FirstGroup H2 2026 Earnings Report

FirstGroup EPS Results

• Actual EPS: GBX 20.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

FirstGroup Revenue Results

• Actual Revenue: $4.75 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

FirstGroup Announcement Details

• Quarter: H2 2026
• Date: 6/18/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, June 18, 2026
• Conference Call Time: 4:00AM ET

FirstGroup (LON:FGP) provides public transport services in the United Kingdom. The company operates through First Bus and First Rail segments. The First Bus segment offers local bus services with a fleet of approximately 4,900 buses in the United Kingdom. The First Rail segment operates a passenger rail network that provides long-distance, commuter, regional, and sleeper services through a portfolio of Great Western Railway, South Western Railway, TransPennine Express, and Avanti West Coast franchises; and hull trains and Lumos. FirstGroup plc was founded in 1986 and is based in London, the United Kingdom.

FirstGroup H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: FirstGroup posted a strong FY2026, with adjusted revenue up 25% to more than £1.7 billion and adjusted EPS rising 5% to £0.203, supported by share repurchases and improving operating performance.
• Positive Sentiment: The board proposed an 11% increase in the full-year dividend to £0.072 per share and launched a further £100 million share buyback program, signaling confidence in cash generation and shareholder returns.
• Positive Sentiment: Bus remained the main growth engine, with operating profit up 7% as yield management, cost efficiencies, and acquisitions offset policy headwinds and inflation. Management also highlighted improving customer metrics, including NPS rising from +11 to +17.
• Neutral Sentiment: Rail is being reshaped as National Rail/DfT contracts transition to public ownership, while FirstGroup expands its open access and rail services businesses. Open access revenue grew despite heavier competition, but margins were pressured by mobilization costs and higher infrastructure charges.
• Positive Sentiment: Management expects to enter a higher free-cash-flow phase, targeting about £400 million over the next three years, while keeping leverage comfortably below its framework and maintaining FY2027 adjusted EPS despite the rail transition.

Presentation

[Graham Sutherland, CEO at FirstGroup]

Good morning, everyone, and welcome to FirstGroup's 2026 full year results presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the year. I will then provide an update on bus and rail before we take your questions at the end. Moving on now to slide three. I'm pleased to report another strong year for the group. The successful execution of our U.K.-focused growth and diversification strategy has driven further earnings momentum and material shareholder returns, reinforcing our track record for delivering on our commitments. Group adjusted revenue, which does not include the National Rail contracts where we take substantially no revenue risk, has grown by 25% to over GBP 1.7 billion. This was largely driven by growth in First Bus revenues, aided by the acquisition of First Bus London, which completed in February 2025.

[Graham Sutherland, CEO at FirstGroup]

Group adjusted earnings per share for the year has increased by 5% to GBP 0.203, with earnings per share growth supported by the repurchase of 22 million shares during the year. As a result of our strong performance and cash generation, the board has proposed a full-year dividend of GBP 0.072 per share, an increase of 11% against the prior year. We are also tightening our dividend policy, and over time, we expect our dividend cover ratio to move towards 2.5x. We are also delighted to announce a further GBP 100 million share buyback program, which we expect to complete over the next 12 months. The U.K. bus and rail markets will continue to evolve during full year 2027 with the transfer of our National Rail contracts to public ownership and as bus franchising begins to gather pace.

[Graham Sutherland, CEO at FirstGroup]

The work we have done to improve performance and restructure our business will allow us to maintain our adjusted earnings per share in full year 2027, following a stronger outturn in full year 2026. We also continue to see a strong pipeline of inorganic U.K. growth opportunities, building on our execution capability of previous years. Moving now to slide four. This sets out some of the key highlights against our strategic framework. Delivering day in and day out remains a key priority. In First Bus, our expertise and delivery focus has driven further operational improvement in lost mileage and a higher Net Promoter Score, which has improved from +11 to +17. Our two successful open access operations have continued to lead in rail customer satisfaction rankings.

[Graham Sutherland, CEO at FirstGroup]

Looking at modal shift, generating additional demand for our service is a key commercial driver of our business and also crucial for reducing congestion, improving air quality, and supporting government decarbonization goals. During full year 2026, we have put more capacity into the market in both bus and rail. In bus, we have increased operated miles in regional bus and added capacity in our business and coach network. We have delivered on our commitment to increase capacity in open access in both Hull Trains and Lumo during the second half of the year. Turning to our sustainability pillar, we continue to be recognized for our market-leading credentials. We remain at the forefront of bus fleet and infrastructure electrification and are working to capitalize on opportunities to unlock adjacent electrification revenue streams.

[Graham Sutherland, CEO at FirstGroup]

This has included the launch of First Charge across 15 of our depots, together with the introduction of battery storage capability to some of our sites. Diversifying our portfolio in attractive markets is a key strategic priority. We continue to make good progress building a diverse, resilient portfolio, less exposed to changes in public policy. Over the last four years, we have invested around GBP 230 million on inorganic growth in First Bus. This includes the acquisition of RATP London, which is performing ahead of our acquisition expectations in its first full year. We have also acquired a number of well-established profitable coach businesses to extend our operational footprint and geographical reach in key markets. We were also delighted to have been awarded the contract to run the London Overground rail network, building on our existing relationship with Transport for London.

[Graham Sutherland, CEO at FirstGroup]

We successfully took over the operation on the 3rd of May. Moving now to slide five. Looking ahead, we are now entering a phase of higher levels of free cash generation and expect to deliver around GBP 400 million over the next three years. This is supported by further earnings growth in Bus and open access rail, together with anticipated cash flow of GBP 90 million as the DfT TOCs transition to public ownership and our rail services businesses continue to provide support post-transfer. We have recapitalized the business as we invested in decarbonization and portfolio growth. This has been made possible by the work we have done to transform business performance over the last few years while still maintaining a strong balance sheet and leverage comfortably below our threshold.

[Graham Sutherland, CEO at FirstGroup]

Looking ahead, annual capital expenditure in First Bus will normalize in full year 2028 to a range of GBP 80 million-GBP 100 million, following a period of accelerated investment in decarbonization whilst government co-funding was available. Our disciplined capital allocation policy remains unchanged, balancing investment in growth and returns to our shareholders. The FirstGroup team have achieved a lot over the last few years, and I remain excited about the potential for meaningful growth and material returns to our shareholders. I will now hand over to Ryan, who will take us through our financial results for the year

[Ryan Mangold, CFO at FirstGroup]

Thank you, Graham, and good morning, everyone. In my presentation, I'll be covering the following three areas: the strong growth in adjusted revenue, the improvement and underpinning progress in adjusted EPS, and finally, the financial guidance for full-year 2027 and the application of our capital allocation policy. Turning to the financial summary on slide seven, where we have made progress across all of the relevant financial KPIs. The group adjusted revenue is up over 25%, driven by both organic and inorganic growth. The revenue improvements in Bus and open access rail have largely been offset by inflationary cost increases, the circa GBP 16 million impact from the National Insurance change, and circa GBP 6 million business development costs in open access for the mobilization of the Stirling route, as well as SWR being nationalized in May 2025.

[Ryan Mangold, CFO at FirstGroup]

Despite this, the group adjusted operating profit of GBP 219.4 million was broadly flat year on year, but from a much stronger, more sustainable base. Our strong operating profit performance has been partially offset by higher net finance costs, resulting in the group delivering GBP 112.6 million in adjusted earnings. The share buyback program has reduced the average share count, and as a result, the group adjusted EPS has increased by 4.6% to GBP 0.203. This robust underlying business performance and strength of the balance sheet has resulted in the board proposing a final dividend of GBP 0.05 per share, resulting in a total dividend for the year of GBP 0.072, an increase of 10.8%. This dividend has been declared in line with the current progressive dividend policy of around 3x adjusted earnings per share.

[Ryan Mangold, CFO at FirstGroup]

Despite the accelerated investment in decarbonization in Bus, the business generated just short of GBP 74 million in free cash flow and ended the year with GBP 137.7 million in adjusted net debt, and this is after GBP 35 million in Bus acquisitions and GBP 89 million in shareholder returns. We have added a new measure, return on invested capital employed, reflecting the post-tax adjusted EBIT return against our total invested capital, which also contemplates IFRS 16 leases. The 10.7% ROIC delivered in the year is up 80 basis points and well above the group's WACC. Turning to the 25% growth in adjusted revenue on slide eight. The material increase in adjusted revenue has been mostly driven by the capital deployment in the second half of the full year 2025, most notably with London Bus, in particular, performing well and delivering ahead of our investment expectations.

[Ryan Mangold, CFO at FirstGroup]

In regional Bus, the significantly reduced fare funding and marginally lower volumes have been more than offset by yield growth. Strong progress has been delivered in our business and coach through the investments we've completed, as well as some organic growth through, for example, the Flix contract. Bus franchising growth includes the full-year effect of London that was acquired in February 2025. First Rail's Open Access and contracted rail operations delivered some revenue growth, with this progress marginally impacted by the December timetable change and increased competition from LNER on the East Coast Main Line in the final quarter. The rail services business delivered strong revenue growth for the year, with this growth offset by lower variable incentive fee opportunities at the DfT TOCs and SWR being nationalized in May. Turning to slide nine, showing the 7% improvement in Bus operating profit.

[Ryan Mangold, CFO at FirstGroup]

The government policy changes that were effective for the whole of the year had a material impact on the business. These policy changes, combined with a softer, wider economic backdrop affecting volumes, impacted the business by circa GBP 69 million. However, the strength and quality of the Bus business, combined with strong performance in certain geographies, meant that the team were able to offset these policy headwinds through GBP 66.8 million in yield improvements. Cost inflation resulted in a GBP 32.7 million increase in operating costs, with the majority of these being labor costs, representing about 50% of the Bus P&L, and these were up 4% year-on-year, with the balance of costs increasing largely in line with CPI.

[Ryan Mangold, CFO at FirstGroup]

Offsetting the inflation was GBP 25.9 million that has been taken out of the cost base through network and cost efficiency improvements, including the restructure of the business, as well as a further drive to use technology to help with business performance. The acquisitions and inorganic growth added GBP 15.6 million to profitability, reflecting successful capital deployment in driving results, with London bus acquisition in particular performing well, along with the several bolt-on Coach acquisitions.

[Ryan Mangold, CFO at FirstGroup]

Turning to the rail performance on slide 10, where we are changing how we report the segments going forwards, reflecting our success in the award of the London Overground contract, which we are combining with our Open Access business, London Trams, and the cable car contracts. Given the upcoming nationalization of our remaining two DfT TOCs, they are being combined with our rail services business for ease of valuation as the TOCs transition over the coming year.

[Ryan Mangold, CFO at FirstGroup]

In total, rail adjusted operating profit is down GBP 18.9 million, driven mostly by SWR being nationalized in May and the GBP 6.8 million lower IFRS 16 adjustment. The rail services business has continued to grow with progress year-on-year, driven by new business in Mistral and First Customer Contact revenue growth, driven by higher levels of activity. The open access and contracted business revenues are up GBP 4.8 million, with additional services that came into effect with the December timetable change and the extension of Edinburgh to Glasgow in the fourth quarter being partially offset by increased competition from LNER. GBP 6.3 million costs were incurred in the mobilization for the new Stirling route that launched in May 2026, and GBP 1.8 million was higher infrastructure charges were incurred at Lumo, where this is now at the full rate.

[Ryan Mangold, CFO at FirstGroup]

The GBP 3.3 million other movement primarily relates to the improved rail services business profit, partially offset by lower performance measures. For the DfT TOCs, net fees post-tax and minority interest accrued in the year were GBP 29.3 million. This is down GBP 9.7 million, reflecting the lower variable fee opportunity and SWR ending. There are further details in the appendices relating to the DfT TOC accounting. Looking at the 5% growth in adjusted EPS on slide 11, this chart shows our adjusted EPS progression on a post-tax basis for the variances. Open access and contracted rail reduced by GBP 0.01, due mainly to the revenue growth being offset by the additional circa GBP 8 million costs for mobilization and infrastructure charges. The DfT TOCs and rail services added GBP 0.002, with the reduction in the TOC fees being more than offset by growth in the services businesses.

[Ryan Mangold, CFO at FirstGroup]

The DfT TOC net fees earned in full year 2026 of GBP 29.2 million translates to circa GBP 0.053 of the GBP 0.079 total for the year, and this is down GBP 0.013 year-on-year, with this reduced contribution in EPS being more than offset by the rail services growth. First Bus increased operating profits contributed GBP 0.01 to the improvement, and the lower central costs added GBP 0.011, driven by cost efficiencies and the group restructure. Interest costs were GBP 0.019 higher, due mainly to lower interest received on lower cash balances and the group now being in an adjusted net debt position. The buyback program resulted in a lower number of average shares in issue, which added GBP 0.015.

[Ryan Mangold, CFO at FirstGroup]

As can be seen, the work that we have been doing over the past few years, together with our disciplined capital allocation approach, has grown our adjusted EPS to GBP 0.203, with a continued improvement in the balance of the quality of the earnings generation. Turning to the cash generation by the group on slide 12. As a reminder, our adjusted measures exclude the ring-fenced cash and the impact of IFRS 16, mainly in the DfT TOCs.

[Ryan Mangold, CFO at FirstGroup]

The group generated EBITDA of GBP 24.8 million before the DfT TOC cash inflows, where we received GBP 45.4 million in distributions. Working capital was a net inflow of GBP 16 million, resulting in a total of GBP 266.2 million in cash generated by operations, up 25% year-on-year. The cash from operations was deployed in investing GBP 189.9 million in CapEx, net of grant funding, and the battery sales into the Hitachi strategic joint venture.

[Ryan Mangold, CFO at FirstGroup]

Disposal proceeds of GBP 21.2 million relate mainly to depot sales completed following the closure of our operations in Cornwall and the sale of a depot in South Yorkshire as this market transitions to franchising. GBP 20 million was received from the bus pension escrows following the completion of the 2024 triennial valuation. GBP 12.9 million was paid in cash interest and tax, and this is mainly related to interest on the new finance lease arrangements for the electric fleet and First Bus, offset by interest earned on cash balances. There was a nominal amount of cash tax paid in the period, with the low level of cash tax driven by the historical losses and the accelerated capital allowances relating to the decarbonization investment program.

[Ryan Mangold, CFO at FirstGroup]

GBP 84 million has been recognized on the balance sheet relating to the deferred tax assets for historical losses that will provide future cash tax shield for several years to come. Other movements includes the payment to acquire shares for the employee benefit trust that holds circa 23 million shares for future share award settlements and small cash payments into the pension schemes, mainly to cover costs. Looking at how we've deployed the capital generated, GBP 30 million has been paid by way of dividends, GBP 35 million was invested in growth capital and several bolt-on acquisitions in First Bus, mainly in the business and coach market, and GBP 50 million was deployed in the share buyback program during the year.

[Ryan Mangold, CFO at FirstGroup]

What is clear from the chart is that the group continues to deploy a very balanced approach to capital allocation, focusing on both organic and inorganic growth opportunities as well as meaningful returns to shareholders in line with our strategy. This resulted in the group ending the year with an adjusted net debt cover ratio of 0.6x, which is well below our leverage framework parameters. To end with, on slide 13, looking ahead at the financial outlook for the year. Despite the stronger outturn for full year 2026, the group expects to maintain adjusted EPS in FY 2027, with the balance continuing to be more weighted to sustainable income sources as the remaining DfT TOCs transition.

[Ryan Mangold, CFO at FirstGroup]

The bus business anticipates sequential operating profit progress year-on-year, with growth being driven by material change in the business following the acquisitions as well as the underlying business improvement with an anticipated more stable policy backdrop. Bus revenues are expected to be above GBP 1.5 billion demonstrating continued growth. At First Rail, the open access revenues are expected to grow to GBP 130 million-GBP 150 million in full-year 2027, with Stirling continuing to ramp up only having just launched. Open access margins are anticipated to be mid-teens when Stirling and the Carmarthen route are fully operating, and this is expected in full-year 2029. The rail services businesses are expected to make progress year-on-year, given the continued support provided to the previous and existing DfT TOCs, as well as growth from new customers.

[Ryan Mangold, CFO at FirstGroup]

For the DfT TOCs, GWR has been confirmed to transition in December 2026, and we expect Avanti to contribute for the full-year. The IFRS 16 positive adjustment to EBIT is anticipated to be circa GBP 23 million in 2027 versus GBP 39 million in 2026. For the DfT TOCs and related services we provide, the expected cash flows from April 2026 onwards are circa GBP 90 million, with the fees being paid a year in arrears. This GBP 90 million does not include the services we continue to provide to former TOCs and the new businesses that have been contracted. At the center, we expect costs to be largely in line with full-year 2026.

[Ryan Mangold, CFO at FirstGroup]

We anticipate incurring circa GBP 45 million in interest, of which GBP 14 million relates to the IFRS 16 charges on the DfT rail leases, meaning the net -GBP 7 million adjustment in earnings relating to IFRS 16 that is not included in our adjusted earnings. We anticipate deploying a net GBP 140 million of CapEx in First Bus, alongside co-funding of circa GBP 15 million and taking into account circa GBP 10 million of cash benefit from the Hitachi strategic battery partnership. The full-year 2027 CapEx in Bus continues to be ahead of expected normal levels of GBP 80 million-GBP 100 million, given the success the business has had in accessing government co-funding, allowing for the acceleration of our decarbonization journey. First Rail remains capital light, with some investment expected on inorganic growth in open access as the new routes are progressed.

[Ryan Mangold, CFO at FirstGroup]

For the pension escrow, just a reminder, the GBP 65 million remains in escrow to be reviewed with the 2030 triennial valuation, and we continue to review options to de-risk through potentially applying some of the escrow monies. The group retains a very strong balance sheet, with further progress anticipated in ROIC off an improved quality of earnings base. The group is now moving into a phase of higher cash conversion over the next three years, supporting the anticipated GBP 400 million free cash generation after CapEx, interest, and tax. Before the deployment of growth capital, where we continue to evaluate a pipeline of opportunities. At the end of the three years, the business is anticipated to be in a stronger position, and equally as important, as a well-capitalized fleet with a better quality of earnings base. I'll hand over to Graham for the business review.

[Graham Sutherland, CEO at FirstGroup]

Thank you, Ryan. There's currently quite a lot going on. I will now take you through the business review. Moving to slide 15. I'll start with First Bus, which, as you can see from this slide, is a very different business today, both in terms of performance and portfolio mix. FY 2026 has been another good year. Despite a challenging environment, we've grown revenue to GBP 1.4 billion with a strong pipeline of further growth opportunities. Bus adjusted operating profit of GBP 103 million was 7% up, driven by yield management, cost efficiencies, and the benefit from recent acquisitions. Over the last four years, Bus adjusted operating profit has grown by circa GBP 60 million per annum.

[Graham Sutherland, CEO at FirstGroup]

Our adjusted operating profit margin of 7.1% was lower than the prior year, reflecting the near GBP 300 million increase in lower-margin London franchise revenues and the policy impact from increased national insurance contributions and lower regional bus fare funding. Our bus portfolio will continue to evolve. In the medium term, we anticipate Bus adjusted operating profit margin to be in a range of around 8%-9%. Moving on now to slide 16. We've grown regional bus revenue by 3%, despite the really unprecedented headwinds in full-year 2026. Obviously, Ryan covered this in his review. This was driven by strong yield management as we actively dealt with the transition to a GBP 3 fare cap in England. Adjusted operating profit margin of 8.8% was lower than full-year 2025 and materially impacted by the increase in national insurance contributions, which had a negative impact of 1.7%.

[Graham Sutherland, CEO at FirstGroup]

We continue to make good progress on operational and customer metrics, with improvements in revenue per mile, lost mileage, and a sustained improvement in our Customer Net Promoter Score. Concessionary volumes were up 4%. This was more than offset by a 6% decline in commercial volumes. The chart shows how we are broadly tracking the wider market, with the decline in passenger volumes largely due to the fare cap changes in England and lower levels of consumer confidence leading to fewer discretionary journeys. We've seen the rate of decline ease in the first quarter of our 2027 financial year. On cost inflation, the team have worked hard to manage industry-wide inflationary pressures, with multi-year pay awards delivered in full-year 2026 that flow into full-year 2027. The continuation of our proactive fuel and electricity hedging program.

[Graham Sutherland, CEO at FirstGroup]

We enter full-year 2027 with materially less headwinds than we experienced in full-year 2026. Moving on to business and coach on slide 17. We've had a good year in business in coach, with revenue up nearly 30% to GBP 230 million, supported by a strong contracted base. The platform now has around 1,000 vehicles, which includes a well-capitalized fleet of nearly 600 coaches, providing the scale that will allow us to efficiently cascade our coaches across our businesses. We continue to extend existing contracts and win new business. Full year 2026 also saw the successful launch and subsequent expansion of our services for FlixBus. We are now operating 11 routes for FlixBus, using vehicles based across seven of our depots. As you can see from the map, we have made significant progress in growing our depot and operational footprint in key markets.

[Graham Sutherland, CEO at FirstGroup]

Full year 2026 acquisitions included J&B Travel and Tetley's Coaches in Leeds and Hills Coaches in Wolverhampton, which have bolstered our position in two key regions that are transitioning to franchising. Post year-end, we have also completed two more acquisitions in Bristol and Doncaster, again, key markets for us. These are all well-established, profitable businesses with strong local relationships, and we maintain a strong pipeline of opportunities to grow our share of this attractive market. Moving on to bus franchising. The addition of First Bus London has had a positive impact on our bus division, providing growth, diversification, and the delivery of excellent operational performance. First Bus London contributed revenues of GBP 310 million in full year 2026, and we expect this to grow to circa GBP 350 million in full year 2027.

[Graham Sutherland, CEO at FirstGroup]

Looking ahead, the acquisition of RATP's U.K. sightseeing operations and its Wandsworth depot in December 2025 provides scope to grow our London route contracts over time. A number of regions have continued to progress bus franchising during full year 2026. We estimate that annual revenues of around GBP 1 billion are expected to be competitively franchised over the next five years. This includes Liverpool and West Midlands, where we don't currently operate, and South Yorkshire, West Yorkshire, and Wales, where we currently earn annual revenues of around GBP 250 million. We are working alongside our local authority partners to support the transition to franchising, demonstrated through the recent sale of depots in South Yorkshire and Wales. There is still some uncertainty over which franchising models will be deployed, in particular around fleet and depot ownership.

[Graham Sutherland, CEO at FirstGroup]

This could lead to potential CapEx savings and property disposals should authorities opt for an all-in ownership model. Our track record of delivering quality bus operations under contract in London and Greater Manchester leaves us well-positioned to actively take part in franchising growth. Moving on to conclude on bus. We continue to make strong progress not only in the decarbonization of our fleet and infrastructure, but also in positioning ourselves to benefit from future adjacent revenue streams. Over a quarter of our bus fleet is now zero emission, over 40% of our London red buses, and we have four fully and 17 partially electrified depots. We expect at least four more to be electrified this financial year, and we continue to roll out our First Charge brand, with third-party charging underway at 15 of our depots.

[Graham Sutherland, CEO at FirstGroup]

Our accelerated decarbonization spend has helped to materially reduce our fleet age, facilitating lower levels of bus CapEx from full year 2028 onwards. Our leading credentials continue to be recognized, with further co-funding secured in Scotland and the work we are doing in South Yorkshire to electrify two depots ahead of franchising. Turning now to rail on slide 20. It's been a pivotal year in First Rail, with the award of London Overground and the work completed to deliver capacity growth and open access. We've also made further progress in our rail services businesses, FCC, Mistral, Consultancy, all have delivered performance improvement during full year 2026. Looking ahead and in line with government policy, the DfT train operating companies are moving to public ownership. Our SWR team worked tirelessly with the DfT operator to ensure a smooth transition, with the business exiting the group on schedule in May 2025.

[Graham Sutherland, CEO at FirstGroup]

GWR, as Ryan has said, is now set to transfer on the 13th of December 2026, and we anticipate that Avanti West Coast will transfer around the end of FY 2027. GWR and Avanti West Coast have also performed well in FY 2026. Moving on to Open Access. Open Access revenues were up 3% on FY 2025 despite increased LNER capacity and more intense price competition after the December 2025 East Coast Main Line timetable change. Open Access adjusted operating profit declined to GBP 26 million, wholly due to GBP 6 million of mobilization costs for our new Stirling to London Euston service and a GBP 2 million scheduled increase in Lumo's infrastructure charge. We are also seeing some impact as lower levels of consumer confidence affect leisure passenger demand. Despite that, seat mile utilization remains stable at 65% and well above the long-distance rail industry levels.

[Graham Sutherland, CEO at FirstGroup]

Competition continues to provide great value for customers. Looking ahead, our attractive Open Access proposition will continue to attract demand. Moving on to slide 22. Growing our Open Access capacity remains a key priority for the group, and we're on track to more than double seat miles in the next two to three years. The chart sets out how we see this developing over the coming years, including the pipeline of applications currently being assessed by the ORR. We have committed significant investment to facilitate the growth of our Open Access services, including our circa GBP 500 million agreement for 14 new Hitachi trains. They'll be manufactured in County Durham, securing the skills base and jobs in the local area. Hull Trains and Lumo have demonstrated the benefits that Open Access can bring to the rail industry, as well as the U.K. taxpayer.

[Graham Sutherland, CEO at FirstGroup]

They drive economic growth without government subsidy, bring considerable private sector investment, pay for access to infrastructure, and connect previously underserved communities. As Great British Railways takes shape over the next few years, we firmly believe there is a continued role for private sector operators in the future railway, with fair competition bringing significant benefits to passengers through new sustainable fleet investment, affordable fares, and much greater choice. Moving on to slide 24 to conclude. Our strong performance in FY 2026 in a challenging economic and policy environment is testament to the skill and commitment of all our people. Following a stronger financial outturn in FY 2026, we're on course to maintain adjusted earnings per share in FY 2027. The quality of our earnings base continues to improve as we grow and diversify our portfolio.

[Graham Sutherland, CEO at FirstGroup]

Looking ahead, we will remain focused on delivery as we position the group for sustained value creation and material returns to our shareholders. We continue to position the group as a leading U.K. transport company. We have the commitment, expertise, scale, and financial strength to build active long-term partnerships that will create better transport services. The U.K. transport sector is clearly evolving and changing at pace. Our strong balance sheet and capital allocation policy gives us the flexibility to take advantage of value-accretive growth opportunities in bus and rail. Our discipline will ensure we work to achieve the right balance between growth investment and returns. Thank you for your time this morning. It's much appreciated. We will now open for questions, firstly from the room, and then from the webcast. Thank you very much.

[Ruairi Cullinane, Analyst at RBC]

Yep. Good morning. It's Ruairi Cullinane from RBC. Actually, I think they're all on bus. Firstly on the expectation that bus CapEx moderates to GBP 80 million-GBP 100 million, should we think of that as a sort of sub-maintenance level? Would that imply an aging of the fleet? How should we think about that? Secondly, on the expectations that bus margins trend towards 8%-9%, I suppose that would be impacted by franchising. You'd expect margins to be lower than that under franchising, what have you assumed there in terms of the models or percentage of revenues that go that way? Finally on bus passenger volumes, obviously encouraging that the trends have improved. Perhaps the concern may be that there was some help from higher fuel costs in encouraging people to switch away from cars. Now fuel is coming down again.

[Ruairi Cullinane, Analyst at RBC]

Is that too negative? Do you think there's a sort of underlying improvement even excluding the fuel? Thank you.

[Graham Sutherland, CEO at FirstGroup]

Okay. On fleet age, we've worked hard over the last few years to bring it down. We felt the business wasn't well enough capitalized three or four years ago, we've made significant efforts to move that forward. We're comfortable with where we are at this point in time, we will look to maintain that into the future. We feel that the CapEx envelopes we're setting out will enable us to do that. On bus margins, yeah, clearly, where we ended up at 7.1% this year was obviously lower than what we had done. There's significant headwinds, we're also growing rapidly. As we've said before, the London Bus story is a turnaround story. Moving from loss-making contracts to profitable contracts. As we laid out before, that journey will take three years. The first year has gone exceptionally well.

[Graham Sutherland, CEO at FirstGroup]

The team in London have done a really, really good job. We expect that to continue to improve. When you look at it, as the mix of the business changes, what we're really saying is some parts of our business will have higher margins in that range, franchising will obviously be lower in a capital light model. Really where it ends up will really be dependent on the mix of the portfolio. What we're committing to, obviously here, is that we still think there's continued growth opportunities. I think we're in a position now where we can grow margin percentage, also grow the revenue. We think it's an attractive place to be. On volumes, I don't think we've seen any significant shift to bus over the last few months given the geopolitical situation.

[Graham Sutherland, CEO at FirstGroup]

I think what we're seeing is really a cycling out of the impact of the shift to GBP 3 fare, and a flattening off of the loss of discretionary volume that took place in a challenging economic situation for many people. We're cautious at this point, but we have seen an improvement over the last few months.

[Gerald Khoo, Analyst at Panmure Liberum]

Morning, everyone. Gerald Khoo from Panmure Liberum. Three on bus from me as well. What happens when the current GBP 3 fare cap expires? I think, correct me if I'm wrong, that runs till March 2025. Should we expect another last-minute extension? Is this actually going to fall away? How do you position yourselves against that uncertainty? Is it actually better to get away from a series of short-term support mechanisms and sort of to get back to normal? Secondly, on Liverpool franchising, have you had any feedback in terms of your bids in the first tranche? What do you think the winners are doing that you're not? Finally, on business and coach, how big a portion of the business is FlixBus? What opportunities are there for you to do more with them? Do you want to limit how big a customer they are?

[Gerald Khoo, Analyst at Panmure Liberum]

Given their ambitions, isn't there one significant upside potential?

[Graham Sutherland, CEO at FirstGroup]

Okay. Great questions. On the fare cap, when it runs out March 2027, you probably have as much idea as I have, Gerald, as to what's going to happen. The first point to note is that the relative levels of funding now that we receive on the GBP 3 fare cap are very small, and they wouldn't be material. If they disappeared, clearly, we would have to look at our commercial situation, but it wouldn't have a major impact on our business. What we are seeing is lots of potential initiatives being slated in lots of different areas, like GBP 2 fare cap in Scotland, for instance, under 22 free travel, child free travel, et cetera. I think we lean in and we have good relationships with government. We're in constant discussion around options and what might work, what might not work. We'll just lean into it.

[Graham Sutherland, CEO at FirstGroup]

The real point to note is the business is materially less dependent on that source of funding than it was a year or two, three years ago. It's more about finding the right initiatives that are good for the government, good for the public, and that we can help support and facilitate. I think that's our approach there. On Liverpool franchising, we got very detailed feedback on the first tranche from the combined authority, which was very helpful. The winners, it was very competitive from a financial perspective. We maintained our usual discipline, but we were not the cheapest bid. On quality, there was a high bar and high standards. I'm not going to go into the details, obviously, commercially sensitive, but we know where the differences were, and we've had really good feedback from the local authority.

[Graham Sutherland, CEO at FirstGroup]

We're obviously acting on that as we look into the second phase. The key message is we're always going to be financially disciplined. We're not going to do franchising for nothing. We'll see how it plays out. A good experience and lots of great feedback. On business and coach, Flix is a very small part of that portfolio today. We're working really well with them. We're very happy with the contracts that we've signed and how they're developing. As you've seen how our depot footprint is expanding, that gives us lots of optionality. One of the reasons we began to put this portfolio together was that there would be additional benefits from having that network, and Flix is a prime example. It's the first real prime example of seeing it.

[Graham Sutherland, CEO at FirstGroup]

As we look at that platform, we're obviously going to look at technology and other options to make this a really attractive platform that's kind of well integrated. We're on that journey. It's still early days, but as you can see from the revenue growth, it's a very fragmented market. There's a lot of contracts out there. If you have good quality local relationships and good assets, then I think there's no reason why you wouldn't do well. We're quite upbeat about the progress, and obviously a lot more to do.

[Luka Trnovsek, Analyst at Berenberg]

Thank you. Luka Trnovsek from Berenberg. Just two from me. First on open access rail. You mentioned increased competition on the East Coast Main Line. Could you give us some color on how you maintain competitiveness and profitability in FY 2027? Then just on free cash flow generation, you said you anticipate GBP 400 million of free cash flow over the next three years. Could you give us some color on the phasing of that GBP 400 million? Maybe how much you expect to spend on growth opportunities in proportion to that? Thank you.

[Graham Sutherland, CEO at FirstGroup]

Okay. Great. I'll take the open access rail, then maybe Ryan can go through the cash flow. What's happened on the East Coast Main Line, obviously, with the December timetable change, one of the outcomes from that was additional hourly services on LNER from London to Newcastle. That effectively put in one shift, 50% extra capacity into that market, which is very, very significant. That has driven more intense price competition. As you know, we run this business, we look at every service every day from eight weeks out. Our whole ethos is seat mile utilization because we have a clear understanding of the utilization required to make a profit and we work accordingly. We've seen little impact on our volumes so far, and we've managed to maintain our seat mile utilization, which is good. That's come at the expense of lower yields.

[Graham Sutherland, CEO at FirstGroup]

What does that mean for us going forward? We have a very competitive platform. We have great people. We run a brilliant service. We're a value player, we will always look to fill our seats and make our profits that way. We think competition at this level will continue for a while, how sustainable that is when you're an organization that's running a public subsidy, I'm not sure. We'll see, I've no concerns about our competitiveness and open access going forward. We have a really good operation performing well.

[Ryan Mangold, CFO at FirstGroup]

On the cash flow, in terms of phasing of the GBP 400 million, I suppose you could look at it in a few buckets. One bucket is the GBP 90 million we're expecting to get from the DfT train operating companies in terms of that cash flow over the next 24-36 months. As that starts to decline, the level of investment in bus almost more than compensates for that, as well as a continuing improvement trend in bus profitability. It's reasonably balanced. The bus CapEx commitment for next year is slightly higher than our GBP 80 million-GBP 100 million guide in terms of more sustainable level in terms of stay-in-business CapEx, that's primarily driven by our success that we've had in accessing grant funding. It's a fairly smooth-ish transition to the GBP 400 million.

[Ryan Mangold, CFO at FirstGroup]

The key point to note, I sort of touched on in the presentation, is at the end of the three-year cycle, it's not like we're extracting cash out of the business. It's just simply the cash generation, where we will still continue to invest, and so the quality of the business at the end of that is even better than when we actually start, given the transition away from the DfT TOCs, if that makes sense. In terms of capital allocation to growth, there's a number of acquisitions that we've got in the pipeline as a target. We're generally doing bolt-on acquisitions in bus between sort of GBP 5 million-GBP 10 million or so in terms of the scale of what we're investing. We're deploying on average, if you take out RATP London deal that we did in 2025, we're generally doing about GBP 20 million-GBP 30 million.

[Ryan Mangold, CFO at FirstGroup]

It really is opportunity-led rather than us necessarily driving. We've got quite a high bar from a return expectations. If we can't take the business forward from what we're doing, then we won't do it. Arguably, the share buyback program gives us a decent amount of flex against that to almost keep us honest to ensure that we're investing wisely, if that makes sense.

[Luka Trnovsek, Analyst at Berenberg]

Thank you.

[Graham Sutherland, CEO at FirstGroup]

Any more questions from the room of Gerald? Come back for extras.

[Gerald Khoo, Analyst at Panmure Liberum]

A couple of extra from me. On bus NPS, obviously positive number, but slightly in a vacuum because no one else really does this, I believe. What's a really good number for you? Where would you need to get to for you to feel that the NPS score was generating revenue? Secondly, on open access, what do you think the timeline is on deciding on your pending applications? I know that you've got assumptions about when those services start, but when do you actually think ORR is going to make a decision?

[Graham Sutherland, CEO at FirstGroup]

Okay. Good questions. Yeah, no, it would be more helpful if we had more people publishing NPS scores. It's a tough measure, as you know. My opinion, once you get north of +20, you're in a strong kind of loyalty environment. We've made really good progress over the last couple of years. We have strong linkages between improvements in operational performance and what our NPS number is saying. The read-through for us is the more reliability we have, effectively the more relative effective cost base we have, the higher NPS, more revenues, and that's our read-through. My personal view, once we get north of +20, I think we're in a good territory for the type of industry we are, given it's a high-volume, dynamic, almost 24/7 business.

[Graham Sutherland, CEO at FirstGroup]

I think the team have done a really good job, and we have an awful lot of detail here, and we're using it in terms of how we're making operational decisions on the ground. In terms of open access applications, without trying to overcommit, I think some of them are imminent. I expect over the next couple of months, we will get an indication on quite a few of the pending applications. Okay.

[Colin Smith, Analyst at Capital Access Group]

Colin Smith from Capital Access Group. You mentioned, Ryan, that your ROIC was well above your WACC. I just wondered if you could comment about what you think the group's WACC is. In the context of the improving underlying business and the plan to reduce the overall level of dividend cover balanced with the increasing cash flow and the CapEx program that you set out, what's the thought about the way the balance sheet changes potentially to improve the overall cost of capital that you face?

[Ryan Mangold, CFO at FirstGroup]

On the WACC currently, our calculations would suggest it's sort of 8.8%, so delivering over 10 is substantially ahead of that, which should in theory mean that we're creating a lot of value for shareholders. I think at the outturn of the GBP 400 million of cash generation. I don't think that our balance sheet structurally is going to be that different at the end of it than it is at the beginning. Clearly, the IFRS 16 leases in the train operating companies will be gone. In theory, if you look at the statutory measures for this last fiscal year, we've de-leveraged by GBP 260 million. It's not our risk, those contracts. It's for DfT account in terms of how those work.

[Ryan Mangold, CFO at FirstGroup]

As those cycle out, because they're counted into our ROIC, and they're replaced by a balance sheet which doesn't have such a high level of lease generating such a low level of margin, in theory, based on the earnings that we get out of the DfT TOCs, that should drive a substantially greater improvement in return on capital employed from an investment point of view. Overall, our leverage is sitting at 0.6x adjusted EBITDA measure. We think that that's probably slightly too low. We'd be comfortable enough being at 1x in the current cycle.

[Ryan Mangold, CFO at FirstGroup]

We also want to maintain a strong balance sheet, so should there be something more meaningful that we can target from an acquisition point of view, provided we can get the returns right and it's a decent deal for our shareholders, then we've got the balance sheet capacity to be able to do that. I think you had a question on dividend cover.

[Colin Smith, Analyst at Capital Access Group]

Obviously, dividend cover of three, you're talking about bringing it down to 2.5. What's the thinking behind that, and how does it interrelate with the plans around share buybacks?

[Ryan Mangold, CFO at FirstGroup]

When we set out the policy a number of years ago, we only started paying a dividend of full year 2022. It's not that long ago after being out of the dividend for more than a decade. We indicated at that time that the policy was going to be progressive in quantity and progressive in policy, so a double factor for us to use. We haven't moved away from that. We'd expect our dividend in terms of quantum to remain positive, even if we go through a period of more static EPS like we've guided for this next year. Investors should expect to see a continued progress in that regard.

[Graham Sutherland, CEO at FirstGroup]

Okay. Well, thank you very much. Any questions on the webcast? Okay, that's great. Well, look, thank you for your time today. It's much appreciated, and thanks for all the great questions. We move forward. Thank you very much

Participants

Executives

• Graham Sutherland, CEO
• Ryan Mangold, CFO

Analysts

• Colin Smith, Analyst at Capital Access Group
• Gerald Khoo, Analyst at Panmure Liberum
• Luka Trnovsek, Analyst at Berenberg
• Ruairi Cullinane, Analyst at RBC