FGP Firstgroup Plc

 
TIDMFGP 
 
FIRSTGROUP PLC 
                         BUSINESS AND LIQUIDITY UPDATE 
 
Further to the announcements made on 23 March and 3 April 2020, FirstGroup plc 
('FirstGroup' or the 'Group') today provides further updates on its response to 
the COVID-19 ('coronavirus') pandemic. 
 
  * Liquidity further enhanced through GBP300m issuance under UK government's 
    Covid Corporate Financing Facility ('CCFF') scheme; committed headroom and 
    free cash increases to c.GBP800m 
  * Greyhound uniquely positioned to access a significant share of the $326m in 
    CARES Act funding allocated to US states in support of intercity bus 
    services 
  * North American contract businesses making continued progress in agreeing 
    revenue recovery; ongoing UK government support for critical bus and rail 
    transportation services 
  * Further cost control measures embedded across the Group; Executive 
    Directors and Board have volunteered a 20% reduction in salaries and fees, 
    with salary reductions and deferrals across wider senior management 
  * Triennial valuations agreed with trustees of First Bus pension schemes, 
    with lower overall deficit payments for year to 31 March 2021 
  * The Group's full year results reporting calendar will be extended in 
    recognition of present challenges in producing audited accounts, consistent 
    with recent statements from UK regulators 
 
Our people 
 
We are deeply saddened to report that we have now seen colleagues from within 
each of our five divisions across North America and the UK tragically lose 
their lives as a result of the coronavirus outbreak. We offer our heartfelt 
condolences and support to their families, friends and co-workers and we keep 
in our thoughts all those affected by this global health crisis. The Group's 
first priority is to safeguard the health and wellbeing of our employees and 
our customers, and across our businesses we are following the guidance of 
governments and health authorities. 
 
Supporting our communities 
 
The Group's operations are part of the critical infrastructure providing 
essential transportation services, which enable key workers to travel to their 
destinations and perform their vitally important roles. We are extremely proud 
of our people who are playing such an important part in delivering these 
much-needed services. 
 
In addition, many of our colleagues and teams are also providing support and 
assistance right at the heart of their communities during this challenging 
time. We are grateful for and inspired by their actions, including the many 
drivers at First Student and First Transit in North America who are delivering 
food supplies to vulnerable members of the community as well as curriculum 
support materials to school children. Greyhound is supporting first responder 
and frontline medical professional volunteers by providing free transport to 
those travelling to another town or city to provide assistance during the 
outbreak. Greyhound are also delivering vital medical supplies and safety 
equipment in partnership with the American Red Cross. In the UK we are making 
space available at our bus terminals and railway stations for community 
initiatives such as key worker food collection points or mobile blood donation 
banks. In First Rail, we were pleased the Rail to Refuge scheme with Women's 
Aid went nationwide in April, following the successful trial in GWR. Where we 
have a catering offer, our rail companies have been donating food from on-board 
shops to NHS teams and charities. Finally, the Group is proud to team up with 
Action for Children in the UK, our charity of choice partner, to support some 
of the most vulnerable children and families in the UK. We are particularly 
pleased to support their Coronavirus Emergency appeal through the deployment of 
the matched funding proceeds raised from our partnership in the last year to 
this important fund. 
 
Update on liquidity including CCFF draw down 
 
As anticipated in our update on 23 March 2020, the Group has been confirmed as 
an eligible issuer for the UK Government's CCFF scheme, with an issuer limit of 
GBP300m based on its credit ratings under the terms of the scheme as published by 
the Bank of England. Yesterday we requested a GBP300m issuance of commercial 
paper through the scheme to further enhance our robust level of liquidity. 
 
As at 21 April 2020 (i.e. prior to the drawings made under the CCFF facility 
announced today), the Group's undrawn committed headroom and free cash had 
increased to c.GBP 500m. This comprised GBP190m in free cash and GBP310m of undrawn 
committed bank revolving credit facilities and represents an improvement of c.GBP 
100m compared with the position at the end of February 2020. Therefore, with 
the drawings under the CCFF facility announced today, the Group has undrawn 
committed headroom and free cash of c.GBP800m. 
 
The Group's committed bank facilities include the GBP800m revolving credit 
facility which matures in November 2023 and a GBP250m bank bridge facility for 
the refinancing of the April 2021 bond. The Group's free cash is in addition to 
the ring-fenced cash inside our rail franchise operations. In addition to 
vehicle leasing facilities, the Group also has access to a GBP150m accordion 
feature on the bank revolving credit facility and available supplier financing 
arrangements of more than $100m. 
 
On 1 April 2020 Fitch Ratings maintained its long-term Issuer Default Rating 
(IDR) at BBB- whilst revising the outlook to negative from stable. 
 
Update on operations in North America 
 
Throughout the business we continue to operate our services at levels required 
to support critical transportation activities. As a leader in transportation 
services, we have continued to reinforce the importance of maintaining the 
appropriate level of operational capability both during the current situation 
and as economies begin to reopen. In this area we have been very actively 
engaged with our customers, both directly and through industry bodies, and 
across all levels of government in North America. The US federal stimulus 
package ('CARES Act') signed into law on 27 March 2020 provides substantial 
funding to the states, municipal and local authorities including school boards 
in support of critical transportation and educational services. 
 
In particular, the CARES Act specifically allocates $326m in emergency funds to 
US states to support continued intercity bus transportation on a cost per mile 
basis via Title 49 section 5311(f) of the US Code. Given the unique nature of 
its scale as the only provider of a national network of coach services across 
44 US states, Greyhound is expected to be a major recipient of this funding. 
Greyhound's revenues have fallen by c.80% since the start of the coronavirus 
outbreak, and the business is operating just over a third of its pre-outbreak 
timetabled mileage at present, sufficient to ensure that the community-critical 
transportation network that it provides is maintained through the present 
situation. Greyhound is well advanced in the processes to access the CARES Act 
funding support in each state. 18 of these states already have pre-existing 
arrangements where only small amendments to contracts are required before 
Greyhound's submissions can be processed. Where new or additional arrangements 
are required, Greyhound is working with the states to expedite this process. 
 
As all North American schools are closed First Student is currently operating 
no home-to-school and only minimal charter services. To date the division has 
agreed terms to receive either full or partial payment from customers 
representing c.70% of our bus fleet, based on which we presently anticipate 
recovering c.53% of the home-to-school revenue expected prior to the crisis. A 
number of customers have reduced the amount of revenue reimbursement to reflect 
our ability to mitigate certain labour and fuel-related costs while no services 
are running. Adjusting for this, our effective recovery rate is c.61% of our 
pre-crisis expectations, based on the agreements reached with customers so far. 
 
At this point First Transit's activity levels vary considerably between its 
different sub-segments, but on average the division is operating at 
approximately 60% of its activity levels prior to the outbreak. Of those 
contracts with a material reduction in service, we have agreed terms to date 
with the result that we currently expect to recover the equivalent of 75% of 
the divisional revenue expected prior to the crisis. 
 
Negotiations continue with many of our customers in First Student and First 
Transit in light of the federal emergency funding that is now becoming 
available to them and we anticipate that the revenue recovery levels will 
increase further as a result. 
 
Update on operations in the UK 
 
First Bus is currently operating a level of service equivalent to approximately 
40% of normal capacity, broadly in accordance with the industry-wide funding 
support agreement with the UK Government announced on 3 April 2020. Passenger 
volumes are approximately 90% lower but the agreement (coupled with other 
commitments regarding continued payment of Bus Service Operator's Grant, 
concessionary fares and contract tenders at pre-crisis levels) enables First 
Bus to run mileage in excess of customer demand to support key workers' needs. 
We welcome Transport for Scotland's commitment to maintain concessionary fares, 
Bus Service Operators Grant and tender revenues through to March 2021 and the 
Welsh Government's hardship fund for the bus sector. 
 
All of the Group's First Rail franchises are operating under the Emergency 
Measures Agreements announced on 23 March 2020, under which the Government has 
waived each operator's revenue, cost and contingent capital risk until at least 
20 September 2020 and during which time the operators will be paid a fixed 
management fee. On 29 March 2020 we announced that our Hull Trains open access 
business would suspend operations for an initial eight week period. 
 
Cost control measures 
 

In light of the very substantially reduced passenger volumes across all our 
divisions, we continue to take proactive steps to prioritise cash flow. In 
doing so, our objective is to protect the Group for the long term, while 
ensuring we maintain critical services now and remain well positioned to raise 
capacity rapidly when appropriate. Previously announced cost control measures 
are now embedded, with a substantial proportion of our total workforce in North 
America and the UK on furlough with the assistance of various government 
schemes, and significant reductions in all non-essential operating and capital 
expenditures. In certain areas it has been necessary to reduce headcount, 
particularly where customers have chosen not to support employee retention by 
maintaining some level of contractual payments during this time. The Group is 
also utilising the tax payment holidays and other emergency measures announced 
by governments to assist companies in managing their costs during this time. 
 
The Chief Executive and Chief Financial Officer have volunteered to take a 20% 
reduction in salaries for an initial period of three months, and the Chairman 
and non-executive Board directors have volunteered a corresponding reduction in 
their fees for the same initial period. In addition a wider group of senior 
employees across the Group have made voluntary salary reductions and deferrals 
for the same period. 
 
First Bus pension schemes 
 
Following a productive dialogue with the scheme trustees, the Group has 
recently come to an agreement on the triennial valuation of the First Bus 
defined benefit scheme on a funding basis as at 1 April 2019. An updated 
deficit reduction profile for the scheme has also been agreed. Coupled with the 
recent finalisation of the English Local Government Pensions Scheme ('LGPS') 
valuations that First Bus is a party to, the Group's overall cash contribution 
to pension schemes relating to the First Bus business has reduced by more than 
GBP10m for the year to 31 March 2021 compared with the previous position, after 
which the overall contribution requirements remain broadly in line with recent 
years. 
 
Corporate reporting 
 
In light of the widely publicised challenges of completing audits during the 
current crisis, the Group is intending to follow UK regulatory advice to review 
our full year reporting timetable. The Group will not therefore be publishing 
its full year results on 28 May or convening the Annual General Meeting ('AGM') 
on 28 July as previously indicated. The Group will provide an update on its 
reporting plans as soon as possible, following agreement with its auditors and 
other advisers on an appropriate timetable. 
 
Matthew Gregory, FirstGroup Chief Executive said: 
 
"I am deeply saddened that the coronavirus pandemic has now tragically claimed 
the lives of colleagues from within each of our five divisions in North America 
and the UK. Their families, friends and co-workers have our heartfelt 
condolences and support, and the thoughts of everyone at FirstGroup are with 
all those affected by the global pandemic. 
 
"I am extremely proud of our people who are working hard to support our 
communities during this time of crisis, both by maintaining critical transport 
services and by providing support in their communities to the most vulnerable. 
 
"As an organisation we have taken rapid action to manage our costs, preserve 
cash and protect the Group's financial position in order to ensure we are able 
to deliver the continuity of transport that is so essential to governments, 
local communities and our customers both now and once the present crisis is 
overcome. The support we have received from governments and our customers is 
testament to the importance of the services we provide. The long-term 
fundamentals of our businesses remain sound, and we will continue to take all 
necessary measures to ensure that the Group emerges from this unprecedented 
situation in the most robust position possible to deliver our strategic plans." 
 
Contacts at FirstGroup: 
Faisal Tabbah, Head of Investor Relations 
Stuart Butchers, Group Head of Communications 
corporate.comms@firstgroup.com 
 
Contacts at Brunswick PR: 
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959 
 
Notes 
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 
6 Annex 1R: 2.2. This announcement contains inside information. The person 
responsible for arranging the release of this announcement on behalf of 
FirstGroup is Keith Hubber, Group General Counsel and Company Secretary. 
 
Figures presented in this announcement are not audited. Certain statements 
included or incorporated by reference within this announcement may constitute 
'forward-looking statements' with respect to the business, strategy and plans 
of the Group and our current goals, assumptions and expectations relating to 
our future financial condition, performance and results. By their nature, 
forward-looking statements involve known and unknown risks, assumptions, 
uncertainties and other factors that 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. Notwithstanding the mitigations and emergency 
measures referred to above, the overall impact COVID-19 will have on the 
financial performance and prospects of the Group in the near as well as the 
medium to longer term remains extremely unclear. The situation is evolving very 
rapidly and while every effort has been made to verify the accuracy of the 
information in this announcement figures in this announcement that relate to 
the current impact COVID-19 is having on the financial performance of the Group 
should be treated with extra caution because of the difficulties in such a 
fast-evolving situation of obtaining accurate and up-to-date data from across 
the businesses in the Group. Except as required by the UK Listing Rules and 
applicable law, the Group does not undertake any obligation to update or change 
any forward-looking statements to reflect events occurring after the date of 
this announcement. 
 
 
 
END 
 

(END) Dow Jones Newswires

April 24, 2020 02:00 ET (06:00 GMT)

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