FirstGroup Annual Report and Accounts 2023
91
At each meeting the Board receives an
update from any of the Board Committee
meetings that have been held since the
last meeting together with a presentation
from the CEO, the CFO, the Head of the rail
Division, the Head of the bus Division, the
Group Employee Director and the Company
Secretary.
In addition to the scheduled meetings
there were four additional Board meetings
arranged for the Board to review the offer
from I Squared for the Company, the
bid for the first tranche of bus franchise
arrangements in Manchester, matters
connected with the buyback launched
in December 2022 and the operational
challenges within the Rail division.
Furthermore, the Board appointed a
number of Committees to consider specific
transactions or matters that had been
discussed by the Board.
In January 2023, the Board met in Glasgow
and had the opportunity to visit two bus
depots to observe the operations and meet
colleagues working at these sites. The Board
intends to hold two meetings at operating
sites in FY 2024.
Unsolicited offer for the Company
As shareholders will be aware we received
a number of unsolicited proposals from I
Squared.
Following the approach from I Squared the
Board decided to appoint a committee to
consider matters relating to the approach.
All Board members were invited to
attend meetings of the Committee. This
Committee met six times between April and
August 2022.
As announced on 16 August 2022 the
unsolicited offers received from I Squared
resulted in a final proposal (the ‘Proposal’)
on 15 August 2022 of 135p per FirstGroup
share (comprising 133.9p plus the 1.1p final
dividend that was paid on 19 August 2022)
together with further contingent value
from the First Transit earnout. The Board
carefully evaluated the Proposal, together
with its advisers, and concluded that the
cash component significantly undervalued
FirstGroup’s continuing operations and its
future prospects, and the contingent value
did not provide shareholders with sufficient
certainty.
Board meetings
Board meetings focus on strategy and financial and business performance. The key matters
considered by the Board during the scheduled meetings are set out below.
May
Board evaluation
Year‑end matters – approval of annual report
Review of whistleblowing incidents and procedures
Review of Risk disclosures in the Annual Report
July
Progress on the discussions with I Squared
Views of shareholders following the roadshow conducted with larger
shareholders following the publication of the annual results
September
Strategy Reviews
Modern Slavery Statement and Actions
November
Half year results
Update on Strategy and Capital Allocation
January
(in Glasgow)
Strategic updates
Budget Assumptions
Investor relations and communications update
March
Customer experience
Budget review and approval
Board
continued
Compliance with the Corporate
Governance Code
C
Necessary resources and control
framework
The Board has delegated the
day‑to‑day running of the Company
to the Chief Executive Officer who,
with the Executive Committee, will
ensure that their teams have the
necessary resources in place to meet
their objectives. The Board, via the
Nomination Committee reviewed the
talent and succession planning to
help ensure the Company has the
right teams to deliver on the Group’s
objectives.
6
Workforce concerns (known as
whistleblowing)
The Board routinely reviews all
concerns raised by the workforce
twice each year. If a serious concern
were to be raised between the
reviews, it would be escalated to the
Board rather then waiting until the next
report was due.
D
Responsibilities and engagement
with shareholders and
stakeholders
There is a comprehensive programme
to engage with shareholders and
stakeholders. The engagement with
the different stakeholders is set out in
the Strategic report with the relevant
section starting on page 78.
E
Workforce policies and practices
The Group has a comprehensive
framework of polices and practices
that are aligned with the values and the
long‑term success of the Company
and examples of the practices are set
out within the ‘Supporting our People’
section of the Strategic Report that
starts on page 47. The relevant polices
are owned by the Human Resources
teams and cover the full range of
employment issues expected for a
diverse workforce.
Governance report
FirstGroup Annual Report and Accounts 2023
92
Induction
On appointment all new Directors receive
a comprehensive induction that is tailored
to their experience, background and areas
of focus. Both Claire Hawkings and Myrtle
Dawes completed a tailored induction
programme during the year.
The programme is designed to help
the new Director become fully effective
in their role as quickly as possible with
a good understanding of the Group’s
businesses, key drivers of operational
and financial performance, the role of the
Board and its committees, the approach
to corporate governance and the duties
and responsibilities of being a Director of a
publicly listed company.
Continuing professional development
Following discussions during the first part of
the year two separate training sessions were
organised for the Board. One covered an
update on the UK Regulatory Compliance
regime with a focus on internal controls
and the second covered TCFD reporting
obligations and net‑zero considerations.
In addition to the sessions above, from time
to time the Directors attend seminars and
round table discussions aligned to their areas
of responsibility or interest.
Shareholder engagement
Primary responsibility for shareholder
engagement sits with the Executive
Directors.
The Executive Directors meet with larger
shareholders twice each year, normally
shortly after publication of the annual or
interim results and at other times if required.
During the financial year a number of other
more detailed teach‑in sessions on the
operations of the two divisions took place
with Janette Bell and Steve Montgomery
joining the Executive Directors for the
meetings.
Compliance with the Corporate
Governance Code
F
Chairman leads the Board and is
responsible for its effectiveness
The Chairman is responsible for
leading the Board and its effectiveness.
The duties are set out in a document
published on the Company’s website.
The effectiveness of the Chairman is
reviewed annually as an important part
of the Board evaluation process led by
the Senior Independent Director.
G
Appropriate combination of
Executive and Non‑Executive
Directors
There is an appropriate division of
responsibilities between the Executives
and Non‑Executives. The matters
reserved to the Board are clearly
defined and all significant transactions
would come before the Board.
H
Non‑Executives have sufficient
time to meet responsibilities
The Non‑Executives have sufficient
time to meet their responsibilities – this
is supported by the high attendance
levels at the additional Board and
Committee meetings that have
been arranged during the year. The
over boarding policy adopted by
the Nomination Committee in 2022
helps ensure that Directors are not
too busy to effectively discharge their
responsibilities.
7
Conflicts of interest
The Board reviews all Directors’
external appointments twice each
year to confirm that they do not create
a conflict of interest. If a Director had
a conflict in respect of a particular
contract or arrangement being
considered by the Board, there is a
process for the Director to declare that
conflict and the Board would decide
whether or not it was appropriate
for the Director to be involved in
discussion on that matter.
8
Concerns held by a NED on
resignation
No such concerns have been raised
during the period under review.
9
Chairman independent on
appointment
David Martin was independent on
appointment. The Board recognises
that Mr Martin served as executive
chairman from September 2021 until
30 June 2022.
10
Identification of independent NEDs
The Board has concluded that
Sally Cabrini, Myrtle Dawes, Claire
Hawkings, Jane Lodge and Peter
Lynas are independent in character
and judgment.
11
At least half the Board is
independent
Five of the nine Directors are
independent and are considered by
the Board to be independent. In the
first part of the year seven of the eleven
Directors were independent.
12
Appointment of senior independent
director and review of Chairman
Peter Lynas was appointed as the
Senior Independent Director on
30 June 2021. Mr Lynas led the
Non‑Executive Directors’ review of
the Chairman’s performance and
he discussed the feedback with the
Chairman.
13
Non‑Executives’ role
The Non‑Executives hold Executive
Directors to account and regularly
meet, normally at the conclusion of
each Board meeting, without any
members of the executive team.
14
Roles of Chairman, Chief Executive
and Senior Independent Director
and Committee terms of reference
The responsibilities for these roles
are set out in writing and following
the Board’s review in March 2023
the document has been publicly
available on the Company’s website.
Each Committee reviewed their
terms of reference in March 2023 and
recommended changes were approved
by the Board. The updated terms
of reference for the Committees are
available on the Company’s website.
15
‑ See page 98
I
The Board supported by the
Company Secretary should ensure
that it has resources to function
16
Access to and appointment of the
Company Secretary
The appointment or removal of the
Company Secretary is reserved to the
Board. Since appointment on 1 April
2022, David Blizzard has worked with
the Chairman and Committee Chairs
to support them to discharge their
responsibilities.
All Directors have direct access to the
Company Secretary and governance
matters are raised with the Board as
they arise.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
93
Board
continued
Diversity and inclusion
We believe that a diverse workforce that
represents the communities in which we
operate is vital to the Group’s success. We
value the differences each colleague brings
to their role, making the Group stronger
and better able to meet the needs of our
customers and the communities in which we
operate.
Board diversity
The Group has selected 25 March 2023
as the reference date for the data provided
below. Throughout the period under
review and on the selected reference
date the Company has complied with
the requirements that at least 40% of the
Board are women and also at least one
member of the board is from a minority
ethnic background. The Company has not
complied with the external target that at least
one of the senior board positions (Chair,
Chief Executive Officer, Senior Independent
Director or Chief Financial Officer) is a
woman.
The Audit Committee, the Remuneration
Committee and the Responsible Business
Committee are all chaired by women. The
Nomination Committee is committed to
a meritocratic appointment process and
as and when one of these roles becomes
available it will ensure a diverse long‑list of
candidates.
There have been no changes to
the composition of the Board since
25 March 2023. All Directors and members
of the executive management team are
based in the UK and have been willing to
freely disclose the information required
for the disclosures below. Our approach
to collecting the data has been to ask the
relevant people for the information.
The required tables reporting on sex/gender
and ethnic representation are set out below.
The diversity data for levels below the Board
is set out in the Supporting our people
section starting on page 47.
Reporting table on sex / gender representation
FirstGroup plc
Board of Directors
Specified
Senior Positions
Executive Management
(defined as the Executive Committee)
Number of
Board members
Percentage of
the Board
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
Number in executive
management
Percentage of the
executive management
Men
5
55.6%
4
4
80%
Women
4
44.4%
0
1
20%
Overall Not specified
prefer not to say
–
–
–
–
–
Reporting table on ethnicity representation
FirstGroup plc
Board of Directors
Specified
Senior Positions
Executive Management
(defined as the Executive Committee)
Number of
Board members
Percentage of
the Board
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
Number in executive
management
Percentage of the
executive management
White British or other
White (including
minority‑white groups)
8
88.9%
4
5
100%
Mixed/Multiple Ethnic
Groups
–
–
–
–
–
Asian/Asian British
–
–
–
–
–
Black/African/
Caribbean/Black
British
1
11.1%
–
–
–
Other ethnic group
including Arab
–
–
–
–
–
Not specified
prefer not to say
–
–
–
–
–
Governance report
FirstGroup Annual Report and Accounts 2023
94
Actions and progress from the Board Evaluation conducted in March 2022
Area of focus
Progress
Board composition and dynamics
Create opportunities for the Board to
spend more time together outside Board
meetings and to meet a broader group of the
management team
The return to physical meetings enabled
the Board to spend more time together.
The meetings held in Glasgow in January
provided a good chance to meet a number
of members of the management team of the
business in Scotland.
Board and Committee Support
Company Secretarial team to improve the
service to the Board, its committees, and the
Group
The results of the FY 2023 exercise reflected
a significant improvement in this area.
Effectiveness of the meetings
Quality of Board papers to be further
enhanced with more focused papers to be
provided to Directors
Improvements made and the new CEO has
redesigned the key performance indicators
provided to the Board.
Talent and succession
A detailed view of the Company’s talent and
succession plans to be presented to the
Board during the year
This was delegated to the Nomination
Committee (attended by all Board members)
and a detailed presentation was received in
November.
Stakeholders
Improve the Board’s understanding of
the views of customers, suppliers and the
communities served
Some significant steps through the work of
the Responsible Business Committee.
Actions from Board Evaluation conducted in March 2023
Area of focus
Action
Board composition and dynamics
Create opportunities for the Board to meet a
wider group of senior leaders both within the
Boardroom and other settings
Conduct of meetings / Board
Support
Quality of Board reporting to be enhanced
with more focused papers using executive
summaries, signposting and reduce
repetition
Stakeholders
Continue to improve the Board’s
understanding of the views of customers,
suppliers and communities served
Talent and succession
Build on improvements made in FY 2022
The first action above will also support the
Board’s work in this area of focus
Board evaluation
The Board recognises that to comply with the
UK Code on Corporate Governance it would
have been obliged to conduct an externally
facilitated review in FY 2023. Following the
changes to the Board in the first half of the
year, the Board concluded that it would
be preferable to allow the new working
relationships and patterns to develop further
before conducting an external review. The
Board felt that better value would be obtained
by conducting an external review in FY 2024.
The Company Secretary was asked to
facilitate the internal review which involved the
completion of a questionnaire for the Board
and each of its Committees. The outputs
from the questionnaires were consolidated
into a Board paper for discussion. The
quantitative results for the Board were an
average score of 4.1 against a maximum
of 5. The average score in FY 2022 was
4.0. The scale used for the Committees
was changed for FY 2023 and whilst not
directly comparable the quantitative scores
were broadly similar to those in FY 2022.
The review of the Chairman was conducted
by the Senior Independent Director who
held meetings with the Non‑Executive and
Executive Directors and provided feedback to
the Chairman.
The Board reviewed and discussed the
results, noting progress made in the areas
of focus from the evaluation conducted in
March 2022 and agreeing the new areas
of focus for the coming year. The progress
and new areas of focus are set out in tabular
form below.
Compliance with the Corporate
Governance Code
L
Annual evaluation process
21
Formal and rigorous annual
evaluation
The Board and its Committees
conduct an annual evaluation process
that addresses a broad range of topics
including the Board composition and
effective working practices.
The Company secretary was asked
to lead the review. The explanation for
this deviation from the Code provision
is set out in the section above dealing
with the Board Evaluation.
22
Act on results of evaluation
The Board agreed actions following the
2022 evaluation and acted upon the
findings and has reported against them
this year. The actions from the 2023
review are also set out in the report and
the Board intends to report on progress
in the Annual Report next year.
Introduction
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Financial statements
FirstGroup Annual Report and Accounts 2023
95
David Martin
Chair, Nomination Committee
Main responsibilities
The primary role of the Nomination
Committee is to ensure that the Board has
the appropriate skills, knowledge, experience
and diversity to operate effectively
and deliver strategy. The Committee is
responsible for identifying the skills required
and leading the Director appointment
process and considering succession
planning for Directors and other Senior
Executives.
The terms of reference are available on the
Group’s website.
Committee members:
David Martin (Chair)
Sally Cabrini
Myrtle Dawes
Ant Green
Claire Hawkings
Jane Lodge
Peter Lynas
Warwick Brady (until 27 July 2022)
Dear Shareholder,
The Nomination Committee had a quieter
year given the number of changes
completed in the previous financial year and
the progress that had been made regarding
the appointment of a new Chief Executive
Officer last year.
Following feedback from the Board
effectiveness review conducted around the
last year end we increased the membership
of the Nomination Committee to include all
the Non‑Executive Directors. This change
meant that we had broader range of
views for this year’s meetings which was
particularly beneficial as the focus of the
work was on talent and succession planning
for the Executive Directors, the Executive
Committee, and the levels below.
David Martin
Chairman
8 June 2023
Nomination Committee report
Compliance with the UK Corporate
Governance Code
17
Establish a nomination committee
The Board has established a
nomination committee and its
membership complies with the Code
requirements.
18
Annual re‑election of all directors
Following the year‑end and having
reviewed the output from the Board
effectiveness review it was agreed that
all Directors would stand for re‑election
at the Company’s AGM in July 2023.
19
Chairman’s tenure less than nine
years
The Chairman was appointed to the
Board in August 2019 and his tenure is
well within the limit set by the Code.
Governance report
FirstGroup Annual Report and Accounts 2023
96
Activities during the year
At the start of the year the Committee
completed the final part of the process
to recommend to the Board that Graham
Sutherland be appointed as CEO. The
Committee engaged Sam Allen Associates
Limited as executive search consultant for
this role.
The Non‑Executive Directors are relatively
new to their roles on the Board and the
Committee did not consider that any further
changes to the Board were required during
the year. The tenure of the current Directors
is shown in the table below.
In July, the Committee considered the
composition of the Board Committees with
the impending departures of Warwick Brady
and Julia Steyn and the Board approved
the Committee changes put forward by the
Nomination Committee. These changes
were to appoint all the Non‑Executive
Directors to the Nomination Committee
and to appoint Claire Hawkings to the
Remuneration Committee. These changes
were effective from 27 July 2022.
The Nomination Committee reviewed
a presentation from the executive team
in November looking at the policies and
processes applied throughout the Group
to talent and succession planning. The
Committee reviewed the succession plans
for senior roles in the Group functions,
the bus and rail divisions and the primary
operating companies in the two divisions.
The Committee reviewed the continuing
professional development plans for the
Directors and additional briefing sessions
were organised on TCFD and Internal control
frameworks.
The Executive Directors and the Divisional
Managing Directors attend meetings by
invitation of the Chairman and during
the year attended to present the talent
and succession plans for their areas of
responsibility. The Committee is supported
by the Company Secretary who has
attended all meetings during the year.
Policy on appointments to the Board
The Committee recognises the value that
individuals from diverse backgrounds
can bring to Board deliberations. The
Committee considers diversity in its
wider sense including gender, length
of tenure and nationalities. In line with
the Committee’s diversity policy when
considering the appointment of a new
Director the Committee adopts a formal,
rigorous and transparent procedure and
due regard is given to ensuring fairness
and diversity through the consideration of
skills, experience, competencies, sector
knowledge, independence and individual
characteristics. Prior to any appointment
the Committee evaluates the composition
of the Board and, in light of that evaluation,
prepares a full description of the role and
capabilities required. In identifying suitable
candidates, the Committee:
■
uses open advertising or the services of
external advisers to facilitate the search;
■
considers candidates on merit and against
objective criteria ensuring appointees
have sufficient time to fulfil their Board
and Committee responsibilities (giving
due consideration to the Company’s over
boarding policy described above); and
■
considers candidates from a wide range of
backgrounds.
Compliance with the UK Corporate
Governance Code
J
Appointments subject to a formal,
rigorous and transparent process.
An effective succession plan
should be maintained for the Board
and senior management
During the year as set out above the
committee undertook a review of
succession plans for the senior roles in
the organisation.
K
Board and committees have
combination of skills experience
and knowledge
The Board effectiveness reviews
confirmed that the Board and
Committees felt they had an
appropriate combination of skills,
experience and knowledge to discharge
their functions.
20
Open advertising/search
consultancy for NED roles
An external search consultancy was
used for the NED appointments made
during 2022 and as reported last year
used ISP to lead the searches. The
Nomination Committee anticipates that
this approach would be adopted for
future appointments.
L, 21 and 22 see page 95
23
Work of the Nomination Committee
The work of the Nomination Committee
is set out in this report
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
97
Nomination Committee report
continued
Over‑boarding policy
The policy adopted in 2022 and has
been applied when reviewing additional
external appointments and will be applied
to appointments to the Board. Under the
policy Directors may hold five mandates on
publicly listed companies. For the purposes
of calculating this limit:
■
a non‑executive directorship counts as one
mandate;
■
a non‑executive chair counts as two
mandates; and
■
a position as executive director (or a
comparable role) is counted as three
mandates.
The Company will consider the nature
and scope of the various appointments
and the companies concerned, and if any
exceptional circumstances exist.
The table below shows tenure and total
mandates held by the current Directors
including their appointment to the
FirstGroup Board.
Position
Members
Appointment
date
End of current
3‑year term
Mandates
held
1
Chairman
David Martin
15 August 2019
August 2025
2
Non‑Executive
Directors
Sally Cabrini
24 January 2020
January 2026
1
Myrtle Dawes
1 April 2022
April 2025
4
Claire Hawkings
1 January 2022
January 2025
3
Jane Lodge
30 June 2021
June 2024
4
Peter Lynas
30 June 2021
June 2024
2
Employee Director
Ant Green
15 September 2020
September 2023
1
Executive Directors
Graham Sutherland
16 May 2022
n/a
3
Ryan Mangold
31 May 2019
n/a
3
1
A non‑executive directorship on a listed company counts as one mandate; a chairman of a listed company
counts as two mandates and a position as an executive director counts as three mandates
Compliance with the UK Corporate
Governance Code
15
Time demands considered on new
appointments
The over‑boarding policy provides
guidance which means these issues
can be considered consistently and
objectively. The table on this page
demonstrates that all Directors are in
compliance with the policy.
Governance report
FirstGroup Annual Report and Accounts 2023
98
Audit Committee report
Jane Lodge
Chair, Audit Committee
Main responsibilities
The primary role of the Audit Committee
is to review and monitor the integrity of
the financial reporting by the Company,
to review the Group’s internal control and
risk management systems, to oversee the
Group’s Internal Audit function, to oversee
the relationship with the external auditor and
to report to shareholders on its activities.
The terms of reference are available on the
Group’s website.
Committee members:
Jane Lodge (Chair)
Claire Hawkings
Peter Lynas
Warwick Brady (until 27 July 2022)
Julia Steyn (until 27 July 2022)
Dear Shareholder,
I am delighted to introduce the report from
the Audit Committee for the 52 weeks ended
25 March 2023.
The report provides an overview of the
activities undertaken by the Committee
during the year and explains the significant
issues and judgments that the Committee
considered during the year and, in particular,
when approving this Annual Report.
The Audit Committee has a key governance
role and, on behalf of the Board and
shareholders, reviews important matters
relating to financial reporting, internal
controls, risk management and compliance
with regulations and legislation.
This report provides an overview of the
Committee’s principal activities and areas
of focus during the year together with the
priorities for the year ahead. As part of the
half‑year reporting process the Committee
carefully considered, amongst other things,
the valuation of the First Transit earn out,
assumptions around the valuation of the
pension schemes and distributable reserves.
The primary issues considered at the
year‑end are set out in a table on page 101.
The work on internal controls to improve
risk and financial management across the
Group that was a priority for this year has
progressed well. The work is ongoing as the
new governance regulations are yet to be
published. We will continue to work on this in
the coming year.
Jane Lodge
Chair, Audit Committee
8 June 2023
Compliance with the Corporate
Governance Code
24
Establish an Audit Committee
The Board has established an Audit
Committee, currently it has three
members, all of whom are independent
directors, two (Jane Lodge and Peter
Lynas) have recent and relevant
financial experience and the requisite
competence in accounting to meet the
Code requirements. The Committee
has sufficient sector‑relevant
competence to discharge its duties.
25
Committee’s role
The Committee’s role is summarised
in the report that follows. The terms
of reference are on the Company’s
website. The Committee is comfortable
that its role meets the Code
requirements.
26
Annual Report to describe work of
committee
This Report discharges this Code
Provision.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
99
Summary of Committee activities
throughout the year
The Committee has an extensive agenda
of items of business focusing on financial
reporting, internal control, risk management,
internal and external audit, in addition to
certain standing matters that the Committee
considers at each meeting as well as any
specific topical items that arise during the
course of the year.
During the year, the Committee fully
discharged its responsibilities under the
terms of reference and these broadly fall
under three areas:
Accounting, tax and financial reporting
■
reviewed and approved the half year and
annual results considering the significant
accounting policies, principal estimates
and accounting judgments used in their
preparation, the transparency and clarity of
disclosures and compliance with financial
reporting standards
■
reviewed the basis for preparing the half and
full year accounts on a going concern basis
with input from the external auditors
■
considered and approved management’s
assessment of the Group’s prospects and
longer‑term viability contained within the
Annual Report
■
received reports from management and the
external auditors on accounting, financial
reporting regulation and tax issues
■
reviewed and assessed whether the Annual
Report taken as a whole was fair, balanced
and understandable
■
reviewed the Non‑Audit Services Policy, Tax
Strategy, Treasury Policy and the application
of the Adjusted Items Policy
■
reviewed the assumptions such as future
growth rates, cash flows and discount rate
used in the impairment models and the
output from the impairment review
■
reviewed the non‑GAAP measures in the
Company’s reporting
■
reviewed the accounting treatment of the
disposal proceeds from the North American
property sale
■
reviewed assumptions of the fair value
calculation for the First Transit earnout
■
reviewed the assumptions used to calculate
the pension liabilities
Composition and Committee
attendance
The membership of the Committee is shown
on page 99 and attendance is set out on
page 86. Jane Lodge and Peter Lynas have
recent and relevant financial experience and
the requisite competence in accounting.
Claire Hawkings, the other member of
the Committee, has the necessary skills
and financial literacy to discharge her
responsibilities.
The Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer,
the Company Secretary, the Director of
Finance, the Head of Internal Audit, the
Group Head of Financial Reporting and
the External Audit partner routinely attend
meetings of the Committee. In addition,
others are invited to attend all or parts
of meetings as required to provide the
Committee with additional insight on relevant
matters. Other members of the Board have
an open invitation to attend Committee
meetings and they did so on a number of
occasions during the year under review. The
Committee holds private sessions without
management present and regularly meets
with the Internal and External Auditors (again
without management present).
Internal control, risk management and
internal audit
■
reviewed the structure and effectiveness of
the Group’s system of risk management and
the related disclosures in the Annual Report
and financial statements
■
reviewed the Group’s risk management
activities undertaken by the divisions and
at Group level in order to identify, measure
and assess the Group’s principal and
emerging risks and review the risk appetite
statement, developed by management, for
recommendation to the Board
■
approved the annual internal audit plan and
reviewed reports from the internal audit
team relating to control matters, monitored
progress against the plan and any deviations
were agreed
■
monitored the Group’s insurance
arrangements, insured and uninsured claims
and material litigation
■
reviewed plans and progress to enhance
the internal control environment ahead of
expected regulatory and legislative changes
External audit
■
considered and approved the scope, audit
plan, terms of engagement and fees for
the external audit work to be undertaken in
respect of FY 2023
■
received reports from the external auditor on
their findings during the half‑year review and
the full‑year audit
■
considered the objectivity and
independence of the external auditor and
the effectiveness of the external audit
process, taking into account their policies
to maintain independence, non‑audit work
undertaken by the auditor and compliance
with the Company’s Policy on the provision
of non‑audit services and applicable
regulations
■
considered and approved the letters of
representation to the external auditors
■
considered and recommended to the Board
the reappointment of the external auditor at
the AGM
Audit Committee report
continued
Governance report
FirstGroup Annual Report and Accounts 2023
100
Key accounting judgments reviewed during the year/Significant issues
The matters the Committee considers to be significant for the FY 2023 Annual Report and Financial Statements are as follows:
Significant issues and judgments
How the Audit Committee addressed these issues
Pension assumptions and funding
The Group participates in a number of defined benefit pension
schemes. Management exercises significant judgement when
determining the assumptions used to value the pension liabilities
as these are particularly sensitive to changes in the underlying
assumptions. Scheme valuations were conducted during the year
and changes were made to the assumptions which were considered
to be in acceptable ranges.
Management engaged with external experts and the Committee
considered and challenged the assumptions used for estimating the
liabilities. Sensitivity analysis was performed on the key assumptions:
inflation, discount rate and mortality. The overall liabilities were
assessed for reasonableness. Further detail on pensions is provided
in note 37 in the consolidated financial statements.
Recovery of investments in subsidiaries
(parent company only)
Investments held by the parent company in subsidiary undertakings
were tested for recoverability. Management assessed discounted
cash flows in the Bus division based on the final Three‑Year Plan
to March 2026 adjusted for debt and debt like items. The financial
impact of climate change risks was a key consideration. The
investments were considered to be recoverable.
The Committee received reports from the management team and
the external auditors on the recoverability of the parent company’s
investments in subsidiaries and concluded that the assessments
were reasonable.
Going concern and viability
The Group regularly prepares an assessment detailing available
resources to support the going concern assumption and the
long‑term viability statements. Management concluded that the
financial statements should be prepared on a going concern basis
and there were no material uncertainties which require disclosure.
We continue to provide essential services to our customers
and the communities we serve and anticipate doing so for the
foreseeable future.
The Committee reviewed and challenged management’s funding
forecasts and sensitivity analysis and the impact of various possible
downside scenarios, which took into account the pace of improving
operating margins in the Bus division, changes to the contract
portfolio and the level of performance fees in the Rail Division, and
ESG related risks including climate change. Following the review,
which the Committee carried out at its meeting in June 2023, the
Committee recommended to the Board the adoption of both the
going concern and viability assessment, and the related statements
for inclusion in this report.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
101
Internal control
framework/assurance
The Board is responsible for establishing
a framework of prudent and effective
controls, which enable risk to be assessed
and managed. Periodic review and ongoing
monitoring of risk management and
internal control frameworks are essential
components of any sound system of risk
management and internal control.
The Committee monitors the Company’s
risk management and internal control
systems and, in addition to periodic reviews
by the Committee the Board undertakes an
annual in‑depth review of the effectiveness
of internal controls including the operation
of financial, operational and compliance
controls.
The Committee also guides the Board on
the nature and extent of the principal and
emerging risks the Company may be willing
to take in order to achieve its long‑term
strategic objectives. The output from this
system is the Company’s risk appetite policy,
which is subsequently reviewed by the
Board.
The process the Committee applied in
reviewing the effectiveness of the system of
risk management and internal control is set
out below, together with a summary of the
actions that have been or are being taken to
improve the overall control environment.
Internal controls
The Committee receives regular updates
on the Group’s system of internal control
including progress made to the overall
programme and conclusions on the design
and effectiveness of key controls, mitigating
financial, operational and compliance
risk. Management intends to continue to
improve the standardisation, documentation
and testing of internal controls to give the
Committee greater comfort around the
effectiveness of the control environment.
Overall, the Committee is satisfied that the
Group’s internal control framework was
operating effectively as at the year end.
The Group has initiated a project in
anticipation of the UK Government’s
corporate reform changes. Management
with support of external advisors have
completed assessments of financial
statement risks, fraud risk and non‑financial
reporting readiness. Key business processes
and IT controls have been documented and
control improvements are in the process of
being identified with gaps to be remediated
during the forthcoming financial year.
A target operating model has been designed
with an independent ‘second line of defence’
team to begin testing controls towards the
end of the 31 March 2024 financial year.
The Committee will continue to oversee the
improvement programme that has been
put in place to enhance the internal control
framework.
Risk management
The Board, through the Committee, is
responsible for determining the nature and
extent of any significant risks the Group
is willing to take in order to achieve its
strategic objectives and for maintaining
sound risk management and internal
control systems. The Committee oversees
a Group‑wide system of risk management
and internal control that identifies and
enables management and the Board to
evaluate and manage the Group’s principal
and emerging risks. The system is bespoke
to the Company’s particular needs and the
risks to which it is exposed and is designed
to manage, rather than eliminate, risk. Owing
to the limitations inherent in any system of
internal control, this system provides robust,
but not absolute, assurance against material
misstatement or loss.
The Committee assessed the Group’s risk
management methodology, which is used
to identify and manage the principal and
emerging risks, as well as the reporting
and categorisation of Group risks, and
made recommendations for improvement.
Changes were implemented with the
Committee’s oversight. See the Risk
management section of the Strategic report
starting on page 67 for further information on
the Group’s risk management system.
The Committee also reviewed the process
for assessing the principal and emerging
risks that could threaten the Company’s
business model, future performance,
solvency or liquidity in order to make the
long‑term viability statement on page 76 and
considered the appropriate period for which
the Company was viable.
The Company’s policies on financial risk
management, including the Company’s
exposure to liquidity risk, credit risk and
certain market‑based risks including foreign
exchange rates, interest rates and fuel and
electricity prices, can be found in note 25 to
the consolidated financial statements.
Audit Committee report
continued
Compliance with the Corporate
Governance Code
M See page 104
N
Fair balanced and understandable
assessment of prospects
27
The report is fair balanced and
understandable
The Committee, on behalf of the Board,
reviews the report to confirm that
they believe it to be fair, balanced and
understandable. In addition to their
own knowledge and assessment, the
Committee takes comfort from the
reviews conducted by the Executive
Committee particularly in respect of
fairness and balance. The external
reviews as part of the preparation and
sign off process give comfort in respect
of understandability.
The Board reviewed the Annual
Report and each Director confirmed
to the best of his or her knowledge
that the Annual Report and Accounts,
taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s and the
Group’s position and performance,
business model and strategy.
O
Procedures to oversee internal
control framework and
identification of principal risks
The procedures are described in the
columns to the left.
28
Assessment of emerging and
principal risks
The emerging and principal risks are
disclosed in the Risk management
section of the Strategic Report starting
on page 67 and the assessment
process is also set out in detail in
that part of the annual report. The
Audit Committee reviews the detailed
outputs from the work completed by
the executive team.
29
Monitor risk management and
internal control
The monitoring of risks and a
description of the internal control is
system is set out in the strategic report
and also within the report from the
Audit Committee.
Governance report
FirstGroup Annual Report and Accounts 2023
102
Key elements of the Group’s risk
management framework that operated
throughout the year are:
■
divisions identifying and reviewing their
principal and emerging risks and controls for
monitoring and managing risks, which are
reviewed by senior executive management
supported by the Internal Audit function. The
updated divisional and Group risk profiles,
which are reviewed by the Chief Executive
Officer and Chief Financial Officer, are
presented to the Executive Committee on a
regular basis
■
an agreed methodology for ranking the level
of risk in each of its business operations and
the principal and emerging risks
■
implementation of appropriate strategies
to mitigate principal and emerging risks,
including careful internal monitoring and
ensuring external specialists are consulted
where necessary
■
a centrally coordinated internal audit
programme to verify that policies and
internal control procedures are being
correctly implemented and to identify any
risks at an early stage
■
reviewing and monitoring the confidential
reporting system to allow employees to raise
concerns about possible legal, regulatory,
financial reporting or any other improprieties
■
a remuneration policy for executives
that motivates them, without delivering
excessive benefits or encouraging excessive
risk‑taking.
Twice a year the Board is presented with an
update for its assessment of the principal
and emerging risks facing the Group,
together with a risk map, highlighting any
changes made since the previous update
and the reasons for any changes. Each
Committee that reports regularly to the
Board provides an update on the status of
risks considered within its remit.
Financial and business reporting
The Board recognises its responsibility to
present a fair, balanced and understandable
assessment of the Group’s position and
prospects in its reporting to shareholders.
This responsibility encompasses all
published information including, but not
limited to the half‑yearly and full year financial
statements, regulatory news announcements
and other publicly disclosed information.
The quality of the Company’s reporting is
ensured by having procedures in place for
the review of information by management.
There are also strict procedures to determine
who has authority to release information. A
statement of the Directors’ responsibilities
for preparing the financial statements can be
found on page 138.
The Group adopts a financial reporting
and information system that complies with
generally accepted accounting practice. The
Group Finance Manual details the Group’s
accounting policies and procedures with
which subsidiaries must comply. Budgets
are prepared by subsidiary company
management which are then consolidated
into divisional budgets. These are subject
to review by both senior management and
the Executive Directors followed by formal
approval by the Board. Regular forecast
updates are completed during the year and
compared against actions required. Each
subsidiary unit prepares a monthly report of
operating performance with a commentary
on variances against budget and the
prior year, which is reviewed by senior
management. Similar reports are prepared
at a Group level. Key performance indicators,
both financial and operational, are monitored
on a weekly basis. In addition, business
units participate in strategic reviews, which
include consideration of long‑term financial
projections and the evaluation of business
alternatives.
Reviews of internal controls within operating
units by internal audit have sometimes
highlighted control weaknesses, which are
discussed with management and, where
appropriate, the Committee, and remedial
action plans are agreed. Action plans are
monitored by internal audit and, in some
cases, follow up visits to the operating entity
are conducted until such time as the controls
that have been put in place are working
effectively. No material losses, contingencies
or uncertainties that would require disclosure
in the Annual Report and Accounts have
been identified during the year by this
process.
Compliance with the Corporate
Governance Code
30
Going concern basis of accounting
The going concern basis of accounting
statement complies with the Code
provision and is set out on page 77.
31
Assessment of the current position
and principal risks/Viability
Statement
The principal risks are set out in the
Strategic report on pages 67‑75
together with a description of the
processes in place.
The Viability Statement complies with
the Code provision and is set out on
page 76.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
103
The Committee, in conjunction with executive
management, regularly reviews and develops
the internal control environment to make
continual improvements. No significant
internal control failings were identified during
the year. Where any gaps were identified,
processes were put in place to address
them and these are monitored. In addition,
as stated above, management intends to
continue to improve the standardisation,
documentation and testing of internal
controls to give the Committee greater
comfort around the effectiveness of the
control environment.
The process is designed to provide
assurance by way of cumulative assessment.
It is a risk‑based approach.
Internal audit
The internal audit function advises
management on the extent to which systems
of internal control are adequate and effective
to manage business risk, safeguard the
Group’s resources, and ensure compliance
with the Group’s policies and legal and
regulatory requirements. It provides objective
assurance on risk and controls to senior
management, the Committee and the
Board. Internal audit’s work is focused on
the Group’s principal and emerging risks.
The mandate and programme of work of
the internal audit function is considered and
approved by the Committee annually and
includes a number of internal audits and
health checks across the Group’s divisions.
Findings are reported to relevant operational
management and to the Committee. The
internal audit function follows up on the
implementation of recommendations and
reports on progress to senior management
and to the Committee at each meeting.
The internal audit function is primarily
outsourced. The Head of Internal Audit
reports functionally to the Chair of the
Committee and administratively to the CFO.
The effectiveness of the internal audit
function’s work is continually monitored using
a variety of inputs including the ongoing audit
reports received, the Committee’s interaction
with the function’s head, an annual review
of the function’s internal quality assurance
report, a quarterly summary dashboard
providing a snapshot of the progress
against the internal audit plan tabled at each
Committee meeting as well as any other
ad‑hoc quality reporting requested.
Taking all these elements into account,
the Committee concluded that the internal
audit function was an effective provider of
assurance over the Company’s risks and
controls and appropriate resources were
available as required.
External audit
External auditor independence
and objectivity
PwC were appointed the Company’s
external auditor following a competitive
tender process in 2020 and they undertook
the FY 2021 audit. Matthew Mullins is the
Senior Statutory Auditor.
The independence of the external
auditor is essential to the provision of an
objective opinion on the true and fair view
presented in the financial statements.
PwC’s independence and objectivity
are safeguarded by a number of control
measures including:
■
limiting the nature of non‑audit services
performed by the external auditor
■
the external auditor’s own internal processes
to vet and approve any requests for any
non‑audit work to be performed by the
external auditor
■
monitoring changes in legislation related
to auditor independence and objectivity to
assist the Company to remain compliant
■
the rotation of the lead audit partner after
five years
■
independent reporting lines from the
external auditor to the Committee and
ensuring the external auditor is afforded the
opportunity for in camera sessions with the
Committee
■
placing restrictions on the employment
by the Group of certain employees of the
external auditor
■
providing a confidential helpline that
employees can use to report any concerns,
including those relating to the relationship
between Group employees and the external
auditor
■
an annual review by the Committee of the
policy in place to ensure the objectivity
and independence of the external auditor
is maintained.
Assessing the effectiveness of the
external audit process
The Committee, other Board members,
senior management in both the corporate
functions and within the operations and
the internal audit team evaluated PwC’s
performance and the effectiveness of the
external audit process during FY 2023.
The Committee also considered the
independence and objectivity of PwC.
The following factors were considered:
■
the quality of the interactions between the
audit team and the Committee, other Board
members, management and those involved
in the preparation of the accounts
■
whether the scope of the audit and the
planning process were appropriate for the
delivery of an effective audit
■
the external auditor’s progress achieved
against the agreed audit plan and
communication of any changes to the plan,
including changes in perceived audit risks
■
the competence with which the external
auditor handled the key accounting and
audit judgments and communication of the
same with management and the Committee
■
the external auditor’s compliance with
relevant regulatory, ethical and professional
guidance on the rotation of partners
■
the expertise and resources of the external
audit team conducting the audit
■
whether the statutory audit contributed
to the integrity of the Group’s financial
reporting.
Taking into account the above factors and
feedback from management, members
of the Committee and the Board, the
Committee concluded that the external
audit process and services provided by
PwC were satisfactory. The feedback will be
shared with PwC and any opportunities for
improvement will be considered and agreed.
Compliance with the Corporate
Governance Code
M
Formal transparent policies to
ensure independence of audit
The auditors policies and the
Company’s Non‑Audit Services
Policy that are regularly reviewed
by the Committee helps ensure the
independence of the Auditor.
Audit Committee report
continued
Governance report
FirstGroup Annual Report and Accounts 2023
104
Policy on the provision of
non‑audit services
The Committee’s policy on the use of the
external auditor for non‑audit services
includes the identification of non‑audit
services that may be provided and those
that are prohibited. The policy requires that
the external auditor will only be used for
non‑audit services where regulation permits,
the Group benefits in a cost‑effective
manner and the external auditor maintains
the necessary degree of independence and
objectivity. The policy provides for a cap
on fees for non‑audit work of 70% of the
average of fees paid to the audit firm over the
previous three years for audit services.
The Committee receives regular reports
on all non‑audit assignments awarded to
the external auditor and a breakdown of
non‑audit fees incurred. The Committee is
satisfied that the Company was compliant
during the year with both the Code and the
FRC’s Ethical Standard in respect of the
scope and maximum permitted level of fees
incurred for non‑audit services provided by
PwC. Details of amounts paid to the external
auditor for audit and non‑audit services
for the 52 weeks ended 25 March 2023
are set out in note 6 to the consolidated
financial statements.
Tax strategy
We believe we have a responsibility to
manage our tax affairs in a way that
sustainably benefits the customers and
communities we serve. We also have a
responsibility to shareholders to ensure
we pay the right amount of tax and ensure
compliance with the tax rules in each country
in which we operate. Further information on
our tax strategy, which was reviewed by the
Committee and subsequently approved by
the Board in September 2022, is available
on our website. The tax strategy is reviewed
annually by the Committee.
Compliance with the Competition
and Markets Authority Order
Pursuant to Article 7.1 of The Statutory
Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014, the Company
confirms that it has complied with the
provisions during FY 2023, including Part 5
in relation to the role of the Committee.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
105
Responsible Business Committee report
Claire Hawkings
Chair, Responsible Business Committee
Main responsibilities
The Committee has taken on the
responsibilities of the Board Safety
Committee that ceased to exist from
April 2022 and in addition to Safety the
Committee has oversight of the People
Strategy, Environmental Impact of the
Group’s activities, Sustainability and
Community engagement.
The terms of reference are available on the
Group’s website.
Membership
Claire Hawkings (Chair)
Sally Cabrini
Myrtle Dawes
Ant Green
Peter Lynas
Dear Shareholder,
Sustainability is at the heart of our strategy
as presented in our Mobility Beyond Today
Strategy, and our Responsible Business
Committee supports and overseas the
ambition and drive to deliver this strategy.
The Committee was formed in early
2022, with our first meeting in May.
The Committee’s remit is broad, with
specific focus on safety, climate impact
and environment, social issues (people,
communities and our broader stakeholder
group) as well as governance and
disclosures.
The Committee ensures our Responsible
Business activities are supported by
robust plans and performance metrics.
Performance reports are shared with the
Committee at each meeting and have
provided an essential mechanism for
understanding progress and taking action.
This Report focuses on the governance of
the Responsible Business Committee and
the key governance matters are set out in the
paragraphs below.
I look forward to working with the Executive
Team in the coming year as we continue not
implement our ambitious strategy.
Claire Hawkings
Chair, Responsible Business Committee
8 June 2023
Membership and attendance
The Committee membership is set out in
the column to the left and the attendance
records are shown on page 86.
The Company Secretary attended all
meetings during the year and at the invitation
of the committee Chair the Chairman,
the Chief Executive Officer, the Group
HR Director, the Director of Corporate
Responsibility, the Divisional Heads, the
Group Legal Director, the Head of Internal
Audit attended relevant sections of meetings
to support the work of the Committee with
inputs on their areas of responsibility or
expertise.
Meetings during the year
The Responsible Business Committee met
on four occasions and in each meeting
received a report from the Chief Executive
on Safety matters. Senior representatives
from the rail and bus divisions attended each
presented progress in four areas: Safety,
People, Environment and Community.
There has been a focus on safety
performance across the Group with
positive trends in the key indicators and
the Committee oversees the executive’s
relentless focus on safety. The Committee
received reports on significant safety matters
and reviewed the root cause investigations in
respect of significant incidents that occurred
during the year.
In addition, when the Committee met in
May they reviewed the ESG and Safety
disclosures in the Annual Report for 2022.
In May, the Committee received a report
on the approach to the Group’s Science
Based Targets and TCFD reporting. The
Committee also reviewed the Group’s Social
Value Report that had been prepared by
the Centre for Economics and Business
Research and discussed the approach to
charitable giving and nominating charities.
In September, the Committee received an
update on the Science Based Targets and
the Group’s ethnic and gender pay gap
reporting. The Committee also reviewed the
external recognition from external bodies and
areas in which to focus effort to improve any
such ratings.
In January 2023, the Committee met in
Glasgow and had the opportunity to tour
two bus depots including the charging
infrastructure for electric buses at the
Caledonia depot. The formal meeting
covered a further update on science‑based
targets and TCFD reporting. The Committee
also reviewed ED&I targets.
In March 2023, the Committee reviewed
and approved Safety targets for FY 2024
and received a report on procurement and
supplier engagement. The Committee also
supported the Board training on TCFD
Reporting.
Throughout the year the Committee has
worked with the Remuneration Committee to
oversee the development and performance
against key performance measures that
form part of the variable remuneration of the
executive team.
FY 2024
At the meeting in June 2023 the Committee
reviewed the Responsible Business
disclosures and the TCFD reporting.
During FY 2024, the Committee will
be continue to provide oversight on
safety, people strategy, environmental
impact of the Group’s activities and our
community engagement.
Governance report
FirstGroup Annual Report and Accounts 2023
106
Remuneration Committee report
Sally Cabrini
Chair, Remuneration Committee
Main responsibilities
The Remuneration Committee is primarily
responsible for determining the policy for
Executive Director remuneration and setting
the remuneration for the Chairman, the
Executive Directors and senior management.
The Committee also reviews wider workforce
remuneration and related policies and the
alignment of incentives and rewards with
culture, taking these into account when
setting the policy for Executive Director
remuneration.
The terms of reference are available on the
Group’s website.
Membership
Sally Cabrini (Chair)
Claire Hawkings
Jane Lodge
Peter Lynas
Julia Steyn (until 27 July 2022)
Dear Shareholder,
I am pleased to present the Directors’
Remuneration Report for the financial year
ended 25 March 2023.
The Remuneration Report covers the
required regulatory information and provides
further context and insight into our pay
arrangements for Directors and other Group
employees. We set out our key decisions
since last year, the assessment of FY 2023
performance and determination of pay, and
our approach to ensuring executive pay
outcomes are fair in the context of wider
employee pay.
FY 2023 was a year of strong financial
performance for the Group, particularly
driven by growth in First Bus and First Rail
open access operations. Despite challenging
economic pressures and continuing
industrial relation challenges Group adjusted
attributable profit more than doubled to
£82.1m (FY 2022: £36.2m).
Passenger volumes in First Bus increased
20% compared to last year’s levels, which
resulted in total passenger revenue of
£660.0m (FY 2022: £570.0m). Our strong
cash position has also allowed us to
accelerate our investment in decarbonisation
of our First Bus fleet.
In First Rail, open access operations
performance was ahead of expectations
largely as a result of leisure travel returning
strongly post‑pandemic. In its first year of
operations more than a million customers
used Lumo to travel between London and
Edinburgh. We are also pleased that the
WCP, GWR and SWR rail contracts have
been extended to October 2023, June 2025
and May 2025, respectively.
We have made significant overall financial
progress and we now have a strong balance
sheet. Our strong balance sheet puts us in
a good position to grow and create value
for our shareholders. This is underpinned
by supportive governments, social policies
and investment.
Principles
The principles that underpin the Committee’s
approach to executive remuneration are set
out in the ‘Directors’ Remuneration Policy’
that can be found on the FirstGroup plc
website. The Committee considered the
provisions of the UK Corporate Governance
code, and has sought to reflect the principles
of clarity, simplicity, risk management,
predictability, proportionality, and alignment
to culture in deciding FY 2023 pay outcomes
and developing FY 2024 policy.
Overview of financial performance,
operating achievements, and
strategic progress.
FY 2023 has been a year of strong financial
performance.
■
Group adjusted attributable profit more than
doubled to £82.1m (FY 2022: £36.2m)
■
FY 2023 final dividend of 2.9p
recommended in line with the progressive
dividend policy
■
Completed the sale of all but two remaining
Greyhound US properties for net proceeds
of £122m
■
Launched share buyback programme to
purchase up to £75m of ordinary shares.
Proposed an additional share buyback
programme of £115m, subject to approval
at the AGM
■
Our strong balance sheet puts us in a good
position to grow and create value for our
shareholders
■
Revenue and profits from Open Access rail
businesses exceeded expectations
The transformed Group has delivered strong
financial performance, with operating profit
and cash generation exceeding the outlook
for the year. As a Committee we believe
it is imperative to strike the right balance
between incentivising the management
team, rewarding strong performance and
being equitable in the broader context,
taking into account the experience of our
wider stakeholders, including our employees
and shareholders.
Industry‑wide industrial relations action had
a significant impact on our rail businesses
in FY 2023, particularly at Avanti and TPE.
The Board received regular updates on the
management teams’ plans to address the
issues they faced and progress against their
agreed plans to restore services to the levels
that our passengers rightly expect. The
Committee noted that performance at Avanti
at the year‑end was much improved and
is on a positive trajectory with the number
of services increasing by more than 40%
compared to last summer.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
107
The formulaic EABP award for the Executive
Directors resulted in awards of 94% of
maximum for Graham Sutherland and Ryan
Mangold. The Committee reviewed the
overall outcome in the context of the Group’s
underlying performance and were satisfied
with this level of payout.
Full details of targets and performance
achieved are set out on pages 119‑122.
2020 LTIP:
As disclosed previously, the
Committee delayed the grant and target
setting of the 2020 LTIP to allow adequate
time to better understand the impact of
Covid‑19 on our business and the wider
economy. This meant that the share price
at grant was c.44% higher than the share
price after the initial post‑COVID decline in
March 2020. The vesting of the LTIP granted
in 2020 was subject to two performance
measures:
■
80% relative Total Shareholder Return (TSR)
vs comparator group
■
20% relative TSR vs FTSE 250
See pages 122‑123 for further details).
Performance against the 2020 measures is
as follows:
■
relative TSR vs comparator group
performance was at the 78th percentile
versus the peer group, resulting in 100%
vesting under this element (80% of the
overall award)
■
relative TSR vs FTSE 250 performance
was at the 72nd percentile versus the peer
group, resulting in 90.9% vesting under this
element (18.2% of the overall award)
The formulaic vesting of the 2020 LTIP
award was 98.2%. The Committee
carefully reviewed the overall formulaic
vesting outcome in the context of the
Group’s underlying financial performance,
share price performance on both an
absolute and relative basis, and wider
decisions on remuneration over the
period. The Committee was also mindful
of our commitment to take into account
the potential for ‘windfall gains’ when
determining the final vesting outcome.
The decline in TPE’s service levels was due
to circumstances largely out of our control,
mainly the challenging industrial relations
environment including the withdrawal of
longstanding industry standard overtime
arrangements when TPE was undertaking
unprecedented driver training requirements
due to infrastructure upgrades. Our
management team worked extremely hard to
improve services and to successfully recruit
and train more drivers than ever before. We
worked closely with the DfT and Transport
for the North on an agreed recovery
plan, which led to a c.40% reduction in
cancellations in May 2023. Nevertheless,
subsequent to the year‑end, we were
disappointed to learn of the DfT’s recent
decision to not extend our NRC for TPE in
May 2023.
Due to the impact on service levels during
FY 2023, no payments under the annual
bonus scheme were made to any participant
for operational performance in TPE. The
impact of the DfT decision to not extend the
TPE NRC (which occurred after the FY 2023
year‑end) will be factored into the FY 2024
EABP for the Executive Directors. The
financial targets for the FY 2024 EABP had
already been set prior to the DfT’s decision,
and these included a full year earnings
and cashflow contribution from TPE. The
Committee has decided not to revisit these
targets and as such, the management
team will have to recover these earnings
elsewhere, making them harder to achieve.
FY 2023 EABP:
The FY 2023 EABP was
based 70% on financial metrics (60% EBIT,
10% cash flow) and 30% on non‑financial
metrics (individual performance).
The Committee carefully considered
performance against each of the financial
and non‑financial targets and then a broader
consideration of overall performance.
Achievement of EBIT and cash flow both
exceeded maximum. In respect of individual
performance, the Committee awarded both
Graham Sutherland and Ryan Mangold 80%
of maximum.
After careful consideration, the Committee
decided that although the formulaic
vesting outcome represented genuine
outperformance against both peer groups,
was underpinned by strong underlying
financial performance and resulted directly
from the positive actions of the management
team over the three year performance
period, a downwards adjustment of 10%
would be appropriate to reflect the potential
for windfall gains. When determining this,
the Committee took into account a number
of reference points when determining
what the appropriate level of adjustment
should be. These included the share price
used to determine previous awards, share
price performance before and through the
pandemic as well as underlying financial
performance. It also recognised that
management actions have played a clear
and demonstrable role in the Company’s
share price performance. The Committee
decided to use its discretion and apply a
downward adjustment resulting in an overall
reduction of 10% of the award resulting in a
final vesting outcome of 88.4% of maximum,
which the Committee considered to be a
reasonable final vesting outcome, aligned
with the Company’s performance and
circumstances over the period.
Full details, including the factors the
Committee considered in making a windfall
gains adjustment are set out on page 122.
The shares will be held for an additional
two years to provide alignment with our
shareholders.
2022 LTIP:
The Committee determined
that the 2022 LTIP award made to the CEO,
CFO and other senior leaders would be
measured against EPS, Relative TSR and for
the second year, a Sustainability Scorecard
(comprising two environmental measures),
over a three‑year period.
Full details of targets are set out on pages
124‑125.
Remuneration Committee report
continued
Governance report
FirstGroup Annual Report and Accounts 2023
108
It is the Committee’s intention to make
awards under the LTIP this year and it is
anticipated that the approach regarding
metrics will be similar to the 2022 LTIP, which
is, 50% EPS, 35% Relative TSR and 15% on
a Sustainability Scorecard. The targets for
these awards are set out on page 128.
Remuneration fairness
As a Remuneration Committee we take our
responsibility to consider senior team pay in
the context of wider workforce pay, policies
and practices and a number of items are
tabled at Committee meetings every year to
ensure the approach throughout the Group
is fair, particularly during the current cost of
living crisis.
The ‘Remuneration in Context’ section of
the report on pages 115‑117 provides a
summary of the items and the factors that
the Committee considers when making
executive reward decisions as well as
support we have provided to our employees
during the current cost of living crisis.
What the Remuneration Committee
has looked at in the last 12 months
The Committee has:
■
approved FY 2023 EABP payout for
Executive Directors and other senior
employees
■
determined the vesting of the 2020 LTIP
■
reviewed and approved the FY 2022
Directors’ Remuneration Report
■
approved the 2022 LTIP awards
■
agreed FY 2024 EABP approach
■
reviewed the 2022 Gender and Ethnic Pay
Gap reporting ahead of publication
■
reviewed wider workforce remuneration and
related policies
■
reviewed its Terms of Reference
Directorate changes
As we disclosed previously, Graham
Sutherland was appointed as Chief Executive
Officer on 16 May 2022. Upon appointment,
Graham’s remuneration package was
agreed in line with our agreed Remuneration
Policy and commensurate with a Group now
focused on UK public transport operations:
■
base salary of £550,000
■
pension allowance of 5% of salary
■
maximum EABP opportunity of 150% of
salary
■
maximum LTIP opportunity of 200% of
salary
■
shareholding requirement of 200% of salary
David Martin resumed the role of
Non‑Executive Chairman on 1 July 2022.
For the period he was interim Executive
Chairman (13 September 2021 to 1 July
2022) he was paid an additional fee for
increased scope and responsibilities
associated with this role. Full details are
set out in the Non‑Executive Directors’ and
Chairman’s fees section on page 127.
Remuneration for FY 2024
The Committee carefully considered base
salary increases for the Executive Directors
holistically, taking into account FY 2024
base salary increases applied to the wider
workforce and investor guidance that base
salary increases for Executive Directors
should be lower than those provided to the
wider workforce. Therefore, the Committee
approved an increase of 3% for Graham
Sutherland and Ryan Mangold, effective 1
April 2023. The increase for the Executive
Directors is lower than the increases applied
to the wider workforce, which allowed us
to focus our salary increase budget on our
lower paid employees, who are most likely to
feel the effects of the cost of living crisis, see
page 115 for more information.
The Committee considers the
forward‑looking annual bonus targets to be
commercially sensitive but full disclosure
of targets and performance outcome will
be set out in next year’s Annual Report
on Remuneration setting out the bonus
outcome. At least half will be based on the
financial performance of the Group in line
with our Policy. The maximum award levels
will be in line with our shareholder‑approved
Policy and implementation over recent years.
Governance
The Committee actively monitors
developments in corporate governance and
the guidelines produced by shareholders
and their representative bodies.
Our Group Employee Director is encouraged
to attend all Committee meetings, and
regularly does so. I also periodically attend
meetings of the Employee Directors’
Forum to hear directly from our network
of Employee Directors. In these meetings I
explain how executive remuneration aligns
with wider workforce pay and also provides
an opportunity for Employee Directors the
opportunity to ask questions about last
year’s Directors’ Remuneration Report.
We have provided further details on our
approach to pay throughout the Group on
pages 115‑117.
In conclusion
We will continue to monitor governance
developments and are committed to
maintaining an open and transparent
dialogue with our shareholders on executive
remuneration. We consider ongoing
engagement to be vital in ensuring that
our approach to remuneration continues
to be aligned with the long‑term interests
of the Group’s shareholders and wider
stakeholders.
We welcome the feedback received during
the year and hope to receive your support at
our upcoming AGM.
Sally Cabrini
Chair, Remuneration Committee
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
109
Remuneration at a glance
FY 2023 EABP – Financial Metrics
2020 LTIP – Financial Metrics
Adjusted Operating
Profit (pre‑IFRS16)
Adjusted Cash
Generation
Relative TSR vs
Comparator Group
Relative TSR vs
FTSE 250
£119m
£160m
78th percentile
72nd percentile
This section summarises the pay that our Executive Directors received in respect of their FY 2023 performance, and the proposed rates for
FY 2024. Further details are set out on pages 118‑128.
FY 2023
Fixed pay and shareholding
Base Salary
£483,635
£461,300
Graham Sutherland
CEO
Since appointment
on 16 May 2022.
Annual base salary
upon appointment
was £550,000.
Ryan Mangold
CFO
2.5% increase on
1 April 2022.
Benefits
Medical and life
insurance
Car allowance, medical
and life insurance
Pension
The CEO and CFO receive a pension allowance of
5% and 15% of base salary, respectively.
Shareholding
200%
200%
CEO
CFO
Actual levels, % of base salary as at 25 March 2023
38.9%
172.5%
CEO
CFO
Malus and clawback apply to all incentive awards.
Executive Annual Bonus Plan
FY 2023 EABP
£681,926
£650,433
CEO
Pro‑rata award for time
served on the Board in
FY 2023.
CFO
FY 2022 EABP
n/a
£654,750
CEO
CFO
FY 2023 bonus targets outcome
94%
94%
CEO
CFO
Long‑Term Incentive Plan
2020 LTIP Outcome
n/a
£1,877,592
CEO
CFO
2019 LTIP Outcome
n/a
£732,599
CEO
CFO
2020 LTIP Vesting outcome (% of max)
Measures
Outcome
Vesting
Relative TSR vs
Comparator Group
78th percentile
100%
Relative TSR vs
FTSE 250
72nd percentile
90.9%
Formulaic vesting outcome
98.2%
Adjusted vesting outcome
88.4%
The LTIP outcome includes dividend equivalents
received. Shares are subject to a two‑year holding
period that extends beyond the Executive Director’s
tenure. Full details and targets are set out on
page 122‑123.
FY 2024
Fixed pay and shareholding
Base Salary
£566,500
£475,200
Graham Sutherland
CEO
3% increase
Ryan Mangold
CFO
3% increase
Pension
The CEO and CFO receive a pension allowance of
5% and 15% of base salary, respectively.
Benefits
Medical and life
insurance
Car allowance, medical
and life insurance
Shareholding
Target levels, % of base salary
200%
200%
CEO
CFO
Executive Annual Bonus Plan
Target % of salary
150%
150%
CEO
CFO
Long‑Term Incentive Plan
Maximum % of salary
200%
175%
CEO
CFO
2023 LTIP Measures
Measures
Weighting
EPS Growth
50%
Relative TSR
35%
Sustainability Scorecard
Zero emission fleet transformation
7.5%
Emissions reduction
7.5%
Governance report
FirstGroup Annual Report and Accounts 2023
110
The full Policy, which was approved at the 2021 Annual General Meeting on 13 September 2021, can be found on the FirstGroup plc website
at www.firstgroupplc.com/investors/information‑for‑shareholders and on pages 132‑141 in the FY 2021 Directors’ Remuneration Report.
The following table sets out how the agreed Remuneration Policy addresses the factors set out in Provision 40 of the UK Corporate
Governance Code:
Clarity
The Committee considers that FirstGroup’s remuneration structures are transparent and welcomes open and
frequent dialogue with shareholders on its approach to remuneration. Major shareholders have been consulted on
the Committee’s approach to remuneration.
Simplicity
The overall Remuneration Policy is designed to be comprehensive without becoming overcomplicated and to
encourage the Executive Directors to concentrate on providing easy and convenient mobility, improving quality of
life by connecting people and communities, and delivering ongoing shareholder value through an attractive annual
dividend.
Risk
One of the Committee’s principles is that the majority of the reward opportunity for Executive Directors should be
provided through performance‑related incentives linked to the Group’s strategic goals and taking account of the
Group’s attitude to risk. Reward under these incentives is linked to both individual and Group performance. The
Committee is satisfied that the structures of the incentive arrangements do not encourage inappropriate risk taking.
In addition, the following, best‑practice, measures are in place to minimise risks:
■
EABP deferral, the LTIP holding period and shareholding requirement, including post‑cessation provisions, provide a
clear link to the Group’s ongoing performance and shareholder experience
■
the Committee has discretion to adjust the formulaic incentive outcomes if it considers that they are not reflective of
the underlying performance of the Group or any individual, and has demonstrated in recent years that it is prepared to
use its discretion to reduce a formula driven outcome where this does not reflect broader Company performance or
the shareholder experience
■
malus and clawback provisions apply to EABP and LTIP awards
Predictability
The table on page 112 sets out four illustrations of the application of the Remuneration Policy including potential
opportunity levels resulting from threshold, target and maximum performance under the EABP and LTIP.
Proportionality
Performance measures and target ranges under the EABP and LTIP are designed to be sufficiently stretching in
order to ensure outturns are fully aligned with Group performance. As above, the Committee has discretion, and
has demonstrated in recent years that it is prepared to use its discretion, to override formulaic outcomes in order to
ensure performance is reflective of FirstGroup’s underlying performance.
Alignment to
culture
The Committee believes in an approach to executive pay that is commensurate with value creation for shareholders.
The Remuneration Policy and the Company’s incentive schemes have been designed to drive appropriate
behaviours consistent with FirstGroup’s purpose, values and strategy and are aligned to wider workforce policies
and practice.
The Company’s Policy remains to attract, retain and motivate its leaders and to ensure they are focused on delivering business priorities
within a framework designed to promote the long‑term success of FirstGroup and align with shareholder interests.
Remuneration Policy summary
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
111
Remuneration Policy summary
continued
The diagram below illustrates the balance of pay and time period of each element of the Policy for Executive Directors.
Total pay over five years
Year 1
Year 2
Year 3
Year 4
Year 5
Fixed Pay
Salary
Fixed Pay
Benefits, Pension
EABP
(Malus and clawback provisions apply)
Up to 150% of salary
50% in cash
50% in shares. Three‑year deferral period
No further performance conditions
LTIP
(Malus and clawback provisions apply)
Up to 200% of salary
Three‑year performance period
Two‑year holding period
No further performance conditions
Total remuneration opportunity at various levels of performance
The graphs and tables below provide an indication of the reward opportunity for each Executive Director under the policy as at 1 April 2023.
Graham Sutherland, Chief Executive Officer
Ryan Mangold, Chief Financial Officer
Total remuneration (£’000s)
Total remuneration (£’000s)
Minimum
On-target
Maximum
Maximum with
share price
appreciation
597
597
425 227
597
850
850
1,133
597
1,700
Minimum
On-target
Maximum
Maximum with
share price
appreciation
560
560
356 166
560
713
713
832
560
1,247
Fixed
EAPB
LTIP
Fixed
EAPB
LTIP
Composition of package
%
Fixed
EABP
LTIP
Total
Composition of package
%
Fixed
EABP
LTIP
Total
Minimum
100%
100%
Minimum
100%
100%
On‑target
48%
34%
18%
100%
On‑target
52%
33%
15%
100%
Maximum
23%
33%
44%
100%
Maximum
27%
34%
40%
100%
Maximum with share
price appreciation
19%
27%
54%
100%
Maximum with share
price appreciation
22%
28%
49%
100%
Value of package
(£’000)
Fixed
EABP
LTIP
Total
Value of package
(£’000)
Fixed
EABP
LTIP
Total
Minimum
597
597
Minimum
560
560
On‑target
597
425
227
1,248
On‑target
560
356
166
1,083
Maximum
597
850
1,133
2,580
Maximum
560
713
832
2,105
Maximum with share
price appreciation
597
850
1,700
3,146
Maximum with share
price appreciation
560
713
1,247
2,521
The basis of calculation and key assumptions used to complete the charts are as follows:
Minimum –
Only fixed pay is payable, i.e., base salary, benefits and pension or cash in lieu of pension. No bonus is payable, and no vesting
achieved under the LTIP. The Executive Directors’ pension benefit is included at 5% of salary for the CEO and 15% of salary for the CFO.
On‑target –
Fixed pay plus 50% of maximum annual bonus payout and 20% vesting under the LTIP.
Maximum –
Fixed pay plus 100% of maximum annual bonus payout and 100% vesting under the LTIP.
Maximum + 50% share price growth –
A maximum scenario showing maximum plus 50% share price growth has been included. For
the minimum, on‑target and maximum scenarios, it is assumed that the share price will remain unaltered.
Governance report
FirstGroup Annual Report and Accounts 2023
112
The table below sets out an overview of the key areas of the Policy and summarises how the Committee applied the Policy in FY 2023,
together with details of how the Committee intends to implement the Policy in FY 2024.
Operation
Opportunity
How we implemented
the Policy in FY 2023
How we plan to implement
the Policy in FY 2024
Fixed Pay
To attract and maintain high‑calibre executives with the attributes, skills and experience required to deliver the Group’s strategy.
Salaries are normally reviewed
annually on 1 April, and
take account of individual
performance, experience
and contribution, Company
performance and affordability,
developments in the relevant
employment market, the wider
economic environment, and
internal relativities.
Any increases (in percentage
terms) will normally be within
the range for those of Group
employees. However, a higher
increase may be proposed in
the event of a role change or
promotion, or other exceptional
circumstances.
The Committee has the flexibility
to set the salary of a new hire at
a discount to the market level
initially and to realign it over the
following years as the individual
gains experience in the role.
An increase of 2.5% was applied
to the CFO from 1 April 2022.
This was the first increase
to base salary for the CFO
since being hired in 2019.
This increase was aligned to
the general non‑collectively
bargained employee salary
increase.
The base salary for the new
CEO was not reviewed in
FY 2023.
An increase of 3% was applied
to the CEO and CFO from
1 April 2023. This is below
the increase for the wider
workforce, see page 115 for
more information.
Benefits and Pension
To provide competitive benefits in the market to enable the recruitment and retention of Executive Directors.
Benefits may include car
allowance, private medical
insurance, life assurance, health
screening and other incidental
benefits and expenses. In
addition, Executive Directors
are eligible to participate in
all‑employee share plans on
the same terms as other eligible
employees.
A payment may be made into a
pension scheme or delivered as
a cash allowance.
The value of benefits is based
on the cost to the Company
and there is no pre‑determined
maximum limit. The range and
value of the benefits offered are
reviewed periodically.
A maximum contribution or
allowance of 15% in line with
the average value of employee
pension benefits.
Normal Company benefit
provision.
The CEO receives a pension
contribution or allowance of 5%
of base salary.
The pension contribution or
allowance for the CFO remains
at 15% of base salary.
No change to FY 2023.
Executive Annual Bonus Plan
To focus on the delivery of annual goals, strive for superior performance and achieve specific targets that support the strategy.
The deferred share element of our EABP encourages retention and provides a link between the bonus and share price growth.
Bonuses are awarded annually.
0% of maximum may be
payable at threshold, with 100%
vesting at maximum. At least
half of the bonus award will be
deferred into shares, normally
for three years. The EABP is
reviewed annually to ensure
performance measures and
targets are appropriate and
support the strategy.
Malus and clawback provisions
apply.
The maximum bonus
opportunity is 150% of base
salary for Executive Directors.
Performance measures (as a %
of maximum):
EBIT – 60%
Cash flow – 10%
Personal objectives – 30%
Bonuses awarded of:
The FY 2023 EABP award was
141% of base salary (94% of
maximum) for both the CEO and
CFO. The CEO’s FY 2023 EABP
has been pro‑rated based on
the date he was appointed to
the Board. 50% of all bonuses
are deferred into shares for
three years.
See pages 119‑122 for further
details on outcomes.
No change to the maximum
opportunity or payment
mechanisms of bonuses.
Performance measures will be
disclosed in next year’s Report
with at least half being based on
the financial performance of the
Group in line with our Policy.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
113
Operation
Opportunity
How we implemented
the Policy in FY 2023
How we plan to implement
the Policy in FY 2024
Long‑Term Incentive Plan
Incentivises the execution of strategy and drives long‑term value creation and alignment with longer term returns to shareholders.
Awards are conditional rights to
shares or nil‑cost options over
shares, subject to continued
employment or good leaver
status and one or more
performance conditions.
20% of maximum may be
payable at threshold, with 100%
vesting at maximum. Targets are
measured over three financial
years from the year of award.
Shares that vest are subject to
an additional two‑year holding
period following the three‑year
performance period.
Awards are subject to malus
and clawback.
Normal award policy is for a
maximum award opportunity
of 200% of base salary for
the CEO and 175% for other
Executive Directors.
In exceptional circumstances,
awards of up to 300% of base
salary may be made, such as to
aid recruitment.
Performance measures (as a %
of maximum):
50% EPS, 35% Relative
TSR and 15% Sustainability
Scorecard.
Grant levels:
CEO – 200% of salary
CFO – 175% of salary
The 2020 LTIP had a formulaic
vesting outcome of 98.2%.
Ultimately, after applying a
discretionary 10% reduction,
the 2020 LTIP vested at 88.4%.
See pages 122‑123 for further
details.
See pages 124‑125 for details
of the targets for the 2022 LTIP
awards granted in the year.
No change to maximum
LTIP opportunities or the
performance conditions.
See page 128 for detail on LTIP
awards to be granted.
Shareholding Guidelines
To ensure that Executive Directors’ interests are aligned with those of shareholders over a longer‑term time period.
Executive Directors are expected to hold shares to the value of
200% of base salary within a five‑year period from their date of
appointment.
Post‑employment
Following cessation, Executive Directors are normally expected
to hold the in‑employment guideline (or full actual holding if lower)
for the first year following cessation of employment and 50% of
the in‑employment guideline (or full actual holding if lower) for the
second year following cessation of employment.
CEO – 200% of salary
CFO – 200% of salary
See pages 129‑130 for further
details on shareholding
requirements and outstanding
share awards.
No change to requirements.
Remuneration Policy summary
continued
Governance report
FirstGroup Annual Report and Accounts 2023
114
Remuneration in context
Treating our people fairly
In light of the current cost of living crisis we
have directed a greater proportion of our
salary increase budget to those who are
lower paid across the Group and who are
more likely to feel the impact most heavily.
The approach for non‑collectively bargained
employees in First Bus has been to apply a
flat increase to base salary in order to have a
greater impact on lower earners for FY 2023.
For FY 2024 non‑collectively bargained
colleagues in First Bus received an increase
of 3% + £800, for an average base salary
increase of c.5.2%. For the collectively
bargained population, average increases in
FY 2023 were over 7%.
In First Rail, offers have been made to the
majority of our population for pay increases
for FY 2023 and FY 2024 of 9% (i.e. 5%
for FY 20223 (minimum of £1,750 increase
and maximum increase of £5,000) and
4% for FY 2024). These increases have
been implemented for our non‑collectively
bargained population and collectively
bargained populations where an agreement
has been reached. At the time of publication
the leadership of RMT and Aslef have not put
their respective pay offers to their members,
but we remain open and willing to engage in
national level talks to resolve the dispute.
We also offer other benefits to our employees
to support them through the cost‑of‑living
crisis, including extensive retail discounts
through our shopping portal, including 4‑7%
discounts at several large supermarkets. In
2022, employees saved over £450,000 on
their shopping bills.
TOCs provide free travel for employees and
their families across their own network. First
Bus provides employees and their families
with free travel on the First Bus network. All
employees, regardless of employer, receive
discounted rail travel across our network.
All employees have access to our Employee
Assistance Programme, which among
other things, provides free, individual and
confidential financial advice.
In setting the Remuneration Policy for
Executive Directors, the Committee takes
account of the overall approach to rewarding
other employees in the Group. Due to
the varied nature of the operations of our
divisions and their respective employment
markets, we have a range of remuneration
practices across the organisation. These are
designed to be relevant to each individual
market. Almost 85% of our employees
are covered by collective bargaining
arrangements.
A number of items are tabled at Committee
meetings each year to ensure the approach
throughout the organisation is consistent
and fair:
■
report summarising wider workforce pay
policies and practices with updates provided
on a regular basis
■
Gender and Ethnicity Pay Gap Reports
including statistics from each UK reporting
entity
■
actions management are taking to improve
diversity in the workforce and close pay
gaps where they exist
■
CEO pay ratio and underlying statistics
The diagram on page 117 (Wider workforce
remuneration) summarises the FirstGroup
approach to pay. The main difference
between the structure of our most senior
employees’ remuneration and that of the
wider workforce is that senior employee’s
remuneration is more heavily weighted
to variable pay, that is linked to business
performance.
In FY 2023, First Bus ran a series of Financial
Wellbeing webinars to offer support around
the cost of living crisis. We have also
introduced two new healthcare benefit
schemes that are available to all of our First
Bus colleagues. The SimplyHealth scheme
allows First Bus colleagues to claim back
healthcare costs, including optical, dental,
and muscular health as well as contributions
for health diagnostics. The SmartHealth
scheme is a free app that provides access
to a number of services, including GP
appointments, mental health support,
second medical opinion, nutrition advice,
fitness plans and health checks.
Employee engagement
While the Committee does not formally
consult with employees on Executive
Director remuneration, a number of different
mechanisms are in place to gather feedback
and insights from employees across a range
of issues.
Information on how we engage our
employees is set out on pages 79.
The Group also engages with its workforce
through our Employee Directors and the
Group Employee Director is invited to
attend all of the Committee’s meetings, and
regularly does so. Our Committee Chair,
Sally Cabrini, will also periodically attend the
Employee Director forum meetings to explain
how executive remuneration aligns with
wider workforce pay and answer questions
on last years’ Directors’ Remuneration
Report. More information on the role of
our Group Employee Director is set out on
page 87.
The Committee believes that it is important
for our employees to understand how the
remuneration of our Executive Directors
is determined and utilises the different
communication channels operating across
the Group to ensure our employees are
aware of the information available in the
Directors’ Remuneration Report.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
115
Remuneration in context
continued
Year
Method
CEO Total
Remuneration
Population
25th
percentile
Median
75th
percentile
FY 2023
Option B
£1,190,865
Employee total remuneration
1
£35,189
£40,145
£54,283
CEO to employee ratio
34:1
30:1
22:1
FY 2022
Option B
£2,246,181
Employee total remuneration
£33,073
£36,395
£55,051
CEO to employee ratio
68:1
62:1
41:1
FY 2021
Option B
£839,822
Employee total remuneration
£27,560
£34,002
£53,437
CEO to employee ratio
30:1
25:1
16:1
FY 2020
Option B
£788,400
Employee total remuneration
£24,600
£32,000
£45,400
CEO to employee ratio
32:1
25:1
17:1
1
FY 2023 basic salary for the employee at the 25th, 50th and 75th percentile in FY 2023 were £23,018, £27,592 and £46,518, respectively.
The Committee is satisfied that these pay
ratios are consistent with our pay, reward
and progression policies and that these
colleagues are representative of the relevant
percentiles across the organisation, as they
represent frontline workers in our First Bus
and First Rail divisions, i.e., the large majority
of our UK workforce receiving basic pay,
overtime, holiday pay and employers pension
contributions. The figures also include sick
pay (where relevant).
There has been a decrease in the CEO pay
ratio between FY 2023 and FY 2022. This is
largely due to the appointment of a new CEO
in May 2022 and therefore the CEO did not
have any long‑term incentive awards vesting
in FY 2023, compared to FY 2022 where
the former CEO’s 2019 LTIP award vested at
88.5% of maximum (177% of base salary).
CEO pay ratio
In line with reporting requirements, the table
below sets out the ratio at the median, 25th
and 75th percentiles of the total remuneration
received by the Chief Executive Officer,
compared to the total remuneration received
by our UK employees. The Company has
calculated the ratios in accordance with the
Option B methodology laid out in the pay
gap regulations that were deemed the most
reasonable and practical approach given the
collation of data exercise required for Gender
Pay Gap reporting. There has been no
departure from this methodology and no pay
has been omitted. It should be noted that
the pay ratio may vary year‑on‑year and the
incentive outcomes for the Chief Executive
Officer can impact the results significantly.
We will provide an explanation in each year’s
Report around the change in the ratio as
well as any additional context, where helpful,
to understand variance. The UK employees
at the lower quartile, median and upper
quartiles were identified as at 5 April 2022
and their salary and total remuneration were
calculated in respect of the 52 weeks ended
25 March 2023.
The Committee is satisfied that the data
included in the CEO Pay Ratio table reflect
the goals of the Group’s Remuneration Policy
to support colleagues in the performance
of their roles in collectively delivering the
Group’s strategy. In particular, the Committee
notes that factors such as the Company’s
philosophy to pay the going market rates
of pay, to operate a performance‑based
framework that rewards employees for their
individual efforts and the performance of the
Company, and to structure pay in a simple
and transparent manner, have been applied
consistently.
Governance report
FirstGroup Annual Report and Accounts 2023
116
Wider workforce remuneration
Eligibility
Element
Definition
All employees
(c.30,000)
Base salary
■
Base salaries are reviewed annually.
■
When considering salary for Executive Directors and Executive Committee
members, the Committee considers increases available to the wider
workforce.
Pension
■
We are committed to helping our colleagues save for retirement through
a variety of company pension arrangements, designed in line with market
practice. We operate a number of different pension plans that reflect the
history and requirements of our various businesses. See page 118 for more
information on the average pension contribution.
All employee share
scheme
■
All employees with at least six months of service are eligible to participate in an
all employee share plan and become shareholders in the Company.
Benefits
■
Our Employee Assistance Programme offers all employees access to free,
24/7 confidential telephone, online and face‑to‑face advice for problems they
may be experiencing at home or work. Other benefits include discounted travel
on our rail and bus services, discounts on shopping, entertainment and eating
out.
■
Our larger businesses have dedicated in‑house Occupational Health
teams and our other businesses use external specialist advisers to support
employees with health problems that may affect performance.
■
All divisions run workplace health and wellbeing programmes to support
employees in staying fit and healthy.
Senior executives and
management
(c. 1,100)
Annual bonus
■
Senior executives and management population – incentivises successful
execution of our business strategy and operational goals with participants
including both corporate centre and divisional roles.
■
Our train operating companies businesses also offer commission schemes for
Customer Hosts, Guards and Revenue Protection staff to drive revenue.
Senior executives
(c. 140)
LTIP
■
Senior executives with sufficient line of sight to drive long‑term sustained value
creation for our shareholders.
Executive Committee and
Executive Directors
(5)
Shareholding
guidelines
■
Senior executives ensuring alignment with the shareholder experience.
Alignment of remuneration with our KPIs
The table below sets out how the performance measures in our incentive plans are aligned to our KPIs. See pages 35‑37 for more
information on our KPIs.
Measure
Direct link
to our KPIs
Indirect link
to our KPIs
EABP
EBIT
Cash
Individual Performance
Safety
1
LTIP
EPS
Relative TSR
Sustainability Scorecard
1
The Remuneration Committee makes a holistic safety assessment at year‑end which can reduce the formulaic outturn to reflect any safety concerns.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
117
The annual report on remuneration sets out
■
Directors’ remuneration for FY 2023, pages 118‑127
■
the statement of the planned implementation of policy in FY 2024, page 128
This part of the Directors’ Remuneration Report has been prepared in accordance with Part 3 of The Large and Medium‑sized Companies
and Groups (Accounts and Reports) Regulations 2008 (as amended) and Rule 9.8.6 of the Listing Rules. The annual report on remuneration
and Chair’s statement will be put to an advisory shareholder vote at the 2023 AGM.
Single total figure of remuneration for Executive Directors (audited)
Graham Sutherland
Ryan Mangold
CEO
1
CEO
CFO
CFO
£’000s
FY 2023
FY 2022
FY 2023
FY 2022
Salaries
484
–
461
450
Taxable Benefits
1
–
14
14
Pension
24
–
69
68
Total fixed remuneration
509
–
544
532
Annual Bonus cash
341
–
325
327
Annual Bonus value of deferred shares
341
–
325
327
LTIP
2,3
–
–
1,878
733
Total variable remuneration
682
–
2,528
1,387
Total remuneration
1,191
–
3,072
1,919
1
Graham Sutherland was appointed to the Board as CEO on 16 May 2022 with an annual base salary of £550,000. Graham Sutherland did not receive any payments in
relation to recruitment remuneration, including any buyout awards. Graham Sutherland’s FY 2023 bonus has been pro‑rated based on the date he was appointed to the
Board.
2
The value for 2022 relates to the 2020 LTIP which has a three‑year performance period ending 25 March 2023. As a result of the downwards adjustment of 10%, as
disclosed in the description on pages 122‑123, 88.4% of the award will vest in June 2023. The value of the 2020 LTIP at vesting was calculated using the average share
price over the last 3 months of FY 2023 (106.3p). In line with the requirements under the UK Companies (Miscellaneous Reporting) Regulations 2018. The LTIP values
include dividend equivalent amounts of £34,681 for the CFO, £1,146,999 of the value for the CFO at vesting is attributed to share price growth as the share price at
award was 40.13p in 2020.
3
The value of the 2019 LTIP reported in last year’s report (£697,156) was an estimate based on the average share price over the last three months of 2021/22 (102.95p).
The actual value of the 2019 LTIP, on the 19 August 2022 vesting date was £732,599 (based on an adjusted closing share price of 107.1p), this includes dividend
equivalents of £7,449.
More detail can be found on pages 118‑126.
Benefits (audited)
Benefits for Executive Directors include the provision of a company car allowance, family private medical cover, life assurance and advisory
fees. Graham Sutherland’s benefits for the year comprised £1,122 for UK private medical insurance. Ryan Mangold’s benefits for the year
comprised a £12,000 car allowance and £1,870 for UK private medical insurance.
Pension (audited)
Graham Sutherland received a pension allowance of 5% of his base salary, £24,182 upon appointment to the Board on 16 May 2022.
Ryan Mangold received a pension allowance of 15% of his base salary, £69,195. The average pension benefit for the wider workforce is in
excess of 15% of base salary
1
.
No Director has a prospective benefit under a defined benefit pension.
1
We operate a number of different pension arrangements across the Group including defined benefit pensions in our rail operating companies. Over 60% of our UK
workforce are in a defined benefit pension (either the Railway Pension Scheme or UK Bus and former local government defined benefit schemes). The cost to the
Company on an accounting basis for these plans is c. 27% of salary. The remainder of our UK population are in defined contribution schemes – the largest cohort of
which get an employer contribution of 5%. We then have a small number of employees eligible for a 15% employer contribution. Averaging all of these out gets to an
average UK employee pension contribution of c.18%, although for the majority of our employees this would be c.27%.
Annual report on remuneration
Governance report
FirstGroup Annual Report and Accounts 2023
118
FY 2023 performance and reward decisions
As a Committee, we believe it is imperative to strike the right balance between incentivising the management team, rewarding strong
performance, and being equitable in the broader context.
When assessing the performance of the Executive Directors, the Remuneration Committee takes a broad view of financial performance
delivered, the shareholder experience and the outcome for the Company’s stakeholders, including customers, employees and the
communities in which we operate. When considering remuneration outcomes, the Committee takes into account performance against
specific metrics on safety, including workplace fatalities and injuries, and customer satisfaction, as well as environmental, social, and
governance matters such as significant environmental incidents, large or serial fines or sanctions from regulatory bodies, and significant
adverse legal judgments or settlements. The Committee has broad discretion to ensure incentive outcomes are appropriate.
FY 2023 Executive Directors’ annual bonus
For FY 2023, the annual bonus maximum opportunity was 150% of salary for both Executive Directors. As in previous years, the EABP
aimed to incentivise improved performance against a range of financial and non‑financial metrics. The structure of the bonus was weighted
so that 70% was based on financial metrics and 30% on non‑financial metrics. The Committee retains overriding discretion to adjust the
overall bonus outturn (including to £nil) if a serious safety failing or deterioration is identified.
The chart below sets out the targets, performance achieved and corresponding bonus outturns on a formulaic basis against the financial
and qualitative targets.
FY 2023 annual bonus outcome (audited)
Measure
Weighting
Threshold
Maximum
Actual
Result
Bonus
Achievement
Payout %
Adjusted Group EBIT (Pre‑IFRS 16 basis)
60%
£92.2m
£112.6m
£119.0m
100%
60%
Adjusted Group cash flow
10%
£44.9m
£64.9m
£160.0m
100%
10%
Personal objectives
30%
n/a
n/a
See below
80%
24%
Graham Sutherland
Objectives
Performance Assessment
Oversee the execution of disposal of residual US assets and
completion of Canada closure and all necessary de‑risking.
Greyhound US property portfolio disposal completed in
December 2022 for £122m (above fair value at point of Greyhound
disposal to FlixMobility).
The legacy Greyhound assets and liabilities are now at materially
lower levels than FY 2022 and largely de‑risked.
First Transit earnout expected in early FY 2024 given agreed sale
by EQT to Transdev North America which was announced in
October 2022.
Develop relationships with key investors with a view to holding a
Capital Markets Day by end of year.
We have actively engaged with all key shareholders, further
developed our roadshow performance/reach, and introduced a
new engagement method with First Rail and First Bus teach‑ins
which take place between results announcements. This has given
a number of investors wider access to the FirstGroup management
team and raised confidence in the equity story and our delivery of
financial performance.
Investor feedback from both financial results roadshows and other
meetings has been increasingly positive. Higher levels of trust
have been backed up by the positive news flow in the second
half of FY 2023, primarily, the £75m share buyback launched
in December 2022 and the March 2023 trading update on the
improving FY 2023 outlook.
Evaluate and recommend commercial opportunities apparent from
Bus electrification and upstream energy viability.
We have assessed and selected 20 First Bus sites for solar panels,
and they are in the process of being installed. Estimated savings of
c.£1m a year in FY 2024 electricity costs which represents c.35% of
related depot energy consumption.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
119
Consolidate delivery of NRCs and monitor and develop non‑TOC
activities.
Good progress on GWR and SWR with contract extensions granted
during the year, securing £35m of annualised EBIT.
In First Rail, we experienced significant industrial relations challenges
in some of our rail operations, most notably at Avanti and TPE.
In March we agreed an extension of the current contractual
arrangements for WCP with the DfT, to 15 October 2023. The
agreement to extend the contract has allowed our team to continue
their focus on delivering their robust plans to enhance services for
our customers, including further progress on our train upgrade and
refurbishment programme. AWC extended for six months. Post
year‑end it was announced that the TPE contract would not be
extended.
Excellent progress on open access rail with strong performance in
both Lumo and Hull Trains. Yield management improved consistently
through the year as we were also able to maintain high volumes and
utilisation. Profit performance achieved at c.£15m+ for FY 2023.
Strong performances in both Mistral and First Customer Contact. In
FY 2023 the centre supported customers, processing delay repay
claims and passenger assistance bookings, with quick turnaround
times. The shared passenger service centre operates at a lower cost
than our previous outsourcing arrangements and provides a single
service for customer queries across several First Rail operations.
Establish an Executive Committee and appropriate organisation
structure as a priority.
Revised Group management structure which led to reduced costs
and flatter structure. FY run rate savings delivered of c.£5m.
Demonstrate personal leadership of action to protect customers and
employees from health and safety risks and continue to improve our
health and safety culture.
Implemented an additional governance checkpoint where the CEO
meets with the First Rail and First Bus safety leads on a monthly
basis.
Overall Group safety performance has remained positive with the
majority of KPIs showing improvement in FY 2023 over FY 2022.
At First Rail, five of the six key safety KPIs on staff injury, assaults and
lost time have improved in FY 2023 when compared to FY 2022.
SPADs and all passenger and third‑party injury KPIs have improved
materially in FY 2023 when compared to FY 2022. Only SPAS have
deteriorated in FY 2023. It is worth noting that SPADs are 52%
better/lower than the UK industry.
At First Bus we have seen improvement over FY 2022 in Lost Time
Injuries, Collisions with major injury, Third Party Injuries and Bridge
Strikes but a deterioration in Collisions, All Injuries and Assaults. The
majority of First Bus KPIs show improvement over the pre Covid KPI
performance. FY 2023 to be seen as a new baseline as we have
been encouraging employees to report all injuries, even if minor.
Develop and integrate formal targets on ESG (TCFD) and Diversity
and inclusion as a matter or priority.
TCFD targets in place for Scope 3 emissions agreed at the
Responsible Business Committee. We are committed that 75% of
our suppliers by emissions, covering purchased goods and services
and capital goods, will have science‑based targets by 2028. We also
committed to reduce absolute GHG emissions by 20% from fuel and
energy‑related services activities.
ED&I targets for the Group have also been set at the Responsible
Business Committee.
Bonus Achievement for Graham Sutherland
80%
Payout % for Graham Sutherland
24%
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
120
Ryan Mangold
Objectives
Performance Assessment
Exit of Greyhound US real estate portfolio and ensure the collection
of CARES and ARP attributable to the Group as covered under the
sales and purchase agreement with FlixMobility.
Completed the disposal of the USA real estate portfolio in
December 2022 above fair value at the time the Group disposed
Greyhound to FlixMobility.
Launched the £75m share buyback programme in December 2022
with proceeds from the sale.
Continued to collect CARES and ARP through FY 2023, collecting
$27m in FY 2023, with the final total to be in line or slightly
ahead of the $41m assumed at the point of sale of Greyhound in
October 2021.
Complete Greyhound legacy liability management strategy, including
embarking on annuitising the Greyhound retirement plan in the USA,
merger of the Greyhound Canada pension schemes and put in place
steps to complete the ultimate de‑risking of the legacy pensions
exposure.
Vast majority of the insurance exposure in USA has been de‑risked.
Agreed with the Office of the Superintendent of Financial Institutions
the merger of the Canadian pension schemes and have commenced
the closure and wind up of the scheme. Launched the process to
annuitize the Greyhound retirement plan in the USA.
Facilitate the transition of GWR and WCP onto NRCs at acceptable
contractual arrangements and support further growth in affiliate
contracts.
GWR NRC agreed for three years, with a possibility for a further three
years. Agreed two‑year NRC extension for SWR. WCP extended for
six months to October 2023.
Investigate and support M&A growth opportunities and if successful
to integrate these targets into the Group.
Acquisition of Ensign and Airporter completed in First Bus.
Complete the detailed due diligence in upstream energy generation
and progress the implementation of the proof of concepts at five
sites.
Diligence in the potential opportunity of upstream energy generation
completed. 20 sites selected for solar panels where installation is
being implemented. Estimated saving of c.£500k in electricity costs
in FY 2024 representing c.35% of depot energy consumption.
Progress the Group and UK Bus pension scheme merger to facilitate
operating efficiencies and reduce costs.
Merger project formally launched with the Trustee.
Maintain investment grade rating and move from ‘negative outlook’
with S&P and Fitch.
Investment grade rating maintained throughout the year and
removed negative outlook from both rating agencies and now both
are on stable.
Introduce a new consolidation platform and deliver material
improvement in financial controls and increase operational efficiency
and accuracy of financial reporting.
OneStream implemented in First Bus and currently being rolled out
in First Rail and at the Corporate centre. Go‑live after the FY 2023
is finalised and consolidation on the new platform from Period 3
onwards.
Demonstrate personal leadership of action to protect customers and
employees from health and safety risks and continue to improve our
health and safety culture.
No compromise in systems and processes for health and safety.
Key focus on this in Business Review Meetings and other forums
in reviewing Health, Safety and Environment to reinforce the
importance in this area.
Bed down the new finance and corporate structure following the
completion of the restructuring of the corporate centre, including
improving the D&I of the finance team.
Finance team now fully in place with a materially improved D&I with
female and ethnic minority representation at all levels.
Bonus Achievement for Ryan Mangold
80%
Payout % for Ryan Mangold
24%
As noted in the Chief Executive Officer’s review, performance on the financial measures was strong for the Group as a whole, primarily due
to performance in First Rail, where revenue and profit from our open access businesses, particularly Lumo, exceeded expectations and
growth in First Bus in the second half of the year. There was also strong performance in respect of the non‑financial measures (as detailed
above).
The Committee determined that Graham and Ryan had delivered their personal objectives to a high standard. The Committee accordingly
awarded them both 24% out of a possible 30% for their personal objectives.
Taking into account the above outcomes, the formulaic EABP award for Graham Sutherland and Ryan Mangold resulted in a potential
award of 94% of the maximum. The Committee considered this formulaic performance in the context of the Group’s wider performance and
decided that it did not need to exercise any discretion to reduce this outcome. Under the approved Policy, 50% of the award is normally paid
in cash with 50% deferred into shares (deferred share awards vest after three years, subject to continued employment, and are not subject
to any further performance conditions).
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
121
The overall bonus payout for FY 2023 was therefore as follows:
Graham Sutherland
1
Ryan Mangold
Maximum EABP opportunity (% of salary)
150%
150%
EABP Achieved (as % of maximum)
94%
94%
EABP (% of salary)
141%
141%
Total EABP
£681,926
£650,433
EABP – Cash
£340,963
£325,217
EABP – Deferred Shares
£340,963
£325,217
1
Graham Sutherland’s FY 2023 EABP has been pro‑rated based on the portion of the year he served on the Board as CEO.
Long‑Term Incentive Plan
The vesting of 2020 LTIP awards was subject to achieving the following performance conditions over a three‑year performance period from
1 April 2020 to 31 March 2023.
Vesting of 2020 Long‑Term Incentive Awards (audited)
Metrics
Weighting
Outturn
0%
Threshold:
20%
Maximum:
100%
% of award
which vested
Relative TSR vs
Comparator Group
1
80%
78th percentile
<Median
Median
Upper Quartile
100%
Relative TSR vs
FTSE 250
20%
72nd percentile
<Median
Median
Upper Quartile
90.9%
Total (formulaic outcome)
98.2%
Downwards adjustment to the formulaic outcome
10%
Final outcome
88.4%
1
TSR performance was measured against a comparator group of 27 companies of comparable scale, complexity and activity to FirstGroup.
As disclosed in the 2020 and 2021 ARA, the Committee decided to delay 2020 LTIP grants and target setting to allow adequate time
to better understand the impact of Covid‑19 on the wider economy and our business. The approach to delay setting of targets was
in‑line with advice from main investor bodies and proxy voting agencies, such as the Investment Association and Glass Lewis as well as
further progression of our disposal of the North American divisions. The uncertainties presented by Covid‑19, as well as the significant
period of strategic change that the Company was undergoing, presented significant challenges in setting three‑year targets for Group
EPS. It would have been difficult and complicated to measure Group EPS with the disposals happening at different times throughout the
performance period (First Student and First Transit in July 2021 and Greyhound in October 2021) and would require multiple adjustments
to
in‑flight awards.
Therefore, the Committee determined that the most appropriate approach for the 2020 awards would be to assess performance based on
relative TSR over a three‑year period (previously the LTIP was based on 40% Group EPS, 40% relative TSR, 20% Road ROCE). Relative TSR
avoids the difficulties of setting a profit‑related performance target and aligns with the strategy to realise superior returns for our shareholders
through the execution of portfolio rationalisation.
Awards were made in September 2020 and the performance targets were fully disclosed at this point. The awards are subject to a two‑year
holding period following the three‑year performance period as well as malus and clawback. Before an award vests, the Committee must
be satisfied that the underlying performance of the Group is satisfactory. The Committee has the ability to amend the formulaic vesting
outcome if they believe this is appropriate. The Committee believes that having a performance override is an important feature of the plan as
it mitigates the risk of unwarranted vesting outcomes.
Consideration of potential windfall gains
When the 2020 LTIP was awarded, as is our usual approach, we committed to review the vesting levels to ensure they are appropriate in the
context of underlying financial performance and the experience of our wider stakeholders while also being mindful of the guidance from the
governance community about ‘windfall gains’.
The Committee has demonstrated significant restraint over recent years with actions taken including a reduction to Executive Directors’
salaries when the pandemic first hit, no salary increases for two consecutive years and the exercise of downwards discretion on bonus
outturns for two consecutive years. At all times we consider the experience of our wider stakeholders when determining the pay for our
executives and the Committee has continued to do this when assessing the appropriateness of 2020 LTIP vesting levels.
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
122
Background
The Committee considered in detail number of factors when deciding whether the level of vesting is appropriate including share price
performance (on both an absolute and relative basis), underlying financial performance and the experience of our shareholders, with further
detail provided below:
Share price used to determine grant –
As disclosed above we delayed setting targets for and granting the 2020 LTIP until September 2020
when we had greater clarity over the impact of Covid‑19 on our business, the transport sector and the wider economy. We also were at the
beginning of a period of significant strategic change as we had made plans to divest of our North American businesses. This meant that
the share price at grant (40.13p) was c.44% higher than the share price after the initial post‑Covid decline in March 2020 (c.28p) resulting in
c.31% fewer shares granted to the former CEO and CFO than if the award had been made when the share price was at its lowest. While the
FTSE 250 returned to pre‑Covid levels in early 2021, given the impact on FirstGroup’s sector the recovery took longer demonstrating that the
share price used to determine the grant was not a short‑term low point.
Underlying financial performance –
There were a number of actions taken by management that resulted in strong underlying financial
performance over the period as detailed below.
Responding to the impact of the pandemic:
The management team made a decisive impact in leading the business through the pandemic by:
■
Focusing on cash generation and cost management initiatives;
■
Ensuring sufficient liquidity was in place; and
■
Recovering payments from our customers, including securing payment when schools were shut in the US and funds under federal grants.
Since FY 2020 (1 April 2019 – 31 March 2020), a year that was almost entirely pre‑Covid‑19, revenue from continuing operations has
increased by 18% (from £4,040m to £4,755m). Adjusted Operating Profit (on a pre‑IFRS 16 basis) from continuing operations has increased
by 47% (from £81m to £119m). Adjusted EPS from continuing operations (on a pre‑IFRS 16 basis) increased from ‑1.8p to 12.0p.
Experience of our shareholders –
FirstGroup’s TSR outperformed both our comparator group and the FTSE 250 over the three‑year
performance period with performance at the 78th and 72nd percentiles, respectively. Performance against our sector peer group was above
upper quartile and just below upper quartile against the wider FTSE 250. The Committee is comfortable that this demonstrates that share
price performance does not solely reflect a general market recovery and represents outperformance.
The management team was instrumental in the sale of our North American businesses for a full strategic value of $4.6bn in FY 2022,
following which we returned £500m to shareholders through a tender offer and strengthened the balance sheet by repaying or de‑risking
£2.3bn in debt and other liabilities (including significantly strengthened the funding position of our UK pension schemes with payments of
£337m). Additionally, as a direct result of the work undertaken by management to stabilize our balance sheet we were able to pay our first
dividend in ten years in August 2022, and return further value to shareholders through the £75m share buyback scheme (announced in
December 2022).
Conclusion
Taking into consideration the factors outlined above, the Committee decided that although the formulaic vesting outcome represented
genuine out‑performance against both peer groups, was underpinned by strong underlying financial performance and had been achieved
as a direct result of positive actions of the management team over the three year performance period, an adjustment would be appropriate
to reflect the potential for windfall gains. When determining the level of adjustment the Committee took into account a number of reference
points including the share price used to determine previous awards, share price performance before and through the pandemic as well as
underlying financial performance. It also recognised that management actions have played a clear and demonstrable role in the Company’s
share price performance. The Committee decided to use its discretion and apply a downward adjustment resulting in an overall reduction of
10% of the award. Therefore, the final vesting outcome for the 2020 LTIP was 88.4%, which the Committee considered to be aligned with the
Company’s performance and circumstances over the period.
As a result of this outcome, awards vested as follows:
Executive Director
Total number
of shares granted
Proportion of
award vesting
(% max)
Face value of
shares vesting
(£’000)
1
Value attributable
to share price
movement
(£’000)
2
Value of dividend
equivalents due
(£’000)
Value of
resultant award
(£’000)
CFO
1,962,274
88.4%
£1,843
£1,147
£35
£1,878
1
The face value of the 2020 LTIP at vesting has been calculated based on the average share price over the last three months of FY 2023 (106.3p).
2
£1,147 of the value for the CFO at vesting is attributed to share price growth as the share price at award was 40.13p in 2020. See pages 122‑123 for more information on
what the Committee considered when determining whether the increase in share price was a result of windfall gains.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
123
Long‑Term Incentive Awards made during the year
The Committee determined that the 2022 awards would be measured against EPS, Relative TSR and a Sustainability Scorecard (comprising
two environmental measures), over a three‑year period.
The measures of the 2022 LTIP are consistent with the 2021 LTIP with the only difference being to align the emissions reduction measure
with the Science Based Targets (SBT), set during FY 2022, for a reduction in our Scope 1 and 2 emissions.
Emissions reduction aligned to our SBT will become the main emissions metric that we report on and a key performance indicator for
the Group. In addition, we consider that using an absolute carbon reduction metric is ultimately more appropriate than a carbon intensity
measure, on the basis that the latter is affected by changes in revenue as well as carbon performance. As was the case with the previous
measure, the Scope 1 and 2 emissions reduction targets are quantifiable, capable of being independently verified and are closely aligned
with our strategy and investment case.
Both of our sustainability measures will be tracked, measured and reported to our banking partners as part of the Company’s
sustainability‑linked Revolving Credit Facility.
Awards were made in August 2022 and are subject to a two‑year holding period following the three‑year performance period as well as
malus and clawback. Before an award vests, the Committee must be satisfied that the underlying performance of the Group is satisfactory
and has the ability to amend the formulaic vesting outcome if they believe this is appropriate. The Committee believes that having a
performance override is an important feature of the plan, as it mitigates the risk of unwarranted vesting outcomes.
Details of the performance metrics, targets and comparator group for the 2022 LTIP awards are set out below.
2022 Long‑Term Incentive Plan performance metrics (audited)
Sustainability Scorecard
Adjusted EPS
(50%)
2
Relative TSR vs
FTSE250
3
Additional ZE
4
buses in service/
on order
by 31 March 2025
Emissions
Reduction:
Scope 1&2
emissions
(tCO
2
e) reduction
5
Weighting
50%
35%
7.5%
7.5%
Threshold (20% vesting)
1
9.4p
Median
340
1,030,000tCO
2
e
Maximum (100% vesting)
13.6p
Upper quartile
550
990,000tCO
2
e
1
Vesting will be on a straight‑line basis between threshold and maximum.
2
EPS will be assessed on a pre‑IFRS 16 basis as this aligns with how performance is measured internally and is most readily understood by management teams (EBIT in
the EABP is measured on a pre‑IFRS 16 basis for the same reason). A reconciliation from IAS17 to post‑IFRS 16 EPS will be included in the FY 2025 Directors’
Remuneration Report so to provide clarity between the LTIP targets and achievement relative to the reported EPS on a statutory basis.
3
Relative TSR will be assessed against the FTSE 250 Index.
4 Zero emission.
5 Tonnes of carbon dioxide equivalent (tCO
2
e) per £1m of revenue.
An LTIP award of 200% and 175% of salary were granted to Graham Sutherland and Ryan Mangold, respectively, on 18 August 2022.
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
124
2022 Long‑Term Incentive Plan grants (audited)
Details of Graham Sutherland’s and Ryan Mangold’s awards (granted in the form of conditional share awards) are set out below:
Executive Director
Share price
at date of grant
1
Face value
(% of base salary)
Number
of shares
awarded
Face value
of award
% of award
which vests
at threshold
Performance
Period
Graham Sutherland
113.10p
200%
972,590
£1,100,000
20%
1.4.22 – 31.3.25
Ryan Mangold
113.10p
175%
713,770
£ 807,275
20%
1.4.22 – 31.3.25
1
The share price at grant for the LTIP awards is closing mid‑market share price for the day preceding the grant date.
As is normal practice, the Committee will ensure that any vesting is appropriate in the context of underlying financial performance and the
experience of our wider stakeholders. The Committee retains the ability to apply discretion in the event that the value at vesting is considered
to be an unjustified windfall gain taking into account the performance of the Group.
Directorate changes
Graham Sutherland was appointed as CEO on 16 May 2022. After a period of transition, David Martin stepped down as Interim Executive
Chairman and resumed the role of Non‑Executive Chairman on 1 July 2022.
All Executive Directors are on a rolling contract terminable by either party on 12 months’ notice.
Payments for loss of office (audited)
No payments for loss of office were made during FY 2023.
Payments to past Directors (audited)
As disclosed in the 2022 ARA, from the period he stepped down as Chief Executive Officer on 13 September 2021 until the date his notice
expired on 27 July 2022, Matthew Gregory had been available to provide assistance in relation to ongoing projects and to work closely with
David Martin and Graham Sutherland, as required, to ensure a smooth transition.
In line with Matthew Gregory’s service contract and the shareholder approved Remuneration Policy, his salary, pension and benefits
continued to be paid as usual during this period. If the termination date had been brought forward from 27 July 2022, then any payments
made in respect of the unexpired notice period would have been made in instalments, and subject to mitigation and reduction in the event
Matthew Gregory took up alternative employment.
Amounts paid in FY 2023 after Matthew Gregory stepped down from the Board are set out below.
Executive Director
Salary
£000s
Benefits
1
£000s
Pension
£000s
LTIP
2
£000s
Total
£000s
Matthew Gregory
205
4
29
2,355
2,593
1 Benefits include car allowance and medical insurance.
2
The value of the 2020 LTIP at vesting has been calculated based on the average share price over the last three months of FY 2023 (106.3p). The value of the LTIP
includes dividend equivalents of £43,501.
As disclosed in the FY 2022 remuneration report, Matthew Gregory’s unvested awards under the 2020 LTIP (in relation to 3,164,556 shares)
would not lapse by reason of his leaving employment, and remained eligible to vest on the normal vesting date in accordance with the
rules of the LTIP and subject to the satisfaction of performance conditions and pro‑rating for his period of employment. As disclosed in the
‘Vesting of 2020 Long‑Term Incentive Awards’ section on pages 122‑123, the formulaic vesting outcome was 98.2% of maximum, however,
the Committee determined that a 10% reduction to this was appropriate, resulting in a final vesting outcome of 88.4%. After application
of pro‑ration for his period of employment and application of the performance, 2,175,064 shares will vest on 8 June 2023. Vested shares
are subject to a further two‑year holding period following the end of the performance period. No further LTIP awards were made to
Matthew Gregory.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
125
Performance graphs
The graph below shows the TSR performance of £100 invested in FirstGroup plc shares over the past ten‑years compared to an equivalent
investment in the FTSE 250. The FTSE 250 Index has been selected as it provides an established and broad‑based index, of which the
Company is a constituent.
0
50
100
150
200
£
31/03/15
31/03/16
31/03/17
31/03/18
31/03/19
31/03/20
31/03/21
31/03/23
31/03/22
31/03/13
31/03/14
FirstGroup plc
Total shareholder return
FTSE 250 Index
Total shareholder return
Source: Thomson Reuters Datastream
TSR is measured according to a return index calculated by Thomson Reuters Datastream on the basis that all the Company’s dividends are
reinvested in the Company’s shares. The return is the percentage increase in the Company’s index over the ten‑year period.
Remuneration of the Chief Executive Officer
The table below shows the total remuneration figure for the Chief Executive Officer, during each of the past ten‑years. The total remuneration
figure includes the annual bonus and LTIP awards that vested based on performance in those years. The annual bonus percentages show
the payout for each year as a percentage of the maximum.
2014
2015
2016
2017
2018
2019
(Tim
O’Toole)
2019
(Wolfhart
Hauser)
2019
(Matthew
Gregory)
2020
2021
2022
(Matthew
Gregory)
2022
(David
Martin)
2023
(David
Martin)
2023
(Graham
Sutherland)
Total remuneration
(£000s)
1,986
1,647
1,243
1,267
1,100
175
3
266
4
422
5
788
840
2,246
6
320
7
134
8
1,191
9
EABP (% of
maximum potential)
59.1
57
15.9
–
1
–
2
–
n/a
33.4
–
–
97
n/a
n/a
94
LTIP vesting (% of
maximum potential)
–
–
–
16.3
–
–
n/a
12.5
12
14.6
88.5
n/a
n/a
–
1
An EABP was not paid to Tim O’Toole in 2017 and instead he received a conditional deferred share award.
2
No EABP was paid to Tim O’Toole in 2018.
3
Remuneration for Tim O’Toole until he stepped down as CEO on 31 May 2018. Tim O’Toole was not eligible for an annual bonus or LTIP awards.
4
Remuneration for Wolfhart Hauser for his period as Executive Chairman, 1 June to 12 November 2018. Wolfhart Hauser was not eligible for EABP or LTIP awards.
5
Remuneration for Matthew Gregory as Chief Executive from 13 November 2018 to 31 March 2019.
6
Remuneration for Matthew Gregory as Chief Executive from 1 April 2021 to 13 September 2021.
7
Remuneration for David Martin for his period as Interim Executive Chairman from 13 September 2021. David Martin was not eligible for EABP or LTIP awards.
8
Remuneration for David Martin for his period as Interim Executive Chairman until 30 June 2022. David Martin was not eligible for EABP or LTIP awards.
9
Remuneration of Graham Sutherland from his appointment as Chief Executive Officer on 16 May 2022, salary and EABP have been pro‑rated for time served.
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
126
Non‑Executive Directors’ (NEDs) and Chairman’s fees (audited)
No changes were made to NEDs’ fees in FY 2023. These remained at £58,000 p.a. with additional fees of £12,000 p.a. payable to the Senior
Independent Director and the Chairs of the Audit, Board Safety/Responsible Business, and Remuneration Committees.
During the period 13 September 2021 to 1 July 2022, David Martin took on the interim role of Executive Chairman, while a new Chief
Executive Officer was being recruited. To recognise the additional time commitment associated with this, the Committee agreed a temporary
increase in fees to £535,000 p.a.
FY 2023
FY 2022
£’000
Basic Fee
Committee
Chair
SID
Taxable
Benefits
1
Total
Basic Fee
Committee
Chair
SID
Taxable
Benefits
1
Total
David Martin
2
366
–
–
52
418
435
–
–
33
468
Warwick Brady
3
19
–
–
1
20
58
–
–
–
58
Sally Cabrini
58
12
–
1
71
58
12
–
2
72
Myrtle Dawes
58
–
–
6
64
–
–
–
–
–
Claire Hawkings
4
58
12
–
3
73
11
2
–
–
13
Jane Lodge
5
58
12
–
2
72
44
9
–
2
55
Peter Lynas
5
58
–
12
2
72
44
7
9
1
61
Julia Steyn
6
19
–
–
1
20
58
–
–
2
60
Ant Green
7
58
–
–
–
58
58
–
–
–
58
1
The Company meets all reasonable travel, subsistence, accommodation, and other expenses, including any tax where such expenses are deemed taxable, incurred by
the Chairman and NEDs in the course of performing their duties.
2
David Martin became Executive Chairman on 13 September 2021 and resumed the role of Non‑Executive Chairman on 1 July 2022. For the period he was Executive
Chairman he was paid an additional fee of £225,000 p.a., bringing his total fees to £535,000 p.a. When he returned to the role of Non‑Executive Chairman his fee
returned to £310,000 p.a.
3
Warwick Brady stepped down from the Board on 27 July 2022 and his fees were pro‑rated.
4
Claire Hawkings was appointed as a NED on 21 January 2022 and her fees for FY 2022 were pro‑rated.
5
Jane Lodge and Peter Lynas were appointed as NEDs on 30 June 2021 and their fees for FY 2022 were pro‑rated.
6
Julia Steyn stepped down from the Board on 27 July 2022 and her fees for FY 2022 were pro‑rated.
7
Anthony Green was appointed as Group Employee Director on 15 September 2020. In addition to his fee as Group Employee Director, Anthony received earnings from
the Group as an employee amounting to £25,398 in FY 2022 and £24,898 in FY 2023.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
127
Implementation of Remuneration Policy for FY 2024
Annual base salary
The Committee carefully considered base salary increases for the Executive Directors holistically, taking into account FY 2024 base
salary increases applied to the wider workforce (see page 115 for more information), investor guidance that base salary increases for
Executive Directors should be lower than those provided to the wider workforce, the Group’s strong performance in FY 2023 as well as the
macroeconomic environment, including high rates of inflation experienced during 2023.
The Committee decided it would be appropriate to award a lower percentage increase to the Executive Directors so that greater focus could
be on lower paid employees across the Group. Therefore, the Committee decided it was appropriate to award a base salary increase of 3%
for Graham Sutherland and Ryan Mangold, increasing their base salary to £566,500 and £475,200, respectively, from 1 April 2023.
FY 2024 Executive Directors’ annual bonus
For FY 2024, the EABP will continue to incentivise improved performance against a range of financial and non‑financial metrics. The
financial targets are set by the Committee based on a number of factors such as the Group’s business plan, individual business unit level
performance, consensus, and expectations for FY 2024. The performance measures and targets for FY 2023 will be disclosed in next year’s
report when they are no longer commercially sensitive, however at least 50% of the bonus will be based on financial measures in line with
the approved shareholder Remuneration Policy.
The FY 2024 annual bonus maximum and threshold levels of bonus as a percentage of base salary will be as follows:
Executive Director
Maximum
Threshold
Graham Sutherland
150%
0%
Ryan Mangold
150%
0%
All payouts will be subject to the Committee’s discretion as well as malus and clawback provisions. 50% of any bonus earned will be
deferred into the Company’s shares for three years, conditional upon continued employment. The Committee has demonstrated in
assessing bonus outcomes, including in respect of FY 2021 and FY 2020, that it is prepared to set aside the formulaic outcome and reduce
awards or introduce a further condition, to ensure that business performance or the impact of a significant event is properly reflected.
2023 Long‑Term Incentive Awards
It is the Committee’s intention to make awards under the LTIP this year. Awards of 200% and 175% of salary will be made to the Chief
Executive Officer and Chief Financial Officer, respectively.
The measures of the 2023 LTIP will be consistent with the 2022 LTIP with the only difference being to how we present our emissions
reduction target. In the 2022 LTIP our emissions reduction targets are presented as an absolute emissions figure, however, for the 2023 LTIP,
we present this as a percentage reduction from our SBT base year (FY 2020).
Details of the performance metrics, targets and comparator group for the 2023 LTIP awards are set out below.
Sustainability Scorecard
Adjusted
EPS (50%)
2
Relative TSR
vs FTSE250
3
Additional ZE
4
buses in service/
on order by
31 March 2026
Emissions Reduction:
Scope 1&2 emissions
tCO
2
e)
5
reduction from
SBT base year 2020
Weighting
50%
35%
7.5%
7.5%
Threshold (20% vesting)
1
12.1p
Median
600
12% reduction
Maximum (100% vesting)
15.7p
Upper quartile
850
15% reduction
1
Vesting will be on a straight‑line basis between threshold and maximum.
2
EPS will be assessed on a pre‑IFRS 16 basis as this aligns with how performance is measured internally and is most readily understood by management teams (EBIT in
the EABP is measured on a pre‑IFRS 16 basis for the same reason). A reconciliation from IAS17 to post‑IFRS 16 EPS will be included in the FY 2026 Directors’
Remuneration Report so to provide clarity between the LTIP targets and achievement relative to the reported EPS on a statutory basis.
3
Relative TSR will be assessed against the FTSE250 Index.
4 Zero emission.
5 Tonnes of carbon dioxide equivalent (tCO
2
e).
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
128
Directors’ interests in share awards (audited)
The outstanding LTIP, deferred share bonus awards of Directors are set out in the table below. There have been no changes to the terms of
any share awards granted to Directors.
During year
Director
Plan
1
Date
of grant
Number of
shares
under award
as at
27.03.22
Awards
granted
Awards
exercised
Awards
lapsed
Number of
shares
under award
as at
25.03.23
2
Exercise
price
(£)
Face value of
awards
(£)
3
Date on which
awards vest/
become
exercisable
4
Expiry
date
Graham
Sutherland LTIP
18.08.22
–
972,590
–
–
972,590
nil
1,100,000
18.08.25
18.08.28
Ryan
Mangold
LTIP
19.08.19
765,175
–
677,179
5
87,996
–
nil
917,139
19.08.22
19.08.25
24.09.20
1,962,274
–
–
–
1,962,274
nil
762,736
02.04.23
02.04.24
02.08.21
934,274
–
–
–
934,274
nil
787,500
02.08.24
02.08.25
18.08.22
–
713,770
–
–
713,770
nil
807,275
18.08.25
18.08.28
Deferred
bonus
shares
18.08.22
–
289,456
–
–
289,456
nil
327,375
18.08.25
18.08.32
1
LTIP – granted in the from of nil cost options or conditional share awards granted under the Long‑Term Incentive Plan. Awards prior to FY 2023 were typically made in
the form of nil cost options. From FY 2023 awards were made as conditional share awards. Awards are subject to clawback and malus and subject to an additional
two‑year holding period.
Deferred bonus shares – granted in the form of nil cost options or conditional share awards under the EABP. Awards are subject to clawback and malus.
Participants are entitled to receive accrued dividends and dividend equivalents under the LTIP and EABP pro‑rated in proportion to the amount of the award that vests.
2
The table above shows the maximum number of shares that could be released if awards were to vest in full. In respect of LTIP and deferred bonus awards, participants
are entitled to receive dividends or dividend equivalent amounts, once the share awards have vested.
3
The face value of LTIP and deferred bonus awards made has been calculated by multiplying the maximum number of shares that could vest by the average closing
mid‑market share price for the five days preceding the grant date for awards made prior to FY 2023. For awards made in FY 2023 the face value of LTIP and deferred
bonus awards has been calculated by multiplying the maximum number of shares that could vest by the average closing mid‑market share price on the day preceding
the grant date, £1.1310.
4
LTIP awards will not vest until the date the Committee determines whether performance conditions have been met, or if later, the date specified above. If dealing
restrictions apply on the date of vesting then vesting will occur on the first date after dealing restrictions cease to apply.
5
The market share price on the date of exercise, 22 August 2022, was £1.09 for a total market value of £738,125.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
129
Directors’ shareholding, shareholding guidelines and summary of outstanding share interests (audited)
Under the terms of the Policy approved by shareholders at the 2021 AGM, Executive Directors are expected to hold shares, or rights to
shares in the Company, equivalent to a minimum of 200% of base salary within a five‑year period from their date of appointment to create
greater alignment of the Executive Directors’ interests with those of shareholders. This represents an increase for the CFO from 150%. The
Policy approved at the 2021 AGM also introduced post‑cessation shareholding guidelines where Executive Directors are normally expected
to hold the in‑employment guideline (or full actual holding if lower) in the first year following cessation of employment and 50% (or full actual
holding if lower) in the second year following cessation of employment.
The Committee reserves the right to relax or waive the application of such guidelines in certain circumstances, including the impending
retirement of an Executive Director.
The table below sets out the shareholdings of the Executive Directors and their connected persons’ shareholdings (including beneficial
interests) and a summary of outstanding and unvested share awards as at 25 March 2023. It shows that Graham Sutherland’s current
shareholding is 38.9% of his base salary and Ryan Mangold’s current shareholding is 172.5% of his base salary.
The Committee believes that it is an essential part of the Policy that Executive Directors build significant shareholdings. The retention
and build‑up of equity is important in a long‑term business such as FirstGroup, as it encourages decisions to be made on a long‑term,
sustainable basis for the benefit of customers and shareholders.
There has been no change in the Directors’ interests in the ordinary share capital of the Company between those set out below and the
date of approval of this report. The beneficial interests of Directors who served during the year ending 25 March 2023 and their connected
persons in the shares of the Company as at that date and 27 March 2022 are shown below.
Ordinary shares
beneficially owned
Directors
Date of
appointment
at 28.03.22 or
appointment
date if later
at
25.03.23
1
Unvested
Annual
Bonus/
SIP Shares
2,3
Unvested
LTIP
Shares
4
Vested but not
exercised
Annual Bonus/
LTIP awards
Shareholding
requirement
as % of salary
Current
shareholding
as % of
salary
5,6,7,8
%
shareholding
requirement
achieved
Executive Directors
Graham Sutherland
16 May 22
–
211,181
n/a
972,590
n/a
200%
38.9%
19.4%
Ryan Mangold
31 May 19
280,634
632,113
290,170
3,610,318
n/a
200%
172.5%
86.2%
Non‑Executive Directors
9
David Martin
15 Aug 19
–
–
–
–
–
–
–
–
Warwick Brady
10
24 Jun 14
108,701
108,701
–
–
–
–
–
–
Sally Cabrini
24 Jan 20
–
10,000
–
–
–
–
–
–
Myrtle Dawes
1 Apr 22
–
–
Anthony Green
15 Sep 20
1,542
1,570
–
–
–
–
–
–
Claire Hawkings
21 Jan 22
–
10,000
–
–
–
–
–
–
Jane Lodge
30 June 21
15,000
15,000
–
–
–
–
–
–
Peter Lynas
30 June 21
60,000
80,000
–
–
–
–
–
–
Julia Steyn
10
2 May 19
–
–
–
–
–
–
–
–
1
Ryan Mangold participates in the all‑employee Share Incentive Plan (SIP). His Partnership Shares are held in trust and are not at risk of forfeiture. Ryan Mangold
acquired an additional 140 Partnership Shares between 26 March 2023 and the date of approval of this Report.
2
Annual bonus shares are deferred shares that are subject to continued employment, but not subject to further performance conditions.
3
SIP Matching Shares awarded to Ryan Mangold are held in trust and are at risk of forfeiture if the corresponding Partnership Shares are withdrawn from trust within
three‑years. Ryan Mangold was awarded an additional 18 Matching Shares between 26 March 2023 and the date of approval of this Report.
4
LTIP awards are conditional share awards and nil cost options subject to ongoing performance conditions.
5
Based on the closing mid‑market share price on 26 March 2023 (£1.012).
6
Graham Sutherland has until 16 May 2027 to meet his current shareholding guideline.
7
Ryan Mangold has until 31 May 2024 to meet his current shareholding guideline.
8
The % shown includes the after‑tax value of vested but unexercised awards and the after‑tax value of unvested EABP awards that are subject to continued employment.
9
Shares for Non‑Executive Directors are held outright with no attaching performance conditions.
10 Warwick Brady and Julia Steyn stepped down from the Board on 27 July 2022.
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
130
Dilution
The Company ensures that the level of shares granted under the Company’s share plans and the means of satisfying such awards remains
within best practice guidelines, so that dilution from employee share awards does not exceed 10% of the Company’s issued share capital for
all share plans and 5% in respect of executive share plans in any ten‑year rolling period. The Committee monitors dilution levels at least once
a year. At 25 March 2023, 3.03% of the Company’s issued share capital had been issued for the purpose of the SAYE, BAYE, and LTIP over
a ten‑year period.
Employee Benefit Trust (EBT)
The FirstGroup EBT has been established to acquire ordinary shares in the Company, by subscription or purchase, from funds provided by
the Group to satisfy rights to shares arising on the exercise or vesting of awards under the Group’s share‑based incentive plans. As at 25
March 2023, 13,176,653 shares were held by the EBT to hedge outstanding awards of 27,216,152. This means that the EBT holds sufficient
shares to satisfy approximately 48.4% of outstanding awards.
External board appointments
Where Board approval is given for an Executive Director to accept an outside non‑executive directorship, the Director is entitled to retain any
fees received, unless the appointment is in connection with the business of the Group. None of the Executive Directors currently sit on any
other external company boards.
Percentage change in remuneration levels
The table below shows the movement in the salary, benefits, and annual bonus for all Directors between the current and previous financial
year compared to that for the average UK employee (First Bus and First Rail, but excluding the Corporate centre). For the benefits and bonus
per employee, the figures are based on those employees eligible to participate in such schemes.
Executive Directors
Non‑Executive Directors
Average UK
employees
2
GS
3
RM
4
DM
5,6
WB
7
SC
5
MD
8
CH
9
JL
9
PL
9,10
JS
5,7
AG
5
% change
to FY 2023
Salary/Fees
5.9%
n/a
2.4%
0.0%
0.0%
0.0%
n/a
0.0%
0.0%
(14.6%)
0.0%
0.0%
Benefits
(7.3%)
n/a
0.0%
56.5%
n/a
(41.8%)
n/a
n/a
24.0% 116.2%
(72.1%)
0.0%
Annual Bonus
(32.3%)
n/a
(0.7%)
–
–
–
–
–
–
–
–
–
% change
to FY 2022
Salary/Fees
1
11.1%
n/a
7.1%
7.1%
7.1%
6.1%
n/a
n/a
n/a
n/a
7.1%
0.0%
Benefits
4.2%
n/a
0.0%
n/a
0.0%
n/a
n/a
n/a
n/a
n/a
n/a
0.0%
Annual Bonus
576.6%
n/a
n/a
–
–
–
–
–
–
–
–
–
% change
to FY 2021
Salary/Fees
1
(2.4%)
n/a
(6.7%)
(6.7%)
(6.7%)
(5.7%)
n/a
n/a
n/a
n/a
(6.7%)
n/a
Benefits
9.4%
n/a
0.0%
(100.0%)
0.0%
0.0%
n/a
n/a
n/a
n/a
(100.0%)
0.0%
Annual Bonus
(66.2%)
n/a
n/a
–
–
–
–
–
–
–
–
–
% change
to FY 2020
Salary/Fees
6.1%
n/a
n/a
n/a
0.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Benefits
(4.8%)
n/a
n/a
n/a
0.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Annual Bonus
37.2%
n/a
n/a
–
–
–
–
–
–
–
–
–
1
Directors’ salary/fee figures for FY 2021 reflect the voluntary 20% reduction between April to July 2020. There have been no changes to NED fees since 2019.
2
Pay increases for the majority of UK employees in First Bus and First Rail are collectively bargained with trade unions in individual operating companies in First Bus and
First Rail. Some of these agreements are multi‑year deals. The increase in Benefits in FY 2021 reflects the inclusion of Avanti employees for a full year. The decrease in
annual bonus in FY 2021 reflects no management bonuses paid in the Rail business in FY 2021.
3
Graham Sutherland was appointed to the Board as CEO on 16 May 2022, as such, no comparison to FY 2022 is available.
4
Ryan Mangold was appointed to the Board as CFO on 31 May 2019, therefore, his FY 2020 pay has been annualised for comparison purposes. Bonuses were not paid
in FY 2020 or FY 2021, therefore, the percentage change in annual bonus to FY 2022 is ‘n/a’, meaning that the year‑on‑year change cannot be calculated.
5
David Martin, Sally Cabrini, Julia Steyn and Ant Green were appointed to the board in FY 2020. FY 2020 fees have been annualised for comparison purposes.
6
David Martin was appointed Interim Executive Chairman on 13 September 2021, as such he received a temporary fee increase to £535,000 per annum. David Martin
resumed the role of Non‑Executive Chairman from 1 July 2022 and his fees returned to £310,000 per annum. For comparison purposes FY 2022 and FY 2023 fees
relate to the fees he receives as Non‑Executive Chairman. David Martin did not have any taxable benefits relating to FY 2021, therefore, the percentage change in
benefits to FY 2022 is ‘n/a’, meaning that the year on year change cannot be calculated.
7
Warwick Brady and Julia Steyn resigned from the Board on 27 July 2022. FY 2023 fees have been annualised for comparison purposes.
8
Myrtle Dawes was appointed to the Board on 1 April 2022, as such, no comparison to FY 2022 is available.
9
Claire Hawkings, Jane Lodge and Peter Lynas were appointed to the Board in FY 2022. FY 2022 fees have been annualised for comparison purposes.
10 Peter Lynas served as Chair of Board Safety Committee from September 2021 to March 2022, for comparison purposes the fee he received as Chair has been
annualised. Peter Lynas’ fees decreased in FY 2023 compared to FY 2022 as he no longer served as Chair of a Committee.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
131
Relative importance of spend on pay
The table below illustrates the Company’s expenditure on pay in comparison to adjusted operating profit and distributions to shareholders by
way of dividend payments.
FY 2023
£m
FY 2022
£m
% change
Adjusted operating profit
1
154.4
226.8
(32)%
Distributions to shareholders
2
45.9
500
(91)%
Total employee pay
3
1,520.3
2,154.2
(29)%
1
Group adjusted operating profit has been used as a comparison as it is a key financial metric that the Board considers when assessing Company performance.
2
Distributions to shareholders of £45.9m in FY 2023, which consists of £14.8m in dividends and £31.1m share buyback (£36.1m including related costs).
3
Total employee pay is the total pay for all Group employees, including pension and social security costs. The average monthly number of employees in FY 2023 was
29,983 (FY 2022: 53,323). The decrease in total employee pay and average monthly number of employees from FY 2023 to FY 2022 is a result of the sale of our North
American businesses in FY 2022.
Committee membership and attendance
The membership of the Committee is shown on page 107 and attendance is set out on page 86. After each meeting, the Chair of the
Committee presents a report on its activities to the Board. The Chairman, Chief Executive Officer, Group HR Director, and Company
Secretary will normally attend meetings by invitation, to provide advice and respond to specific questions. Other attendees may include
the Chief Financial Officer, the Group Corporate Services Director, the Group Head of Reward, the Employee Director and the Committee’s
external remuneration adviser. Attendees are not involved in any decisions and are specifically excluded from any matter concerning their
own remuneration. The Deputy Company Secretary acts as secretary to the Committee.
Who supports the Committee?
The Committee continues to receive advice from independent external remuneration advisers, Willis Towers Watson (WTW). The Committee
appointed WTW in FY 2020, following a competitive tender process led by the Chair of the Committee. The Committee is solely responsible
for their appointment, retention and termination and for approval of the basis of their fees and other terms. The Chair of the Committee
agrees the protocols under which WTW provide advice.
WTW is a member of the Remuneration Consultants Group Code of Conduct and adheres to this Code in its dealings with the Committee.
The Committee reviews the appointment of its advisers annually and is satisfied that the advice it receives is objective and independent.
During the course of the year, WTW provided independent advice and commentary on a range of topics including Directors’ remuneration
reporting, discretionary share plans, corporate governance and executive remuneration trends and shareholder consultation. WTW fees for
advice provided to the Committee were £77,954 (FY 2022: £115,500), charged on a time‑spent basis. WTW provides remuneration advice,
including the provision of benchmark data, to the Company.
Annual report on remuneration
continued
Governance report
FirstGroup Annual Report and Accounts 2023
132
Shareholder voting on remuneration
At the 2021 AGM, shareholders approved the Directors’ Remuneration Report and Directors’ Remuneration Policy which were published in
the FY 2021 Annual Report and Accounts. The results of these votes are shown below, together with the result of previous shareholder votes
on remuneration resolutions since 2015.
To approve the Directors’
Remuneration Report
at the 2022 AGM
To approve the Directors’
Remuneration Policy
at the 2021 AGM
2022 AGM voting
2021 AGM voting
Votes for
478,167,186
Votes for
943,536,831
Votes against
90,005,515
Votes against
40,940,117
Votes withheld
1,319,750
Votes withheld
3,531,863
*
Note: A ‘Vote withheld’ is not a vote in law and is not counted in the calculation of the votes ‘For’ and ‘Against’ a resolution.
To approve the relevant Directors’ Remuneration Report
Votes For
Votes Against
2022 AGM
84.16%
15.84%
2021 AGM
98.43%
1.57%
2020 AGM
99.99%
0.01%
2019 AGM
76.32%
23.68%
2018 AGM
96.37%
3.63%
2017 AGM
91.32%
8.68%
2016 AGM
96.53%
3.47%
To approve the Directors’ Remuneration Policy
Votes For
Votes Against
2021 AGM
95.84%
4.16%
2018 AGM
84.52%
15.48%
2015 AGM
92.82%
7.18%
Further engagement
The Committee values its continued dialogue with shareholders and engages directly with them and their representative bodies at the
earliest opportunity. Shareholder feedback received in relation to the AGM, as well as any additional feedback and guidance received during
the year, is considered by the Committee as it develops the Company’s remuneration framework and practices.
In line with Provision 3 of the Code, the Committee Chair welcomes questions from shareholders on the Committee’s activities.
Sally Cabrini
Chair, Remuneration Committee
8 June 2023
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
133
Annual report on remuneration
continued
Compliance with the Corporate Governance Code
P
Remuneration policies and
practices designed to support
strategy
The Directors’ Remuneration Policy,
approved at the 2021 AGM, was
designed with consideration of
the UK Corporate Governance
Code. The majority of the Executive
Directors’ remuneration is through
performance‑related incentives linked
to the Group’s strategic goals. Half
of any Executive Directors’ annual
bonus that vests under the EABP
is deferred into shares that vest
after three years. Any awards that
vest under the LTIP are subject to
a further two‑year holding period.
Additionally, the Executive Directors’
have a shareholding guidelines and
post‑cessation shareholding guidelines
provide a clear link to the Group’s
ongoing performance and shareholder
experience. See pages 132‑141 of the
FY 2021 Annual Report and Accounts
for the full remuneration policy.
Q
Formal and transparent procedure
for developing policy on executive
remuneration
FirstGroup welcomes open and
frequent dialogue with shareholders
on its approach to remuneration. Major
shareholders have been consulted
on the Committee’s approach to
remuneration.
R
Directors to exercise independent
judgment and discretion when
authorising remuneration
outcomes
The remuneration policy allows for the
use of discretion to adjust the formulaic
incentive outcomes if they are not
reflective of underlying performance of
the Group. As noted under Provision
37, discretion has been applied to
reduce formulaic outcomes under
the EABP in FY 2020 and FY 2021,
resulting in no bonus being awarded
in either year.
32
Establish a remuneration
committee
The Company has a Remuneration
Committee in accordance with the
requirements of the Code.
33
Delegation of responsibilities and
review of workforce remuneration
and related policies
When determining senior team pay the
Committee considers it in the context
of wider workforce pay, policies and
practices. Each year, a number of items
are tabled at Committee meetings to
ensure the approach throughout the
Group is fair. See pages 115‑117 for
further information.
34
Non‑executive director
remuneration
The Company’s NEDs each receive
an annual fee reflecting the time
commitment for their roles. An
additional fee is paid to the Senior
Independent Director and Chairs of the
Audit, Remuneration and Responsible
Business Committees to reflect the
additional time commitment associated
with these roles. The NEDs do not
receive any performance‑related pay
or equity awards. NEDs are permitted
to buy shares in the Company, subject
to the Company’s share dealing code.
See page 127 for fees paid to NEDs
and the Chairman.
35
Consultants appointed by the
committee
Willis Towers Watson was appointed by
the Committee in FY 2020.
36
Remuneration schemes should
promote long‑term holdings by
executive directors
Executive Directors are required to
hold shares to the value of 200%
of base salary within five‑years of
appointment. Post‑cessation, Executive
Directors must maintain 100% of their
in‑employment shareholding guideline
in the first year following employment,
dropping to 50% in the second year (or
the full actual holding if lower).
37
Use of discretion
As noted in Principle R, the Committee
has the ability to use discretion to
override formulaic outcomes.
The Committee most recently used
their discretion to reduce formulaic
outcomes under the FY 2020 and FY
2021 EABP, resulting in no payout in
both years, to ensure performance is
reflective of the Company’s underlying
performance and aligned with the
shareholder experience. Additionally,
malus and clawback provisions apply
to both the EABP and LTIP.
38
Only basic salary to be pensionable
The Company complies with this
provision and pension contributions are
aligned with the wider workforce. See
page 118 for further information.
39
Notice and contractual periods
The notice and contractual periods for
the Executive Directors are for one year.
40
Matters to be addressed by the
committee when determining
remuneration
The current remuneration structures
address the principles of clarity,
simplicity, risk, predictability,
proportionality and alignment to
culture. See page 111 for further detail
on how the agreed Remuneration
Policy addresses these factors.
41
Report on the work of the
committee and reporting
requirements
The strategic rationale for our
Executive Director remuneration
policies and structures is set out in the
Remuneration Committee Chair’s letter
on pages 107‑109 and in the Annual
Report on Remuneration on pages
118‑133. The Committee is satisfied
that the remuneration outcomes are
appropriate, considering internal and
external measures and the wider
workforce pay.
We encourage an open dialogue
with shareholders on executive
remuneration matters.
In developing the Remuneration
Policy we consider alignment with
the wider workforce pay policies.
The Remuneration Committee Chair
regularly attends Employee Director
Forums and answers questions about
executive remuneration.
Governance report
FirstGroup Annual Report and Accounts 2023
134
Directors’ report and
additional disclosures
The Directors present their report on the
affairs of the Group, together with the
audited financial statements and the report
of the auditor for the 52 weeks ended
25 March 2023. Information required to be
disclosed in the Directors’ report may be
found below and are incorporated into the
Directors’ Report by cross reference to the
following sections of the Annual Report
and Financial Statements in accordance
with the Companies Act 2006 (the 2006
Act) and Listing Rule 9.8.4R of the Financial
Conduct Authority.
Information
Page
Sustainability governance
38
Greenhouse gas emissions
45
Likely future developments in the
business
18
Risk factors and principal risks; going
concern and viability statements
67‑77
Governance arrangements; human
rights and anti‑corruption and bribery
matters
56
Long‑term incentive schemes
114
Financial instruments and related
market transactions
162‑163
Directors
The Directors of the Company who served
during the year, and those appointed after
the end of the financial year, are shown on
pages 88‑90. Warwick Brady and Julia Steyn
stepped down following the 2022 AGM on
27 July 2022. Myrtle Dawes and Graham
Sutherland were appointed to the Board with
effect from 1 April 2022 and 16 May 2022
respectively.
Details of the Directors’ interests in shares
can be found in the Directors’ remuneration
report on page 130.
During the year, no Director had any
interest in any shares or debentures in the
Company’s subsidiaries, or any material
interest in any contract with the Company or
a subsidiary being a contract of significance
in relation to the Company’s business.
Powers of the Directors
The Directors are responsible for the
management of the business of the
Company and may exercise all powers of the
Company subject to applicable legislation
and regulation and the Company’s Articles.
Directors’ indemnities and
liability insurance
FirstGroup maintains liability insurance for
its Directors and Officers. The Company
has also granted indemnities to the extent
permitted by law to each of the Directors,
the Company Secretary and a number of
other executives and senior managers.
These indemnities are uncapped in amount
in relation to certain losses and liabilities
which they may incur to third parties in the
course of acting as a Director or Officer
of the Company or any of its associated
companies. Neither the indemnity, nor
insurance cover provides cover in the
event a Director or Officer is proved to
have acted fraudulently or dishonestly. The
indemnity is categorised as a ‘qualifying
third‑party indemnity’ for the purposes of
the Companies Act 2006 and will continue in
force for the benefit of Directors and Officers
on an ongoing basis.
Conflicts of interest
The Directors have a statutory duty under
the Companies Act 2006 to avoid situations
in which they have, or can have, a direct or
indirect interest that conflicts, or may conflict,
with the interests of the Company. This
duty is in addition to the existing duty that a
Director owes to the Company to disclose to
the Board any transaction or arrangement
under consideration by the Company. The
Company’s conflict of interest procedures
are reflected in the Articles. In line with the
Companies Act 2006, the Articles allow the
Directors to authorise conflicts and potential
conflicts of interest where appropriate. The
decision to authorise a conflict can only be
made by non‑conflicted Directors. Directors
do not participate in decisions concerning
their own remuneration or interests.
The Company Secretary minutes the
consideration of any conflict or potential
conflict of interest and authorisations granted
by the Board. On an ongoing basis, the
Directors inform the Company Secretary
of any new, actual or potential conflict of
interest that may arise or if there are any
changes in circumstances that may affect
an authorisation previously given. Even
when authorisation is given, a Director is
not absolved from their duty to promote the
success of the Company.
Furthermore, the Articles include provisions
relating to confidential information,
attendance at Board meetings and
availability of Board papers to protect a
Director from breaching their duty if a conflict
of interest arises. These provisions will only
apply where the circumstance giving rise to
the potential conflict of interest has previously
been authorised by the Directors. The Board
considers that the formal procedures for
managing conflicts of interest currently in
place have operated effectively during the
year under review.
Election and re‑election of Directors
Directors are required under the Articles
to submit themselves for election by
shareholders at the AGM following their
appointment by the Board. Also, in
accordance with best practice and the Code,
all of our Directors put themselves forward
for re‑election by shareholders annually and
will do so at the AGM on 21 July this year.
Disclosure of information to the
external auditor
Each of the Directors who held office at
the date of approval of this report confirm
that, so far as they are aware, there is no
relevant audit information (being information
needed by the auditor in connection with
preparing their audit report), of which the
Company’s auditor is unaware, and each of
the Directors has taken all the steps that they
ought reasonably to have taken as a Director
in order to make themselves aware of any
relevant audit information and to establish
that the Company’s auditor is aware of that
information.
This confirmation is given and should be
interpreted in accordance with the provisions
of Section 418 of the Companies Act 2006.
Share capital
As at 25 March 2023, the Company’s issued
share capital was 750,596,762 ordinary
shares of 5 pence, each credited as fully
paid and the Company held 30,306,435
of these shares in treasury, and the issued
share capital of the Company which carries
voting rights of one vote per share comprised
720,290,327 ordinary shares. Given the
ongoing buyback programme these figures
continue to change – announcements are
made to the market each day that shares
are repurchased. Further details of the
Company’s issued share capital are shown
in note 28 to the Company’s financial
statements.
The Company’s shares are listed on the
London Stock Exchange.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
135
Substantial shareholdings
As at 25 March 2023, the Company had been notified under the FCA’s Disclosure, Guidance
and Transparency Rule of the following interests in its total voting rights of 3% or more:
Name of shareholder
Number of
ordinary
shares
%
of total
voting rights
Date of
notification
Schroders Plc
102,087,662
13.86
8 February 2023
Ameriprise Financial, Inc.
1
112,529,975
14.99
29 November 2022
Coast Capital Management LP
25,169,383
3.35
20 May 2022
Aberforth Partners LLP
49,386,172
6.61
3 December 2021
Majedie Asset Management Limited
60,915,714
4.99
3 February 2021
Lombard Odier Asset Management Limited
55,461,667
4.54
16 December 2020
Between 25 March 2023 and the date of this report:
1
Ameriprise Financial, Inc. notified the Company on 30 May 2023 that their holding had decreased to
98,672,583 shares which represented 13.99% of total voting rights as at the date of notification.
Dividend rights
Shareholders may by ordinary resolution
declare dividends but the amount of the
dividend may not exceed the amount
recommended by the Board.
Transfer of shares
There are no specific restrictions on the size
of a holding, nor on the transfer of shares
which are both governed by the general
provisions of the Company’s Articles and
prevailing legislation. The Directors are not
aware of any agreements between holders
of the Company’s shares that may result in
restrictions on the transfer of securities or on
voting rights at any meeting of the Company.
Going concern and viability
Directors are required to consider if it is
appropriate to adopt the going concern
basis of accounting. Disclosure of the
Directors’ deliberations to determine
whether it is appropriate to adopt the going
concern basis of accounting in addition to
consideration of the material uncertainties
which may affect the Group’s ability to
continue to adopt this basis can be found in
the Going Concern statement on page 77,
the Audit Committee report on page 101
and in note 2 to the financial statements.
In summary, the Directors have concluded
that it is appropriate to prepare the financial
statements on a going concern basis.
Directors are also required to provide a
broader assessment of viability over a longer
period, which can be found on page 76.
Articles of Association
The description in this section summarises
certain provisions of the Company’s
Articles and applicable Scottish law
concerning companies. This summary is
qualified in its entirety by reference to this
Company’s Articles and the Companies
Act 2006. The Company’s Articles may
be amended by a special resolution of the
Company’s shareholders.
Shares
The rights attached to the ordinary shares of
the Company are defined in the Company’s
Articles. No person has any special rights
of control over the Company’s share capital
and all issued shares are fully paid.
Voting rights
Shareholders are entitled to attend and vote
at any general meeting of the Company. It
is the Company’s practice to hold a poll on
every resolution at general meetings. Every
member present in person or by proxy has,
upon a poll, one vote for every share held. In
the case of joint holders of a share the vote
of the senior who tenders a vote, whether
in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint
holders and, for this purpose, seniority shall
be determined by the order in which the
names stand in the Register of Members in
respect of the joint holding.
Employee share plans
The Company operates a number of
employee share plans, details of which
are set out in note 36 and in the Directors’
Remuneration Report that starts on
page 107.
All of the Company’s employee share plans
contain provisions relating to change of
control. On a change of control, options
and awards granted to employees may vest
and become exercisable, subject to the
satisfaction of any applicable performance
conditions at the time.
Employment of disabled persons
Applicants with disabilities are given full
and fair consideration during recruitment
processes. We are committed to supporting
employees with disabilities with regard to
training, career development and promotion.
Our policies on employee consultation and
on equal opportunities for all employees can
be found on page 47‑50.
Employee engagement
We remain committed to employee
involvement throughout the Group.
Employees are kept well informed of the
performance and strategy of the Group and
other matters of concern through a variety of
means including personal briefings, regular
meetings, email and broadcasts by the Group
Chief Executive and other senior managers.
Refer to page 50 for further information.
Stakeholder engagement
The Board has determined that the Group’s
stakeholders are customers, investors,
government, employees, communities
and our strategic partners and suppliers.
The Board is aware that its actions and
decisions impact our stakeholders. Effective
engagement with stakeholders is important
to the Board as it strengthens the business
and helps to deliver a positive result for all
our stakeholder groups. In order to comply
with Section 172 of the Companies Act, the
Board is required to take into consideration
the interests of stakeholders and include
a statement setting out the way in which
Directors have discharged this duty during
the year. The Group’s stakeholders are
identified on pages 78‑80 of the Strategic
report and the statement of compliance with
Section 172 is set out on page 81. Further
information on workforce engagement can
also be found on page 50.
Directors’ report and additional disclosures
continued
Governance report
FirstGroup Annual Report and Accounts 2023
136
Purchase of own shares
At the AGM of the Company in 2022
authority was granted for the Company to
purchase up to 10% of its ordinary shares.
The Company announced a buyback
programme on 16 December 2022 under
the authority granted at the 2022 AGM. The
Company anticipates seeking authority to
purchase up to 14.99% of its ordinary shares
at the AGM in 2023.
Political donations
At the 2022 AGM, shareholders passed a
resolution to authorise the Company and
its subsidiaries to make political donations
to political parties or independent election
candidates, to other political organisations,
or to incur political expenditure (as such
terms are defined in sections 362 to 379
of the 2006 Act), in each case in amounts
not exceeding £100,000 in aggregate. As
the authority granted at the 2022 AGM
will expire, renewal of this authority will be
sought at this year’s AGM. Further details are
available in the Notice of AGM.
As a result of the broad definition used in
the 2006 Act of matters constituting political
donations, it is possible that normal business
activities, which might not be thought to be
political expenditure in the usual sense, could
be covered. Accordingly, authority is being
sought as a precaution to ensure that the
Company’s normal business activities do not
infringe the 2006 Act, but it is not the policy
of the Company to make donations to UK or
EU political organisations, nor to incur other
political expenditure in the UK or EU.
No political donations nor expenditure was
incurred by the Company and its subsidiaries
during FY 2023.
Change of control – significant
agreements
Financing agreements
As at 25 March 2023, the Group had a
£300m multi‑currency revolving credit
and guarantee facility between, amongst
others, the Company and The Royal Bank
of Scotland plc dated 27 August 2021,
maturing in August 2026, which refinanced
the Group’s existing revolving credit and
guarantee facilities. Following any change of
control of the Company, individual lenders
may negotiate with the Company with a
view to resolving any concerns arising from
such change of control. If the matter has not
been resolved within 30 days, an individual
bank may cancel its commitment and the
Company must repay the relevant proportion
of any drawdown.
The outstanding £184.3m 6.875% bonds
due 2024 issued by the Company may
also be affected by a change of control of
the Company. Upon a change of control of
the Company, provided that certain further
thresholds in relation to the credit rating of
the bonds are met, the bondholders have
the option to require the Company to redeem
the bonds.
First Rail
The Group’s contracted passenger rail
operators, First TransPennine Express
Limited, First Greater Western Limited, First
MTR South Western Trains Limited (jointly
owned with MTR Corporation) and First
Trenitalia West Coast Rail Limited (jointly
owned with Trenitalia) are each party to a
contractual agreement with the Secretary
of State for Transport. These agreements
are subject to termination clauses which
may apply on a change of control. First MTR
South Western Trains Limited, First Greater
Western Limited, First Trenitalia West Coast
Rail Limited and the Group’s non‑contracted
rail operators, Hull Trains Company Limited
and East Coast Trains Limited, each hold
railway licences as required by the Railways
Act 1993 (as amended); these licences
may be revoked on three months’ notice
if a change of control occurs without the
approval of the Office of Rail and Road. All
of these operators also require and hold
track access agreements with Network Rail
Infrastructure Limited under which they are
permitted to access railway infrastructure.
Failure by any of the operators to maintain
its railway licence is a potential termination
event under the terms of the track access
agreements. The Group’s railway operators
also lease rolling stock from specialist rolling
stock leasing companies such as Eversholt
Rail Group, Rock Rail Limited, Beacon Rail
Limited, Porterbrook Leasing Company
Limited and Angel Trains Limited. A material
number of the individual leasing agreements
include change of control provisions. The
Group is also involved from time to time in
bidding processes for transport contracts in
the UK and further afield which customarily
include change in circumstance provisions
which would be triggered on a change of
control and could result in termination or
rejection from further participation in the
relevant competitions.
Significant shareholders’ agreements
The Group, through First Rail Holdings
Limited, has shareholders’ agreements
governing its relationship with MTR
Corporation in relation to the SWR rail
operator and with Trenitalia in relation to
the West Coast Partnership rail operator.
As is customary, these agreements include
provisions addressing change of control.
Post balance sheet events
Information on material events that occurred
from 25 March 2023 to the date of this report
can be found on page 220 and in note 39.
Branch disclosure
The Group has a branch in France (First
Travel Solutions Ltd), which was established
on 28 March 2019.
Streamlined Energy and Carbon
Reporting (SECR) compliance
In compliance with the SECR requirements,
our GHG emissions and our energy
consumption and energy and emissions
reduction initiatives are reported on page 45.
Management report
The Strategic and Directors’ reports together
are the management report for the purposes
of the FCA’s DGTR 4.1.5R.
The Directors’ report was approved on
behalf of the Board on 8 June 2023.
David Blizzard
Company Secretary
8 June 2023
395 King Street, Aberdeen AB24 5RP
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
137
Directors’ responsibility statement
Statement of Directors’
responsibilities in respect of the
Financial Statements
The Directors are responsible for preparing
the Annual Report and Accounts 2023 and
the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the group financial statements
in accordance with UK‑adopted international
accounting standards and the company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”, and
applicable law).
Under company law, directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Company and of the profit or loss
of the group for that period. In preparing
the financial statements, the Directors are
required to:
■
select suitable accounting policies and then
apply them consistently;
■
state whether applicable UK‑adopted
international accounting standards have
been followed for the group financial
statements and United Kingdom Accounting
Standards, comprising FRS 101 have
been followed for the company financial
statements, subject to any material
departures disclosed and explained in the
financial statements;
■
make judgements and accounting estimates
that are reasonable and prudent; and
■
prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for
keeping adequate accounting records
that are sufficient to show and explain the
Group’s and Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group and
Company and enable them to ensure that
the financial statements comply with the
Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report and Accounts 2023, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed in Board of Directors
confirm that, to the best of their knowledge:
■
the group financial statements, which have
been prepared in accordance with UK‑
adopted international accounting standards,
give a true and fair view of the assets,
liabilities, financial position and profit of the
Group;
■
the company financial statements, which
have been prepared in accordance with
United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair
view of the assets, liabilities and financial
position of the Company; and
■
the Strategic report includes a fair review of
the development and performance of the
business and the position of the Group and
Company, together with a description of the
principal risks and uncertainties that it faces.
In the case of each Director in office at the
date the Directors’ report is approved:
■
so far as the director is aware, there is
no relevant audit information of which
the Group’s and Company’s auditors are
unaware; and
■
they have taken all the steps that they ought
to have taken as a director in order to make
themselves aware of any relevant audit
information and to establish that the Group’s
and Company’s auditors are aware of that
information.
Ryan Mangold
Chief Financial Officer
8 June 2023
395 King Street, Aberdeen AB24 5RP
Governance report
FirstGroup Annual Report and Accounts 2023
138
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
139
Financial
statements
Financial statements
FirstGroup Annual Report and Accounts 2023
140
Opinion
In our opinion:
■
FirstGroup plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of the
state of the group’s and of the company’s affairs as at 25 March 2023 and of the group’s profit and the group’s cash flows for the 52 week
period then ended;
■
the group financial statements have been properly prepared in accordance with UK‑adopted international accounting standards as applied
in accordance with the provisions of the Companies Act 2006;
■
the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
■
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2023 (the “Annual Report”), which comprise: the
Consolidated balance sheet and the Company balance sheet as at 25 March 2023; the Consolidated income statement, the Consolidated
statement of comprehensive income, the Consolidated statement of changes in equity, the Company statement of changes in equity, and
the Consolidated cash flow statement for the period then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non‑audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 6, we have provided no non‑audit services to the company or its controlled undertakings in the period
under audit.
Independent auditors’ report
to the members of FirstGroup plc
Report on the audit of the financial statements
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
141
Our audit approach
Context
The Group now operates in the UK only after the sale of their US divisions in the prior year. The Group consists of two main divisions, Rail
and Bus. In the Rail division, all train operating companies have continued to be operating under contracts with the Department for Transport
(“DfT”) for FY23, with TransPennine Express (TPE), Great Western Railway (GWR) and South Western Railway (SWR) on National Rail
Contracts and Avanti West Coast (AWC) under an Emergency Recovery Measures Agreement (ERMA), which has meant a fixed
management fee was received to operate at agreed service levels, as well as a performance‑based fee element. At the date of reporting
TPE has ceased operating as no extension was granted to their existing NRC which expired on 28 May 2023. The structure of the contracts
within the Rail division has reduced the revenue and cost risk compared to the previous franchise arrangements. Outside of the TOCs the
Rail Division also consists of Hull Trains and East Coast Trains which continue to perform strongly and have experienced growth year on
year. First Bus continued to receive government support in the way of Business Recovery Grants (BRG) in England, Bus Emergency Scheme
(BES) in Wales and Bus Service Operators Grant (BSOG) in Scotland throughout the year which requires the business to operate a certain
level of service and reimburses based on pre‑covid revenue levels to compensate for slower return of passenger levels. In addition the
introduction of the £2 bus fare cap in England has provided further government revenue support in the Bus division with the announcement
in May that this will be extended until October 2024. The Bus division continues to expand its contractual business. There is one change to
our key audit matters this year, as explained later in the report, in relation to the Valuation of the Transit Earn Out. The Group has continued
to realise value from retained assets from the sale of Greyhound, including the sale of a number of properties that provided material profit
on disposal. This year we have also specifically set out our consideration of the impact of climate change on the audit which is further
explained below.
Overview
Audit scope
■
The scope of our audit determines where we go and what we do, the best types of audit evidence to obtain, the right areas of operations
to focus on and the resources needed to deliver this. As group auditors we are required to obtain sufficient audit evidence from the
components of the group. We have determined there are five components for group reporting purposes
■
Each Rail Train Operating Company (TOC) is a separate component, and the three largest TOCs are in scope for group reporting, being
Great Western Railway (GWR), South Western Railway (SWR), and Avanti West Coast (AWC)
■
UK Bus
Key audit matters
■
Valuation of pension liabilities driven by salary increase, mortality, discount rate and inflation levels assumptions (group)
■
Valuation of complex investments within the pension assets (group)
■
Recoverability of the company’s investments in subsidiary undertakings (parent)
Materiality
■
Overall group materiality: £20,000,000 (2022: £9,750,000) based on 0.42% of revenue from continuing operations.
■
Overall company materiality: £16,200,000 (2022: £27,128,000) based on 1% of total assets.
■
Performance materiality: £15,000,000 (2022: £7,300,000) (group) and £12,150,000 (2022: £20,346,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Valuation of Transit Earn Out (group), which was a key audit matter last year, is no longer included because of a completed sale of the
Transit business by EQT which has reduced the level of management judgment required to estimate the fair value of the contingent
consideration receivable. Otherwise, the key audit matters below are consistent with last year.
Financial statements
FirstGroup Annual Report and Accounts 2023
142
Independent auditors’ report to the members of FirstGroup plc
continued
Key audit matter
How our audit addressed the key audit matter
Valuation of pension liabilities driven by salary
increase, mortality, discount rate and inflation
levels assumptions (group)
The group has gross defined benefit obligations in the UK and US
totalling £6,156.5m at 25 March 2023 (2022: £8,046.5m), excluding
agent arrangements. The valuation of pension plan liabilities requires
estimation in determining appropriate assumptions such as salary
increases, mortality rates, discount rates and inflation levels.
Movement in these assumptions can have a material impact on the
determination of the liability Management uses external actuaries
to assist in determining these assumptions, and this is considered
to be the significant audit risk.. In addition, there are restrictions
under IAS19 and IFRIC 14 as to when a net pension surplus should
be recognised, as well as balance sheet adjustments in respect of
First Rail due to the Rail contracts. Refer note 37 and the Critical
accounting judgements and key sources of estimation uncertainty
section in note 2. Refer to the Audit Committee report on page 101
for a description of its assessment of this significant judgement.
We used our actuarial experts to assess whether the assumptions
used in calculating the defined benefit liabilities for the UK,US and
Canadian Schemes were reasonable and in line with accounting
standards. We assessed whether mortality rate assumptions were
appropriate for each plan and, where applicable, incorporated
considerations of relevant national actuarial data. We also assessed
whether the discount rate and inflation rates were consistent
with our internally developed benchmarks and in line with market
information. We examined the salary increase assumptions to
consider whether they represent management’s best estimate. In
addition to our significant risk areas, we reviewed the trust deeds
and statutory legislation relevant to each plan where applicable,
and concur with management’s view that the surplus in the Local
Government Pension Schemes cannot be recognised in full on the
balance sheet. We tested the IFRIC 14 adjustments in respect of
these plans, agreed the value of the restrictions and found them
to be reasonable, based on the specifics of each plan. We also
assessed management’s judgement with regard to the rail franchise
adjustment and found no exceptions. We evaluated the calculations
prepared by the external actuaries to assess the consistency of
the assumptions used. Where there has been updated Funding
Valuations, we have performed completeness checks and reviewed
movements in the census data for each scheme by reference to
the latest Funding Valuation performed. In addition we performed
two‑way testing of the listings of active members back to the scheme
administrator records, or alternate procedures where appropriate .
We have reviewed the controls report of the administrators where
available and identified no exceptions relating to members’ data.
Based on procedures performed we consider that the assumptions
used to value the pension obligation are within an acceptable range
other than a trivial difference. We assessed the appropriateness of
the related disclosures in note 37 of the group financial statements
and consider them to be materially appropriate.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
143
Key audit matter
How our audit addressed the key audit matter
Valuation of complex investments
within the pension assets (group)
As set out in note 37, the group has gross defined benefit plan
assets in the UK and US totalling £6,220.0m at 25 March 2023
(2022: £7,133.1m) from continuing operations (excluding agent
arrangements). The pension schemes in which the Group
participates hold unquoted plan assets in private equity,
infrastructure and property funds. There is significant estimation
uncertainty in determining the valuation of these investments
which are based on inputs that are not directly observable. The
funds where the valuation requires significant judgement across
the group total £467m (2022: £531m). The funds are present in the
FirstGroup UK Bus Pension Scheme. There is a potential range of
reasonable outcomes to the valuations of these assets greater than
our materiality for the financial statements as a whole.
We obtained pricing confirmations directly from investment
managers and custodians as primary sources of evidence. We also
performed additional procedures on investments that are more
complex in nature to evaluate whether there is any contradictory
evidence suggesting that the pricing confirmations do not reflect an
appropriate valuation as at the balance sheet date. For investments
considered more complex these procedures included one or more
of the following: Obtained third party controls assurance reports
and bridging letters on the valuations procedures and investment
managers’ operations for the current financial year; Reviewed the
pricing of transactions taking place close to the balance sheet
date; Performed look back testing of previous valuations provided
by investment managers to audited financial statements of the
underlying funds; Performed independent internet based searches
for information suggesting any doubts in the investment managers’
capability of pricing; and/or Reviewed investment contributions and
distributions between the valuation date and the balance sheet date
and obtained affirmations from investment managers that the price
taken is the latest price available where the valuation date is different
to the balance sheet date. Based on the procedures performed we
have no findings to report.
Recoverability of the company’s investments
in subsidiary undertakings (parent)
As set out in note 5 to the Company financial statements,
investments in subsidiaries are £740.7m (2022: £2,147.9m).Of this
balance, £659.3m relates to the direct and indirect ownership
of the Bus division. The investments are accounted for at cost
less provision for impairment in the Company balance sheet at
25 March 2023. The carrying value of the investment in Bus is
supported by the recoverable amount which has been calculated
on a value in use basis. Investments are tested for impairment if
impairment indicators exist. If such indicators exist, the recoverable
amounts of the investments in subsidiaries are estimated in order to
determine the extent of any impairment loss. Consideration is also
given to whether there are indications that impairments previously
booked should be reversed. Management have prepared a value
in use model which shows headroom compared to the carrying
value of the investment. This is considered a significant audit risk.
Judgement is required in this area, particularly in assessing whether
the carrying value of an asset can be supported by the recoverable
value, being the higher of fair value less cost of disposal or the net
present value of future cash flows which are estimated based on the
continued use of the asset in the business. Refer to note 5 in the Plc
company accounts and the Critical accounting judgements and key
sources of estimation uncertainty section in note 1.
The recoverable value of the investment in First Bus subsidiaries
was determined from the discounted future cash flows of the Bus
division. We obtained management’s value in use impairment
assessment and ensured the calculations were mathematically
accurate. We evaluated the inputs in the value in use calculation and
challenged the key assumptions including:
■
The operating margins forecast to be achieved, noting that the
margins in the terminal year are consistent with those achieved in
the industry pre‑covid;
■
Using our internal valuation experts to calculate an independent
WACC rate range, with reference to comparable businesses;
■
With the support of internal valuation experts assessing the long
term growth rate applied. We evaluated the extent to which the
considerations of climate change, such as capital expenditure
on battery, electric and hydrogen fuel cell vehicle fleets had
been reflected in the underlying cash flows. We recalculated
management’s own sensitivity analysis of key assumptions
used in the value in use assessment and also performed our
own independent sensitivity testing to include the application of
reasonable alternative individual and combined risk scenarios in
order to assess for any potential material impairment under such
conditions. Based on our procedures we did not identify any
matters indicating that management’s model was inappropriate.
We have assessed the disclosures provided and consider them
to be appropriate. For non‑Bus investments we have assessed
the value of the US investment to the cash that is expected
to be received in relation to the Earn Out which provides
sufficient support.
Financial statements
FirstGroup Annual Report and Accounts 2023
144
Independent auditors’ report to the members of FirstGroup plc
continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which
they operate.
Following the disposal of First Student, First Transit and Greyhound in the prior year, the Group is organised into two operating divisions,
First Bus and First Rail. There are 123 reporting units within the consolidation, the majority of which are inactive although there is some
trading activity in nine reporting units in addition to those included in Group reporting scope. We have defined a component as a business
unit where legal entities have been grouped together based on the fact they have the same management, the same control environment and
also considering the way the component reports to the group. We have determined there are four components required for Group reporting
as follows: SWR, GWR, AWC and UK Bus.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process management on climate change adopted to assess
the extent of the potential impact of climate risk on the Group’s financial statements and support the disclosures made within the Note 2
and Note 11.
In addition to enquiries with management, we also:
■
Read the governance processes in place to assess climate risk
■
Read additional reporting made by the entity on climate including its Environmental Performance Report 2023
We challenged the completeness of management’s climate risk assessment by:
■
Reading external reporting made by management including the Carbon Disclosure Project submissions
■
Reading the entity’s website /communications for details of climate related impacts
Management have made commitments to operate a fully zero emission Bus fleet by 2035. Management considers the impact of climate risk
does give rise to a potential material financial statement impact.
The key areas of the financial statements where management evaluated that climate risk has a potential significant impact are disclosures
relating to impairment assessment of goodwill and carrying value of investments in subsidiaries.
Using our knowledge of the business we evaluated management’s risk assessment, its estimates as set out in note 2 of the financial
statements and resulting disclosures where significant. We considered the following areas that could potentially be materially impacted by
climate risk and consequently we focused our audit work in these areas:
■
Valuation of goodwill
■
Carrying value of investment is subsidiaries
To respond to the audit risks identified in these areas we tailored our audit approach to address these, in particular, we:
■
Challenged management on how the impact of climate commitments made by the Group would impact the assumptions within the
discounted cash flows prepared by management that are used in the Group’s impairment analysis.
■
Evaluated whether the impact of both physical and transition risks arising due to climate risk had been appropriately included in the
recoverable value of the Group’s assets.
■
Challenged whether the impact of climate risk in the Directors’ assessments and disclosures of going concern and viability were consistent
with management’s climate impact assessment.
We also considered the consistency of the disclosures in relation to climate change (including the disclosures in the Task Force on
Climate‑related Financial Disclosures (TCFD) section) within the Annual Report with the financial statements and our knowledge obtained
from our audit.
Our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key audit matters
for the period ended 25 March 2023.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
145
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – group
Financial statements – company
Overall materiality
£20,000,000 (2022: £9,750,000).
£16,200,000 (2022: £27,128,000).
How we determined it
Based on 0.42% of revenue from continuing operations
1% of total assets
Rationale for benchmark applied
Revenue is considered to be the most appropriate
benchmark for the financial year. In the engagement
leader’s judgement £20 million is an appropriate
materiality for a group of the scale and size of
FirstGroup plc.
The entity is a holding company of the rest of the
Group and is not a trading entity. Therefore an
asset based measure is considered appropriate.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £13,500,000 and £19,000,000. Certain components are audited to a local statutory
audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our
performance materiality was 75% (2022: 75%) of overall materiality, amounting to £15,000,000 (2022: £7,300,000) for the group financial
statements and £12,150,000 (2022: £20,346,000) for the company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1,000,000 (group
audit) (2022: £470,000) and £1,000,000 (company audit) (2022: £470,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Financial statements
FirstGroup Annual Report and Accounts 2023
146
Independent auditors’ report to the members of FirstGroup plc
continued
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of
accounting included:
■
obtaining and agreeing management’s going concern assessment to the business’s board approved plan and ensuring that the base case
scenario indicates that the business generates sufficient cash flows to meets its obligations within the going concern assessment period
while complying with covenant arrangements;
■
considering the extent to which the group’s and company’s future cash flows might be adversely affected by the long term impacts of
COVID‑19 and the impact of the cost of living crisis; reviewing management’s cash flow forecasts, assessing the existing sources of finance
and considering the overall impact on liquidity;
■
ensuring the mathematical accuracy of management’s models;
■
evaluating management’s severe but plausible scenario and ensuring this is appropriately modelled through the cash flows;
■
considering the risk of breach of the covenant arrangements in place for external borrowings under the severe but plausible scenario;
■
evaluating whether the cashflows in the going concern period include the costs associated with achieving the group’s climate change goals
such as capital expenditure on battery, electric and hydrogen fuel cell vehicle fleet;
■
performing further sensitivity analysis on the severe but plausible scenario;
■
considering the adequacy of the disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the
company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information, which includes reporting based on the Task Force on Climate‑related Financial
Disclosures (TCFD) recommendations. Our opinion on the financial statements does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters
as described below.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
147
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report
for the period ended 25 March 2023 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Annual report on remuneration to be audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer‑term viability and that part of the
corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material
to add or draw attention to in relation to:
■
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
■
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
■
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the group’s and company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements;
■
The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers and why the
period is appropriate; and
■
The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and
meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer‑term viability of the group and company was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with
the financial statements and our knowledge and understanding of the group and company and their environment obtained in the course
of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
■
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s and company’s position, performance, business model and strategy;
■
The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
■
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by
the auditors.
Financial statements
FirstGroup Annual Report and Accounts 2023
148
Independent auditors’ report to the members of FirstGroup plc
continued
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the Financial Statements, the directors are responsible
for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and
fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non‑compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non‑compliance with laws and regulations
related to employment laws and regulations and health and safety legislation, and we considered the extent to which non‑compliance might
have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial
statements such as Companies Act 2006 and UK tax legislation. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to
posting inappropriate journal entries including those to increase revenue and management bias within accounting estimates. The group
engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in
response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included:
■
Enquiries of management at the Group and divisional levels;
■
Enquiries of the Group and Rail legal teams;
■
Enquiries with component auditors;
■
Review of internal audit reports in so far as they related to the financial statements;
■
Identifying and testing journal entries, in particular certain journal entries posted with unusual account combinations which result in an
impact to revenue; and
■
Challenging estimates and judgements made by management in determining significant accounting estimates, in particular in relation
to valuation of pensions liabilities, valuation of complex investments within the pension assets and recoverability of investments held by
the parent.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non‑compliance
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
149
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
■
we have not obtained all the information and explanations we require for our audit; or
■
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches
not visited by us; or
■
certain disclosures of directors’ remuneration specified by law are not made; or
■
the company financial statements and the part of the Annual report on remuneration to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 5 November 2020 to audit the financial
statements for the year ended 27 March 2021 and subsequent financial periods. The period of total uninterrupted engagement is three
years, covering the periods ended 27 March 2021 to 25 March 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of
the ESEF‑prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with
the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report
has been prepared using the single electronic format specified in the ESEF RTS.
Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
8 June 2023
Financial statements
FirstGroup Annual Report and Accounts 2023
150
Continuing Operations
Notes
2023
£m
2022
£m
Revenue
3,5
Operating costs
6
(4,601.1 )
(4,468.3 )
Operating profit
5,6
Investment income
8
Finance costs
8
(69.1 )
(141.6 )
Profit/(loss) before tax
(17.7 )
Tax
9
(10.4 )
Profit/(loss) from continuing operations
(5.8 )
Profit from discontinued operations
21
Profit for the year
Attributable to:
Equity holders of the parent
Non‑controlling interests
Earnings per share
Earnings per share for profit/(loss) from continuing operations attributable to the
ordinary equity holders of the Company
Basic earnings per share
(1.1 )p
Diluted earnings per share
(1.1 )p
Earnings per share for profit attributable to the ordinary equity holders of the Company
Basic earnings per share
10
Diluted earnings per share
10
Adjusted results (from continuing operations)
1
Adjusted operating profit
4
Adjusted profit before tax
Adjusted EPS
10
Adjusted diluted EPS
1
Adjusted for certain items as set out in note 4.
The accompanying notes form an integral part of this consolidated income statement.
Consolidated income statement
For the 52 weeks ended 25 March
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
151
Notes
2023
£m
2022
£m
Profit for the year
Items that will not be reclassified subsequently to profit or loss
Actuarial (losses)/gains on defined benefit pension schemes
37
(150.9 )
Deferred tax on actuarial losses/(gains) on defined benefit pension schemes
(22.1 )
(113.7 )
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements
29
(6.3 )
Deferred tax on derivative hedging instrument movements
(1.3 )
(10.8 )
Cumulative loss on hedging instruments reclassified to the income statement
Exchange differences on translation of foreign operations – continuing operations
(5.6 )
Exchange differences on translation of foreign operations – discontinued operations
Non‑controlling interests share of loan waived
Reclassification of foreign currency translation reserve on discontinued operations (see note 21)
(543.4 )
(480.2 )
Other comprehensive loss for the year
(102.7 )
(380.0 )
Total comprehensive (loss)/income for the year
(7.4 )
Attributable to:
Equity holders of the parent
(15.6 )
Non‑controlling interests
(7.4 )
Total comprehensive (loss)/income for the year attributable to owners of FirstGroup plc arises from:
Attributable to:
Continuing operations
(22.6 )
Discontinued operations
(7.4 )
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
Consolidated statement of comprehensive income
For the 52 weeks ended 25 March
Financial statements
FirstGroup Annual Report and Accounts 2023
152
Notes
2023
£m
2022
£m
Non‑current assets
Goodwill
11
Other intangible assets
12
Property, plant and equipment
13
Contingent consideration receivable
17
Deferred tax assets
26
Retirement benefit assets
37
Derivative financial instruments
25
Financial assets
25
Investments
14
Current assets
Inventories
16
Trade and other receivables
17
Contingent consideration receivable
17
Current tax assets
Cash and cash equivalents
20
Derivative financial instruments
25
Assets held for sale – continuing operations
18
Assets held for sale – discontinued operations
18,21
Total assets
Current liabilities
Trade and other payables
19
Tax liabilities – Current tax liabilities
– Other tax and social security
Borrowings
22
Derivative financial instruments
25
Provisions
27
Current liabilities
Net current liabilities
(253.9 )
(546.8 )
Non‑current liabilities
Borrowings
22
Derivative financial instruments
25
Retirement benefit liabilities
37
Provisions
27
Total liabilities
Net assets
Equity
Share capital
28
Share premium
Hedging reserve
29
(0.7 )
Other reserves
29
Own shares
29
(15.4 )
(9.0 )
Translation reserve
30
(16.3 )
(24.0 )
Retained earnings
Equity attributable to equity holders of the parent
Non‑controlling interests
Total equity
The accompanying notes form an integral part of this consolidated balance sheet.
Ryan Mangold
8 June 2023
Consolidated balance sheet
As at 25 March
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
153
Share
capital
(note 28)
£m
Share
premium
£m
Hedging
reserve
(note 29)
£m
Other
reserves
(note 29)
£m
Own
shares
(note 29)
£m
Translation
reserve
(note 30)
£m
Retained
earnings
£m
Total
£m
Non‑
controlling
interests
£m
Total
equity
£m
Balance at 28 March 2021
(3.4 )
(9.0 )
(89.6 )
(23.9 ) 1,154.1
Profit for the year
Other comprehensive income/(loss)
for the year
(548.7 )
(415.4 )
(380.0 )
Total comprehensive income/(loss)
for the year
(548.7 )
Derivative hedging instrument movements
transferred to balance sheet (net of tax)
(10.4 )
(10.4 )
(10.4 )
Transactions with owners in their
capacity as owners
Shares issued
Shares bought back and cancelled
(23.8 )
(500.0 )
(506.0 )
(506.0 )
Disposal of non‑controlling interest in
First Transit
(0.7 )
(0.7 )
Dividends paid/other
(7.9 )
(5.9 )
Movement in EBT and treasury shares
(16.8 )
(16.8 )
(16.8 )
Share‑based payments
Balance at 26 March 2022
(9.0 )
(24.0 )
Balance at 27 March 2022
(9.0 )
(24.0 )
Profit for the year
Other comprehensive income/(loss)
for the year
(113.7 )
(102.7 )
(102.7 )
Total comprehensive income/(loss)
for the year
(26.6 )
(15.6 )
(7.4 )
Derivative hedging instrument movements
transferred to balance sheet (net of tax)
(23.3 )
(23.3 )
(23.3 )
Transactions with owners in their
capacity as owners
Shares issued
Shares bought back but not yet cancelled
(31.6 )
(31.6 )
(31.6 )
Liability for shares not yet bought back
(43.9 )
(43.9 )
(43.9 )
Dividends paid
(14.7 )
(14.7 )
(6.1 )
(20.8 )
Movement in EBT and treasury shares
(6.4 )
(8.6 )
(15.0 )
(15.0 )
Share‑based payments
Deferred tax on share‑based payments
Balance at 25 March 2023
(0.7 )
(15.4 )
(16.3 )
The accompanying notes form an integral part of this consolidated statement of changes in equity.
Consolidated statement of changes in equity
For the 52 weeks ended 25 March
Financial statements
FirstGroup Annual Report and Accounts 2023
154
Notes
2023
£m
2022
restated
£m
Cash generated by operations
32
Tax paid
(1.0 )
(21.4 )
Interest paid
(70.0 )
(176.6 )
Net cash from operating activities
32
(12.2 )
Investing activities
Interest received
Proceeds from disposal of property, plant and equipment
Purchases of property, plant and equipment
(173.7 )
(241.9 )
Purchases of software
(4.2 )
(9.7 )
Proceeds from capital grant funding
Net proceeds from disposal of subsidiaries (net of cash disposed)
1
Settlement of foreign exchange hedge
(12.5 )
Acquisition of businesses
31
(30.6 )
(11.3 )
Net cash used in investing activities
Financing activities
Shares purchased by Employee Benefit Trust
(15.3 )
(23.5 )
Treasury shares purchased via share buyback scheme and directly associated costs (2022: tender offer)
(31.6 )
(506.0 )
External dividends paid
(14.7 )
Dividends paid to non‑controlling shareholders
(6.1 )
Shares issued
Repayment of CCFF
(298.2 )
Repayment of bond issues
(15.7 )
(674.4 )
Repayment of senior unsecured loans
(200.0 )
Repayment of bank facilities
(579.3 )
Repayment of lease liabilities
(546.9 )
(600.4 )
Repayment of asset backed financial liabilities
(10.6 )
(9.4 )
Fees for finance facilities
(1.7 )
Net cash flow used in financing activities
(640.9 )
(2,890.0 )
Net increase/(decrease) in cash and cash equivalents before foreign exchange movements
(743.0 )
Cash and cash equivalents at beginning of year
Foreign exchange movements
(4.0 )
(0.2 )
Cash and cash equivalents at end of year
1
2023 amount of £2.0 m comprises cash consideration received of £7.2 m less cash and cash equivalent sold of £5.2 m (2022: £2,320.0 m comprises cash consideration
of £2,478.7 m less cash and cash equivalents sold of £158.7 m per Note 21 (b) and (c).
Cash flows of discontinued operations are shown in note 21.
Notes
2023
£m
2022
£m
Reconciliation to cash flow statement
Cash and cash equivalents – Balance Sheet
20
791.4
787.7
Bank overdraft
22
(82.9)
(87.5)
Cash and cash equivalents at end of year per consolidated balance sheet
708.5
700.2
Consolidated cash flow statement
For the 52 weeks ended 25 March
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
155
Notes
2023
£m
2022
£m
Net increase/(decrease) in cash and cash equivalents in year
12.3
(743.0)
Decrease in debt excluding leases
15.7
1,751.9
Adjusted cash flow
28.0
1,008.9
Payment of lease liabilities
557.5
609.8
(Inception)/termination of leases
(1,231.8)
184.1
Foreign exchange movements
(4.0)
(3.8)
Other non‑cash movements
0.2
207.8
Movement in net debt in year
(650.1)
2,006.8
Net debt at beginning of year
(619.0)
(2,625.8)
Net debt at end of year
33
(1,269.1)
(619.0)
Other non‑cash movements consist of movements in supplier financing of £nil (2022: £159.2m), transfer of asset backed financial liabilities
of £nil (2022: £61.0m) on sale of disposal First Student and First Transit, amortisation of debt issue fees of £(0.6)m (2022: £(12.4)m) and other
non‑cash movements of £0.8m (2022: £nil).
Management considers that adjusted cash flow is an appropriate measure for assessing the Group cash flow as it is the measure that is
used to assess both Group and divisional cash performance against budgets and forecasts. Adjusted cash flow is stated prior to cash flows
in relation to debt excluding leases.
The accompanying notes form an integral part of this consolidated cash flow statement.
Note to the consolidated cash flow statement –
reconciliation of net cash flow to movement in net debt
Financial statements
FirstGroup Annual Report and Accounts 2023
156
Notes to the consolidated financial statements
General information
These financial statements are presented in pounds Sterling. Foreign operations are included in accordance with the accounting policies set
Significant accounting policies
requirements of the Companies Act 2006 (IFRS) and the applicable legal requirements of the Companies Act 2006, in addition to complying
The consolidated financial statements of FirstGroup plc comply with UK‑adopted international accounting standards and with the
requirements of the Companies Act 2006. These financial statements are also prepared in accordance with IFRSs as issued by the IASB,
including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRSs as issued by
the IASB for the periods presented. There were no unendorsed standards effective for the period ended 25 March 2023 affecting these
consolidated and separate financial statements.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, and on a
going concern basis as described in the going concern statement within the Strategic report on page 77.
As set out on page 77, the Group has undertaken detailed reviews of a range of severe but plausible financial and operational scenarios
using financial outlook modelling. Based on their review of the financial forecasts and having regard to the risks and uncertainties to which
the Group is exposed, the Directors believe that the Company and the Group have adequate resources to continue in operational existence
for at least a 12‑month period from the date on which the financial statements were approved. Accordingly, the financial statements have
been prepared on a going concern basis.
The financial statements for the 52 weeks ended 25 March 2023 include the results and financial position of the First Rail business for the
year ended 31 March 2023 and the results and financial position of all the other businesses for the 52 weeks ended 25 March 2023. The
financial statements for the 52 weeks ended 26 March 2022 include the results and financial position of the First Rail businesses for the year
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries). Control exists when the Company has power over an investee entity, exposure to variable returns from its involvement with the
entity and the ability to use its power over the entity to affect its returns.
Non‑controlling interests in subsidiaries are identified separately from the Group’s equity interest therein. The present ownership interests
of non‑controlling shareholders entitle their holders to a proportionate share of net assets upon liquidation, and may initially be measured
at fair value, or at the non‑controlling interests’ proportionate share of their fair value of the acquiree’s identifiable net assets. The choice of
measurement is made on an acquisition by acquisition basis. Other non‑controlling interests are initially measured at fair value. Subsequent
to acquisition, the carrying amount of non‑controlling interests is the amount of those interests at initial recognition plus the non‑controlling
interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non‑controlling interests even if this results in
the non‑controlling interests having a deficit balance.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date
of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by the Group.
Restatements
During the year, management reassessed the classification of cash flows in relation to capital grants received from the Department for
Transport (DfT) and Transport Scotland, which had previously been reported within net cash from operating activities. As these grants
typically relate to the funding of capital investment by the Group, management concluded that these cash flows represented investing
activities, rather than operating activities, and accordingly have classified them as such in the FY 2023 financial statements and restated the
FY 2022 presentation. The consolidated cash flow statement and the net cash from operating activities note (note 32) have been updated
to reclassify the capital grant funding. In the FY 2022 restatement, an inflow of £77.6m was reclassified from operating activities to investing
activities.
The acquisition of subsidiaries is accounted for using the acquisitions method. The consideration for each acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the
Group in exchange for control of the acquiree. Acquisition‑related costs are recognised in the income statement as incurred.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business
Non‑current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use. This condition is regarded as met only when the sale is highly probable
and the asset is available for immediate sale in its present condition. Management must be committed to the sale which should be expected
to qualify for recognition as a completed sale within one year of the date of classification.
Such assets, or disposal groups, are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on
initial classification as held for sale and subsequent gains and losses on remeasurement are recognised in profit or loss.
A disposal group qualifies as a discontinued operation if it is a component of an entity that either has been disposed of, or is classified as
held for sale, and:
■
represents a separate major line of business or geographical area of operations; or
■
is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
■
is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after
Goodwill arising on consolidation is recognised as an asset at the date that control is acquired. Goodwill is measured as the excess of the
sum of the consideration transferred, the amount of any non‑controlling interest in the acquiree and the fair value of the acquirer’s previously
held equity interest (if any) in the entity over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units (CGUs) which are tested for
impairment annually, or more frequently where there is an indication that the CGU may be impaired. If the recoverable amount of the CGU
is less than the carrying amount of the CGU, the impairment loss is allocated to the goodwill of the CGU and then to the other assets of the
CGU pro rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in
a subsequent period. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Computer software is recognised separately as an intangible asset and is carried at cost less accumulated amortisation and accumulated
impairment losses. Costs include software licences, website development, costs attributable to the development, design and
implementation of the computer software and internal costs directly attributable to the software.
The existing finite life intangible assets have a residual value of nil and are amortised on a straight‑line basis over their useful economic lives
as follows:
■
Customer contracts – over the estimated life of the contract (nine to ten years)
■
Franchise agreements – over the initial term of the franchise (two to ten years)
■
Under IFRS 15 revenue is recognised when control of a good or service transfers to the customer. The point at which goods and services
are transferred to the customer is based on the fulfilment of performance obligations.
As the Group has the right to consideration corresponding directly with the value of performance completed to date, customer contract
revenue is recognised consistent with the amount that the Group has a right to invoice. The Group is therefore exercising the practical
expedient not to explain transaction prices allocated to unsatisfied performance obligations at the end of the reporting period.
Revenue principally comprises revenue from train passenger services, road passenger transport, and certain management and maintenance
services in the UK. Where appropriate, amounts are shown net of rebates and sales taxes. An explanation of the types of revenue is set
out below.
Note that revenues include contractual and direct fiscal support as a result of coronavirus, including post‑pandemic recovery funding. This is
covered in more detail further on in this note.
Passenger revenues
Passenger revenues primarily relate to ticket sales through First Bus and First Rail. Passenger revenue is recognised at both a point in
time and over time. Ticket sales for journeys of less than one week’s duration are recognised on the first date of travel. Ticket sales for
season tickets, travel cards and open‑return tickets are initially deferred then recognised over the period covered by the relevant ticket.
Concessionary amounts are recognised in the period in which the service is provided.
Contract revenues
Contract revenues mainly relate to tenders in First Bus, and in the prior year to First Student school bus contracts and First Transit contracts
in North America. Revenues are recognised as the services are provided over the length of the contract and based on a transaction price
which is defined in the terms of the contract.
Charter/private hire
Charter and private hire predominantly related to charter work in First Student (generated before the sale of the division in the prior year) for
both school districts with extracurricular activities and third parties with general transportation needs. Revenue was recognised over the
period in which the charter/private hire was provided to the customer.
Rail contract subsidy receipts
Revenue in First Rail includes subsidy receipts from the Department for Transport (DfT) for Emergency Measures Agreements (EMA),
Emergency Recovery Measures Agreements (ERMA), National Rail Contracts (NRC) and amounts receivable under these arrangements
including certain funded operational projects. Revenue also includes amounts attributable to the Train Operating Companies (TOCs),
predominantly based on models of route usage, by the Railway Settlement Plan in respect of passenger receipts. Revenue is recognised
over time as the performance obligations are met as agreed between the individual TOCs and the DfT.
Other revenues
Other revenues mainly relate to non‑rail subsidies, revenue arising from ancillary services to other rail and road passenger service providers
for maintenance, refuelling and other associated services and to sundry third parties for the use of space at terminals and on‑board vehicles
for other business activities, e.g. retail outlets, taxi ranks, catering and advertising. Other revenues are recognised at both a point in time and
Contractual and direct fiscal support
The principal direct fiscal support recognised during the year comprised £848.8m (2022: £1,635.6m) of EMA/ERMA/NRC funding in First
Rail, and £76.3m (2022: £190.2m) of BRG, NSG+, BES, concessions and other funding (including the £2 fare cap in England) in First Bus.
These are recognised within revenue in accordance with IFRS 15 when control of the good or service is transferred to the customer and the
Group is entitled to the consideration.
In the legacy North America business (discontinued operations), there were £nil (2022: £10.7m) of CARES Act employee retention credits
accounted for through operating costs. These amounts were recognised as an offset to the related costs when conditions were met and
expenses were incurred.
The main direct fiscal support recognised in revenue over time for each division has been as follows:
First Bus
Funding schemes were in place across the vast majority of the operation (BRG‑E in England, NSG+ in Scotland, and BES2.0 and BES3.0
in Wales). BRG‑E was the extension to the BRG scheme that was in place in FY 2022 and ran from the start of the year providing operators
with a fixed monthly payment to enable them to maintain a higher level of commercial mileage than the current passenger levels would allow.
NSG+ also ran throughout FY 2023 replacing the less commercially orientated CSG‑R scheme and provided operators across Scotland
with a fixed payment per kilometre operated again to enable a higher level of commercial mileage to be maintained. Both BRG‑E and NSG+
contain profitability clauses meaning that any profits over a certain threshold should be shared or returned to the relevant authority, up to the
total value of the funding provided. BES2.0 was in place from the start of the year before being replaced by BES 3.0 and takes the form of a
grant payable to operators to offset any losses incurred from running an agreed level of mileage. In England, the £2 fare cap, underpinned by
UK Government support, was announced by the Department for Transport in December 2022.
First Rail
The Emergency Measures Agreements (EMAs), the Emergency Recovery Measures Agreement (ERMAs) and the National Rail Contracts
(NRCs) transferred substantially all revenue and substantially all cost risk to the government and for the full period our First Rail contracts
were operated under the terms of these arrangements.
■
EMA in respect of GWR up to 26 June 2022, whereupon GWR transitioned to a new, three‑year NRC with an option for the DfT to extend
by a further three years to June 2028
■
ERMA in respect of WCP / Avanti up to 16 October 2022, where the existing arrangement was extended by a further six months by the DfT
to March 2023. On 20 March 2023, the existing arrangement was again extended, to 15 October 2023
■
NRCs for SWR and TPE throughout the year. On 10 February 2023, the DfT exercised its option to continue SWR’s NRC for a full two‑year
extension period, to run to 25 May 2025. On 11 May 2023, the DfT confirmed that it would not exercise its option to extend the existing
arrangements for FirstGroup’s TransPennine Express (TPE) National Rail Contract, which was due to expire on 28 May 2023. On that date
the DfT appointed its Operator of Last Resort to take over delivery of passenger services on the TPE network.
Under the arrangements, our franchised TOCs are paid a fixed management fee to continue to operate the rail network at a service level
agreed with the government. Net DfT funding including the management and performance fee is recognised as revenue in Rail contracts
subsidy receipts, in line with the revenue recognition policy for contract subsidy receipts from the DfT.
Greyhound
Subsidy funding was made available under section 5311(f) of the terms of the US CARES Act and under the American Rescue Plan Act.
These Acts allow Greyhound to claim for losses made from operating intercity bus services in the US after 20 January 2020. In the prior year
and up to the date that the business was divested, the subsidy funding receivable was recognised as other revenue in the period in which
the services were provided and the operational costs were incurred.
Disaggregated revenue by operating segment is set out in note 4.
First Bus has received coronavirus related grants which are government grants receivable in light of the pandemic. The amounts principally
reflect grants receivable under the Bus Recovery Grant – Extension (BRG‑E), the Bus Emergency Scheme (BES) for Wales and the Network
Support Grant Plus (NSG+) with all grants being disclosed in revenue. Under the BRG‑E, NSG+ and BES schemes, grant income may be
claimed by operators of local bus services to close the shortfall of revenue earned by them during the period affected by coronavirus and the
costs incurred by them in that period. The extent to which certain costs are eligible for inclusion in claiming bus support grant income and
how certain costs should be determined for the purposes of the schemes remains subject to reconciliation processes. Income is recognised
in the income statement in the same period in which the related shortfall of revenue over costs is incurred to the extent there is reasonable
certainty that: (a) the Group will comply with the conditions attaching to the grant and (b) the grant will be received and retained by the
Lease identification
At inception of a contract, the Group shall assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Right of use asset
At the commencement date, the right of use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, less any incentives received, plus any initial direct costs
incurred and an estimate of costs to be incurred by the Group to dismantle and remove the underlying asset or restore the underlying asset
or the site on which it is located.
The right of use asset is depreciated on a straight‑line basis over the shorter of the estimated useful life of the asset, the lease term or current
contract terms for rail TOCs. In addition, the right of use asset is periodically reduced by impairment losses, if applicable, and adjusted for
certain remeasurements of the lease liability.
Lease liability
At the commencement date of the lease, the lease liability is initially measured at the present value of lease payments to be made over the
lease term. The lease payments include fixed payments (including in‑substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid by the Group under residual value guarantees. The
lease payments also include the exercise price of a purchase option if the Group is reasonably certain to exercise that option. Payments
of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate the lease, are also included. The
payments are discounted at the incremental borrowing rate since the rates implicit in the leases are not readily available.
The lease liability is measured by increasing the carrying amount to reflect the interest on the lease liability and reducing the carrying
amount to reflect the lease payments made. The carrying value is remeasured when there is a change in future lease payments arising
from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value
guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
Short‑term leases and leases of low‑value assets
The Group applies the short‑term lease recognition exemption to selected leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option and where it is not reasonably certain that the lease term will be extended.
It also applies the low‑value assets recognition exemption to leases of assets of low value based on the value of the asset when it is new,
regardless of the age of the asset being leased. Lease payments on short‑term leases and leases of low‑value assets are recognised as an
expense on a straight‑line basis over the lease term.
On the balance sheet, right of use assets have been included in property, plant and equipment and lease liabilities have been included in
it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each
Group company are expressed in pounds Sterling, which is the functional currency of the Company, and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the functional currency are recorded
at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non‑monetary assets and liabilities
carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss
for the period. Exchange differences arising on the retranslation of non‑monetary items carried at fair value are included in profit or loss for
the period, except for differences arising on the retranslation of non‑monetary items in respect of which gains and losses are recognised
within other comprehensive income. For such non‑monetary items, any exchange component of that gain or loss is also recognised within
other comprehensive income.
In order to hedge its exposure to certain foreign exchange risks, the Group holds currency swaps and borrowings in foreign currencies (see
note 25 for details of the Group’s policies in respect of foreign exchange risks).
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at the closing exchange rates on the balance
sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising from the
average exchange rates used and the period end rate, if any, are classified as equity and transferred to the Group’s translation reserve. Such
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Non‑GAAP measures and performance
In measuring the Group and divisional adjusted operating performance, additional financial measures derived from the reported results have
been used by management in order to eliminate factors which distort year‑on‑year comparisons. The Group’s adjusted performance is used
to explain year‑on‑year changes when the effect of certain items is significant, including strategic items (including material M&A and group
restructuring projects), costs of acquisitions including aborted acquisitions, and impairment of assets. Other items below £5.0m would not
normally be considered as adjusting items unless part of a larger strategic project, but items which distort year‑on‑year comparisons that
exceed this amount could potentially be classified as an adjusting item and are assessed on a case‑by‑case basis. Such potential adjusting
other items may include: restructuring and reorganisation costs; property gains or losses; aged legal and self‑insurance claims; movements on
insurance discount rates; onerous contract provisions; pension settlement gains or losses; and other items which management has
determined as not being relevant to an understanding of the Group’s underlying business performance. Subsequent remeasurements of
adjusting items are also recognised as an adjusting item in the future period in which the remeasurement occurs.
In addition, management assess divisional performance before other intangible asset amortisation charges, as these are typically a result of
Group decisions and therefore the divisions have little or no control over these charges. Management considers that this overall basis supports
year‑on‑year business performance comparisons, to underpin planning and decision‑making on resource allocation. The Group does not
consider the non‑GAAP measures to be more important than, or superior to, IFRS measures. See note 4 for the reconciliation to non‑GAAP
measures and performance.
The Group operates or participates in a number of pension schemes, which include both defined benefit schemes and defined contribution
schemes.
Payments to defined contribution plans are charged as an expense as they fall due. There is no further obligation to pay contributions into a
defined contribution plan once the contributions specified in the plan rules have been paid.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial updates
being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are
recognised outside the income statement and presented in the consolidated statement of other comprehensive income.
All past service costs are recognised immediately in the consolidated income statement.
2
Significant accounting policies
continued
Where changes to the benefits in payment on defined benefit pension schemes require a change in scheme rules or ratification by the
Trustees, the change is recognised as a past service charge or credit in the income statement. Where changes in assumptions can be made
without changing the Trustee agreement, these are recognised as a change in assumptions in other comprehensive income.
The retirement benefit position recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by
the fair value of scheme assets. Any residual asset resulting from this calculation is limited to refunds economically available to the Company,
in the form of either a public sector payment or the present value of future service costs recognised via suspension of cash contributions.
Various TOCs in the First Rail business participate in the Railways Pension Scheme (RPS), which is an industry‑wide defined benefit scheme.
The Group is obligated to fund the relevant section of the scheme over the period for which the contract is held. The full liability is recognised
on the balance sheet, which is then reduced by a ‘contract adjustment’ so that the net liability reflects the Group’s obligations to fund the
scheme over the contract term, subject to any changes in the schedule of contributions following a statutory valuation.
Certain Transit Management contracts have defined benefit pension arrangements that are fully indemnified by the authority to which the
contract relates. The gross assets and liabilities are recognised along with an amount recoverable from the contracting authorities on the
basis that there is limited risk of default and which is also limited to the period of the contract.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date and includes an estimate of the tax which could be payable as a result of differing interpretation of tax laws.
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests
in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised and
is based on the estimated tax consequences of items that are subject to differing interpretations of tax laws. Deferred tax is charged or
credited in the income statement, except when it relates to items charged or credited in other comprehensive income or directly to equity, in
which case the deferred tax is also dealt with within other comprehensive income or directly in equity respectively.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on
The Group follows IFRIC 23 Uncertainty over Income Tax Treatments. IFRIC 23 sets out how to determine the accounting tax position when
there is uncertainty over income tax treatments. The interpretation requires the Group to determine whether uncertain tax positions are
assessed separately or as a Group: and
■
Assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its
income tax filings:
– If yes, the Group should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income
tax filings.
– If no, the Group should reflect the effect of uncertainty in determining its accounting tax position using either the most likely amount or the
continued
Properties for provision of services or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes
professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of
these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
impairment loss.
Depreciation is charged so as to write off the cost of assets, other than freehold land, the land element of long leasehold properties or on
assets in the course of construction, over their estimated useful lives, using the straight‑line method, on the following bases:
Freehold buildings
50 years straight‑line
Passenger carrying vehicles
seven to 17 years straight‑line
Other plant and equipment
Assets specific to Train Operating Companies are depreciated over the lesser of their estimated useful lives or the rail contract term.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
Capital grants
Capital grants relating to property, plant and equipment are held in other payables and released to the income statement over the expected
useful lives of the assets concerned. Capital grants are not recognised until there is a reasonable assurance that the Group will comply with
the conditions attaching to them and that the grants will be received.
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is
reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised as income
Inventories of spare parts and consumables are stated at the lower of cost and net realisable value, after making appropriate allowances
for obsolete and slow‑moving items. Cost comprises direct materials and, where applicable, those overheads that have been incurred in
bringing the inventories to their present location and condition. Cost is calculated using the weighted average cost method. Where the
purchase of inventory was the hedged item in a cash flow hedge relationship, the initial carrying amount of the recognised inventory is
adjusted by the associated hedging gain or loss transferred from the hedging reserve (a basis adjustment). There are no material inventory
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets can be measured at amortised cost, fair value through profit or loss or fair value through other comprehensive income. The
measurement basis is determined by reference to both the business model for managing the financial asset and the contractual cash flow
characteristics of the financial asset.
Financial assets are classified into one of three primary categories:
Financial assets at amortised cost
Financial assets at amortised costs are non‑derivative financial assets held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest. Financial assets at amortised cost are subsequently measured using the effective
interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired.
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition
at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held
for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are also classified as held for trading
unless they are designated as effective hedging instruments.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair
value recognised in the income statement within finance costs. Transaction costs arising on initial recognition are expensed in the income
Fair value through other comprehensive income
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments
issued by the Company are recorded at the proceeds received net of direct issue costs.
Financial liabilities
Bonds and loan notes
These are measured either on an amortised cost basis or at fair value, if designated.
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate
The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. Use of such
financial instruments is governed by policies and delegated authorities approved by the Board. The Group does not hold or issue derivative
financial instruments for trading purposes. The main derivative financial instruments used by the Group are interest rate swaps, fuel swaps,
and cross currency interest rate swaps. Such instruments are initially recognised at fair value and subsequently remeasured to fair value at
the reported balance sheet date. The fair values are calculated by reference to market exchange rates, interest rates and fuel prices at the
period end, and supported by counterparty confirmations. Where derivatives do not qualify for hedge accounting, any gains or losses on
re‑measurement are immediately recognised in the Group income statement. Where derivatives qualify for hedge accounting, recognition of
any resultant gain or loss depends on the nature of the hedge relationship and the item being hedged. At inception of designated hedging
relationships, the Group documents the risk management objective and strategy for undertaking the hedge, the nature of the risks being
hedged and the economic relationship between the item being hedged and the hedging instrument.
Fair value hedging: The fair value change on qualifying hedging instruments is recognised in profit or loss. The carrying amount of a hedged
item not already measured at fair value is adjusted for the fair value change attributable to the hedged risk with a corresponding entry in profit
or loss.
Cash flow hedging: The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are
designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of
hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss. Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the
recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non‑financial item such as inventory,
the gains and losses previously recognised in other comprehensive income and accumulated in equity are removed from equity and
included as a basis adjustment in the initial measurement of the cost of that item. This transfer does not affect other comprehensive income,
however the hedging gains and losses that will subsequently be transferred as basis adjustments are categorised as amounts that may be
reclassified subsequently to profit or loss, as such a reclassification may occur in the event that the hedged transaction is no longer expected
to occur. Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in
the future, that amount is immediately reclassified to profit or loss.
continued
Net investment hedging: Derivative financial instruments are classified as net investment hedges when they hedge the Group’s net
investment in an overseas operation. The effective element of any foreign exchange gain or loss from remeasuring the derivative instrument
is recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Any ineffective element
is recognised immediately in the Group income statement. Gains and losses accumulated in the foreign currency translation reserve are
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be
required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation
at the balance sheet date and are discounted to present value where the effect is material.
Self‑insurance
The Group’s policy is to self‑insure high frequency, low value claims within the businesses. In addition there are typically a smaller
number of major claims during a financial year for which cover is obtained through third‑party insurance policies subject to an insurance
deductible. Where the Group holds legacy self‑insurance exposures related to disposed businesses, insurance and re‑insurance policies
have been purchased to de‑risk this exposure. Provision is made under IAS 37 Provisions, Contingent Liabilities and Contingent Assets
for the estimated cost of settling uninsured claims for incidents occurring prior to the balance sheet date. The provision is discounted to
appropriately reflect the timing of future cash claims settlements. Self‑insurance is also covered in the key sources of estimation uncertainty
section of note 2 below.
The Group issues equity‑settled share‑based payments to certain employees. Equity‑settled share‑based payments are measured at fair
value at the date of grant. The fair value is expensed over the vesting period, based on the Group’s estimate of shares that will eventually vest
and is adjusted for the effects of non‑market‑based vesting conditions.
Fair value is measured by use of a Black‑Scholes or other appropriate valuation models. The expected life used in the model has been
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which
Adoption of new and revised standards
The accounting policies adopted are consistent with those of the previous financial year except for the changes arising from new standards
and amendments to existing standards which have been adopted in the current year.
The following amended standards and interpretations were adopted by the Group during the year.
– Property, plant and equipment: Proceeds before Intended Use (Amendments to IAS 16)
– Reference to the Conceptual Framework (Amendments to IFRS 3)
– Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
– Annual improvements to IFRS Standards 2018‑2020
There has been no material change as a result of applying these amendments and no significant impact is expected from any of the future
standards and amendments that are visible.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results
may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
revision and future periods if the revision affects both current and future periods.
The following are the critical estimates and judgements that the Directors have made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts recognised in the financial statements.
First Transit earnout valuation
On 26 October 2022, EQT Infrastructure announced its agreement to sell First Transit to Transdev North America, Inc. As part of the
First Transit disposal to EQT Infrastructure, FirstGroup is entitled to an earnout consideration. The Group currently estimates the earnout
consideration to be c.$89m (£72.3m). While the earnout is considered to have crystallised following the sale, with proceeds anticipated in the
first half of FY 2024, there remains a degree of estimation uncertainty regarding the amount to be received, depending on the finalisation of
customary closing transaction adjustments.
Impairment of assets in CGUs
The key sources of estimation uncertainty in relation to the potential risk of impairment of assets in CGUs relate to the cash flow forecasts
including significant judgements in deciding what assumptions to make regarding the future financial performance of the CGU in a
post‑pandemic environment, the ongoing macroeconomic uncertainty, and the Group’s future climate‑related targets and ambitions. This is
covered in more detail in note 11.
Defined benefit pension arrangements
Railway Pension Scheme
The Group sponsors six sections of the Railway Pension Scheme (RPS) in the current year, relating to its obligations for its contracted‑TOCs,
and a further section for Hull Trains, its Open Access operator. RPS is a defined benefit pension scheme which covers the whole of the UK
rail industry. In contrast to the pension schemes operated by most businesses the RPS is a shared cost scheme which means that costs
are formally shared 60% employer and 40% employee. The Group only recognises amounts in relation to its share of costs in the income
statement. The RPS is partitioned into sections and, for the sections that relate to contracts, the Group is responsible for the funding of these
sections only while it operates the relevant contract.
At the end of the contract term, responsibility for funding the relevant section of the scheme, and consequentially any deficit or surplus
existing at that date, is passed to the next contractor. At each balance sheet date a contract adjustment is recognised against the IAS 19 net
pension asset or liability to reflect that portion expected to pass to the next contractor.
The Directors view this arrangement as analogous to the circumstances described in paragraphs 92‑94 of IAS 19 (Revised) with a third party
taking on the obligation for future contributions. As there is no requirement to make contributions to fund the current deficit, it is assumed
that all of the current deficit will be funded by another party and hence none of that deficit is attributable to the current contractor. In respect
of the future service costs, there is currently no pension obligation in respect of those costs. When the costs are recognised in the income
statement, the extent to which the committed contributions fall short determines the amount that is to be covered by contributions of another
party in future, which is recognised as an adjustment to service cost in the income statement. Under circumstances where contributions are
renegotiated, such as following a statutory valuation, an adjustment will be recognised in the income statement, whilst changes in actuarial
assumptions continue to be recognised through other comprehensive income.
The Directors consider this judgement to be the most appropriate interpretation of IAS 19 to reflect the specific circumstances of the RPS
where the contract commitment is only to pay contributions during the period in which we run the contract. An alternative approach would
involve not limiting the measurement of the service cost through the recognition of an income statement contract adjustment but recognising
all changes in the contract adjustment as a reimbursement right in Other Comprehensive Income (OCI).
For illustrative purposes, for the year ended 31 March 2023 the impact of this alternative approach would be an increase in costs of £102.9m
(2022: £102.7m) in the income statement and a credit to OCI of £113.1m (2022: credit of £70.9m). In addition, the balance sheet would reflect
a surplus of £35.2m (2022: surplus of £25.0m). Since the contract only refers to the contribution requirements during its term, and not any
reimbursement rights, in the Directors’ view contributions are shared with the next contractor and therefore the treatment of the arrangement
as contribution‑sharing is considered the most appropriate.
Actuarial assumptions
The UK schemes retirement benefit obligations are discounted at a rate set by reference to market yields at the end of the reporting period
on high‑quality corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the population from
which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue size of the corporate
bonds, quality of the bonds and the identification of outliers which are excluded. Management follows actuarial advice from a third party
when determining these judgements. Another key estimate is the longevity of members. We take specialist advice on this from our actuarial
advisers which aims to consider the likely experience taking into account each scheme’s characteristics. Our approach is to review these
assumptions for each scheme following completion of their funding valuations, and more frequently only if appropriate to do so. Given pay
increases for employees in the Rail division are under negotiation, the gross figures for the contract Rail pensions disclosures may be under‑
or overstated, but there will be nil impact on the balance sheet as a result of the contract adjustment. Additionally, in terms of the value
of the assets held by one of the Local Government Pension Scheme funds, around £200m is held co‑mingled with a considerably larger
pool of assets held for the interests of the local authority and a significant number of other admitted employers. This means that the value
attributable to the Company’s share of the overall fund requires a degree of estimation, allowing for returns and outgo. Management review
the approach, taking consideration and advice from actuarial and other professional advisors.
The Pension Regulator (TPR) has been in discussions with the RPS (the Scheme) regarding the long‑term funding strategy of the Scheme.
Whilst TPR believes that the Scheme should be funded on a more prudent basis, it is not possible at this stage to determine the impact to
ongoing contribution requirements.
The carrying amount of the Group’s continuing retirement benefit arrangements at 31 March 2023 was an asset of £27.8m (2022: asset of
£186.7m). Further details and sensitivities are set out in note 37.
Self‑insurance
Provision is made for all known incidents for which there is self‑insurance using management’s best estimate of the likely settlement of these
incidents. The estimated settlement is reviewed on a regular basis with independent actuarial advice and the amount provided (including
the Incurred But Not Reported (IBNR) element) is adjusted as required. Given the diversity of claim types, their size, the range of possible
outcomes and the time involved in settling these claims, a material change could be required to the carrying value of claims provisions in the
next financial year. These factors also make it impractical to provide sensitivity analysis on one single measure and its potential impact on
overall insurance provisions. The Group’s total self‑insurance provisions as at the balance sheet date were £129.9m (2022: £148.0m) as set
out in note 27. Of this £79.1m relates to North America of which £73.3m is de‑risked with insurance, leaving £5.8m where the actuarial range
is £5.1m to £5.8m (2022: £9.6m and actuarial range £8.6m to £9.5m). A receivable matching the value of the de‑risked provision of £73.3m is
recorded within Other receivables to account for the recovery from the third‑party insurer.
Determining the incremental borrowing rate used to measure lease liabilities
The Group is required to determine its incremental borrowing rate (IBR) to measure its lease liabilities. Judgement is required to determine
the components of the IBR used for each lease, including risk‑free rates, credit risk and any lease specific adjustments.
IBRs applied to new (or modified) leases are determined quarterly or at the time of a new franchise. They depend on the term, country and
start and end date of the lease. They are estimated based on several factors which include the risk‑free rate based on government bond
rates, a country‑specific adjustment and a credit risk adjustment based on the average credit spread of entities with similar ratings to the
Group.
Climate change
In the preparation of the Group’s consolidated financial statements, management has considered the potential impact of climate change,
particularly in the context of the disclosures included in the Strategic Report (including the Task Force for Climate‑related Disclosures),
and the Group’s own climate‑related ambitions and targets. This includes an assessment of how the Group’s accounting estimates and
judgements are impacted by the Group’s pathway to achieving its stated ambitions and targets, as well as by climate‑related risks and
opportunities for the Group.
Actions required to drive the Group’s climate‑related ambitions and targets, including their financial impacts, are factored into the longer‑term
business planning cycles of the Group. The following areas of estimation have been considered as part of these planning cycles, in addition
those detailed in the ‘Key sources of estimation uncertainty’ section below. Management do not believe that these areas will have a material
impact on financial reporting estimates and judgements in the next year. Owing to the inherent medium/longer‑term uncertainty with regard
to climate‑related risks and opportunities, it is not currently possible to assess whether in the future, these areas of estimation and judgement
may have a more material impact on carrying values of assets and liabilities. Management will continue to regularly assess climate‑related
risks in the context of the estimates and judgements made in the preparation of the Group’s financial statements.
Going concern and viability
There may be a risk of increased future costs and capital investment requirements to ensure compliance with environmental regulatory
requirements (for example carbon taxes/charges, or other emissions‑related restrictions), and to achieve the Group’s stated sustainability
targets and ambitions. However, the Group believes that there is likely to be an increasing modal shift towards public transport, as
awareness grows among customers of climate‑related issues, and with governmental support for transport decarbonisation, which could
create new opportunities for the Group.
Carrying value of non‑current assets
Environmental regulatory requirements, in parallel with the Group’s climate‑related targets and ambitions, may further accelerate the
transition to electrification of vehicle fleets. Transitional risks relating to the evolution of climate‑related technologies may alter the expected
obsolescence profile of existing vehicle fleets. These factors may impact the Group’s estimates of the useful lives of existing assets, their
residual values, and the risk of asset impairment. The Group monitors closely the accounting estimates in relation to its vehicle fleets to
ensure they remain reasonable.
Provisions
Climate‑related legislative and regulatory changes may, in future, require the Group to assess whether environmental provisions are
necessary, for example the potential introduction of carbon taxes/charges. In parallel with the work towards achieving its climate‑related
ambitions and targets, the Group tracks such legislative changes to ensure the impact on the business is well understood and managed
The Board carried out a review of the Group’s financial projections for the 18 months to 30 September 2024 and on a going concern basis.
In doing so, the Board considered whether any material uncertainties exist that cast doubt on the Group’s and the Company’s ability to
continue as a going concern over the going concern period.
Consistent with prior years, the Board’s going concern assessment is based on a review of future trading projections, including whether
banking covenants are likely to be met and whether there is sufficient committed facility headroom to accommodate future cash flows for the
going concern period.
Divisional management teams prepared detailed, bottom‑up projections for their businesses reflecting the impact of the post‑pandemic
operating environment, including assumptions on passenger volume recovery and government support, as well as the impact of actions
required to address the Group’s climate‑related targets and ambitions.
Base case scenario
The Board considered the annual budget to 31 March 2024 and medium‑term plan to be the base case scenario for the purpose of the
going concern assessment for the FY 2023 year end. These projections were the subject of a series of executive management reviews
and were used to update the base case scenario that was used for the purposes of the going concern assessment at the 2023 year end.
The base case assumes a continuing recovery in passenger volumes and yields in FY 2024, but that passenger volumes remain below
pre‑pandemic levels in the going concern assessment period. The base case also reflects the expiry and non‑renewal of the TransPennine
Express rail contract in May 2023. The macro projections in the updated base case assume that the UK operates in a recovering coronavirus
economy. The annual budget and medium‑term plan also capture the expected financial impact of the actions required to support the
Group’s climate‑related targets and ambitions.
Downside scenario
In addition, a downside case was also modelled which assumes a more protracted post‑pandemic recovery profile. In First Bus the
downside case assumes a reduction in passenger volumes driving a 25% reduction in Bus profitability. In First Rail, the downside case
assumes TOC performance fee awards at 50% of expected levels; revenue reduction in Hull Trains and Lumo of 20%; and loss of one
National Rail Contract at the end of its current term. The downside scenario also assumes a delay in receipt of final Greyhound property
proceeds until after the going concern period; a lower realised value for the First Transit earnout; and a £10m impact of a significant
climate‑related event.
Mitigating actions
If the performance of the Group were to be more adversely impacted than assumed in the base case or downside case scenarios, the
Group would reduce and defer planned growth capex spend and further reduce costs in line with a lower volume operating environment to
the extent that the essential services we operate in First Bus are not required to be run for the governments and communities we support.
Going concern statement
Based on the review of the financial forecasts for the period to September 2024 and having regard to the risks and uncertainties to which the
Group is exposed, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for at least the 12‑month period from the date on which the financial statements were approved, including compliance with banking
covenants under both the base case and downside scenarios. Accordingly, they continue to adopt a going concern basis of accounting in
Revenue
2023
£m
2022
£m
Services rendered
3,483.0
2,537.0
First Rail contract subsidy receipts
893.0
1,662.1
Other revenues
379.0
392.0
Revenue from continuing operations
4,755.0
4,591.1
Discontinued operations
4.0
996.9
Revenue
4,759.0
5,588.0
Disaggregated revenue by operating segment is set out in note 5.
4
Reconciliation to non‑GAAP measures and performance
In measuring the Group and divisional adjusted operating performance, additional financial measures derived from the reported results have
been used by management in order to eliminate factors which distort year‑on‑year comparisons. The Group’s adjusted performance is used
to explain year‑on‑year changes when the effect of certain items is significant, including strategic items (including material M&A and group
restructuring projects), costs of acquisitions including aborted acquisitions, and impairment of assets. Other items below £5.0m would not
normally be considered as adjusting items unless part of a larger strategic project, but items which distort year‑on‑year comparisons that
exceed this amount could potentially be classified as an adjusting item and are assessed on a case‑by‑case basis. Such potential adjusting
other items may include: restructuring and reorganisation costs; property gains or losses; aged legal and self‑insurance claims; movements
on insurance discount rates; onerous contract provisions; pension settlement gains or losses; and other items which management has
determined as not being relevant to an understanding of the Group’s underlying business performance. Subsequent remeasurements of
adjusting items are also recognised as an adjusting item in the future period in which the remeasurement occurs.
Reconciliation of operating profit to adjusted operating profit on a continuing basis
2023
£m
2022
£m
Operating profit on a continuing basis
153.9
122.8
Adjustments for:
First Bus divisional restructuring costs
7.0
–
Strategic items
(1.4)
–
Greyhound Canada
1.5
1.7
Rail termination sums net of impairment reversal
–
(4.0)
Gain on disposal of properties
–
(13.8)
Total operating profit adjustments on a continuing basis
7.1
(16.1)
Adjusted operating profit on a continuing basis (note 5)
161.0
106.7
Reconciliation of operating profit/(loss) to adjusted operating profit on a discontinued basis
2023
£m
2022
£m
Operating profit from discontinued operations
31.3
683.3
Gain on sale of First Student and First Transit
–
(501.1)
Gain on sale of Greyhound
–
(109.0)
Operating profit from discontinued operations (excluding gain on sale of First Student, First Transit and Greyhound)
31.3
73.2
Adjustments for:
Transit earnout charge
33.8
–
Gain on disposal of Greyhound properties
(71.4)
(6.5)
Strategy costs
(0.3)
–
Other intangible asset amortisation charges
–
0.4
Other costs associated with the disposal of First Student and First Transit
–
32.7
Other costs associated with the disposal of Greyhound
–
11.1
Greyhound insurance de‑risking
–
19.3
Employment taxes relating to First Student and First Transit
–
6.6
Partial reversal of prior year impairments of Greyhound
–
(55.4)
Impairment of land and buildings
–
7.2
North America insurance provisions
–
31.5
Total operating profit adjustments from discontinued operations (excluding gain on sale of First Student,
First Transit and Greyhound)
(37.9)
46.9
Adjusted operating (loss)/profit from discontinued operations
(6.6)
120.1
Introduction
4
Reconciliation of profit/(loss) before tax to adjusted profit before tax and adjusted earnings
2023
£m
2022
£m
Profit before tax (including discontinued operations)
128.7
654.1
Adjusting operating profit adjustments – continuing operations
7.1
(16.1)
Adjusting operating profit adjustments – discontinued operations excluding gain on sale
(37.9)
46.9
Gain on sale of First Student and First Transit
–
(501.1)
Gain on sale of Greyhound
–
(109.0)
Operating profit adjustments – total operations
(30.8)
(579.3)
Adjusting finance cost items – continuing operations
–
58.6
Adjusted profit before tax including discontinued operations
97.9
133.4
Adjusted tax charge
(20.7)
(20.4)
Non‑controlling interests
1
(5.1)
(5.6)
Adjusted earnings including discontinued operations
72.1
107.4
1
Statutory non‑controlling interests in 2023 and 2022 principally reflect Avanti West Coast and South Western Railway.
Reconciliation of tax charge to adjusted tax charge
2023
£m
2022
£m
Tax charge (note 9)
33.4
12.1
Tax effect of adjusting items (note 10)
(12.7)
21.8
Adjustments attributable to changes in tax rates and laws
1.4
1.4
Write back of previously unrecognised deferred tax assets (note 9)
–
25.7
Write down of previously recognised deferred tax assets (note 9)
(1.4)
(40.6)
Adjusted tax charge (including discontinued)
20.7
20.4
Adjusted tax charge – continuing operations
20.4
2.7
Adjusted tax charge – discontinued operations
0.3
17.7
Adjusting items
–
2023
The principal adjusting items in the year are as follows:
First Bus restructuring
As part of the restructuring of the First Bus division to exit loss‑making markets and to align networks with post‑pandemic demand, the
Group completed the sale of its First Scotland East business in September 2022, realising a loss on disposal of £(3.7)m, and closed the
Southampton depot resulting in closure costs and a release of prior impairment for a net credit of £2.3m. In line with this transition plan, the
Group also incurred costs of £(5.6)m relating to surplus vehicle write‑downs and other reorganisation charges in the division.
Strategic items
A final net credit of £1.4m was recognised, being costs incurred in relation to the Group’s central functions as part of its ongoing cost
efficiency initiatives following the exit from North America, offset by the release of accruals following the disposal of North America and the
execution of the strategy.
Greyhound Canada
Net restructuring and closure costs of £(1.5)m relating to the continued winding down of Greyhound Canada operations were incurred during
the year.
Adjusting items – discontinued operations
First Transit earnout
Following the announcement on 26 October 2022 of EQT Infrastructure’s agreement to sell First Transit to Transdev North America, Inc., the
Group now estimates its earnout consideration to be around $88.5m (£72.3m) based on the information received on the sale by EQT. This
gives rise to a non‑cash, adjusting charge of £33.8m relative to the carrying value of the earnout of £106.1m as at 26 March 2022.
Gain on disposal of properties
A gain of £71.4m arose on the completion of the sale of the majority of the remaining Greyhound US properties in December 2022.
Adjusting items
–
2022
The principal adjusting items in relation to the continuing business for 2022 were as follows:
Gain on disposal of properties
An overall gain of £13.8m was realised in the prior year on the disposal of Greyhound Canadian properties.
Greyhound Canada closure
£1.7m in relation to Greyhound Canada restructuring and closure costs were incurred during the prior year.
First Rail termination sums net of impairment reversal
A £4.0m credit was recognised in the prior year, representing final adjustments of residual matters regarding the TPE and SWR termination
sums.
The principal adjusting items in relation to the discontinued operations for 2022 were as follows:
Other intangible asset amortisation charges
The amortisation charge for the prior year was £0.4m.
Gain on sale of First Student and First Transit
As a result of the disposal of First Student and First Transit, a gain on sale of £501.1m was realised in the prior year.
Other costs associated with the disposal of First Student and First Transit
£32.7m of costs were incurred in the prior year associated with the disposal of First Student and First Transit that were not directly
attributable to the sale and were therefore not included in the gain on disposal calculation.
Gain on sale and partial reversal of prior year impairments of Greyhound
As a result of the terms of the disposal of the Greyhound US business, there was a gain on disposal in the prior year of £109.0m and a credit
of £55.4m representing the partial reversal of the prior years’ impairment charges.
Other costs associated with the disposal of Greyhound
There was a charge of £11.1m in the prior year principally comprising legal and professional costs.
Employment taxes relating to First Student and First Transit
There was a charge of £6.6m during the prior year for a one‑off charge for accelerated state and federal employment taxes.
North American insurance provisions and Greyhound insurance de‑risking
There was a prior year charge of £31.5m for insurance costs due to deteriorations in respect of prior years’ claims, and for the de‑risking of
legacy Greyhound insurance liabilities.
Gain on disposal of properties and impairment of land and buildings
An overall gain on disposal of Greyhound US properties of £6.5m was realised in the prior year. There was also an impairment charge of
£7.2m for properties where market value was less than the book value.
The adjusting items in relation to finance cost adjustments – continuing operations for 2022 were as follows:
Total make‑whole costs (bonds and facilities)
Costs of £50.0m in the prior year comprised a charge of £30.4m for the early repayment of the $275m US Private Placement (USPP) and a
charge of £19.6m for the early repayment of the £325m 2022 bond.
Write‑off of unamortised bridge, bond and facility costs
There was a charge of £8.6m in the prior year for unamortised fees for various facilities which were cancelled on completion of the sale of
First Student and First Transit.
Other measures
First Bus EBITDA comprises:
2023
£m
2022
£m
Pre‑IFRS 16 EBITDA
105.0
87.6
IFRS 16 adjustments
1
15.9
16.8
First Bus adjusted EBITDA per segmental results table above
120.9
104.4
First Rail EBITDA comprises:
Non‑management fees‑based TOCs pre‑IFRS 16 EBITDA
32.5
(9.7)
Group’s share of management fee income available for dividends (net of tax and minority interest)
38.7
45.5
Tax on management fee income
10.2
12.0
Minority interest at management fee TOCs
5.1
5.8
Other adjustments
–
3.0
IFRS 16 adjustments
1
574.5
593.3
First Rail adjusted EBITDA per segmental results table above
661.0
649.9
Group items EBITDA comprises:
Pre‑IFRS 16 EBITDA
(21.2)
(24.8)
IFRS 16 adjustments
1
1.7
1.7
Group items adjusted EBITDA per segmental results table above
(19.5)
(23.1)
First Rail adjusted operating profit comprises:
Non‑management fees based TOCs
31.5
(9.7)
Group’s share of management fee income available for dividends (net of tax and minority interest)
38.7
45.5
Tax on management fee income
10.2
12.0
Minority interest at management fee TOCs
5.1
5.8
IFRS 16 adjustments/other
1
39.3
34.2
First Rail adjusted operating profit per segmental results table above
124.8
87.8
Group adjusted attributable profit comprises:
First Bus operating profit
58.4
45.2
Attributable net income from First Rail management fee‑based operations
38.7
45.5
First Rail adjusted operating profit from open access and additional services
31.5
(9.7)
Group central costs (operating profit basis)
(22.2)
(26.3)
Treasury interest
2
(14.1)
(20.7)
Tax
3
(10.2)
2.2
Group adjusted attributable profit
82.1
36.2
1
IFRS 16 adjustments to EBITDA principally reflect the add back of operating lease rental costs charged to the income statement before the adoption of IFRS 16.
IFRS 16 adjustments to operating profit reflect operating lease rental costs less depreciation charges on Right of Use Assets.
2
Interest charge excluding notional interest and IFRS 16 lease interest.
3 Pro forma taxation at 19%.
Business segments and geographical information
For management purposes, the Group was organised into five operating divisions – First Bus, First Rail, First Student, First Transit and
Greyhound. First Student and First Transit were categorised as Discontinued Operations at 27 March 2021 and the sale of these completed
on 21 July 2021. Greyhound US and Mexico were categorised as Discontinued Operations at 25 September 2021 and the sale of this
completed on 21 October 2021. The properties relating to the retained Greyhound US business were classified as held for sale and treated
as discontinued up to their disposal in December 2022. Greyhound Canada was retained and was categorised as a Continuing Operation
however, trading operations have ceased. The divisions are managed separately in line with the differing services that they provide and the
geographical markets which they operate in. There is a clear distinction between each division and no judgement is required to identify each
reportable segment.
The segment results for the 52 weeks ended 25 March 2023 are as follows:
Continuing Operations
Discontinued
Operations
First
Bus
£m
First
Rail
£m
Greyhound
£m
Group
items
1
£m
Intra‑group
elimination
£m
Continuing
Operations
£m
Greyhound
£m
Group
items
1
£m
Total
£m
Passenger revenue
660.0
2,713.8
–
–
–
3,373.8
–
–
3,373.8
Contract revenue
149.9
–
–
–
(40.7)
109.2
–
–
109.2
Rail contract subsidy receipts
–
893.0
–
–
–
893.0
–
–
893.0
Other revenues
92.6
286.4
–
–
–
379.0
4.0
–
383.0
Revenue
902.5
3,893.2
–
–
(40.7)
4,755.0
4.0
–
4,759.0
EBITDA
2
120.9
661.0
–
(19.5)
–
762.4
(6.6)
–
755.8
Depreciation
(68.6)
(651.2)
–
(2.1)
–
(721.9)
–
–
(721.9)
Software amortisation
(1.7)
(6.3)
–
(0.6)
–
(8.6)
–
–
(8.6)
Capital grant amortisation
7.8
121.3
–
–
–
129.1
–
–
129.1
Segment results
58.4
124.8
–
(22.2)
–
161.0
(6.6)
–
154.4
Other adjustments (note 4)
(7.0)
–
(1.5)
1.4
–
(7.1)
71.7
(33.8)
30.8
Operating profit/(loss)
3
51.4
124.8
(1.5)
(20.8)
–
153.9
65.1
(33.8)
185.2
Investment income
–
2.0
–
10.3
–
12.3
0.5
–
12.8
Finance costs
(2.5)
(49.4)
–
(17.2)
–
(69.1)
(0.2)
–
(69.3)
Profit before tax
48.9
77.4
(1.5)
(27.7)
–
97.1
65.4
(33.8)
128.7
Tax
(33.4)
Profit after tax
95.3
Continuing Operations
Discontinued Operations
First
Bus
£m
First
Rail
£m
Greyhound
£m
Group
items
1
£m
Continuing
Operations
£m
First
Student
£m
First
Transit
£m
Greyhound
£m
Group
items
1
£m
Total
£m
Capital additions
150.1
56.7
–
1.1
207.9
–
–
–
–
207.9
Capital additions comprises of intangible asset additions and acquisitions (note 12) and property plant and equipment acquisitions, additions
and transfers from right of use assets (note 13).
Balance sheet
4
Total
assets
£m
Total
liabilities
£m
Net assets/
(liabilities)
£m
Greyhound retained
79.8
(101.6)
(21.8)
First Bus
775.5
(263.6)
511.9
First Rail
2,460.4
(1,092.1)
1,368.3
3,315.7
(1,457.3)
1,858.4
Group items
251.5
(89.4)
162.1
Borrowings and cash
791.4
(2,067.0)
(1,275.6)
Taxation
47.0
(41.7)
5.3
Total
4,405.6
(3,655.4)
750.2
Greyhound (held for sale)
0.6
–
0.6
Total
4,406.2
(3,655.4)
750.8
1 Group items comprise central management and other items.
2 EBITDA is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.
3 Although the segment results are used by management to measure performance, statutory operating profit by operating division is also disclosed for completeness.
4 Segment assets and liabilities are determined by identifying the assets and liabilities that relate to the business of each segment but excluding intercompany balances,
net debt and taxation.
The segment results for the 52 weeks ended 26 March 2022 are as follows:
Continuing Operations
Discontinued Operations
First
Bus
£m
First
Rail
£m
Greyhound
£m
Group
items
1
£m
Continuing
Operations
£m
First
Student
£m
First
Transit
£m
Greyhound
£m
Group
items
1
£m
Total
£m
Passenger revenue
570.0 1,886.4
–
–
2,456.4
–
–
150.4
–
2,606.8
Contract revenue
80.6
–
–
–
80.6
450.3
203.2
–
–
734.1
Charter/private hire
–
–
–
–
–
21.8
0.1
0.9
–
22.8
Rail contract subsidy receipts
– 1,662.1
–
–
1,662.1
–
–
–
–
1,662.1
Other revenues
139.3
252.7
–
–
392.0
7.4
96.4
66.4
–
562.2
Revenue
789.9 3,801.2
–
–
4,591.1
479.5
299.7
217.7
–
5,588.0
EBITDA
2
104.4
649.9
–
(23.1)
731.2
88.2
15.6
27.1
–
862.1
Depreciation
(63.3) (669.5)
–
(2.6)
(735.4)
–
–
(11.0)
–
(746.4)
Software amortisation
(1.6)
(2.1)
–
(0.6)
(4.3)
–
–
(0.4)
–
(4.7)
Capital grant amortisation
5.7
109.5
–
–
115.2
–
–
0.6
–
115.8
Segment results
45.2
87.8
–
(26.3)
106.7
88.2
15.6
16.3
–
226.8
Other intangible asset amortisation
charges
–
–
–
–
–
–
–
(0.4)
–
(0.4)
Other adjustments (note 4)
–
4.0
12.1
–
16.1
(14.8)
(6.5)
28.7
556.2
579.7
Operating profit/(loss)
3
45.2
91.8
12.1
(26.3)
122.8
73.4
9.1
44.6
556.2
806.1
Investment income
–
0.6
–
0.5
1.1
–
–
0.4
–
1.5
Finance costs
(2.8)
(37.6)
(1.1)
(100.1)
(141.6)
(7.5)
(0.7)
(3.7)
–
(153.5)
Profit before tax
42.4
54.8
11.0
(125.9)
(17.7)
65.9
8.4
41.3
556.2
654.1
Tax
(12.1)
Profit after tax
642.0
Continuing Operations
Discontinued Operations
First
Bus
£m
First
Rail
£m
Greyhound
£m
Group
items
1
£m
Continuing
Operations
£m
First
Student
£m
First
Transit
£m
Greyhound
£m
Group
items
1
£m
Total
£m
Capital additions
113.8
52.6
–
5.1
171.5
87.7
12.2
37.1
–
308.5
Capital additions comprises of intangible asset additions and acquisitions (note 12) and property plant and equipment acquisitions, additions
and transfers from right of use assets (note 13).
Balance sheet
4
Total
assets
£m
Total
liabilities
£m
Net assets/
(liabilities)
£m
Greyhound retained
170.7
(137.0)
33.7
First Bus
806.0
(179.6)
626.4
First Rail
1,659.9
(1,062.6)
597.3
2,636.6
(1,379.2)
1,257.4
Group items
370.4
(124.6)
245.8
Borrowings and cash
787.7
(1,406.7)
(619.0)
Taxation
39.2
(38.3)
0.9
Total
3,833.9
(2,948.8)
885.1
1 Group items comprise central management and other items.
2 EBITDA is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.
3 Although the segment results are used by management to measure performance, statutory operating profit by operating division is also disclosed for completeness.
4 Segment assets and liabilities are determined by identifying the assets and liabilities that relate to the business of each segment but excluding intercompany balances,
net debt and taxation.
Geographical information
The Group’s operations are located predominantly in the United Kingdom, with the prior year also including United States of America and
Canada until the point of disposal of those businesses. The following table provides an analysis of the Group’s revenue by geographical
market:
Revenue
2023
£m
2022
£m
United Kingdom
4,755.0
4,591.1
Total continuing operations
4,755.0
4,591.1
United States of America – discontinued operations
4.0
908.2
Canada – discontinued operations
–
88.7
Total discontinued operations
4.0
996.9
Total revenue
4,759.0
5,588.0
The following is an analysis of non‑current assets excluding financial instruments, deferred tax and pensions, the carrying amount of
segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the
assets are located:
Non‑current assets excluding
financial instruments deferred
tax and pensions
Additions to property,
plant and equipment and
intangible assets
Carrying amount
of segment total assets
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
United Kingdom
2,557.6
2,021.7
207.9
171.5
4,278.8
3,613.2
United States of America – continuing operations
–
–
–
–
–
179.3
Canada – continuing operations
–
–
–
–
0.7
2.2
Unallocated corporate items
–
–
–
–
47.0
39.2
Total – continuing operations
2,557.6
2,021.7
207.9
171.5
4,326.5
3,833.9
United States of America – discontinued operations
2.6
2.2
–
128.6
79.7
–
Canada – discontinued operations
–
–
–
8.4
–
–
Unallocated corporate items
–
–
–
–
–
–
Total – discontinued operations
2.6
2.2
–
137.0
79.7
–
2,560.2
2,023.9
207.9
308.5
4,406.2
6
Operating profit
Operating profit has been arrived at after charging/(crediting):
2023
£m
2022
£m
Depreciation – owned assets
171.4
157.1
Depreciation – right of use assets
550.5
578.3
Operating commitments
516.2
483.3
Other intangible asset amortisation charges
8.6
4.3
Capital grant amortisation
(129.1)
(115.2)
Cost of inventories recognised as an expense
268.1
236.6
Employee costs (note 7)
1,517.9
1,469.4
Gain on disposal of property, plant and equipment
(0.7)
(13.8)
Rail termination sums net of impairment reversal (note 4)
–
(4.0)
Impairment charges
13.6
–
Reversal of impairment
(4.3)
–
Auditor’s remuneration (see below)
3.4
4.7
Rail franchise payments
3.4
24.6
Foreign exchange
(0.4)
(1.0)
Other operating costs
1
1,682.5
1,644.0
Operating costs – continuing operations
4,601.1
4,468.3
Operating (income)/costs – discontinued operations
(27.3)
313.6
Operating costs – continuing and discontinued operations
4,573.8
4,781.9
1
Other operating costs includes £32.6m (2022: £48.0m) received or receivable from Government bodies in respect of bus service operator grants and fuel duty
rebates.
2
Discontinued operations’ operating income in 2023 consists primarily of the Greyhound US property gains on disposal (£71.4m), partly offset by the First Transit
earnout charge (£33.8m). See note 4 for more details.
discontinued operations in respect of audit and non‑audit services are shown below:
2023
£m
2022
£m
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
0.2
0.2
Fees payable to the Company’s auditor and its associates for the audit of the
Company’s subsidiaries pursuant to legislation
3.0
3.4
Total audit fees
3.2
3.6
Audit‑related assurance services
0.1
0.5
Other non‑audit services
0.1
0.6
Total non‑audit fees
0.2
1.1
Fees payable to PricewaterhouseCoopers LLP and its associates for non‑audit services to the Company are not required to be disclosed
because the consolidated financial statements are required to disclose such fees on a consolidated basis.
Details of the Group’s policy on the use of auditors for non‑audit services, the reasons why the auditor was used rather than another supplier
and how the auditor’s independence and objectivity were safeguarded are set out in the Corporate Governance report on page 104. No
services were provided pursuant to contingent fee arrangements.
Employee costs
The average monthly number of employees including discontinued operations (including Executive Directors) was:
2023
Number
2022
Number
Operational
26,708
49,162
Administration
3,275
4,161
29,983
53,323
Less – discontinued operations
–
(22,513)
29,983
30,810
The aggregate remuneration including discontinued operations (including Executive Directors) comprised:
2023
£m
2022
£m
Wages and salaries
1,296.8
1,946.8
Employee retention credits
1
–
(69.9)
Social security costs
137.1
186.6
Pension costs (note 37)
86.4
90.7
1,520.3
2,154.2
Less – discontinued operations
(2.4)
(684.8)
1,517.9
1,469.4
1 £nil (2022: £61.1m) of these credits were in First Student, First Transit and Greyhound as part of the coronavirus temporary relief measures through the CARES Act in
the US and the Canada Emergency Wage Subsidy (CEWS) in Canada. In addition, £nil (2022: £8.8m) relates to relief in First Bus from the Coronavirus Job Retention
Scheme (CJRS).
Wages and salaries include a charge in respect of share‑based payments of £6.4m (2022: £5.4m).
Disclosures on Directors’ remuneration, share options, long‑term incentive schemes and pension entitlements required by the Companies
Act 2006 and those specified for audit by the Financial Conduct Authority (FCA) are contained in the tables/notes within the Annual report on
Investment income and finance costs
2023
£m
2022
£m
Investment income
Bank interest receivable
(6.3)
(1.5)
Interest on pensions
(6.5)
–
Total investment income (including discontinued operations)
(12.8)
(1.5)
Finance costs
Bonds
13.5
22.2
Bank borrowings
3.5
14.1
Total make‑whole costs (bonds and facilities)
–
50.0
Write off of unamortised bridge, bond and facility costs
–
8.6
CCFF funding
–
0.7
Supplier financing
–
1.5
Senior unsecured loan notes
–
3.2
Finance charges payable in respect of lease liabilities
50.6
41.0
Finance charges payable in respect of asset backed financial liabilities
1.5
2.3
Interest on long‑term provisions
0.2
4.9
Interest on pensions
–
2.6
Interest – other
–
2.4
Total finance costs (including discontinued operations)
69.3
153.5
Finance costs before adjustments
69.3
153.5
Investment income
(12.8)
(1.5)
Net finance cost before adjustments
56.5
152.0
Split:
Adjusted net finance costs
56.5
93.4
Other adjustments (note 4)
–
58.6
56.5
152.0
Finance costs are stated after charging fee expenses of £0.6m (2022: £4.2m). There was no interest capitalised into qualifying assets in either
the 52 weeks ending 25 March 2023 or 26 March 2022.
Tax on profit/(loss) on ordinary activities
2023
£m
2022
£m
Current tax
1.1
2.9
Adjustments with respect to prior years
1.7
1.2
Total current tax charge (including discontinued operations)
2.8
4.1
Origination and reversal of temporary differences
40.9
5.2
Adjustment in respect of prior years
(10.3)
(10.7)
Adjustments attributable to changes in tax rates and laws
(1.4)
(1.4)
Writing down of previously recognised deferred tax assets
1.4
40.6
Write back of previously unrecognised deferred tax assets
–
(25.7)
Total deferred tax charge (note 26)
30.6
8.0
Total tax charge (including discontinued operations)
33.4
12.1
Tax charge attributable to:
Profit from continuing operations
10.4
(11.9)
Profit from discontinued operations
23.0
24.0
The adjustments with respect to prior years includes the release of tax provisions.
UK corporation tax is calculated at 19% (2022: 19%) of the estimated assessable profit for the year. Tax for other jurisdictions is calculated at
the rates prevailing in the respective jurisdictions. From 1 April 2023 the corporation tax rate will increase to 25% and deferred tax has been
provided at 25% on temporary differences at the balance sheet date.
As the Group’s parent company is domiciled and listed in the UK, the Group uses the UK corporation tax rate to reconcile its effective tax
rate. The tax charge for the year can be reconciled to the UK corporation tax rate as follows:
2023
£m
2023
%
2022
£m
2022
%
Profit/(loss) from continuing operations before income tax expense
97.1
n/a
(17.7)
n/a
Profit from discontinued operations before income tax expense
31.6
n/a
671.8
n/a
Profit from total operations
128.7
100.0
654.1
100.0
Tax at the UK corporation tax rate of 19% (2022: 19%)
24.5
19.0
124.3
19.0
Non deductible expenditure
7.6
5.9
8.7
1.3
Non taxable income
–
–
(3.2)
(0.5)
Capital expenditure super deduction
(1.9)
(1.5)
(1.6)
(0.2)
Tax rates outside of the UK
6.7
5.2
(2.8)
(0.4)
Unrecognised losses
1.2
1.0
(0.9)
(0.1)
Non taxable income statement effects of the disposals of US businesses
–
–
(104.3)
(16.0)
Other adjustments in relation to prior years
(8.6)
(6.7)
(9.5)
(1.5)
Reversal of previously unrecognised deferred tax assets on Greyhound
–
–
(11.6)
(1.8)
Writing down of previously recognised deferred tax assets
1.4
1.1
40.6
6.2
Write back of previously unrecognised deferred tax assets
–
–
(25.7)
(3.9)
Increased deferred tax rates on current year temporary differences
3.9
3.1
(0.5)
(0.1)
Adjustments attributable to changes in tax rates and laws
(1.4)
(1.1)
(1.4)
(0.2)
Tax charge and effective tax rate for the year
33.4
26.0
12.1
1.8
Future years’ tax charges would be impacted if the final liability for currently open years is different from the amount currently provided for.
The future tax charge may also be affected by the levels and mix of profits in the countries in which we operate including differing foreign
exchange rates that apply to those profits. Changes to the prevailing tax rates and tax rules in any of the countries in which we operate may
also impact future tax charges. From 1 April 2023 the UK corporation tax rate will increase from 19% to 25%.
In addition to the amount charged/(credited) to the income statement, deferred tax relating to actuarial losses on defined benefit pension
schemes £(37.2)m (2022: £(22.1)m) and cash flow hedges £1.3m (2022: £10.8m) have been charged/(credited) to comprehensive income
together with a further £(7.8)m (2022: £(5.0)m) on cash flow hedges and £(0.9)m (2022: £nil) on share‑based payments taken directly to
Earnings per share (EPS)
EPS is calculated by dividing the profit attributable to equity shareholders of £87.1m (2022: profit £636.4m) by the weighted average number
of ordinary shares of 739.5m (2022: 1,057.5m). The number of ordinary shares used for the basic and diluted 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.
2023
Number
m
2022
Number
m
Weighted average number of shares used in basic calculation
739.5
1,057.5
Executive share options
24.0
35.6
Weighted average number of shares used in the diluted calculation
763.5
1,093.1
The adjusted EPS is intended to highlight the recurring operating results of the Group before amortisation charges and certain other
adjustments as set out in note 4. A reconciliation is set out below:
2023
2022
£m
EPS
(pence)
£m
EPS
(pence)
Basic profit/EPS
87.1
11.8
636.4
60.2
Amortisation charges (note 4)
–
–
0.4
–
Other adjustments (note 4)
(30.8)
(4.2)
(579.7)
(54.7)
Non‑controlling interest on SWR
3.1
0.4
–
–
Adjusting finance costs (note 4)
–
–
58.6
5.5
Tax effect of above adjustments
12.7
1.7
(21.8)
(2.1)
Adjustments attributable to changes in tax rates and laws
(1.4)
(0.2)
(1.4)
(0.1)
Write down of previously recognised deferred tax assets
1.4
0.2
40.6
3.8
Write back of previously unrecognised deferred tax assets
–
–
(25.7)
(2.4)
Adjusted profit and EPS attributable to the ordinary equity holders of the Company
72.1
9.7
107.4
10.2
Adjusted (loss)/profit/EPS from discontinued operations
(6.6)
(0.9)
90.9
8.6
Adjusted profit/EPS from continuing operations
78.7
10.6
16.5
1.6
2023
pence
2022
pence
Diluted EPS
11.4
60.2
Adjusted diluted EPS
9.4
9.8
The adjusted EPS on a continuing basis is set out below:
2023
2022
£m
EPS
(pence)
£m
EPS
(pence)
Basic profit/(loss)/EPS
78.5
10.6
(11.4)
(1.1)
Other adjustments (note 4)
7.1
1.0
(16.1)
(1.4)
NCI on SWR
3.1
0.4
–
–
Adjusting finance costs (note 4)
–
–
58.6
5.5
Tax effect of above adjustments
(10.0)
(1.4)
(7.1)
(0.7)
Adjustments attributable to changes in tax rates and laws
(1.4)
(0.2)
(1.4)
(0.1)
Write back of previously unrecognised deferred tax assets
1.4
0.2
(6.1)
(0.6)
Adjusted profit/(loss)/EPS from continuing operations
78.7
10.6
16.5
1.6
2023
pence
2022
pence
Diluted EPS
10.3
(1.1)
Adjusted diluted EPS
10.3
2023
£m
Cost
At 27 March 2022
93.5
Additions
1
6.1
At 25 March 2023
99.6
Accumulated impairment losses
At 27 March 2022
–
At 25 March 2023
–
Carrying amount
At 25 March 2023
99.6
At 26 March 2022
93.5
1
Additions of £4.3m relate to goodwill on the acquisition of Ensign Bus Company Ltd and £1.8m relates to goodwill on the acquisition of Airporter Ltd.
Goodwill in the above table primarily relates to First Bus.
At the year end, the carrying value of goodwill was reviewed for impairment in accordance with IAS 36 Impairment of Assets.
In carrying out this review, climate‑related impacts were considered, in line with the TCFD disclosures. This work assessed FirstGroup’s
potential exposure to climate‑related transition and physical risks, across different climate scenarios, over the short, medium and long term,
and estimated cumulative Enterprise Value at Risk over the period FY 2024 to FY 2028.
Transition risks included potential impacts from increased carbon prices and route constraints due to new zero‑emission zones, as well
as technology costs from an accelerated shift to a zero‑emission fleet and the impairment of carbon‑intensive vehicles. Physical risks
concentrated mainly on flooding as the most material impact. Key findings are outlined on pages 63‑64 of this report and focus on direct
risks to FirstGroup, recognising that under the current National Rail Contracts some of the wider risks and opportunities would be shared
with/transferred to third parties.
For impairment calculations, the 2.5°C (‘Stated Policy’) scenario modelled by Marsh was used, which identified technology risks as ‘medium
impact’ and flooding risks as ‘low impact’ over the next five years.
11 Goodw ill
Full detailed impairment testing has been performed on a value in use basis on First Bus. The value of the Franchised TOC asset base is
protected by the passthrough and termination arrangements of the respective EMA/ERMAs or NRCs, such that no impairment is expected
to arise on these assets.
The Group prepares cash flow forecasts derived from the Board approved plan for 2023/24 to 2025/26 which takes account of both past
performance and expectations for future developments. Cash flows beyond the plan period are extrapolated using estimated long‑term
growth rates which do not exceed the long‑term average growth rate for the market. Cash flows are discounted using a pre‑tax discount rate
derived from a market participant’s weighted average cost of capital, benchmarked to externally available data.
Impairment testing – First Bus
First Bus value in use has been assessed based on the projected cash flows for 2023/24 to 2025/26 from the Board‑approved forecasts.
These have been extrapolated to perpetuity cash flows and discounted to a net present value based on the following assumptions.
First Bus has £496m of positive headroom at 25 March 2023 (26 March 2022: £628m) based on a 10.0% discount rate (2022: 9.3%) and
11.2% terminal margin (2022: 10.6%), which reflects the impact of expected future passenger volumes and yields, as well as planned resizing
of the network.
Break‑even would arise at:
15.5% discount rate (with a 11.2% terminal margin),
4.9% terminal margin (applying the cap to just the final year/terminal value) using a 10.0% discount rate, or
6.4% terminal margin throughout the forecast period and terminal margin (applying the cap in all years at 6.4%, not just in the terminal years)
using a 10.0% discount rate.
Greyhound
brand and
trade name
£m
Software
£m
Total
£m
Cost
Cost
At 27 March 2021
68.4
60.1
128.5
Acquisitions (note 31)
–
0.2
0.2
Additions
–
9.7
9.7
Transfers to held for sale – discontinued operations
(57.7)
(39.4)
(97.1)
Disposals
(14.0)
(0.3)
(14.3)
Foreign exchange movements
3.3
1.7
5.0
At 26 March 2022
–
32.0
32.0
At 27 March 2022
–
32.0
32.0
Additions
–
4.2
4.2
Transfers from property, plant and equipment
–
3.6
3.6
At 25 March 2023
–
39.8
39.8
Accumulated amortisation and impairment
At 27 March 2021
60.8
51.5
112.3
Charge for year
0.3
6.1
6.4
Impairment
1
1.6
–
1.6
Impairment reversal
2
(3.4)
(0.8)
(4.2)
Transfers to held for sale – discontinued operations
(48.2)
(38.7)
(86.9)
Disposals
(14.0)
(0.3)
(14.3)
Foreign exchange movements
2.9
1.8
4.7
At 26 March 2022
–
19.6
19.6
At 27 March 2022
–
19.6
19.6
Charge for year
–
8.6
8.6
Transfers from property, plant and equipment
–
0.8
0.8
At 25 March 2023
–
29.0
29.0
Carrying amount
At 25 March 2023
–
10.8
10.8
At 26 March 2022
–
12.4
12.4
1
Impairment relates to the closure of the Greyhound business in Canada.
2
Property, plant and equipment
Owned assets
Land and
buildings
£m
Passenger
carrying
vehicle fleet
£m
Other
plant and
equipment
£m
Total
£m
Cost
At 28 March 2021
275.4
1,026.9
634.6
1,936.9
Additions
3.7
92.6
51.7
148.0
Transfers from right of use assets
–
50.8
–
50.8
Disposals
(5.4)
(42.2)
(6.8)
(54.4)
Reclassified as assets held for sale
(47.6)
(10.3)
–
(57.9)
Transfers
10.3
–
16.8
27.1
Transferred to held for sale – discontinued operations
(36.7)
(326.9)
(36.6)
(400.2)
Foreign exchange movements
3.9
8.2
3.1
15.2
At 26 March 2022
203.6
799.1
662.8
1,665.5
At 27 March 2022
203.6
799.1
662.8
1,665.5
Acquisitions
2
20.2
7.6
0.5
28.3
Additions
16.1
80.1
79.2
175.4
Disposals
(8.2)
(134.0)
(23.8)
(166.0)
Reclassified as assets held for sale
(18.4)
–
(2.7)
(21.1)
Transfers
(0.2)
0.7
(4.4)
(3.9)
At 25 March 2023
213.1
753.5
711.6
1,678.2
Accumulated depreciation and impairment
At 28 March 2021
77.5
720.2
389.9
1,187.6
Charge for year
6.0
44.2
106.6
156.8
Transfers from right of use assets
–
6.3
–
6.3
Disposals
(2.5)
(42.5)
(4.0)
(49.0)
Impairment
1
7.3
(34.8)
(2.6)
(30.1)
Reclassified as assets held for sale
(9.5)
(10.3)
–
(19.8)
Transfers
2.6
–
16.5
19.1
Transferred to held for sale – discontinued operations
(5.8)
(209.6)
(60.3)
(275.7)
Foreign exchange movements
1.3
10.7
1.9
13.9
At 26 March 2022
76.9
484.2
448.0
1,009.1
At 27 March 2022
76.9
484.2
448.0
1,009.1
Charge for year
3.6
48.3
119.5
171.4
Disposals
(2.4)
(104.1)
(22.9)
(129.4)
Impairment
1
(4.3)
4.5
2.0
2.2
Reclassified as assets held for sale
(11.3)
–
(1.6)
(12.9)
Transfers
(2.0)
–
1.1
(0.9)
At 25 March 2023
60.5
432.9
546.1
1,039.5
Carrying amount
At 25 March 2023
152.6
320.6
165.5
638.7
At 26 March 2022
126.7
314.9
214.8
656.4
1
The impairment reversal of £4.3m relates to Southampton properties, which were subsequently transferred to assets held for sale (2022: impairment reversal
of £37.4m relating to Greyhound). The impairment charge of £6.5m primarily relates to the write down of passenger carrying vehicles as a result of fleet resizing
(2022: £7.3m relating to retained Greyhound properties, which were subsequently transferred to assets held for sale).
2
Acquisitions of £28.3m relate to continuing operations (see note 31).
An amount of £0.8m (2022: £0.8m) in respect of assets under construction is included in the carrying amount of land and buildings, plant
and equipment.
At 25 March 2023/31 March 2023 the Group had entered into contractual capital commitments amounting to £125.0m (2022: £32.2m),
principally representing purchase of PCVs, electrical infrastructure and TOC commitments.
Right of use assets
Rolling
stock
£m
Land and
buildings
£m
Passenger
carrying
vehicle fleet
£m
Other
plant and
equipment
£m
Total
£m
Cost
At 28 March 2021
2,597.5
115.7
145.0
6.9
2,865.1
Additions
93.1
3.2
9.4
1.0
106.7
Transfer to owned assets
–
–
(50.8)
–
(50.8)
Disposals
(105.0)
(3.7)
(1.9)
–
(110.6)
Transferred to held for sale – discontinued operations
–
(62.2)
(42.2)
(0.4)
(104.8)
Foreign exchange movements
–
2.9
0.7
–
3.6
At 26 March 2022
2,585.6
55.9
60.2
7.5
2,709.2
At 27 March 2022
2,585.6
55.9
60.2
7.5
2,709.2
Additions
1,200.2
16.2
1.3
1.3
1,219.0
Disposals
(4.1)
(0.9)
(9.8)
(0.3)
(15.1)
Foreign exchange movements
–
0.2
–
–
0.2
At 25 March 2023
3,781.7
71.4
51.7
8.5
3,913.3
Accumulated depreciation and impairment
At 28 March 2021
1,059.6
61.4
45.8
3.9
1,170.7
Transfer to owned assets
1
–
–
(6.3)
–
(6.3)
Charge for period
553.2
10.9
17.0
1.6
582.7
Impairment
2
–
(10.4)
(3.4)
–
(13.8)
Disposals
(3.1)
(1.6)
(1.0)
–
(5.7)
Transferred to held for sale – discontinued operations
–
(39.9)
(17.3)
(0.4)
(57.6)
Foreign exchange movements
–
2.1
0.8
–
2.9
At 26 March 2022
1,609.7
22.5
35.6
5.1
1,672.9
At 27 March 2022
1,609.7
22.5
35.6
5.1
1,672.9
Charge for period
528.7
8.5
11.8
1.5
550.5
Lease impairment
2
7.1
–
–
–
7.1
Disposals
(0.8)
(0.3)
(7.1)
(0.2)
(8.4)
Foreign exchange movements
–
0.2
–
–
0.2
At 25 March 2023
2,144.7
30.9
40.3
6.4
2,222.3
Carrying amount
At 25 March 2023
1,637.0
40.5
11.4
2.1
1,691.0
At 26 March 2022
975.9
33.4
24.6
2.4
1,036.3
1 Transfers to owned assets represents lease buyouts.
2
The impairment of £7.1m relates to GWR (2022: reversal of £13.8m relating to Greyhound).
The discounted lease liability relating to the right of use assets included above is shown in note 23.
Owned assets and right of use assets
Rolling stock
£m
Land and
buildings
£m
Passenger
carrying
vehicle fleet
£m
Other
plant and
equipment
£m
Total
£m
Carrying amount
At 25 March 2023
1,637.0
193.1
332.0
167.6
2,329.7
At 26 March 2022
975.9
160.1
339.5
217.2
1,692.7
The maturity analysis of lease liabilities is presented in note 23.
Amounts recognised in income statement (including discontinued operations)
2023
£m
2022
£m
Depreciation expense on right of use assets
550.5
582.7
Interest expense on lease liabilities
50.6
41.0
Impairment charge
7.1
–
Expense relating to short‑term leases
2.0
–
Expense relating to leases of low value assets
2.1
3.4
612.3
2023
£m
2022
£m
Other investments
2.5
Subsidiaries and non‑controlling interests
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given
below.
A full list of subsidiaries, joint ventures and associates is disclosed in note 40.
The non‑controlling interests of the Group are First Trenitalia West Coast Limited (70% ownership and voting rights), First MTR South
Western Trains Limited (70% ownership and voting rights) and Leicester CityBus Limited (94% ownership and voting rights). The registered
addresses are disclosed in note 40. The non‑controlling interest share of profit for the financial year is a profit of £2.5m which relates to First
Trenitalia West Coast Limited and £5.7m which relates to MTR South Western Trains Limited.
UK and Ireland local bus and coach operators
Rail companies
Ensign Bus Company Limited
First Aberdeen Limited
1
First Beeline Buses Limited
First Cymru Buses Limited
First Eastern Counties Buses Limited
First Essex Buses Limited
First Glasgow (No. 1) Limited
1
First Glasgow (No. 2) Limited
1
First Hampshire and Dorset Limited
First Manchester Limited
First Midland Red Buses Limited
First Potteries Limited
First South West Limited
First South Yorkshire Limited
First West of England Limited
First West Yorkshire Limited
First York Limited
Last Passive Limited
2
Leicester CityBus Limited (94%)
Somerset Passenger Solutions Limited
First Greater Western Limited
First TransPennine Express Limited
Hull Trains Company Limited
First Trenitalia West Coast Limited (70%)
First MTR South Western Trains Limited (70%)
East Coast Trains Limited
All subsidiary undertakings are wholly owned by FirstGroup plc at the end of the year except where percentage of ownership is shown above. All these companies above
are incorporated in United Kingdom and registered in England and Wales except those:
1. Registered in Scotland.
2. Incorporated in the Republic of Ireland.
All shares held in subsidiary undertakings are ordinary shares, with the exception of Leicester CityBus Limited where the Group owns 100%
of its redeemable cumulative preference shares, as well as 94% of its ordinary shares.
2023
£m
2022
£m
Spare parts and consumables from continuing operations
26.0
28.9
In the opinion of the Directors there is no material difference between the balance sheet value of inventories and their replacement cost.
Trade and other receivables
Amounts due within one year (from discontinued operations)
2023
£m
2022
£m
Contingent consideration receivable
72.3
–
Amounts due after more than one year (from discontinued operations)
Contingent consideration receivable
–
106.1
2023
£m
2022
1
restated
£m
Trade receivables
386.1
295.2
Loss allowance
(49.0)
(15.2)
Trade receivables net
337.1
280.0
Other receivables
210.3
194.7
Amounts recoverable on contracts
22.5
22.5
Prepayments
90.8
69.4
Accrued income
187.6
115.7
848.3
682.3
Movement in accrued income:
2023
£m
2022
£m
Balance as at 26 March 2022/27 March 2021
115.7
199.2
Additions
119.4
569.4
Accrued income invoiced during the year
(47.5)
(652.9)
Foreign exchange movements
–
–
Balance as at 25 March 2023/26 March 2022
187.6
115.7
1. The prior year comparatives for trade receivables, amounts recoverable on contracts and accrued income have been amended for a more
accurate presentation of comparative data.
The loss allowance relates solely to credit loss allowances arising from contracts with customers.
Other receivables includes £67.1m (2022: £35.9m) of VAT receivables, £8.6m (2022: £4.3m) of receivables from government bodies for fuel
duty rebates, and £73.3m (2022: £88.5m) of insurance recoveries.
Amounts recoverable on contracts relates to amounts due from governmental and similar bodies for agreed contractual changes.
Accrued income principally comprises amounts relating to contracts with customers billed each month. Any amount previously recognised
as accrued income is reclassified to trade receivables at the point at which is it invoiced to the customer.
Credit risk is the risk that financial loss arises from failure by a customer or counterparty to meet its obligations under a contract.
Credit risk exists in relation to the Group’s financial assets, which comprise trade receivables, amounts recoverable on contracts and
accrued income of £596.2m (2022: £433.1m), cash and cash equivalents of £791.4m (2022: £787.7m) and derivative financial instruments of
£7.5m (2022: £30.4m).
The Group’s maximum exposure to credit risk for all financial assets at the balance sheet date was £1,395.1m (2022: £1,261.2m). The
exposure is spread over a large number of unconnected counterparties and the maximum single concentration with any one counterparty
was £286.0m (2022: £246.0m) at the balance sheet date.
The Group’s credit risk is primarily attributable to its trade receivables, amounts recoverable on contracts and accrued income. The amounts
presented in the balance sheet are net of credit loss allowances, estimated by the Group’s management based on prior experience and their
assessment of the current economic environment. The credit loss allowance at the balance sheet date was £49.0m (2022: £15.2m).
Most trade receivables, amounts recoverable on contracts and accrued income are with public or quasi public bodies, principally the DfT,
Network Rail and local authorities in the UK and school bus boards and city municipal authorities in North America. The Group does not
consider any of these counterparties to be a significant risk. Each division within the Group has a policy governing credit risk management
on receivables.
The counterparties for bank balances and derivative financial instruments are mainly represented by lending banks and large banks with a
minimum of ‘A’ credit ratings assigned by international credit rating agencies. These counterparties are subject to approval by the Board.
Impairment of trade receivables amounts recoverable on contracts and accrued income
The Group applies the IFRS 9 simplified approach to measuring expected credit losses for all trade receivables, amounts recoverable on
contracts and accrued income at each reporting date.
Provision matrices are used to measure expected losses. The provision rates are based on days past due for groupings of various customer
segments with similar loss patterns, such as geographical region, service type, and customer type and rating. The calculation reflects the
probability‑weighted outcome and reasonable and supportable information that is available at the reporting date about past events, current
conditions and forecasts of future economic conditions.
Trade receivables, amounts recoverable on contracts and accrued income are written off when there is no reasonable expectation of
recovery.
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts
previously written off are credited against the same line item.
The majority of the Group’s customers are governmental or similar bodies and hence there is not considered to be any issues with the
recoverability of these receivables. Further there has not been any significant issues with the recoverability of non‑governmental receivables.
In 2023, the credit loss allowance increased as a result of amounts transferred from liquidated damages.
The gross carrying amount of trade receivables, amounts recoverable on contracts and accrued income for which the loss allowance is
measured at an amount equal to the lifetime expected credit losses under the simplified method, is analysed below:
Days past due: 2023
Carrying
amount
£m
Current
£m
Less than
30 days
£m
30‑90 days
£m
90‑180 days
£m
Over
180 days
£m
Expected credit loss rate
8.2%
0.7%
6.6%
42.7%
88.7%
60.2%
Gross carrying amount of trade receivables, amounts
recoverable on contracts and accrued income
596.2
494.2
29.0
24.1
14.2
34.7
Loss allowance (from continuing operations)
49.0
3.3
1.9
10.3
12.6
20.9
Days past due: 2022
Carrying
amount
£m
Current
£m
Less than
30 days
£m
30‑90 days
£m
90‑180 days
£m
Over
180 days
£m
Expected credit loss rate
3.5%
–
14.3%
1.4%
3.0%
63.9%
Gross carrying amount of trade receivables, amounts
recoverable on contracts and accrued income
433.4
328.2
37.0
22.1
32.8
13.3
Loss allowance (from continuing operations)
15.2
0.1
5.3
0.3
1.0
8.5
The table above is an aggregation of different provision matrices for each of the customer segment groupings, as outlined above. The
expected loss rate for each ageing category is the weighted average loss rate across these groupings. The ‘current’ category consist
primarily of receivables from groupings for which, based on historical losses and both the current and forecast economic conditions, the
expected credit losses are negligible, resulting in the application of a close to 0% loss rate.
Movement in the loss allowance for trade receivables
2023
£m
2022
£m
At 26 March 2022/27 March 2021
15.2
7.3
Amounts written off during the year
(3.2)
(0.7)
Increase in allowance recognised in the income statement
1.2
9.0
Amounts recovered during the year
(8.2)
(0.4)
Amounts transferred from liquidated damages
44.0
–
At 25 March 2023/26 March 2022
49.0
15.2
Assets held for sale
2023
£m
2022
£m
Assets held for sale
8.9
38.5
Assets held for sale relate primarily to properties in First Bus (2022: properties in Greyhound discontinuing business).
Movement in assets held for sale
£m
At 26 March 2022
38.5
Net book value of additions
8.3
Net book value of disposals
(41.3)
Foreign exchange movements
3.4
At 25 March 2023
Trade and other payables
2023
£m
2022
£m
Trade payables
338.8
253.3
Other payables
210.8
165.9
Accruals
621.6
703.2
Deferred income
125.5
109.8
Season ticket deferred income
17.7
12.9
1,314.4
1,245.1
Movement in deferred income
2023
£m
2022
£m
Balance as at 26 March 2022/27 March 2021
109.8
112.8
Additions
131.5
296.6
Recognised as revenue during the period
(115.8)
(295.9)
Transferred to held for sale – discontinued operations
–
(3.7)
Balance as at 25 March 2023/26 March 2022
125.5
109.8
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. Deferred income and
Other payables includes £15.2m (2022: £12.1m) for the purchase of property, plant and equipment where increased payment terms have
been agreed with the supplier due to the nature of the payable. Other payables also include deferred capital grants from government or other
public bodies of £116.1m (2022: £101.0m).
The average credit period taken for trade purchases is 36 days (2022: 30 days). The Group has controls in place to ensure that all payments
are paid within the appropriate credit timeframe. The Directors consider that the carrying amount of trade and other payables approximates
2023
£m
2022
£m
Cash and cash equivalents from continuing operations
791.4
787.7
The fair value of cash and cash equivalents approximates to the carrying value. Cash and cash equivalents includes ring‑fenced cash
of £369.6m (2022: £468.1m). Ring‑fenced cash is cash held in the Group which has restrictions around its use or distribution. The
most significant ring‑fenced cash balances are held by the Group’s First Rail subsidiaries. All non‑distributable cash in franchised Rail
subsidiaries is considered ring‑fenced under the terms of either the National Rail Contract, Emergency Measures Agreement or Emergency
Recovery Measures Agreement. Ring‑fenced cash balances of £5.4m (2022: £27.8m) are held outside the First Rail subsidiaries. These
other ring‑fenced cash balances include three elements: (1) loss escrow funds of £nil (2022: £3.8m) maintained by various third‑party
administrators, the purpose of which is to provide a source of funds for use by the administrators for payment of the self‑insurance liability
for losses and loss adjustment expenses in accordance with agreements between the administrators and the Business, (2) balances of
£1.3m (2022: £8.4m) within former First Transit subsidiaries which were retained by the Group following the sale of First Transit, where
those subsidiaries act as a disbursement agent on the behalf of their customers and the cash is only allowed to be used to settle customer
First Student and First Transit
The sale of First Student and First Transit was approved by a shareholder majority on 27 May 2021 and was reported as a discontinued
operation in the financial statements for the 52 weeks ended 26 March 2022 for the period to the sale completion on 21 July 2021. Financial
information relating to the discontinued operation for the period to the date of the disposal is set out below in (a).
Greyhound
The disposal of Greyhound Lines, Inc to a wholly owned subsidiary of FlixMobility GmbH was announced and completed on
21 October 2021. Greyhound US was therefore reported as a discontinued operation for the period to the sale completion in the financial
statements for the 52 weeks to 26 March 2022. The properties relating to the Greyhound US business were classified as held for sale at
26 March 2022, and in 2023 were treated as discontinued for the period to their disposal in December 2022.
(a) Financial performance and cash flow information
The financial performance and cash flow information presented are for the 52 weeks ending 25 March 2023, and the prior year information
includes the results of First Student and First Transit to the period before disposal on 21 July 2021, and the results of Greyhound US to the
period before disposal on 21 October 2021.
Discontinued operations
2023
£m
2022
£m
Revenue
4.0
996.9
Operating income/(costs)
27.3
(313.6)
Operating profit
31.3
683.3
Investment income
0.5
0.4
Finance costs
(0.2)
(11.9)
Profit before tax
31.6
671.8
Tax
(23.0)
(24.0)
Profit for the year after tax
8.6
647.8
Attributable to:
Equity holders of the parent
8.6
647.8
Non‑controlling interests
–
–
8.6
647.8
EPS
2023
pence
2022
pence
Basic EPS
1.2
61.3
Diluted EPS
1.1
61.3
Cash flow
2023
£m
2022
£m
Net cash (outflow)/inflow from operating activities
(139.7)
233.4
Net cash inflow/(outflow) from investing activities
126.9
(286.6)
Net cash outflow from financing activities
–
(20.3)
Net decrease in cash generated
(12.8)
(73.5)
Other comprehensive income/loss
2023
£m
2022
£m
Actuarial gains on defined benefit pension schemes
0.2
12.1
Hedging instrument movements
(0.4)
2.7
Deferred tax on hedging instrument movements
–
(0.7)
Exchange differences on translation of discontinued operations
6.8
(5.6)
Total
6.6
8.5
(b) Details of the sale of First Student and First Transit
2023
£m
2022
£m
Consideration received or receivable:
Cash
–
2,377.3
Direct transaction costs/fees
–
(54.0)
Fair value of contingent consideration
–
101.8
Total net disposal consideration
–
2,425.1
Carrying amount of net assets sold
–
(2,374.6)
Gain on sale before tax and reclassification of foreign currency translation reserve
–
50.5
Reclassification of foreign currency translation reserve
–
450.6
Gain on sale of the division before tax
–
501.1
Tax on gain
–
–
Gain on sale of the divisions after tax
–
501.1
As part of the disposal of First Transit, FirstGroup were entitled to an earnout consideration of up to $290m (c. £220m). The earnout was for
a period of three years from 21 July 2021 and calculated as a percentage of the Realised Equity Value.
On 26 October 2022, EQT Infrastructure announced its agreement to sell First Transit to Transdev North America, Inc. As a result of this
agreement, the Group estimates the earnout consideration to be around $88.5m (£72.3m) at 25 March 2023. This gives rise to a non‑cash
adjusting charge of £(33.8)m relative to the carrying value of the earnout of £106.1m at 26 March 2022.
(c) Details of the sale of Greyhound
2023
£m
2022
£m
Consideration received or receivable:
Cash
–
101.4
Direct transaction costs/fees
–
(17.0)
Fair value of contingent consideration
–
23.3
Total net disposal consideration
–
107.7
Carrying amount of net assets sold
–
(91.5)
Gain on sale before tax and reclassification of foreign currency translation reserve
–
16.2
Reclassification of foreign currency translation reserve
–
92.8
Gain on sale of the division before tax
–
109.0
Tax on gain
–
–
Gain on sale of the division after tax
–
109.0
In December 2022, the Group completed the sale of the majority of its remaining Greyhound US properties for net proceeds of £122m, and
2023
£m
2022
£m
On demand or within one year
Lease liabilities (note 23)
2,3
447.4
573.4
Asset backed financial liabilities (note 23)
3
17.3
9.0
Bank overdraft
82.9
87.5
Loan notes (note 24)
0.6
–
Bond 6.875% (repayable 2024)
1
6.5
7.1
Total current liabilities
554.7
677.0
Within one to two years
Lease liabilities (note 23)
2,3
381.6
167.8
Asset backed financial liabilities (note 23)
3
5.9
15.7
Loan notes (note 24)
–
0.6
Bond 6.875% (repayable 2024)
184.2
–
571.7
184.1
Within two to five years
Lease liabilities (note 23)
2,3
825.9
294.4
Asset backed financial liabilities (note 23)
3
12.1
10.5
Bond 6.875% (repayable 2024)
–
199.9
838.0
504.8
Over five years
Lease liabilities (note 23)
2,3
93.7
47.6
Asset backed financial liabilities (note 23)
3
8.9
0.3
102.6
47.9
Total non‑current liabilities at amortised cost
1,512.3
736.8
1 Includes accrued interest only.
2
The right of use assets relating to lease liabilities are shown in note 13.
3
The maturity analysis of lease liabilities and asset backed financial liabilities is presented in note 23.
Fair value of bonds issued
Par value
£m
Interest
payable
Month
2023
Fair value
£m
2022
Fair value
£m
Bond 6.875% (repayable 2024)
184.3
Annually
September
192.2
225.8
The fair value of the bond is inclusive of accrued interest. The fair value is calculated by discounting the future cash flow that will arise under
the contracts.
Effective interest rates
The effective interest rates at the balance sheet dates were as follows:
2023
Maturity
2022
Maturity
Bank overdraft
LIBOR + 1%
–
LIBOR + 1%
–
Syndicated loan facilities
LIBOR + 0.73%
August 2026
LIBOR + 0.97%
August 2025
Bond 2024
6.93%
September 2024
6.93%
September 2024
HP contracts and finance leases
Average fixed
rate of 3.3%
Various
Average fixed
rate of 3.1%
Various
Loan notes
LIBOR + 0.5%
March 2024
LIBOR + 0.5%
March 2024
2023
£m
2022
£m
Pounds Sterling
2,066.9
1,413.0
Euro
–
0.1
Canadian Dollar
0.1
0.7
2,067.0
1,413.8
Borrowing facilities
The Group had £300.0m (2022: £300.0m) of undrawn committed borrowing facilities as at year end. Total bank borrowing facilities at year
end stood at £316.5m (2022: £316.1m) of which £300.0m (2022: £300.0m) was committed and £16.5m (2022: £16.1m) was uncommitted.
The Group aims to maintain an investment grade credit rating and appropriate balance sheet liquidity headroom. The Group has a net debt
to EBITDA ratio of 1.7 times as at March 2023 for the continuing Group (2022: 0.8 times).
Liquidity within the Group has remained strong. At year end there was £638.9m (2022: £532.1m) of committed headroom and free cash.
The Group’s Treasury policy requires a minimum of £250m of committed headroom at the year end and half year for the budget year, and
£200m for year two of the three‑year plan. The Group’s net debt, excluding accrued bond interest, at 25 March 2023, was £1,269.1m
(2022: £619.0m) as set out in the Financial review on page 32.
The Group’s primary objectives of capital management is to ensure that the Group is able to continue as a going concern, to maintain an
optimal capital structure and adequate liquidity headroom to deliver on shareholder and stakeholder expectations. The Group’s capital
structure consists of equity and net debt. The Group actively manages its capital structure and will adjust it when appropriate should
economic conditions change. The Group’s debt is monitored on the basis of a gearing ratio, being net debt divided by EBITDA, further
Lease liabilities and asset backed financial liabilities
The Group had the following lease liabilities and asset backed financial liabilities at the balance sheet dates, excluding liabilities relating to the
discontinued operations:
Lease liabilities
Asset backed
financial liabilities
Maturity analysis
2023
£m
2022
£m
2023
£m
2022
£m
Due in less than one year
503.1
593.0
17.9
9.3
Due in more than one year but not more than two years
421.5
179.4
6.3
16.6
Due in more than two years but not more than five years
878.8
304.4
13.7
11.9
Due in more than five years
105.0
59.8
10.9
0.5
1,908.4
1,136.6
48.8
38.3
Less future financing charges
(159.8)
(53.4)
(4.6)
(2.8)
1,748.6
1,083.2
44.2
35.5
Lease liabilities have a fair value of £1,748.6m and asset backed financial liabilities have a fair value of £43.3m (2022: lease liabilities
£1,083.2m, asset backed financial liabilities £36.4m).
The total cash outflow for the lease liabilities and asset backed financial liabilities recorded on the balance sheet amounted to £546.9m and
£10.6m respectively (2022: £600.4m and £9.4m).
The Group had the following loan notes issued as at the balance sheet dates relating to continuing operations:
2023
£m
2022
£m
Due in less than one year
0.6
–
Due in more than one year but not more than two years
–
0.6
0.6
0.6
The loan notes have an average effective borrowing rate of 2.6% (2022: 1.7%) and an average remaining term of one year (2022: two years)
Non‑derivative financial instruments
2023
£m
2022
£m
Total non‑derivatives
Total non‑current assets
117.6
117.0
Total assets
117.6
117.0
Certain pension partnership structures were implemented during 2022. These structures involved the creation of special purpose vehicles
(SPVs) to hold cash to fund the Bus and Group pension schemes if required based on a designated funding mechanism. Management have
concluded that these amounts represent financial assets under IAS 32.
2023
£m
2022
£m
Total derivatives
Total non‑current assets
0.1
4.2
Total current assets
7.4
26.2
Total assets from continuing operations
7.5
30.4
Total current liabilities
2.6
–
Total non‑current liabilities
1.9
–
Total liabilities from continuing operations
4.5
–
Derivatives designated and effective as hedging instruments carried at fair value
Non‑current assets
Fuel derivatives (cash flow hedge)
–
4.0
Currency forwards (cash flow hedge)
0.1
0.2
0.1
4.2
Current assets
Fuel derivatives (cash flow hedge)
3.3
25.6
Currency forwards (cash flow hedge)
4.1
0.6
7.4
26.2
Current liabilities
Fuel derivatives (cash flow hedge)
2.6
–
2.6
–
Non‑current liabilities
Currency forwards (cash flow hedge)
0.1
–
Fuel derivatives (cash flow hedge)
1.8
–
1.9
–
The Group enters into derivative transactions under International Swaps and Derivatives Association Master Agreements that allow for the
related amounts to be set‑off in certain circumstances. The amounts set out as Fuel Derivatives and Currency forwards in the table above
represent the derivative financial assets and liabilities of the Group that may be subject to the above arrangements and are presented on a
gross basis. Derivative liabilities of £nil (2022: £nil) were subject to netting arrangements.
Total cash flow hedges are an asset of £3.0m (2022: £30.4m asset).
The following (profits) were transferred from equity into inventory as basis adjustments during the year:
2023
£m
2022
£m
Operating (profits)
(31.2)
(13.8)
Fair value of the Group’s financial assets and financial liabilities (including trade and other receivables and trade and other payables) on a
continuing basis:
2023
Fair value
Carrying
value
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets and derivatives
Contingent consideration receivable
–
72.3
–
72.3
72.3
Trade and other receivables
–
596.2
–
596.2
596.2
Derivative financial instruments
–
7.5
–
7.5
7.5
Financial liabilities and derivatives
Borrowings
1
0.6
1,984.1
–
1,984.7
1,984.1
Trade and other payables
–
1,198.3
–
1,198.3
1,198.3
Derivative financial instruments
–
4.5
–
4.5
4.5
1 Includes lease liabilities and asset backed financial liabilities as set out in note 23.
The estimated fair value of cash and cash equivalents, financial assets and bank overdrafts are a reasonable approximation to the carrying
value of these items.
2022
Fair value
Carrying
value
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets and derivatives
Contingent consideration receivable
–
–
106.1
106.1
106.1
Trade and other receivables
–
433.4
–
433.4
433.4
Derivative financial instruments
–
30.4
–
30.4
30.4
Financial liabilities and derivatives
Borrowings
1
10.6
1,345.4
–
1,356.0
1,326.3
Trade and other payables
–
1,144.1
–
1,144.1
1,144.1
Level 1:
Quoted prices in active markets for identical assets and liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly.
Level 3:
Inputs for the asset or liability that are not based on observable market data.
There were no transfers between Level 1 and Level 2 during the current or prior year. The announcement of EQT Infrastructure’s agreement
to sell First Transit to Transdev North America, Inc, means that the Group’s valuation of the earnout now reflects an observable market value,
and the contingent consideration receivable has therefore been reclassified from Level 3 to Level 2 at 25 March 2023.
The estimated fair value of cash and cash equivalents and bank overdrafts are a reasonable approximation to the carrying value of these
items.
Financial assets/(liabilities)
Fair values
at 25 March
2023
£m
Fair values
at 26 March
2022
£m
Fair value
hierarchy
Valuation technique(s) and key inputs
Derivative contracts
1) Fuel derivatives
(1.1)
29.6
Level 2
Discounted cash flow; future cash flows are estimated based on
forward fuel prices and contract rates and then discounted at a rate
that reflects the credit risk of the various counterparties.
2) Currency forwards
4.1
0.8
Level 2
Discounted cash flow; future cash flows are estimated based on
forward foreign exchange rates and contract rates and then discounted
at a rate that reflects the credit risk of the various counterparties.
The following table illustrates the carrying value of all financial assets and liabilities held by the Group on a continuing basis.
2023
Classification of financial instruments
Assets and
liabilities at
amortised
costs
£m
At fair value
through
profit
and loss
£m
At fair value
through
OCI
£m
Total
£m
Financial assets and derivatives
Cash and cash equivalents
791.4
–
–
791.4
Trade and other receivables
596.2
–
–
596.2
Non‑derivative financial instruments
117.6
–
–
117.6
Derivative financial instruments
–
–
7.5
7.5
1,505.2
–
7.5
1,512.7
Financial liabilities and derivatives
Interest bearing loans and borrowings
1
2,067.0
–
–
2,067.0
Trade and other payables
1,198.3
–
–
1,198.3
Derivative financial instruments
–
–
4.5
4.5
3,265.3
–
4.5
3,269.8
1
Includes lease liabilities and asset backed financial liabilities as set out in note 23.
2022
Classification of financial instruments
Assets and
liabilities at
amortised
costs
£m
At fair value
through
profit
and loss
£m
At fair value
through
OCI
£m
Total
£m
Financial assets and derivatives
Cash and cash equivalents
787.7
–
–
787.7
Trade and other receivables
433.4
–
–
433.4
Non‑derivative financial instruments
117.0
–
–
117.0
Derivative financial instruments
–
–
30.4
30.4
1,338.1
–
30.4
1,368.5
Financial liabilities and derivatives
Interest bearing loans and borrowings
1,413.8
–
–
1,413.8
Trade and other payables
1,144.1
–
–
1,144.1
2,557.9
–
–
2,557.9
Cash flow hedges
As at 25 March 2023
Commodity
price risk
Electricity
price risk
Foreign
exchange
price risk
Nominal amount of hedging
0.57m bbls
30,720 MWh
$63.0m
< 1 year
0.39m bbls
17,568 MWh
$40.8m
1 – 2 years
0.18m bbls
13,152 MWh
$22.2m
2 – 5 years
–
–
–
> 5 years
–
–
–
Average hedged rate
$95.11/bbl
£167/MWh
1.2628
Maturity
Apr23‑Mar25
Apr23‑Mar25
Apr23‑Mar25
Carrying amount of hedging instruments
Assets – Derivatives (£m)
3.3
–
4.2
Liabilities – Derivatives (£m)
(3.2)
(1.2)
(0.1)
(Liabilities – Borrowings (£m)
–
–
–
Carrying amount of hedged item
Liabilities – Borrowings (£m)
–
–
–
Accumulated amount of fair value hedging adjustments included in carrying amount of hedged item
Liabilities – Borrowings (£m)
–
–
–
Changes in fair value of hedged item used for calculating hedge effectiveness
(2.0)
1.2
7.1
Changes in fair value of hedging instrument used in calculating hedge effectiveness
2.0
(1.2)
(7.1)
Changes in fair value of hedging instrument accumulated in cash flow hedge reserve
(19.3)
(0.9)
0.6
No gains and losses on derivatives designated for hedge accounting have been charged through the consolidated income statement in
The Group is exposed to financial risks including liquidity risk, credit risk and certain market‑based risks principally being the effects of
changes in foreign exchange rates, interest rates and fuel prices. The Group manages these risks within the context of a set of formal policies
established by the Board. Certain risk management responsibilities are formally delegated by the Board, principally to a sub‑committee of
the Board and to the Chief Financial Officer and to the Treasury Committee. The Treasury Committee comprises the Chief Financial Officer
and certain senior finance employees and is responsible for approving hedging transactions permitted under Board‑approved policies,
monitoring compliance against policy and recommending changes to existing policies.
Liquidity risk is the risk that the Group may encounter difficulty in meeting obligations associated with financial liabilities. The objective of
the Group’s liquidity risk management is to ensure sufficient committed liquidity resources exist. The Group has a diversified debt structure
largely represented by medium term unsecured syndicated committed bank facilities, medium to long‑term unsecured bond debt and
finance leases. It is a policy requirement that debt obligations must be addressed well in advance of their due dates.
The Group’s Treasury policy requires a minimum of £250m of committed headroom at the year end and half year for the budget year,
and £200m for year two of the three‑year plan. At year end, the total amount of these facilities stood at £300.0m (2022: £300.0m), and
committed headroom was £300.0m (2022: £300.0m), in addition to free cash balances of £338.9m (2022: £232.1m). The next material
contractual expiry of revolver bank facilities is in August 2026.
The average duration of net debt (excluding ring‑fenced cash) at 25 March 2023 was 2.7 years (2022: 3.0 years).
The following tables detail, on a continuing basis, the Group’s expected maturity of payables for its borrowings, derivative financial
instruments and trade and other payables. The amounts shown in these tables are prepared on an undiscounted cash flow basis and
include future interest payments in the years in which they fall due for payment.
2023
< 1 year
£m
1‑2 years
£m
2‑5 years
£m
> 5 years
£m
Total
£m
Borrowings
1
563.1
578.1
839.5
104.6
2,085.3
Fuel derivatives
(2.6)
(1.8)
–
–
(4.4)
FX forwards
–
(0.1)
–
–
(0.1)
Trade and other payables
1,198.3
–
–
–
1,198.3
1,758.8
576.2
839.5
104.6
3,279.1
2022
< 1 year
£m
1‑2 years
£m
2‑5 years
£m
> 5 years
£m
Total
£m
Borrowings
1
683.6
197.3
516.8
45.8
1,443.5
Trade and other payables
1,144.1
–
–
–
1,144.1
1,827.7
197.3
516.8
45.8
2,587.6
1
Includes lease liabilities and asset backed financial liabilities as set out in note 23.
No derivative financial instruments had collateral requirements or were due on demand in any of the years. Derivative financial instruments
Currency risk
Currency risk is the risk of financial loss to foreign currency net assets, earnings and cash flows reported in pounds Sterling due to
movements in exchange rates.
The Group’s principal operations outside the UK were previously in the US and Canada, with the US having been the most significant
and the principal currency risk related to movements in the US Dollar to pounds Sterling. Following the disposal of Student, Transit and
Greyhound, this exposure has been significantly reduced, with the only balance of note being the US Dollar‑denominated earnout asset
relating to First Transit.
‘Certain’ and ‘highly probable’ foreign currency transaction exposures may be hedged at the time the exposure arises for up to two years at
specified levels, or longer if there is a very high degree of certainty. The Group is also exposed to currency risk relating to its UK fuel costs
which are denominated in USD. This is hedged through entering a series of average rate forward contracts on a similar profile to our fuel
hedging programme. Forward currency risk is designated in the cash flow hedges, however valuation movements arising from changes in
currency‑basis spreads are excluded from the relationships as costs of hedging. At the balance sheet date the value to be recorded in a
separate component of equity was immaterial, and as such no separate reserve has been shown within the primary financial statements.
continued
IFRS 7 requires the Group to show the impact on profit after tax and hedging reserve on financial instruments from a movement in
exchange rates. The following analysis details the Group’s sensitivity to a 10% strengthening in pounds Sterling against the US Dollar.
A 10% weakening in pounds Sterling against the US Dollar would have an equal but opposite effect to that shown below. The analysis has
been prepared based on the change taking place at the beginning of the financial year and being held constant throughout the reporting
period. A positive number indicates an increase in earnings or equity where pounds Sterling strengthens against the US Dollar.
2023
£m
2022
£m
Impact on profit after tax
0.2
3.9
Impact on hedging reserve
(0.1)
(1.8)
Interest rate risk
The Group has variable rate debt and cash and therefore net income is exposed to the effects of changes to interest rates. The Group
treasury policy objective is to maintain fixed interest rates at a minimum of 50% of on‑balance sheet net debt over the medium term, so that
volatility to EPS is substantially reduced year‑on‑year. The policy objective is primarily achieved through fixed rate debt. The main floating rate
benchmark on variable rate debt is SONIA.
At 25 March 2023, 99% (2022: 99%) of gross debt (pre IFRS 16) was fixed. This fixed rate protection had an average duration of 1.8 years
(2022: 2.4 years).
Interest rate risk within operating leases is hedged 100% by agreeing fixed rentals with the lessors prior to inception of the lease contracts.
The following sensitivity analysis details the Group’s sensitivity to a 100 basis points (1%) increase in interest rates throughout the reporting
period with all other variables held constant.
2023
£m
2022
£m
Impact on profit after tax
5.7
4.1
Diesel fuel price risk
The Group purchases its fuel on a floating price basis and is therefore exposed to changes in diesel prices, primarily in relation to First Bus
operations. The Group’s policy objective is to maintain a significant degree of fixed price protection in the short term with lower levels of
protection in the medium term, so that the businesses affected are protected from any sudden and significant increases and have time
to prepare for potentially higher costs, whilst retaining some access for potentially lower costs over the medium term. To achieve this the
Group operates a progressive hedging policy. The policy hedge target levels differ by division but are monitored monthly and appropriate
actions taken to maintain satisfactory hedge levels. Gasoil derivatives are used to hedge UK exposure. Risk component hedging has been
adopted under IFRS 9, meaning that the hedged price risk component of the purchased diesel matches that of the underlying derivative
commodity. The hedged risk component is considered to be separately identifiable and reliably measurable. Gasoil is considered to be the
core risk component of the fuel grade ultimately purchased and there is a very strong correlation between the movements in the prices of the
derivative underlying and the purchased fuel. Variances in pricing of the derivative commodities and the purchased fuel are primarily driven
by further refinement of the fuel or the associated transportation costs which were excluded from the hedge relationship. Currently First Bus
diesel exposure is hedged 85% to March 2024 and 55% to March 2025.
The Group has entered into swaps for periods from April 2023 to March 2025 with the majority of these swaps relating to the 53 weeks
ending 30 March 2024. The swaps give rise to monthly cash flow exchanges with counterparties to offset the underlying settlement of
floating price costs, except where they have a deferred start date. Gains or losses on fuel derivatives are recycled from equity into inventory
on qualifying hedges to achieve fixed rate fuel costs within operating results.
The following analysis details the Group’s sensitivity on profit after tax and equity if the price of diesel fuel had been $10 per barrel higher
during the 52 weeks ending 25 March 2023 and at the year end:
2023
£m
2022
£m
Impact on profit after tax
(0.3)
(4.9)
Impact on hedging reserve
3.5
4.5
Electricity price risk
The Group purchases electricity on a floating price basis and is therefore exposed to changes in electricity prices, primarily in relation to
First Bus and Group operations. The Group’s policy objective is to maintain a significant degree of fixed price protection in the short term, so
that the businesses affected have time to prepare for prices after the current hedge period expires. To achieve this the Group uses cash flow
hedge financial instruments to achieve significant fixed price certainty
The Group did not have any hedges in place for the year to 25 March 2023. It has entered into swaps for periods from April 2023 to
March 2025. The swaps give rise to monthly cashflow exchanges with counterparties to offset the underlying settlement of floating price
costs, except where they have a deferred start date. Gains or losses on electricity derivatives will be recycled from equity to the income
statement on qualifying hedges to achieve fixed rate electricity costs within operating results.
The following analysis details the Group’s sensitivity on profit after tax and equity if the price of electricity had been £50 per MWh higher
during the 52 weeks ending 25 March 2023 and at the year end:
2023
£m
2022
£m
Impact on profit after tax
(1.0)
–
Impact on hedging reserve
1.2
The major deferred tax (assets)/liabilities recognised by the Group and movements thereon during the current and prior reporting periods are
as follows:
Accelerated
tax
depreciation
£m
Retirement
benefit
schemes
£m
Other
temporary
differences
£m
Tax
losses
£m
Total
£m
At 27 March 2021
10.7
(32.4)
(13.3)
–
(35.0)
Charge/(credit) to income statement
1.2
39.0
(39.7)
7.5
8.0
Charge to other comprehensive income and equity
–
22.1
5.8
–
27.9
Transferred to held for sale – discontinued operations
(16.6)
20.6
1.3
(43.0)
(37.7)
Foreign exchange and other movements
(1.4)
(0.7)
1.0
1.8
0.7
At 26 March 2022
(6.1)
48.6
(44.9)
(33.7)
(36.1)
Charge/(credit) to income statement
28.0
(2.8)
10.6
(5.2)
30.6
Credit to other comprehensive income and equity
–
(37.2)
(7.4)
–
(44.6)
Acquisitions and disposals of subsidiaries
4.7
–
0.3
–
5.0
Foreign exchange and other movements
(1.9)
–
–
–
(1.9)
At 25 March 2023
24.7
8.6
(41.4)
(38.9)
(47.0)
With respect to the total net deferred tax asset of £47.0m, UK net deferred tax assets of £46.1m have been recognised as the Group
forecasts sufficient taxable profits in future periods and a deferred tax asset of £0.9m relating to the US is recognised because it is probable
that book gains will arise on the remaining US property portfolio.
No deferred tax has been recognised on deductible temporary differences of £1.3m (2022: £105.1m) and tax losses of £460.8m
(2022: £95.6m) as there are insufficient future profits forecast in North America and some UK entities may cease to trade before their tax
Insurance
claims
£m
Legal and
other
£m
Pensions
£m
Total
£m
At 26 March 2022
148.0
86.0
1.3
235.3
Charged to the income statement
11.6
20.4
(1.3)
30.7
Utilised in the year
(37.1)
(26.8)
–
(63.9)
Notional interest
0.2
–
–
0.2
Foreign exchange movements
7.2
1.6
–
8.8
At 25 March 2023
129.9
81.2
–
211.1
Current liabilities
45.5
40.4
–
85.9
Non‑current liabilities
84.4
40.8
–
125.2
At 25 March 2023
129.9
81.2
–
211.1
Current liabilities
51.8
62.7
0.1
114.6
Non‑current liabilities
96.2
23.3
1.2
120.7
At 26 March 2022
148.0
86.0
1.3
235.3
The insurance claims provision arises from estimated exposures for incidents occurring prior to the balance sheet date. It is anticipated
that the majority of such claims will be settled within the next four years although certain liabilities in respect of lifetime obligations of £1.3m
(2022: £8.9m) can extend for more than 25 years. The utilisation of £37.1m (2022: £43.0m) represents payments made against the current
liability of the preceding year as well as the settlement of certain large aged claims.
The insurance claims provisions, of which £78.6m (2022: £96.0m) relates to legacy Greyhound claims, includes £73.3m (2022: £88.5m)
which is recoverable from insurance companies and a receivable is included within other receivables in note 17.
Legal and other provisions relate to estimated exposures for cases filed or thought highly likely to be filed for incidents that occurred prior to
the balance sheet date. It is anticipated that most of these items will be settled within ten years. Also included are provisions in respect of
costs anticipated on the exit of surplus properties which are expected to be settled over the remaining terms of the respective leases and
dilapidation, other provisions in respect of contractual obligations under rail franchises and restructuring costs. The dilapidation provisions
are expected to be settled at the end of the respective franchise.
Number
of shares
million
2023
£m
Allotted, called up and fully paid (ordinary shares of 5p each)
Balance as at 27 March 2022
750.2
37.5
SAYE/BAYE exercises
0.4
–
Balance as at 25 March 2023 (ordinary shares of 5p each)
750.6
37.5
The Company has one class of ordinary shares which carries no right to fixed income.
In December 2022, the Company announced a share buyback programme to purchase up to £75m of ordinary shares, and at
25 March 2023, the Company had repurchased 29,515,396 shares for an amount of £31.6m, including transaction costs of £0.3m. As at
25 March 2023, £75.5m has been deducted from retained earnings in respect of the shares already purchased and remaining commitment
to purchase up to £75m of ordinary shares.
The share premium account represents the premium on shares issued since 1999 and arose principally on the rights issue on the Ryder
acquisition in 1999 and the share placings in 2007 and 2008. The reserve is non‑distributable.
The hedging reserve includes £1.2m in relation to the cost of hedging and records the movement on designated hedging items.
The own shares reserve represents the cost of shares in FirstGroup plc purchased in the market and either held as treasury shares or held in
trust to satisfy the exercise of share options.
Hedging reserve
The movements in the hedging reserve were as follows:
2023
£m
2022
£m
Balance at 26 March 2022/27 March 2021
19.3
(3.4)
Transfer to hedging reserve through consolidated statement of comprehensive income
Fuel derivatives
0.8
42.3
Currency forwards
(7.1)
1.6
(6.3)
43.9
Tax on derivative hedging instrument movements through statement of comprehensive income
(1.3)
(10.8)
Transfer from hedging reserve to the balance sheet:
Fuel derivatives
(27.7)
(14.6)
Currency forwards
(3.4)
0.7
(31.1)
(13.9)
Tax on derivative hedging instrument movements to the balance sheet
7.8
3.5
(11.6)
19.3
Cumulative loss on hedging instruments reclassified to the income statement
10.9
–
Balance at 25 March 2023/26 March 2022
(0.7)
19.3
The number of own shares held by the Group at the end of the year was 42,774,044 (2022: 9,472,372) FirstGroup plc ordinary shares
of 5p each. Of these, 13,068,899 (2022: 9,282,623) were held by the FirstGroup plc Employee Benefit Trust, 32,520 (2022: 32,520) by
the FirstGroup plc Qualifying Employee Share Ownership Trust and 157,229 (2022: 157,229) were held as treasury shares, with a further
29,515,396 held as treasury shares as part of the share buyback programme which commenced on 19 December 2022. Both trusts and
treasury shares have waived the rights to dividend income from the FirstGroup plc ordinary shares. The market value of the shares at
25 March 2023 was £43.3m (2022: £10.2m).
Capital
redemption
reserve
£m
Capital
reserve
£m
Total other
reserves
£m
Balance at 25 March 2023/26 March 2022
19.7
2.7
22.4
The capital redemption reserve represents the cumulative par value of all shares bought back and cancelled, less the associated transaction
2023
£m
2022
£m
At 26 March 2022/27 March 2021
(24.0)
524.7
Reclassification of foreign currency translation reserve on discontinued operations (see note 21)
–
(543.4)
Movement for the financial year
7.7
(5.3)
At 25 March 2023/26 March 2022
(16.3)
(24.0)
The translation reserve records exchange differences arising from the translation of the balance sheets of foreign currency denominated
subsidiaries offset by movements on loans used to hedge the net investment in those foreign subsidiaries. Reclassification of foreign
currency translation reserve on discontinued operations in 2022 relates to the sale of First Student and First Transit (£450.6m) and
Acquisition of businesses and subsidiary undertakings
2023
£m
2022
£m
Provisional fair value of net assets acquired:
Property, plant and equipment
28.3
1.4
Other intangible assets
–
0.2
Current assets
11.8
4.7
Other liabilities
(8.0)
(4.2)
32.1
2.1
Goodwill
6.1
11.0
Satisfied by cash paid and payable
38.2
13.1
Acquisitions in 52 weeks to 25 March 2023
On 9 March 2023, the Group completed the acquisition of Ensign Bus Company Ltd, which has strong positions in business‑to‑business
and regional commercial bus operations in Essex, as well as a vehicle refurbishment and re‑sale operation.
The total consideration of £35.7m represents £34.7m paid during the period and £1.0m to be paid in future periods, and includes cash
acquired of £6.6m included in current assets.
The business acquired during the year contributed £1.2m to Group revenue from continuing operations and £0.1m profit to Group operating
profit from continuing operations from the date of acquisition.
If the acquisition of the business had been completed on the first day of the financial year, Group revenue from the acquisition for the year
would have been £28.4m and Group operating profit would have been £3.0m.
On 26 October 2022, the Group completed the acquisition of Airporter Ltd, a provider of bus services and supplier of coaches, mini buses
and private vehicles for hire.
The total consideration of £2.5m was fully paid in the year.
The business acquired during the year contributed £0.3m to Group revenue from continuing operations and £0.2m profit to Group operating
profit from continuing operations from the date of acquisition.
If the acquisition of the business had been completed on the first day of the financial year, Group revenue from the acquisition for the year
would have been £1.8m and Group operating profit would have been £1.0m.
Acquisitions in 52 weeks to 26 March 2022
On 1 June 2021 the Group completed the acquisition of Mid State School Bus Inc. a provider of school transportation services in Nebraska,
United States of America. The total consideration of £2.9m represented £2.7m cash paid during the year and £0.2m deferred to be paid
in future periods. The business was subsequently disposed of as part of the sale of First Transit on 21 July 2021 and therefore did not
contribute to the Group’s revenue from continuing operations or operating profit from continuing operations.
On 30 September 2021 the Group completed the acquisition of Somerset Passenger Solutions Ltd. a company which serves the passenger
transport needs of the Hinkley Point C construction project in Somerset, England. Prior to the date of acquisition the company was operated
as a joint venture between the Group and JJP Holdings (South West) Ltd. with both parties holding a 50% share.
The total consideration of £10.2m represented £8.6m cash paid during the year and £1.6m deferred to be paid in future periods.
The business acquired during 2022 contributed £14.6m to Group revenue from continuing operations and £1.4m profit to Group operating
profit from continuing operations from the date of acquisition to 26 March 2022.
If the acquisition of the business acquired during the year had been completed on the first day of the financial year, Group revenue from
continuing operations from the acquisition for the year would have been £30.9m and the Group operating profit from continuing operations
Net cash from operating activities
2023
£m
2022
restated
£m
Operating profit from:
Continuing operations
153.9
122.8
Discontinued operations
31.3
683.3
Total operations
185.2
806.1
Adjustments for:
Depreciation charges
721.9
746.4
Capital grant amortisation
(129.1)
(115.8)
Software amortisation charges
8.6
4.7
Other intangible asset amortisation charges
–
0.4
Loss/(gain) on disposal of subsidiaries and businesses
3.7
(66.7)
Recycling of translation reserve
–
(543.4)
Impairment
13.6
–
Reversal of impairment
(4.3)
(48.1)
Share‑based payments
6.4
5.4
Profit on disposal of property, plant and equipment
(71.7)
(22.1)
Operating cash flows before working capital and pensions
734.3
766.9
Decrease/(increase) in inventories
2.9
(6.4)
(Increase)/decrease in receivables
(159.4)
95.5
Increase/(decrease) in payables due within one year
53.8
(130.0)
Increase in financial assets
–
(117.0)
Decrease/(increase) in contingent consideration receivable
33.8
(106.1)
(Decrease)/increase in provisions due within one year
(31.8)
36.5
Decrease in provisions due over one year
(1.2)
(13.2)
Settlement of foreign exchange hedge
(1.2)
–
Local Government Pension Scheme refund
11.8
–
Defined benefit pension payments in excess of income statement charge
1.8
(340.4)
Cash generated by operations
644.8
185.8
Tax paid
(1.0)
(21.4)
Interest paid¹
(70.0)
(176.6)
Net cash from operating activities
2
573.8
(12.2)
1
Interest paid includes £50.6m relating to lease liabilities (2022: £41.0m).
2
Analysis of changes in net debt
At
26 March
2022
£m
Cash flow
£m
Foreign
exchange
movements
£m
Other
£m
At
25 March
2023
£m
Components of financing activities:
Bonds
(199.9)
15.7
–
–
(184.2)
Lease liabilities
1
(1,083.2)
546.9
–
(1,212.3)
(1,748.6)
Asset backed financial liabilities
(35.5)
10.6
–
(19.3)
(44.2)
Other debt
(0.6)
–
–
–
(0.6)
Total components of financing activities
(1,319.2)
573.2
–
(1,231.6)
(1,977.6)
Cash
319.6
106.2
(4.0)
–
421.8
Bank overdrafts
(87.5)
4.9
–
(0.3)
(82.9)
Ring‑fenced cash
468.1
(98.5)
–
–
369.6
Cash and cash equivalents
700.2
12.6
(4.0)
(0.3)
708.5
Net debt (including held for sale – discontinued operations)
(619.0)
585.8
(4.0)
(1,231.9)
(1,269.1)
1 Lease liabilities ‘other’ includes £1,212.3m net inception of new leases. This comprises £1,219.0m inception of new leases, being £1,200.2m of rolling stock leases,
£1.3m of PCV leases and £17.5m of property and other leases, offset by £6.7m termination of leases. Termination of leases includes £3.3m in relation to rolling stock
leases, £2.7m in relation to PCV leases and £0.7m relating to property and other leases.
At
28 March
2021
£m
Cash flow
£m
Foreign
exchange
movements
£m
Other
£m
At
26 March
2022
£m
Components of financing activities:
Bank loans
(566.3)
579.3
(2.4)
(10.6)
–
Bonds
(873.1)
674.4
–
(1.2)
(199.9)
Senior unsecured loan notes
(198.8)
200.0
(0.6)
(0.6)
–
CCFF
(298.2)
298.2
–
–
–
Supplier financing
1
(159.2)
–
–
159.2
–
Lease liabilities
2
(1,850.0)
600.4
(1.0)
167.4
(1,083.2)
Asset backed financial liabilities
(122.9)
9.4
0.3
77.7
(35.5)
Other debt
(0.7)
–
–
0.1
(0.6)
Total components of financing activities
(4,069.2)
2,361.7
(3.7)
392.0
(1,319.2)
Cash
834.3
(514.5)
(0.2)
–
319.6
Bank overdrafts
(53.8)
(33.7)
–
–
(87.5)
Ring‑fenced cash
662.9
(194.8)
–
–
468.1
Cash and cash equivalents
1,443.4
(743.0)
(0.2)
–
700.2
Net debt (including held for sale – discontinued operations)
(2,625.8)
1,618.7
(3.9)
392.0
(619.0)
1 Supplier financing related wholly to First Student.
2
Lease liabilities ‘other’ includes £167.4m net inception of new leases. This comprises £116.9m inception of new leases, being £9.4m of PCV leases, £93.1m of rolling
stock leases and £14.4m of property and other leases, offset by £284.3m termination of leases. Termination of leases includes £101.9m in relation to rolling stock
leases, £31.8m in relating to PCV leases and £150.6m relating to property and other leases.
To support subsidiary undertakings in their normal course of business, FirstGroup plc and certain subsidiaries have indemnified certain
banks and insurance companies who have issued performance bonds for £55.0m (2022: £69.4m) and letters of credit for £169.9m
(2022: £219.7m). The performance bonds primarily relate to First Rail franchise operations of £51.8m and residual North American obligations
of £3.2m. The letters of credit relate substantially to insurance arrangements in the UK and North America. The parent company has
committed further support facilities of up to £98.5m to First Rail Train Operating Companies of which £73.6m remains undrawn. Following
the sale of Greyhound, the majority of the surety bonds were cancelled, with a residual amount of £3.2m remaining as noted above. Letters
of credit remain in place to provide collateral for legacy Greyhound insurance and pension obligations.
The Group is party to certain unsecured guarantees granted to banks for overdraft and cash management facilities provided to itself and
subsidiary undertakings. The Company has given certain unsecured guarantees for the liabilities of its subsidiary undertakings arising
under certain HP contracts, finance leases, operating leases and certain pension scheme arrangements. It also provides unsecured cross
guarantees to certain subsidiary undertakings as required by VAT legislation. First Bus subsidiaries have provided unsecured guarantees on
a joint and several basis to the Trustee of The First Bus Pension Scheme. Two of the Company’s North American subsidiaries participated in
multi‑employer pension plans in which their contributions were pooled with the contributions of other contributing employers. The funding of
those plans is reliant on the ongoing involvement of third parties.
In its normal course of business the Group has ongoing contractual negotiations with Government and other organisations. The Group is
party to legal proceedings and claims which arise in the normal course of business, including but not limited to employment and safety
claims. The Group takes legal advice as to the likelihood of success of claims and counterclaims. No provision is made where due to
inherent uncertainties, no accurate quantification of any cost, or timing of such cost, which may arise from any of the legal proceedings can
be determined.
The Group’s operations are required to comply with a wide range of regulations, including environmental and emissions regulations. Failure
to comply with a particular regulation could result in a fine or penalty being imposed on that business, as well as potential ancillary claims
rooted in non‑compliance.
The inquest relating to the death of seven passengers in the Croydon tram incident in November 2016 concluded in July 2021. The tram was
operated by Tram Operations Limited (‘TOL’), a subsidiary of the Group, under a contract with a Transport for London (‘TfL’) subsidiary. TOL
provides the drivers and management to operate the tram services, whereas the infrastructure and trams are owned and maintained by a
TfL subsidiary. The Office of Rail & Road (‘ORR’) announced in March 2022 that it had taken the decision to prosecute TfL, the driver of the
tram and TOL for breaches of Health and Safety law. While TOL has indicated a guilty plea to the charge laid against it, the Company cannot
yet accurately determine the quantum or timing of any financial penalties or related costs which may arise from these proceedings. TfL has
also indicated a guilty plea. The driver has pleaded not guilty – his trial started in mid‑May 2023.
First MTR South Western Trains Limited (‘FSWT’), a subsidiary of the Company and the operator of the South Western railway contract, is a
defendant to collective proceedings before the UK Competition Appeal Tribunal (the ‘CAT’) in respect of alleged breaches of UK competition
law. Stagecoach South Western Trains Limited (‘SSWT’) (the former operator of the South Western network) is also a defendant to these
proceedings. Separate sets of proceedings have been issued against London & South Eastern Railway Limited and related entities (‘LSER’)
and, more recently, against Govia Thameslink Railway Limited and related entities (‘GTR’) in respect of the operation of other rail services.
The three sets of proceedings are being heard together. The class representative (‘CR’) alleges that FSWT, SSWT, LSER and GTR breached
their obligations under UK competition law by not making boundary fares sufficiently available for sale, and/or by failing to ensure that
customers were aware of the existence of boundary fares and/or bought an appropriate fare in order to avoid being charged twice for
part of a journey. A collective proceedings order (‘CPO’) was made by the CAT in January 2022 in respect of the FSWT/SSWT and LSER
proceedings and, following an unsuccessful appeal by the defendants, the proceedings are continuing alongside the GTR proceedings in
respect of which the CAT issued a judgment setting out its reasons for granting a CPO in March 2023. The Secretary of State for Transport
served a written statement of intervention in all three proceedings in April 2023. A trial date has not yet been set. In March 2022, FSWT, the
Company and the CR executed an undertaking under which the Company has agreed to pay to the CR any sum of damages and/or costs
which FSWT fails to pay, and which FSWT is legally liable to pay to the CR in respect of the claims (pursuant to any judgment, order or award
of a court or tribunal), including any sum in relation to any settlement of the claims. At present the Company cannot accurately determine the
2023
£m
2022
£m
Minimum payments made under contractual terms recognised in the income statement for the year:
Plant and machinery
6.9
3.8
Track and station access
492.7
475.3
Hire of rolling stock
1.0
1.9
Other assets
15.6
2.3
Discontinued operations
–
2.3
516.2
485.6
At the balance sheet dates, the Group had outstanding commitments for future payments under non‑cancellable operating contracts, which
fall due as follows:
2023
£m
2022
£m
Within one year
481.1
511.0
In the second to fifth years inclusive
1,135.8
420.9
After five years
0.5
0.3
1,617.4
932.2
Included in the above commitments are contracts held by the First Rail businesses with Network Rail for access to the railway infrastructure,
Equity‑settled share option plans
The Group recognised total expenses of £6.4m (2022: £5.4m) related to equity‑settled share‑based payment transactions.
(a) Save as you earn (SAYE)
The Group operates an HMRC approved savings‑related share option scheme. No grants were made during the period. The scheme is
based on eligible employees being granted options and their agreement to opening a sharesave account with a nominated savings carrier
and to save weekly or monthly over a specified period. Sharesave accounts are held with Computershare. The right to exercise the option is
at the employee’s discretion at the end of the period previously chosen for a period of six months.
SAYE
Dec 2018
Options
Number
Outstanding at the beginning of the year
1,621,686
Exercised during the year
(1,019,311)
Lapsed during the year
(602,375)
Outstanding at the end of the year
–
Exercisable at the end of the year
Nil
Weighted average exercise price (pence)
70.0
Weighted average share price at date of exercise (pence)
123.2
(b) Deferred bonus shares (DBS)
DBS awards vest over a three‑year period following the financial year that they relate to and are typically settled by equity.
DBS 2012
Options
Number
DBS 2013
Options
Number
DBS 2014
Options
Number
DBS 2015
Options
Number
Outstanding at the beginning of the year
52,646
124,309
136,733
124,662
Exercised during the year
(22,109)
(18,215)
(28,695)
(16,475)
Lapsed during the year
(30,537)
–
–
–
Outstanding at the end of the year
–
106,094
108,038
108,187
Exercisable at the end of the year
Nil
106,094
108,038
108,187
Weighted average share price at date of exercise (pence)
110.6
107.5
114.6
118.6
DBS 2016
Options
Number
DBS 2017
Options
Number
DBS 2018
Options
Number
DBS 2019
Options
Number
DBS 2020
Options
Number
DBS 2021
Options
Number
Outstanding at the beginning of the year
130,141
35,741
62,424
1,271,965
787,709
1,124,496
Granted during the year
–
–
–
–
–
–
Forfeited during the year
–
–
–
–
–
–
Lapsed during the year
(2,539)
(4,086)
(24,556)
(8,091)
(81,974)
(95,338)
Exercised during the year
(65,934)
(6,299)
(13,220)
(913,569)
(198,362)
(141,603)
Outstanding at the end of the year
61,668
25,356
24,648
350,305
507,373
887,555
Exercisable at the end of the year
61,668
25,356
24,648
350,305
265,320
98,748
Weighted average share price at date of exercise (pence)
114.8
118.6
118.5
118.9
113.1
111.0
(c) Buy As You Earn (BAYE)
BAYE enables eligible employees to purchase shares from their gross income. The Company provides two matching shares for every three
shares bought by employees, subject to a maximum Company contribution of shares to the value of £20 per employee per month. If the
shares are held in trust for five years or more, no income tax and national insurance will be payable. The matching shares will be forfeited if
the corresponding partnership shares are removed from trust within three years of award.
At 25 March 2023 there were 5,667 (2022: 4,570) participants in the BAYE scheme. Scheme participants have cumulatively purchased
32,563,932 (2022: 30,574,677) shares with the Company contributing 10,436,402 (2022: 9,843,232) matching shares on a cumulative basis.
(d) Long‑Term Incentive Plan (LTIP)
LTIP awards have TSR, ROCE and EPS targets and vest over a three‑year period following the financial year that they relate to and are
settled by equity where an award exceeds a performance target.
LTIP 2019
Options
Number
LTIP 2020
Options
Number
LTIP 2021
Options
Number
Outstanding at the beginning of the year
3,304,805
5,839,948
3,293,642
Granted during the year
–
–
–
Forfeited during the year
–
–
–
Lapsed during the year
(380,058)
(703,235)
(704,944)
Exercised during the year
(2,412,111)
–
–
Outstanding at the end of the year
512,636
5,136,713
2,588,698
Exercisable at the end of the year
512,636
–
–
Weighted average share price at date of exercise (pence)
110.1
N/A
N/A
(e) Executive Share Plan (ESP)
ESP awards vest over a three‑year period following the financial year that they relate to and are typically settled by equity.
ESP 2015
Options
Number
ESP 2016
Options
Number
ESP 2017
Options
Number
ESP 2018
Options
Number
ESP 2019
Options
Number
ESP 2020
Options
Number
ESP 2021
Options
Number
Outstanding at the beginning
of the year
101,572
86,960
262,242
593,290
4,353,501
2,352,827
2,975,111
Granted during the year
–
–
–
–
–
–
–
Forfeited during the year
–
–
–
–
–
–
–
Lapsed during the year
(19,359)
(20,959)
(15,044)
(25,352)
(26,341)
(292,123)
(255,630)
Exercised during the year
–
(18,756)
(66,023)
(172,226)
(2,912,481)
(834,301)
(450,687)
Outstanding at the end
of the year
82,213
47,245
181,175
395,712
1,414,679
1,226,403
2,268,794
Exercisable at the end of the year
82,213
47,245
181,175
395,712
1,414,679
554,499
515,776
Weighted average exercise price (pence)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Weighted average share price
at date of exercise (pence)
N/A
121.8
117.4
116.9
123.1
104.8
110.1
(f) Conditional awards
In FY 2023 the equity share awards were granted as conditional awards rather than options. There is no impact on the economic values for
either the Company or participants resulting from this change.
The conditional awards outstanding under each scheme are shown below:
Deferred
Bonus 2022
Number
ESP Awards
2022
Number
LTIP Awards
2022
Number
Outstanding at the beginning of the year
–
–
–
Granted during the year
2,121,738
263,045
8,839,303
Lapsed during the year
(19,589)
(6,432)
(162,629)
Outstanding at the end of the year
2,102,149
256,613
8,676,674
One award of 10,038 granted under the ESP 2022 Plan is permitted to vest. No other awards in the table above have vested.
The fair values of the options granted during the last two years were measured using a Black‑Scholes model except for the TSR element of the LTIPs
which were measured using a Monte Carlo model. The inputs into the models were as follows:
2023
2022
Weighted average share price at grant date (pence)
– DBS
110.6
85.7
– LTIP
112.8
84.3
– ESP
99.9
93.4
Weighted average exercise price at grant date (pence)
– DBS
–
–
– LTIP
–
–
– ESP
–
–
Expected volatility (%)
– DBS
N/A
N/A
– LTIP
60
59
– ESP
N/A
N/A
Expected life (years)
– DBS
3.0
3.0
– SAYE schemes
N/A
3.0
– LTIP
2.62
2.66
– ESP
3.0
3.0
Rate of interest (%)
– DBS
N/A
N/A
– LTIP
–
–
– ESP
–
–
Expected dividend yield (%)
– DBS
–
–
– LTIP
–
–
– ESP
–
–
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous five years. The expected
life used in the model has been adjusted based on management’s best estimate, for the effects of non‑transferability, exercise restrictions
and behavioural considerations.
Allowances have been made for the SAYE schemes for the fact that, amongst a group of recipients some are expected to leave before an
entitlement vests. The accounting charge is then adjusted over the vesting period to take account of actual forfeitures, so although the total
charge is unaffected by the pre‑vesting forfeiture assumption, the timing of the recognition of the expense will be sensitive to it. Fair values
for the SAYE include a 10% per annum pre‑vesting leaver assumption whereas the Executive, LTIP and deferred share plans exclude any
allowance for pre‑vesting forfeitures.
The Group used the inputs noted above to measure the fair value of the new conditional awards (FY 2022: share options).
2023
pence
2022
pence
Weighted average fair value of options at grant date
– DBS
105.4
85.7
– LTIP
84.9
71.8
– ESP
99.9
The Group supports defined contribution and defined benefit schemes for the benefit of employees across the following business areas:
First Bus and Group – including The First UK Bus Pension Scheme, The FirstGroup Pension Scheme and two Local Government Pension
Schemes
North America – legacy schemes from operations which have now been sold
Rail – sponsoring six sections of the Railways Pension Scheme (RPS) relating to the Group’s obligations for its TOCs, with an additional
section for its Open Access Hull Trains business. Since the obligations to the TOC arrangements are considered to be limited to
contributions during the period of the contract, these are fundamentally different to the obligations to the other pension arrangements.
Details for these arrangements have therefore been shown separately.
Overall, the duration of the Company’s obligations is approximately 16 years although the durations of the individual schemes tend to vary
with the UK exposures tending to be of longer duration and the North American exposures tending to be of shorter duration.
All of the pension schemes are operated independently of the Group by the relevant pension scheme’s manager or trustee, and the assets of
each pension scheme are held separately from FirstGroup’s assets. The managers or trustees (as appropriate) of the pension schemes are
responsible for the investment policy, although the sponsor is consulted.
At their last valuations, the defined benefit schemes had funding levels between 74% and 114% (2022: 82% and 114%). The market value of
the assets as at 25 March 2023 for all non‑contract rail operation defined benefit schemes totalled £2,534m (2022: £3,343m).
(a) First Bus and Group (including open access rail operators)
Defined contribution plans (shown on a continuing basis)
Payments to defined contribution plans are charged as an expense as they fall due. There is no further obligation to pay contributions into a
defined contribution plan once the contributions specified in the plan rules have been paid. The total expense recognised in the consolidated
income statement of £28.1m (2022: £21.6m) represents contributions payable to these plans by the Group at rates specified in the rules of
the plans.
The Group operates defined contribution plans for all Group and First Bus employees (with the exception of a small number of employees
who remain active in a Local Government Pension Scheme) and First Rail employees who are not eligible to join a defined benefit
arrangement. They receive a company match to their contributions, which varies by salary and/or service.
Defined benefit plans (shown on a continuing basis)
The Group has full responsibility for the retirement benefits for former and current employees of Group, First Bus and Hull Trains who are
members of the schemes described in the following paragraphs, bearing all the risks and responsibilities of management and sponsorship
of these schemes. These comprise five funded defined benefit plans across its First Bus and Group operations (including Hull Trains which,
unlike the majority of First Rail operations, is operated under open access), covering approximately 35,500 former and current employees.
With the exception of Hull Trains, all of these schemes are closed to new entrants.
Triennial valuations assess the cost of future service (where relevant) and the funding position. The employer and trustees are required to
agree on assumptions for the valuations and to agree the contributions that result from these. Deficit recovery contributions may be required
in addition to future service contributions. In agreeing contribution rates, reference must be made to the affordability of contributions by
the employer.
Surplus after benefits have been paid/secured, can be repaid to the employer, in line with the rules of the schemes.
The First UK Bus Pension Scheme
This provides pension benefits to employees in First Bus. Historically it provided salary related benefits on a shared cost basis, but from
April 2013, all new members have been enrolled in the defined contribution section. The scheme closed to defined benefit accrual on
5 April 2018.
A smaller FirstGroup Pension Scheme provides defined benefit pensions to Group employees in addition to certain First Bus employees.
This scheme closed to defined benefit accrual on 5 April 2018.
The rules governing both these schemes grant the employer influence over the allocation of any residual surplus once the beneficiaries’
rights have been secured. Accordingly, the net surplus/deficit is recognised in full for these schemes.
Local Government Pension Schemes
The Group participates in two Local Government Pension Schemes (LGPS), one in England and one in Scotland, which provide salary
related benefits. These differ from trust‑based schemes in that their benefits and governance are prescribed by specific legislation, and
they are administered by local authorities. New members have not been admitted to the LGPS for several years, although benefit accrual
continues for a small number of existing members.
Contribution rates are agreed for the three‑year period until the next valuation. The balance sheet position in respect of the LGPS funds is
restricted per the requirements of IFRIC14.
The Hull Trains Shared Cost Section of the Railways Pension Scheme
Hull Trains participates in its own Section of the Railways Pension Scheme. This scheme, which remains open to new entrants, provides
salary‑related benefits. Costs relating to accrual and to any deficit are shared with members.
The table below is set out to show the movements in the fair value of schemes’ assets (Assets) along with the movements in the present
value of Defined benefit obligations (DBO) (Liabilities) for the Bus and Group and Hull Trains Defined Benefit schemes:
2023
2022
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
At beginning of period
2,930.1
2,571.7
2,732.4
2,792.8
Income statement
Operating
– Current service cost
–
8.5
–
8.3
– Past service gain including curtailments and settlements
–
–
–
–
Total operating
–
8.5
–
8.3
Interest income/cost
84.0
72.5
57.3
56.0
Total income statement
84.0
81.0
57.3
64.3
Amounts paid to/(from) scheme
Employer contributions
(7.5)
–
245.5
–
Employee contributions
1.2
1.2
1.3
1.3
Benefits paid
(121.6)
(121.6)
(118.5)
(118.5)
Total
(127.9)
(120.4)
128.3
(117.2)
Expected closing position
2,886.2
2,532.3
2,918.0
2,739.9
Change in financial assumptions
–
(632.8)
–
(220.6)
Change in demographic assumptions
–
(43.6)
–
7.9
Employee share of changes
0.2
(1.6)
0.3
(0.7)
Return on assets in excess of discount rate
(719.5)
–
11.8
–
Experience
–
118.2
–
45.2
Total
(719.3)
(559.8)
12.1
(168.2)
At end of period
2,166.9
1,972.5
2,930.1
2,571.7
Surplus/(deficit) before adjustment
194.4
358.4
Impact of shared cost
(0.3)
1.4
Adjustment for irrecoverable surplus
1
(156.7)
(162.3)
Surplus in schemes
37.4
197.5
The amount is presented in the consolidated balance sheet as follows:
Non‑current assets
44.6
203.0
Non‑current liabilities
(7.2)
(5.5)
37.4
197.5
1
The irrecoverable surplus represents the amount of the surplus that the Group could not recover through reducing future Company contributions to LGPS, see below.
Adjustment for First Bus irrecoverable surplus
Movements in the adjustment for the First Bus irrecoverable surplus were as follows:
2023
£m
2022
£m
At beginning of period
(162.3)
(108.7)
Interest on irrecoverable surplus
(4.7)
(2.2)
Actuarial gain/(loss) on irrecoverable surplus
10.3
(51.4)
At end of period
(156.7)
(162.3)
Asset Allocation
At March 2023
Quoted
£m
Unquoted
£m
Total
£m
Equity
145.9
164.4
310.3
Other return seeking assets
22.0
56.8
78.8
Real estate
–
21.9
21.9
Fixed income/liability driven
1,428.2
145.9
1,574.1
Other income generating
–
1.1
1.1
Annuities
–
129.6
129.6
Cash and cash equivalents
51.1
–
51.1
1,647.2
519.7
2,166.9
At March 2022
Quoted
£m
Unquoted
£m
Total
£m
Equity
318.2
157.5
475.7
Other return seeking assets
–
78.9
78.9
Real estate
19.4
7.9
27.3
Fixed income/liability driven
1,664.5
(41.7)
1,622.8
Other income generating
197.8
255.2
453.0
Annuities
–
160.6
160.6
Cash and cash equivalents
1
111.8
–
111.8
2,311.7
618.4
2,930.1
(b) North America
Greyhound pension arrangements
Following the sales of all of the businesses which the Group owned in North America, the Group retained certain responsibilities for the
provision of retirement benefits for a number of legacy schemes. These arrangements are described in the following paragraphs.
The Group operates a single legacy defined benefit arrangement in the US (2022: one), while in Canada, there is one funded legacy plan
(2022: three) and a small unfunded supplementary executive retirement plan. Following the merger of three legacy plans, the Company has
given notice of its intention to terminate the Canadian plan.
All the North American plans are valued annually, to identify the funding positions in order to determine the statutory funding requirements.
The table below is set out to show the movements in the fair value of schemes’ assets (Assets) along with the movements in the present
value of Defined benefit obligations (DBO) (Liabilities) for the North American Defined benefit schemes:
2023
2022
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
At beginning of period (including held for sale)
412.4
408.7
437.8
567.2
Income statement
Operating
– Current service cost
–
2.1
–
3.0
– Past service gain including curtailments and settlements
–
–
(81.1)
(109.7)
Total operating
–
2.1
(81.1)
(106.7)
Interest income/cost
16.5
16.2
11.9
13.6
Total income statement
16.5
18.3
(69.2)
(93.1)
Amounts paid to/(from) scheme
Employer contributions
4.5
–
102.0
–
Employee contributions
–
–
–
–
Benefits paid
(46.9)
(46.9)
(61.9)
(61.9)
Total
(42.4)
(46.9)
40.1
(61.9)
Expected closing position
386.5
380.1
408.7
412.2
Change in financial assumptions
–
(27.2)
–
(34.5)
Change in demographic assumptions
–
–
–
1.1
Employee share of change in DBO
–
–
–
–
Return on assets in excess of discount rate
(33.9)
–
(16.4)
–
Experience
–
1.6
–
9.2
Total
(33.9)
(25.6)
(16.4)
(24.2)
Currency gain/loss
14.2
15.0
20.1
20.7
At end of period
366.8
369.5
412.4
408.7
Surplus/(deficit)
Calculated as at 25 March
(2.7)
3.7
Opening irrecoverable surplus
(14.6)
Change in irrecoverable surplus
7.0
(13.8)
Currency gain/(loss) on irrecoverable surplus
0.8
(0.8)
Presented in the consolidated balance sheet as Non‑current liabilities
(9.5)
(10.9)
Asset Allocation
At March 2023
Quoted
£m
Unquoted
£m
Total
£m
Fixed income/liability driven
336.2
(27.2)
309.0
Cash and cash equivalents
57.5
0.3
57.8
393.7
(26.9)
366.8
At March 2022
Quoted
£m
Unquoted
£m
Total
£m
Equity
17.4
–
17.4
Real estate
–
24.9
24.9
Fixed income/liability driven
206.5
115.2
321.7
Cash and cash equivalents
49.6
(1.3)
48.3
273.5
138.8
412.3
First Transit management contracts
The Group retained ten First Transit Management Contracts following the sale of First Transit in 2021. As at the balance sheet date, the
Group’s First Transit subsidiary companies sponsored a total of three single‑employer pension arrangements (2022: five). The Group is
indemnified against any pension liabilities by the relevant transit authorities, and pension costs are reimbursed as they fall due. The Group will
not retain any pension liability upon expiry of the contract or if the contracts are reassigned.
Details of the assets and liabilities of these schemes is as follows:
2023
£m
2022
£m
Assets
14.0
281.6
Liabilities
(21.8)
(322.1)
Deficits in schemes
(7.8)
(40.5)
Amounts recoverable from contracting authorities
7.8
40.5
Net deficits in schemes
–
–
(c) Rail contracts
The Railways Pension Scheme (RPS)
The Group is responsible for collecting and paying contributions for a number of sections of the Railways Pension Scheme (RPS) as part of
its obligations under the contracts which it holds for its TOCs. These responsibilities continue for the periods of the TOCs and are passed to
future contract holders when those TOCs terminate. Management of the RPS is not the responsibility of the Group, nor is it liable to benefit
from any future surplus or fund any deficit of those funds.
As at the balance sheet date, the Group sponsored six sections of the RPS, relating to its contracting obligations for its TOCs. The RPS
is managed by the Railways Pension Trustee Company Limited and is subject to regulation from the Pensions Regulator and relevant UK
legislation.
The RPS is a shared cost arrangement. All costs, and any deficit or surplus, are shared 60% by the employer and 40% by the members.
For the TOC sections, under the contractual arrangements with the DfT, the employer’s responsibility is to pay the contributions following
triennial funding valuations while it operates the contracted services. These contributions are subject to change on consideration of future
statutory valuations. At the end of the contract, any deficit or surplus in the scheme section passes to the subsequent train operating
company with no compensating payments from or to the outgoing TOC.
The statutory funding valuations of the various Rail Pension Scheme sections in which the Group is involved (last finalised with an effective
date of 31 December 2013) and the IAS 19 actuarial valuations are carried out for different purposes and may result in materially different
results. The IAS 19 valuation is set out in the disclosures below.
The accounting treatment for the time‑based risk‑sharing feature of the Group’s participation in the RPS is not explicitly considered by IAS
19 Employee Benefits (Revised). The contributions currently committed to being paid to each TOC section are lower than the share of the
service cost (for current and future service) that would normally be calculated under IAS 19 (Revised) and the Group does not account
for uncommitted contributions towards the sections’ current or expected future deficits. Therefore, the Group does not need to reflect
any deficit on its balance sheet. A TOC adjustment (asset) exists that exactly offsets any section deficit that would otherwise remain after
reflecting the cost sharing with the members. This reflects the legal position that some of the existing deficit and some of the service costs in
the current year will be funded in future years beyond the term of the current contract and committed contributions. The TOC adjustment on
the balance sheet date reflects the extent to which the Group is not currently committed to fund the deficit.
Movements in the TOC contract adjustment in a period arise from and are accounted for as follows:
Any service cost for the period for which the contribution schedule requires no contributions from the entity are reflected as an adjustment to
the service cost in the income statement, which is considered to be in line with paragraphs 92‑94 of IAS 19 (Revised).
Under circumstances where contributions are renegotiated, such as following a statutory valuation, any adjustment necessary to reflect an
obligation to fund past service cost will be recognised in the income statement.
At the previous year end, we noted that The Pensions Regulator (TPR) had been in discussion with the RPS (the Scheme) regarding the
assumptions used to determine the Scheme’s funding requirements. Discussions are ongoing, and the possibility remains of changes to
contributions that could impact all rail operators sponsoring this industry‑wide scheme.
TPR and the DfT had requested that the RDG co‑ordinate the Train Operators’ involvement in an industry‑wide review of Scheme’s funding.
The RDG, comprising participants from each of the large owning groups, has been seeking to develop a framework which meets TPR,
DfT, RPS and RDG objectives. There has been continuing engagement between the key parties during the year, and efforts to develop a
framework to take forward to a formal consultation are ongoing.
Management continues to believe that the protections contained within current contractual agreements with the DfT will allow the Scheme to
continue with its current funding strategy in the short term. Nevertheless, TPR believes that a higher level of funding is required in the longer
term, and the Group has been engaged with the industry‑wide project to consider the funding of the Scheme.
Management continues to believe that an approach that meets TPRs key objectives while maintaining stability and fairness, and retaining
protection against unacceptable risk, for both operators and scheme members, is achievable.
Management do not believe that the current EMAs and NRCs have impacted the position in relation to the Group’s funding obligations
towards the RPS sections and no allowance has therefore been made within the disclosures for these Agreements.
The disclosed information has been set out to illustrate the effect of this on the costs borne by FirstGroup. In particular, 40% of the costs,
gains or losses and any deficit are attributed to the members. In addition, the total surplus or deficit is adjusted by way of a ‘contract
adjustment’ which includes an assessment of the changes that will arise from contracted future contributions and which is the portion of the
deficit or surplus projected to exist at the end of the contract which the Group will not be required to fund or benefit from.
Assets
£m
Liabilities
£m
Adjustment for
employee share of
RPS deficits (40%)
£m
Contract
adjustment
£m
Net
£m
At 1 April 2022
3,790.6
(5,066.1)
510.2
765.3
–
Income statement
Operating
– Service cost
–
(236.7)
94.6
89.2
(52.9)
– Admin cost
–
(10.4)
4.2
–
(6.2)
Total operating
–
(247.1)
98.8
89.2
(59.1)
Financing
108.2
(138.1)
12.0
17.9
–
Total income statement
108.2
(385.2)
110.8
107.1
(59.1)
Amounts paid to/(from) scheme
Employer contributions
59.1
–
(23.6)
23.6
59.1
Employee contributions
39.4
–
(15.8)
(23.6)
–
Benefits paid
(140.8)
140.8
–
–
–
Total
(42.3)
140.8
(39.4)
–
59.1
Expected closing position
3,856.6
(5,310.5)
581.6
872.3
–
Change in financial assumptions
–
1,840.2
(736.1)
(1,104.1)
–
Return on assets in excess of discount rate
(172.3)
–
68.9
103.4
–
Experience
–
(344.2)
137.7
206.5
–
Total
(172.3)
1,496.0
(529.5)
(794.2)
–
At 31 March 2023
3,684.3
(3,814.5)
52.1
78.1
–
Assets
£m
Liabilities
£m
Adjustment
for employee
share of RPS
deficits (40%)
£m
Contract
adjustment
£m
Net
£m
At 1 April 2021
3,370.6
(5,318.6)
779.2
1,168.8
–
Income statement
Operating
– Service cost
–
(253.4)
101.4
100.8
(51.2)
– Admin cost
–
(11.1)
4.4
–
(6.7)
Total operating
–
(264.5)
105.8
100.8
(57.9)
Financing
69.4
(105.1)
14.3
21.5
–
Total income statement
69.4
(369.6)
120.1
122.3
(57.9)
Amounts paid to/(from) scheme
Employer contributions
57.9
–
(23.1)
23.1
57.9
Employee contributions
37.9
–
(15.2)
(22.7)
–
Benefits paid
(129.5)
129.5
–
–
–
Total
(33.8)
129.5
(38.3)
0.4
57.9
Expected closing position
3,406.2
(5,558.6)
861.0
1,291.4
–
Change in financial assumptions
–
510.0
(204.0)
(306.0)
–
Return on assets in excess of discount rate
384.4
–
(153.8)
(230.7)
–
Experience
–
(17.5)
7.0
10.5
–
Total
384.4
492.5
(350.8)
(526.1)
–
At 31 March 2022
3,790.6
(5,066.1)
510.2
765.3
–
During the year £10.4m (2022: £11.1m) of gross administrative expenses were incurred, included in benefits paid above.
Finance costs above include interest income of £64.9m (2022: £41.6m) and employee share of interest on assets of £43.3m (2022: £27.8m)
Income statement charges on liabilities above of £385.2m (2022: £369.6m) represent:
2023
£m
2022
£m
Current service costs
148.2
158.6
Interest costs
82.9
63.1
Employee share of change in DBO (not attributable to contract adjustment)
154.1
147.9
385.2
369.6
Asset Allocation
At 25 March 2023/31 March 2023
Quoted
£m
Unquoted
£m
Total
£m
Equity
–
2,069.3
2,069.3
Other return seeking assets
–
1,177.8
1,177.8
Real estate
–
426.5
426.5
Cash and cash equivalents
10.7
–
10.7
10.7
3,673.6
3,684.3
At 26 March 2022/31 March 2022
Quoted
£m
Unquoted
£m
Total
£m
Equity
–
2,241.9
2,241.9
Other return seeking assets
–
1,089.7
1,089.7
Real estate
–
450.8
450.8
Cash and cash equivalents
8.2
–
8.2
8.2
3,782.4
3,790.6
The Rail contracts’ assets are invested in pooled funds created specifically for the Rail schemes. As such, these assets have been
categorised as unquoted.
(d) Valuation assumptions
The valuation assumptions used for accounting purposes have been made uniform to Group standards, as appropriate, when each scheme
is actuarially valued.
First Bus
2023
%
First Rail
2023
%
North
America
2023
%
First Bus
2022
%
First Rail
2022
%
North
America
2022
%
Key assumptions used:
Discount rate
4.67 – 4.69
4.80
4.66 – 4.92
2.91 – 2.97
2.83
3.72 – 4.19
Expected rate of salary increases
3.51
3.22
n/a
4.01
3.43
n/a
Inflation – CPI
2.51 – 2.56
2.72
2.0
2.89 – 3.01
2.93
2.0
Future pension increases
2.53
2
2.72
n/a
2.68
2
2.93
n/a
Post‑retirement mortality (life expectancy in years)
1
Current pensioners at 65:
19.4
20.7
19.7 – 21.6
19.9
20.6
19.7 – 21.5
Future pensioners at 65 aged 45 now:
19.8
22.2
21.3 – 22.6
21.4
22.1
21.2 – 22.6
1
Life expectancies reflect the largest underlying plans in each region.
2 Weighted average for principal scheme.
The Group reviews its longevity assumptions for each scheme following completion of funding valuations. The assumptions adopted reflect
recent scheme experience and views on future longevity which may include industry specific adjustment where appropriate. The Group
obtains specialist actuarial advice before agreeing longevity assumptions.
(e) Sensitivity of retirement benefit obligations to changes in assumptions
The method used to derive the sensitivities is the same as that used to calculate the main disclosures. The exception is longevity where we
have instead applied a general rule that one year’s extra life expectancy adds c.3% to the defined benefit obligation (with resultant impacts
on rail and irrecoverable surplus adjustments). This is consistent with the method applied to deriving last year’s sensitivities.
A 1.0% movement in the discount rate would impact the balance sheet position by approximately £218m. A 0.5% movement in the inflation
rate would impact the balance sheet position by approximately £67m. A one‑year movement in life expectancy would impact the balance
sheet position by approximately £52m.
Management considers that the figures provide a suitable indication of the potential impact of reasonably possible changes in the financial
assumptions and one‑year change in the mortality assumption. No allowance has been made for any consequent change in the value of
assets held.
(f) Consolidated statement of comprehensive income
Amounts presented in the consolidated statement of comprehensive income comprise:
2023
£m
2022
£m
Actuarial gain on DBO
2,079.7
684.3
Actuarial (loss)/gain on assets
(925.7)
380.1
Actuarial (loss) on contract adjustments
(1,323.7)
(876.9)
Adjustment for irrecoverable surplus
18.8
(65.2)
Actuarial (losses)/gains on defined benefit schemes
(150.9)
122.3
(g) Cash contributions
The estimated amounts of employer contributions expected to be paid to the defined benefit schemes during the 53 weeks ending
30 March 2024 is £64m based on current contributions schedules in force (25 March 2023: £70m).
(h) Risks associated with defined benefit plans:
Generally the number of employees in defined benefit plans is reducing rapidly, as these plans are largely closed to new entrants, and in
most cases to future accrual. Consequently, the number of defined contribution members is increasing.
The First Bus Pension Scheme and the FirstGroup Pension Scheme both closed to future accrual on 5 April 2018. This change will serve to
limit the risks associated with defined benefit pension provision by the Group.
Despite remaining open to new entrants and future accrual, the risks posed by the RPS are limited, as under the contractual arrangements
with DfT, the First Rail TOCs are not responsible for any residual deficit at the end of a contract. As such, there is only short‑term cash flow
risk within this business.
The key risks relating to the other defined benefit pension arrangements and the steps taken by the Group to mitigate them are as follows:
Risk
Description
Mitigation
Asset volatility
The liabilities are calculated using a discount rate
set with reference to corporate bond yields; if assets
underperform this yield, this will create a deficit. The
assets held in the defined benefit arrangements are
intended to meet the long‑term funding objectives of
those arrangements, and therefore results in some
risk in the short term and has the potential for material
adverse movements relative to the liabilities as valued
for accounting purposes.
Asset liability modelling has been undertaken to
ensure that any risks taken are expected to be
rewarded and, in relation to the Company’s largest
pension exposures, further work is being undertaken
to ensure that the investment strategy remains the
most appropriate.
Inflation risk
A significant proportion of the UK benefit obligations
are linked to inflation and higher inflation will lead to
higher liabilities.
Investment strategy reviews have led to increased
inflation hedging, mainly through swaps or holding
Index Linked Gilts in the UK schemes.
Uncertainty over level
of future contributions
Contributions to defined benefit schemes can be
unpredictable and volatile as a result of changes in
the funding level revealed at each valuation.
The Group engages with the trustees and plan
managers to consider how contribution requirements
can be made more stable. The level of volatility and
the Group’s ability to control contribution levels varies
between arrangements.
Life expectancy
The majority of the scheme’s obligations are to
provide benefits for the life of the member, so
increases in life expectancy will result in an increase in
the liabilities.
Linking retirement age to State Pension Age (as in The
First Bus Pension Scheme and LGPS) has mitigated
this risk to some extent. An annuity buy‑in has further
mitigated this risk in one of the LGPS arrangements.
Legislative risk
Future legislative changes are uncertain. In the past
these have led to increases in obligations, through
introducing pension increases, vesting of deferred
pensions, equalisation of certain benefits for men and
women or reduced investment return through the
ability to reclaim Advance Corporation Tax.
The Group receives professional advice on the impact
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note.
The remuneration of the Directors, which comprise the plc Board who are the key management personnel of the Group, is set out below in
aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual
Directors is provided in the Annual report on remuneration on pages 118‑133.
2023
£m
2022
£m
Basic salaries
1
1.7
1.6
Benefits in kind
–
–
Fees
0.8
0.9
Share‑based payment
2.5
2.6
5.0
5.1
1
Events after the reporting period
■
On 11 May 2023, the Department for Transport (DfT) confirmed that it would not exercise its option to extend the existing arrangements for
FirstGroup’s TransPennine Express (TPE) National Rail Contract, which was due to expire on 28 May 2023. On that date the DfT appointed
its Operator of Last Resort to take over delivery of passenger services on the TPE network.
■
The sale of the Bus division’s depot at Empress Road, Southampton, which was disclosed as held for sale at 25 March 2023, completed
on 3 April 2023 with proceeds in line with the held for sale valuation.
■
First Transit earnout crystallised following completion of the sale of the First Transit business by EQT Infrastructure in March 2023, with
estimated proceeds of c.$89m anticipated in H1 FY 2024.
■
In May 2023, the DfT announced a two‑year funding settlement for bus operators in England which includes £300m of further funding
to protect bus services until 2025, and £200m funding to extend the £2 fare cap until the end of October 2023 and then at £2.50 until
Information about related undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 25 March 2023
is disclosed below. Unless otherwise stated, the Group’s shareholding represents ordinary shares held indirectly by FirstGroup plc, the
entities are unlisted, and have one type of ordinary share capital, the year end is 25 March. The Group’s interest in the voting share capital is
100% unless otherwise stated. No subsidiary undertakings have been excluded from the consolidation:
Evolutionary Rail Limited,
5,9
8th Floor,
First Cymru Buses Limited,
3,7
Heol
Subsidiaries – wholly owned and
The Point, 37 North Wharf Road, London,
Gwyrosydd, Penlan, Swansea, SA5 7BN
incorporated in the United Kingdom
W2 1AF
First Dublin Metro Limited,
5,9
8th Floor,
A E & F R Brewer Limited,
4,5
Heol
FB Canada Holdings Limited
The Point, 37 North Wharf Road, London,
Gwyrosydd, Penlan, Swansea, SA5 7BN
(SC356482),
3,4
395 King Street, Aberdeen,
W2 1AF
Airport Buses Limited,
5
Bus Depot,
AB24 5RP
First Eastern Counties Buses Limited,
7
Westway, Chelmsford, Essex, CM1 3AR
FG Canada Investments Limited
Davey House, 7b Castle Meadow, Norwich,
Airport Coaches Limited,
5
Bus Depot,
(SC356484),
3,4
395 King Street, Aberdeen,
Norfolk, NR1 3DE
Westway, Chelmsford, Essex, CM1 3AR
AB24 5RP
First Essex Buses Limited,
7
Bus Depot,
Airporter Limited,
3,7
21 Arthur Street,
FG Properties Limited,
3,8
8th Floor,
Westway, Chelmsford, Essex, CM1 3AR
Belfast, BT1 4GA
The Point, 37 North Wharf Road, London,
First European Holdings Limited
W2 1AF
Butler Woodhouse Limited,
5
Bus Depot,
(05113697),
1,3,5
8th Floor, The Point,
Westway, Chelmsford, Essex, CM1 3AR
FGI Canada Holdings Limited
37 North Wharf Road, London, W2 1AF
(SC356485),
3,4
395 King Street, Aberdeen,
Cawlett Limited,
4
Enterprise House,
First Games Transport Limited,
5
AB24 5RP
Easton Road, Bristol, BS5 0DZ
8th Floor, The Point, 37 North Wharf Road,
First Aberdeen Limited,
3,7
395 King Street,
London, W2 1AF
CCB Holdings Limited (03128545),
4
Aberdeen, AB24 5RP
8th Floor, The Point, 37 North Wharf Road,
First Glasgow Limited,
1,5
100 Cathcart
London, W2 1AF
First Beeline Buses Limited,
3,7
Hoeford,
Road, Glasgow, G42 7BH
Gosport Road, Fareham, Hampshire,
CentreWest Limited (02844270),
5
First Glasgow (No.1) Limited,
7
PO16 0ST
8th Floor, The Point, 37 North Wharf Road,
100 Cathcart Road, Glasgow, G42 7BH
London, W2 1AF
First Bus Central Services Limited,
3,8
First Glasgow (No.2) Limited,
3,7
8th Floor, The Point, 37 North Wharf Road,
CentreWest London Buses Limited,
5
100 Cathcart Road, Glasgow, G42 7BH
London, W2 1AF
8th Floor, The Point, 37 North Wharf Road,
4
First Great Western Limited,
5,9
8th Floor,
London, W2 1AF
First Bus Pension GP Limited,
8th Floor,
The Point, 37 North Wharf Road, London,
5
The Point, 37 North Wharf Road, London,
CentreWest ESOP Trustee (UK) Limited,
W2 1AF
W2 1AF
8th Floor, The Point, 37 North Wharf Road,
5,9
First Great Western Trains Limited,
5,9
London, W2 1AF
First Caledonian Sleeper Limited,
8th Floor, The Point, 37 North Wharf Road,
5
395 King Street, Aberdeen, AB24 5RP
Chester City Transport Limited,
Bus
London, W2 1AF
Depot, Wallshaw Street, Oldham, OL1 3TR
First Capital Connect Limited,
3,5,9
8th
First Greater Western Limited,
7,9
8th
5
Floor, The Point, 37 North Wharf Road,
Crosville Limited,
Bus Depot, Wallshaw
Floor, The Point, 37 North Wharf Road,
London, W2 1AF
Street, Oldham, OL1 3TR
London, W2 1AF
First Capital East Limited,
5
Bus Depot,
Don Valley Buses Limited,
5
Olive Grove,
First Hampshire & Dorset Limited,
7
Westway, Chelmsford, Essex, CM1 3AR
Sheffield, South Yorkshire, S2 3GA
Hoeford, Gosport Road, Fareham,
7,9
First Capital North Limited,
4
8th Floor,
Hampshire, PO16 0ST
East Coast Trains Limited,
8th Floor,
The Point, 37 North Wharf Road, London,
The Point, 37 North Wharf Road, London,
First Information Services Limited
W2 1AF
W2 1AF
(SC288178),
1,3,8
395 King Street, Aberdeen,
5,9
First CentreWest Buses Limited,
5
AB24 5RP
East West Rail Limited,
8th Floor,
8th Floor, The Point, 37 North Wharf Road,
The Point, 37 North Wharf Road, London,
First International (Holdings) Limited
London, W2 1AF
W2 1AF
(08743641),
1,3,4
8th Floor, The Point, 37
5
First City Line Ltd,
5
8th Floor, The Point,
North Wharf Road, London, W2 1AF
ECOC (Holdings) Limited,
Bus Depot,
37 North Wharf Road, London, W2 1AF
Westway, Chelmsford, Essex, CM1 3AR
First International No.1 Limited
First Coaches Limited,
5
7
Enterprise House,
(08746564),
3,5
8th Floor, The Point,
Ensign Bus Company Limited,
The Rifle
Easton Road, Bristol, BS5 0DZ
37 North Wharf Road, London, W2 1AF
Range, Juliette Close, Purfleet Industrial
Park, Aveley, South Ockendon, Essex,
First Customer Contact Limited,
8,9
First Manchester Limited,
3,7
Wallshaw
RM15 4YF
8th Floor, The Point, 37 North Wharf Road,
Street, Oldham, OL1 3TR
London, W2 1AF
First Merging Pension Schemes
Limited,
5
8th Floor, The Point, 37 North
Wharf Road, London, W2 1AF
First Metro Limited,
5,9
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
First Midland Red Buses Limited,
3,7
Abbey Lane, Leicester, England, LE4 0DA
First North West Limited (02862042),
3,4
Wallshaw Street, Oldham, OL1 3TR
First Northern Ireland Limited,
3,7
21 Arthur Street, Belfast, BT1 4GA
First Pioneer Bus Limited,
3,5
Wallshaw Street, Oldham, OL1 3TR
First Potteries Limited,
3,7
Abbey Lane,
Leicester, England, LE4 0DA
First Provincial Buses Limited,
4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
First Rail Holdings Limited,
1,4,9
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
First Rail Procurement Limited,
1,3,8,9
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
First Rail Support Limited,
4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
First ScotRail Limited,
3,5,9
395 King Street,
Aberdeen, AB24 5RP
First ScotRail Railways Limited,
5,9
395 King Street, Aberdeen, AB24 5RP
First Shared Services Limited,
5
395 King Street, Aberdeen, AB24 5RP
First South West Limited,
3,7
Union Street,
Camborne, Cornwall, TR14 8HF
First South Yorkshire Limited,
7
Olive
Grove, Sheffield, South Yorkshire, S2 3GA
First Student UK Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
First Thameslink Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
First Trains Limited,
5,9
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
First TransPennine Express Limited,
7,9
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
First Travel Solutions Limited,
7
Unit 5
Petre Court, Petre Road Clayton Business
Park, Clayton Le Moors, Accrington,
BB5 5HY
First Wessex National Limited,
5
Enterprise House, Easton Road, Bristol,
BS5 0DZ
First West of England Limited,
7
Enterprise
House, Easton Road, Bristol, BS5 0DZ
First West Yorkshire Limited,
7
Hunslet
Park Depot, Donisthorpe Street, Leeds,
West Yorkshire, LS10 1PL
First York Limited,
3,7
Hunslet Park Depot,
Donisthorpe Street, Leeds, West Yorkshire,
LS10 1PL
FirstBus (North) Limited,
1,3,4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
FirstBus (South) Limited,
1,3,4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
FirstBus Group Limited,
4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
FirstBus Investments Limited
(02205797),
1,3,4
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
FirstGroup American Investments
(SC330038),
3,4
395 King Street, Aberdeen,
AB24 5RP
FirstGroup Canadian Finance Limited
(03486937),
1,3,6
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
FirstGroup Construction Limited,
5
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
FirstGroup Holdings Limited,
1,8
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
FirstGroup Pension GP Limited,
4
8th
Floor, The Point, 37 North Wharf Road,
London, W2 1AF
FirstGroup (QUEST) Trustees
Limited,
1,5,9
8th Floor, The Point, 37 North
Wharf Road, London, W2 1AF
FirstGroup US Finance Limited
(SC330060),
1,3,6
395 King Street, Aberdeen,
AB24 5RP
FirstGroup US Holdings (SC330054),
3,4
395 King Street, Aberdeen, AB24 5RP
Fleetrisk Management Limited,
5
Olive Grove, Sheffield, South Yorkshire,
S2 3GA
G.E. Mair Hire Services Limited,
5
395 King Street, Aberdeen, AB24 5RP
G.A.G. Limited,
1,4
Enterprise House,
Easton Road, Bristol, BS5 0DZ
GB Railways Group Limited,
1,3,4,9
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
Great Western Trustees Limited,
5,9
Milford House, 1 Milford Street, Swindon,
SN1 1HL
Grenville Motors Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Greyhound Limited,
5
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
GRT Bus Group Limited (SC114203),
1,3,4
395 King Street, Aberdeen, AB24 5RP
Gurna Limited,
5
Bus Depot, Westway,
Chelmsford, Essex, CM1 3AR
Halesworth Transit Limited,
5
Bus Depot,
Westway, Chelmsford, Essex, CM1 3AR
Hampshire Books Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Hull Trains Company Limited,
7,9
The
Point, 8th Floor, 37 North Wharf Road,
London, England, W2 1AF
Indexbegin Limited,
5
Hunslet Park Depot,
Donisthorpe Street, Leeds, West Yorkshire,
LS10 1PL
KCB Limited,
5
100 Cathcart Road,
Glasgow, G42 7BH
Kelvin Central Buses Limited,
5
100
Cathcart Road, Glasgow, G42 7BH
Kelvin Scottish Omnibuses Limited,
5
100 Cathcart Road, Glasgow, G42 7BH
Kirkpatrick of Deeside Limited,
5
395
King Street, Aberdeen, AB24 5RP
Lynton Bus and Coach Limited,
5
Bus Depot, Westway, Chelmsford, Essex,
CM1 3AR
Lynton Company Services Limited,
5
Bus Depot, Westway, Chelmsford, Essex,
CM1 3AR
Mainline Partnership Limited,
1,4
Olive Grove, Sheffield, South Yorkshire,
S2 3GA
Midland Travellers Limited,
5
Hunslet Park Depot, Donisthorpe Street,
Leeds, West Yorkshire, LS10 1PL
Mistral Data Limited,
8,9
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
North Devon Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Northampton Transport Limited,
5
Bus Depot, Westway, Chelmsford, Essex,
CM1 3AR
Project Coral Limited,
4
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Quickstep Travel Ltd,
5
Hunslet Park
Depot, Donisthorpe Street, Leeds,
West Yorkshire, LS10 1PL
Reiver Ventures Properties Limited,
4
Carmuirs House, 300 Stirling Road, Larbert,
Stirlingshire, FK5 3NJ
Reiver Ventures Limited,
5
Carmuirs
House, 300 Stirling Road, Larbert,
Stirlingshire, FK5 3NJ
Reynard Buses Limited,
5
Hunslet Park
Depot, Donisthorpe Street, Leeds, West
Yorkshire, LS10 1PL
Rider Holdings Limited (02272577),
3,4
Hunslet Park Depot, Donisthorpe Street,
Leeds, West Yorkshire, LS10 1PL
Rider Travel Limited,
5
Hunslet Park Depot,
Donisthorpe Street, Leeds, West Yorkshire,
LS10 1PL
Scott’s Hospitality Limited,
5
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Sheafline (S.U.T.) Limited,
5
Olive Grove,
Sheffield, South Yorkshire, S2 3GA
Sheffield & District Traction Company
Limited,
5
Olive Grove, Sheffield,
South Yorkshire, S2 3GA
Sheffield United Transport Limited,
5
Olive Grove, Sheffield, South Yorkshire,
S2 3GA
Skillplace Training Limited,
5
Heol
Gwyrosydd, Penlan, Swansea, SA5 7BN
Smiths of Portland Limited,
5
Enterprise
House, Easton Road, Bristol, BS5 0DZ
SMT Omnibuses Limited,
5
Carmuirs
House, 300 Stirling Road, Larbert,
Stirlingshire, FK5 3NJ
Somerset Passenger Solutions Ltd,
3,7
J24 Hinkley Point C, Park and Ride,
Huntworth Business Park, Bridgwater,
TA6 6TS
Southampton CityBus Limited,
3,4
8th
Floor, The Point, 37 North Wharf Road,
London, W2 1AF
Southampton City Transport
Company Limited,
4
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
Strathclyde Buses Limited,
5
100 Cathcart Road, Glasgow, G42 7BH
Streamline Buses (Bath) Limited,
1,5
Enterprise House, Easton Road, Bristol,
BS5 0DZ
Taylors Coaches Limited,
5
Enterprise
House, Easton Road, Bristol, BS5 0DZ
The FirstGroup Pension Scheme
Trustee Limited,
8
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
The First UK Bus Pension Scheme
Trustee Limited,
5
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
Totaljourney Limited,
1,5,9
8th Floor,
The Point, 37 North Wharf Road, London,
W2 1AF
Tram Operations Limited,
7,9
Tramlink
Depot, Coomber Way, Croydon, CR0 4TQ
Transportation Claims Limited,
8
Aquis House, 49‑51 Blagrave Street,
Reading, RG1 1PL
Truronian Limited,
3,5
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
West Dorset Coaches Limited,
4
Enterprise House, Easton Road, Bristol,
BS5 0DZ
Western National Holdings Limited,
4
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
Subsidiaries – wholly owned and
incorporated in the United States
of America
Durham City Transit Company,
7
600 Vine
Street, Suite 1400, Cincinnati, Ohio 45202
FirstGroup Management,
5
Inc. 600 Vine
Street, Suite 1400, Cincinnati, Ohio 45202
FirstGroup Services,
5
Inc. 600 Vine Street,
Suite 1400, Cincinnati, Ohio 45202
Laidlaw Transportation Holdings,
5
Inc. 600 Vine Street, Suite 1400, Cincinnati,
Ohio 45202
Transit Management of Dutchess
County,
7
Inc. 600 Vine Street, Suite 1400,
Cincinnati, Ohio 45202
Transit Management of Racine,
7
Inc. 600 Vine Street, Suite 1400, Cincinnati,
Ohio 45202
Transit Management of St Joseph,
7
Inc. 600 Vine Street, Suite 1400, Cincinnati,
Ohio 45202
Subsidiaries – not wholly owned but
incorporated in the United States
of America
Transportation Realty Income Partners
LP
(50%),
7
600 Vine Street Suite 1400,
Cincinnati, Ohio 45202
Subsidiaries – wholly owned and
incorporated in Ireland
Aeroporto Limited,
4
25‑28 North Wall
Quay, Dublin
Last Passive Limited,
7
25–28 North Wall
Quay, Dublin
Subsidiaries – wholly owned and
incorporated in Panama
First Transit de Panama, Inc.
5
Morgan & Morgan, Costa del Este,
MMG Tower, 23
rd
Floor, Panama City
Subsidiaries – wholly owned and
incorporated in Canada
GCT Holdings Ltd,
4
Blake, Cassels &
Graydon LLP, 3500, 855 – 2 Street SW,
Calgary, Alberta, T2P 4J8
GCT Investment Limited Partnership,
4
Blake, Cassels & Graydon LLP, 3500, 855 –
2 Street SW, Calgary, Alberta, T2P 4J8
Greyhound Canada Transportation
ULC,
7
Blake, Cassels & Graydon LLP,
595 Burrard Street, P.O. Box 49314, Suite
2600, Three Bentall Centre, Vancouver,
British Columbia V7X 1L3
Subsidiary not wholly owned but
incorporated in Canada
GACCTO Limited (50%),
5
130 King Street
West, #1600, Toronto, Ontario M5X 1J5
Subsidiaries not wholly owned but
incorporated in the United Kingdom
Careroute Limited (80%),
5
8th Floor, The
Point, 37 North Wharf Road, London, W2
1AF
First/Keolis Holdings Limited (55%),
1,3,5,9
8th Floor, The Point, 37 North Wharf Road,
London, W2 1AF
First/Keolis TransPennine Holdings
Limited (55%),
3,4,9
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
First/Keolis TransPennine Limited
(55%),
3,5,9
8th Floor, The Point, 37 North
Wharf Road, London, W2 1AF
First MTR South Western Trains Limited
(70%),
7,9
8th Floor, The Point, 37 North
Wharf Road, London, W2 1AF
First Trenitalia East Midlands Rail
Limited (70%),
5,9
8th Floor, The Point,
37 North Wharf Road, London, W2 1AF
First Trenitalia West Coast Rail Limited
(70%),
7,9
8th Floor, The Point, 37 North
Wharf Road, London, W2 1AF
Leicester CityBus Benefits Limited
(94%),
5
Bus Depot, Westway, Chelmsford,
Essex, CM1 3AR
Leicester CityBus Limited (94%),
2,3,7
Abbey Lane, Leicester, England, LE4 0DA
LCB Engineering Limited (94%),
5
Bus Depot, Westway, Chelmsford, Essex,
CM1 3AR
Subsidiary not wholly owned but
incorporated in India
Transit Operations Private Limited
(99.95%),
7
Lentin Chambers, 2nd Floor, Dalal
Street, Fort Mumbai, 400023
1 Directly owned by FirstGroup plc.
2
All shares held in subsidiary undertakings are ordinary shares, with the exception of Leicester CityBus Limited where the Group owns 100% of its redeemable
cumulative preference shares and 94% of its ordinary shares.
3
For the year ending 25 March 2023 these subsidiaries are exempt from audit of individual accounts under S479A of the UK Companies Act 2006.
4 Primary business is a holding company
5 Primary business is a dormant company
6 Primary business is an intragroup financing company
7 Primary business is the provision of transportation services
8 Primary business is an administrative or support services company
9 Rail companies with 31 March year end
Certain pension partnership structures (FirstBus Pension Limited Partnership and FirstGroup Pension Limited Partnership) were implemented during the 52 weeks
ending 26 March 2022. These structures involved the creation of special purpose vehicles (SPVs) to hold cash to fund the Bus and Group pension schemes if required,
based on a designated funding mechanism. The first accounting period end for these SPVs was 31 March 2023. The SPVs are consolidated into FirstGroup plc’s
consolidated accounts, and therefore under Partnership (Accounts) Regulations 2008, Regulation 7, the SPVs are exempt from the requirement to prepare individual
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
225
Consolidated income statement (includes discontinued operations)
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
Group revenue
4,759.0
5,588.0
6,844.8
7,754.6
7,126.9
Operating profit before amortisation charges and other adjustments
154.4
226.8
220.4
256.8
314.8
Amortisation charges
–
(0.4)
(4.1)
(4.9)
(11.8)
Other adjustments
30.8
579.7
69.7
(404.6)
(293.2)
Operating profit/(loss)
185.2
806.1
285.8
(152.7)
9.8
Finance costs
(69.3)
(153.5)
(172.0)
(146.9)
(107.7)
Investment income
12.8
1.5
2.0
–
–
Profit/(loss) before tax
128.7
654.1
115.8
(299.6)
(97.9)
Tax
(33.4)
(12.1)
(24.7)
(25.0)
(10.1)
Profit/(loss) for the year
95.3
642.0
91.1
(324.6)
(108.0)
EBITDA
755.8
862.1
1,178.9
1,108.9
670.3
Per share measures
pence
pence
pence
pence
pence
Adjusted continuing EPS
10.6
1.6
(3.5)
6.8
13.3
Basic EPS
11.8
60.2
6.5
(27.0)
(5.5)
Dividend per share
3.8
1.1
–
–
–
Consolidated balance sheet
£m
£m
£m
£m
£m
Non‑current assets
2,651.9
2,267.2
2,641.2
6,225.1
4,003.5
Net current (liabilities)/assets
(253.9)
(546.8)
(876.8)
(701.9)
10.7
Non‑current liabilities
(1,530.9)
(753.1)
(2,817.7)
(3,927.5)
(1,958.9)
Held for sale – continuing operations
8.3
–
–
–
–
Held for sale – discontinued operations
0.6
38.5
2,342.9
–
–
Non‑current provisions
(125.2)
(120.7)
(135.5)
(419.0)
(532.0)
Net assets
750.8
885.1
1,154.1
1,176.7
1,523.3
Share data
Number of shares in issue
millions
millions
millions
millions
millions
At year end
750.6
750.2
1,221.8
1,219.5
1,213.9
Average (excluding treasury shares and shares in trusts)
739.5
1,057.5
1,203.6
1,210.9
1,205.9
Share price
pence
pence
pence
pence
pence
At year end
101
107
92
50
91
High
140
107
95
138
117
Low
94
73
31
28
79
Market capitalisation
£m
£m
£m
£m
£m
At year end
760
803
1,124
610
1,105
Continuing operations
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
Revenue
4,755.0
4,591.1
4,318.8
4,039.6
3,506.1
Adjusted operating profit
161.0
106.7
112.2
81.3
91.7
Operating profit/(loss)
153.9
122.8
171.0
38.2
(94.8)
EBITDA
762.4
731.2
782.8
623.3
208.0
First Bus
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
Revenue
902.5
789.9
698.9
835.9
876.1
Adjusted operating profit
58.4
45.2
36.6
46.1
65.1
Operating profit/(loss)
51.4
45.2
30.8
32.4
27.4
EBITDA
120.9
104.4
100.8
113.2
119.7
First Rail
Revenue
3,893.2
3,801.2
3,619.9
3,203.7
2,666.7
Adjusted operating profit
124.8
87.8
108.1
70.4
68.8
Operating profit/(loss)
124.8
91.8
203.8
69.3
(77.1)
EBITDA
661.0
649.9
711.1
540.3
127.4
Group financial summary
Unaudited
Financial statements
FirstGroup Annual Report and Accounts 2023
226
Note
2023
£m
2022
£m
Non‑current assets
Trade and other receivables
3
506.9
376.4
Derivative financial instruments
4
0.1
0.2
Investments
5
740.7
2,147.9
1,247.7
2,524.5
Current assets
Cash and cash equivalents
371.4
186.8
Trade and other receivables
3
2.7
0.9
Derivative financial instruments
4
4.1
0.6
378.2
188.3
Total assets
1,625.9
2,712.8
Current liabilities
Trade and other payables
7
313.3
1,518.4
Derivative financial instruments
4
0.1
–
313.4
1,518.4
Net current assets/(liabilities)
64.8
(1,330.1)
Non‑current liabilities
Trade and other payables
7
184.2
199.9
184.2
199.9
Total liabilities
497.6
1,718.3
Net assets
1,128.3
994.5
Equity
Share capital
8
37.5
37.5
Share premium
693.2
692.8
Other reserves
117.2
167.3
Own shares
9
(15.4)
(9.0)
Retained earnings
295.8
105.9
Total equity
1,128.3
994.5
The Company reported a profit for the 52 weeks ending 25 March 2023 of £232.3m (2022: loss of £150.8m).
Ryan Mangold
8 June 2023
Company number SC157176
Company balance sheet
As at 25 March
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
227
Share
capital
£m
Share
premium
£m
Own
shares
£m
Hedging
reserve
£m
Merger
reserve
£m
Capital
reserve
£m
Capital
Redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 28 March 2021
61.1
689.6
(9.0)
(10.0)
64.0
93.8
1.9
761.9
1,653.3
Loss for the year
–
–
–
–
–
–
–
(150.8)
(150.8)
Other comprehensive (loss)/income for the year
–
–
–
(0.2)
–
–
–
6.2
6.0
Total comprehensive loss for the year
–
–
–
(0.2)
–
–
–
(144.6)
(144.8)
Transactions with owners in their capacity as
owners
Shares issued
0.2
3.2
–
–
–
–
–
–
3.4
Shares bought back and cancelled
(23.8)
–
–
–
–
–
17.8
(500.0)
(506.0)
Movement in EBT and treasury shares
–
–
–
–
–
–
–
(16.8)
(16.8)
Share‑based payments
–
–
–
–
–
–
–
5.4
5.4
Balance at 26 March 2022
37.5
692.8
(9.0)
(10.2)
64.0
93.8
19.7
105.9
994.5
Balance at 27 March 2022
37.5
692.8
(9.0)
(10.2)
64.0
93.8
19.7
105.9
994.5
Profit/(loss) for the year
–
–
–
–
–
–
–
232.3
232.3
Other comprehensive (loss)/income for the year
–
–
–
0.0
–
–
–
–
0.0
Total comprehensive gain/(loss) for the year
–
–
–
0.0
–
–
–
232.3
232.3
Transactions with owners in their capacity as
owners
Shares issued
–
0.4
–
–
–
–
–
–
0.4
Shares bought back but not yet cancelled
–
–
–
–
–
–
–
(31.6)
(31.6)
Liability for shares not yet bought back
–
–
–
–
–
–
–
(43.9)
(43.9)
Movement in EBT and treasury shares
–
–
(6.4)
–
–
–
–
(8.6)
(15.0)
Share‑based payments
–
–
–
–
–
–
–
6.4
6.4
Dividends paid
–
–
–
–
–
–
–
(14.8)
(14.8)
Reclassification to retained earnings
–
–
–
–
(50.1)
–
–
50.1
–
Balance at 25 March 2023
37.5
693.2
(15.4)
(10.2)
13.9
93.8
19.7
295.8
1,128.3
Merger reserves relating to disposal of investments for qualifying consideration and those relating to the extent related investments are
impaired are considered realised and transferred to retained earnings.
The non‑distributable portion of retained earnings Is £32.7m (2022 £35.0m).
Company statement of changes in equity
For the 52 weeks ended 25 March
Financial statements
FirstGroup Annual Report and Accounts 2023
228
1
Significant accounting policies
Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. The financial statements
have been prepared on a historical cost basis, except for the revaluation of certain financial instruments and on a going concern basis as
described in the going concern statement within the Strategic report on pages 04‑82.
The Company meets the definition of a qualifying entity under Financial Reporting Standard (FRS 101) ‘Reduced Disclosure Framework’
issued by the Financial Reporting Council. Accordingly, these financial statements have been prepared in accordance with FRS 101.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share‑based payment, financial instruments, capital management, presentation of a cash flow statement, certain related party transactions
and the requirement to present a statement of financial position as at the beginning of the preceding period when an entity applies an
accounting policy retrospectively or makes a retrospective restatement of its financial statements.
The financial statements for the 52 weeks ending 25 March 2023 include the results and financial position of the Company for the 52 weeks
ending 25 March 2023. The financial statements for the 52 weeks ending 26 March 2022 include the results and financial position of the
Company for the 52 weeks ending 26 March 2022.
Where relevant, equivalent disclosures have been given in the consolidated financial statements. The principal accounting policies adopted
are the same as those set out in note 2 to the consolidated financial statements except as noted below.
Investments
Investments in subsidiaries and associates are shown at cost less provision for impairment. For investments in subsidiaries acquired for
consideration in the form of shares, including the issue of shares qualifying for merger relief, cost is measured by reference to the fair value
only of the shares issued.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which
the dividends are approved by the Company’s shareholders.
Dividends receivable from the Company’s subsidiaries are recognised only when they are approved by shareholders.
Key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results
may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
revision and future periods if the revision affects both current and future periods.
Investment in subsidiaries
Estimation is required in relation to the recoverability of the investments and are sensitive to changes in cash flow forecasts supporting the
recoverable amount. There is a significant risk that material adjustment to the carrying amounts of the investments and receivables could be
required within the next financial year, including the reversal of prior year impairments. The carrying value of investments at 25 March 2023 is
£740.7m (2022: £2,147.9m).
2
Profit for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own income statement for the year.
The Company reported a profit for the financial year ended 25 March 2023 of £232.3m (2022: loss of £150.8m).
Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements are disclosed in note 6 of the Group
accounts. The Company had no employees in the current or preceding financial year.
3
Trade and other receivables
2023
£m
2022
£m
Amounts due within one year
Prepayments
2.7
0.9
2.7
0.9
Notes to the Company financial statements
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
229
3
Trade and other receivables
continued
2023
£m
2022
£m
Amounts due after more than one year
Amounts due from subsidiary undertakings
472.9
345.8
Loss allowance
(0.9)
(0.7)
Net amounts due from subsidiary undertakings
472.0
345.1
Deferred tax asset (note 6)
34.9
31.3
506.9
376.4
4
Derivative financial instruments
2023
£m
2022
£m
Total derivatives
Total assets – due after more than one year
0.1
0.2
Total assets – due within one year
4.1
0.6
Total assets
4.2
0.8
Total creditors – amounts falling due within one year
0.1
–
Total creditors
0.1
–
Derivatives designated and effective as hedging instruments carried at fair value
Non‑current assets
Cross currency swaps (net investment hedge)
–
–
Total assets
–
–
Current liabilities
Currency forwards (net investment hedge)
0.1
–
Total liabilities
0.1
–
Derivatives classified as held for trading
Non‑current assets
Currency forwards (cash flow hedge)
0.1
0.2
Current assets
Currency forwards (net investment hedge)
–
–
Currency forwards (cash flow hedge)
4.1
0.6
4.1
0.6
Total assets
4.2
0.8
Current liabilities
Fuel derivatives (cash flow hedge)
–
–
–
–
Non‑current liabilities
Fuel derivatives (cash flow hedge)
–
–
–
–
Total liabilities
–
–
Full details of the Group’s financial risk management objectives and procedures can be found in note 25 of the Group accounts. As the
holding company for the Group, the Company faces similar risks over foreign currency and interest rate movements.
Financial statements
FirstGroup Annual Report and Accounts 2023
230
Notes to the Company financial statements
continued
5
Investments in subsidiary undertakings
Unlisted
subsidiary
undertakings
£m
Cost
At 26 March 2022
2,717.8
Additions
6.4
Write‑off of investment
(42.0)
Return of investment
(1,497.8)
At 25 March 2023
1,184.4
Provision for impairment
At 26 March 2022
569.9
Impairment
6.4
Return of investment
(132.6)
At 25 March 2023
443.7
Carrying amount
At 25 March 2023
740.7
At 26 March 2022
2,147.9
The carrying value of the investment in subsidiary undertakings is reviewed for impairment on an annual basis. The recoverable amount is
the higher of fair value less cost of disposal or the net present value of future cash flows which are estimated based on the continued use of
the asset in the business. The investments of £740.7m principally relate to an investment in the Group’s former North American divisions and
holding companies of £78.9m and the First Bus business of £659.3m.
The First Bus value in use requires the determination of appropriate assumptions (which are sources of estimation uncertainty) in relation
to the cash flow forecasts, the long term growth rate to be applied and the discount rate used to discount the estimated cash flows to
present value.
The return of investment during the year relates to the distribution of net assets from subsidiary companies.
There was no reversal of impairment during the year.
The additions in the year relate to IFRS 2 share‑based charges, which have subsequently been fully written down.
The investments in First Bus would break even using a discount rate of 12.3% or a reduction of terminal margin to 9.0%.
A full list of subsidiaries and investments can be found in note 40 to the Group accounts.
6
Deferred tax
The deferred tax asset/liability recognised by the Company and the movements thereon during the current and prior reporting periods are as
follows:
Other
temporary
differences
£m
At 26 March 2022
(31.3)
(Credit)/charge to income statement
(3.8)
(Credit)/charge to reserves
0.2
At 25 March 2023
(34.9)
The following is the analysis of the deferred tax balances for financial reporting purposes:
2023
£m
2022
£m
Deferred tax (asset)/liability due after more than one year
(34.9)
(31.3)
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
231
7
Creditors
2023
£m
2022
£m
Amounts falling due within one year
Bank overdraft
82.9
87.5
£200m Sterling bond – 6.875% 2024
6.5
7.1
Amounts due to subsidiary undertakings
170.0
1,415.6
Accruals and deferred income
53.9
8.2
313.3
1,518.4
Amounts falling due after more than one year
£200m Sterling bond – 6.875% 2024
184.2
199.9
184.2
199.9
Borrowing facilities
The maturity profile of the Company’s undrawn committed borrowing facilities is as follows:
2023
£m
2022
£m
Facilities maturing:
Due in more than two years
300.0
300.0
Details of the Company’s borrowing facilities are given in note 22 to the Group accounts.
8
Called up share capital
Number
of shares
million
2023
£m
Allotted, called up and fully paid (ordinary shares of 5p each)
Balance as at 27 March 2022
750.2
37.5
SAYE/BAYE exercises
0.4
–
Balance as at 25 March 2023 (ordinary shares of 5p each)
750.6
37.5
In December 2022, the Company announced a share buyback programme to purchase up to £75m of ordinary shares, and at
25 March 2023, the Company had repurchased 29,515,396 shares for an amount of £31.6m, including transaction costs of £0.3m. As at
25 March 2023, £75.5m has been deducted from retained earnings in respect of the shares already purchased and remaining commitment
to purchase up to £75m of ordinary shares.
The number of ordinary shares of 5p in issue, excluding treasury shares held in trust for employees, at the end of the period was 737.3m
(2022: 740.7m). At the end of the period 42.8m shares (2022: 9.5m shares) were being held as treasury shares and own shares held in trust
for employees.
9
Own shares
Own shares
£m
At 27 March 2022
(9.0)
Movement in EBT, QUEST and treasury shares during the year
(6.4)
At 25 March 2023
(15.4)
The number of own shares held by the Group at the end of the year was 42,774,044 (2022: 9,472,372) FirstGroup plc ordinary shares
of 5p each. Of these, 13,068,899 (2022: 9,282,623) were held by the FirstGroup plc Employee Benefit Trust, 32,520 (2022: 32,520) by
the FirstGroup plc Qualifying Employee Share Ownership Trust and 157,229 (2022: 157,229) were held as treasury shares, with a further
29,515,396 held as treasury shares as part of the share buyback programme which commenced on 19 December 2022. Both trusts and
treasury shares have waived the rights to dividend income from the FirstGroup plc ordinary shares. The market value of the shares at
25 March 2023 was £43.3m (2022: £10.2m).
Financial statements
FirstGroup Annual Report and Accounts 2023
232
10 Contingent liabilities
To support subsidiary undertakings in their normal course of business, FirstGroup plc and certain subsidiaries have indemnified certain
banks and insurance companies who have issued performance bonds for £55.0m (2022: £69.4m) and letters of credit for £169.9m
(2022: £219.7m). The performance bonds primarily relate to First Rail franchise operations of £51.8m and residual North American obligations
of £3.2m. The letters of credit relate substantially to insurance arrangements in the UK and North America. The parent company has
committed further support facilities of up to £98.5m to First Rail Train Operating Companies of which £73.6m remains undrawn. Following
the sale of Greyhound, the majority of the surety bonds were cancelled, with a residual amount of £3.2m remaining as noted above. Letters
of credit remain in place to provide collateral for legacy Greyhound insurance and pension obligations.
The Group is party to certain unsecured guarantees granted to banks for overdraft and cash management facilities provided to itself and
subsidiary undertakings. The Company has given certain unsecured guarantees for the liabilities of its subsidiary undertakings arising
under certain HP contracts, finance leases, operating leases and certain pension scheme arrangements. It also provides unsecured cross
guarantees to certain subsidiary undertakings as required by VAT legislation. First Bus subsidiaries have provided unsecured guarantees on
a joint and several basis to the Trustee of The First Bus Pension Scheme. Two of the Company’s North American subsidiaries participated in
multi‑employer pension plans in which their contributions were pooled with the contributions of other contributing employers. The funding of
those plans is reliant on the ongoing involvement of third parties.
In its normal course of business the Group has ongoing contractual negotiations with Government and other organisations. The Group is
party to legal proceedings and claims which arise in the normal course of business, including but not limited to employment and safety
claims. The Group takes legal advice as to the likelihood of success of claims and counterclaims. No provision is made where due to
inherent uncertainties, no accurate quantification of any cost, or timing of such cost, which may arise from any of the legal proceedings can
be determined.
The Group’s operations are required to comply with a wide range of regulations, including environmental and emissions regulations. Failure
to comply with a particular regulation could result in a fine or penalty being imposed on that business, as well as potential ancillary claims
rooted in non‑compliance.
The inquest relating to the death of seven passengers in the Croydon tram incident in November 2016 concluded in July 2021. The tram was
operated by Tram Operations Limited (‘TOL’), a subsidiary of the Group, under a contract with a Transport for London (‘TfL’) subsidiary. TOL
provides the drivers and management to operate the tram services, whereas the infrastructure and trams are owned and maintained by a
TfL subsidiary. The Office of Rail & Road (‘ORR’) announced in March 2022 that it had taken the decision to prosecute TfL, the driver of the
tram and TOL for breaches of Health and Safety law. While TOL has indicated a guilty plea to the charge laid against it, the Company cannot
yet accurately determine the quantum or timing of any financial penalties or related costs which may arise from these proceedings. TfL has
also indicated a guilty plea. The driver has pleaded not guilty – his trial started in mid‑May 2023.
First MTR South Western Trains Limited (‘FSWT’), a subsidiary of the Company and the operator of the South Western railway contract, is a
defendant to collective proceedings before the UK Competition Appeal Tribunal (the ‘CAT’) in respect of alleged breaches of UK competition
law. Stagecoach South Western Trains Limited (‘SSWT’) (the former operator of the South Western network) is also a defendant to these
proceedings. Separate sets of proceedings have been issued against London & South Eastern Railway Limited and related entities (‘LSER’)
and, more recently, against Govia Thameslink Railway Limited and related entities (‘GTR’) in respect of the operation of other rail services.
The three sets of proceedings are being heard together. The class representative (‘CR’) alleges that FSWT, SSWT, LSER and GTR breached
their obligations under UK competition law by not making boundary fares sufficiently available for sale, and/or by failing to ensure that
customers were aware of the existence of boundary fares and/or bought an appropriate fare in order to avoid being charged twice for
part of a journey. A collective proceedings order (‘CPO’) was made by the CAT in January 2022 in respect of the FSWT/SSWT and LSER
proceedings and, following an unsuccessful appeal by the defendants, the proceedings are continuing alongside the GTR proceedings in
respect of which the CAT issued a judgment setting out its reasons for granting a CPO in March 2023. The Secretary of State for Transport
served a written statement of intervention in all three proceedings in April 2023. A trial date has not yet been set. In March 2022, FSWT, the
Company and the CR executed an undertaking under which the Company has agreed to pay to the CR any sum of damages and/or costs
which FSWT fails to pay, and which FSWT is legally liable to pay to the CR in respect of the claims (pursuant to any judgment, order or award
of a court or tribunal), including any sum in relation to any settlement of the claims. At present the Company cannot accurately determine the
likelihood, quantum or timing of any damages and costs which may arise from these proceedings.
Notes to the Company financial statements
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
233
Shareholder information
Annual General Meeting
The AGM will be held on 21 July 2023 at
Queen Elizabeth II Centre, Broad Sanctuary,
Westminster, London, SW1P 3EE.
The Notice of AGM is available on the
Company’s website and will have been
posted to you if you have chosen to
receive hard copy communications from
the Company. Either a Form of Proxy or
online Voting Card has been posted to all
shareholders registered on the Company’s
register of members.
We are intending to hold the AGM as a
physical meeting. Any changes to the
arrangements will be communicated to
shareholders before the meeting through
our website and, where appropriate, by RIS
announcement.
Shareholders are encouraged to submit
proxies for the 2023 AGM electronically
by logging on to www.sharevote.co.uk.
Electronic proxy appointments must be
received by the Company’s Registrar,
Equiniti, no later than 48 hours, excluding
non‑business days, before the time fixed for
the AGM.
Shareholders who wish to ask questions
relating to the business of the AGM are
encouraged to do so by submitting
questions in advance of the AGM by email
to companysecretariat@firstgroup.co.uk,
or by post for the attention of the Company
Secretary (see addresses on the next page).
We will consider all questions received and,
to the extent practicable, answers will also
be published on the Company’s website. For
all other queries regarding the AGM, please
contact the Company Secretary.
Website and shareholder
communications
A wide range of information on FirstGroup
is available at the Company’s website
including:
■
financial information – annual and half‑
yearly reports as well as trading updates
■
share price information – current trading
details and historical charts
■
shareholder information – AGM results,
details of the Company’s advisers and
frequently asked questions
■
news releases – current and historical.
FirstGroup uses its website as its
primary means of communication
with its shareholders provided that the
shareholder has agreed or is deemed to
have agreed that communications may be
sent or supplied in that manner. Electronic
communications allow shareholders to
access information instantly as well as
helping FirstGroup to reduce its costs and
its impact on the environment. Shareholders
that have consented or are deemed to have
consented to electronic communications
can revoke their consent at any time by
contacting Equiniti.
Shareholders can sign up for electronic
communications online by registering with
Shareview, the internet‑based platform
provided by Equiniti. In addition to enabling
shareholders to register to receive
communications by email, Shareview
provides a facility for shareholders to
manage their shareholding online by
allowing them to:
■
receive trading updates by email
■
view their shareholdings
■
update their records, including change of
address
■
view payment and tax information
■
vote in advance of Company general
meetings.
To find out more information about the
services offered by Shareview, please visit
www.shareview.co.uk.
Shareholder enquiries
The Company’s share register is maintained
by Equiniti. Shareholders with queries
relating to their shareholding should contact
Equiniti directly using one of the methods
listed below:
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA
Tel: 0371 384 2046*
(or from overseas on
Tel: +44 (0)371 384 2046)
Online: help.shareview.co.uk (from here, you
will be able to email Equiniti securely with
your enquiry).
*
Telephone lines are open from 8.30am
to 5.30pm, Monday to Friday.
If you receive more than one copy of the
Company’s mailings this may indicate that
more than one account is held in your name
on the register. This happens when the
registration details of separate transactions
differ slightly. If you believe more than one
account exists in your name, please contact
Equiniti to request that the accounts are
combined. There is no charge for this
service.
Equiniti also offers a postal dealing facility for
buying and selling FirstGroup plc ordinary
shares; please write to them at the address
shown above or telephone 0371 384 2248.
They also offer a telephone and internet
dealing service which provides a simple
and convenient way of dealing in FirstGroup
shares. For telephone dealing call 0345
603 7037 between 8.30am and 4.30pm,
Monday to Friday, and for internet dealing
log on to www.shareview.co.uk/dealing.
Financial statements
FirstGroup Annual Report and Accounts 2023
234
ShareGift
If shareholders have a small number
of shares and the dealing costs or the
minimum fee make it uneconomical to
sell them, it is possible to donate these
to ShareGift, a registered charity, which
provides a free service to enable you to
dispose charitably of such shares. More
information on this service can be found at
www.sharegift.org or by calling +44 (0)20
7930 3737. A ShareGift transfer form can
also be obtained from Equiniti.
FirstGroup’s policy on discounts
for shareholders
The Group does not offer travel or other
discounts to shareholders.
Unsolicited advice on the
Company’s shares
Shareholders are advised to be wary of any
unsolicited advice, offers to buy shares at
a discount, or offers of free reports about
the Company. These are typically from
overseas‑based ‘brokers’ who target US or
UK shareholders, offering to sell them what
often turn out to be worthless or high risk
shares. These operations are commonly
known as ‘boiler rooms’ and the ‘brokers’
can be very persistent and extremely
persuasive.
Shareholders are advised to deal only with
financial services firms that are authorised
by the FCA. You can check a firm is properly
authorised by the FCA before getting
involved by visiting www.fca.org.uk/register.
If you do deal with an unauthorised firm,
you will not be eligible to receive payment
under the Financial Services Compensation
Scheme if anything goes wrong. For more
detailed information on how you can
protect yourself from an investment scam,
or to report a scam, go to www.fca.org.
uk/consumers/scams/report‑scam or call
0800 111 6768.
Half‑yearly results
The half‑yearly results, normally announced
to the market in November, will continue to
be available on the Company’s website in
the form of a press release and not issued to
shareholders in hard copy.
Contact information
Company Secretary
David Blizzard
Tel: +44 (0)20 3149 0661
Registered office
FirstGroup plc
395 King Street
Aberdeen AB24 5RP
Tel: +44 (0)1224 650 100
Corporate office
FirstGroup plc
8th Floor
The Point
37 North Wharf Road
London W2 1AF
Tel: +44 (0)20 7291 0505
Joint corporate brokers
RBC Europe Limited
(trading as RBC Capital Markets)
100 Bishopsgate
London
EC2N 4AA
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
External auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Shareholder information
continued
Introduction
Governance report
Strategic report
Financial statements
FirstGroup Annual Report and Accounts 2023
235
Adjusted cash flow
Adjusted cash flow is described in the table
shown on page 31 of the Financial review
Adjusted net debt/(cash)
Net debt excluding ring‑fenced cash
and IFRS 16 lease liabilities
Adjusted measures (other)
References to ‘adjusted operating profit’,
‘adjusted profit before tax’, and ‘adjusted
EPS’ throughout this document are before
items which management has determined
as not being relevant to an understanding
of the Group’s underlying business
performance, as set out in note 4 to
the financial statements
AGM
Annual General Meeting
ARP
American Rescue Plan
Avanti
Avanti West Coast, a train operating
company
BAYE
Buy As You Earn
The Board
The Board of Directors of the Company
BRG
Bus Recovery Grant
CARES Act
Coronavirus Aid, Relief, and Economic
Security Act; the US economic relief
package signed into law on 27 March 2020
CBSSG and CBSSG‑R
COVID‑19 Bus Service Support Grant,
a UK Government measure to secure
continuity of service on crucial bus routes
which may otherwise have ceased during
the pandemic. CBSSG‑Restart (CBSSG‑R)
was a successor scheme
CCFF
Covid Corporate Financing Facility,
a UK Government commercial paper
lending facility
CDP
An international non‑profit organisation that
helps companies and cities disclose their
environmental impact
CGU
Cash Generating Unit
tCO
2
(e)
Tonnes of Carbon dioxide equivalent,
allowing other volumes of greenhouse
gas emissions to be expressed in terms of
carbon dioxide based on their relative global
warming potential. Usually expressed as per
kilometre or per passenger kilometre
Company
FirstGroup plc, a company registered in
Scotland with number SC157176 whose
registered office is at 395 King Street,
Aberdeen AB24 5RP
‘Cont’ or the ‘Continuing operations’
Refer to First Bus, First Rail and Group items
CPI
Consumer price index, an inflation measure
that excludes certain housing‑related costs
Defra
Department for Environment, Food and
Rural Affairs (UK Government)
DfT
Department for Transport (UK Government)
‘Disc’ or the ‘Discontinued’ operations
Refer to First Student, First Transit
and Greyhound US
Dividend
Amount payable per ordinary share
on an interim and final basis
EABP
Executive Annual Bonus Plan
EBITDA
Earnings before interest, tax, depreciation
and amortisation, calculated as adjusted
operating profit less capital grant
amortisation plus depreciation
EBITDA adjusted for First Rail
management fees
First Bus and First Rail EBITDA from
open access and additional services,
plus First Rail attributable net income
from management fee‑based operations,
minus central costs
EBT
Employee benefit trust
EDF
Employee Directors’ Forum
ED&I
Equality, diversity and inclusion
EMA/ERMA
Emergency Measures Agreements
and Emergency Recovery Measures
Agreements were introduced by the DfT to
ensure that rail services could continue to
operate during the pandemic
EPS
Earnings per share
ESG
Environmental, social and governance
EV
electrical vehicle
GED
Group Employee Director
GHG
Greenhouse gas emissions
Group
FirstGroup plc and its subsidiaries
Glossary
Set out below is a guide to commonly used financial, industry and Group related terms in the Annual Report and Accounts.
These are not precise definitions and are included to provide readers with a guide to the general meaning of the terms.
Financial statements
FirstGroup Annual Report and Accounts 2023
236
Group adjusted attributable profit
First Bus and First Rail adjusted operating
profit from open access and additional
services, plus First Rail attributable net
income from management fee‑based
operations, minus central costs, minus
treasury interest, minus tax
GWR
Great Western Railway, a train
operating company
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
KPIs
Key performance indicators, financial
and non‑financial metrics used to define
and measure progress towards our
strategic objectives
LBG
London Benchmarking Group, an
organisation that has created a framework
for measuring community impact
LGPS
Local Government Pension Scheme
Local authority
Local government organisations in the UK,
including unitary, metropolitan, district and
county councils
LTIP
Long‑Term Incentive Plan
M&A
Mergers and acquisitions
NBS
National Bus Strategy, announced by UK
Government in March 2021
NRC
National Rail Contract
Net debt
The value of Group external borrowings
excluding the fair value adjustment for
coupon swaps designated against certain
bonds, excluding accrued interest, less
cash balances
Network Rail
Owner and operator of Britain’s
rail infrastructure, a UK public
sector company that operates
as a regulated monopoly
Ordinary shares
FirstGroup plc ordinary shares of 5p each
ORR
Office of Rail and Road
PLC
Public limited company
PPM
The UK rail industry’s Public Performance
Measure (punctuality and reliability). Trains
are punctual if they arrive at their destination,
having made all timetabled stops, within five
minutes of scheduled time for London and
South East and regional/commuter services
and ten minutes for long distance trains
RCF
Revolving credit facility
RDG
Rail Delivery Group, the UK rail industry
membership body that brings together
passenger and freight rail companies,
Network Rail and HS2
ROCE
Return on capital employed is a measure
of capital efficiency and is calculated by
dividing adjusted operating profit after
tax by all year end assets and liabilities
excluding debt items
RSSB
Rail Safety and Standards Board
SAYE
Save As You Earn
SBT
Science‑based target for reducing
greenhouse gas emissions
ScotZeb
Scottish Zero Emission Bus challenge find
SECR
Streamlined Energy and Carbon Reporting
regulations, which took effect on
1 April 2019
SWR
South Western Railway, a train
operating company
S&P
S&P Global Rating Agency
TCFD
Task Force on Climate‑Related
Financial Disclosures
TfL
Transport for London, the transport authority
responsible for most aspects of London’s
transport system
TOC
Train operating company
TPE
TransPennine Express, a train
operating company
TSR
Total shareholder return, the growth in value
of a shareholding over a specified period
assuming that dividends are reinvested
to purchase additional shares
USPP
The US Private Placement market is a US
private bond market which is available to
both US and non‑US companies
ZEBRA
Zero Emission Bus Regional Areas funding
scheme
Glossary
continued
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FirstGroup plc
Annual Report and Accounts 2023