FIRSTGROUP PLC : - Final Results

FIRSTGROUP PLC
RESULTS FOR THE 52 WEEKS TO 27 MARCH 2021

A landmark year of delivery:

• Proud of all our people for delivering vital travel services for our customers and communities during the pandemic
• Key strategic objective completed: portfolio rationalised with sale of First Student and First Transit
• Resilient financial performance was significantly ahead of initial expectations, generating cash despite lower volumes due to travel restrictions
• Working with our industry and Government, we are helping to shape the future of public transport in the UK

Autumn 2021 proposed return of value increased to £500m (c.41p per share), with potential for further additional distributions to shareholders in due course from the following:

• First Transit earnout of up to $240m (carrying value assessed in audited accounts at $140m)
• Greyhound resolution
• Capacity to increase gearing over time, as end market conditions and hence business performance improves
• Pension escrow release (up to £117m)

Transformed company: a UK public transport leader with sustainable, profitable growth prospects:

• Inflection point for First Bus, with most supportive economic and sustainability-driven government policy backdrop for the industry in decades, and clear path to raise margins to 10% post-pandemic
• First Rail's balance of risk and reward transformed under new rail contracting structure
• Renewed focus on capturing incremental opportunities adjacent to core bus and rail operations
• Environmental, social and economic contributions remain at the heart of public transport business model
• Simplified, well-capitalised balance sheet: c.£100m pro forma adjusted net debt³, no longer encumbered by pension deficit repayments or any significant contingent liabilities
• Cash generative operating model supports regular dividends commencing in 2022
• Encouraged by improving UK bus passenger volumes (now c.60% of pre-pandemic levels) as UK reopens

Board changes

• Matthew Gregory has informed Board of intention to step down as Chief Executive after AGM; David Martin to become interim Executive Chairman. Comprehensive search underway for a new Chief Executive

			Mar 2021 (£m)				Mar 2020 (£m)				Change (£m)
	Cont.	Disc.	Total		Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,641.8	2,203.2	6,845.0		4,642.8	3,111.8	7,754.6		(1.0)	(908.6)	(909.6)
Adjusted1 operating profit	101.9	107.5	209.4		69.7	187.1	256.8		+32.2	(79.6)	(47.4)
Adjusted1 operating profit margin	2.2%	4.9%	3.1%		1.5%	6.0%	3.3%		+70bps	(110)bps	(20)bps
Adjusted1 profit before tax			39.4				109.9				(70.5)
Adjusted1 EPS			2.4p				6.8p				(4.4)p
Adjusted cash flow2			284.0				97.4				+186.6
Adjusted net debt3			1,414.3				1,490.9				+76.6
			Mar 2021 (£m)				Mar 2020 (£m)
Statutory	Cont.	Disc.	Total		Cont.	Disc.	Total
Revenue	4,641.8	2,203.2	6,845.0		4,642.8	3,111.8	7,754.6
Operating profit/(loss)	224.3	61.5	285.8		(215.2)	62.5	(152.7)
Profit/(loss) before tax			115.8				(299.6)
EPS			6.5p				(27.0)p
Net debt			2,625.8				3,260.9
- Bonds, bank and other debt net of cash			775.8				879.0
- IFRS 16 right of use lease liabilities			1,850.0				2,381.9

'Cont.' refers to the Continuing operations comprising First Bus, First Rail, Greyhound and Group items. 'Disc.' refers to discontinued operations, being First Student and First Transit.

Financial overview

• Resilient performance in light of travel restrictions and other pandemic effects – Group adjusted operating profit reduction held to £47.4m despite a Group revenue decline of £909.6m year-on-year:
  • £101.9m adjusted operating profit from continuing operations (comprising First Bus, First Rail, Greyhound and Group items) was in line with our expectations for these divisions (2020: £69.7m)
  • Reduced activity levels in the discontinued operations (First Student and First Transit) mitigated by cost savings, better than expected revenue recoveries from customers and higher service levels in Q4
• £224.3m statutory operating profit from continuing operations (2020: loss of £(215.2)m) reflects £122.4m of net adjusting items compared with £(284.9)m in 2020:
  • Includes £71.1m profit on sale of Greyhound properties and £95.7m reversal of prior year impairments for SWR and TPE rail contracts, net of rail termination sums
  • Partially offset principally by £16.6m in property impairments, £15.1m in costs associated with the rationalisation of the Group and £11.2m self-insurance provision increase in Greyhound due to further hardening of the insurance market in North America
• Net debt and cash flow stronger than initially expected, strong liquidity preserved: disciplined capital and operating expenditure control supplemented by Greyhound property sales
• Expect to build momentum in the current financial year, providing a solid foundation for delivering financial framework objectives – including commencing regular dividend payments – in 2022

Portfolio rationalisation

• Sale of First Student and First Transit completed on 21 July following receipt of final regulatory approvals and shareholder approval in May
• Increase in proposed return of value to £500m (equivalent to c.41p per share) reflects increase in cash proceeds received at completion due to final working capital and debt and debt-like balances, agreement of final rail franchise termination sums and National Rail Contracts for SWR and TPE, and improving cash flow expectations for the ongoing Group
• Proposed return of value to be undertaken in the autumn; distribution mechanism announced in due course in consultation with shareholders
• Greyhound remains non-core and the Group continues to pursue all exit options for the business in order to conclude the Group’s portfolio rationalisation strategy

Commenting, Chairman David Martin said:

"This has been a very active and significant year in the Group’s evolution. We achieved the key strategic objective, set out when I joined as Chairman in 2019, to unlock value through the sale of our US contract businesses. Within the context of a proactive and supportive government framework for public transport and the transition to net-zero, we have created a focused and strong business with a bright future. Built on a solid foundation of a well-capitalised balance sheet and a new lower risk model, the ongoing Group will be cash generative and support a return to shareholder dividends. As we move forward and deliver for all stakeholders, the Board will continue to evolve. As a UK public transport leader, FirstGroup has a strong platform on which to create sustainable value going forward and I am confident in our prospects to benefit from the many exciting opportunities ahead of us."

Commenting, Chief Executive Matthew Gregory said:

“In this landmark year FirstGroup has more than risen to its challenges. We have delivered  on our strategic objectives, protected our financial stability, and supported our communities with essential services while helping to shape the future of public transport in the UK. Having delivered the substantial portfolio rationalisation strategy and with FirstGroup now positioned to emerge from the pandemic as a resilient and robust business, I have decided the time is right for me to move on to new opportunities. FirstGroup is well placed to capitalise on the considerable opportunities ahead, helping communities and economies build back better and more sustainably."

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
[e-mail]
[phone]

Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: [phone]

A conference call for investors and analysts will be held at 9:00am today – attendance is by invitation. Please email [e-mail] in advance of the call to receive joining details. To access the presentation to be discussed on the conference call, together with a pdf copy of this announcement, go to www.firstgroupplc.com/investors. A playback facility will also be available there in due course.

Notes

¹        ‘Adjusted’ figures throughout this document are before rail termination sums net of impairment reversal, gain on disposal of properties, impairment of land and buildings, strategy costs and certain other items as set out in note 4 to the financial statements.

²        ‘Adjusted cash flow’ is described in the table shown on page 23.

³     'Adjusted net debt' excludes First Rail ring-fenced cash and IFRS 16 lease liabilities from net debt.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 1.1.

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.3 billion in revenue and around 30,000 employees, our UK divisions transported nearly 700,000 passengers a day in the 52 weeks to 27 March 2021. First Bus is the second largest regional bus operator in the UK, serving two thirds of the UK’s 15 largest conurbations with a fleet of c.5,000 buses. First Rail is the UK’s largest rail operator, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of c.3,750 rail vehicles on four contracted operations (Avanti, GWR, SWR, TPE) and two open access routes (Hull Trains and a new East Coast service launching later in 2021). We create solutions that reduce complexity, making travel smoother and life easier. 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 formally committed to operating a zero-emission First Bus fleet by 2035 and will not purchase further diesel buses after 2022; and First Rail will help deliver the UK Government’s goal to remove all diesel-only trains from service by 2040. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.

Chairman’s statement

This has been a very active and significant year in FirstGroup's evolution. This time last year I said that concluding the process to sell First Student and First Transit was our core objective, as the best route to enhance the long-term value of our businesses, while respecting our commitments to all our stakeholders. I was very pleased we completed the sale of these businesses in July 2021 to EQT Infrastructure for a full strategic value, which looks beyond the pandemic and reflects the high quality and long-term nature of these attractive assets.

The sale process

The sale followed a comprehensive and competitive process overseen by the Board, in order to seek the best possible price for First Student and First Transit, which was well-publicised for more than a year. Through the sale process, the businesses were widely marketed, and the Group and our financial advisers actively engaged with more than 40 potential buyers.

In the context of a competitive process to seek the most attractive proposal, an earnout structure was agreed for First Transit which would benefit continuing shareholders in the Group. This reflects First Transit’s strong prospects for future performance, not least in light of recent ambitious plans for investment in infrastructure and public transportation in the US. Under the earnout FirstGroup will receive up to a further $240m (c.£175m), payable on the third anniversary of the sale (following an independent valuation), or sooner if the business is sold by EQT Infrastructure to a third party. The earnout has been initially fair valued at $140m for accounting purposes, applying discounted cash flow methodology.

Shareholder approval

As a substantial transaction, the sale required approval of a majority of shareholders in general meeting, which was received in May. As noted at the time, I and the whole Board take very seriously our responsibility to understand the different views and perspectives of investors, and recognise that a number of shareholders did not vote in favour of the resolution. As FirstGroup enters a new and exciting phase in its development, the Board and I look forward to continuing an open and constructive dialogue with all shareholders as we look to the future.

Use of proceeds

As previously set out, the Group has a number of longstanding liabilities. In determining the use of proceeds of the sale the Board has sought to balance returning value to shareholders while also making a necessary and substantial contribution to the UK pension deficit, reducing its debt (including repayment of Covid Corporate Financing Facility to the UK Government) and addressing other longstanding liabilities. In parallel, the Board carefully considered the appropriate capital structure and distribution policy for the ongoing Group, and it concluded that a well-capitalised, de-risked balance sheet will provide FirstGroup with flexibility to navigate end-market uncertainty at this point in the pandemic recovery, pursue its strategy going forward and support a progressive annual dividend commencing during the financial year ending March 2023, as described in more detail below.

The Board has announced its intention to increase the proposed return of value to shareholders from £365m to £500m (equivalent to c.41p per share) in light of the higher cash proceeds received due to the final adjustments for working capital and debt and debt-like items in the First Student and First Transit sale, the greater clarity for First Rail resulting from agreement in May of the Group's final rail franchise termination sum and the signing of the National Rail Contracts for SWR and TPE, as well as improving cash flow expectations for the continuing Group as a result of further easing of pandemic restrictions in our core UK bus and rail markets. The estimated pro forma adjusted net debt of c.£100m for the ongoing Group following the sale and uses of proceeds is therefore unchanged.

The Board remains committed to keeping the balance sheet position of the ongoing Group under review and will consider the potential for further additional distributions to shareholders in due course, following crystallisation of the First Transit earnout, resolution of the legacy liabilities related to Greyhound and the potential release of monies from pension escrow (up to £117m). The Board also notes the capacity to increase gearing over time, as end market conditions and hence business performance improves.

The proposed return of value is expected to be undertaken in the autumn of 2021, with the distribution mechanism to be announced in due course in consultation with shareholders.

The future of the Group

FirstGroup has a clear purpose to provide vital transport services that connect communities – taking customers where they need to go for business, education, health, social or recreational purposes. FirstGroup’s public transport services offer efficient, cost effective and convenient travel options for passengers, both within and between the UK’s congested towns and cities.

Public transport services are also critical long-term green infrastructure, as demonstrated during the coronavirus pandemic, and are fundamental to achieving the goals of the communities they serve, the economy and wider society. The connections offered by the ongoing Group’s services are a critical enabler of vibrant local economies and can play an important role in the UK’s regional ‘levelling up’ agenda. Of course, Westminster and the devolved governments in other parts of the UK have also recognised that transitioning more travellers to low- and then zero-carbon transport services is also critical to meeting the challenge of climate change, and have put in place substantial funding and strategies which will enhance our investments in our business in the years to come.

In addition to the Group’s services being a critical enabler for society meeting its broader environmental, social and governance (ESG) objectives, the Group’s own Mobility Beyond Today sustainability framework commits to making progress across a number of key areas. As a transport operator, the most important element is the Group’s commitments to a zero-emission trajectory for its vehicle fleets (see the First Bus and First Rail business reviews for more detail), which will increase its EU Green Taxonomy eligibility year by year. Taken together, I believe that the increasingly supportive UK policy backdrop and the growing focus on innovating to enhance passenger convenience and the sustainability of our business points to a potential inflection point for the ongoing Group’s growth potential.

The Board

As a natural consequence of the sale of First Student and First Transit and as the Group enters a new strategic phase, the composition and background of the Board will evolve.

Matthew Gregory has informed the Board of his intention to step down as Chief Executive and as an Executive Director at the conclusion of the AGM on 13 September 2021. Accordingly, Matthew will not be seeking re-election at the AGM. I will become interim Executive Chairman at the conclusion of the AGM until a permanent Chief Executive is appointed. A comprehensive search is underway to select a new Chief Executive for the Group. Matthew and I will work closely together to ensure a smooth handover process. Given his knowledge and experience of the Group, Matthew will also be available to support me over the coming months, including with certain matters associated with completing the transition to the ongoing UK-focused Group.

On behalf of the Board I would like to thank Matthew for his significant contribution to FirstGroup since joining in 2015, initially as CFO and then stepping forward to take up the post of Chief Executive in 2018. Matthew has been instrumental in delivering the Board’s strategy to rationalise our portfolio of businesses, culminating in the transformational sale of First Student and First Transit. Matthew was also responsible for delivering margin improvements particularly in First Student and First Bus, as well as First Rail's successful Avanti West Coast bid, which restored FirstGroup to its leading position in UK passenger rail. Under his leadership the Group adeptly responded to the unprecedented challenges created by the coronavirus pandemic. He leaves FirstGroup a more focused, resilient and flexible organisation, well positioned to benefit from the many opportunities ahead. On behalf of the Board I would like to thank Matthew for all that he has achieved and wish him every success for the future.

Jane Lodge and Peter Lynas joined the Board as Non-Executive Directors on 30 June 2021, while David Robbie stood down from the Board on the same date. On behalf of the Board I would like to thank David for his significant contribution over the past three years, including acting as interim Chairman for a period in 2019. I would also like to welcome Jane and Peter to the Board. They join at a pivotal time and I am confident that their considerable experience and knowledge will enable them both to make a strong contribution to the Group.

We will continue to oversee an orderly and appropriate evolution of the Board in order to ensure it has the right balance of skills, experience and diversity for the Group’s future needs.

Our people

The effects of the coronavirus pandemic will continue to be felt throughout our business and the communities we serve for some time to come. During the year the Group has continued to respond to the evolving situation swiftly and decisively. I am particularly proud of the dedication and fortitude shown by all our employees during this immensely challenging time. They have more than risen to the challenges presented and stepped up to support our customers and communities each and every day.

We are deeply saddened by the loss of employees in each of our divisions due to coronavirus. On behalf of the Board and everyone at FirstGroup, I offer our sincere condolences and ongoing support to their families, friends and colleagues.

Conclusion

There remains a fundamental need for people to travel safely and conveniently for business, education, social or recreational purposes which is essential to sustainable and thriving economies and communities. The vital role of public transport in the UK has never been clearer and following the sale, FirstGroup is in prime position to deliver on its goals, with a well-capitalised balance sheet and an operating model that will support an attractive dividend for shareholders commencing during the financial year ending March 2023. The ongoing Group has significant opportunities ahead of it as a focused UK public transport leader and I look forward to the future with confidence.

David Martin

Chairman

27 July 2021

Chief Executive’s review

The Group has faced a number of significant challenges in the past year and has responded quickly and robustly. As a transportation business, all of our operations were heavily affected by the actions taken by governments and society to respond to the coronavirus pandemic. We stayed close to our customers and stakeholders, adapted our services flexibly in accordance with their needs, and maintained our financial stability. Alongside this, we also progressed our strategic plans, culminating in the sale of First Student and First Transit which completed in July 2021. This transformational transaction refocuses the Group on our leading public transport operations in the UK and sets the scene for long-term sustainable value creation.

Protecting our passengers and employees

Our first priority remains the health and safety of the Group’s passengers, employees and communities. We continue to follow all appropriate public health authority guidance and have adopted and also developed best practice in areas such as enhanced cleaning and decontamination of vehicles, depots and terminals. We take great pride in the way our colleagues and teams across the Group have provided direct assistance and support to those most in need, right at the heart of our communities. Very sadly, we have lost employees in the year as a result of the pandemic, and we offer our deepest condolences to their loved ones and colleagues.

Adapting services to support our customers and communities

By the start of this financial year, the Group had experienced an average passenger volume reduction of c.90%, with international lockdowns in place and all North American schools we serve closed. However, many of our customers and government partners worked with us to adjust capacity to fit demand while preserving our ability to restore service quickly as required. Since then, passenger activity has increased in all divisions, albeit at differing rates, but remains substantially below pre-pandemic levels in many areas.

Across all divisions we adapted rapidly, both operationally and commercially, to support our customers and communities. We have reduced our fixed cost base wherever possible and rigorously focused on variable cost and capital expenditure control to mitigate the impact of lower revenues.

Operational highlights – continuing operations

Given the impact of social distancing rules and government travel guidance on passenger volumes, operating our UK bus and rail networks at scale during the year would have been commercially unviable and many could have ceased. However, recognising the essential nature of public transport connections to local economies, Westminster and the devolved governments put in place comprehensive emergency measures to procure continuity of critical rail services and to maintain industry-wide bus capacity at a time of significantly reduced demand and with social distancing restrictions in place.

First Bus and other regional bus operators have effectively provided their assets and expertise to operate a government-funded bus system over the last financial year on a broadly cash break-even basis. The Government has recently announced a recovery funding package of £226.5m which will reinforce delivery of local bus services across England as passenger numbers rebuild. The funding package will support the industry’s transition away from the COVID-19 Bus Service Support Grant (CBSSG) programme which has been in place since May 2020 and will formally come to an end in England on 31 August 2021 with the introduction of the new package. We are encouraged that passenger volumes have recovered to c.60% of pre-pandemic levels in some of our local areas in recent weeks, particularly since social distancing restrictions on public transport began to be eased from early April.

Meanwhile we have continued to enhance the ease, convenience and value for money of our services through further digitisation, and our increased capability to analyse our passenger numbers and routes in real-time will stand us in good stead as we realign our routes and networks to post-pandemic demand conditions.

We are also working hard with local transport authorities in our areas to implement the National Bus Strategy which was announced in March, and we continue to work towards our commitment of a zero-emission bus fleet by 2035. For example, we have started to transform our Glasgow Caledonia depot into the largest electric vehicle charging hub in the UK, with the first phase to complete ahead of the UN COP26 Climate Change Conference which takes place in Glasgow in November 2021.

Throughout the year our First Rail contracts were operated under the terms of the emergency arrangements put in place by the UK Government in response to the pandemic. In May 2021 we agreed the final payment with the DfT to terminate our pre-existing franchise contracts by agreement, which then enabled TPE and SWR to agree National Rail Contracts later that month. These run to 2023 with potential extensions to 2025 and are the first contracts awarded under the Government's new model offering a more appropriate balance of risk and reward for rail operators, passengers and the taxpayer. Under the new agreements, operators no longer take passenger revenue risk, instead receiving a fixed fee for operating the service, with the opportunity to earn additional fees based on performance. We are now discussing similar contracts for Avanti (potentially extending to 2032) and for GWR.

The final agreement reached with the DfT for the TPE franchise termination was c.£50m better than the assumption made by the Group in setting aside cash for the discharge of the rail termination sums at the time of the announcement of the First Student and First Transit sale.

We welcomed the publication in May 2021 of the UK Government's longer term ambitions for the future of the UK rail industry. As the largest UK passenger rail operator, we look forward to helping to bring to reality the Williams-Shapps Plan for Rail, which puts the expertise, innovation and experience of private sector rail operators at the heart of the new model for improving service delivery for passengers in the coming years.

We are proud that all our train operating companies delivered top marks on all the passenger service metrics assessed to-date under the emergency measures regime.

Greyhound volumes have improved modestly since the start of the calendar year and the business is now operating just over half of its pre-pandemic mileage. As the market leader, we responded to the very challenging conditions with capacity adjustments aligned to demand, yield management actions and $60m in fixed cost reductions to maintain a level of service for passengers, while our competitors withdrew from the market. Negotiations with state agencies to secure CARES Act emergency grants for vital intercity bus connections have been modestly ahead of our expectations and further funding is expected to come through under the Biden administration's recent legislative activities.

In May 2021 we announced the closure of Greyhound Canada after more than a year of services being suspended due to the pandemic. Greyhound Canada made significant outreach efforts to the provincial and federal government to request financial support for the industry, but operations could not continue in the absence of that financial support.

In December 2020 we announced the sale of three surplus Greyhound properties for gross proceeds of $137m and continue to actively monetise the remainder of the property portfolio.

Greyhound remains non-core and sale discussions are ongoing, but the process has been affected by the pandemic’s impact on this passenger volume-based business. As clarity improves in its end-markets, we will look to exit the business.

Operational highlights – discontinued operations

The proportion of First Student’s bus fleet operating either full service or on a hybrid basis increased to 87% of pre-pandemic levels in early June before schools in some regions began closing for the summer holidays. During the year most of our schools where we were not fully operational have been supporting us with agreements to make either full or partial payments to ensure that we are in a position to deliver increased services rapidly when needed. Between services in operation and these agreements with our customers, we secured c.71% of our pre-pandemic home-to-school revenue in the year.

Alongside this activity we also achieved a good outcome to the bid season, with retention rates in line with our expectations of 88% of ‘at risk’ contracts or 95% of the whole contract portfolio, and several important new business wins.

Most of First Transit’s contracts are to provide essential services, so provision during the year was not reduced as significantly as in some other parts of the Group. Where service levels did change we worked closely with clients to agree contractual amendments.

While the rate of recovery varies by sub-segment, overall First Transit operated c.70% of services and recovered c.86% of revenues in the year compared with pre-pandemic levels.

The division’s 'at risk' contract retention rate was 89% in the year and it delivered a number of new business wins across both traditional markets and new mobility services.

Group financial performance was significantly ahead of our expectations at the pandemic's outset

Revenue from continuing operations was in line with the prior year at £4,641.8m (2020: £4,642.8m). Excluding the new Avanti contract, revenue decreased by £567.4m as a result of the pandemic.

Adjusted operating profit from continuing operations was £101.9m (2020: £69.7m), an increase of £16.9m excluding the incremental Avanti contribution of £15.3m. For First Bus and First Rail this largely reflects the terms of the UK Government-procured emergency arrangements to enable socially distanced travel, while in Greyhound it comprised the drop through of lower revenues offset by reduced variable costs, the substantial fixed cost actions and CARES Act grants for vital bus service connections.

Reduced activity levels due to the pandemic in the discontinued operations were mitigated by cost savings, better than expected revenue recoveries from customers and higher service levels in the final quarter, with the businesses contributing £2,203.2m (2020: £3,111.8m) in revenue and £107.5m (2020: £187.1m) in adjusted operating profit to the Group.

Statutory operating profit from continuing operations was £224.3m (2020: loss of £(215.2)m) reflecting £122.4m of net adjusting items compared with £(284.9)m in 2020, and statutory EPS was 6.5p (2020: (27.0)p).

The Group's new alternative performance measure of Rail-adjusted EBITDA (First Bus and non-contracted First Rail EBITDA, plus contracted Rail net attributable earnings, minus central costs) was £87.1m in the year.

Substantial cash flow in period, significantly ahead of expectations

The Group's adjusted cash flow of £284.0m (2020: £97.4m) was well ahead of initial expectations, reflecting our actions to maintain liquidity and financial strength despite the passenger volume reductions.

Some capital expenditure was deferred, which in the case of the discontinued operations was partially reflected in the terms of the sale. First Bus anticipates c.£90m in capital expenditure in FY22, some of which was deferred from the last financial year, with £30m spent in FY21.

The Group also secured £109.5m in cash proceeds from the sale of properties in the year, principally from Greyhound.

Stable liquidity and balance sheet reinforced

Adjusted net debt (bonds, bank debt and other debt net of cash (excluding First Rail ring-fenced cash) before IFRS 16 leases) reduced by £76.6m in the year to £1,414.3m (2020: £1,490.9m). IFRS 16 lease liabilities (which are predominantly First Rail rolling stock leases which expire when the relevant operations cease) decreased to £1,850.0m (2020: £2,381.9m), with the majority of the decrease relating to payments made under the rolling stock lease agreements. Taken together, reported net debt including IFRS 16 lease liabilities decreased to £2,625.8m (2020: £3,260.9m).

Net debt: EBITDA was 1.6x (2020: 1.3x) on the basis relevant to the Group's bank covenant tests, comfortably ahead of the enhanced headroom agreed with our lenders last November.

As at 27 March 2021 the Group’s undrawn committed headroom and free cash (before First Rail ring-fenced cash) was £1,130.7m (March 2020: £585.7m), reflecting cash generation in FY21 and new facilities entered into during the year, notably a £300m bridge to the CCFF and new finance leases and supplier credit facilities.

Since the last liquidity update in December 2020, the Group has repaid the £350m April 2021 bond mainly funded from drawdown of the £250m bridge facility entered into in March 2020, secured £102m in cash proceeds from the sale of Greyhound properties announced at the end of December 2020, while operating cash flow in the second half of the financial year was positive and ahead of our expectations. In March the Group renewed the £300m in commercial paper issued through the UK Government's Coronavirus Corporate Financing Fund (CCFF) scheme for a further year and secured a £300m committed bridge facility from the CCFF maturity in March 2022, thereby providing adequate financial resources for the short to medium term.

Following receipt of the proceeds of sale of First Student and First Transit, the Group has begun the process of settling the majority of its outstanding financial indebtedness, including the repaying the CCFF and cancelling the £300m committed bridge facility. Following all the funds flows previously outlined, the ongoing Group expects to have pro forma adjusted net debt of c.£100m.

Momentum to build during current financial year as sale completes and pandemic travel restrictions diminish

Overall we expect our financial performance in the current financial year to provide a strong foundation for delivering the Group's previously announced financial policy framework (as set out in the Financial review on p.20), including commencing regular dividend payments during FY23.

First Bus' contribution to adjusted operating profit in FY22 will be dependant on the pace at which passenger volumes build back. First Rail earnings in FY22 will be driven by the contractual arrangements now in place. Greyhound expected to exceed its FY21 contribution in light of encouraging recent volume trajectory. Central costs are expected to be c.£5m lower in FY22, reflecting half a year of progress towards the £10m per annum reduction target following completion of the First Student and First Transit sale.

Further ahead, the Group has committed to commencing paying a regular dividend during FY23, supported by our expectations for a 10% margin in First Bus on increasing revenues, as passenger volumes return to between 80-90% of pre-pandemic levels over the first year after restrictions on public transport are lifted. First Rail's profitability will be driven by our delivery against performance targets under the new National Rail Contracts whilst we expect to add further earnings from opportunities adjacent to our core rail operations.

Portfolio rationalisation and the opportunities for the ongoing Group

Following completion of the sale of First Student and First Transit, FirstGroup is a leader in public transport in the UK, with a clear social purpose through its vision to provide easy and convenient mobility, improving quality of life by connecting people and communities. The core of the ongoing Group is our First Bus and First Rail divisions, which are both leaders in their respective sectors of the UK public transport industry, with substantial operational experience, strong stakeholder relationships, deep expertise and a growing track record of using technology to innovate for passengers.

As described in more detail in the divisional reviews, both divisions are experiencing substantial – and in many ways very positive – changes in their operating environment, with the National Bus Strategy and new developments in the rail contracting model in line with the recently announced Williams-Shapps Plan for Rail offering new opportunities.

Opportunities

Our goal is to continue to deliver for our passengers and wider society. We aim to make sure our services are attractive travel choices for customers, with increasingly sophisticated and easy-to-use journey planning tools, a range of ticket products catering to a wide range of needs, and reduced complexity and cost compared to other travel options (in particular owning, maintaining, insuring and parking a private car in the UK’s increasingly crowded towns and cities). FirstGroup’s transport services allow flexible and easy to access travel on WiFi-enabled vehicles to and from key destinations in towns and cities across the UK.

Travel connections are also fundamental to stronger local economies, expanding the scale and interconnectivity of neighbourhoods, cities and whole regions with each other. With the UK's increasingly crowded and congested cities, the most cost-effective way to enhance those connections – and 'level up' regional opportunity – is through a dynamic public transport service sector. The ongoing Group’s services are also a more efficient use of infrastructure space with lower emissions than other forms of travel in urban areas.

Responsible business

Governments worldwide are also increasingly focused on making it easier for public transport providers to support the response to the climate change challenge. FirstGroup expects its services to make an important contribution to achieving this goal in two ways. Firstly, by facilitating a modal shift of passengers out of their cars and into public transport, because the per passenger mile emissions of a typical train or double-decker bus today are significantly lower than the equivalent number of private vehicles.

Secondly, FirstGroup is committed to accelerating the transition of its own fleets to zero emissions in the coming years (see the First Bus and First Rail business reviews), supporting a commensurate growth in green jobs, manufacturing and new business models such as vehicle-to-grid power, for example. Both divisions of the ongoing Group will therefore make a significant contribution to delivering the UK’s climate change commitments.

In addition, the Group has also committed to implementing the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations in its 2021 Annual Report, a year ahead of the regulatory mandate. FirstGroup is also the first UK road and rail operator to formally commit to setting a science-based target (SBT) for reaching net zero emissions by 2050 or earlier, in accordance with the SBT initiative.

We are also working to create a more diverse and inclusive business in what has been a ‘traditional’ sector. Our development programmes continue to increase the proportion of women in senior management roles, from 23% in 2019 to 28% in 2021, and following recent appointments, the female proportion of the Group's Board has increased to 36%. FirstGroup has also recently signed up to the ‘Change the Race Ratio’ programme, which commits the Group to taking action to increase our racial and ethnic diversity and create an inclusive culture. Detailed targets and action plans are in development, and the Group will publish its first ethnicity pay gap report in FY22.

Alongside top decile ratings in our sector globally from multiple ESG ratings providers, FirstGroup is a longstanding constituent in the FTSE4Good index and was recognised with a place in the 2021 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. We are the only passenger transport operator based in Europe to be listed in this year’s report.

FirstGroup's investment case

Going forward, we expect FirstGroup to be a strong platform for further value creation based on the following:

• Leading positions in bus and rail transport in the UK: First Bus is a leader in regional bus operations outside London with c.20% of market share and strong positions in most of its local areas of operation. First Rail is the largest passenger rail operator in the UK by revenue with c.27% of the national passenger rail sector;

• Inflection point for growth, underpinned by supportive government and social policies: Public transport operators play a vital role in meeting local and national objectives, including net zero carbon, green jobs, reduced congestion, improved air quality, and the 'levelling up' agenda, particularly in 'left behind' towns and regions, as well as the recovery in economic and social activity following the pandemic;

• Digital innovation to attract more customers, enhance business efficiency and flexibility: Enhancements to stimulate passenger growth, by delivering FirstGroup’s vision to provide easy and convenient mobility, improving quality of life by connecting people and communities;

• First Bus: ready to complete trajectory to delivering a 10% margin in the first full financial year after pandemic-related social distancing restrictions on public transport end: With network realignment, service delivery efficiencies, data-driven pricing and other actions to drive passenger revenue growth and margin improvement, as described further in the First Bus business review below;

• First Rail: well-placed for lower risk, long term and cash generative rail operations: As the largest incumbent operator with four UK passenger rail contracts expected to at least 2023, First Rail will benefit from the UK Government’s transition of the passenger rail industry’s commercial structure to a lower-risk and more predictable model, with a more appropriate balance of risk and reward, as described further in the First Rail business review below;

• Opportunities from adjacent markets in UK bus and rail and in new geographies over time: Leveraging the Group’s considerable industry knowledge, skills and experience; and

• Critical enabler of society’s ESG goals, accelerating the transition to a zero-carbon world: Principally through facilitating modal shift from cars and through FirstGroup’s commitments to transition to a zero-emission bus fleet by 2035, to cease purchasing further diesel buses after December 2022 and to support the UK Government’s goal to remove all diesel-only trains from service by 2040.

Having delivered the substantial portfolio rationalisation strategy and with FirstGroup now positioned to emerge from the pandemic as a resilient and robust business, I have decided the time is right for me to move on to new opportunities. In this landmark year the Group has more than risen to its challenges. We have delivered on our strategic objectives, protected our financial stability, and supported our communities with essential services whilst helping to shape the future of public transport in the UK.

The ongoing Group will have a fundamental role to play in delivering the UK’s economic, environmental and social objectives, as well as providing a vital service that is an essential part of the daily lives of many people in communities across the UK. With a well-capitalised balance sheet and an operating model that will support an attractive dividend for shareholders, FirstGroup is well placed to capitalise on the considerable opportunities ahead, helping communities and economies build back better and more sustainably.

Matthew Gregory

Chief Executive

27 July 2021

Divisional review

Continuing operations – First Bus

52 weeks to 27 March				£m			£m, change in constant currency1
				2021	2020
Revenue				698.9	835.9		(137.5)
Adjusted operating profit				36.6	46.1		(9.6)
Adjusted operating margin				5.2%	5.5%		(30)bps
EBITDA				100.8	113.2		(12.5)
Net operating assets				328.1	379.5
Capital expenditure				24.0	46.3

¹        Based on retranslating 2020 foreign currency amounts at 2021 rates.

First Bus reported revenue of £698.9m (2020: £835.9m), reflecting the effects of the coronavirus pandemic during the year. Government guidelines to avoid all but essential travel throughout the year meant like-for-like passenger revenue during the year as a whole was 49% lower, with commercial passenger volumes 66% lower, although volumes were higher at times during the various periods of lockdown easing. We are encouraged that passenger volumes have recovered to c.60% of pre-pandemic levels in recent weeks, particularly since certain social distancing restrictions on buses in England started to be eased in early April.

We worked very closely with local authorities and other partners throughout the year to ensure that key workers were able to rely on our services for their essential journeys during the pandemic. The UK Government and devolved administrations put in place a range of measures which were in place throughout the year to secure continuity of service on these crucial routes which would otherwise have had to cease. Measures included the rolling COVID-19 Bus Services Support Grant (CBSSG) and its successor programme in England, mirrored by similar arrangements in Scotland and Wales. Under these arrangements, First Bus is paid the costs of operation less revenue received from customers and other public sector monies. Recoverable costs include all reasonable operational costs including depreciation and allocated debt finance together with pension deficit funding. Fixed costs were also reduced by £3.0m in the year.

As a result of these agreements, the division reported adjusted operating profit of £36.6m (2020: £46.1m), which is calculated before debt finance costs and pension deficit contributions which pay down the balance sheet deficit. Reported statutory profit was £30.8m (2020: £32.4m), principally reflecting the adjusted operating profit partially offset by the impairment of land and buildings.

Digital transformation

In recent years our digital transformation has placed First Bus at the forefront of the industry, including for real-time passenger volume data capture, GPS functionality and ticketing. We now have an enhanced capability to assess passenger flows, and make subsequent commercial decisions, with greater speed and precision. Throughout the pandemic this allowed us to continuously adjust services in consultation with local stakeholders to ensure they met travel demands. Going forward, this data will be fundamental in enabling us to continue to shape our networks to align with evolving customer needs and trends while being commercially sustainable. This will be particularly relevant during the eight-week transitional period before the CBSSG scheme ends following the lifting of social distancing restrictions on public transport. In the year we also used our new digital platforms to develop a technical solution to mitigate bridge strike risks.

Customer experience

Our digital transformation has included enhancements to the customer experience. During the year, we were the first operator to introduce innovative functionality to our mobile app and websites, enabling customers to check the real-time available capacity on an approaching bus, including the wheelchair space. Furthermore, this technology allows customers to check how busy their bus is likely to be on any day of the week and time of day. Two-thirds of all ticket transactions now involve our mobile app or other contactless payment methods. Daily and weekly contactless ‘tap and cap’ fares are now being rolled out to multiple locations across the network, while in September 2020 we were the first national bus operator to introduce Express Mode for Apple Pay across all networks.

National Bus Strategy

Buses are vital to help deliver wider economic, social and environmental goals and we fully support the UK Government’s National Bus Strategy (NBS), published in March, which provides a clear framework and £3bn in funding for bus operators and local government to promote bus use in England, including funding allocated for 4,000 new zero-emission buses across the country. We are working with local transport authorities in our areas to develop the Bus Service Improvement Plans and Enhanced Partnerships as outlined in the NBS, which will align services to the needs of local bus customers and enable access to the funding available to help deliver them in the coming years. We already work closely and effectively with local authorities and the partnership approach will enable us to build on these strong local relationships as we move toward recovery and work to improve customer experience.

Fleet decarbonisation

During the year we announced our commitment to operate a wholly zero-emission bus fleet across the UK by 2035 and will not purchase further diesel buses after December 2022. In January, we began operating the world’s first fleet of hydrogen powered double-decker buses in Aberdeen, supported by funding from the city council, Scottish Government and the EU. In Yorkshire we introduced new electric double-decker buses to our all-electric York Park&Ride fleet as well as new electric buses for Leeds, in partnership with local and regional authorities.

In Glasgow a partnership between First Bus and Transport Scotland announced in March will replace 126 of the oldest buses in our fleet with electric vehicles for the city, in addition to the 24 buses already in operation or on order. Ahead of the UN COP26 Climate Change Conference which takes place in Glasgow in November 2021, this ambitious collaboration will also begin transforming our Caledonia bus depot, the UK’s largest, into one of the country’s biggest electric fleet charging stations, with the potential for 162 vehicles to be recharged at a time. In January we completed the retrofit of our 1,000^th bus to the Euro VI low-emission standard, and just under half of our fleet now meet this benchmark.

As zero-emission bus technology is developing rapidly, we are working with a number of vehicle manufacturers to evaluate and shape the key attributes of these vehicles. In February 2021, for example, we announced that we will be the first operator in the UK to trial the unique vertically integrated electric bus technology from Arrival.

First Bus medium-term outlook

Passenger volume and revenue levels following the pandemic are difficult to forecast with any certainty. However, our current expectation is that volumes will recover to between 80%-90% of pre-pandemic levels during the first year after social distancing restrictions on public transport end, with further growth thereafter.

We expect that the effect of any initial volume reductions due to post-pandemic changes in customer behaviour will be mitigated over time by targeted network changes, the profound support for modal shift and increasing bus patronage provided by the NBS, as well as our new data-driven pricing strategy and ticketing innovations. First Bus has a significant level of operational gearing and this, together with the operational and engineering efficiency programmes we have in place as well as cost improvements to the business already made, means that we expect to deliver 10% margins in the first full financial year after pandemic-related social distancing restrictions on public transport end, in a range of potential passenger volume scenarios.

We are also building on our existing platform of contracted fleet services for commercial customers in order to deliver further revenue growth and capital efficiency. We are also well positioned to develop solutions in the nascent UK market for Mobility as a Service (MaaS), thanks to collaboration with First Transit colleagues.

Looking ahead, we are already a leader in the industry for low emission vehicles and look forward to playing our part in decarbonising the UK economy. Bus networks are key to supporting modal shift particularly from cars to sustainable, zero-carbon public transport, a key part of the UK’s climate change goals.

As recognised in the NBS, there is also a significant, growing role for buses to help deliver on national and local government commitments to reduce congestion and air pollution, improve city connectivity and ‘level up’ parts of the country through improved economic infrastructure and opportunity. Buses are the most flexible, value for money solution for providing the critical public transport services which are so essential to local economies and communities. The fundamentals for a resurgent bus business are sound, and we look forward to playing an important role in a robust, and environmentally sustainable, recovery.

Continuing operations – First Rail

Year to 31 March				£m			£m, change excl. Avanti
				2021	2020
Revenue				3,619.9	3,203.7		(150.2)
Adjusted operating profit				108.1	70.4		+22.4
Adjusted operating margin				3.0%	2.2%		(100)bps

Tramlink now reported within First Rail (previously within Group items). 2020 Comparative has been restated accordingly.

First Rail revenue increased to £3,619.9m (2020: £3,203.7m) reflecting a full year of the Avanti contract, which commenced operations in December 2019. Tramlink is also reported within First Rail for the first time, with the comparative restated accordingly. Excluding Avanti and Tramlink, like-for-like passenger revenues decreased by 84%, with passenger volumes 79% lower due to the effects of the pandemic. Passenger volumes increased to some extent during periods of lockdown easing throughout the year, and stand at c.42% of pre-pandemic levels on average as of mid-July, although under the new contractual arrangements in place during the year and going forward in the industry, changes in revenue no longer affect our financial performance. We continue to work closely with the DfT on the level of service provision as government guidance changes, and in the summer of 2020, and again from May 2021, we increased services to c.90% of prior levels to support increased travel activity.

The UK Government acted quickly to ensure the country’s vital rail networks could continue to operate during the pandemic by introducing Emergency Measures Agreements (EMAs) which were in place for much of the first half of the year.

Under these agreements, the DfT waived revenue, cost and contingent capital risk and our train operating companies (TOCs) were paid a fixed management fee to operate at agreed service levels, as well as a performance-based fee. The EMAs were superseded in autumn 2020 by Emergency Recovery Measures Agreements (ERMAs) for Avanti, SWR and TPE which were similar in structure, the principal differences being that fees have a lower overall potential and were more heavily weighted to performance delivery. In the first phase, we were very pleased to have scored the highest performance marks across all categories for all four of our rail contracts.

Adjusted operating profit was £108.1m (2020: £70.4m), which reflects the fees paid, including a first-time contribution from Avanti, the settlement of historical claims mainly in GWR in H1 and a £(10.2)m loss from Hull Trains open access reflecting its suspension during parts of the year. The division reported a statutory operating profit of £203.8m (2020: £69.3m), including a partial reversal of prior year impairments for SWR and TPE following agreements reached on rail franchise termination sums and other amounts due to the DfT (see below).

Contracted Rail net attributable earnings in the year – being the Group's share of contracted rail fee income available for dividend distribution up to the parent company – was £42.3m.

Transition to National Rail Contracts

Each ERMA required us to agree with the DfT what, if any, remaining payments were required to conclude the pre-existing franchise agreements, a process which Avanti, SWR and TPE have now completed (there is no termination sum process for GWR given that this contract was entered into after the transition to the EMAs). These termination sums are paid at the end of the ERMA term, at which point the pre-existing franchises also end, and allowed us to move forward with discussions on new National Rail Contracts (NRCs).

The SWR and TPE ERMAs duly expired at the end of May 2021 and the two TOCs are now operating under the first two NRCs to be agreed. Both have been awarded for a two-year term to the end of May 2023 with an option to be extended by up to two further years at the DfT’s discretion. Under the NRCs the DfT will retain all revenue risk and substantially all cost risk. There is a fixed management fee and the opportunity to earn an additional performance fee. For the Group’s 70% share of the First MTR joint venture for SWR the fixed management fee is £3.3m p.a. and there is the opportunity to earn an additional fee of up to £9.9m p.a. which is the maximum attainable performance fee. For TPE the fixed management fee is £2.3m p.a. and there is the opportunity to earn an additional fee of up to £5.2m p.a. which is the maximum attainable performance fee. Punctuality and other operational targets required to achieve the maximum level of performance fee are designed to incentivise service delivery for customers.

The NRCs achieve a more appropriate balance of risk and reward between FirstGroup and the Government. They carry no significant contingent capital risk and there are limited scenarios in which this contingent capital can be called upon, primarily in the event of early termination of the contracts by the operator. SWR and TPE will continue to be fully consolidated in the Group accounts with the net cost of operations and capex to be funded in advance by the DfT. The Group will receive an annual dividend from the TOCs reflecting the post-tax net management and performance fees. These dividends are expected to be paid each September following the completion of the TOC audited accounts.

For Avanti, the ERMA is in place to the end of March 2022 and can be extended by a further six months. We are discussing an NRC which could last up to 31 March 2032, with the core and extension periods to be determined. Meanwhile the DfT recently exercised its option to extend the EMA for GWR until 12 December 2021, subsequent to which it is expected that GWR will move on to an NRC in due course.

Open access operations

Hull Trains was not eligible for the EMAs or ERMAs, and as a result the service was temporarily suspended on three occasions during the year when nationwide lockdowns took place, but has now been restored with encouraging passenger volumes returning. We are on course to launch a second open access service between London and Edinburgh in autumn 2021. This will provide a value for money and sustainable way to travel between the two capitals, where domestic air travel currently has a significant share of journeys. Reflecting start-up costs for East Coast and the uncertain demand environment, we expect our open access operations to record a c.£20m loss in the current financial year, before making a profit contribution from FY23.

Customer experience innovation

As travel restrictions ease, our TOCs are working collaboratively with industry partners and stakeholders to build back patronage, while delivering plans to upgrade our service offering. These plans include the introduction of flexible commuter tickets and continuing to facilitate a move towards electronic and mobile ticketing, smartcards and improved apps. New functionality includes the ability for Avanti passengers to have refreshments delivered to them without leaving their seat. Avanti has also become the first UK TOC to offer an additional class of travel as part of its services. Standard Premium will give customers greater choice of facilities, and is initially available to buy as an upgrade on the day of travel with advance tickets on sale later this year.

Innovation and adjacent rail opportunities

In the year we developed and deployed new technology such as next generation onboard 5G Wi-Fi from evo-rail, developed in-house by First Rail. This pioneering system was first trialled on the Isle of Wight, and later this year will be installed on a 70km section of the SWR mainline, followed in 2022 by a roll out on the London to Birmingham section of Avanti's network.

Our industry-leading cloud technology and analytics systems have allowed us to integrate real-time data from several systems on to a single platform branded Mistral Data that enables our teams to identify and resolve potential problems before they arise. The platform also provides information to our customers via website and mobile app channels on the formation and facilities available on each train, which gives customers the ability to plan their journey with confidence.

During the year we further integrated a variety of customer-facing and back office functions into our passenger service centre, which was built based on scalability and the latest technology. The shared 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.

We continue to provide our consultancy experience as ‘shadow operator’ to the HS2 infrastructure project. During the last financial year we completed more than 40 deliverables, including technical and financial baseline reviews of operational plans for HS2, a fresh view of the travel market on the West Coast corridor and employee engagement planning.

Fleet decarbonisation

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, for example through the introduction of electric trains to replace diesel where possible. Our expertise and capability will help the Government deliver its ambition to remove all diesel-only trains from service in the UK by 2040.

GWR have recently taken delivery of the UK’s first tri-mode train which can use overhead wires, third rail or diesel power. Plans to upgrade the SWR fleet continue with new suburban rolling stock starting to enter service this year and a new depot at Feltham was completed in order to stable this fleet. New all-electric and bi-mode trains will also be introduced by Avanti next year to replace diesel-only trains in the current fleet.

First Rail medium-term outlook

For some time we have advocated for a longer-term approach to the railway with passengers at the core, underpinned by a more sustainable balance of risk and reward for all parties, and welcomed the Williams-Shapps Plan for Rail published in May 2021. In it the UK Government outlined its ambitions for the future of the UK rail industry with the expertise, innovation and experience of private sector rail operators at the heart of the model. As the largest UK operator with four passenger rail contracts expected to run to at least 2023, we are well positioned to work closely with industry partners, including the DfT, to bring this to reality in the coming years.

First Rail has operated 20% of the UK passenger rail market by revenue since 2007 on average, and currently has a c.27% market share. As such, we can draw on a strong track record of delivery on major projects to enhance passenger experience, including fleet introductions, major timetable changes, capital projects on behalf of Network Rail, customer service innovations and managing the impact of significant infrastructure changes from network electrification through to route upgrades.

In addition, the rail division has potential for further growth through the skills and expertise developed in a range of related areas, such as designing and operating open access services, deploying new rail technology and customer-facing innovation and the division will also seek to build on its consultancy experience as ‘shadow operator’ to the HS2 infrastructure project.

In summary, First Rail's profitability will be driven by our delivery against performance targets under the new National Rail Contracts whilst we expect to add further earnings from opportunities adjacent to our core rail operations. Overall, as the UK passenger rail industry continues its evolution to a more successful railway system that works better for passengers and taxpayers, we believe that First Rail is well-placed to generate more resilient and consistent returns for shareholders in tandem.

Continuing operations – Greyhound (non-core)

52 weeks to 27 March	$m			£m			£m, change in constant currency1
	2021	2020		2021	2020
Revenue	422.6	766.0		323.0	603.2		(266.5)
Adjusted operating profit	(12.1)	(15.3)		(10.3)	(11.6)		–
Adjusted operating margin	(2.9)%	(2.0)%		(3.2)%	(1.9)%		(150)bps
EBITDA	23.3	44.0		17.0	35.3		(17.9)
Net operating assets	(75.1)	(163.0)		(54.5)	(130.8)
Capital expenditure	7.8	61.6		5.7	44.1

¹        Based on retranslating 2020 foreign currency amounts at 2021 rates.

Greyhound’s revenue was $422.6m or £323.0m (2020: $766.0m or £603.2m) in the year as a result of the effects of the pandemic on passenger demand. US passenger revenues were 59% lower year-on-year, while we suspended our remaining operations in eastern Canada in May 2020 due to limited demand and the closure of the US border, and permanently shut it down in May 2021. Total revenue for the whole division decreased by 45% year-on-year.

As previously noted, during the early part of the financial year, Greyhound’s overall passenger revenues were c.20% of pre-pandemic levels and passenger volumes were c.15%. Greyhound led its industry as the only major coach operator that continued to provide any service for passengers. In the US during the first quarter, Greyhound operated c.45% of its pre-pandemic timetabled mileage, sufficient to maintain the integrity of its US network and provide ongoing service to hundreds of rural communities, many with no other form of intercity transportation. Greyhound was able to do so through rapid management action including commercial initiatives, optimising pricing, managing capacity and cost (principally through reduced variable costs, furlough as well as $60m in fixed cost reductions) to match lower demand levels, and utilising employee retention tax credits as appropriate. Greyhound also secured $130m of the US CARES Act funding made available to state agencies to maintain operation of intercity rural bus services in the year, modestly ahead of our expectations.

Over the course of the year, Greyhound flexed operating mileage in response to volatile passenger demand in different parts of the country as the impact of the pandemic continued to be felt. Historically low airline fares have also had an impact on coach passenger demand. Since the start of the calendar year, US passenger revenue has increased through improved volumes and higher yields, reaching c.60% of pre-pandemic levels in early July 2021. Passenger mileage travelled in early July is just over half of pre-pandemic levels. As a result of these actions, Greyhound was able to largely offset the substantial reduction in revenue, recording an adjusted operating loss of $(12.1)m or £(10.2)m (2020: $(15.3)m or £(11.6)m) in the year. Excluding the closure costs and other losses associated with Greyhound Canada, Greyhound in the US generated $1.8m in adjusted operating profit in the year (2020: loss of $ (14.9)m). The division reported a statutory profit of £41.6m (2020: £(253.4)m loss) after £71.1m in profit on sales of property described below partly offset by a £11.2m charge for historic insurance claims.

Greyhound continues to rationalise its property portfolio by moving operations to intermodal transport hubs or new facilities better tailored to its needs when the opportunity arises. During the year 15 surplus locations were sold, resulting in profit on certain property sales (net of leaseback, property tax and selling costs) of $101.2m or £71.1m (2020: $12.4m or £9.7m). The largest was the sale of Greyhound’s oversized legacy garage and customer terminal facility in the downtown Arts District of Los Angeles, California to a subsidiary of Prologis, Inc. Under the agreement Greyhound received net $88m in cash and will lease back the facility for two years, during which time Greyhound will complete the moves of its terminal and garage operations. The book value of the remaining properties in the portfolio is $78.6m. A number of other property sales processes are underway.

In the year, Greyhound has continued to upgrade its offering for passengers, offering industry-leading streaming entertainment on all buses and new web and mobile functionality to manage bookings. In light of the demand environment, new vehicle investment has been very substantially reduced. Together with disciplined fleet management, operational and maintenance changes have resulted in further improvements to punctuality, emissions and other non-financial metrics.

Greyhound outlook

Greyhound remains non-core and FirstGroup continues to pursue all exit options for the business in order to conclude the Group’s portfolio rationalisation strategy. Greyhound’s financial performance will continue to be supported by tight cost control and recoveries of federal grants for operating key coach services, and is expected to exceed its FY21 contribution in light of the recent passenger volume trajectory. As set out in the announcement of the sale of First Student and First Transit, a portion of the net disposal proceeds will be utilised to de-risk Greyhound's legacy pension and self-insurance liabilities. The Group will continue to actively manage the Greyhound property portfolio for value alongside Greyhound’s reduced residual liabilities. Emerging from the pandemic, Greyhound is primarily focused on our mid- to long-distance services, utilising short-distance services to support the national network. Greyhound remains focused on actively managing operating mileage in response to changing demand as the pandemic's impact on our customers' travel plans recedes.

Discontinued operations – First Student

52 weeks to 27 March	$m			£m			£m, change in constant currency1
	2021	2020		2021	2020
Revenue	1,617.7	2,474.9		1,226.2	1,940.4		(668.3)
Adjusted operating profit	78.1	205.9		55.8	158.8		(101.1)
Adjusted operating margin	4.8%	8.3%		4.6%	8.2%		(370)bps
EBITDA	374.3	496.7		282.6	387.6		(96.7)
Net operating assets	3,283.3	3,176.3		2,381.1	2,549.2
Capital expenditure	225.4	370.6		174.0	256.8

¹        Based on retranslating 2020 foreign currency amounts at 2021 rates.

First Student revenue was $1,617.7m or £1,226.2m (2020: $2,474.9m or £1,940.4m), a decrease of $857.2m reflecting the near-total closure of schools due to the pandemic prior to the start of the financial year. The reduction was partially offset by recovery of a substantial proportion of our expected home-to-school revenues by agreement with our school board customers, such that by the end of the 2019/20 spring term, we were recovering c.55% of budgeted home-to-school revenues, or an effective recovery rate of 78% including labour and fuel savings.

Some schools restarted full in-person teaching at the start of the 2020/21 academic year in August/September 2020, but many continued to review and alter their back-to-school plans in light of dynamic local conditions throughout the second half of the financial year. Overall, the trend has been for increasing home-to-school services either full time or as a mixture of in-person and online teaching, although some of our school customers were able to operate all-online, principally in the larger urban districts which form a relatively significant part of our portfolio. The proportion of First Student’s bus fleet operating either full service or on a hybrid basis was 87% in early June before schools in some regions began closing for the summer holidays, and between services in operation and agreements with our customers, we were securing c.95% of pre-pandemic home-to-school revenue.

At the adjusted operating level, profit decreased by only $127.8m to $78.1m or £55.8m (2020: $205.9m or £158.8m), reflecting our industry-leading levels of agreements with customers noted above and the extensive cost actions we have undertaken to mitigate the reduced activity levels. These include variable cost savings, temporary salary reductions, removing all non-essential contract employees, together with some more permanent reductions in back office headcount where unavoidable. Where appropriate, First Student has also made use of the employee retention tax credits in the US (and wage subsidies in Canada) available to all businesses whose operations were disrupted by government order. All non-contracted capital expenditure was reviewed early in the pandemic and deferred, reprofiled or converted to leasing where consistent with customers’ requirements. As a result of the reduced level of operating activity throughout the year for many of our customers, the division’s normal seasonal build-up of working capital took place later than normal, and has not fully normalised. In all, c.$110m of capital expenditure and payroll tax payments under the US Federal Insurance Contributions Act (FICA) have been deferred as a consequence of the pandemic, which will subsequently reverse under the buyers’ ownership as operating conditions normalise. The division reported a statutory profit of £62.1m (2020: £89.4m) including a £10.2m benefit from an improved position on historical insurance claims.

In the bid season for the 2020/21 school year, First Student maintained its leading position in the market, supported by our excellent safety record and consistently high customer satisfaction scores, which resulted in a contract retention rate of 88% on contracts up for renewal, or 95% across the entire portfolio of multi-year contracts. Given the immense complexity of school start-up in the pandemic, our driver recruitment, retention and safety programmes have responded well to the challenges posed by the pandemic for the school bus industry and its employee dynamic, though we continue to track our employee levels closely as activity levels rebuild.

Despite the pandemic, First Student continued its bolt-on acquisition activities and driver technology innovation, as well as extending its leadership in zero-emission school bus operations in North America. In January 2021, First Student announced a collaboration with NextEra Energy Resources, the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage. The collaboration aims to jointly foster innovation, accelerate the mass adoption of zero-emission school bus vehicles and also develop early mover capability in the nascent vehicle-to-grid power management, energy storage and ancillary grid services markets in North America.

Discontinued operations – First Transit

52 weeks to 27 March	$m			£m			£m, change in constant currency1
	2021	2020		2021	2020
Revenue	1,277.4	1,488.4		977.0	1,171.4		(164.1)
Adjusted operating profit	69.1	36.2		51.7	28.3		+23.8
Adjusted operating margin	5.4%	2.4%		5.3%	2.4%		+290bps
EBITDA	115.3	80.0		87.1	62.9		+25.7
Net operating assets	410.9	465.0		298.0	372.0
Capital expenditure	27.7	24.1		20.2	16.7

¹        Based on retranslating 2020 foreign currency amounts at 2021 rates.

First Transit continued to maintain a high level of service throughout the year, as its services provide essential transportation options for passengers needing to travel to work, university, for medical and other essential travel. While passenger ridership volumes were more than 50% lower year-on-year, our clients required us to continue to maintain significant levels of service for the communities we serve throughout the year. First Transit worked closely with many clients where service levels did change to make contractual amendments such as additional payments to cover fixed costs or altered productivity requirements. Overall, First Transit’s revenue was $1,277.4m or £977.0m (2020: $1,488.4m or £1,171.4m), a decrease of 14.2%.

While the rates of recovery in activity levels have varied by sub-segment since March 2020 and we have been flexible in both increasing and decreasing activity levels in conjunction our clients to adapt to local developments, as of June, First Transit was operating c.87% of pre-pandemic services overall (compared with c.60% at the low point). Net revenue recovery was running at c. 95% of pre-pandemic expectations in June, reflecting the service levels and customer arrangements in place.

Adjusted operating profit was $69.1m or £51.7m (2020: $36.2m or £28.3m), or an increase of $32.9m compared with the prior year. This equates to an adjusted operating margin of 5.4% (2020: 2.4%). This performance reflects a number of factors, including the contractual variations negotiated with customers noted above, substantial variable cost savings, including temporary furloughing of some employees and salary reductions in the year, and a reduction in fixed costs by $10m in the year. The division also made use of fiscal tax credit programmes available to all companies to protect jobs where appropriate, and also benefited from the non-recurrence of prior year legal judgment costs (2020: $3.5m). Statutory profit was £20.5m (2020: loss of £(21.9)m), reflecting a charge of £31.2m for the deterioration of historic insurance claims.

The division continued to drive further cost efficiencies from lean maintenance, predictive analytics, procurement, systematic employee engagement and retention programmes and further shared service efficiencies. First Transit is not as capital intensive as some of the Group’s other businesses as for the most part it operates vehicles procured and owned by customers, but non-essential capital expenditure was deferred or halted in light of the pandemic.

First Transit continues to build on its portfolio of both existing and emerging mobility services contracts, benefiting from its reputation for safe, innovative and best value solutions for clients and another improvement in its already strong customer service scores, which reached a five-year high in 2021. These included particularly strong responses from clients in the categories of working with them during the pandemic, technology adding value, safety and quality of service for passengers. The contract retention rate on ‘at risk’ business in the year was stable at 89% (2020: 89%), and included retention of five important multi-year contracts with long-term clients (Houston, Texas, Met Council, Minnesota, Hartford, Connecticut, New Jersey Transit and City of Pasadena, California).

Despite extended bidding cycles due to the pandemic, First Transit secured new business wins in its traditional sectors such as MARTA in Atlanta, Georgia in H1 and Pinellas Suncoast Transit Authority, Florida and Access Services in Los Angeles, California in H2. In emerging mobility services, First Transit has extended its partnership with Lyft to provide wheelchair accessible vehicles to several US cities in the year, as well as operation of bikeshare services in Portland, Oregon.

The business has also continued to build on its strong position in the maintenance and operation of autonomous vehicles (AV), electric vehicles (EV), and in January 2021 announced plans to collaborate with NextEra Energy Resources to target the rapid growth of EV capabilities in its markets.

Overall, First Transit is well-placed for further growth, not least in light of the Biden administration's plans for further investment in infrastructure and public transportation.

Financial review

Financial policy framework

As part of the announcement of the sale of First Student and First Transit, a financial policy framework for the ongoing Group for the financial year ending in March 2023 (FY23) and beyond was set out as follows:

Metric	Objective
Revenue	First Bus: planning for a range of post-pandemic scenarios; central case envisages passenger volumes recover to c.80-90% of pre-pandemic levels during first twelve months after social distancing restrictions on public transport end, with further growth thereafter First Rail: opportunities to build on the base business of four contracted operations with no revenue risk
Profitability	First Bus: targeting a 10% margin in the first full financial year after social distancing restrictions on public transport end (FY23 on UK Government's current plans) First Rail: profitability driven by delivering against performance targets under the NRCs while adding earnings in adjacent rail opportunities Other: central cost reduction of at least £10m p.a. from FY23; interest c.£50m p.a. (of which c.60% IFRS16); UK corporation tax rate (currently 19% increasing to 25% for FY24)
Investment	First Bus: c.£90m p.a. from FY22, mainly driven by zero-emission bus fleet commitments. First Rail: expected to continue to be cash capital-light under the NRCs
Leverage	Targeting leverage ratio of less than 2.0x adjusted net debt: Rail-adjusted EBITDA1 in the medium term
Dividend	Intention to pay regular dividends to shareholders commencing during FY23 Targeting annual dividend around 3x covered by Rail-adjusted Profit After Tax2, assuming normalisation of trading conditions post-pandemic

¹ First Bus and non-contracted First Rail EBITDA, plus contracted Rail net attributable earnings, minus central costs

² First Bus and non-contracted First Rail adjusted operating profit, plus contracted Rail net attributable earnings, minus central costs, minus treasury interest, minus tax

In summary, the ongoing Group is expected to be a sustainable and cash generative business with a well-capitalised balance sheet, and an operating model that will support an attractive dividend for shareholders.

Group revenue

Revenue from continuing operations was in line with prior year at £4,641.8m (2020: £4,642.8m). Excluding the new Avanti contract which commenced in December 2019, revenue from continuing operations decreased by £567.4m as a result of the pandemic. Avanti revenue was £897.6m for the year (2020: £331.2m).

Revenue from discontinued operations was £2,203.2m (2020: £3,111.8m), reflecting the reduced activity levels due to the pandemic, partially offset by recoveries from some customers. Overall Group revenue in the full year decreased by 11.7% or £909.6m to £6,845.0m (2020: £7,754.6m).

	52 weeks to 27 March 2021			52 weeks to 28 March 2020
	Revenue £m	Adjusted operating profit3 £m	Adjusted operating margin3 %	Revenue £m	Adjusted operating profit3 £m	Adjusted operating margin3 %
First Bus	698.9	36.6	5.2	835.9	46.1	5.5
First Rail	3,619.9	108.1	3.0	3,203.7	70.4	2.2
Greyhound	323.0	(10.3)	(3.2)	603.2	(11.6)	(1.9)
Group items4	–	(32.5)			(35.2)
Continuing operations	4,641.8	101.9	2.2	4,642.8	69.7	1.5
First Student	1,226.2	55.8	4.6	1,940.4	158.8	8.2
First Transit	977.0	51.7	5.3	1,171.4	28.3	2.4
Discontinued operations	2,203.2	107.5	4.9	3,111.8	187.1	6.0
Total Group	6,845.0	209.4	3.1	7,754.6	256.8	3.3
North America in USD	$m	$m	%	$m	$m	%
Greyhound (continuing)	422.6	(12.1)	(2.9)	766.0	(15.3)	(2.0)
First Student	1,617.6	78.1	4.8	2,474.9	205.9	8.3
First Transit	1,277.4	69.1	5.4	1,488.4	36.2	2.4
Discontinued operations	2,895.0	147.2	5.1	3,963.3	242.1	6.1
Total North America	3,317.6	135.1	4.1	4,729.3	226.8	4.8

^{3   ‘}Adjusted’ figures throughout this document are before rail termination sums net of impairment reversal, gain on disposal of properties, impairment of land and buildings, strategy costs 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 £285.8m (2020: loss of £(152.7)m) as set out in note 4.

⁴  Central management and other items. Tramlink is now reported in First Rail.

Group adjusted operating performance

Adjusted operating profit from continuing operations was in line with expectations at £101.9m (2020: £69.7m), an increase of £16.9m excluding the Avanti contribution of £29.6m (2020: £14.3m). For First Bus and First Rail this largely reflects the terms of the UK Government-procured emergency arrangements to enable socially distanced travel, while in Greyhound it comprised the drop through of lower revenues offset by reduced variable costs, substantial fixed cost actions and CARES Act grants for vital bus service connections.

Adjusted operating profit from discontinued operations was £107.5m (2020: £187.1m) with the impact of reduced activity levels due to the pandemic mitigated by cost savings, better than expected revenue recoveries from customers and higher service levels in the final quarter. Overall Group adjusted operating profit decreased by £47.4m to £209.4m (2020: £256.8m).

The shareholder circular relating to the sale of First Student and First Transit published on 10 May 2021 stated that "adjusted operating profit for the year ended 31 March 2021 will be ahead of the top of the range of analyst consensus forecasts of approximately £171 million", subject to completion of the audit process. Subsequent to this profit forecast being made, the further increase in North American insurance provisions described below was reclassified as an adjusting item for the purposes of adjusted operating profit as well as further revenue recovery recognition agreed with customers.

Note that software amortisation of £11.3m (2020: £16.1m) is no longer classed as a separately disclosed item and has been charged to divisional and Group adjusted results and the prior periods are restated accordingly.

Group central costs for FY22 are anticipated to reduce by c.£5m from FY21 levels, reflecting the previously announced annual run rate reduction of c.£10m after completion of the First Student and First Transit sale.

Reconciliation to non-GAAP measures and performance

Note 4 to the financial statements sets out the reconciliations of operating profit/(loss) and loss before tax to their adjusted equivalents. The adjusting items are as follows:

Other intangible asset amortisation charges

The charge for the year was £4.1m (2020: £4.9m).

Strategy costs

The charge of £37.1m (2020: £58.2m) comprises £21.1m costs incurred to date related to the sale of First Student and First Transit, £7.0m for the proposed sale of Greyhound, £6.9m of costs related to restructuring in Greyhound Canada, including the cost of severance, legal costs, lease termination costs and other costs of closure. £2.1m relates to other costs associated with the rationalisation of the Group.

North American insurance provisions

FirstGroup North American insurance arrangements involve retaining the working loss layers in a captive and insuring against the higher losses. Based on our actuaries’ recommendation and a second additional, independent actuarial review, last year we increased our reserve to $657m. During this financial year we have continued to see a deteriorating claims environment with legal judgements increasingly in favour of plaintiffs and punitive in certain regions. In this hardening motor claims environment, we have seen further significant new adverse settlements and developments on a number of aged insurance claims, and as a result our actuaries have increased their expectation of the reserve required on historical claims. Partially offsetting this, there has been a significant change in the market-based discount rate used in the actuarial calculation from 0.8% to 1.65%.

In light of the continued change in claims environment we have increased the provision to provide more protection for historical claims, and the resulting self-insurance reserve level is above the midpoint of the actuarial range. These changes in accounting estimates combined with the discount rate movement has resulted in the Group recording an additional charge of $44.8m or £32.2m (2020: $175.2m or £141.3m); of this charge, $15.6m or £11.2m relates to Greyhound and $29.2m or £21.0m relates to discontinued operations.

The charge comprises $57.0m or £41.0m relating to losses from historical claims (of this, $18.6m or £13.4m relates to Greyhound and $38.4m or £27.6m relates to discontinued operations) and a credit of $12.2m or £8.8m relating to the change in the discount rate (of this, $3.0m or £2.2m relates to Greyhound and $9.2m or £6.6m relates to discontinued operations). It is expected that the majority of these claims will be settled over the next five years. Following these charges, the provision at 27 March 2021 stands at $659m (2020: $657m) compared with the actuarial range of $554m to $723m (2020: $551m to $683m). Of the total provision at 27 March 2021, $156m relates to Greyhound and $503m relates to discontinued operations.

The charge to the adjusted operating profit for the current period reflects this revised environment and the businesses continue to build the higher insurance costs into their bidding processes and hurdle rates for investment. The Group also actively evaluates alternatives to reduce insurance risk and ongoing expense, and continues to make improvements to claims management processes. It has been agreed that the self-insurance provisions for First Student and First Transit will transfer under the sale of those businesses with no further purchase price adjustment and part of the proceeds from the sale will be used to de-risk the residual self-insurance provisions of Greyhound.

Gain on disposal of properties

Greyhound recognised a profit of £71.1m on sale of properties in the year (2020: £1.3m). A gain of £51.6m was recognised on the disposal of property in Los Angeles, California. A gain of £20.2m was recognised on the disposal of property in Denver, Colorado, while a loss of £0.7m was recognised on disposal of a number of other properties in Canada.

Impairment of land and buildings

An impairment charge of £10.0m has been booked in respect of the Aberdeen headquarters and £6.6m for First Bus premises in Southampton.

Rail termination sums net of impairment reversal

The Group has agreed franchise termination sums with the DfT in respect of all our obligations under the ERMAs. These are included in adjusting items, together with the agreed settlement and other adjustments under the net asset clauses of the ERMA and the release of the impairment provisions relating to SWR and TPE as at 28 March 2020.

Discontinued operations

With the announcement of the agreed sale of First Student and First Transit to EQT Infrastructure on 23 April 2021 and subsequent completion on 21 July, the financial results of the disposal group have been reclassified as discontinued operations on the face of the income statement and the balance sheet and cash flow statement adjusted accordingly.

The transaction has been structured on a 'locked box' basis as of 27 March 2021, with all economic benefits or costs for the buyer's account from that date onwards, albeit these will continue to be disclosed as discontinued operations up to the point of transaction completion.

Group statutory operating performance

Statutory operating profit from continuing operations was £224.3m (2020: loss of £(215.2)m) reflecting £122.4m of net adjusting items compared with £(284.9)m in 2020, as noted above.

Finance costs and investment income

Net finance costs were £170.0m (2020: £146.9m) with the increase principally due to the increase in lease interest from £42.6m in 2020 to £73.1m in 2021. This increase was mainly due to the new rolling stock leases in relation to the start of the Avanti operation from December 2019 and the GWR DA-3 rolling stock lease liabilities from March 2020. Net finance costs for FY22 are estimated to be c.£100m including IFRS16 lease interest but excluding anticipated debt make-whole costs of c.£65m.

Profit before tax

Adjusted profit before tax as set out in note 4 to the consolidated financial statements was £39.4m (2020: profit £109.9m) including discontinued operations. An overall credit of £76.4m (2020: £(409.5)m) for adjustments principally reflecting gains on property disposals of £71.1m (2020: £9.3m), Rail termination sums net of impairment reversal credit of £95.7m (2020: nil), North America self-insurance reserve charge of £32.2m (2020: £141.3m), restructuring and reorganisation charges of £37.1m (2020: £58.2m), impairment on land and buildings £16.6m (2020: nil) and other intangible asset amortisation charges of £4.1m (2020: £4.9m), resulted in a profit before tax including discontinued operations of £115.8m (2020: loss before tax of £(299.6)m).

Tax

The tax charge, on adjusted profit before tax, for the year was £4.2m (2020: £24.6m), representing an effective tax rate of 10.7% (2020: 22.4%). The reduced effective rate is due to reduced deferred tax on US state taxes and the comparatively lower profits. There was a tax charge of £30.6m (2020: credit of £39.6m) relating to other intangible asset amortisation charges and other adjustments, partly offset by the write back of previously unrecognised deferred tax assets of £10.1m (2020: a charge of £40.0m). The total statutory tax charge was £24.7m (2020: £25.0m) representing an effective tax rate on the statutory loss before tax of 21.3% (2020: (8.3)%). This rate is different from the effective tax rate on adjusted profits primarily because the underlying profit is higher so the reduced deferred tax on US state taxes has less impact and certain adjustments are not tax deductible. The actual tax paid during the year was £4.5m (2020: £2.9m) and differs from the tax charge of £24.7m primarily due to refunds received during the year in respect of prior years and payments to be made post-year end. The ongoing Group's effective tax rate is expected to be broadly in line with UK corporation tax levels (currently 19% and increasing to 25% from 1 April 2023).

EPS

Adjusted EPS was 2.4p (2020: 6.8p). Basic EPS was 6.5p (2020: (27.0)p).

Shares in issue

As at 27 March 2021 there were 1,206.4m shares in issue (2020: 1,210.8m), excluding treasury shares and own shares held in trust for employees of 15.4m (2020: 8.7m). 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) was 1,203.6m (2020: 1,210.9m).

Capital expenditure

Road cash capital expenditure was £112.2m (2020: £283.4m) and comprised First Student £50.6m (2020: £193.0m), First Transit £16.2m (2020: £18.8m), Greyhound £14.9m (2020: £38.8m), First Group America £nil (2020: £1.5m), First Bus £30.1m (2020: £30.1m) and Group items £0.2m (2020: £2.7m). First Rail capital expenditure was £116.5m (2020: £115.7m) and is typically matched by franchise receipts or other funding.

In addition, during the year we entered into leases in the Road divisions with capital values in First Student of £37.5m (2020: £75.1m), First Transit of £17.0m (2020: £13.8m), Greyhound of £9.0m (2020: £21.3m) and First Bus of £4.6m (2020: £6.3m) and Group items £0.3m (2020: £0.4m). During the year First Rail entered into leases with a capital value of £105.2m.

Gross capital investment (fixed asset and software additions plus the capital value of new leases) was £516.0m (2020: £2,326.5m) and comprised First Student £211.5m (2020: £331.9m), First Transit £37.2m (2020: £30.5m), Greyhound £14.7m (2020: £65.4m), First Bus £28.6m (2020: £52.6m), First Rail £223.8m (2020: £1,842.9m) and Group items £0.3m (2020: £3.2m). 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.

Adjusted cash flow

The Group's adjusted cash flow of £284.0m (2020: £97.4m) was well ahead of initial expectations, reflecting our actions to maintain liquidity and financial strength despite the passenger volume reductions. Some capital expenditure and working capital outflows were deferred, which in the case of the discontinued operations were reflected in the terms of the sale. First Bus cash flows were affected by the timing of a c.£70m CBSSG settlement from DfT, which is expected during FY22. The Group also secured £109.5m in cash proceeds from the sale of properties in the year, principally from Greyhound. The foreign exchange gain in the year in part reflects the hedging strategy put in place for the net proceeds of the First Student and First Transit sale. The adjusted cash flow is set out below:

52 weeks to end March				2021 £m	2020 (restated) £m
EBITDA				1,169.5	1,108.9
Other non-cash income statement charges				9.6	8.8
Working capital				166.1	71.5
Movement in other provisions				72.7	(64.5)
Pension payments in excess of income statement charge				(59.2)	(38.8)
Cash generated by operations				1,358.7	1,085.9
Capital expenditure and acquisitions				(391.0)	(352.8)
Proceeds from disposal of property, plant and equipment				119.0	30.5
Proceeds from disposal of business				–	16.2
Interest and tax				(152.1)	(126.1)
Lease payments now in debt/other				(650.6)	(556.3)
Adjusted cash flow				284.0	97.4
Foreign exchange movements				78.5	(24.1)
Inception of new leases				(210.2)	(1,828.1)
Lease payments now in debt				644.1	549.2
Other non-cash movements				(161.3)	(2.0)
Adjustment on transition to IFRS 16				–	(1,168.2)
Movement in net debt in the period				635.1	(2,375.8)

Funding and risk management

Liquidity within the Group has remained strong. At 27 March 2021, there was £1,130.6m (2020: £585.7m) of undrawn committed headroom and free cash, being £346.1m (2020: £348.6m) of committed headroom and £784.5m (2020: £237.1m) of net free cash after offsetting overdraft positions. This reflects the previously disclosed issuance of £300m in commercial paper through the UK Government’s CCFF scheme in April 2020 which was renewed for a further year in March 2021, cash flow in the period and the timing of working capital movements in First Student. Subsequent to the year end the Group completed the sale of First Student and First Transit for net cash proceeds of c.£2.3bn that is being applied to significantly deleverage the balance sheet with pro forma adjusted net debt of c.£100m after all funds flows relating to the transaction. The Group expects to settle £1.8bn of outstanding debt including the CCFF commercial paper, the 2022 bond and other debt, incurring c.£65m in make-whole costs; to contribute £220m in cash and transfer £117m into escrow in respect of the UK Bus and Group pensions schemes; to apply a total of c.£260m for Greyhound legacy liability de-risking and other short-term capital requirements; and to make the proposed £500m return of value to shareholders in due course.

Following the transaction, the majority of our debt has either been repaid, or will be repaid after required notice periods have elapsed, including under the £800m Revolving Credit Facility. Once these repayments have taken place, the remaining drawn facilities will include the £200m 2024 bond and fleet finance leases in First Bus and Greyhound. The £800m revolving credit facilities remain in place for up to three months and the Group is in discussions with its banking group for a more suitable facility going forwards for a smaller remaining Group. The Group does not enter into speculative financial transactions and uses only authorised financial instruments for certain financial risk management purposes.

The covenant relief obtained in November 2020 will no longer be required once the USPP is repaid in August.  All other debt on which relief had been obtained has either been repaid and cancelled, or, in the case of the Revolving Credit Facility, we have advised the agent that the relief no longer applies. For the March 2021 covenant test the net debt:EBITDA ratio was 1.6x and the fixed charge cover ratio was 1.6x, well within the original covenant ratios.

Net debt

The Group’s adjusted net debt at 27 March 2021, which excludes the impact of IFRS 16 and the capitalisation of Right of Use Assets and First Rail ring-fenced cash was £1,414.3m (2020: £1,490.9m). Reported net debt was £2,625.8m (2020: £3,260.9m) after IFRS 16 and including First Rail ring-fenced cash, as follows:

			27 March 2021	28 March 2020 (restated)
Analysis of net debt	Cont. £m	Disc. £m	Total Group £m	Total Group £m
Sterling bond (2021)	349.9	–	349.9	348.7
Sterling bond (2022)	323.4	–	323.4	322.7
Sterling bond (2024)	199.8	–	199.8	199.8
CCFF	298.2	–	298.2	–
Bank loans and overdrafts	620.1	–	620.1	656.3
Supplier financing	–	159.2	159.2	–
Lease liabilities	1,784.4	188.5	1,972.8	2,473.1
Senior unsecured loan notes	198.8	–	198.9	219.8
Loan notes	0.7	–	0.7	9.4
Gross debt excluding accrued interest	3,775.3	347.7	4,123.0	4,229.8
Cash	(784.3)	(50.0)	(834.3)	(319.5)
First Rail ring-fenced cash and deposits	(638.5)	–	(638.5)	(611.9)
Other ring-fenced cash and deposits	(16.1)	(8.3)	(24.4)	(37.5)
Net debt excluding accrued interest	2,336.4	289.4	2,625.8	3,260.9
IFRS 16 lease liabilities – Road	66.8	127.4	194.2	283.3
IFRS 16 lease liabilities – Rail	1,655.8	–	1,655.8	2,098.6
IFRS 16 lease liabilities – total	1,722.6	127.4	1,850.0	2,381.9
Net debt excluding accrued interest (pre-IFRS 16)	613.8	162.0	775.8	879.0
Adjusted net debt (pre-IFRS 16 and excluding First Rail ring-fenced cash)	1,252.3	162.0	1,414.3	1,490.9

Under the terms of the First Rail contractual agreements, cash can only be distributed by the TOCs up to the amount of their retained profits. The ring-fenced cash represents cash that is in the TOCs at the balance sheet date. First Rail ring-fenced cash increased by £26.6m to £638.5m in the year principally due to the pre-funding of working capital flows noted elsewhere.

Interest rate risk

We seek to reduce our exposure by using a combination of fixed rate debt and interest rate derivatives to achieve an overall fixed rate position over the medium term of at least 50% of net debt.

Fuel price risk

We use a progressive forward hedging programme to manage commodity risk. As at 27 March 2021, 44% of our ‘at risk’ UK crude requirements for the current year in the UK (1.7m barrels) were hedged at an average rate of $61 per barrel, 17% of our requirements for the year to end March 2023 at $55 per barrel, and 1% of our requirements for the year to end March 2024 at $62 per barrel. Greyhound’s fuel exposure is largely unhedged because its competitors – passenger cars and the airlines – do not hedge their fuel exposure, so Greyhound’s pricing is responsive to fuel price changes.

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. 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 27 March 2021		52 weeks to 28 March 2020
			Closing rate	Effective rate	Closing rate	Effective rate
US Dollar			1.38	1.39	1.25	1.29
Canadian Dollar			1.74	1.75	1.74	1.72

Pensions

We have updated our pension assumptions as at 27 March 2021 for the defined benefit schemes in the UK and North America. The net pension deficit (comprising continued and discontinued operations) of £313m at the beginning of the period was £296m at the end of the year, with UK Bus schemes increasing from £93m to £164m, and North America decreasing from £218m to £129m. The main factors that influence the balance sheet position for pensions and the principal sensitivities to their movement at 27 March 2021 are set out below:

	Movement	Impact
Discount rate	+0.1%	Reduce deficit by £32m
Inflation	+0.1%	Increase deficit by £27m
Life expectancy	+1 year	Increase deficit by £90m

The Trustee and Company have finalised the 2019 funding valuation for the First UK Bus Pension Scheme. Taking into account the parent company guarantee provided by FirstGroup plc, the funding deficit of £271m at the valuation date is lower than that of the previous triennial valuation (£302m as at April 2016), but higher than the balance sheet position on an accounting basis at the relevant date. The funding shortfall on a targeted low dependency basis (with a discount rate of gilts +0.5% per annum) at the reporting date is estimated to be c.£170m higher than the deficit reported in these financial statements.

We are now actively engaging with the Trustee on strategic discussions in relation to a long-term funding target for the Scheme, including liability management options, covenant, de-risking the investment strategy and securing member benefits. Such a long-term funding target (often referred to as low dependency or self-sufficiency) is not defined precisely but may be achieved by setting a funding target in line with a discount rate for liabilities in the range of Gilts to Gilts +50bps. In our opinion, funding the Scheme to such a level within a reasonably short time horizon, while taking actions to reduce exposure to investment risk, is both realistic and achievable – especially given the rate at which the Scheme is now maturing following closure first to new entrants and then subsequently to ongoing accrual. Such a lower risk, low dependency funding target could be c.£100m higher than the value of liabilities in the funding valuation.

In November, an annuity buy-in was completed for all the current pensioners in the Aberdeen LGPS. The pensioners represent £230m, or 70%, of our Scotland LGPS pension liabilities, and removing our exposure to that risk represents a material reduction to the Group’s overall ongoing pension risk.

As part of the sale of First Student and First Transit, memoranda of understanding have been agreed with the Group Pension Scheme and Bus Pension scheme whereby £220m of cash will be contributed to the Bus Scheme and £117m in total put into escrow that could be released back to the Group depending on future triennial valuation outcomes.

Balance sheet

Net assets have decreased by £22.6m since 28 March 2020. The principal reasons for the decrease are actuarial losses on defined benefit pension schemes (net of deferred tax) of £33.8m and unfavourable translation reserve movements of £110.9m partly offset by the profit for the year of £91.1m and favourable derivative hedging movements net of tax of £28.0m.

			As at 27 March 2021	As at 28 March 2020
Balance sheets – Net assets/(liabilities)	Cont. £m	Disc. £m	Total Group £m	Total Group £m
First Bus	328.1	–	328.1	379.5
First Rail	925.6	–	925.6	1,348.7
Greyhound	(54.5)	–	(54.5)	(130.8)
Discontinued operation – First Student	–	2,381.1	2,381.1	2,549.2
Discontinued operation – First Transit	–	298.0	298.0	372.0
Divisional net assets	1,199.2	2,679.1	3,878.3	4,518.6
Group items	(38.1)	(10.0)	(48.1)	(35.2)
Net debt	(2,336.4)	(289.4)	(2,625.8)	(3,260.9)
Taxation	(13.5)	(36.8)	(50.3)	(45.8)
Total	(1,188.8)	2,342.9	1,154.1	1,176.7

Post-balance sheet events

• On 23 April announced sale of First Student and First Transit (see discontinued operations note 14) and completed the sale on 21 July
• Cancelled the £300m bridge facility that matures in March 2022
• Repaid Sterling bond 2021 of £350m on 15 April
• Repaid a further £527m of indebtedness and contributed £220m to UK Bus Pension Scheme in applying some of the sale proceeds from the sale of First Student and First Transit
• Following the sale of First Student and First Transit, the letters of credit, surety bonds and parent company guarantees relating to those businesses have been cancelled or in the process of being released
• Agreed termination sum with the DfT relating to the TPE franchise
• Signed National Rail Contracts for SWR and TPE in May for initial two year term with the DfT having an option to extend the respective contracts for a further two years to May 2025
• Agreed with the DfT the extension of the Emergency Measures Agreement for GWR to December 2021
• Announced the closure of Greyhound Canada on 15 May

Going concern

The Board reviewed an updated base case and a severe but plausible downside scenario, considering the progress made since the Group’s announcement of its full year results for the 52 weeks ended 27 March 2020 (FY20) and the potential mitigating actions.

Based on their review of the financial forecasts for the period to September 2022 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 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.

In the FY20 results the Group disclosed that the risks and uncertainties facing the Group at that stage of the pandemic indicated that material uncertainty existed that could cast doubt on the Group’s and the Company’s ability to continue as a going concern. The material uncertainty related to:

• the uncertainty regarding the levels of fiscal financial and contractual support which may be provided beyond the period for which that funding and contractual support is currently being provided;
• whether passenger volumes recover to the levels necessary to sustain the business without the current fiscal financial and contractual support;
• the ability of the Group to obtain covenant waivers from debt providers if required;
• the ability of the Group to draw down on c.£550m of the currently available but uncommitted facilities throughout the going concern period; and
• the timing of cash flows, including movements in working capital and the timing of receipts of contractual and fiscal support that may impact debt levels at covenant test dates.

Update since the FY20 results

As noted in the Chief Executive's review and divisional reviews, compared with the position in July 2020 we now have substantially greater clarity about the resilience of our businesses, the contractual arrangements in First Rail through the ERMA in Avanti, NRCs in SWR and TPE and the EMA in GWR, and the fiscal arrangements in place in the UK and North America.

• Continued support from governments, school boards and other contract customers throughout the FY21 pandemic period have demonstrated a commitment to maintaining the essential public transport services the Group operates. In the US, further fiscal support bills are being legislated through Congress in FY22 including significant provision for further support to the public transport sector.
• Passenger volume levels have outperformed our prior forecast assumptions in year-to-date trading. It is anticipated that governments will continue to support minimum operating service levels through the emergence from the pandemic until social distancing is removed and these services can be run commercially.
• Management has demonstrated the flexibility of our businesses to generate cash flows well within required debt facility and covenant levels since the pandemic struck.
• On 21 July 2021 the Group completed the sale of First Student and First Transit to EQT Infrastructure for net proceeds of c.£2.3bn. The transaction has resulted in a material deleveraging and de-risking of the business.

Evaluation of going concern

The Board evaluated whether it was appropriate to prepare the company and consolidated financial statements in this report on a going concern basis and in doing so 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, and in particular whether any of the circumstances giving rise to the material uncertainties at the 2020 year-end still existed.

Consistent with prior years, the Board’s going concern assessment is based on a review of future trading projections, including whether the amended 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 coronavirus pandemic operating environment, including customer revenue recovery where services had been disrupted and what government or contractual support arrangements were in place.

Base case scenario

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 2021 year end. The base case assumes a gradual recovery in passenger volumes as a result of an anticipated lifting of social distancing and travel restrictions in FY22, but that passenger volumes remain below pre-pandemic levels in the going concern assessment period. The macro projections in the updated base case assume that the UK operates in a post-Brexit coronavirus economy. We have not assumed any further North American fiscal support beyond what has already been committed by the federal governments.

Severe, plausible downside scenario

In addition, a severe but plausible downside case was also modelled which assumes a more protracted post-pandemic recovery profile. In Greyhound and First Bus the severe but plausible downside case assumes slower recovery with passenger revenues in the second half of FY22 at an average rate of 57% and 75% of pre-pandemic levels respectively. In First Rail, the downside case assumes reduced TOC performance fee awards and operating losses in Hull Trains and East Coast Open Access.

Mitigating actions

If the impact on the Group of the pandemic were to be more protracted than assumed in the base case scenario, the Group would reduce and defer planned growth capex and further reduce costs in line with a lower volume operating environment to the extent that the essential services we operate are not required to be run for the governments and communities we support.

Going concern statement

Based on the scenario modelling undertaken, and the potential mitigating actions referred to above, the Board is satisfied that the Group’s liquidity over the going concern period is sufficient for the business needs.

Definitions

Unless otherwise stated, all financial figures for the 52 weeks to 27 March 2021 (the ‘year’ or ‘FY21’) include the results and financial position of the First Rail business for the year ended 31 March 2021 and the results and financial position of all the other businesses for the 52 weeks ended 27 March 2021. The figures for the 52 weeks to 28 March 2020 (the ‘prior year’ or ‘FY20’) include the results and financial position of First Rail for the year ended 31 March 2020 and the results and financial position of all the other businesses for the 52 weeks ended 28 March 2020.

'Cont.' or the 'Continuing operations' refer to First Bus, First Rail, Greyhound and Group items.

'Disc.' or the 'Discontinued operations' refer to First Student and First Transit.

References to 'adjusted operating profit', 'adjusted profit before tax', and 'adjusted EPS' throughout this document are before rail termination sums net of impairment reversal, gain on disposal of properties, impairment of land and buildings, strategy costs and certain other items as set out in note 4 to the financial statements.

'EBITDA’ is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.

'Rail-adjusted EBITDA' is First Bus and non-contracted First Rail EBITDA, plus contracted Rail net attributable earnings, minus central costs.

'Rail-adjusted Profit After Tax' is First Bus and non-contracted First Rail adjusted operating profit, plus contracted Rail net attributable earnings, minus central costs, minus treasury interest, minus tax.

'Net debt' is the value of Group external borrowings excluding the fair value adjustment for coupon swaps designated against certain bonds, excluding accrued interest, less cash balances.

'Adjusted net debt' excludes First Rail ring-fenced cash and IFRS 16 lease liabilities from net debt.  

References to ‘like-for-like’ revenue adjust for changes in the composition of the divisional portfolio, holiday timing, severe weather and other factors, for example engineering possessions in First Rail, that distort the period-on-period trends in our passenger revenue businesses.

Forward-looking statements

Certain statements included or incorporated by reference within this document may constitute ‘forward-looking statements’ with respect to the business, strategy and plans of the Group and our current goals, assumptions and expectations relating to our future financial condition, performance and results. By their nature, forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors that cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Shareholders are cautioned not to place undue reliance on the forward-looking statements.

Except as required by the UK Listing Rules and applicable law, the Group does not undertake any obligation to update or change any forward-looking statements to reflect events occurring after the date of this document.

Principal risks and uncertainties

The Board has conducted a thorough assessment of the principal risks and uncertainties facing the Group for the remainder of the financial year, including those that would threaten the successful and timely delivery of its strategic priorities, future performance, solvency and liquidity.

The most immediate risk facing the Group remains the impact to the Group and each of its businesses from the coronavirus pandemic. We have set out in more detail elsewhere in this document (and previously announced) the measures we have taken and continue to take as a Group and in each of our businesses to mitigate those risks. In our going concern statement we have highlighted continued uncertainties that could, in certain severe downside scenarios, cast significant doubt on the Group’s ability to continue as a going concern.

The Directors recognise that significant judgements had to be made in deciding what assumptions to make regarding how the impact of the coronavirus pandemic might evolve over the coming months and what impact that will have on the ability of each of the business divisions to resume near normal levels of service. Many of those judgements are, by their nature, highly subjective and the modelled outcomes depend to a significant degree on how the coronavirus pandemic evolves during the remaining months of the financial year. There is therefore a much higher degree of uncertainty than would usually be the case in making the key judgements and assumptions that underpin the financial forecasts.

A summary of the Principal Risks and Uncertainties will be set out in the Annual Report and Accounts.

Matthew Gregory                                                      Ryan Mangold

Chief Executive                                                         Chief Financial Officer

27 July 2021                                                              27 July 2021

Consolidated income statement

For the 52 weeks ended 27 March

Continuing Operations	Notes	2021 £m	2020 £m
Revenue	2	4,641.8	4,642.8
Operating costs		(4,417.5)	(4,858.0)
Operating profit/(loss)		224.3	(215.2)
Investment income	5	1.8	2.6
Finance costs	5	(150.9)	(125.6)
Profit/(loss) before tax		75.2	(338.2)
Tax	6	(15.8)	3.6
Profit/(loss) from continuing operations		59.4	(334.6)
Profit from discontinued operations	14	31.7	10.0
Profit/(loss) for the year		91.1	(324.6)
Attributable to:
Equity holders of the parent		78.4	(327.2)
Non-controlling interests		12.7	2.6
		91.1	(324.6)
Earnings per share
Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company
Basic earnings per share		3.9p	(27.8)p
Diluted earnings per share		3.9p	(27.8)p
Earnings per share for profit attributable to the ordinary equity holders of the company
Basic earnings per share	7	6.5p	(27.0)p
Diluted earnings per share	7	6.4p	(27.0)p
Adjusted results (from continuing operations)1
Adjusted operating profit	4	101.9	69.7
Adjusted loss before tax		(47.2)	(53.3)
Adjusted EPS	7	(3.5)p	(3.4)p
Adjusted diluted EPS		(3.5)p	(3.4)p

1   Adjusted for certain items as set out in note 4.

The accompanying notes form an integral part of this consolidated income statement.

Consolidated statement of comprehensive income

52 weeks ended 27 March

		2021 £m	2020 £m
Profit/(loss) for the year		91.1	(324.6)
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes		(49.3)	(29.0)
Deferred tax on actuarial losses on defined benefit pension schemes		15.5	1.1
Writing down previously recognised deferred tax assets on actuarial losses on defined benefit schemes		-	(25.7)
		(33.8)	(53.6)
Items that may be reclassified subsequently to profit or loss
Derivative hedging instrument movements		16.4	(29.3)
Deferred tax on derivative hedging instrument movements		(3.6)	5.9
Exchange differences on translation of foreign operations		(110.9)	91.3
		(98.1)	67.9
Other comprehensive (loss)/income for the year		(131.9)	14.3
Total comprehensive loss for the year		(40.8)	(310.3)
Attributable to:
Equity holders of the parent		(53.5)	(312.9)
Non-controlling interests		12.7	2.6
		(40.8)	(310.3)
Total comprehensive (loss)/income for the period attributable to owners of FirstGroup Plc arises from
Attributable to
Continuing operations		18.1	(400.1)
Discontinued operations		(58.9)	89.8
		(40.8)	(310.3)

The accompanying notes form an integral part of this consolidated statement of comprehensive income.

Consolidated balance sheet

As at 27 March

	Note	2021 £m	2020 (restated)1 £m
Non-current assets
Goodwill	8	83.9	1,663.2
Other intangible assets	9	16.2	51.9
Property, plant and equipment	10	2,443.7	4,374.5
Deferred tax assets	19	35.0	33.6
Retirement benefit assets		52.9	53.2
Derivative financial instruments	18	1.2	15.8
Investments		8.3	32.9
		2,641.2	6,225.1
Current assets
Inventories	11	29.4	63.3
Trade and other receivables	12	676.7	1,170.6
Current tax assets		0.4	9.8
Cash and cash equivalents		1,438.9	968.9
Derivative financial instruments	18	14.9	4.8
		2,160.3	2,217.4
Assets held for sale – continuing operations		11.9	1.0
Assets held for sale – discontinued operations	14	3,479.5	-
Total assets		8,292.9	8,443.5
Current liabilities
Trade and other payables	13	1,587.6	1,816.9
Tax liabilities  – Current tax liabilities		14.4	7.5
– Other tax and social security		34.6	42.9
Borrowings	15	1,326.2	776.7
Derivative financial instruments	18	11.8	44.2
Provisions	20	74.4	232.1
		3,049.0	2,920.3
Net current liabilities		(888.7)	(702.9)
Non-current liabilities
Borrowings	15	2,492.0	3,502.9
Derivative financial instruments	18	1.2	19.2
Retirement benefit liabilities		324.5	366.6
Deferred tax liabilities	19	-	38.8
Provisions	20	135.5	419.0
		2,953.2	4,346.5
Liabilities held for sale - discontinued operations	14	1,136.6	-
Total liabilities		7,138.8	7,266.8
Net assets		1,154.1	1,176.7
Equity
Share capital	21	61.1	61.0
Share premium		689.6	688.6
Hedging reserve		(3.4)	(28.3)
Other reserves		4.6	4.6
Own shares		(9.0)	(10.2)
Translation reserve		524.7	635.6
Retained earnings		(89.6)	(141.5)
Equity attributable to equity holders of the parent		1,178.0	1,209.8
Non-controlling interests		(23.9)	(33.1)
Total equity		1,154.1	1,176.7

1   Details of restatement are included in note 1.

The accompanying notes form an integral part of this consolidated balance sheet.

Consolidated statement of changes in equity

52 weeks ended 27 March

	Share Capital (note 21) £m	Share premium £m	Hedging reserve £m	Other reserves £m	Own shares £m	Translation reserve £m	Retained earnings £m	Total £m	Non- controlling interests £m	Total equity £m
Balance at 31 March 2019	60.7	684.0	17.5	4.6	(4.7)	544.3	232.5	1,538.9	(31.2)	1,507.7
Loss for the year	–	–	–	–	–	–	(327.2)	(327.2)	2.6	(324.6)
Other comprehensive income/(loss) for the year	–	–	(23.4)	–	–	91.3	(53.6)	14.3	–	14.3
Total comprehensive (loss)/income for the year	–	–	(23.4)	–	–	91.3	(380.8)	(312.9)	2.6	(310.3)
Shares issued	0.3	4.6	–	–	–	–	–	4.9	–	4.9
Derivative hedging instrument movements transferred to balance sheet (net of tax)	–	–	(22.4)	–	–	–	–	(22.4)	–	(22.4)
Dividends paid/other	–	–	–	–	–	–	0.7	0.7	(4.5)	(3.8)
Movement in EBT and treasury shares	–	–	–	–	(5.5)	–	(4.2)	(9.7)	–	(9.7)
Share-based payments	–	–	–	–	–	–	10.3	10.3	–	10.3
Balance at 28 March 2020	61.0	688.6	(28.3)	4.6	(10.2)	635.6	(141.5)	1,209.8	(33.1)	1,176.7
Balance at 29 March 2020	61.0	688.6	(28.3)	4.6	(10.2)	635.6	(141.5)	1,209.8	(33.1)	1,176.7
Profit for the year	–	–	–	–	–	–	78.4	78.4	12.7	91.1
Other comprehensive income/(loss) for the year	–	–	12.8	–	–	(110.9)	(33.8)	(131.9)	–	(131.9)
Total comprehensive (loss)/income for the year	–	–	12.8	–	–	(110.9)	44.6	(53.5)	12.7	(40.8)
Shares issued	0.1	1.0	–	–	–	–	–	1.1	–	1.1
Derivative hedging instrument movements transferred to balance sheet (net of tax)	–	–	15.2	–	–	–	–	15.2	–	15.2
Reserves reclassification	–	–	(3.1)	–	–	–	3.1	–	–	–
Dividends paid/other	–	–	–	–	–	–	(1.6)	(1.6)	(3.5)	(5.1)
Movement in EBT and treasury shares	–	–	–	–	1.2	–	(6.1)	(4.9)	–	(4.9)
Share-based payments	–	–	–	–	–	–	11.9	11.9	–	11.9
Balance at 27 March 2021	61.1	689.6	(3.4)	4.6	(9.0)	524.7	(89.6)	1,178.0	(23.9)	1,154.1

The accompanying notes form an integral part of this consolidated statement of changes in equity.

Consolidated cash flow statement

52 weeks ended 27 March

	Note	2021 £m	2020 (restated) £m
Cash generated by operations	22	1,358.7	1,085.9
Tax paid		(4.5)	(2.9)
Interest paid		(149.8)	(125.9)
Net cash from operating activities	22	1,204.4	957.1
Investing activities
Interest received		2.0	2.7
Proceeds from disposal of property, plant and equipment		119.0	30.5
Purchases of property, plant and equipment		(385.5)	(321.8)
Purchases of software		(4.1)	(9.2)
Disposal of businesses		-	16.2
Acquisition of businesses		(1.4)	(21.8)
Net cash used in investing activities		(270.0)	(303.4)
Financing activities
Shares purchased by Employee Benefit Trust		(4.7)	(9.8)
Shares issued		0.5	4.5
Proceeds from CCFF		298.2	–
Drawdowns from bank facilities		117.7	123.4
Repayment of bank facilities		(89.6)
Repayment of loan notes		(8.7)	–
Repayments of lease liabilities		(669.2)	(596.5)
Fees for finance facilities		(2.1)	(2.1)
Net cash flow used in financing activities		(357.9)	(480.5)
Net increase in cash and cash equivalents before foreign exchange movements		576.5	173.2
Cash and cash equivalents at beginning of year		886.5	711.2
Foreign exchange movements		(19.6)	2.1
Cash and cash equivalents at end of year		1,443.4	886.5

Prior year has been restated and increased by £99.6m at 28 March 2020. An £82.4m overdraft had been set off against the cash balance In the prior period. Ring fenced cash has been restated and increased by £17.2m as cash balances relating to companies under the control of First Transit had not been recognised in prior periods.

Cash and cash equivalents are included within current assets on the consolidated balance sheet. Cash and cash equivalents includes ring-fenced cash of £662.9m at 27 March 2021 (28 March 2020: £632.2m). The most significant ring-fenced cash balance are held by the Group’s First Rail subsidiaries. All cash in franchised Rail subsidiaries is considered ring-fenced under the terms pf the Emergency Measures Agreement. Non Rail ring-fenced cash includes two elements: (1) loss escrow funds 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, and (2) balances within First Transit subsidiaries 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 liabilities. 

Reconciliation to cash flow statement		£m	£m
Cash and cash equivalents – Continuing operations		1,438.9	920.0
Cash and cash equivalents – Discontinued operations		58.3	48.9
Cash and cash equivalents – Total operations		1,497.2	968.9
Bank overdraft		(53.8)	(82.4)
Balances per consolidated cash flow statement		1,443.4	886.5

Note to the consolidated cash flow statement –

reconciliation of net cash flow to movement in net debt

		2021 £m	2020 (restated) £m
Net increase in cash and cash equivalents in year		576.5	172.7
Increase in debt and IAS17 finance leases		(292.5)	(75.3)
Adjusted cash flow		284.0	97.4
Payment of lease liabilities		644.1	549.2
Inception of new leases		(210.2)	(1,828.3)
Fees capitalised against bank facilities and bond issues		2.1	0.7
Foreign exchange movements		78.5	(24.1)
Other non-cash movements		(163.5)	(2.5)
Movement in net debt in year		635.1	(1,207.6)
Adjustment for transition to IFRS 16		-	(1,168.2)
Net debt at beginning of year		(3,260.9)	(885.1)
Net debt at end of year		(2,625.8)	(3,260.9)

Prior year has been restated and increased by £99.6m at 28 March 2020. An £82.4m overdraft had been set off against the cash balance In the prior period. Ring fenced cash has been restated and increased by £17.2m as cash balances relating to companies under the control of First Transit had not been recognised in prior periods.

Adjusted cash flow is stated prior to cash flows in relation to debt and IAS17 finance leases.

The accompanying notes form an integral part of this consolidated cash flow statement.

Notes to the consolidated financial statements

1   General information

The financial information set out above does not constitute the Company’s Statutory Accounts for the 52 weeks ended 27 March 2021 or 28 March 2020, but is derived from those accounts. Statutory Accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered following the Company’s Annual General Meeting. The auditors have reported on both sets of account; their reports were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not in itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in July 2021. Copies of the Statutory Accounts for the 52 weeks ended 27 March 2021 will be available to all shareholders in July and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.

Basis of accounting

The financial statements have been prepared in accordance with IFRSs in conformity with the requirements of the Companies Act 2006 (IFRS) and the applicable legal requirements of the Companies Act 2006. In addition to complying with international accounting standards in conformity with requirements of the Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board. The consolidated financial statements will transition to UK adopted international accounting standards for financial periods beginning 1 April 2021.

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 set out on pages 26 to 27, the Group has undertaken detailed reviews of the potential impact of coronavirus 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 the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the twelve-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 27 March 2021 include the results and financial position of the First Rail business for the year ended 31 March 2021 and the results and financial position of all the other businesses for the 52 weeks ended 27 March 2021. The financial statements for the 52 weeks ended 28 March 2020 include the results and financial position of the First Rail businesses for the year ended 31 March 2020 and the results and financial position of all the other businesses for the 52 weeks ended 28 March 2020.

The prior year cash and cash equivalents balance has been restated. The total impact is an increase of £99.6m at 28 March 2020 which comprises two restatements. The first for an £82.4m overdraft which in prior year was incorrectly offset against cash balances when the group had no ability for net physical settlement. This has been grossed up and the impact is to increase cash balances by £82.4m with a corresponding increase in borrowings of the same amount. At 31 March 2019, the impact of the correction is to increase borrowings by £81.9m and increase cash and cash equivalents by the same amount. The second restatement is in relation to certain entities, in First Transit, which the group controls that were incorrectly excluded from consolidation in prior years. These have been consolidated in the current year and the effect of this is an increase in cash balances of £17.2m and a corresponding increase in payables of £17.2m. There is no material impact on the consolidated income statement. The impact on the cash flow statement is an increase in cash balance of £99.6m and increase on cash generated from operations of £1.1m. As this may be considered a prior period error the Group and Company should present a third balance sheet to capture the opening position at 29 March 2020. However, having reviewed the guidance, management has opted instead to present the impact of the restatement in this note only, on the basis of materiality, as there is no impact on net assets. 

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. Adoptions in the current year include amendments to IAS 1 ‘Presentation of Financial Statements’, amendments to IFRS3 ‘Business Combinations’ and Phase 2 of the ‘Interest Rate Benchmark Reform’.

There has been no material change as a result of applying these amendments and no significant impact is expected from any the future standards and amendments that are visible.

2   Revenue

	2021 £m	2020 £m
Services rendered	1,368.6	4,268.4
First Rail franchise subsidy receipts	2,905.9	369.1
Other revenues	367.3	5.3
Revenue from continuing operations	4,641.8	4,642.8
Discontinued operations	2,203.2	3,111.8
Revenue	6,845.0	7,754.6

3   Business segments and geographical information

For management purposes, the Group is organised into five operating divisions – First Student, First Transit, Greyhound, First Bus and First Rail. First Student and First Transit are categorised as Discontinued at 27 March 2021. The divisions are managed separately in line with the differing services that they provide and the geographical markets which they operate in. The principal activities of these divisions are described in the Strategic report.

The segment results for the 52 weeks to 27 March 2021 are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Greyhound £m	Group Items1 £m	Continuing Operations £m	First Student £m	First Transit £m	Group Items1 £m	Total £m
Passenger revenue	383.1	537.7	179.3	-	1,100.1	-	-	-	1,100.1
Contract revenue	46.5	-	-	-	46.5	1,191.8	867.1	-	2,105.4
Charter/private hire	-	-	1.3	-	1.3	18.1	0.6	-	20.0
Rail franchise subsidy receipts	-	2,905.9	-	-	2,905.9	-	-	-	2,905.9
Other	269.3	176.3	142.4	-	588.0	16.3	109.3	-	713.6
Revenue	698.9	3,619.9	323.0	–	4,641.8	1,226.2	977.0	-	6,845.0
EBITDA2	100.8	711.1	17.0	(29.1)	799.8	282.6	87.1	-	1,169.5
Depreciation	(68.7)	(607.9)	(26.2)	(2.8)	(705.6)	(223.6)	(32.9)	-	(962.1)
Software amortisation	(1.4)	(1.4)	(2.2)	(0.6)	(5.6)	(3.2)	(2.5)	-	(11.3)
Capital grant amortisation	5.9	6.3	1.1	-	13.3	-	-	-	13.3
Segment results	36.6	108.1	(10.3)	(32.5)	101.9	55.8	51.7	-	209.4
Other intangible asset amortisation charges	-	-	(1.1)	-	(1.1)	(3.0)	-	-	(4.1)
Other adjustments (note 4)	(5.8)	95.7	53.0	(19.4)	123.5	9.3	(31.2)	(21.1)	80.5
Operating profit/(loss)3	30.8	203.8	41.6	(51.9)	224.3	62.1	20.5	(21.1)	285.8
Investment income									2.0
Finance costs									(172.0)
Profit before tax									115.8
Tax									(24.7)
Profit after tax									91.1

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.

The segment results for 52 weeks ended 28 March 2020 are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Greyhound1 £m	Group Items2 £m	Continuing Operations £m	First Student £m	First Transit £m	Group Items2 £m	Total £m
Passenger revenue	758.2	2,584.1	532.7	-	3,875.0	-	-	-	3,875.0
Contract revenue	63.5	17.8	-	-	81.3	1,764.9	1,031.9	-	2,878.1
Charter/private hire	-	-	3.5	-	3.5	159.4	5.0	-	167.9
Rail franchise subsidy receipts	-	369.1	-	-	369.1	-	-	-	369.1
Other	14.2	232.7	67.0	-	313.9	16.1	134.5	-	464.5
Revenue	835.9	3,203.7	603.2	-	4,642.8	1,940.4	1,171.4	-	7,754.6
EBITDA3	113.2	538.6	35.3	(28.7)	658.4	387.6	62.9	-	1,108.9
Depreciation	(69.2)	(518.2)	(39.7)	(4.3)	(631.4)	(225.8)	(32.2)	-	(889.4)
Software amortisation5	(0.9)	(1.0)	(8.1)	(0.7)	(10.7)	(3.0)	(2.4)	-	(16.1)
Capital grant amortisation	3.0	49.5	0.9	-	53.4	-	-	-	53.4
Segment results	46.1	68.9	(11.6)	(33.7)	69.7	158.8	28.3	-	256.8
Other intangible asset amortisation charges	-	-	(2.5)	-	(2.5)	(2.4)	-	-	(4.9)
Other adjustments (note 4)	(13.7)	(1.1)	(239.3)	(28.3)	(282.4)	(67.0)	(50.2)	(5.0)	(404.6)
Operating profit/(loss)4	32.4	67.8	(253.4)	(62.0)	(215.2)	89.4	(21.9)	(5.0)	(152.7)
Investment income									2.7
Finance costs									(149.6)
Loss before tax									(299.6)
Tax									(25.0)
Loss after tax									(324.6)

1    Greyhound segment results contain £8.4m of property gains on the disposal of properties.

2   Group Items comprise central management and other Items.

3   EBITDA is adjusted operating profit less capital grant amortisation plus depreciation plus software amortisation.

4   Although the segment results are used by management to measure performance, statutory operating (loss)/profit by operating division is also disclosed for completeness.

5   Restated to charge £18.1m of software amortisation to divisional results in arriving at adjusted operating profit. Software amortisation is no longer treated as an adjusting item but as a cost in arriving at operating profit, as this treatment is considered more appropriate

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 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 are significant, including restructuring and reorganisation costs, material property gains or losses, aged legal and self-insurance claims, significant adverse development factors on insurance provisions, significant movements on discount rates used to discount the insurance reserve onerous contract provisions, impairment charges and pension settlement gains or losses including GMP equalisation. 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 consider that this overall basis more appropriately reflects operating performance and provides a better understanding of the key performance indicators of the business.

Reconciliation of operating profit/(loss) to adjusted operating profit	52 weeks ending 27 March 2021 £m	52 weeks ending 28 March 2020 £m
Operating profit/(loss) on a continuing basis	224.3	(215.2)
Adjustments for:
Greyhound impairment charges	-	186.9
Strategy costs	15.2	47.7
Rail termination sums net of impairment reversal	(95.7)	–
Impairment of land and buildings	16.6	–
Other intangible asset amortisation charges	1.1	2.5
Ineffectiveness on derivatives	0.3	–
Gain on disposal of properties	(71.1)	(1.3)
North America insurance provisions	11.2	43.7
Fuel over hedge	–	4.3
Increase in SWR performance bond	–	1.1
Total operating profit adjustments on a continuing basis	(122.4)	284.9
Adjusted operating profit on a continuing basis (note 3)	101.9	69.7

   

Reconciliation of operating profit/(loss) to adjusted operating profit	52 weeks ending 27 March 2021 £m	52 weeks ending 28 March 2020 £m
Operating profit from discontinued operations	61.5	62.5
Adjustments for:
Strategy costs	21.9	10.5
Other intangible asset amortisation charges	3.0	2.4
Gain on disposal of properties	-	(8.0)
North America insurance provisions	21.0	97.6
Transit legal settlements	-	4.9
Student losses on onerous contracts	–	14.1
Fuel over hedge	–	3.1
Total operating profit adjustments from discontinued operations	46.0	124.6
Adjusted operating profit from discontinued operations (note 3)	107.5	187.1

   

Reconciliation of profit/(loss) before tax to adjusted profit before tax and adjusted earnings	52 weeks ending 27 March 2021 £m	52 weeks ending 28 March 2020 £m
Profit/(loss) before tax	115.8	(299.6)
Operating profit adjustments – continuing operations	(122.4)	284.9
Operating profit adjustments – discontinued operations	46.0	124.6
Operating profit adjustments – total operations	(76.4)	409.5
Adjusted profit before tax including discontinued operations	39.4	109.9
Adjusted tax charge (see below)	(4.2)	(24.6)
Non-controlling interests1	(6.1)	(2.6)
Adjusted earnings including discontinued operations	29.1	82.7

1     Statutory non-controlling interests in both 2021 and 2020 principally reflect Avanti West Coast). Adjusted non-controlling interests of £6.6m (2020: £nil) relate to termination sums and other adjustments at South Western Rail.

4    Reconciliation to non-GAAP measures and performance (continued)

Reconciliation of tax charge to adjusted tax charge	52 weeks ending 27 March 2021 £m	52 weeks ending 28 March 2020 £m
Tax charge (note 6)	24.7	25.0
Tax effect of adjusting items (note 7)	(30.6)	39.6
Write back of previously unrecognised deferred tax assets (note 7)	10.1	-
Write down of previously recognised deferred tax assets (note 7)	-	(40.0)
Adjusted tax charge including discontinued operations	4.2	24.6

The adjusting items are as follows:

Strategy costs

The total charge of £37.1m (2020: £58.2m) comprises of £15.1m (2020: £47.4m) from continuing operations and £21.9m (2020: £10.5m) from discontinued operations.  The charge comprises £21.0m related to the sale of First Student & First Transit, £7.0m for the proposed sale of Greyhound, £6.9m of costs related to restructuring in Greyhound Canada, including the cost of severance, legal costs, lease termination costs and other costs of closure and £2.1m relates to other costs associated with the rationalisation of the Group. 

North American insurance provisions

FirstGroup North American insurance arrangements involve retaining the working loss layers in a captive and insuring against the higher losses. Based on our actuaries’ recommendation and a second additional, independent actuarial review, last year we increased our reserve to $657m. During this financial year we have continued to see a deteriorating claims environment with legal judgements increasingly in favour of plaintiffs and punitive in certain regions. In this hardening motor claims environment, we have seen further significant new adverse settlements and developments on a number of aged insurance claims, and as a result our actuaries have increased their expectation of the reserve required on historical claims.

In addition, there has been a significant change in the market-based discount rate used in the actuarial calculation from 0.8% to 1.65%, creating the requirement to increase the provision.

In light of the continued change in claims environment we have increased the provision to provide more protection for historical claims, and the resulting self-insurance reserve level is above the midpoint of the actuarial range. These changes in accounting estimates combined with the discount rate movement has resulted in the Group recording an additional charge of $44.8m or £32.2m (2020: $175.2m or £141.3m); of this charge, $15.6m or £11.2m relates to Greyhound and $29.2m or £21.0m relates to discontinued operations.

The charge comprises $57.0m or £41.0m relating to losses from historical claims (of this, $18.6m or £13.4m relates to Greyhound and $38.4m or £27.6m relates to discontinued operations) and a credit of $12.2m or £8.8m relating to the change in the discount rate (of this, $3.0m or £2.2m relates to Greyhound and $9.2m or £6.6m relates to discontinued operations). It is expected that the majority of these claims will be settled over the next five years. Following these charges, the provision at 27 March 2021 stands at $659m (2020: $657m) compared with the actuarial range of $554m to $723m (2020: $551m to $683m).  Of the total provision at 27 March 2021, $156m relates to Greyhound and $503m relates to discontinued operations.

The charge to the adjusted operating profit for the current period reflects this revised environment and the businesses continue to build the higher insurance costs into their bidding processes and hurdle rates for investment. The Group also actively evaluates alternatives to reduce insurance risk and ongoing expense, and continues to make improvements to claims management processes. It has been agreed that the self-insurance provisions for First Student and First Transit will transfer under the sale of those business and part of the proceeds from the sale will be used to de-risk the residual self insurance provisions of Greyhound.

Rail Termination Sums net of impairment reversal

The Group has agreed franchise termination sums with the DfT in respect of all our obligations under the ERMAs. The agreed amounts are SWR £33.2m (FirstGroup 70% share – the 100% consolidation amount is £47.4m), Nil for TPE (net of other favourable settlements) and Nil for Avanti.  These are included in Adjusting Items, together with the agreed settlement and other adjustments under the Net Asset clauses of the ERMA and the release of the impairment provisions relating to SWR and TPE as at 31 March 2020.

			SWR £m	TPE £m	Total £m
Termination sums payable (100% included – FG share £33.2m)			(47.4)	-	(47.4)
Adjustments relating to the Net Asset clauses of the ERMA			(31.1)	6.2	(24.9)
Release of provision for impairment at 31 March 2020			88.1	79.9	168.0
Adjusting items			9.6	86.1	95.7

Impairment of land and buildings

An impairment charge of £10.0m has been booked in respect of the Aberdeen Headquarters and £6.6m for First Bus premises in Southampton.

Other intangible asset amortisation charges

The amortisation charge for the year was £4.1m (2020: £4.9m) with the reduction due to a number of customer contract intangibles which have now been fully amortised with the remainder mainly relating to brand amortisation in Greyhound.  This charge is made up of £1.1m from continuing operations and £3.0m from discontinuing operations.

Ineffectiveness on derivatives

There was a charge of £0.3m relating to ineffectiveness on three fuel hedges of £0.2m and an ineffective element on foreign exchange and currency derivatives due to IFRS 13 credit value adjustments of £0.1m.

Gain on disposal of properties

Greyhound recognised a profit of £71.1m on sale of properties in the year (2020: £1.3m). A Gain of £51.6m was recognised on the disposal of property in Los Angeles, California.  A Gain of £20.2m was recognised on the disposal of property in Denver, Colorado, whilst a loss of £0.7m was recognised on disposal of a number of other properties in Canada.

4     Reconciliation to non-GAAP measures and performance (continued)

Reconciliation of underlying1 adjusted including discontinued operations2	52 weeks ending 27 March 2021				52 weeks ending 28 March 2020 (restated)
	Reported £m	Avanti franchise 12 months £m	Avanti adjusted £m		Reported £m	Avanti franchise 3 months £m	Avanti adjusted £m	Effect of foreign exchange £m	Adjusted constant currency £m	% change
Revenue	6,845.0	(897.6)	5,947.4		7,754.6	(331.2)	7,423.4	(89.5)	7,333.9	(18.9)%
Operating profit	209.4	(29.6)	179.8		256.8	(14.3)	242.5	(0.8)	241.7	(25.6)%

   

Reconciliation of constant currency including discontinued operations3	52 weeks ending 27 March 2021 £m	52 weeks ending 28 March 2020 (restated)
		Reported £m	Effect of foreign exchange £m	Constant Currency £m	% change
Revenue	6,845.0	7,754.6	(89.5)	7,665.1	(10.7)%
Adjusted operating profit	209.4	256.8	(0.8)	256.0	(18.2)%
Adjusted profit before tax	39.4	109.9	2.4	112.3	(64.9)%
Adjusted EPS	2.4p	6.8p	0.2p	7.0p	(65.7)%
Net debt	2,625.8	3,260.9	(22.5)	3,238.4	18.9%

1   Growth excluding Avanti franchise (which became part of First Rail in December 2019 in constant currency).

2   ‘Adjusted’ figures throughout this document are before self-insurance reserve charges, strategy costs, impairments, other intangible asset amortisation charges and any other charges which are included in note 4 to the financial statements.

3   Changes ‘in constant currency’ throughout this document are based on retranslating 2020 foreign currency amounts at 2021 rates.

5   Investment income and finance costs

	2021 £m	2020 £m
Investment income
Bank interest receivable	(2.0)	(2.7)
Finance costs
Bonds	55.8	56.5
Bank borrowings	15.7	18.5
CCFF funding	2.0	-
Supplier financing	3.0	1.2
Senior unsecured loan notes	9.1	9.2
Loan notes	0.1	1.2
Finance charges payable in respect of leases	73.1	42.6
Notional interest on long-term provisions	3.8	11.8
Notional interest on pensions	9.0	8.6
Notional interest – other	0.4	-
Total finance costs (including discontinued operations)	172.0	149.6
Finance costs before adjustments	172.0	149.6
Investment income	(2.0)	(2.7)
Net finance cost before adjustments	170.0	146.9

Investment income of £0.2m and finance costs of £21.2m relate to discontinued operations (note 14).

6   Tax on profit/(loss) on ordinary activities

	2021 £m	2020 £m
Current tax	17.2	(0.7)
Adjustments with respect to prior years	5.5	1.2
Total current tax charge (including discontinued operations)	22.7	0.5
Origination and reversal of temporary differences	27.0	(14.1)
Adjustment in respect of prior years	(14.9)	1.4
Adjustments attributable to changes in tax rates and laws	-	(2.8)
Writing down of previously recognised deferred tax assets	-	40.0
Write back of previously unrecognised deferred tax assets	(10.1)	-
Total deferred tax charge (note 19)	2.0	24.5
Total tax charge (including discontinued operations)	24.7	25.0

   

Tax charge/(credit) attributable to:
Profit from continuing operations	15.8	(3.6)
Profit from discontinued operations	8.9	28.6

7   Earnings per share (EPS)

EPS is calculated by dividing the profit attributable to equity shareholders of £78.4m (2020: loss £327.2m) by the weighted average number of ordinary shares of 1,203.6m (2020: 1,210.9m). 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.

	2021 Number m	2020 Number m
Weighted average number of shares used in basic calculation	1,203.6	1,210.9
Executive share options	27.9	14.8
Weighted average number of shares used in the diluted calculation	1,231.5	1,225.7

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:

		2021		2020
	£m	EPS (pence)	£m	EPS (pence)
Basic profit/(loss)/EPS	78.4	6.5	(327.2)	(27.0)
Amortisation charges (note 4)	4.1	0.3	4.9	0.4
Other adjustments (note 4)	(80.5)	(6.7)	404.6	33.4
NCI on SWR	6.6	0.6	-	-
Tax effect of above adjustments	30.6	2.5	(39.6)	(3.3)
Write down of previously unrecognised deferred tax assets	(10.1)	(0.8)	-	-
Write down of previously recognised deferred tax assets	-	-	40.0	3.3
Adjusted profit and EPS attributable to the ordinary equity holders of the company	29.1	2.4	82.7	6.8
Adjusted profit from discontinued operations	70.9	5.9	123.4	10.2
Adjusted (loss)/EPS from continuing operations	(41.8)	(3.5)	(40.7)	(3.4)

   

Diluted EPS	2021 pence	2020 pence
Diluted EPS	6.4	(27.0)
Adjusted diluted EPS	2.4	6.7

8   Goodwill

	2021 £m	2020 £m
Cost
At 29 March/31 March	1,955.3	1,862.7
Additions	-	1.7
Transfers to held for sale - discontinued operations	(1,442.0)	-
Foreign exchange movements	(165.6)	90.9
At 27 March/28 March	347.7	1,955.3
Accumulated impairment losses
At 29 March/31 March	292.1	264.6
Foreign exchange movements	(28.3)	27.5
At 27 March/28 March	263.8	292.1
Carrying amount
At 27 March/28 March (from continuing operations)	83.9	1,663.2

Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

Carrying amount	2021 £m	2020 £m
Held for sale - discontinued operations – First Student	1,162.1	1,269.4
Held for sale - discontinued operations – First Transit	279.9	309.8
	1,442.0	1,579.2
First Bus	78.3	78.4
First Rail	5.6	5.6
	83.9	84.0
	1,525.9	1,663.2

9    Other intangible assets

	Customer contracts £m	Greyhound brand and trade name £m	Software £m	Total £m
Cost
At 31 March 2019	471.4	71.5	76.2	619.1
Acquisitions	11.1	–	–	11.1
Additions	–	–	9.2	9.2
Transfers	–	–	(0.2)	(0.2)
Foreign exchange movements	19.3	2.7	2.7	24.7
At 28 March 2020	501.8	74.2	87.9	663.9
Acquisitions	0.9	–	–	0.9
Additions	–	–	4.1	4.1
Transfers to held for sale – discontinued operations	(460.6)	–	(21.2)	(481.8)
Disposals	–	–	(3.8)	(3.8)
Foreign exchange movements	(42.1)	(5.8)	(6.9)	(54.8)
At 27 March 2021	–	68.4	60.1	128.5
Accumulated amortisation and impairment
At 31 March 2019	460.3	43.7	40.0	544.0
Charge for year	2.4	2.5	16.1	21.0
Transfers	–	–	0.9	0.9
Impairment1	–	16.7	6.3	23.0
Foreign exchange movements	18.6	1.8	2.7	23.1
At 28 March 2020	481.3	64.7	66.0	612.0
Charge for year	2.9	1.2	11.0	15.1
Transfers to held for sale - discontinued operations	(443.7)	–	(16.3)	(460.0)
Disposals	–	–	(3.3)	(3.3)
Foreign exchange movements	(40.5)	(5.1)	(5.9)	(51.5)
At 27 March 2021	–	60.8	51.5	112.3
Carrying amount
At 27 March 2021	–	7.6	8.6	16.2
At 28 March 2020	20.5	9.5	21.9	51.9

1   The impairment charge of £nil (2020: £23.0m) relates to Greyhound.

10 Property, plant and equipment

Owned assets	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Cost
At 31 March 2019	463.9	3,217.0	866.9	4,547.8
Acquisitions	–	16.2	–	16.2
Additions in the year	10.1	294.0	149.1	453.2
Transfers to right of use assets1	–	(0.7)	–	(0.7)
Transfers from right of use assets/held for sale2	34.9	23.0	–	57.9
Disposals	(15.6)	(90.4)	(161.4)	(267.4)
Reclassified as assets held for sale	(24.4)	(122.9)	7.1	(140.2)
Foreign exchange movements	11.3	103.9	14.3	129.5
At 28 March 2020	480.2	3,440.1	876.0	4,796.3
At 29 March 2020	480.2	3,440.1	876.0	4,796.3
Acquisitions	–	0.6	–	0.6
Additions in the year	4.9	197.4	135.5	337.8
Transfers to right of use assets1	–	(89.2)	–	(89.2)
Transfers from right of use assets1	–	91.7	–	91.7
Disposals	(37.0)	(119.6)	(93.0)	(249.6)
Reclassified as assets held for sale	(14.6)	(110.4)	–	(125.0)
Transferred to held for sale - discontinued operations	(134.2)	(2,150.6)	(251.5)	(2,536.3)
Foreign exchange movements	(23.9)	(233.1)	(32.4)	(289.4)
At 27 March 2021	275.4	1,026.9	634.6	1,936.9
Accumulated depreciation and impairment
At 31 March 2019	101.0	1,686.8	668.5	2,456.3
Charge for year	15.0	234.7	143.3	393.0
Transfers to right of use assets1	–	(0.2)	–	(0.2)
Transfers from right of use assets/held for sale2	8.4	7.9	–	16.3
Disposals	(4.9)	(93.4)	(160.5)	(258.8)
Impairment3	–	108.4	8.4	116.8
Reclassified as assets held for sale	(2.8)	(121.5)	6.4	(117.9)
Foreign exchange movements	3.2	55.9	12.3	71.4
At 28 March 2020	119.9	1,878.6	678.4	2,676.9
At 29 March 2020	119.9	1,878.6	678.4	2,676.9
Charge for year	13.5	226.6	51.7	291.8
Transfers to right of use assets1	-	(11.5)	–	(11.5)
Transfers from right of use assets1	-	44.3	-	44.3
Disposals	(8.9)	(103.7)	(86.9)	(199.5)
Impairment3	16.6	-	-	16.6
Reclassified as assets held for sale	(2.7)	(106.5)	-	(109.2)
Transferred to held for sale - discontinued operations	(52.6)	(1,076.6)	(229.0)	(1,358.2)
Foreign exchange movements	(8.3)	(131.0)	(24.3)	(163.6)
At 27 March 2021	77.5	720.2	389.9	1,187.6
Carrying amount
At 27 March 2021	197.9	306.7	244.7	749.3
At 28 March 2020	360.3	1,561.5	197.6	2,119.4

1. Transfers to right of use assets represents purchased property, plant and equipment that was transitioned to lease shortly after purchase. Transfers from right of use assets represents lease buyouts.
2. Transfers from right of use assets comprise £22.3m of cost and £7.9m accumulated depreciation.  Transfers from assets held for sale comprises £34.9m of cost and £8.4m of accumulated depreciation.
3. The impairment charge of £16.6m in 2021 relates to assets associated with Bus and Group.  The impairment charge of £116.8m in 2020 relates to assets associated with Greyhound.

10   Property, plant and equipment (continued)

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 30 March 2019	-	-	-	-	-
Adjustment on transition to IFRS 16	829.4	217.2	257.1	4.3	1,308.0
At 31 March 2019	829.4	217.2	257.1	4.3	1,308.0
Additions	1,712.0	36.8	85.6	2.3	1,836.7
Transfer from owned assets1	-	-	0.7	-	0.7
Transfer to owned assets1	-	-	(23.0)	-	(23.0)
Foreign exchange movements	-	7.3	12.4	0.2	19.9
At 28 March 2020	2,541.4	261.3	332.8	6.8	3,142.3
At 29 March 2020	2,541.4	261.3	332.8	6.8	3,142.3
Additions in the year	102.9	56.6	13.7	0.5	173.7
Transfer from owned assets1	-	-	(91.7)	-	(91.7)
Transfers to owned assets1	-	-	89.2	-	89.2
Disposals	(46.8)	(4.3)	-	-	(51.1)
Transferred to held for sale - discontinued operations	-	(177.0)	(174.3)	(0.4)	(351.7)
Foreign exchange movements	-	(20.9)	(24.6)	-	(45.5)
At 27 March 2021	2,597.5	115.7	145.1	6.9	2,865.1
Accumulated depreciation and impairment
At 30 March 2019	-	-	-	-	-
Adjustment on transition to IFRS 16	208.6	-	93.2	-	301.8
At 31 March 2019	208.6	-	93.2	-	301.8
Transfer from onerous contract provision	44.2	-	-	-	44.2
Transfer from owned assets1	-	-	0.2	-	0.2
Transfer to owned assets1	-	-	(7.9)	-	(7.9)
Charge for period	399.5	59.4	35.0	2.5	496.4
Impairment2	-	33.8	13.0	-	46.8
Foreign exchange movements	-	0.8	4.9	-	5.7
At 28 March 2020	652.3	94.0	138.4	2.5	887.2
At 29 March 2020	652.3	94.0	138.4	2.5	887.2
Transfer to owned assets1	-	-	(44.3)	-	(44.3)
Transfers from owned assets1	-	-	11.5	-	11.5
Charge for period	571.2	52.7	44.7	1.8	670.4
Impairment2	(146.5)	3.5	-	-	(143.0)
Disposals	(17.4)	(1.5)	-	-	(18.9)
Transferred to held for sale -discontinued operations	-	(79.0)	(93.2)	(0.4)	(172.6)
Foreign exchange movements	-	(8.3)	(11.2)	-	(19.5)
At 27 March 2021	1,059.6	61.4	45.9	3.9	1,170.8
Carrying amount
At 27 March 2021	1,537.9	54.3	99.2	3.0	1,694.3
At 28 March 2020	1,889.1	167.3	194.4	4.3	2,255.1

1    Transfers from owned assets represents purchased property, plant and equipment that was transitioned to lease shortly after purchase. Transfers to owned assets represents lease buyouts.

2   The impairment charge of £3.5m relates to First Student. The impairment reversal of £146.5m relates to SWR and TPE (2020: £46.8m relates to Greyhound).

The discounted lease liability relating to the right of use assets included above are shown in note 15.

10  Property, plant and equipment (continued)

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 27 March 2021	1,537.9	252.2	405.9	247.7	2,443.7
At 28 March 2020	1,889.1	527.6	1,755.9	201.9	4,374.5

The maturity analysis of lease liabilities is presented in note 16.

Amounts recognised in income statement (including discontinued operations)	2021 £m	2020 £m
Depreciation expense on right of use assets	670.4	496.4
Interest expense on lease liabilities	73.1	42.6
Expense relating to short-term leases	4.7	31.7
Expense relating to leases of low value assets	3.4	3.4
	751.6	574.1

11 Inventories

	2021 £m	2020 £m
Spare parts and consumables from continuing operations	29.4	63.3

On 27 March 2021 inventories of £19.5m (2020: £nil) have been transferred to held for sale - discontinued operations, see note 14.

In the opinion of the Directors there is no material difference between the balance sheet value of inventories and their replacement cost. There was no material write-down of inventories during the current or prior year.

12 Trade and other receivables

Amounts due within one year (from continuing operations)	2021 £m	2020 £m
Trade receivables	223.5	652.2
Loss allowance	(7.3)	(4.9)
Trade receivables net	216.2	647.3
Other receivables	162.4	90.2
Amounts recoverable on contracts	23.3	91.2
Prepayments	75.6	90.3
Accrued income	199.2	251.6
	676.7	1,170.6

On 27 March 2021 trade and other receivables of £548.4m (2020: £nil) have been transferred to held for sale - discontinued operations, see note 14.

13 Trade and other payables

Amounts falling due within one year (from continuing operations)	2021 £m	2020 (restated) £m
Trade payables	182.3	336.9
Other payables	239.5	402.9
Accruals	1,047.0	838.5
Deferred income	112.8	152.3
Season ticket deferred income	6.0	86.3
	1,587.6	1,816.9

Prior year has been restated and increased by £17.2m as liabilities relating to companies under the control of First Transit had not been recognised in prior periods.

On 27 March 2021 trade and other payables of £325.4m (2020: £nil) have been transferred to held for sale - discontinued operations, see note 14.

14 Discontinued Operations

The sale of First Student and First Transit was approved by a Shareholder majority on 27th May 2021. As such they are reported in the current period as discontinued operations. Financial information relating to the discontinued operation for the period to the date of disposal is set out below.

Financial performance and cash flow information

The financial performance and cash flow information presented are for the 52 weeks ended 27 March 2021 and 28 March 2020.

Discontinued Operations		2021 £m	2020 £m
Revenue		2,203.2	3,111.8
Operating costs		(2,141.6)	(3,049.3)
Operating profit		61.6	62.5
Investment income		0.2	0.1
Finance costs		(21.2)	(24.0)
Profit before tax		40.6	38.6
Tax		(8.9)	(28.6)
Profit for the year after tax		31.7	10.0
Attributable to:
Equity holders of the parent		30.9	10.0
Non-controlling interests		0.8	–
		31.7	10.0

   

EPS	2021 pence	2020 Pence
Basic EPS	2.6	0.8
Diluted EPS	2.5	0.8

   

Net cash inflow from operating activities		331.4	280.0
Net cash outflow from investing activities		(227.3)	(163.3)
Net cash outflow from financing activities		(111.9)	(86.0)
Net (decrease)/increase in cash generated by the division		(7.8)	30.7

Details of the Sale of the Divisions

The sale of First Student and First Transit was approved by a majority of FirstGroup shareholders on 27 May 2021 and completed on 21 July 2021. The headline enterprise value is $4.6bn (£3.3bn), which includes a First Transit earnout of up to $240m (c.£175m). Initial net proceeds are c.£2,190m (after deducting First Student and First Transit self-insurance liabilities valued at c.£390m and c.£505m in debt and debt-like items, net working capital and other adjustments).

14 Discontinued Operations (continued)

Assets and liabilities of disposal group classified as held for sale

The following assets and liabilities were reclassified as held for sale in relation to the discontinued operation as at 27 March 2021:

	2021 £m
Non-current assets
Goodwill	1,442.0
Other intangible assets	21.8
Property, plant and equipment	1,357.2
Derivative Financial Instruments	0.5
Investments	30.9
	2,852.4
Current assets
Inventories	19.5
Trade and other receivables	548.4
Current tax assets	0.4
Derivative Financial Instruments	0.1
Assets held for sale	0.4
Cash and cash equivalents	58.3
	627.1
Total assets of discontinued operations	3,479.5
Current liabilities
Trade and other payables	325.4
Tax liabilities – Current tax liabilities	3.5
Derivative Financial Instruments	0.9
Borrowings	68.4
Provisions	138.6
	536.8
Net current assets	90.3
Non-current liabilities
Borrowings	279.3
Derivative Financial Instruments	0.2
Retirement benefit liabilities	24.7
Deferred tax liabilities	33.6
Provisions	262.0
	599.8
Total liabilities of discontinued operations	1,136.6
Net assets of discontinued operations	2,342.9

15 Borrowings

	2021 £m	2020 £m (restated)
On demand or within 1 year
Leases (note 16)3	581.4	642.2
Bank overdraft	53.8	82.4
Loan notes (note 17)	-	8.7
CCFF	298.2	-
Bond 8.75% (repayable 2021)1	380.1	30.4
Bond 5.25% (repayable 2022)2	5.6	5.8
Bond 6.875% (repayable 2024)2	7.1	7.2
Total current liabilities from continuing operations	1,326.2	776.7
Amounts relating to held for sale - discontinued operations	68.4	-
Total current liabilities	1,394.6	776.7
Within 1-2 years
Leases (note 16)3	572.8	587.4
Syndicated loans	116.5	-
Loan notes (note 17)	0.7	0.7
Bond 8.75% (repayable 2021)	-	355.1
Bond 5.25% (repayable 2022)	323.4	-
	1,013.4	943.2
Within 2-5 years
Syndicated loan facilities	449.8	573.9
Leases (note 16)3	577.0	1,030.3
Bond 5.25% (repayable 2022)	-	322.6
Bond 6.875% (repayable 2024)	199.8	199.8
Senior unsecured loan notes	72.5	80.3
	1,299.1	2,206.9
Over 5 years
Leases (note 16)3	53.2	213.3
Senior unsecured loan notes	126.3	139.5
	179.5	352.8
Total non-current liabilities at amortised cost from continuing operations	2,492.0	3,502.9
Amounts related to held for sale - discontinued operations	279.3	-
Total non-current liabilities	2,771.3	3,502.9

'Bank overdraft' has been restated and increased by £82.4m at 28 March 2020, as an overdraft had been set off against the cash balance In the prior periods.

1. Includes accrued interest.
2. Includes accrued interest only.

3   The right of use assets relating to lease liabilities are shown in note 10. The maturity analysis of lease liabilities is presented in note 16.

16 Lease liabilities

The Group had the following lease liabilities at the balance sheet dates excluding liabilities relating to the discontinued operations:

Maturity analysis:	2021 £m	2020 £m
Due in less than one year	632.3	702.4
Due in more than one year but not more than two years	592.9	632.8
Due in more than two years but not more than five years	606.6	1,089.3
Due in more than five years	71.7	240.6
	1,903.5	2,665.1
Less future financing charges	(119.1)	(191.9)
	1,784.4	2,473.2

On 27 March 2021 Lease liabilities of £187.5m (2020: £nil) have been transferred to held for sale - discontinued operations, see note 14.

The total cash outflow for lease principal recorded on the balance sheet amounted to £669.2m (2020: £596.5m), this includes cash outflow relating to discontinued operations amounting to £111.9m (2020: £86.0m).

The right of use assets related to the lease liabilities is presented in note 10.

17 Loan notes

The Group had the following loan notes issued as at the balance sheet dates relating to continuing operations:

	2021 £m	2020 £m
Due in less than one year	–	8.7
Due in more than one year but not more than two years	0.7	0.7
	0.7	9.4

18 Financial instruments

Derivative financial instruments

	2021 £m	2020 £m
Total derivatives
Total non-current assets	1.2	15.8
Total current assets	14.9	4.8
Total assets from continuing operations	16.1	20.6
Amounts relating to held for sale - discontinued operations	0.6	–
Total Assets	16.7	20.6
Total current liabilities	11.8	44.2
Total non-current liabilities	1.2	19.2
Total liabilities from continuing operations	13.0	63.4
Amounts relating to held for sale - discontinued operations	1.1	-
Total liabilities	14.1	63.4
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Coupon swaps (fair value hedge)	–	13.3
Fuel derivatives (cash flow hedge)	1.0	–
Cross currency swaps (net investment hedge)	0.3	–
Currency forwards (cash flow hedge)	–	2.5
	1.3	15.8
Current assets
Fuel derivatives (cash flow hedge)	1.9	–
Cross currency swaps (net investment hedge)	13.5	–
Currency forwards (cash flow hedge)	–	4.8
	15.4	4.8
Current liabilities
Fuel derivatives (cash flow hedge)	4.8	32.4
Currency forwards (cash flow hedge)	1.1	–
Currency forwards (net investment hedge)	6.4	4.4
	12.3	36.8
Non-current liabilities
Currency forwards (cash flow hedge)	0.6	–
Fuel derivatives (cash flow hedge)	0.8	19.2
	1.4	19.2
Derivatives designated classified as held for trading
Current liability
Fuel derivatives	0.4	7.4
	0.4	7.4

19 Deferred tax

The major deferred tax liabilities/(assets) 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 31 March 2019	188.9	(60.0)	98.0	(255.7)	(28.8)
Charge to income statement	10.5	6.4	0.5	7.1	24.5
Charge/(credit) to other comprehensive income and equity	–	24.6	(11.8)	–	12.8
Foreign exchange and other movements	7.9	(1.6)	5.0	(14.6)	(3.3)
At 29 March 2020	207.3	(30.6)	91.7	(263.2)	5.2
Charge to income statement	6.8	6.4	(26.8)	15.6	2.0
Charge/(credit) to other comprehensive income and equity	–	(15.5)	10.0	–	(5.5)
Transferred to held for sale - discontinued operations	(185.8)	6.3	(77.4)	223.3	(33.6)
Foreign exchange and other movements	(17.6)	1.0	(10.8)	24.3	(3.1)
At 27 March 2021	10.7	(32.4)	(13.3)	–	(35.0)

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

	2021 Continuing £m	2021 Discontinued £m	2021 £m	2020 £m
Deferred tax assets	(35.0)	–	(35.0)	(33.6)
Deferred tax liabilities	–	33.6	33.6	38.8
	(35.0)	33.6	(1.4)	5.2

The deferred tax asset relates to the UK and is recognised as the Group forecasts sufficient taxable profits in future periods.

No deferred tax has been recognised on deductible temporary differences of £232.2m (2020: £220.6m) and tax losses of £430.4m (2020: £478.7m) and US tax credits of £9.7m have not been recognised. £42.7m of the losses are subject to expiry with £28.4m expiring in 2024, £11.5m expiring in 2025 to 2028 and £2.8m expiring thereafter.

No deferred tax asset has been recognised in respect of £2.9m (2020: £2.9m) of capital losses.

20 Provisions

	2021 £m	2020 £m
Insurance claims	111.9	382.8
Legal and other	22.8	34.6
Pensions	0.8	1.6
Non-current liabilities from continuing operations	135.5	419.0

On 27 March 2021 Provisions of £400.6m (2020: £nil) have been transferred to held for sale - discontinued operations, see note 14.

	Insurance claims £m	Legal and other £m	Pensions £m	Total £m
At 29 March 2020	588.9	60.6	1.6	651.1
Charged to the income statement	205.4	13.3	–	218.7
Utilised in the year	(186.0)	(19.3)	–	(205.3)
Transferred from accruals	–	(3.8)	(0.4)	(4.2)
Notional interest	3.8	–	–	3.8
Transferred to held for sale - discontinued operations	(389.4)	(11.2)	–	(400.6)
Foreign exchange movements	(50.5)	(3.1)	–	(53.6)
At 27 March 2021	172.2	36.5	1.2	209.9
Current liabilities	60.3	13.7	0.4	74.4
Non-current liabilities	111.9	22.8	0.8	135.5
At 27 March 2021	172.2	36.5	1.2	209.9
Current liabilities	206.1	26.0	–	232.1
Non-current liabilities	382.8	34.6	1.6	419.0
At 28 March 2020	588.9	60.6	1.6	651.1

20 Provisions (continued)

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 five years although certain liabilities in respect of lifetime obligations of £10.3m (2020: £35.4m) can extend for up to 30 years. The utilisation of £205.3m (2020: £219.4m) 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 contains £24.7m (2020: £22.1m) which is recoverable from insurance companies and is included within other receivables in note 12.

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.

The pensions provision relates to unfunded obligations that arose on the acquisition of certain First Bus companies. It is anticipated that this will be utilised over approximately five years.

21 Called up share capital

	2021 £m	2020 £m
Allotted, called up and fully paid
1,221.8m (2020: 1,219.5m) ordinary shares of 5p each	61.1	61.0

The Company has one class of ordinary shares which carries no right to fixed income.

During the year 2.3m shares were issued to satisfy principally SAYE exercises.

22 Net cash from operating activities

	2021 £m	2020 (restated) £m
Operating profit/(loss) from:
Continuing Operations	224.3	(215.2)
Discontinued Operations	61.5	62.5
Total Operations	285.8	(152.7)
Adjustments for:
Depreciation charges	962.3	889.4
Capital grant amortisation	(13.3)	(53.4)
Software amortisation charges	11.2	16.1
Other intangible asset amortisation charges	4.1	4.9
Impairment charges	16.6	189.0
Share-based payments	11.9	10.3
Profit on disposal of property, plant and equipment	(73.0)	(12.9)
Operating cash flows before working capital and pensions	1,205.6	890.7
Increase/(decrease) in inventories	12.0	(1.7)
Increase in receivables	(5.9)	(9.0)
Increase in payables due within one year	197.0	167.9
(Decrease)/increase in provisions due within one year	(1.7)	9.7
Increase in provisions due over one year	10.9	67.1
Defined benefit pension payments in excess of income statement charge	(59.2)	(38.8)
Cash generated by operations	1,358.7	1,085.9
Tax paid	(4.5)	(2.9)
Interest paid1	(149.8)	(125.9)
Net cash from operating activities2	1,204.4	957.1

1   Interest paid includes £73.1m relating to lease liabilities (2020: £42.6m)

2   Net cash from operating activities is stated after an outflow of £17.3m (2020: inflow of £13.2m) in relation to financial derivative settlements.

Ring-fenced cash has been restated and increased by £17.2m at 29 March 2020 and £18.3m as at 31 March 2019, as cash balances relating to companies under the control of First Transit had not been recognised in prior periods. The cashflow impact of these changes has been reflected in payables since the liabilities relating to companies under the control of First Transit had not been recognised in prior periods.

Responsibility Statement of the Directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group’s full annual report for the 52 weeks ended 28 March 2021. Certain parts thereof are not included within the announcement.

We confirm to the best of our knowledge:

• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole
• the Management Report, which is incorporated into the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
• The Directors consider that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide information necessary for the shareholders to assess the Company’s and the Group’s position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors and is signed on its behalf by:

Ryan Mangold

Chief Financial Officer

27 July 2021