FIRSTGROUP PLC - Half-year Report

FIRSTGROUP PLC
HALF-YEARLY REPORT FOR THE 26 WEEKS TO 25 SEPTEMBER 2021

A transformed business having exited North American operations, with further value to be realised including from First Transit earnout and Greyhound property disposals and other receipts, in addition to the £500m recently returned to shareholders
Resilient financial performance in period; no change to management's FY22 expectations, recognising there is uncertainty around the pace of recovery in light of the evolving circumstances of the pandemic
First Bus on track to deliver 10% margin in first full year after pandemic-related restrictions end, with c.£20m in annualised cost efficiencies delivered since 2019
First Rail's four management fee-based operations are delivering performance metrics in line with management expectations
Passenger volume recovery ongoing, and renewed government commitment to strengthening convenient, low-carbon public transport connections is becoming a reality
Cash generative businesses support intention to commence regular dividends within next 12 months and strong balance sheet provides flexibility to capture the opportunities ahead

			H1 2022 (£m)			H1 2021 (£m)			Change (£m)
	Cont.	Disc.	Total	Cont.	Disc.	Total	Cont.	Disc.	Total
Revenue	2,139.1	970.6	3,109.7	2,053.1	1,048.5	3,101.6	+86.0	(77.9)	+8.1
Adjusted¹ operating profit	51.8	121.3	173.1	55.7	(45.3)	10.4	(3.9)	+166.6	+162.7
Adjusted¹ operating profit margin	2.4%	12.5%	5.6%	2.7%	(4.3)%	0.3%	(30)bps	+1,680bps	+530bps
Adjusted¹ profit/(loss) before tax			103.7			(73.3)			+177.0
Rail management fee-adjusted Attributable loss⁴			(1.2)			(10.4)			+9.2
Adjusted¹ EPS			6.6p			(5.3)p			+11.9p
Adjusted cash flow²			1,704.7			197.9			+1,506.9
Adjusted Net (Cash)/Debt³			(613.9)			1,532.1			+2,146.0

			H1 2022 (£m)			H1 2021 (£m)
Statutory	Cont.	Disc.	Total	Cont.	Disc.	Total
Revenue	2,139.1	970.6	3,109.7	2,053.1	1,048.5	3,101.6
Operating profit/(loss)	52.2	592.3	644.5	37.8	(54.2)	(16.4)
Profit/(loss) before tax			516.5			(100.1)
EPS			42.4p			(8.3)p
Net debt			234.2			2,946.1
- Bonds, bank and other debt net of (cash)			*(1,188.8)*			681.1
- IFRS 16 lease liabilities			*1,423.0*			2,265.0

'Cont.' refers to the Continuing operations comprising First Bus, First Rail, Group items and Greyhound retained assets and liabilities including Greyhound Canada. 'Disc.' refers to discontinued operations, being First Student, First Transit and Greyhound US. Statutory operating profit from discontinued operations of £592.3m includes the gain on sale of First Student and First Transit.

Corporate activity

Three North American divisions sold for combined enterprise value of c.$4.6bn, c.£2.2bn in debt and other liabilities repaid or de-risked and £500m returned to shareholders
Further value to be realised over time, including from First Transit earnout (up to c.£180m, estimated fair value of £102m), Greyhound property portfolio realisation (estimated £120m net realisable value from FY23 onwards), potential UK pension escrow release of up to £117m
Capital structure reorganisation completed; £676.4m of liquidity (new £300m, multi-year sustainability-linked RCF and free cash) as at 6 December 2021, before pensions escrow and Greyhound liability de-risking payments planned before financial year end
New financial framework for investment, gearing and shareholder returns in place; Rail management fee-adjusted EBITDA and Attributable Profit⁴ measures introduced to better reflect cash flow characteristics of rail contracts

Financial overview

Resilient financial performance in light of travel restrictions and other pandemic effects in the period – Total Group adjusted operating profit (including discontinued operations) increased by £162.7m:
- Continuing operations in line with management expectations, with £51.8m adj. operating profit reflecting UK governments' procurement of service capacity from First Bus to enable socially distanced travel for most of H1 and new low-risk management contracts in First Rail, partially offset by open access losses
- Discontinued operations adjusted operating profit of £121.3m reflects increased volume of travel activity in North America, ongoing grant receipts in Greyhound, as well as no depreciation being charged to profit under the accounting rules once the divisions become classed as held for sale
£52.2m statutory operating profit from continuing operations (H1 2021: profit of £37.8m) includes £0.4m credit from net adjusting items (H1 2021: £(17.9)m)
£471.4m credit from net adjusting items in discontinued operations (H1 2021: £8.9m) principally reflect the portfolio rationalisation and uses of the proceeds:
- Gain on sale of First Student and First Transit, including realisation of £450.6m in cumulative foreign currency gains since date of original acquisition, partially offset by transaction and other costs
- Greyhound impairment reversal to reflect the sale value, partially offset by transaction and closure costs
At period end, Adjusted Net Debt/(Cash)³ was £(613.9)m (H1 2021: £1,532.1m) reflecting receipts from First Student and First Transit disposal and the previously outlined uses of the proceeds including debt repayments and cash contributions to the defined benefit pension schemes
More recently, Adjusted Net Cash³ was £137.3m as at 6 December 2021, reflecting further actions undertaken since the period end, including:
- the £500m returned to shareholders via the recent tender offer
- Initial cash consideration of £100.9m received from Greyhound sale as well as four subsequent Greyhound property sales for $6.8m in total; since closing the transaction the Group has also begun receiving certain US federal funding scheme payments ($1.5m to date) relating to losses during period of ownership as well as rental income and the first tranches of deferred consideration

Current trading and outlook

First Bus passenger volume recovery ongoing; 71% of equivalent 2019 levels on average in recent weeks represents a slowdown in the rate of improvement, with pandemic-related restrictions varying by UK region
No change to management expectations for First Bus adjusted operating profit for FY22, which reflects the current pandemic-related restrictions and government funding schemes in place, some further passenger volume improvement, and with our pricing strategy expected to broadly offset the effects of industry-wide driver shortages
First Bus remains on track to deliver 10% adjusted operating margin in the first full year after pandemic-related restrictions end
First Rail's four management fee-based operations are delivering performance metrics in line with management expectations. Previously anticipated losses on the open access operations reflect costs incurred on start-up of the new Lumo service and at Hull Trains
Both divisions continue to develop additional revenue opportunities, with further progress on affiliate contracts at First Rail, and additional B2B contracts in First Bus
Expect to end the financial year with c.£10-20m in Adjusted Net Debt (following £117m payment into pensions escrow and plans for c.£150m of further de-risking of Greyhound liabilities)
While some uncertainty remains around pace of recovery in light of the evolving circumstances of the pandemic, there is no change to management's expectations for FY22: expect to build operational momentum in current financial year, providing a solid foundation for delivering financial framework objectives – including commencing regular dividends within the next twelve months

Commenting, Executive Chairman David Martin said:

"We have delivered on our commitment to unlock value. By divesting our North American operations, we have strengthened our financial position, refocused on our market-leading public transport operations in the UK, and returned £500m in value to our shareholders.

"With a well-capitalised balance sheet and an operating model that supports our intention to begin regular dividends to shareholders within the next 12 months, FirstGroup is now a more resilient and flexible business. I am confident that we are well-placed to create long term, sustainable value from the opportunities ahead, underpinned by the UK policy backdrop which places public transport at the centre of the economic recovery, decarbonisation and levelling up agendas."

Contacts at FirstGroup:

Faisal Tabbah, Head of Investor Relations

Stuart Butchers, Group Head of Communications

corporate.comms@firstgroup.co.uk

+44 (0) 20 7725 3354

Contacts at Brunswick PR:

Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959

A webcast for investors and analysts will be held at 9:00am today – attendance is by invitation. Please email corporate.comms@firstgroup.co.uk in advance of the webcast to receive joining details. To access the presentation to be discussed on the webcast, 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 the gain on sale of First Student and First Transit, partial reversal of impairment charges on Greyhound and certain other items as set out in note 3 in the interim results section.

² ‘Adjusted cash flow’ is described in the table shown on p.18.

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

⁴ For definitions of the Rail management fee-adjusted alternative performance measures and other key terms, see the definitions section on p.21.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 1.2.

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 through four management fee-based train operating companies (Avanti, GWR, SWR, TPE) and two open access routes (Hull Trains and Lumo, our new East Coast service which launched in October 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 to cease purchasing further diesel buses after 2022; and First Rail will help support 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.

Results overview

FirstGroup is a transformed business. Through the sale of the three North American divisions, we have simplified and refocused the Group on our leading UK public transport businesses, substantially strengthened the balance sheet and de-risked legacy liabilities, and set out our plans to emerge from the pandemic as a more resilient and robust enterprise, well-equipped to capture the many opportunities ahead.

In addition to these 'self-help' actions, the operating environment for public transport companies in the UK has also substantially shifted. A new lower-risk passenger rail operating model is emerging, which rewards operators that demonstrate consistent delivery of quality services for passengers rather than overly ambitious revenue growth forecasts as was the case in the past. As the largest incumbent operator, we are well-placed to earn a consistent stream of low-risk earnings from our four existing management fee-based rail operations, while using our expertise and experience to continue building affiliate earnings from the UK rail industry and elsewhere.

As the second largest regional bus operator in the UK, we are also well-placed to benefit from the increasing recognition at all levels of government and society of the value of stronger bus networks. At their best, bus networks provide the most responsive, flexible and value-for-money solution to the air quality, congestion and connectivity problems increasingly faced by our towns and cities. Through supporting modal shift out of cars and our commitments to convert our fleets to zero carbon buses, we also have an important part to play in decarbonising transport in our operating areas. There is an unprecedented focus on all of these opportunities by Government – and increasingly this renewed ambition has the funding programmes behind it to deliver.

In the short term, our financial results are complex, affected by the sale of three divisions, c.£2.2bn of debt repayments and de-risking of pensions and other liabilities , as well as a £500m cash return to shareholders, some of which completed after the period end. Further inflows to the Group are also expected over time from certain deferred and contingent aspects of the portfolio rationalisation (including the First Transit earnout, cash in escrow for the UK pension schemes, and the net proceeds from the Greyhound assets and liabilities retained). The Board is committed to keeping the balance sheet position of the Group under review and will consider the potential for further additional distributions to shareholders in due course following crystallisation of some of these matters and in light of other value creation opportunities that present themselves. We also note the capacity to increase gearing over time, as end market conditions and hence business performance improves.

The FirstGroup emerging from this transformation has a clear and important role to play at the heart of our communities and economies, is cash-generative, well-capitalised, and committed to investing in a low carbon future while supporting a regular dividend to shareholders. In summary, we believe it is very well-placed to create substantial further shareholder value in future.

Portfolio rationalisation strategy delivered; uses of proceeds substantially complete

In the 26 weeks to 25 September 2021, the Group announced and completed the sale of First Student and First Transit for a headline enterprise value of $4.6bn and net disposal proceeds of $3.1bn (£2.3bn), repaid £1.8bn of bank facilities, commercial paper, bonds and other debt, paid £220m in cash into the UK Bus pension scheme, and made payments of £73.7m into the Greyhound US and Canadian pensions schemes to begin the process of de-risking them. In the period the Group also signed a new multi-year £300m sustainability-linked Revolving Credit Facility (RCF) with a group of its relationship banks.

Since the period end, the Group has announced and completed the sale of Greyhound Lines, Inc. to FlixMobility GmbH for net cash proceeds at closing of c.£100.9m, received cash proceeds from four Greyhound property sales, and begun receiving funding awards from the American Rescue Plan (ARP) relating to losses incurred while Greyhound was under the Group's ownership during the pandemic, as well as rental income and the first tranches of the deferred consideration. The Group has also returned £500m to shareholders through a tender offer since the period end.

During the remainder of the current financial year, the Group expects to utilise c.£150m to accelerate de-risking of the remaining Greyhound pension and insurance liabilities and to place the agreed £117m into escrow for the First Bus and Group UK pension schemes. In light of the expected corporate activities noted above and current trading expectations, the Group continues to estimate that Adjusted Net Debt at the end of FY22 will be in the range of £10-20m.

Protecting our passengers and employees

Our first priority has been and remains the health and safety of our passengers, employees and communities. We continue to follow all appropriate public health authority guidance and continue to maintain our commitment to best practice in areas such as enhanced cleaning and decontamination of vehicles, depots and terminals. We take great pride in the way all our colleagues and teams have provided direct assistance and support to those most in need, right at the heart of our communities.

We are deeply saddened to have lost employees in the period as a result of the pandemic. On behalf of the Board and everyone at FirstGroup, I offer our sincere condolences and ongoing support to their families, friends and colleagues.

Operational highlights – continuing operations

Social distancing rules and government guidance to limit travel gradually eased over the period, although this has taken place faster in England than in Scotland or Wales. This has resulted in a commensurate increase in passenger volumes on our bus and rail networks, although travel activity has yet to fully recover to levels seen before the start of the pandemic.

Recognising the essential nature of public transport connections to local economies, Westminster and the devolved governments put in place comprehensive emergency measures at the start of the pandemic to procure continuity of the management 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. Their commitment to the important role played by transport has continued, with further grant funding and other contractual arrangements supporting the recovery in travel volumes that is now underway.

For the majority of the period, First Bus and other regional bus operators effectively provided their assets and expertise to operate a government-funded bus system on a broadly cash break-even basis. In England the COVID-19 Bus Service Support Grant (CBSSG) programme formally came to end on 1 September 2021, and since that time delivery of local bus services across England has been reinforced by the Department for Transport (DfT)'s £226.5m Bus Recovery Grant (BRG) funding package for the industry announced in early July. The BRG scheme, which is allocated to regional bus operators based on mileage and volumes meaning operators are now taking a level of passenger volume risk, is in place through to March 2022. Scotland and Wales continue to operate under schemes similar to CBSSG, with discussions underway which may push the current end date for the Scottish scheme out from the end of March 2022, and the Welsh scheme funded to the end of July 2022. These schemes allow for relatively limited changes to the level of service provision, fares and other matters while they are in place.

First Bus has also worked closely with its local authority partners in England on the Bus Service Improvement Plans which build on the National Bus Strategy (NBS), and has also been awarded £13m in funding to support our investment in 68 electric buses in Leicester as part of the first 'fast-track' round of funding under the NBS, with further opportunities in the pipeline. As we continue to work towards our commitment of operating a zero-emission bus fleet by 2035, we were pleased to select Hitachi Europe as prime strategic partner for our First Caledonia depot in Glasgow, under which Hitachi will provide electric bus batteries 'as a service', smart charging software and collaborate on other technology to further decarbonise what will soon be the largest electric vehicle charging hub in the UK. The depot hosted a joint event with Hitachi for delegates of the recent UN COP26 Climate Change Conference.

First Bus passenger volumes have increased to 71% of equivalent 2019 levels on average in recent weeks. There is some evidence of a slowdown in the rate of recovery recently, as the travel guidance and activity levels in Scotland and Wales and in many education settings across the UK remain somewhat restricted in light of the pandemic. Notwithstanding this, our planning assumption for the purposes of our future network realignment plans remains that 80-90% of pre-pandemic passenger volume levels will be reached during the twelve months following the end of pandemic-related restrictions in our operating areas. These network plans continue to be optimised as we use our new digital tools to observe how passenger demand patterns are evolving.

In common with a number of sectors in the UK, the bus industry is currently experiencing driver shortages, with the resultant impact on mileage operated itself holding back passenger volume recovery in some of our areas. Notwithstanding this, and the recent increases in global fuel prices, First Bus remains confident that it has the tools to deliver its 10% margin objective for the first full financial year after pandemic-related restrictions on public transport users come to an end, through network realignment to observed demand, data-driven pricing, ticketing and customer innovations, and the c.£20m in annualised cost efficiencies, fixed cost reductions and other savings achieved since 2019, with further engineering savings expected.

First Bus also continues to progress its strategy to develop and grow its share of the business-to-business (B2B) services market. For example, in October it acquired the 50% not already owned in the SPS JV, which operates the contract to provide transport for workers employed at the Hinkley Point C nuclear power station. First Bus was appointed official transport operators of the delegate shuttle service at the COP26 climate conference in Glasgow, providing zero emissions travel throughout the event, and has a number of other B2B contracts in the pipeline.

Our four First Rail management fee-based Train Operating Companies (TOCs) have continued to deliver overall passenger and other performance metrics in line with our expectations, and are accruing for the fixed fees plus a substantial proportion of the performance fees on the concession-style contracts in place. Under these 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. In the period both SWR and TPE commenced operating under new National Rail Contracts which run to 2023 with potential extensions to 2025. Discussions are ongoing with DfT regarding the GWR and West Coast Partnership (incorporating Avanti) National Rail Contracts, with expected durations of up to six and ten years respectively (during the period the current pandemic-related emergency arrangements on these contracts were extended to March and October 2022 respectively). Meanwhile the division was recently awarded £5m in additional work to assist with the TransPennine Route upgrade over two years, demonstrating its capabilities to provide affiliate services to the wider rail industry.

In October our new Lumo open access operation launched with strong passenger bookings, and Hull Trains' passenger volumes are also currently running modestly ahead of our expectations and the industry average. Both of our open access operations primarily serve leisure travellers, which as a segment nationally has returned to more than 90% of equivalent 2019 levels in recent periods. As previously indicated, we expect our two open access operations to record a c.£20m loss between them in the current financial year, before both making a profit contribution from FY23.

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 aims to put the expertise, innovation and experience of private sector rail operators at the heart of the new model for providing efficient, reliable and high quality services for passengers in the coming years.

Discontinued operations

With the completion of the sale of First Student and First Transit on 21 July 2021, the financial results of these two divisions have been reclassified as discontinued operations. The transaction was 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. Accordingly, their results are disclosed in the accounts as part of discontinued operations up to the point of transaction completion.

Prior to its sale on 21 October 2021, Greyhound had received $108m in cash grants under the US Department of the Treasury’s Coronavirus Economic Relief for Transportation Services (CERTS) scheme, which was retained by Greyhound Lines Inc. to be spent on its operations in accordance with the terms of the grant. Greyhound remains eligible to receive further awards from other US federal schemes and, to the extent that further such recoveries are made which relate to the period Greyhound was under the Group's ownership, FlixMobility will pay equivalent amounts to FirstGroup. Since the sale completed, the Group has begun receiving such CARES and ARP payments ($1.5m to date from a potential total of c.$80m).

Almost all of Greyhound's property holdings in the US and Canada, with an estimated net market value of c.$200m as at 25 September 2021, were excluded from the sale to FlixMobility and leased back for varying periods. FirstGroup intends to monetise all of these properties over time and has since sold four for $6.8m.

In addition to the properties, FirstGroup has also retained certain other Greyhound liabilities, including its self-insurance reserve liabilities up to the date of closing, defined benefit pensions schemes, and certain environmental and other net liabilities and costs including the now-closed Canadian operation. After the c.£150m in pension and self-insurance de-risking expected to take place before year end, the Group estimates that the balance of the total Greyhound assets and liabilities retained will result in c.$155m (c.£120m) in net value for the Group being realised over time, based on current valuations.

Resilient financial performance in the period

Revenue from continuing operations (comprising First Bus, First Rail and Group items, as well as certain retained Greyhound assets and liabilities) increased to £2,139.1m (H1 2021: £2,053.1m), principally reflecting improving First Bus passenger revenues broadly offset by lower receipts from government grants and other funding mechanisms, while First Rail revenue was broadly flat compared with the prior period.

Adjusted operating profit from continuing operations was in line with expectations at £51.8m (H1 2021: £55.7m), with an increase in the adjusted operating profit of First Bus offset by a reduction in that of First Rail. These largely reflect the changing terms of the various UK Government arrangements to support passenger travel during the period.

Discontinued operations contributed £970.6m (H1 2021: £1,048.5m) in revenue and £121.3m in adjusted operating profit (H1 2021: loss of £ (45.3) m) to the Group, reflecting the increased volume of travel activity in North America compared with the equivalent period in 2020, ongoing grant receipts in Greyhound as well as there being no charge for depreciation under IFRS5 from the point that tangible assets are classified as Held for Sale and therefore no depreciation has been charged to First Student and First Transit's operating results for the period 28 March to the sale completion on 21 July 2021.

The statutory operating profit from continuing operations of £52.2m (H1 2021: £37.8m) reflects £0.4m credit from net adjusting items compared with £(17.9)m in H1 2021, and statutory EPS from continuing operations was (3.4)p (H1 2021: (3.7)p).

The Group's Rail management fee-adjusted EBITDA alternative performance measure (which focuses on the adjusted earnings from First Bus, non management-fee based Rail operations net of central costs plus the actual net fees available to be distributed as dividends up to FirstGroup from the four management fee-based rail operations, as described in more detail on p.16) was £45.4m (H1 2021: £50.4m). This was a decrease of £5.0m over H1 2021, principally reflecting the losses in the period from open access rail operations partially offset by an improvement in the contribution from First Bus. The Group's Rail management fee-adjusted Attributable Loss was £(1.2)m in the period, an improvement of £9.2m over H1 2021, with a substantial reduction in cash interest (interest charge excluding notional interest and lease interest on IFRS 16 Right of Use assets) offset by the reduced contribution from First Rail. As previously indicated, these metrics will define our leverage and dividend policies going forward, as set out in the financial policy framework on p.15.

Substantial adjusted cash flow in period

The Group's adjusted cash flow of £1,704.7m (H1 2021: £197.9m) in the period reflects positive operational cash flow from the continuing divisions as well as the proceeds from the sales of First Student and First Transit, offset by the repayment of debt and de-risking of certain retained liabilities. Underlying operational cash flow in the period was £113.5m (H1 2021: £763.5m), reflecting our actions to maintain liquidity and financial strength despite the passenger volume reductions. Cash generated in First Bus includes working capital inflows from CBSSG receipts while First Rail recorded a cash outflow primarily due to timing of ring-fenced cash outflows and losses in the open access operations.

As a result of the proceeds received, the Group had Adjusted Net Cash of £613.9m (H1 2021: Adjusted net debt of £1,532.1m) as at 25 September 2021. IFRS 16 lease liabilities (predominantly First Rail rolling stock leases) decreased to £1,255.7m (H1 2021: £1,867.9m), while First Rail ring-fenced cash was £ (518.3)m (H1 2021: £726.0m). Taken together, reported net debt including IFRS 16 lease liabilities and Rail ring-fenced cash decreased to £234.2m (H1 2021: £2,946.1m).

Since the period end, the Group has completed the tender offer which returned £500m to shareholders. It has also sold Greyhound Lines, Inc. and subsequently four Greyhound properties, and began receiving ARP payments relating to losses during period of its ownership. As a result, the Group's Adjusted Net Cash was £137.3m as at 6 December 2021. On the same date, the Group’s undrawn committed headroom and free cash (before First Rail ring-fenced cash) was £676.4m prior to the further Greyhound pension and majority of insurance de-risking and contribution into escrow for the UK pension schemes which are both expected to take place before the end of the financial year.

Outlook

While there remains some uncertainty around the pace of recovery in light of the evolving circumstances of the pandemic, there is no change to our expectations for FY22: we expect to continue to build operational momentum in the current financial year, providing a solid foundation for delivering the Group's previously announced financial framework objectives in the medium term (as set out in the financial policy framework on p.15), including our intention to commence regular dividends within the next 12 months.

Our expectations for First Bus' contribution to adjusted operating profit in FY22 are unchanged, and reflect the current pandemic-related restrictions and government funding schemes in place, and assume some further passenger volume improvement during the balance of the financial year. Our pricing strategy is expected to broadly offset the effects of the driver shortages and cost headwinds being experienced in common with many UK industry sectors, underpinned in part by the Bus Recovery Grant in England and the CBSSG-style arrangements in Scotland and Wales. First Rail earnings in FY22 will principally be driven by the management fee-based contracts currently in place, offset by the expected losses in the open access operations and modest profits from other affiliate contracts. 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 the recent completion of the portfolio rationalisation.

Further ahead, the Group intends to pay a regular dividend, supported by the resilience of the balance sheet and 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 pandemic-related restrictions affecting travel patterns are lifted. First Rail's profitability will be driven by the fixed fees plus our delivery against performance targets under the new National Rail Contracts whilst we expect to add further earnings from opportunities affiliated to our core operations, including the transition into profit in FY23 of our open access rail operations.

Sustainability developments

The Group began implementing the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations in its 2021 Annual Report, a year ahead of the regulatory mandate, and is committed to building on this in the FY22 reporting cycle. This will include setting a science-based target (SBT) during the current financial year for reaching net zero emissions by 2050 or earlier, in accordance with the SBT initiative.

First Bus continued to introduce zero-emission vehicles in the period with deliveries expected to accelerate in the second half.

FirstGroup is also working to create a more diverse and inclusive business in what has been a ‘traditional’ sector. Since 2017, female employees have almost doubled to just under 20% of the total UK workforce. Despite recruitment activity being significantly reduced by the pandemic, we have increased the proportion of female hires for the third successive year, to 24.1%. 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 the coming weeks. As an example of how we support the career progression of colleagues from ethnic minority backgrounds, First Rail has created two new development programmes to help colleagues prepare for and attain their first management role, and to support existing managers from BAME backgrounds to progress into more senior leadership positions.

In the period the Group entered into a £300m sustainability linked RCF, under which the interest rate varies with the Group’s leverage and its performance against two sustainability KPIs, being the level of Scope 1, 2 and 3 carbon emissions per £m of revenue from its First Bus and First Rail operations, and the relative growth of its zero-emission bus fleet in the UK.

FirstGroup's investment case

Going forward, in addition to the substantial value potentially to be realised from the deferred and contingent elements of the portfolio rationalisation and the increased balance sheet flexibility, we believe FirstGroup has 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 restrictions 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 sustainability goals, accelerating the transition to a zero-carbon world: Principally through facilitating modal shift from cars and through FirstGroup’s commitments to transition to operating 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.

Conclusion

The ability for people to travel safely and conveniently for business, education, social or recreational purposes is essential to the long-term sustainability of our economies and communities. With more and more stakeholders recognising the importance of a thriving public transport sector, FirstGroup is in prime position to deliver on its goals, with a well-capitalised balance sheet and an operating model that will support our intention to recommend an attractive dividend for shareholders commencing within the next 12 months. I am very confident that the Group now has the flexibility, the resilience and the capability to create sustainable, long-term value from the opportunities ahead.

David Martin

Executive Chairman

8 December 2021

Divisional review

Continuing operations – First Bus

26 weeks to 25 September	£m		£m, change in constant currency¹
26 weeks to 25 September	H1 2022	H1 2021	£m, change in constant currency¹
Revenue	392.5	311.0	+81.5
Adjusted operating profit	26.8	17.4	+9.3
Adjusted operating margin	6.8%	5.6%	+120bps
EBITDA	55.5	48.1	+7.3
Net operating assets	509.4	408.6
Capital expenditure	11.9	9.7

¹ Based on retranslating H1 2021 foreign currency amounts at H1 2022 rates.

First Bus reported revenue of £392.5m (H1 2021: £311.0m), principally reflecting a 46% increase in like-for-like passenger revenue following volume increases as pandemic travel restrictions began to ease over the period. In England, social distancing restrictions on buses and guidance to avoid travel where possible were removed in July, although the latter has remained in place in Scotland and Wales which together represent more than a quarter of First Bus revenues. Overall passenger volumes were 58% of the equivalent period in 2019, with commercial passenger volumes at 59% and concessions at 55%.

First Bus has worked very closely with local and national authorities and other partners to ensure that passengers have been able to rely on its services throughout the pandemic. For the majority of the period, First Bus and other regional bus operators effectively provided their assets and expertise to operate a government-funded bus system on a broadly cash break-even basis. Under these arrangements, First Bus was paid the costs of operation less revenue received from customers and other public sector monies. Recoverable costs included all reasonable operational costs including depreciation and allocated debt finance together with pension deficit funding. Over the period, First Bus operated c.85% of the service mileage in the equivalent period in 2019. The CBSSG programme formally came to end in England on 1 September 2021, and since that time delivery of local bus services across England has been reinforced by the DfT's £226.5m Bus Recovery Grant (BRG) funding package for the industry. The BRG scheme, which is allocated to regional bus operators based on mileage and volumes, is in place through to March 2022 as passenger numbers rebuild. Services in Scotland and Wales continue to operate under schemes similar to CBSSG, with discussions underway that may extend the Scottish scheme out beyond the current end date of 31 March 2022, and the Welsh scheme funded to the end of July 2022. As a result of the operation of these arrangements, the division reported operating profit of £26.8m (H1 2021: £17.4m) in the period, with no adjusting items.

Through investments in real-time passenger volume data capture, GPS functionality and ticketing, First Bus has moved to the forefront of the digital transformation of the bus industry. This has transformed our ability to understand and assess passenger flows and make subsequent commercial decisions more efficiently. These tools allow us to observe how passenger demand patterns are evolving and will allow us to optimise our networks and timetables to align with customer needs.

We have also continued to roll out innovative functionality to our customers, building on our award-winning mobile app, such as launching 'tap on tap off' payment technology on buses in West Yorkshire. We are driving up the volume of ticket transactions which involve contactless payment methods or our app, reaching 70% in the period. We also continue to bring new ticketing options to customers, including daily and weekly contactless capping fares in Leicester and Potteries in recent months with more areas to follow. These also deepen our knowledge of customers' needs and enable us to structure our pricing models more efficiently.

The division also continues to progress its cost reduction and operational efficiency programmes, which have delivered annualised savings of c.£20m since 2019, with further engineering savings expected.

Throughout the period First Bus also worked closely with its local authority partners in England on the Bus Service Improvement Plans which build on the National Bus Strategy (NBS). The majority of these were submitted in October and although bespoke to the local needs of each area, many focused on actions to improve bus priority measures including bus lanes, funded fares reductions for certain groups of passengers, frequency and network enhancements on key routes and further 'capped' period ticketing schemes. The next stage is for DfT to review and assess the plans submitted by each local authority and allocate funding accordingly. As previously indicated, the vast majority of these measures are to be delivered in First Bus local areas through Enhanced Partnerships (rather than franchising), and work is now progressing to establish these by the Government’s April 2022 target. In the period the Scottish Government committed to funding free bus travel for all under-22’s from 31 January 2022, which will also enhance passenger flows. In December a major project to lengthen the Eclipse bus rapid transit (BRT) project operated by FirstGroup in Hampshire was completed. Jointly funded by the National Productivity Investment Fund, Hampshire County Council and the Government’s Transforming Cities Fund, with First Bus also committing to investing in additional buses, Eclipse services already carry 60% more passengers than the two services they replaced, and bus use in the whole local area has increased by more than 12% since the service was first introduced.

First Bus continues to be successful in securing funding assistance from government for zero-emission vehicles, in line with its commitment to operating a wholly-zero-emission bus fleet by 2035. In October we were awarded £13m in funding to support 68 new electric buses in Leicester as part of the first 'fast-track' round of funding under the NBS, with further opportunities in the pipeline. In the period our Glasgow Caledonia depot continued its transformation into the largest electric vehicle charging hub in the UK, with 60% of chargers installed and the first 24 of 150 electric buses now operational. In November First Bus selected Hitachi Europe as prime strategic partner for the decarbonisation programme at the depot in Glasgow, under which Hitachi will provide bus batteries 'as a service' for First Glasgow’s electric fleet, smart charging software and will collaborate on other low carbon technology such as solar panels and battery energy storage solutions for the site. The depot hosted a joint event with Hitachi for delegates of the recent UN COP26 Climate Change Conference. The division's collaboration with innovative electric vehicle manufacturer Arrival is targeting testing and validation in Spring 2022. In England the government announced a further £355m funding for zero emission buses in the October Spending Review, and in Scotland a further £50m has been announced.

First Bus has also progressed its strategy to develop and grow its share of the B2B services market. In October it acquired the 50% not already owned in the SPS JV, which operates the contract to provide transport for workers employed at the Hinkley Point C nuclear power station in Somerset, for up to £10m. SPS now employs around 450 people running a 156 vehicle operation, delivering shuttle services seven days a week to and from the site, with annual revenues of c.£37m. First Bus was also appointed official transport operator of delegate shuttle services at the COP26 climate conference in Glasgow, and has a number of other B2B contracts in the pipeline.

Looking ahead

We are encouraged that bus volumes have improved over the course of the period, increasing to c.71% of equivalent 2019 levels on average in recent weeks, although as previously indicated, forecasting short term volume and revenue levels remains challenging in light of the continuing pandemic-related effects on passengers' travel patterns. There is some evidence of a slowdown in the pace of recovery recently as a result of the travel advisory position in Scotland and Wales and the activity levels being observed in particular in many education settings in across the UK in light of the pandemic. Our Aircoach business in Ireland has increased its activity levels but remains heavily linked to the passenger aviation levels. Notwithstanding this, our planning assumption for the purposes of our future network realignment plans remains that 80-90% of pre-pandemic levels will be reached during the twelve months following the end of pandemic-related restrictions in our operating areas, with further growth thereafter as a result of the support for modal shift and higher bus usage offered by the NBS, social changes more broadly and our business-to-business strategy.

In common with many other businesses in the UK, First Bus is currently experiencing a shortage of available drivers and higher than normal lost mileage in some localities, although the division has stepped up recruitment and retention activities in response, as well as refreshing our overall employee proposition to ensure we sustain a strong team of colleagues. There is no change to our expectations for First Bus' contribution to adjusted operating profit in FY22, which reflects the current pandemic-related restrictions and government funding schemes that are in place, and assumes some further passenger volume improvement during the balance of the financial year, with our pricing strategy expected to broadly offset the effects of the driver shortages and cost headwinds being experienced. We also remain confident that First Bus is on track to deliver its 10% margin objective for the first full financial year after pandemic-related restrictions come to an end, through the inherent operating leverage of the business to increased passenger volumes, our data-driven network realignment plans, the cost efficiency programme implemented in recent years, as well as our new pricing strategy and ticketing innovations which are being progressively rolled out.

Continuing operations – First Rail

Six months to 18 September

£m

H1 2022

H1 2021

£m, change

Revenue

1,746.6

1,741.9

+4.7

Adjusted operating profit

39.2

59.4

(20.2)

Rail attributable net income from management fee-based TOCs¹

17.5

20.4

(2.9)

Tramlink now reported within First Rail (previously within Group items). H1 2021 comparative has been restated accordingly.

¹ Pre-IFRS 16 basis net of tax and minority interests represents the Group's share of the management fee income available for dividend distribution from the GWR, SWR, TPE and WCP (incorporating Avanti) contracts with DfT as described in more detail on p.16. See also note 4 to the financial statements for a reconciliation to the segmental disclosures.

First Rail revenue increased modestly to £1,746.6m (H1 2021: £1,741.9m). Tramlink is now reported within First Rail, with the comparative restated accordingly. Under the contractual arrangements in place for our four management fee-based TOCs during the year and going forward in the industry, changes in passenger revenue no longer affect our financial performance so although like-for-like passenger revenues increased significantly relative to the prior period, there was an offsetting reduction in income from DfT. Passenger volumes in our businesses continue to recover as demand began to return following the easing of travel restrictions in England from Spring 2021. We are seeing demand recovering particularly well in the leisure market, where demand on some flows is higher than before the pandemic. Although passenger volumes have increased, they still remain at c.65% of the equivalent 2019 period on average in recent weeks. We continue to work closely with the DfT on appropriate service provision, with services currently running at c.85-90% of 2019 equivalent levels.

Under the Emergency Measures Agreements (EMAs) put in place during the pandemic to secure the continued operation of the country’s rail networks, the DfT waived revenue, cost and contingent capital risk and our four major train operating companies are paid a fixed management fee to continue to operate the rail network at agreed service levels. The fee varies according to each contract and includes the potential for a small performance-based fee. In the period the four management fee-based TOCs delivered overall passenger and other performance metrics in line with our expectations, and accordingly are accruing for the fixed fees plus a substantial proportion of the performance fees as a result. Adjusted operating profit was £39.2m (H1 2021: £59.4m), which reflects the fees paid under the current arrangements as well as costs incurred on start-up of the new Lumo open access service and at Hull Trains. The division reported a statutory operating profit of £43.2m (H1 2021: £41.1m) reflecting a £4.0m final credit adjustment in relation to TPE and SWR franchise termination sums. Rail attributable net income from management fee-based TOCs – being the Group's share of the management fee income available for dividend distribution from the GWR, SWR TPE and WCP (incorporating Avanti) contracts with the DfT – was £17.5m (H1 2021: £20.4m).

During the period both TPE and SWR transitioned to the Government’s new National Rail Contracts. 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 substantially all revenue risk and substantially all cost risk. There is a fixed management fee and the opportunity to earn an additional performance fee. The punctuality and other operational targets required to achieve the maximum level of performance fee are designed to incentivise service delivery for customers. The NRCs achieve a more appropriate balance of risk and reward between operators and the Government and carry no significant contingent capital risk.

Discussions are ongoing with the DfT regarding National Rail Contracts for our other two management fee-based operations, GWR and West Coast Partnership (incorporating Avanti). The DfT have indicated that the West Coast Partnership National Rail Contract which will follow the current agreement could last up to ten years to October 2032, and that GWR's could last up to six years to June 2028. In the period the DfT extended the current emergency agreements for GWR and West Coast Partnership (incorporating Avanti) to March and October 2022 respectively. Beyond the NRCs the DfT have begun dialogue with operators about the next generation of Passenger Service Contracts which will focus operators on continuing to run services efficiently and providing reliable and high-quality services for passengers.

Open access operations were not eligible for the DfT's emergency pandemic support, which meant our Hull Trains service was temporarily suspended on a number of occasions reflecting lower passenger demand. Having restarted operations following the ending of lockdown restrictions, Hull Trains is recently seeing encouraging passenger volumes running ahead of the industry average. Our new Lumo open access service began operations in October, and has seen strong passenger bookings. Lumo’s purely electric fleet provides a value for money and sustainable way to travel between London, Newcastle and Edinburgh, routes where a significant number of passengers still travel by air. As previously indicated, as a result of the start-up costs for Lumo and the demand environment for Hull Trains, we expect our open access operations to record a c.£20m loss between them in the current financial year, before both making a profit contribution from FY23.

The division was recently awarded additional work to assist in the Transpennine Route Upgrade project to upgrade railways in the North of England. Worth c.£5m in fees over the next two years, this demonstrates our expertise in rail and ability to generate earnings from affiliated services to the wider industry. Meanwhile evo-rail, our solution to power next generation onboard Wi-Fi, is progressing to installation on SWR and also has a number of trials either underway or in negotiation in international markets.

Our rail companies continue to work together with industry partners and stakeholders to upgrade the customer offering. During the period flexible season tickets were introduced across the country and we continue to develop our suite of mobile ticketing and customer apps. New functionality includes the ability for SWR passengers to check car park capacity and a customer loyalty scheme. In the period Avanti also became the first UK TOC to offer an additional class of travel as part of its services, Standard Premium, which gives customers greater choice of facilities. On 1 November SWR reopened the Isle of Wight’s railway following a £26m investment into trains, stations and infrastructure funded by the DfT, Isle of Wight Council and Solent Local Enterprise Partnership. On 20 November, GWR reopened the Dartmoor Line in partnership with Devon County Council and Network Rail, the first to be reinstated under the DfT’s ‘Restoring your Railway‘ initiative.

First Rail is working with its partners to reduce carbon emissions, for example through the introduction of electric trains to replace diesel where possible, and our expertise and capability will help the Government deliver its ambition to remove all diesel-only trains from service in the UK by 2040. New suburban rolling stock for SWR starts to enter service this year and a new depot at Feltham was completed in the period to stable this fleet. New all-electric and bi-mode trains will also be introduced by Avanti next year, and a £117m refurbishment of the operator’s electric Pendolino fleet began in the period. We are also working to increase connectivity with other transport modes, with new, secure bike spaces, bus connections and car parking introduced across our networks in the period.

Looking ahead

First Rail earnings in FY22 will principally be driven by the management fee-based contracts currently in place, offset by the expected losses in the open access operations and modest profits from other affiliate contracts. Longer term it will be driven by the fixed fees plus our delivery against performance targets under the new National Rail Contracts whilst we expect to add further earnings from opportunities affiliated to our core operations, including the transition into profit in FY23 of our open access rail operations.

We have long advocated for a more sustainable balance of risk and reward for all parties which would underpin a longer-term approach to the railway with passengers at its centre. This is well aligned to the Government's Williams-Shapps Plan for Rail, and as the largest UK operator with four passenger rail contracts expected to run until at least 2023, we are well positioned to work closely with industry partners to bring the Plan 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, resulting in a strong track record of delivery on major projects, and potential for further growth through opportunities in addressable markets affiliated with our core management fee-based operations. As the UK passenger rail industry continues its evolution to a more successful and sustainable railway system that works better for all parties, we are well-placed both to drive increased patronage and to generate resilient and consistent returns for shareholders.

Greyhound retained assets and liabilities including Greyhound Canada

In the period £(4.0)m (H1 2021: £(7.0)m) of operating losses were recorded for the Greyhound Canada operations which were permanently shut down in May 2021, of which £(0.4)m (H1 2021: £(7.4)m) were classed as adjusted operating losses, with the remainder being restructuring and closure costs.

Greyhound remains eligible to receive further funding awards from US federal schemes such as the CARES Act and the ARP, and, to the extent that further such recoveries are made which relate to losses for miles run incurred while Greyhound was under the Group's ownership during the pandemic, the buyer will pay equivalent amounts to FirstGroup. Since the sale completed, $1.5m has been received in CARES and ARP payments relating to pre-closing operations.

Almost all of Greyhound's property holdings in the US and Canada, with an aggregate estimated net market value of c.$200m, were excluded from the sale. The buyer has entered into lease agreements at market rental levels to use the properties in the US for varying periods as part of Greyhound’s future operations. The majority of these are subject to a three-year lease term, with the remainder subject to a six-month initial term followed by six-month rolling terms. FirstGroup intends to monetise all of these retained properties over time to further optimise net proceeds and has since sold four such properties for $6.8m.

In addition to the retained properties, FirstGroup has also retained certain other Greyhound liabilities, including Greyhound’s self-insurance reserve liabilities up to the date of closing ($161.7m as at 25 September 2021), Greyhound defined benefit pensions schemes ($64.9m as at 25 September 2021 following a cash injection of $102.4m in the period), and certain environmental and other net liabilities and costs including the now-closed Canadian operation. After the c.£150m in pension and self-insurance de-risking expected to take place before year end the Group estimates that the balance of the total Greyhound assets and liabilities retained will result in c.$155m (c.£120m) in net value being realised over time.

Discontinued operations – First Student, First Transit and Greyhound US

First Student revenue was $669.5m or £479.5m (H1 2021: $509.6m or £404.4m) in the period prior to completion of the sale on 21 July 2021, reflecting the reopening of more schools compared with the prior period. At the adjusted operating level, profit increased significantly to $123.4m or £88.2m (H1 2021: $(66.7)m or £(50.3)m) as a result of the increased activity levels, and no depreciation charge in the current period due to the division being classed as held for sale. Statutory profit of £73.4m reflects a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims and also a one-off charge for accelerated state and federal employment taxes.

First Transit recorded revenue of $417.7m or £299.7m (H1 2021: $613.9m or £484.5m) in the period prior to completion of the sale on 21 July 2021, with a high level of service continuing to be maintained despite the pandemic, as it provides essential transportation options for passengers. Adjusted operating profit was $29.0m or £20.7m (H1 2021: $17.1m or £13.4m), principally reflecting no depreciation charge in the current period due to the division being classed as held for sale. The division continued to win new business in the period, and remains well positioned for further growth, especially in light of the $1.2tn bipartisan Infrastructure Investment and Jobs Act recently signed into law and other federal legislative priorities. Statutory profit of £14.2m (H1 2021: £13.4m) reflects a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims.

Greyhound’s US operations generated revenue of $265.6m or £191.4m (H1 2021: $202.7m or £159.6m) in the period, reflecting an improvement in passenger demand as pandemic restrictions eased, partially offset by lower CARES Act receipts in the period. Through continued cost management, federal funding receipts and other actions Greyhound was able to increase adjusted operating profit to $17.2m or £12.4m (H1 2021: $(9.8)m or £(8.4)m) in the period. Statutory profit of £56.0m (H1 2021: loss of £(8.9)m) reflects the partial reversal of prior year impairments of Greyhound as well as a self-insurance provision charge due to a deterioration in respect of prior years' insurance claims.

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 pandemic-related restrictions end, with further growth thereafter First Rail: opportunities to build on the base business of four management fee-based TOCs with no revenue risk
Profitability	First Bus: targeting a 10% margin in the first full financial year after pandemic-related restrictions end First Rail: profitability driven by fixed fees plus delivering against performance targets under NRCs while adding earnings in affiliated rail opportunities, including transition into profit of open access operations Other: central cost reduction of at least £10m p.a. from FY23; interest c.£50m p.a. (of which c.40% cash); UK corporation tax rate (currently 19% increasing to 25% for FY24)
Investment	First Bus: c.£90m p.a. mainly driven by zero-emission bus fleet commitments First Rail: expected to continue to be cash capital-light under the NRCs
Leverage	Less than 2.0x Adjusted Net Debt: Rail management fee-adjusted EBITDA¹ in the medium term
Dividend	Intention to commence regular dividends to shareholders within the next 12 months Targeting annual dividend around 3x covered by Rail management fee-adjusted Attributable Profit², assuming normalisation of trading conditions post-pandemic

¹ First Bus and First Rail EBITDA not from management fee-based TOCs, plus Rail attributable net income from management fee-based TOCs, minus central costs (see also p.16)

² First Bus and First Rail adjusted operating profit not from management fee-based TOCs, plus Rail attributable net income from management fee-based TOCs, minus central costs, minus cash interest, minus tax (see also p.16)

Revenue

Revenue from continuing operations increased to £2,139.1m (H1 2021: £2,053.1m), principally reflecting improving passenger revenues in First Bus broadly offset by lower receipts from government grants and other funding mechanisms.

Revenue from discontinued operations was £970.6m (H1 2021: £1,048.5m), reflecting the trading results of First Student and First Transit in the stub period of FirstGroup's ownership to 21 July 2021 and Greyhound's US operations for the whole period. Overall, total revenue in the period was flat at £3,109.7m (H1 2021: £3,101.6m).

	26 weeks to 25 September 2021			26 weeks to 26 September 2020			52 weeks to 27 March 2021
	Revenue £m	Adjusted operating profit¹ £m	Adjusted operating margin¹ %	Revenue £m	Adjusted operating profit¹ £m	Adjusted operating margin¹ %	Revenue £m	Adjusted operating profit¹ £m	Adjusted operating margin¹ %
First Bus	392.5	26.8	6.8	311.0	17.4	5.6	698.9	36.6	5.2
First Rail	1,746.6	39.2	2.2	1,741.9	59.4	3.4	3,619.9	108.1	3.0
Greyhound retained	-	(0.4)	n/m	0.2	(7.4)	n/m	0.2	(10.7)	n/m
Group items²	-	(13.8)		-	(13.7)		?	(32.5)
Continuing operations	2,139.1	51.8	2.4	2,053.1	55.7	2.7	4,319.0	101.5	2.4

First Student	479.5	88.2	18.4	404.4	(50.3)	(12.4)	1,226.2	55.8	4.6
First Transit	299.7	20.7	6.9	484.5	13.4	2.8	977.0	51.7	5.3
Greyhound US	191.4	12.4	6.5	159.6	(8.4)	(5.3)	322.8	0.4	0.1
Discontinued operations	970.6	121.3	12.5	1,048.5	(45.3)	(4.3)	2,526.0	107.9	4.3

Total	3,109.7	173.1	5.6	3,101.6	10.4	0.3	6,845.0	209.4	3.1
North America in USD	$m	$m	%	$m	$m	%	$m	$m	%
Greyhound retained	-	(0.7)	n/m	0.3	(9.5)	n/m	0.3	(14.2)	n/m

First Student	669.5	123.4	18.4	509.6	(66.7)	(13.1)	1,617.6	78.1	4.8
First Transit	417.7	29.0	6.9	613.9	17.1	2.8	1,277.4	69.1	5.4
Greyhound US	265.6	17.2	6.5	202.7	(9.8)	(4.8)	422.3	2.1	0.5
Discontinued operations	1,352.8	169.6	12.7	1,326.2	(59.4)	(4.5)	3,317.3	149.3	4.5

Total North America	1,352.8	168.9	12.7	1,326.5	(68.9)	(5.2)	3,317.6	135.1	4.1

^{1 ‘}Adjusted’ figures throughout this document are before the gain on sale of First Student and First Transit, partial reversal of impairment charges on Greyhound and certain other items as set out in note 3 to the financial statements. The statutory operating profit including discontinued operations for the period was £644.5m (H1 2021: loss of £(16.4)m) as set out in note 4.

² Central management and other items. Tramlink is now reported in First Rail.

Adjusted operating performance

Adjusted operating profit from continuing operations was in line with expectations at £51.8m (H1 2021: £55.7m), with an increase in the adjusted operating profit of First Bus offset by a reduction in that of First Rail. These principally reflect the UK governments' procurement of service capacity from First Bus to enable socially distanced travel for most of H1 and the new low-risk management contracts in First Rail, partially offset by open access rail losses during the period.

Adjusted operating profit from discontinued operations of £121.3m (H1 2021: loss of £ (45.3)m) reflected the increased volume of travel activity in North America compared with equivalent period in 2020, ongoing receipt of grant funds by Greyhound and no depreciation being charged to profit in the period in the divisions classed as held for sale under accounting rules. Overall Group adjusted operating profit increased by £162.7m to £173.1m (H1 2021: £10.4m). 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 North American disposals.

The Group's Rail management fee-adjusted EBITDA performance measure is calculated as follows:

	26 weeks to 25 September 2020 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
First Bus EBITDA	47.6	39.9	84.5
First Rail EBITDA not from management fee-based TOCs	(7.4)	2.0	(8.9)
Rail attributable net income from management fee-based TOCs¹ – Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts	17.5	20.4	42.3
Group central costs (EBITDA basis)	(13.0)	(12.9)	(30.8)
Group Rail management fee-adjusted EBITDA	44.7	49.4	87.1

1 A reconciliation to the segmental disclosures is set out in note 4.

The Group's Rail management fee-adjusted Attributable Profit performance measure is calculated as follows:

	26 weeks to 25 September 2020 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
First Bus adjusted operating profit	26.8	17.4	36.6
First Rail adjusted operating profit not from management fee-based TOCs	(7.6)	2.4	(10.4)
Rail attributable net income from management fee-based TOCs¹ – Group's share of the management fee income available for dividend distribution from GWR, SWR, TPE and WCP contracts	17.5	20.4	42.3
Group central costs (operating profit basis)	(13.9)	(13.7)	(32.5)
Cash interest²	(28.4)	(44.1)	(21.3)
Tax³	4.3	7.2	5.2
Group's Rail management fee-adjusted Attributable (Loss)/Profit	(1.2)	(10.4)	19.9

¹ A reconciliation to the segmental disclosures is set out in note 4.

² Pro forma interest charge excluding notional interest, lease interest on IFRS16 Right of Use assets and interest on discontinued operations.

³ Pro forma taxation at 19%.

Reconciliation to non-GAAP measures and performance

Note 3 to the financial statements sets out the reconciliations of operating profit/(loss) and loss before tax to their adjusted equivalents.

The principal adjusting items in relation to the continuing business are as follows:

Greyhound Canada closure

£3.6m in relation to Greyhound Canada restructuring and closure costs were incurred during the period.

First Rail termination sums

£4.0m credit representing final adjustments of residual matters regarding the TPE and SWR termination sums.

The principal adjusting items in relation to the discontinued operations are as follows:

Other intangible asset amortisation charges

The amortisation charge for the period was £0.4m.

Gain on sale of First Student and First Transit

As a result of the disposal of First Student and First Transit, a gain on sale of £479.4m was realised. This includes a gain of £450.6m as a result of the unrealised translation reserves that have been realised on the disposal of First Student and First Transit. This represents the cumulative foreign currency gains on these businesses since date of original acquisition and arises primarily from the Laidlaw acquisition in 2007 when the US Dollar rate was approximately $2.00:£1. See Note 14 for more details.

Other costs associated with the disposal of First Student and First Transit

£31.5m of costs were incurred in the period associated with the disposal of First Student and First Transit that were not directly attributable to the sale. These are therefore not included in the gain on disposal calculation. These comprise IT and other separation related costs, certain management bonuses and incentives, premium on hedging costs in relation to disposal proceeds, lease termination and certain other costs.

Partial reversal of prior year impairments of Greyhound

As a result of the terms of the disposal of the Greyhound US business, there is a credit of £55.4m representing the partial reversal of the prior years’ impairment charges on tangible fixed assets and intangible assets.

Professional fees relating to Greyhound

During the period there was a charge of £2.9m relating to the sale of Greyhound comprising principally legal and professional costs.

Employment taxes relating to First Student and First Transit

There was a charge of £6.6m during the period due to a one-off charge for accelerated state and federal employment taxes in relation to First Student and First Transit.

North American insurance provisions

During the period there was a charge of £22.4m for insurance costs comprising £11.4m in relation to First Student and First Transit due to a deterioration in respect of prior years’ claims, and a charge of £11.0m for additional provisions required in Greyhound also due to a deteriorating insurance position on prior year claims.

The adjusting items in relation to finance cost adjustments – continuing operations are as follows:

Total make-whole costs (bonds and facilities)

Costs of £50.0m comprise a charge of £30.4m for the early repayment of the $275m US Private Placement (USPP) and a charge of £19.6m for the early repayment of the £325m 2022 Bond.

Write off of unamortised bridge, bond and facility costs

There was a charge of £8.6m for unamortised fees which had been capitalised and were being amortised over the terms of the £325m 2022 Bond, the $275m USPP and various bank facilities, including the £800m RCF and Bridge facilities which were cancelled on completion of the sale of First Student and First Transit.

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 classified as discontinued operations on the face of the income statement and the balance sheet and cash flow statement adjusted accordingly. The transaction was 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.

On 21 October 2021 the Group announced the sale of Greyhound lines Inc. to a wholly owned subsidiary of FlixMobility GmbH. Accordingly, Greyhound US is also classified as discontinued operations and held for sale as at the balance sheet date. Greyhound Canadian operations were not sold but were permanently closed in May 2021. Comparatives for this business are included within continuing operations albeit non-core activities.

Group statutory operating profit

Statutory operating profit from continuing operations was £52.2m (H1 2021: £37.8m) reflecting the £0.4m credit from net adjusting items (compared with £(17.8)m in net adjusting items in H1 2021).

Finance costs and investment income

Net finance costs were £128.0m (H1 2021: £83.7m) with the increase principally due to debt make-whole costs of £50.0m in total in relation to the early settlement of the £325m 2022 bond and the $275m US Private Placement (USPP), partially offset by lower finance costs following the repayment of debt after receipt of the First Student and First Transit disposal proceeds. Net finance costs for FY22 are estimated to be c.£100m including c.£40m in IFRS16 lease interest but excluding debt make-whole costs.

Profit before tax

Adjusted profit before tax as set out in note 3 to the financial statements was £103.7m (H1 2021: loss of £(73.3)m) including discontinued operations. An overall credit of £412.8m (including £58.6m of adjusting items in net finance costs) (H1 2021: charge of £(26.8)m) for adjustments principally reflecting the profit on sale of First Student and First Transit, resulted in a statutory profit before tax of £516.5m (H1 2021: loss of £(100.1)m).

Tax

The tax charge, on adjusted profit before tax including discontinued operations, for the period was £21.6m (H1 2021: credit of £13.5m), There was a tax credit of £24.3m (H1 2021: charge of £1.8m) relating to adjusting items and a one-off tax charge of £5.9m (H1 2021: nil) from adjustments to deferred tax. The total statutory tax charge was £3.2m (H1 2021: credit of £11.7m). The actual tax paid during the period was £12.2m (H1 2021: £0.8m). 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 6.6p (H1 2021: (5.3)p). Basic EPS was 42.4p (H1 2021: (8.3)p).

Shares in issue

As at 25 September 2021 there were 1,215.3m shares in issue (H1 2021: 1,204.7m), excluding treasury shares and own shares held in trust for employees of 7.6m (H1 2021: 16.1m). The weighted average number of shares in issue for the purpose of basic EPS calculations (excluding treasury shares and own shares held in trust for employees) in the period was 1,203.4m (H1 2021: 1,203.3m). Subsequent to the period end, 476.2m shares were acquired pursuant to the tender offer and cancelled. As at 6 December 2021 there were 746.8m shares in issue (excluding treasury shares and own shares held in trust for employees), and as a result the weighted average number of shares in issue at the end of the current financial year (excluding treasury shares and own shares held in trust for employees) is expected to be c.1.1bn.

Adjusted cash flow

Underlying operational cash flow in the period was £113.5m (H1 2021: £763.5m), 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 now anticipates c.£60-65m in capital expenditure net of government grants in FY22, some of which was deferred from the last financial year, and c.£60m in FY23. Cash generated in First Bus includes working capital inflows from CBSSG receipts while First Rail recorded a cash outflow primarily due to timing of ring-fenced cash outflows and losses in the open access operations. The adjusted cash flow is set out below:

	26 weeks to 25 September 2020 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
EBITDA	478.9	465.0	1,169.5
Other non-cash income statement charges	480.6	7.1	9.6
Gain on disposal of subsidiary	(479.4)	-	-
Working capital	(7.6)	290.6	166.1
Movement in other provisions	(20.4)	8.8	72.7
Pension payments in excess of income statement charge	(338.6)	(8.0)	(59.2)
Cash generated by operations	113.5	763.5	1,358.7
Capital expenditure and acquisitions	(142.2)	(134.6)	(391.0)
Proceeds from disposal of property, plant and equipment	3.4	4.4	119.0
Proceeds from disposal of business	2,293.4	-	-
Interest and tax	(167.9)	(81.8)	(152.1)
Lease payments now in debt/other	(395.5)	(353.6)	(675.7)
Adjusted cash flow	1,704.7	197.9	258.9
Foreign exchange movements	(7.9)	9.1	78.5
Inception of new leases	172.4	(150.7)	(210.2)
Lease payments now in debt	378.4	347.6	669.3
Other non-cash movements	144.0	(89.1)	(161.4)
Movement in net debt in the period	2,391.6	314.8	635.1

Capital expenditure

Road cash capital expenditure was £114.5m (H1 2021: £59.0m) and comprised First Student £72.6m (H1 2021: £28.7m), First Transit £21.8m (H1 2021: £18.6m), Greyhound £11.0m (H1 2021: £0.8m), First Bus £8.7m (H1 2021: £10.2m) and Group items £0.4m (H1 2021: £0.7m). First Rail capital expenditure was £25.1m (H1 2021: £70.4m) and is typically matched by receipts from the DfT under the current contractual arrangements or other funding.

In addition, during the period leases in the Road divisions were entered into with capital values in First Student of £8.4m (H1 2021: £24.5m), First Transit of £1.3m (H1 2021: £10.4m), Greyhound of £2.1m (H1 2021: £0.4m) and First Bus of £1.9m (H1 2021: £0.4m) and Group items £0.7m (H1 2021: £0.2m). During the period First Rail entered into leases with a capital value of £26.1m (H1 2021: £54.5).

Gross capital investment (fixed asset and software additions plus the capital value of new leases) was £178.2m (H1 2021: £196.4m) and comprised First Student £94.7m (H1 2021: £110.0m), First Transit £13.5m (H1 2021: £16.1m), Greyhound £12.3m (H1 2021: £1.4m), First Bus £11.9m (H1 2021: £9.7m), First Rail £44.9m (H1 2021: £58.8m) and Group items £0.9m (H1 2021: £0.4m). 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.

Funding and risk management

During the period, the Group sold First Student and First Transit to EQT Infrastructure in July for net cash proceeds of $3,123m and has subsequently reorganised the Group's debt arrangements. On 31 August 2021, the Group announced it had signed a new multi-year £300m sustainability-linked RCF with a group of its relationship banks, which contains customary financial covenants of Net Debt/EBITDA and EBITDA/Net Interest, all as defined within the credit agreement. The new RCF replaced all the Group's former committed syndicated and bilateral banking facilities, which have been repaid and cancelled. The Group also repaid the UK Government's Covid Corporate Financing Facility (CCFF) commercial paper, all of its Private Placement debt and redeemed the £325m bonds due November 2022.

As at the period end, the Group had £1,161.0m of undrawn committed headroom and free cash, being £300.0m (H1 2021: £320.4m) of committed headroom and £861.0m (H1 2021: £645.2m) of net free cash after offsetting overdraft positions.

Subsequent to the period end, the Group completed the tender offer which returned £500m to shareholders and sold Greyhound Lines, Inc. to FlixMobility GmbH in October for initial cash proceeds of £100.9m, received cash proceeds from four Greyhound property sales, recovered funding awards from the ARP relating to losses incurred while Greyhound was under the Group's ownership during the pandemic, as well as rental income and the first tranches of the deferred consideration. As a result, as at 6 December 2021, the Group had £676.4m of undrawn committed headroom and free cash, being £300.0m of committed headroom and £376.4m of net free cash after offsetting overdraft positions.

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 6 December 2021, 73% of our ‘at risk’ UK crude requirements for the current year (0.7m barrels) were hedged at an average rate of $59 per barrel, 63% of our requirements for the year to the end of March 2023 at $63 per barrel, and 14% of our requirements for the year to the end of March 2024 at $75 per barrel.

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:

	26 weeks to 25 September 2021		26 weeks to 26 September 2020		52 weeks to 27 March 2021
	Closing rate	Effective rate	Closing rate	Effective rate	Closing rate	Effective rate
US Dollar	1.37	1.39	1.27	1.30	1.38	1.39
Canadian Dollar	1.73	1.72	1.71	1.72	1.74	1.75

Net debt

The Group’s Adjusted Net (Cash)/Debt at 25 September 2021, which excludes the impact of IFRS 16 and the capitalisation of Right of Use Assets and First Rail ring-fenced cash was £(630.4)m (H1 2021: £1,541.2m). Reported net debt was £234.2m (H1 2021: £2,955.2m) after IFRS 16 and including First Rail ring-fenced cash of £518.3m (H1 2021: £726.0m), as follows:

	25 September 2021			26 September 2020	27 March 2021
Analysis of net debt	Cont. £m	Disc. £m	Total Group £m	Total Group £m	Total Group £m
Sterling bond (2021)	-	-	-	352.7	349.9
Sterling bond (2022)	-	-	-	322.7	323.4
Sterling bond (2024)	199.9	-	199.9	199.8	199.8
CCFF	-	-	-	299.0	298.2
Bank loans and overdrafts	31.4	-	31.4	655.1	620.1
Supplier financing	-	-	-	84.6	159.2
Lease liabilities	1,359.1	63.9	1,423.0	2,265.0	1,972.9
Senior unsecured loan notes	-	-	-	215.0	198.8
Loan notes	0.6	-	0.6	0.7	0.7
Gross debt excluding accrued interest	1,591.0	63.9	1,654.9	4,394.6	4,123.0
Cash	(892.2)	(0.2)	(892.4)	(701.3)	(834.3)
First Rail ring-fenced cash and deposits	(518.3)	-	(518.3)	(726.0)	(638.5)
Other ring-fenced cash and deposits	(10.0)	-	(10.0)	(21.2)	(24.4)
Net debt excluding accrued interest	170.5	63.7	234.2	2,946.1	2,625.8

IFRS 16 lease liabilities – Road	63.5	47.2	110.7	272.1	194.2
IFRS 16 lease liabilities – Rail	1,255.7	-	1,255.7	1,867.9	1,655.8
IFRS 16 lease liabilities – total	1,319.2	47.2	1,366.4	2,140.0	1,850.0

Net (cash)/debt excluding accrued interest (pre-IFRS 16)	(1,148.7)	16.5	(1,132.2)	806.1	775.8

Adjusted Net (Cash)/Debt (pre-IFRS 16 and excluding First Rail ring-fenced cash)	(630.4)	16.5	(613.9)	1,532.1	1,414.3

Under the terms of the First Rail contractual agreements, cash can only be distributed by the TOCs either up to the lower amount of their retained profits or the amount determined by prescribed liquidity ratios. The ring-fenced cash represents that which is not available for distribution or the amount required to satisfy the liquidity ratio at the balance sheet date.

As a result of the tender offer, Greyhound sale and related cash flows subsequent to the period end described previously, the Group's Adjusted Net Cash was £137.3m as at 6 December 2021.

Pensions

We have updated our pension assumptions as at 25 September 2021 for the defined benefit schemes in the UK and North America. The net pension deficit (comprising continued and discontinued operations) of £296m at the beginning of the period moved to a net surplus of £10m at the end of the period principally due to good asset performance and cash contributed to the schemes (including cash payments of £220m to the First Bus Pension Scheme on 26 July 2021 and cash payments to the Greyhound ATU Pension Scheme of $23.8m on 30 March 2021 and $51.2m on 2 August 2021), as well as the disposal of the First Student and First Transit pension arrangements. CAD36.2m was also paid into the Greyhound Canada pensions scheme in the period following closure of the business in May 2021. The main factors that influence the balance sheet position for pensions and the principal sensitivities to their movement at 25 September 2021 are set out below:

	Movement	Impact
Discount rate	+0.1%	Reduce deficit by £38m
Inflation	+0.1%	Increase deficit by £32m
Life expectancy	+1 year	Increase deficit by £90m

The cash contributed to the legacy North American pension plans has enabled us to accelerate our de-risking of these plans, and we are now planning our strategy for terminating and winding-up the plans.

We are seeking to agree valuation results with the Trustees of the UK pension schemes, and agree a strategy for reaching a self-sufficiency funding target. We expect that the schemes should be able to reach the funding target without any further deficit contributions. Funding for a Limited Partnership agreement that was agreed as part of the sale of the North American divisions will be available to the schemes in the event that it is required, but will otherwise be returned to the company if the funding target it met within the agreed timescales.

Balance sheet

Net assets have increased by £45.5m since 27 March 2021. The principal reasons for the increase are profitability in the period, combined with a stronger US dollar at closing on translation of the residual net assets in North America, partially offset by actuarial losses in the pension schemes.

	As at 25 September 2021			As at 26 September 2020	As at 27 March 2021
Balance sheets – Net assets/(liabilities)	Cont. £m	Disc. £m	Total Group £m	Total Group £m	Total Group £m
First Bus	509.4	-	509.4	408.6	328.1
First Rail	777.7	-	777.7	983.9	925.6
Greyhound	(49.0)	136.9	87.9	(102.1)	(54.5)
Discontinued operation – First Student	-	-	-	2,334.5	2,381.1
Discontinued operation – First Transit	-	-	-	359.3	298.0
Divisional net assets	1,238.1	136.9	1,375.0	3,984.2	3,878.3
Group items	53.2	-	53.2	(9.8)	(5.2)
Net debt	(170.5)	(63.7)	(234.2)	(2,955.2)	(2,668.7)
Taxation	5.2	0.4	5.6	(3.0)	(50.3)
Total	1,126.0	73.6	1,199.6	1,016.2	1,154.1

Post-balance sheet events

On 4 October acquired the remaining 50% shareholding in Somerset Passenger Solutions Ltd (SPS) joint venture
On 21 October announced the sale of Greyhound Lines, Inc (see discontinued operations note 14) and completed on the sale on the same day
On 18 November three special resolutions and one ordinary resolution were passed to approve the tender offer to return £500m to shareholders. The tender offer was executed on 2 December
A number of legacy Greyhound properties were sold with proceeds totalling $6.8m (£4.9m)

Going concern

The Directors have carried out a review of the Group’s financial projections for the 18 months to 31 March 2023, with due regard for the risks and uncertainties to which the Group is exposed, the uncertain economic climate and the impact that this could have on trading performance, as described in note 1 to the financial statements. Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the condensed consolidated financial statements have been prepared on the going concern basis in preparing this half-yearly report.

Definitions

Unless otherwise stated, all financial figures for the 26 weeks to 25 September 2021 (the 'first half', the 'period' or 'H1 2022') include the results and financial position of the First Rail business for the period ended 18 September 2021 and the results of all other businesses for the 26 weeks ended 25 September 2021. The figures for the 26 weeks to 26 September 2020 (the 'prior period' or 'H1 2021') include the results and financial position of the First Rail business for the period ended 26 September 2020 and the results and financial position of all other businesses for the 26 weeks ended 26 September 2020. Figures for the 52 weeks to 27 March 2021 (‘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. Results for the 52 weeks to 26 March 2022 ('FY22') will include the results and financial position for First Rail for the year ending 31 March 2022 and the results and financial position of all the other businesses for the 52 weeks ending 26 March 2022.

'Cont.' or the 'Continuing operations' refer to First Bus, First Rail, Greyhound retained assets and liabilities including Greyhound Canada and Group items.

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

References to 'adjusted operating profit', 'adjusted profit before tax', and 'adjusted EPS' throughout this document are before the gain on sale of First Student and First Transit, partial reversal of impairment charges on Greyhound and certain other items as set out in note 3 to the financial statements.

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

The Group's 'Rail management fee-adjusted EBITDA' is First Bus and First Rail EBITDA not from management fee-based TOCs, plus Rail attributable net income from management fee-based TOCs, minus central costs.

The Group's 'Rail management fee-adjusted Attributable Profit' is First Bus and First Rail adjusted operating profit not from management fee-based TOCs, plus Rail attributable net income from management fee-based TOCs, minus central costs, minus cash 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.

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.

For a full summary of the Principal Risks and Uncertainties facing the Group, please refer to the Annual Report and Accounts 2021 at https://www.firstgroupplc.com/investors/annual-report-2021.aspx.

David Martin Ryan Mangold

Executive Chairman Chief Financial Officer

8 December 2021 8 December 2021

Condensed consolidated income statement

	Notes	Unaudited 26 weeks to 25 September 2021 £m	Unaudited 26 weeks to 26 September 2020 (restated) £m	Audited 52 weeks to 27 March 2021 (restated) £m
Revenue	2, 4	2,139.1	2,053.1	4,319.0
Operating costs		(2,086.9)	(2,015.3)	(4,148.0)
Operating profit		52.2	37.8	171.0
Investment income	5	0.3	1.5	1.8
Finance costs	5	(117.0)	(72.8)	(143.7)
(Loss)/profit before tax		(64.5)	(33.5)	29.1
Tax	6	26.4	(0.7)	(3.4)
(Loss)/profit from continuing operations		(38.1)	(34.2)	25.7
Profit/(loss) from discontinued operations	14	551.4	(54.2)	65.4
Profit/(loss) for the period		513.3	(88.4)	91.1
Attributable to:
Equity holders of the parent		510.7	(99.3)	78.4
Non-controlling interests		2.6	10.9	12.7
		513.3	(88.4)	91.1
Earnings per share

Earnings per share for (loss)/profit from continuing operations attributable to the ordinary equity holders of the company
Basic		(3.4)p	(3.7)p	0.8p
Diluted		(3.4)p	(3.7)p	0.8p
Earnings per share for (loss)/profit attributable to the ordinary equity holders of the company
Basic	7	42.4p	(8.3)p	6.5p
Diluted	7	42.4p	(8.3)p	6.4p

Adjusted results (from continuing operations)¹
Adjusted operating profit	3	51.8	55.7	101.4
Adjusted loss before tax		(6.3)	(15.6)	(40.5)
Adjusted EPS	7	(0.4)p	(1.4)p	(3.8)p
Adjusted diluted EPS		(0.4)p	(1.4)p	(3.8)p

¹ Adjusted for certain items as set out in note 3.

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

Prior year restatements are detailed in note 1.

Condensed consolidated statement of comprehensive income

	Unaudited 26 weeks to 25 September 2021 £m	Unaudited 26 weeks to 26 September 2020 (restated) £m	Audited 52 weeks ended 27 March 2021 (restated) £m
Profit/(loss) for the period	513.3	(88.4)	91.1

Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes	(30.7)	(54.2)	(49.3)
Deferred tax on actuarial losses on defined benefit pension schemes	2.7	9.4	15.5
Impact of UK tax rate change on deferred tax on actuarial losses	10.0	-	-
	(18.0)	(44.8)	(33.8)
Items that may be reclassified subsequently to profit or loss
Hedging instrument movements	15.5	(5.1)	16.4
Deferred tax on hedging instrument movements	(3.9)	1.3	(3.6)
Exchange differences on translation of foreign operations – continuing operations	0.6	0.7	1.3
Exchange differences on translation of foreign operations – discontinued operations	(1.7)	(38.8)	(112.2)
Reclassification of foreign currency translation reserve on discontinued operations (see 14(b))	(450.6)	-	-
	(440.1)	(41.9)	(98.1)

Other comprehensive loss for the period	(458.1)	(86.7)	(131.9)

Total comprehensive income/(loss) for the period	55.2	(175.1)	(40.8)
Attributable to:
Equity holders of the parent	52.6	(186.0)	(53.5)
Non-controlling interests	2.6	10.9	12.7
	55.2	(175.1)	(40.8)
Total comprehensive income/(loss)for the period attributable to owners of FirstGroup Plc arises from
Attributable to
Continuing operations	(42.9)	(85.4)	(50.2)
Discontinued operations	98.1	(89.7)	9.4
	55.2	(175.1)	(40.8)

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

Prior year restatements are detailed in note 1.

Condensed consolidated balance sheet

	Note	Unaudited 25 September 2021 £m	Unaudited 26 September 2020 (restated) £m	Audited 27 March 2021 £m
Non-current assets
Goodwill	8	83.9	1,634.3	83.9
Other intangible assets	9	9.9	47.4	16.2
Property, plant and equipment	10	1,973.1	4,294.0	2,443.7
Deferred tax assets		68.1	41.3	35.0
Retirement benefit assets	23	61.2	52.5	52.9
Derivative financial instruments	18	3.0	0.8	1.2
Investments		2.0	38.0	8.3
		2,201.2	6,108.3	2,641.2
Current assets
Inventories		27.6	55.9	29.4
Trade and other receivables	12	912.7	1,062.5	676.7
Current tax assets		0.3	5.4	0.4
Cash and cash equivalents	22	1,420.5	1,448.5	1,438.9
Derivative financial instruments	18	7.4	7.4	14.9
Current assets		2,368.5	2,579.7	2,160.3
Assets held for sale – continuing operations	11	2.4	4.2	11.9
Assets held for sale – discontinued operations	14	288.3	-	3,479.5
		2,659.2	2,583.9	5,651.7
Total assets		4,860.4	8,692.2	8,292.9
Current liabilities
Trade and other payables	13	1,508.1	1,950.0	1,587.6
Tax liabilities – Current tax liabilities		8.4	8.8	14.4
– Other tax and social security		54.8	20.5	34.6
Borrowings	15	593.2	1,372.4	1,326.2
Derivative financial instruments	18	0.8	28.4	11.8
Provisions	19	83.7	395.1	74.4
Current liabilities		2,249.0	3,775.2	3,049.0
Liabilities held for sale – discontinued operations	14	214.7	-	1,136.6
		2,463.7	3,775.2	4,185.6
Net current assets/(liabilities)		119.5	(1,195.5)	(888.7)
Non-current liabilities
Borrowings	15	997.8	3,051.8	2,492.0
Derivative financial instruments	18	-	13.6	1.2
Retirement benefit liabilities	23	51.2	412.4	324.5
Deferred tax liabilities		-	20.4	-
Provisions	19	148.1	402.6	135.5
		1,197.1	3,900.8	2,953.2
Total liabilities		3,660.8	7,676.0	7,138.8
Net assets		1,199.6	1,016.2	1,154.1
Equity

Share capital	20	61.1	61.1	61.1
Share premium		690.5	689.0	689.6
Hedging reserve		6.8	(25.0)	(3.4)
Other reserves		4.6	4.6	4.6
Own shares		(6.4)	(9.8)	(9.0)
Translation reserve		73.0	604.8	524.7
Retained earnings		392.0	(286.3)	(89.6)
Equity attributable to equity holders of the parent		1,221.6	1,038.4	1,178.0
Non-controlling interests		(22.0)	(22.2)	(23.9)
Total equity		1,199.6	1,016.2	1,154.1

Prior year restatements are detailed in note 1.

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

COndensed consolidated statement of changes in equity

	Share capital £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 28 March 2021	61.1	689.6	(3.4)	4.6	(9.0)	524.7	(89.6)	1,178.0	(23.9)	1,154.1
Income for the period	-	-	-	-	-	-	510.7	510.7	2.6	513.3
Other comprehensive loss for the period	-	-	11.6	-	-	(451.7)	(18.0)	(458.1)	-	(458.1)
Total comprehensive income/(loss) for the period	-	-	11.6	-	-	(451.7)	492.7	52.6	2.6	55.2
Shares issued	-	0.9	-	-	-	-	-	0.9	-	0.9
Hedging instrument movements transferred to balance sheet (net of tax)	-	-	(1.4)	-	-	-	-	(1.4)	-	(1.4)
Disposal of non-controlling interest in First Transit	-	-	-	-	-	-	-	-	(0.7)	(0.7)
Movement in EBT and treasury shares	-	-	-	-	2.6	-	(13.4)	(10.8)	-	(10.8)
Share-based payments	-	-	-	-	-	-	2.3	2.3	-	2.3
Balance at 25 September 2021 (unaudited)	61.1	690.5	6.8	4.6	(6.4)	73.0	392.0	1,221.6	(22.0)	1,199.6

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
Loss for the period	-	-	-	-	-	-	(99.3)	(99.3)	10.9	(88.4)
Other comprehensive (loss)/ income for the period	-	-	(3.8)	-	-	(38.1)	(44.8)	(86.7)	-	(86.7)
Total comprehensive (loss)/income for the period	-	-	(3.8)	-	-	(38.1)	(144.1)	(186.0)	10.9	(175.1)
Shares issued	0.1	0.4	-	-	-	-	-	0.5	-	0.5
Hedging instrument movements transferred to balance sheet (net of tax)	-	-	14.4	-	-	-	-	14.4	-	14.4
Reserves reclassification	-	-	(7.3)	-	-	7.3	-	-	-	-
Movement in EBT and treasury shares	-	-	-	-	0.4	-	(5.3)	(4.9)	-	(4.9)
Share-based payments	-	-	-	-	-	-	4.6	4.6	-	4.6
Balance at 26 September 2020 (unaudited)	61.1	689.0	(25.0)	4.6	(9.8)	604.8	(286.3)	1,038.4	(22.2)	1,016.2

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 income/(loss) 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
Hedging instrument movements transferred to balance sheet (net of tax)	–	–	15.2	–	–	–	–	15.2	–	15.2
Reserves reclassification	–	–	(3.1)	–	–	–	3.1	–	–	–
Dividends paid	–	–	–	–	–	–	(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.

Condensed consolidated cash flow statement

	Note	Unaudited 26 weeks to 25 September 2021 £m	Unaudited 26 weeks to 26 September 2020 (restated) £m	Audited 52 weeks 27 March 2021 £m
Cash generated by operations		113.5	763.5	1,358.7
Tax paid		(12.2)	(0.8)	(4.5)
Interest paid		(156.0)	(82.6)	(149.8)
Net cash from operating activities	21	(54.7)	680.1	1,204.4

Investing activities
Interest received		0.3	1.6	2.0
Proceeds from disposal of property and plant and equipment		3.4	4.4	119.0
Purchases of property, plant and equipment		(135.2)	(129.4)	(385.5)
Purchases of software		(4.4)	(3.8)	(4.1)
Net proceeds from disposal of subsidiaries (net of cash disposed)¹		2,293.4	-	-
Acquisition of business		(2.7)	(1.4)	(1.4)
Net cash used in investing activities		2,154.8	(128.6)	(270.0)
Financing activities Shares purchased by Employee Benefit Trust		(17.4)	(4.7)	(4.7)
Shares issued		0.6	-	0.5
Dividends paid to non-controlling shareholders		(0.3)	-	-
Proceeds from CCFF		-	299.0	298.2
Repayments of CCFF		(298.2)	-	-
Proceeds from borrowings		-	115.5	117.7
Repayment of bank facilities		(581.2)	(86.0)	(89.6)
Repayment of bond issues		(675.4)	-	-
Repayment of senior unsecured loans		(200.1)	-	-
Repayment of loan notes		-	(8.7)	(8.7)
Repayments of lease liabilities		(378.3)	(347.5)	(669.2)
Fees for finance facilities		(1.7)	(1.4)	(2.1)
Net cash flow used in financing activities		(2,152.0)	(33.8)	(357.9)
Net (decrease)/increase in cash and cash equivalents before foreign exchange movements		(51.9)	517.7	576.5
Cash and cash equivalents at beginning of period		1,443.4	886.5	886.5
Foreign exchange movements		(3.9)	(15.3)	(19.6)
Cash and cash equivalent at the end of the period		1,387.6	1,388.9	1,443.4

¹ £2,293.4m comprises cash consideration received of £2,377.3m less cash and cash equivalent sold of £83.9m per Note 14 (b).

Cash and cash equivalents are included within current assets on the consolidated balance sheet. Cash and cash equivalents includes ring-fenced cash of £528.3m in H1 2022 (H1 2021: £738.1m; full year 2021: £662.9m). 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 of the Emergency Measures Agreement. In the prior periods, 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	Note	Unaudited 6 months to 26 September 2021 £m	Unaudited 6 months to 25 September 2020 (restated) £m	Audited 52 weeks to 27 March 2021 (restated) £m
Cash and cash equivalents – Balance Sheet		1,420.5	1,448.5	1,438.9
Cash and cash equivalents – Held for Sale		0.2	-	58.3
Cash and cash equivalents – Total operations		1,420.7	1,448.5	1,497.2
Bank overdraft	15	(33.1)	(59.6)	(53.8)
Balances per consolidated cash flow statement		1,387.6	1,388.9	1,443.4

Prior year restatements are detailed in note 1.

Note to the condensed consolidated cash flow statement – reconciliation of net cash to movement in net debt

	Note	Unaudited 26 weeks to 25 September 2021 £m	Unaudited 26 weeks to 26 September 2020 (restated) £m	Audited 52 weeks to 27 March 2021 (restated) £m
Net (decrease)/increase in cash and cash equivalents in period		(51.9)	517.7	576.5
Decrease/(increase) in debt excluding leases		1,756.6	(319.8)	(317.6)
Adjusted cash flow		1,704.7	197.9	258.9
Payment of lease liabilities		378.3	347.6	669.3
(Inception)/termination of leases Fees capitalised against bank facilities and bond issues		172.4 (1.7)	(150.7) 0.1	(210.2) 2.1
Foreign exchange movements		(7.9)	9.1	78.5
Other non-cash movements		145.8	(89.2)	(163.5)
Movement in net debt in period		2,391.6	314.8	635.1
Net debt at beginning of period		(2,625.8)	(3,260.9)	(3,260.9)
Net debt at end of period	22	(234.2)	(2,946.1)	(2,625.8)

Other non-cash movements consist of movements in supplier financing of £159.2m in H1 2022 (H1 2021: £(84.6)m; full year 2021: £(159.2)m) amortisation of debt issue fees of £(12.5)m in H1 2022 (H1 2021: £(1.4)m; full year 2021: £(3.2)m) and other non-cash movements of £(0.9)m in H1 2022 (H1 2021: £(3.2)m; full year 2021: £(1.1)m).

Supplier Financing are amounts due to the principal supplier of school buses in the US and Canada for deliveries of vehicles. As the ageing of these payables exceed 6 months interest starts to be charged and they are subsequently transferred from trade payables to borrowings. On completion of the sale of First Student & First Transit, this liability was transferred to EQT infrastructure.

Management considers that adjusted cash flow is an appropriate measure for assessing the Group cash flow as it is the measure that is used to assess both Group and divisional cash performance against budgets and forecasts. Adjusted cash flow is stated prior to cash flows in relation to debt excluding leases. This is a change and a restatement from the treatment reported in the financial statement for the 52 weeks to 27 March 2021 and for the 26 weeks to 26 September 2020 when adjusted cashflow was stated prior to cash flows in relation to debt and to finance leases.

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

Notes to the half yearly results

1 Basis of preparation

The half yearly results for the 26 weeks to 25 September 2021 include the results and financial position of the First Rail division for the period ended 18 September 2021 and the results and financial position for the other divisions for the 26 weeks ended 25 September 2021. The comparative figures for the 26 weeks to 26 September 2020 include the results and financial position of the First Rail division for the period ended 26 September 2020 and the results and financial position of the other divisions for the 26 weeks ended 26 September 2020.

These half yearly results do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 27 March 2021 were approved by the board of directors on 27 July 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The half yearly results have been reviewed, not audited.

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. FirstGroup plc transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 28 March 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. This condensed consolidated interim financial report for the half-year reporting period for the 26 weeks to 25 September 2021 has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 27 March 2021, which has been prepared in accordance with both “International Accounting Standards in conformity with the requirements of the Companies Act 2006” and “International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union”, and any public announcements made by FirstGroup plc during the interim reporting period.

The accounting policies applied are consistent with those described in the Group’s latest annual audited financial statements, except for a number of amendments to IFRSs which became effective for the financial years beginning on 1 April 2021 and for income tax which at the interim is based on applying expected full year effective tax rates to the interim results. There has been no material change as a result of applying these amendments. We have also included certain non-GAAP measures in order to reflect management’s reported view of financial performance excluding other intangible asset amortisation charges and certain other items.

These results are unaudited but have been reviewed by the auditor. The comparative figures for the 26 weeks to 26 September 2020 are unaudited and are derived from the half-yearly financial report for that period, which was also reviewed by the auditor.

Restatements

The results for the 26 weeks to 26 September 2020 and for the 52 weeks to 27 March 2021 have been restated since they have been split into the results for the continuing operations and the results for the discontinued operations.

The cash and cash equivalents balance and trade and other payables balance at 26 September 2020 has been restated. This restatement is in relation to certain entities in First Transit, which the group controls that were incorrectly excluded from consolidation at 26 September 2020, but were correctly consolidated and included at 27 March 2021. The effect of this restatement is an increase in cash balances of £9.1m and a corresponding increase in payables of £9.1m at 26 September 2020. There is no impact on the consolidated income statement.

Going concern – basis of preparation

The Directors have carried out a review of the Group’s financial projections for the 18 months to 31 March 2023, with due regard for the risks and uncertainties to which the Group is exposed, the uncertain economic climate and the impact that this could have on trading performance. Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the half yearly results have been prepared on the going concern basis in preparing this half-yearly report.

Update since the FY21 results

As noted in the Chief Executive’s review and business reviews, following the sale of First Student, First Transit and Greyhound the Group has repaid the vast majority of the debt (as at half year end in net cash position of £613.9m before Rail ring fenced cash and IFRS16) and partially de-risked the Greyhound legacy liabilities, combined with substantially greater clarity about the resilience of the remaining portfolio.

1 Basis of preparation (continued)

The contractual arrangements in First Rail through the ERMA in Avanti, NRC’s in SWR and TPE and the EMA in GWR, provide confidence in the near-term cash generation of our Rail businesses
In our First Bus division, grant funding for high service levels from the UK government and other contract customers throughout the FY21 pandemic period have demonstrated a commitment to maintaining the essential public transport services the Group operates
Passenger volume levels in First Bus and First Rail have performed broadly in line with 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 and until these services can be run commercially
On 31 August 2021, the Group announced it had signed a new £300m sustainability-linked Revolving Credit Facility (‘RCF’) with a group of its relationship banks. This committed RCF has an initial maturity of four years and remains undrawn
Management has demonstrated the flexibility of our businesses to generate cash flows well within required debt facility and covenant levels since the pandemic struck.

Evaluation of going concern

The Board evaluated whether it was appropriate to prepare the half yearly results 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.

Consistent with prior years, the Board’s going concern assessment is based on a review of future trading projections, including whether banking covenants are likely to be met and whether there is sufficient committed facility headroom to accommodate future cash flows for the going concern period.

Divisional management teams prepared detailed, bottom-up projections for their businesses reflecting the impact of the coronavirus pandemic operating environment, including assumptions on passenger volume recovery and government support arrangements.

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 the easing 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. The base case also includes £500m return of capital to shareholders in December 2021 and substantial de-risking of the Greyhound historic insurance liabilities and pensions liabilities retained by the Group.

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 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 75% of pre-pandemic levels. In First Rail, the downside case assumes reduced TOC performance fee awards and operating losses in Hull Trains and East Coast Open Access. The downside case also assumes a lower net recovery of Greyhound funds post-closing.

Mitigating actions

If the impact on the Group of the pandemic were to be more protracted than assumed in the base case or downside case scenarios, the Group would reduce and defer planned growth capex spend and further reduce costs in line with a lower volume operating environment to the extent that the essential services we operate in Bus 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 and covenant headroom over the going concern period is sufficient for the business needs.

Operating and financial review

The operating and financial review considers the impact of seasonality on the Group and also the principal risks and uncertainties facing it in the remaining six months of the financial year.

1 Basis of preparation (continued)

Summary of significant events in the Group

Significant events in relation to the change in the financial position and performance of the Group:

On 21 July 2021 the Group completed the sale of First Student and First Transit divisions to EQT Infrastructure for net disposal proceeds of $3,194m (excluding earn out). The resultant gain on disposal was £479.4m which includes £450.6m of cumulative foreign exchange gains on these businesses since original acquisition recycled through the Income Statement.

Following the receipt of the proceeds of sale, the Group has completed the reorganisation of the Group's debt arrangements and settled the majority of its outstanding financial indebtedness as set out below:

Debt repayments since completion of sale of Student and Transit	Date	£m	$m	C$m
Bank debt:
China Construction Bank Bilateral	15 July	-	82.5	-
Bridge Facility	23 July	250.0	-	-
RCF Repayments	23 July	-	295.0	-
Caixa Bank Bilateral	26 July	60.0	-	-
RCF Repayment	28 July	70.0	50.0	-
RCF Repayment	3 August	-	-	95.0
		380.0	427.5	95.0

Other debt:
Government CCFF	28 July	299.0	-	-
US Private Placement (inc Make-whole costs (MW))	11 August	-	321.1	-
Bond 6 Repayment (inc MW)	17 September	358.3	-	-
		657.3	321.1	-
Total debt repaid		1,037.3	748.6	95.0

In addition £220m was paid into the First Bus Pension Scheme on 26 July 2021 and $51.2m was paid into the Greyhound ATU Pension Scheme on 2 August 2021.

On 31 August 2021, the Group signed a new multi-year £300m sustainability-linked Revolving Credit Facility ('RCF') with a group of its relationship banks. The new RCF replaced all the Group's former committed syndicated and bilateral banking facilities, which were repaid and cancelled.

In First Rail both TPE and SWR transitioned from Emergency Recovery Measures Agreements to National Rail Contracts during the period.

In First Bus following the end of the CBSSG scheme across England on 30 August 2021, the DfT has introduced a new £204m discretionary Bus Recovery Grant designed to support local bus operators to return to commercial operation during the period 1 September 2021 to 15 March 2022. Each operator will receive a share of the overall funding based on lost revenue and relative mileage.

Greyhound became eligible for Coronavirus Economic Relief for Transportation Services funding during the period. Although the funding was not received until shortly after period end as there was certainty of the arrangements at the balance sheet date a receivable of $84.6m and deferred income of the same amount has been recognised at the balance sheet date.

On 21 October 2021, the Group announced the completion of the sale of Greyhound Lines, Inc. to a wholly-owned subsidiary of FlixMobility GmbH for a cash consideration of $165m. As a result of the disposal there has been a partial reversal of prior years’ impairment charges of £55.4m.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of these half yearly results requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results might differ from these estimates.

In preparing these half yearly results, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 27 March 2021.

This half-yearly report has been prepared in respect of the Group as a whole and accordingly matters identified as being significant or material are so identified in the context of FirstGroup plc and its subsidiary undertakings taken as a whole.

This half-yearly financial report was approved by the Board on 8 December 2021.

2 Revenue

The principal direct fiscal support recognised during the period comprised £920.2m (H1 2021: £1,314.7m; full year 2021: £2,900.7m) of EMA funding in First Rail, £30.3m (H1 2021 £48.4m; full year 2021: £99.7m) of CARES Act 5311(f) and American Rescue Plan Act funding in Greyhound and £127.9m (H1 2021: £180.4m; full year 2021: £266.5m) of CBSSG, concessions and other funding in First Bus. These are recognised within revenue in accordance with IFRS 15 (as per our policy on revenue recognition in the FY2021 Annual Accounts), when control of the good or service is transferred to the customer and the group is entitled to the consideration.

Government grants were obtained in the UK and in North America businesses, through the UK furlough scheme and the CARES and CEWS Acts respectively. There was £7.7m (H1 2021: £55.7m; full year 2021: £95.7m) of CARES and CEWS Act employee retention credits in First Student, £2.8m (H1 2021: £16.7m; full year 2021: £28.9m) in First Transit and £0.2m (H1 2021: £2.6m; full year 2021: £3.2m) in Greyhound accounted for through operating costs, as well as furlough support obtained in the UK. These amounts were recognised as an offset to the related costs when conditions were met and expenses were incurred.

The main direct fiscal support recognised in revenue over time for each division has been as follows:

Greyhound: Subsidy funding was made available under section 5311(f) of the terms of the US CARES Act and under the American Recue Plan Act. These Acts allow Greyhound to claim for losses made from operating intercity bus services in the US after 20 January 2020. The subsidy funding receivable is recognised as other revenue in the period in which the

services are provided and the operational costs are incurred.

First Bus: Funding schemes remain in place across the vast majority of the operation (initially CBSSG and now Bus Recovery Grants (BRGs) in England, CSG-R in Scotland and BES2.0 in Wales). CBSSG, CSG-R and BES2.0 were all in place from the start of the year and take the form of a grant payable to operators to offset any losses incurred from running an agreed level of mileage with CSG-R and BES2.0 likely to remain in place throughout the financial year. CBSSG was replaced by BRG across England on 1 September 2021 with BRG being a more commercially focused scheme than its predecessor which makes fixed payments to operators to run a minimum level of commercial mileage but also gives them the flexibility to make greater levels of adjustments to the network and increase fares to improve its underlying commercial viability.

First Rail: The Emergency Measures Agreements (EMAs), the Emergency Recovery Measures Agreement (ERMAs) and the National Rail Contracts (NRCs) transferred substantially all revenue and substantially all cost risk to the government and for the full period our First Rail franchises were operated under the terms of these arrangements.

EMA in respect of GWR for the full period,
ERMA in respect of WCP / Avanti for the full period
ERMAs for SWR and TPE from 1 April 2021 to 30 May 2021, and the new NRCs from 30 May 2021 to 25 Sept 2021

Under the arrangements, our franchised TOCs are paid a fixed management fee to continue to operate the rail network at a service level agreed with the government. Net DfT funding including the management and performance fee is recognised as revenue in Rail franchise subsidy receipts, in line with the revenue recognition policy for franchise subsidy receipts from the DfT.

Disaggregated revenue by operating segment is set out in note 4.

3 Reconciliation to non-GAAP measures and performance

In measuring the Group and divisional adjusted operating performance, additional financial measures derived from the reported results have been used by management in order to eliminate factors which distort year-on-year comparisons. The Group’s adjusted performance is used to explain year-on-year changes when the effect of certain items are significant, including strategic items (including material M&A and group restructuring projects), costs of acquisitions including aborted acquisitions and impairment of assets. Other items below £5.0m would not normally be considered as adjusting items unless part of a larger strategic project, but items which distort year-on-year comparisons that exceed this amount could potentially be classified as an adjusting item and are assessed on a case by case basis. Such potential adjusting other items include: restructuring and reorganisation costs, property gains or losses, aged legal and self-insurance claims, movements on insurance discount rates, onerous contract provisions and pension settlement gains or losses. In addition, management assess divisional performance before other intangible asset amortisation charges (excluding software amortisation), 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 to adjusted operating profit on a continuing basis	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 (restated)² £m	52 weeks to 27 March 2021 (restated) £m
Operating profit on a continuing basis	52.2	37.8	171.0
Adjustments for:
Other intangible asset amortisation charges	-	0.1	0.2
Strategy costs	-	-	(0.9)
Greyhound Canada closure	3.6	(0.5)	9.5
Impairment of land and buildings	-	-	16.6
Rail termination sums net of impairment reversal	(4.0)	18.3	(95.7)
Loss on disposal of property	-	-	0.7
Total adjusting operating profit items on a continuing basis	(0.4)	17.9	(69.6)
Adjusted operating profit on a continuing basis	51.8	55.7	101.4

26 weeks to 26 September 2020 has been restated to split the results into continuing operations and discontinued operations.

Reconciliation of operating profit/(loss) to adjusted operating profit on a discontinued basis	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 (restated)² £m	52 weeks to 27 March 2021 £m
Operating profit from discontinued operations including gain on sale of First Student and First Transit	592.3
Less Gain on sale of First Student and First Transit	(479.4)
Operating profit/(loss) from discontinued operations	112.9	(54.2)	114.8
Adjustments for:
Other intangible asset amortisation charges	0.4	2.0	3.9
Other costs associated with the disposal of First Student and First Transit	31.5	5.2	-
Partial reversal of prior year impairments of Greyhound	(55.4)	-	-
Professional fees relating to Greyhound	2.9	1.7	-
Employment taxes relating to First Student and First Transit	6.6	-	-
Strategy costs	-	-	28.9
Gain on disposal of property	-		(71.8)
North America insurance provisions	22.4	-	32.2
Total adjusting operating profit items from discontinued operations	8.4	8.9	(6.8)
Adjusted operating profit from discontinued operations	121.3	(45.3)	108.0

Reconciliation of profit/(loss) before tax to adjusted (loss)/profit before tax	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 (restated)² £m	52 weeks to 27 March 2021 £m
Profit/(loss) before tax (including discontinued operations)³	516.5	(100.1)	115.8
Adjusting operating profit items – continuing operations	(0.4)	17.9	(69.6)
Adjusting operating profit items – discontinued operations	8.4	8.9	(6.8)
Gain on sale of First Student and First Transit	(479.4)	-	-
Adjusting operating profit items – total operations	(471.4)	26.8	(76.4)
Adjusting finance cost items – continuing operations	58.6	-	-
Adjusted profit/(loss) before tax including discontinued operations	103.7	(73.3)	39.4
Adjusted tax credit/(charge)	(21.6)	13.5	(4.2)
Non-controlling interests¹	(2.6)	(3.8)	(6.1)
Adjusted earnings including discontinued operations	79.5	(63.6)	29.1

Statutory non-controlling interests principally reflects Avanti West Coast and South Western Rail. Adjusted non-controlling interests of £nil in H1 2022 (H1 2021: £7.1m; full year 2021: £6.6m) relate to termination sums and other adjustments at South Western Rail.
The prior periods the 26 weeks to 26 September 2020 and the 52 weeks to 27 March 2021 have been restated to split the results into continuing operations and discontinued operations.
See note 4.

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

The principal adjusting items in relation to the operating profit adjustments - continuing business are as follows:

Greyhound Canada closure

Costs of £3.6m in relation to Greyhound Canada restructuring and closure costs were incurred during the period.

Rail termination sums

A £4.0m credit which represents the final adjustments in relation to residual maters in relation to TPE and SWR termination sums.

The principal adjusting items in relation to the operating profit adjustments - discontinued operations are as follows:

Other intangible asset amortisation charges

The amortisation charge for the period was £0.4m.

Gain on sale of First Student and First Transit

As a result of the disposal of First Student and First Transit on 21 July 2021, a gain on sale of £479.4m was realised. This includes a gain of £450.6m as a result of the unrealised translation reserves that have been realised on the disposal of First Student and First Transit. This represents the cumulative foreign currency gains on these businesses since date of original acquisition and arises primarily from the Laidlaw acquisition in 2007 where the US Dollar rate was approximately $2.00. See note 14 for more details.

Other costs associated with the disposal of First Student and First Transit

Costs of £31.5m were incurred during the period which are associated with the disposal of First Student and First Transit but not directly attributable to the sale. These costs are therefore not included in the gain on disposal calculation. These comprise IT and other separation related costs, certain management bonuses and incentives, premium on hedging costs in relation to disposal proceeds, lease termination costs and certain other costs.

Partial reversal of prior year impairments of Greyhound

As a result of the terms of the disposal of the Greyhound US business on 21 October 2021, there is a credit of £55.4m representing the partial reversal of the prior years’ impairment charges on tangible fixed assets and intangible assets.

Professional fees relating to Greyhound

During the period there was a charge of £2.9m relating to the sale of Greyhound comprising principally legal and professional costs.

Employment taxes relating to First Student and First Transit

There was a charge of £6.6m during the period due to a one-off charge for accelerated State and Federal Employment Taxes in relation to First Student and First Transit.

North America insurance provisions

During the period there was a charge of £22.4m for insurance costs comprising £11.4m in relation to First Student and First Transit due to a deterioration in respect of prior years’ claims as the transportation industry continued to deal with substantial insurance cost increases driven by the continued escalation in higher value claims, and a charge of £11.0m for additional provisions required in Greyhound also due to a deteriorating position.

The adjusting items in relation to the finance costs adjustments - continuing operations are as follows:

For all of these costs the comparatives for H1 2021 and the full year 2021 were nil.

Total make-whole costs (bonds and facilities)

Costs of £50.0m comprise a charge of £30.4m for the early repayment of the $275m US Private Placement (USPP) and a charge of £19.6m for the early repayment of the £325m 2022 Bond.

Write off of unamortised bridge, bond and facility costs

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

Reconciliation of constant currency including discontinued operations¹

		26 weeks to 26 September 2020
	26 weeks to 25 September 2021 £m	Reported (restated) £m	Effect of foreign exchange £m	Constant Currency £m	% change
Revenue	3,109.7	3,101.6	(84.2)	3,017.4	+3.1%
Adjusted operating profit	173.1	10.4	13.0	23.4	+639.7%
Adjusted profit/(loss) before tax	103.7	(73.3)	17.6	(55.7)	+286.2%
Adjusted EPS	6.6p	(5.3)p	1.2p	(4.1)p	+261.0%
Net debt	234.2	2,946.1	(55.4)	2,890.7	(91.9)%

¹ Changes ‘in constant currency’ throughout this document are based on retranslating H1 2021 foreign currency amounts at H1 2022 rates

Net debt as at 26 September 2020 has been restated and reduced by £9.1m at 26 September 2020, as cash balances relating to companies under the control of First Transit had not been recognised in prior periods.

4 Business segments 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 were categorised as Discontinued Operations at 27 March 2021 and the sale of these completed on 21 July 2021. Greyhound was categorised as Discontinued Operations at 25 September 2021 and the sale of this completed on 21 October 2021.The divisions are managed separately in line with the differing services that they provide and the geographical markets which they operate in. There is a clear distinction between each division and no judgement is required to identify each reportable segment.

The segment results for the 26 weeks to 25 September 2021 are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Grey- hound £m	Group Items¹ £m	Continuing Operations £m	First Student £m	First Transit £m	Grey- hound £m	Group Items¹ £m	Total £m
Passenger revenue	266.3	699.2	-	-	965.5	-	-	132.6	-	1,098.1
Contract revenue	32.9	-	-	-	32.9	450.3	203.2	-	-	686.4
Charter/private hire	-	-	-	-	-	21.8	0.1	0.8	-	22.7
Rail franchise subsidy receipts	-	948.4	-	-	948.4	-	-	-	-	948.4
Other	93.3	99.0	-	-	192.3	7.4	96.4	58.0	-	354.1
Revenue	392.5	1,746.6	-	-	2,139.1	479.5	299.7	191.4	-	3,109.7
Adjusted EBITDA²	55.5	304.2	(0.2)	(12.2)	347.3	88.2	20.7	22.7	-	478.9
Depreciation	(30.3)	(302.5)	(0.2)	(1.3)	(334.3)	-	-	(10.5)	-	(344.8)
Software amortisation	(0.7)	(0.8)	-	(0.3)	(1.8)	-	-	(0.4)	-	(2.2)
Capital grant amortisation	2.3	38.3	-	-	40.6	-	-	0.6	-	41.2
Segment results	26.8	39.2	(0.4)	(13.8)	51.8	88.2	20.7	12.4	-	173.1
Other intangible asset amortisation charges	-	-	-	-	-	-	-	(0.4)	-	(0.4)
Other adjustments (note 3)	-	4.0	(3.6)	-	0.4	(14.8)	(6.5)	44.0	448.7	471.8
Operating profit/(loss)³	26.8	43.2	(4.0)	(13.8)	52.2	73.4	14.2	56.0	448.7	644.5
Investment income	-	0.2	-	0.1	0.3	-	-	-	-	0.3
Finance costs⁴	(1.3)	(20.8)	(0.7)	(94.2)	(117.0)	(7.5)	(0.7)	(3.1)	-	(128.3)
Profit/(loss) before tax	25.5	22.6	(4.7)	(107.9)	(64.5)	65.9	13.5	52.9	448.7	516.5
Tax										(3.2)
Profit after tax										513.3

1 Group items comprise central management and other items.

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

3 Although the segment results are used by management to measure performance, statutory operating profit by operating division is also disclosed for

completeness.

4 Finance costs under Group items include £58.6m of adjusting items for total make-whole costs (bonds and facilities) and for the write off of unamortised bridge, bond and facility costs (see note 3).

4 Business segments information (continued)

Balance sheet at 25 September 2021	Total assets £m	Total liabilities £m	Net assets/(liabilities) £m
Greyhound Retained	107.5	(156.5)	(49.0)
First Bus	710.7	(201.3)	509.4
First Rail	2,093.7	(1,316.0)	777.7
	2,911.9	(1,673.8)	1,238.1
Group items	171.3	(118.1)	53.2
Borrowings and Cash	1,420.5	(1,591.0)	(170.5)
Taxation	68.4	(63.2)	5.2
Total	4,572.1	(3,446.1)	1,126.0
Greyhound (held for sale)²	287.7	(150.8)	136.9
Borrowings and Cash¹	0.2	(63.9)	(63.7)
Taxation	0.4	-	0.4
Total	288.3	(214.7)	73.6
Grand total	4,860.4	(3,660.8)	1,199.6

¹ Net debt includes lease liabilities recognised under IFRS 16 of £1,423.0m and comprises Greyhound £75.6m, First Bus £84.6m, First Rail £1,255.7m and Group items £7.1m.

² Greyhound US is classified as held for sale at 25 September 2021 and shown as such in the Condensed Consolidated Balance Sheet .

The segment results for the 26 weeks to 26 September 2020 (restated)⁴ are as follows:

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Grey-hound £m	Group Items¹ £m	Continuing Operations £m	First Student £m	First Transit £m	Grey-hound £m	Group Items¹ £m	Total £m
Passenger revenue	182.2	314.2	0.2	-	496.6	-	-	88.9	-	585.5
Contract revenue	19.3	8.3	-	-	27.6	393.2	401.4	-	-	822.2
Charter/private hire	-	-	-	-	-	5.6	0.3	1.0	-	6.9
Rail franchise subsidy receipts	-	1,347.3	-	-	1,347.3	-	-	-	-	1,347.3
Other revenues²	109.5	72.1	-	-	181.6	5.6	82.8	69.7	-	339.7
Revenue	311.0	1,741.9	0.2	-	2,053.1	404.4	484.5	159.6	-	3,101.6
Adjusted EBITDA³	48.1	333.8	(7.1)	(11.9)	362.9	65.0	30.9	6.2	-	465.0
Depreciation	(33.7)	(275.6)	(0.3)	(1.5)	(311.1)	(113.6)	(16.3)	(13.1)	-	(454.1)
Software amortisation	(0.7)	(0.4)	-	(0.3)	(1.4)	(1.7)	(1.2)	(2.0)	-	(6.3)
Capital grant amortisation	3.7	1.6	-	-	5.3	-	-	0.5	-	5.8
Segment results	17.4	59.4	(7.4)	(13.7)	55.7	(50.3)	13.4	(8.4)	-	10.4
Other intangible asset amortisation charges	-	-	(0.1)	-	(0.1)	(1.5)	-	(0.5)	-	(2.1)
Other adjustments (note 3)	-	(18.3)	0.5	-	(17.8)	-	-	-	(6.9)	(24.7)
Operating (loss)/profit³	17.4	41.1	(7.0)	(13.7)	37.8	(51.8)	13.4	(8.9)	(6.9)	(16.4)
Investment income	-	1.3	-	0.2	1.5	0.1	-	-	-	1.6
Finance costs	(1.2)	(29.1)	(0.4)	(42.1)	(72.8)	(7.9)	(1.2)	(3.4)	-	(85.3)
(Loss)/profit before tax	16.2	13.3	(7.4)	(55.6)	(33.5)	(59.6)	12.2	(12.3)	(6.9)	(100.1)
Tax										11.7
Loss after tax										(88.4)

¹ Group items comprise central management and other items.

² Other revenue principally includes: First Transit - management revenue, reimbursable costs and some of the COVID-19 relief revenue from customers to cover fixed costs; Greyhound - £48.4m of CARES Act 5311(f) funding; First Bus - £109.5m of CBSSG/CSG funding; First Rail - includes Emergency Measurements Agreement management and performance fees, other industry funded projects and other contractual services with third party rail operators.

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

⁴ The prior period, comprising the 26 weeks to 26 September 2020 has been restated to split the results into continuing operations and discontinued operations.

4 Business segments information (continued)

Balance sheet at 26 September 2020	Total assets (restated) £m	Total liabilities (restated) £m	Net assets/(liabilities) £m
First Student	2,924.7	(590.2)	2,334.5
First Transit	640.8	(281.5)	359.3
Greyhound	272.8	(374.9)	(102.1)
First Bus	746.4	(337.8)	408.6
First Rail	2,533.9	(1,550.0)	983.9
	7,118.6	(3,134.4)	3,984.2
Group items	87.5	(97.3)	(9.8)
Net debt¹	1,439.4	(4,394.6)	(2,955.2)
Taxation	46.7	(49.7)	(3.0)
Total	8,692.2	(7,676.0)	1,016.2

Total assets and total liabilities at 26 September 2020 have been restated. This restatement is in relation to certain entities, in First Transit, which the group controls that were incorrectly excluded from consolidation in prior years. The effect of the restatement is to increase the cash balances by £9.1m and to increase the payables by £9.1m at 26 September 2020.

¹ Net debt includes lease liabilities recognised under IFRS 16 of £2,140.0m and comprises First Student £105.9m, First Transit £35.9m, Greyhound £68.9m, First Bus £53.4m, First Rail £1,868.0m and Group items £7.9m.

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

	Continuing Operations					Discontinued Operations
	First Bus £m	First Rail £m	Grey-hound £m	Group Items¹ £m	Continuing Operations £m	First Student £m	First Transit £m	Grey-hound £m	Group Items¹ £m	Total £m
Passenger revenue	383.1	537.7	0.2	-	921.0	-	-	179.1	-	1,100.1
Contract revenue	46.5	-	-	-	46.5	1,191.8	867.1	-	-	2,105.4
Charter/private hire	-	-	-	-	-	18.1	0.6	1.3	-	20.0
Rail franchise subsidy receipts	-	2,905.9	-	-	2,905.9	-	-	-	-	2,905.9
Other	269.3	176.3	-	-	445.6	16.3	109.3	142.4	-	713.6
Revenue	698.9	3,619.9	0.2	–	4,319.0	1,226.2	977.0	322.8	-	6,845.0
Adjusted EBITDA²	100.8	711.1	(9.4)	(29.1)	773.4	282.6	87.1	26.4	-	1,169.5
Depreciation	(68.7)	(607.9)	(1.4)	(2.8)	(680.8)	(223.6)	(32.9)	(24.8)	-	(962.1)
Software amortisation	(1.4)	(1.4)	-	(0.6)	(3.4)	(3.2)	(2.5)	(2.2)	-	(11.3)
Capital grant amortisation	5.9	6.3	-	-	12.2	-	-	1.1	-	13.3
Segment results	36.6	108.1	(10.8)	(32.5)	101.4	55.8	51.7	0.5	-	209.4
Other intangible asset amortisation charges	-	-	(0.2)	-	(0.2)	(3.0)	-	(0.9)	-	(4.1)
Other adjustments (note 3)	(5.8)	95.7	(10.1)	(10.0)	69.8	9.3	(31.2)	63.1	(30.5)	80.5
Operating profit/(loss)³	30.8	203.8	(21.1)	(42.5)	171.0	62.1	20.5	62.7	(30.5)	285.8
Investment income	-	1.6	-	0.2	1.8	0.2	-	-	-	2.0
Finance costs	(2.6)	(55.7)	(1.1)	(84.3)	(143.7)	(17.8)	(3.4)	(7.1)	-	(172.0)
Profit/(loss)before tax	28.2	149.7	(22.2)	(126.6)	29.1	44.5	17.1	55.6	(30.5)	115.8
Tax										(24.7)
Profit after tax										91.1

1 Group items comprise central management and other items.

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

3 Although the segment results are used by management to measure performance, statutory operating profit by operating division is also disclosed for completeness.

4 Business segments information (continued)

Balance sheet at 27 March 2021	Total assets £m	Total liabilities £m	Net assets/(liabilities) £m
Greyhound	266.1	(320.6)	(54.5)
First Bus	732.1	(404.0)	328.1
First Rail	2,272.0	(1,346.4)	925.6
	3,270.2	(2,071.0)	1,199.2
Group items	68.9	(107.0)	(38.1)
Borrowings and Cash	1,438.9	(3,775.3)	(2,336.4)
Taxation	35.4	(48.9)	(13.5)
Total	4,813.4	(6,002.2)	(1,188.8)
First Student	2,848.6	(467.5)	2,381.1
First Transit	572.2	(274.2)	298.0
Group	-	(10.0)	(10.0)
Borrowings and Cash ¹	58.3	(347.7)	(289.4)
Taxation	0.4	(37.2)	(36.8)
Total	3,479.5	(1,136.6)	2,342.9
Grand total	8,292.9	(7,138.8)	1,154.1

1 Segment assets and liabilities are determined by identifying the assets and liabilities that relate to the business of each segment but excluding intercompany balances, net debt and taxation.

2 First Student and First Transit were classified as held for sale at 27 March 2021 and shown as such in the Condensed Consolidated Balance Sheet.

Reconciliation to Group Rail management fee-adjusted EBITDA and operating profit

First Bus EBITDA comprises:

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Pre-IFRS16 EBITDA	47.6	39.9	84.5
IFRS16 adjustments¹	7.9	8.2	16.3
First Bus adjusted EBITDA per segmental results table above	55.5	48.1	100.8

First Rail EBITDA comprises:

Non-management fees based TOCs	(7.4)	2.0	(8.9)
Group’s share of management fee income available for dividends (net of tax and minority interest)	17.5	20.4	42.3
Tax	4.7	5.8	11.8
Minority interest	2.8	4.2	7.9
Depreciation relating to contracted TOCs	2.9	2.6	30.9
Pre-EMA/ERMA and other adjustments	4.1	10.3	18.6
IFRS16 adjustments¹	279.6	288.5	608.6
First Rail adjusted EBITDA per segmental results table above	304.2	333.8	711.2

Group items EBITDA comprises:

Pre-IFRS16 EBITDA	(13.0)	(12.9)	(30.8)
IFRS16 adjustments¹	0.8	1.0	1.7
Group items adjusted EBITDA per segmental results table above	(12.2)	(11.9)	(29.1)

First Rail adjusted operating profit comprises:

Non-management fees based TOCs	(7.6)	2.4	(10.4)
Group’s share of management fee income available for dividends (net of tax and minority interest)	17.5	20.4	42.3
Tax	4.7	5.8	11.8
Minority interest	2.8	4.2	7.9
Pre-EMA/ERMA and other adjustments	4.1	10.3	18.6
IFRS16 adjustments/other¹	17.7	16.3	37.9
First Rail adjusted operating profit per segmental results table above	39.2	59.4	108.1

¹ IFRS 16 adjustments to EBITDA principally reflect the add back of operating lease rental costs charged to the income statement before the adoption of IFRS 16. IFRS 16 adjustments to operating profit reflect operating lease rental costs less depreciation charges on Right of Use Assets.

5 Investment income and finance costs

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Investment income
Bank interest receivable	(0.3)	(1.6)	(2.0)
Finance costs
Bonds	15.4	27.5	55.8
Bank borrowings	14.9	9.2	15.7
Total make-whole costs (bonds and facilities)	50.0	-	-
Write off of unamortised bridge, bond and facility costs	8.6	-	-
Senior unsecured loan notes	3.2	4.7	9.1
CCFF funding	-	0.9	2.0
Supplier financing	-	-	3.0
Loan notes	-	-	0.1
Finance charges payable in respect of leases	24.6	36.7	73.1
Notional interest on long term provisions	3.4	2.5	3.8
Notional interest on pensions	5.8	3.8	9.0
Notional interest - other	2.4	-	0.4
Total finance costs (including discontinued operations)	128.3	85.3	172.0

Total finance costs	128.3	85.3	172.0
Investment income	(0.3)	(1.6)	(2.0)
Net finance costs (including discontinued operations)	128.0	83.7	170.0

Split:
Adjusted net finance costs	69.4	83.7	170.0
Other adjustments (note 3)	58.6	-	-
	128.0	83.7	170.0

Investment income of £nil in H1 2022 (H1 2021: £0.1m; full year 2021: £0.2m) and finance costs of £11.3m (H1 2021: £12.5m; full year 2021: £28.3m) relate to discontinued operations (note 14).

6 Tax on profit on ordinary activities

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Current tax charge	1.8	6.6	22.7
Deferred tax charge/(credit)	1.4	(18.3)	2.0
Total tax charge/(credit) (including discontinued operations)	3.2	(11.7)	24.7

The tax charge is reduced by a credit of £4.3m to reflect that the change in the UK tax rate to 25% from 2023 has been substantively enacted.

Tax charge/(credit) attributable to:
(Loss)/profit from continuing operations	(26.4)	0.7	3.4
Profit/(loss) from discontinued operations	29.6	(12.4)	21.3

The tax effect of the adjustments disclosed in note 3 was a credit of £24.3m in H1 2022 (H1 2021: charge of £1.8m; full year 2021: charge of £30.6m). In addition, there were further adjustments to brought forward tax balances giving rise to a net charge of £5.9m (H1 2021: nil ; full year 2021: credit of £10.1m),.

7 Earnings per share (EPS)

EPS is calculated by dividing the profit attributable to equity shareholders of £510.7m in H1 2022 (H1 2021: loss £99.3m; full year 2021: profit £78.4m) by the weighted average number of ordinary shares in issue of 1,203.4m (H1 2021: 1,203.3m; full year 2021: 1,203.6m). 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.

	25 September 2021 number m	26 September 2020 number m	27 March 2021 number m
Weighted average number of shares used in basic calculation	1,203.4	1,203.3	1,203.6
Executive share options¹	-	-	27.9
Weighted average number of shares used in the diluted calculation	1,203.4	1,203.3	1,231.5

The adjusted EPS is intended to highlight the recurring results of the Group before amortisation charges and certain other adjustments as set out in note 3. A reconciliation is set out below:

	26 weeks to 25 September 2021		26 weeks to 26 September 2020 (restated)²		52 weeks to 27 March 2021
	£m	EPS (p)	£m	EPS (p)	£m	EPS (p)
Basic profit/(loss) / EPS	510.7	42.4	(99.3)	(8.3)	78.4	6.5
Amortisation charges (note 3)	0.4	-	2.1	0.2	4.1	0.3
Finance cost adjustments (note 3)	58.6	4.9	-	-	-	-
Other adjustments (note 3)	(471.8)	(39.2)	24.7	2.1	(80.5)	(6.8)
NCI on SWR (note 3)	-	-	7.1	0.6	6.6	0.6
Tax effect of above adjustments	(24.3)	(2.0)	1.8	0.1	30.6	2.5
Other adjustments to deferred tax assets	5.9	0.5	-	-	(10.1)	(0.8)
Adjusted profit/(loss) and EPS attributable to the ordinary equity holders of the company	79.5	6.6	(63.6)	(5.3)	29.1	2.3
Adjusted profit/(loss) from discontinued operations	84.4	7.0	(46.6)	(3.9)	74.0	6.1
Adjusted loss EPS from continuing operations	(4.9)	(0.4)	(17.0)	(1.4)	(44.9)	(3.8)

	26 weeks to 25 September 2021 pence	26 weeks to 26 September 2020 (restated) pence	52 weeks to 27 March 2021 pence
Diluted EPS	42.4	(8.3)	6.4
Adjusted diluted EPS	6.6	(5.3)	2.4

¹ For the period ended 26 weeks to 25 September 2021 and 26 September 2020 the loss from continuing operations make the executive share options anti-dilutive and therefore have not been included in these periods.

² The prior period the 26 weeks to 26 September 2020 has been restated to split the results into continuing operations and discontinued operations.

8 Goodwill and impairment of assets

	£m
Cost
At 28 March 2021	347.7
Transfers to assets held for sale – discontinued operations	(266.1)
Foreign exchange movements	2.3
At 25 September 2021	83.9

Accumulated impairment losses At 28 March 2021 Transfers to assets held for sale – discontinued operations	263.8 (266.1)
Foreign exchange movements	2.3
At 25 September 2021	-

Carrying amount
At 25 September 2021	83.9
At 27 March 2021	83.9
At 26 September 2020	1,634.3

Goodwill transferred to held for sale – discontinued operations on 25 September 2021 in relation to Greyhound is shown in the table above. On 27 March 2021 goodwill of £1,442.0m (26 September 2020: £nil) was transferred to held for sale - discontinued operations in relation to First Student and First Transit. See note 14.

Disclosures including goodwill by cash generating unit (CGU), details of impairment testing and sensitivities thereon are set out on pages 177 to 179 of the 2021 Annual Report.

First Bus

At 25 September 2021 we have revisited the First Bus impairment testing and concluded there are no indicators of impairment since March 2021. Therefore no adjustment to the carrying value of First Bus is required at 25 September 2021.

Hull Trains

At 25 September 2021 we have revisited the Hull Trains impairment testing and concluded there are no indicators of impairment since March 2021. Therefore no adjustment to the carrying value of Hull Trains is required at 25 September 2021.

Greyhound

For the 52 weeks ending 27 March 2021 the value of the Greyhound CGU was assessed on a fair value less costs to sell basis for the purposes of the impairment review, which was consistent with the intention to divest of the business and this represents the recoverable amount in accordance with IAS36 . The CGU valuation on a fair value less costs to sell basis was assessed as a Level 3 fair value in the hierarchy as defined by IFRS 13, assessing the value of a stand-alone Greyhound business using a discounted cash flow approach.

A risk adjusted view of the discounted future cash flows for the next three years, including £180.7m of net property disposal proceeds, was prepared to determine the potential value that a market participant may ascribe to the Greyhound CGU. A long-term revenue growth rate of 1.0% (2020 1.0%) and terminal margin of 5% (2020: 5.4%) on a stand-alone CGU basis has been assumed. Cash flows are discounted using a pre-tax discount rate of 11.2% (March 2020: 9.7%).

On this basis the fair value less costs to sell of Greyhound exceeded its carrying value by £57.6m, therefore no additional impairment was required at 27 March 2021. An impairment reversal was not recognised due to uncertainties caused by coronavirus. Greyhound was not classified as held for sale at that time since there was not enough probability that the sale would complete within one year.

At 25 September 2021 we have revisited the Greyhound CGU impairment testing and concluded there are no indicators of impairment since March 2021. The actual net proceeds from the disposal of the Greyhound US business on 21 October 2021 represent the FVLCTS of the business and indicate that the prior year impairment losses on Greyhound have decreased. A credit of £55.4m represents the partial reversal of the prior year impairments on Greyhounds intangible (£4.2m) and tangible assets (owned £37.4m, right of use assets £13.8m) and is included in non-Gaap items in the 26 weeks to 25 September 2021 in note 3.

9 Other intangible assets

	Customer contracts £m	Greyhound brand and trade name £m	Software £m	Total £m
Cost
At 28 March 2021	-	68.4	60.1	128.5
Additions	-	-	3.6	3.6
Disposals	-	-	(0.3)	(0.3)
Transferred to held for sale – discontinued operations	-	(55.6)	(38.0)	(93.6)
Foreign exchange movements	-	0.5	0.5	1.0
At 25 September 2021	-	13.3	25.9	39.2

Accumulated amortisation and impairment
At 28 March 2021	-	60.8	51.5	112.3
Charge for the period	-	0.2	2.0	2.2
Disposals	-	-	(0.3)	(0.3)
Impairment	-	1.6	-	1.6
Impairment reversal	-	(3.4)	(0.8)	(4.2)
Transferred to held for sale – discontinued operations	-	(46.3)	(36.8)	(83.1)
Foreign exchange movements	-	0.4	0.4	0.8
At 25 September 2021	-	13.3	16.0	29.3

Carrying amount
At 25 September 2021	-	-	9.9	9.9
At 27 March 2021	-	7.6	8.6	16.2
At 26 September 2020	19.5	8.8	19.1	47.4

The impairment of £1.6m relates to the impairment of the Greyhound trading name.

Other assets transferred to held for sale – discontinued operations on 25 September 2021 in relation to Greyhound are shown in the table above. On 27 March 2021 other intangible assets of £21.8m (26 September 2020: £nil) were transferred to held for sale - discontinued operations in relation to First Student and First Transit. See note 14.

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 28 March 2021	275.4	1,026.9	634.6	1,936.9
Additions	5.2	15.6	15.4	36.2
Transferred to held for sale – discontinued operations	(35.9)	(289.3)	(65.6)	(390.8)
Disposals	(1.6)	(34.6)	(2.7)	(38.9)
Reclassified as held for sale – continuing operations	(0.4)	-	-	(0.4)
Foreign exchange movements	0.6	2.5	0.5	3.6
At 25 September 2021	243.3	721.1	582.2	1,546.6

Accumulated depreciation and impairment
At 28 March 2021	77.5	720.2	389.9	1,187.6
Transferred to held for sale – discontinued operations	(17.2)	(214.0)	(59.0)	(290.2)
Charge for period	3.4	22.7	42.6	68.7
Disposals	(0.9)	(35.3)	(2.6)	(38.8)
Impairment reversal	-	(34.8)	(2.6)	(37.4)
Reclassified as held for sale – continuing operations	-	-	-	-
Foreign exchange movements	0.3	2.4	0.5	3.2
At 25 September 2021	63.1	461.2	368.8	893.1

Carrying amount
At 25 September 2021	180.2	259.9	213.4	653.5
At 27 March 2021	197.9	306.7	244.7	749.3
At 26 September 2020	347.2	1,513.7	237.5	2,098.4

Right of use assets

	Rolling stock £m	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Cost
At 28 March 2021	2,597.4	115.7	145.1	6.9	2,865.1
Additions	26.1	1.7	1.6	0.8	30.2
Disposals	(101.7)	(0.4)	(0.6)	-	(102.7)
Transferred to held for sale – discontinued operations	-	(62.0)	(41.6)	(0.3)	(103.9)
Foreign exchange movements	-	0.5	0.4	-	0.9
At 25 September 2021	2,521.8	55.5	104.9	7.4	2,689.6

Accumulated depreciation and impairment
At 28 March 2021	1,059.6	61.4	45.9	3.9	1,170.8
Charge for period	259.4	6.8	8.6	0.7	275.5
Disposals	(7.3)	(0.2)	(0.4)	-	(7.9)
Impairment reversal	-	(10.4)	(3.4)	-	(13.8)
Transferred to held for sale – discontinued operations	-	(38.2)	(16.6)	(0.3)	(55.1)
Foreign exchange movements	-	0.4	0.1	-	0.5
At 25 September 2021	1,311.7	19.8	34.2	4.3	1,370.0

Carrying amount
At 25 September 2021	1,210.1	35.7	70.7	3.1	1,319.6
At 27 March 2021	1,537.8	54.3	99.2	3.0	1,694.3
At 26 September 2020	1,827.3	166.2	198.7	3.4	2,195.6

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

At 25 September 2021 the Group had entered into contractual capital commitments amounting to £134.7m, principally representing buses ordered in the United Kingdom and commitments under South Western Railway, Avanti West Coast Railway and East Coast Railway.

10 Property, plant and equipment (continued)

	Rolling stock £m	Land and buildings £m	Passenger carrying vehicle fleet £m	Other plant and equipment £m	Total £m
Carrying amount
At 25 September 2021	1,210.1	215.9	330.6	216.5	1,973.1
At 27 March 2021	1,537.9	252.2	405.9	247.7	2,443.7
At 26 September 2020	1,827.3	513.4	1,712.4	240.9	4,294.0

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

Property, plant and equipment and right of use assets transferred to held for sale – discontinued operations on 25 September 2021 in relation to Greyhound are shown in the tables above. On 27 March 2021 property plant and equipment in total of £1,357.2m (comprising owned assets of £1,178.1m and right of use assets of £179.1m) (26 September 2020: £nil) were transferred to held for sale - discontinued operations in relation to First Student and First Transit. See note 14.

Amounts recognised in income statement (including discontinued operations)	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Depreciation expense on right of use assets	275.5	308.3	670.4
Interest expense on lease liabilities	24.6	36.7	73.1
Expense relating to short-term leases	0.3	3.2	4.7
Expense relating to leases of low value assets	1.7	1.7	3.4
	302.1	349.9	751.6

11 Assets held for sale – continuing operations

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Assets held for sale	2.4	4.2	11.9

Assets held for sale from continuing operations primarily relate to properties in Greyhound Canada.

12 Trade and other receivables

Amounts due within one year (from continuing operations)	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Trade receivables	231.4	369.8	223.5
Loss allowance	(10.2)	(5.1)	(7.3)
Trade receivables net	221.2	364.7	216.2
Other receivables	224.1	177.7	162.4
Contingent consideration receivable	101.8	-	-
Amounts recoverable on contracts	21.2	72.4	23.3
Prepayments	104.7	137.5	75.6
Accrued income	239.7	310.2	199.2
	912.7	1,062.5	676.7

On 25 September 2021, trade and other receivables of £114.0m were transferred to held for sale – discontinued operations in relation to Greyhound. On 27 March 2021, trade and other receivables of £548.4m (26 September 2020: £nil) were transferred to held for sale – discontinued operations in relation to First Student and First Transit. See note 14.

13 Trade and other payables

Amounts falling due within one year (from continuing operations)	25 September 2021 £m	26 September 2020 (restated) £m	27 March 2021 £m
Trade payables	241.7	248.3	182.3
Other payables	204.2	314.6	239.5
Accruals	942.0	1,066.5	1,047.0
Deferred income	107.6	312.6	112.8
Season ticket deferred income	12.6	8.0	6.0
	1,508.1	1,950.0	1,587.6

Other payables at 26 September 2020 have been restated. This 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 period and the effect of this is an increase in other payables of £9.1m.

On 25 September 2021, trade and other payables of £148.9m were transferred to held for sale – discontinued operations in relation to Greyhound. On 27 March 2021, trade and other payables of £325.4m (26 September 2020: £nil) were transferred to held for sale – discontinued operations in relation to First Student and First Transit. See note 14.

14 Discontinued operations

First Student and First Transit

The sale of First Student and First Transit was approved by a shareholder majority on 27th May 2021 and was reported as a discontinued operation in the financial statements for the 52 weeks ended 27 March 2021. The sale completed on 21 July 2021. Net proceeds were c.£2,323m excluding earn out.

First Student and First Transit are therefore reported in the current period as discontinued operations. Financial information relating to the discontinued operation for the period to the date of disposal (21 July 2021) is set out below in (a).

Greyhound

The disposal of Greyhound Lines, Inc to a wholly-owned subsidiary of FlixMobility GmbH was announced and completed on 21 October 2021. Greyhound US is reported as a discontinued operation for the 26 weeks to 25 September 2021, and the assets and liabilities sold are classed as held for sale as at 25 September 2021.

Financial performance and cash flow information

The financial performance and cash flow information presented are for the 26 weeks to 25 September 2021 (which includes the results of First Student and First Transit to the period before disposal on 21 July 2021) and for the 26 weeks to 26 September 2020 and the 52 weeks ended 27 March 2021. The split of operating profit/(loss) into First Student, First Transit, Greyhound and Group items is shown in note 4.

Discontinued Operations	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Revenue	970.6	1,048.5	2,526.0
Operating costs	(857.7)	(1,102.7)	(2,411.2)
Operating profit/(loss)	112.9	(54.2)	114.8
Investment income	-	0.1	0.2
Finance costs	(11.3)	(12.5)	(28.3)
Profit/(loss) before tax	101.6	(66.6)	86.7
Tax	(29.6)	12.4	(21.3)
Profit/(loss) for the year after tax	72.0	(54.2)	65.4
Gain on sale of the divisions after tax (see (b) below)	479.4	-	-
Profit from discontinued operation	551.4	(54.2)	65.4

Attributable to:
Equity holders of the parent	551.4	(55.0)	64.6
Non-controlling interests	-	0.8	0.8
	551.4	(54.2)	65.4

EPS	26 weeks to 25 September 2021 pence	26 weeks to 26 September 2020 pence	52 weeks to 27 March 2021 pence
Basic EPS	45.8	(4.6)	5.7
Diluted EPS	45.8	(4.6)	5.6

Net cash inflow from operating activities	140.4	107.5	256.2
Net cash outflow from investing activities	(193.1)	(51.1)	(126.7)
Net cash outflow from financing activities	(88.6)	52.0	(124.6)
Net (decrease)/increase in cash generated by the division	(141.3)	108.4	4.9

Other comprehensive income from discontinued operations

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Actuarial (losses)/gains on defined benefit pension schemes	(3.0)	5.1	51.4
Deferred tax on actuarial gains/(losses) on defined benefit pension schemes	-	2.1	(4.6)
Hedging instrument movements	2.7	(5.2)	7.6
Deferred tax on hedging instrument movements	(0.7)	1.3	(2.0)
Exchange differences on translation of discontinued operations	(1.7)	(38.8)	(112.2)
Total	(2.7)	(35.5)	(59.8)

(b) Details of the sale of First Student and First Transit

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Consideration received or receivable:		-	-
Cash	2,377.3	-	-
Direct transaction costs/fees	(54.0)	-	-
Fair value of contingent consideration	101.8	-	-
Total net disposal consideration	2,425.1	-	-
Carrying amount of net assets sold	(2,396.3)	-	-
Gain on sale before tax and reclassification of foreign currency translation reserve	28.8	-	-
Reclassification of foreign currency translation reserve	450.6	-	-
Gain on sale of the division before tax	479.4
Tax on gain	-	-	-
Gain on sale of the divisions after tax	479.4	-	-

As part of the disposal transaction, FirstGroup are entitled to an ‘earn out’ consideration of up to $240m (c. £181m) relating to First Transit. The earn out is for a period of 3 years from 21 July 2021 and is calculated as a percentage of the Realised Equity Value.

The earn out was fair valued at 25 September 2021 using stochastic modelling of discounted cash flows and assumes EQT does not dispose of the business by the third anniversary (21 July 2024). Fair value was $140m (c. £102m) at 25 September 2021.

The carrying amounts of assets and liabilities as at the date of sale (21 July 2021) were:

	21 July 2021 £m
Non-current assets
Goodwill	1,448.0
Other intangible assets	23.0
Property, plant and equipment	1,464.3
Investments	26.4
	2,961.7
Current assets
Inventories	21.8
Trade and other receivables	411.9
Current tax assets	0.8
Assets held for sale	0.5
Cash and cash equivalents	83.9
	518.9
Total assets	3,480.6
Current liabilities
Trade and other payables	357.8
Tax liabilities – Current tax liabilities	-
Borrowings	65.1
Provisions	131.2
	554.1
Net current liabilities	(35.2)
Non-current liabilities
Borrowings	194.9
Retirement benefit liabilities	24.4
Deferred tax liabilities	56.6
Provisions	254.3
	530.2
Total liabilities of discontinued operations	1,084.3
Net assets	2,396.3

The following assets and liabilities were reclassified as held for sale in relation to the discontinued operations as at 25 September 2021 in relation to Greyhound and as at 27 March 2021 in relation to First Student and First Transit:

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Non-current assets
Goodwill	-	-	1,442.0
Other intangible assets	10.5	-	21.8
Property, plant and equipment	149.4	-	1,357.2
Derivative Financial Instruments	-	-	0.5
Investments	-	-	30.9
	159.9	-	2,852.4
Current assets
Inventories	4.6	-	19.5
Trade and other receivables	114.0	-	548.4
Current tax assets	0.4	-	0.4
Derivative Financial Instruments	-	-	0.1
Assets held for sale	9.2	-	0.4
Cash and cash equivalents	0.2	-	58.3
	128.4	-	627.1
Total assets of discontinued operations	288.3	-	3,479.5
Current liabilities
Trade and other payables	148.9	-	325.4
Tax liabilities – Current tax liabilities	-	-	3.5
Derivative Financial Instruments	-	-	0.9
Borrowings	9.8	-	68.4
Provisions	1.9	-	138.6
	160.6	-	536.8
Net current (liabilities)/assets	(32.2)		90.3
Non-current liabilities
Borrowings	54.1	-	279.3
Derivative Financial Instruments	-	-	0.2
Retirement benefit liabilities	-	-	24.7
Deferred tax liabilities	-	-	33.6
Provisions	-	-	262.0
	54.1	-	599.8
Total liabilities of discontinued operations	214.7	-	1,136.6
Net assets of discontinued operations	73.6	-	2,342.9

15 Borrowings

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
On demand or within 1 year
Leases (note 16)³	561.6	631.5	581.4
Bank overdraft	33.1	59.6	53.8
Unamortised loan fees	(1.7)	-	-
CCFF	-	299.0	298.2
Bond 8.75% (repayable 2021)¹	-	367.4	380.1
Bond 5.25% (repayable 2022)²	-	14.6	5.6
Bond 6.875% (repayable 2024)²	0.2	0.3	7.1
Total current liabilities: borrowings – from continuing operations	593.2	1,372.4	1,326.2
Amounts relating to held for sale – discontinued operations	9.8	-	68.4
Total current liabilities	603.0	1,372.4	1,394.6
Within 1 – 2 years
Syndicated loans	-	60.0	116.5
Leases (note 16)³	392.1	607.6	572.8
Supplier financing	-	84.6	-
Loan notes (note 17)	0.6	0.7	0.7
Bond 5.25% (repayable 2022)	-	-	323.4
	392.7	752.9	1,013.4
Within 2 – 5 years
Syndicated loan facilities	-	535.5	449.8
Leases (note 16)³	366.3	871.8	577.0
Bond 5.25% (repayable 2022)	-	322.7	-
Bond 6.875% (repayable 2024) Senior unsecured loan notes	199.9 -	199.8 78.5	199.8 72.5
	566.2	2,008.3	1,299.1
More than 5 years
Leases (note 16)³	38.9	154.1	53.2
Senior unsecured loan notes	-	136.5	126.3
	38.9	290.6	179.5
Total non-current liabilities at amortised cost from continuing operations	997.8	3,051.8	2,492.0
Amounts related to held for sale – discontinued operations	54.1	-	279.3
Total non-current liabilities	1,051.9	3,051.8	2,771.3

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 which have been transferred to held for sale – discontinued operations:

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Due in less than one year	604.6	691.1	632.3
Due in more than one year but not more than two years	404.7	647.5	592.9
Due in more than two years but not more than five years	377.2	916.7	606.6
Due in more than five years	41.8	179.2	71.7
	1,428.3	2,434.5	1,903.5
Less future financing charges	(69.4)	(169.5)	(119.1)
	1,358.9	2,265.0	1,784.4
Comprising:
Lease liabilities - Road	103.2	397.1	182.8
Lease liabilities - Rail	1,255.7	1,867.9	1,601.6

On 25 September 2021, lease liabilities of £63.9m were transferred to held for sale – discontinued in relation to Greyhound. On 27 March 2021 lease liabilities of £187.5m (26 September 2020: £nil) were transferred to held for sale - discontinued operations in relation to First Student and First Transit, part of amounts related to held for sale. See note 14.

The total cash outflow for lease principal recorded on the balance sheet amounted to £378.6m in H1 2022 (H1 2021: £347.5m; full year 2021: £669.2m), this includes cash outflow relating to discontinued operations amounting to £88.6m (H1 2021: £85.8m; full year 2021: 124.6m)

The right of use assets relating 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:

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Due in less than one year	-	-	-
Due in more than one year but not more than two years	0.6	0.7	0.7
	0.6	0.7	0.7

18 Financial instruments

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Total derivatives
Total non-current assets	3.0	0.8	1.2
Total current assets	7.4	7.4	14.9
Total assets from continuing operations	10.4	8.2	16.1
Amounts relating to held for sale – discontinued operations	-	-	0.6
Total assets	10.4	8.2	16.7
Total current liabilities	0.8	28.4	11.8
Total non-current liabilities	-	13.6	1.2
Total liabilities from continuing operations	0.8	42.0	13.0
Amounts relating to held for sale – discontinued operations	-	-	1.1
Total liabilities	0.8	42.0	14.1

Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Cross currency swaps (net investment hedge)	-	-	0.3
Currency forwards (cash flow hedge)	-	0.8	-
Fuel derivatives (cash flow hedge)	3.0	-	1.0
	3.0	0.8	1.3
Current assets
Fuel derivatives (cash flow hedge)	7.4	-	1.9
Currency forwards (cash flow hedge)	-	2.3	-
Cross currency swaps (net investment hedge)	-	5.1	13.5
	7.4	7.4	15.4
Current liabilities
Fuel derivatives (cash flow hedge) Currency forwards (net investment hedge)	- -	24.0 4.4	4.8 6.4
Currency forwards (cash flow hedge)	0.8	-	1.1
	0.8	28.4	12.3
Non-current liabilities
Fuel derivatives (cash flow hedge)	-	13.6	0.8
Currency forwards (cash flow hedge)	-	-	0.6
	-	13.6	1.4

Derivatives classified as held for trading
Current assets
Currency forwards	-	-	-
Current liabilities
Fuel derivatives	-	-	0.4

18 Financial instruments (continued)

Fair value of the Group's financial assets and financial liabilities (including cash, trade and other receivables, trade and other payables) on a continuing basis:

	25 September 2021
	Fair value				Carrying value Total £m
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m	Carrying value Total £m
Financial assets and derivatives
Contingent consideration receivable	-	-	101.8	101.8	101.8
Derivative financial instruments	-	10.4	-	10.4	10.4
Financial liabilities and derivatives
Borrowings¹	-	1,622.4	-	1,622.4	1,655.1
Derivative financial instruments	-	0.8	-	0.8	0.8

	26 September 2020
	Fair value				Carrying value Total £m
	Level 1 (restated) £m	Level 2 (restated) £m	Level 3 £m	Total £m	Carrying value Total £m
Financial assets and derivatives
Derivative financial instruments	-	8.2	-	8.2	8.2
Financial liabilities and derivatives
Borrowings¹	1,039.4	3,562.4	-	4,601.8	4,424.2
Derivative financial instruments	-	42.0	-	42.0	42.0

	27 March 2021
	Fair value				Carrying value Total £m
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m	Carrying value Total £m
Financial assets and derivatives
Derivative financial instruments	-	16.1	-	16.1	16.1
Financial liabilities and derivatives
Borrowings¹	919.0	2,948.5	-	3,867.5	3,814.4
Derivative financial instruments	-	13.0	-	13.0	13.0

¹ Includes lease liabilities as set out in note 16.

On 25 September 2021 fair value of financial assets and financial liabilities of £(63.9)m being borrowings of £(63.9)m (Level 2) were transferred to held for sale – discontinued operations in relation to Greyhound. On 27 March 2021 fair value of financial assets and financial liabilities of £(351.0)m being borrowings of £(159.2)m (Level 1) and £(191.3)m (Level 2) and derivative financial instruments of £(0.5)m (Level 2) were transferred to held for sale – discontinued operations in relation to First Student and First Transit (26 September 2020: £nil). See note 14.

The estimated fair value of cash and cash equivalents, short term trade and other receivables and short term trade and other payables is a reasonable approximation to the carrying value of these items.

Level 1: Quoted prices in active markets for identical assets and liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly.

Level 3: Inputs for the asset or liability that are not based on observable market data.

There were no transfers between Level 1 and Level 2 during the current or prior year.

18 Financial instruments (continued)

There were no transfers between level 1 and level 2 during the current or prior periods.

Financial assets/(liabilities)	Fair values (£m) at			Fair value hierarchy	Valuation technique(s) and key inputs
Financial assets/(liabilities)	25 September 2021	26 September 2020	27 March 2021	Fair value hierarchy	Valuation technique(s) and key inputs
Derivative contracts
1. Interest rate swaps	-	-	-	Level 2	Discounted cash flow; future cash flows are estimated based on forward interest rates and contract interest rates then discounted at a rate that reflects the credit risk of the various counterparties.
2. Fuel derivatives	10.4	(37.6)	(3.1)	Level 2	Discounted cash flow; future cash flows are estimated based on forward fuel priced and contract rates and then discounted at a rate that reflects the credit risk of the various counterparties.
3. Currency forwards	(0.8)	3.8	(8.1)	Level 2	Discounted cash flow; future cash flows are estimated based on forward exchange rates and contract rates and then discounted at a rate that reflects the credit risk of the various counterparties.
4. Cross Currency Swaps	-	-	13.8	Level 2	Discounted cash flow: future cashflows are estimated based on forward exchange rates and interest rates and then discounted at a rate that reflects the credit risk of the various counterparties.

Fair value measurements using significant unobservable inputs (level 3)

As part of the disposal of First Student and First Transit on 21 July 2021, FirstGroup are entitled to an earnout payment of up to £181m ($240m) relating to First Transit. The earnout is for a period of 3 years from 21 July 2021 and is calculated as 62.5% of the realised equity value and will results in a payment of between nil and $240m.

There is a contingent consideration receivable within trade and other receivables of £101.8m ($139.9m) at 25 September 2021 (25 September 2020: £nil; 27 March 2021: £nil). This represents the fair value of the earnout of First Transit from the sale of First Student and First Transit on 21 July 2021 and has been calculated using stochastic modelling of discounted cash flows and assumes that EQT (the buyer) does not dispose of the business by the third anniversary (21 July 2024).

The following table summarises the quantitative information about the significant unobservable inputs used in the level 3 fair value measurement of the contingent consideration receivable:

Fair value at 26 September 2021 £m	Unobservable inputs	Range of inputs (probability weighted average)	Relationship of unobservable inputs to fair value

101.8m	Weighted average cost of capital	12.5%	An increase or decrease in the discount rate of 50 bps would decrease or increase the fair value by £8.0m and £8.1m respectively.

	FY20 EV/EBITDA multiple	11.2x	If expected cash inflow were 10% higher or lower, the fair value would increase or decrease by £11.1m and £12.8m respectively.

	Asset volatility	30.0%	If asset volatility were 2.5% higher or lower, the fair value would decrease or increase by £3.7m and £3.9m respectively.

An assessment of the contingent consideration receivable was undertaken as at 25 September 2021 and will be undertaken at the end of each reporting period. These assessments are reviewed by the Chief Financial Officer and included in the Accounting Judgements as presented to the Audit Committee.

19 Provisions

	Insurance claims £m	Legal and other £m	Pensions £m	Total £m
At 28 March 2021	172.2	36.5	1.2	209.9
Charged to the income statement	33.7	6.8	-	40.5
Utilised in the period	(15.5)	(6.0)	-	(21.5)
Notional interest	1.5	-	-	1.5
Transferred to held for sale – discontinued operations	-	(1.9)	-	(1.9)
Foreign exchange movements	3.1	0.2	-	3.3
At 25 September 2021	195.0	35.6	1.2	231.8

Current liabilities	68.3	15.0	0.4	83.7
Non-current liabilities	126.7	20.6	0.8	148.1
At 26 September 2021	195.0	35.6	1.2	231.8

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	198.2	196.9	-	395.1
Non-current liabilities	368.0	33.3	1.3	402.6
At 26 September 2020	566.2	230.2	1.3	797.7

On 25 September 2021 provisions of £1.9m were transferred to held for sale – discontinued operations in relation to Greyhound. On 27 March 2021 provisions of £400.6m (26 September 2020: £nil) were transferred to held for sale – discontinued operations in relation to First Student and First Transit. See note 14.

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 £11.7m in H1 2022 (H1 2021: £34.0m, full year 2021: £10.3m) can extend for up to 30 years. The utilisation of £15.5m in H1 2022 (H1 2021: £135.3m, full year 2021: £205.3m) represents payments made largely against the current liability of the preceding year.

The insurance claims provisions contain £24.9m in H1 2022 (H1 2021: £21.7m, full year 2021: £24.7m) 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 10 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 and other provisions in respect of contractual obligations under rail franchises and rail estimated termination sums relating to the ERMA’s in TPE and SWR, 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.

20 Called up share capital

	25 September 2021 £m	26 September 2020 £m	27 March 2021 £m
Allotted, called up and fully paid
1,222.9m ordinary shares of 5p each	61.1	61.1	61.1

The Company has one class of ordinary shares which carries no right to fixed income. The number of ordinary shares of 5p each in issue, excluding treasury shares and shares held in trust for employees, at the end of the period in H1 2022 was 1,215.3m (H1 2021: 1,204.7m). At the end of the period in H1 2022 7.6m shares (H1 2021: 16.1m shares) were being held as treasury shares and own shares held in trust for employees.

21 Net cash from operating activities

	26 weeks to 25 September 2021 £m	26 weeks to 26 September 2020 £m	52 weeks to 27 March 2021 £m
Operating profit/(loss) from:
Continuing Operations	52.2	37.8	224.3
Discontinued Operations (including gain on sale of First Student and First Transit)	592.3	(54.2)	61.5
Total Operations	644.5	(16.4)	285.8
Adjustments for:
Depreciation charges	344.9	454.1	962.3
Capital grant amortisation	(41.7)	(5.8)	(13.3)
Software amortisation charges	2.3	6.3	11.2
Other intangible asset amortisation charges	0.5	2.1	4.1
Gain on disposal of subsidiaries	(479.4)	-	-
(Reversal of impairment)/impairment charges	(55.4)	-	16.6
Share-based payments	2.3	4.6	11.9
(Profit)/loss on disposal of property, plant and equipment	(0.9)	2.5	(73.0)
Operating cash flows before working capital and pensions	417.1	447.4	1,205.6
(Increase)/decrease in inventories	(5.1)	6.8	12.0
(Increase)/decrease in receivables	(112.0)	115.9	(5.9)
Increase in payables due within one year	150.1	174.3	197.0
Increase/(decrease) in provisions due within one year	1.5	36.7	(1.7)
Increase/(decrease) in provisions due over one year	0.5	(9.6)	10.9
Defined benefit pension payments in excess of income statement charge	(338.6)	(8.0)	(59.2)
Cash generated by operations	113.5	763.5	1,358.7
Tax paid	(12.2)	(0.8)	(4.5)
Interest paid¹	(156.0)	(82.6)	(149.8)
Net cash from operating activities	(54.7)	680.1	1,204.4

¹ Interest paid includes £24.6m relating to lease liabilities (H1 2021: £36.7m; year end 2021: £73.1m).

22 Analysis of changes in net debt – adjusted cash flow

	At 28 March 2021 £m	Cash flow £m	Foreign Exchange £m	Other £m	At 25 September 2021 £m
Components of financing activities:
Bank loans	(566.3)	581.2	(2.4)	(12.5)	-
Unamortised loan fees	-	1.7	-	-	1.7
Bonds	(873.1)	675.4	-	(2.2)	(199.9)
Senior unsecured loan notes	(198.8)	200.1	(0.6)	(0.7)	-
CCFF	(298.2)	298.2	-	-	-
Supplier financing¹	(159.2)	-	-	159.2	-
Lease liabilities²	(1,972.9)	378.3	(1.0)	172.6	(1,423.0)
Other debt	(0.7)	-	-	0.1	(0.6)
Total components of financing activities	(4,069.2)	2,134.9	(4.0)	316.5	(1,621.8)
Cash	834.3	62.0	(3.9)	-	892.4
Bank overdrafts	(53.8)	20.7	-	-	(33.1)
Ring-fenced cash	662.9	(134.6)	-	-	528.3
Cash and cash equivalents	1,443.4	(51.9)	(3.9)	-	1,387.6

Net debt (including held for sale – discontinued operations)	(2,625.8)	2,083.0	(7.9)	316.5	(234.2)

Other movement in supplier finance is a non-cash movement.
Lease liabilities ‘Other’ includes £212.9m reduction in relation to leases disposed of, offset by inception of new leases of £40.3m.

On 25 September 2021, net debt of £63.7m relates to held for sale – discontinued operations in relation to Greyhound, see note 14.

	At 29 March 2020 (restated) £m	Cash flow £m	Foreign Exchange £m	Other £m	At 26 September 2020 £m
Components of financing activities:
Bank loans	(573.9)	(29.3)	8.0	(0.3)	(595.5)
Bonds	(877.5)	-	-	2.3	(875.2)
Fair value of interest rate coupon swaps	6.4	-	-	(6.4)	-
Senior unsecured loan notes	(219.8)	-	4.9	(0.1)	(215.0)
CCFF	-	(299.0)	-	-	(299.0)
Supplier financing¹	-	-	-	(84.6)	(84.6)
Lease liabilities²	(2,473.2)	25.5	11.5	171.2	(2,265.0)
Other debt	(9.4)	8.7	-	-	(0.7)
Total components of financing activities	(4,147.4)	(294.1)	24.4	82.1	(4,335.0)
Cash	319.5	397.1	(15.3)	-	701.3
Bank overdrafts	(82.4)	22.8	-	-	(59.6)
Ring-fenced cash	649.4	97.8	-	-	747.2
Cash and cash equivalents	886.5	517.7	(15.3)	-	1,388.9

Net debt	(3,260.9)	223.6	9.1	82.1	(2,946.1)

Bank overdrafts of £82.4m at 29 March 2020 and £59.6m at 26 September 2020 have been reclassified within the cash and cash equivalents section. Previously the overdrafts were presented within bank loans in the components of financing activities section. Ring-fenced cash has been restated and increased by £17.2m at 29 March 2020 and £9.1m at 26 September 2020, as cash balances relating to companies under the control of First Transit had not been recognised in prior periods.

Other movement in supplier finance is a non-cash movement.
Lease liabilities ‘Other’ includes £321.9m repayment of lease liabilities formerly classified as operating leases through repayment, net of the £150.7m inception of new leases.

22 Analysis of changes in net debt – adjusted cash flow (continued)

	At 29 March 2020 £m	Cash flow £m	Foreign Exchange £m	Other £m	At 27 March 2021 £m
Components of financing activities:
Bank loans	(573.9)	(28.1)	35.7	-	(566.3)
Bonds	(877.5)	-	-	4.4	(873.1)
Fair value of interest rate coupon swaps	6.4	-	-	(6.4)	-
Senior unsecured loan notes	(219.8)		21.3	(0.3)	(198.8)
CCFF	-	(298.2)	-	-	(298.2)
Supplier financing¹	-	-	-	(159.2)	(159.2)
Lease liabilities²	(2,473.2)	669.2	41.1	(210.0)	(1,972.9)
Other debt	(9.4)	8.7	-	-	(0.7)
Total components of financing activities	(4,147.4)	351.6	98.1	(371.5)	(4,069.2)
Cash	319.5	532.5	(17.7)	-	834.3
Bank overdrafts	(82.4)	28.6	-		(53.8)
Ring-fenced cash	649.4	15.4	(1.9)	-	662.9
Cash and cash equivalents	886.5	576.5	(19.6)	-	1,443.4

Net debt (including held for sale – discontinued operations)	(3,260.9)	928.1	78.5	(371.5)	(2,625.8)

Supplier financing relates wholly to First Student and the payable in respect of these items is included within discontinued operations in note 14.
Lease liabilities ‘other’ includes £242.6m inception of new leases, this comprises £107.5m of PCV and property leases in First Student, £105.2m of rolling stock leases across TOCs and £29.9m of other PCV and property leases across the Group offset by £32.4m of lease terminations in the year.

On 27 March 2021, net debt of £289.4m (2020: £nil) relates to held for sale – discontinued operations, in relation to First Student and First Transit see note 14.

Accrued interest of £0.2m in H1 2022 (H1 2022: £29.7m; full year 2021: £42.9m) is excluded from the values above and derivative valuations are presented as the clean values.

23 Retirement benefit schemes

The Group operates or participates in a number of defined benefit pension schemes. These include schemes providing benefits to the majority of First Rail employees and legacy arrangements for employees or former employees of First Bus and in North America. The scheme details are described on pages 207 to 209 of the Annual Report and Accounts for the 52 weeks ended 27 March 2021.

The Group currently sponsors six sections of the Railways Pension Scheme (RPS), relating to its obligations for its TOCs, and for Hull Trains, its Open Access operator. The Railways Pension Trustee Company Limited is responsible for managing the RPS, which is subject to regulation by the Pensions Regulator and relevant UK legislation. The RPS is a shared cost arrangement. All costs, and any deficit or surplus, are shared 60% by the employer and 40% by the members. For the TOC sections, under the terms agreed with DfT, the employer’s responsibility is to pay the contributions agreed with the Trustee, whilst it operates the franchise or contract. There is no residual liability or asset for any deficit, or surplus, which remains at the end of the franchise or contract period.

Since the contributions being paid to each TOC section are lower than the share of the service cost that would normally be calculated under IAS19, the Group does not make any contribution towards the sections’ deficits. Therefore, the Group does not need to reflect any deficit on its balance sheet. A franchise adjustment (asset) exists that exactly offsets any section deficit that would otherwise remain after reflecting the cost sharing with the members. The last signed off valuation for the TOC sections was effective 31 December 2013, and these disclosures reflect a roll-forward of that valuation.

The market value of the assets at 25 September 2021 for all defined benefit schemes totalled £7,212m (H1 2021: £6,442m; full year 2021: £6,468m). This excludes Transit Management contracts, detailed in the table below.

Contributions are paid to all defined benefit pension schemes in accordance with rates recommended by the schemes’ actuaries. The valuations are made using the Projected Unit Credit Method.

The key assumptions were as follows:

		25 September 2021			26 September 2020			27 March 2021
	First Bus %		First Rail %	North America %	First Bus %	First Rail %	North America %	First Bus %	First Rail %	North America %
Key assumptions used:
Discount rate	1.90		1.90	2.25	1.55	1.55	2.38	2.05	2.05	2.87
Expected rate of salary increases	3.75		3.75	2.50	2.00	3.05	2.50	2.55	3.05	2.50
Inflation – CPI	2.75		2.75	2.00	2.00	2.00	2.00	2.55	2.55	2.00
Future pension increases	2.75		2.75	-	2.00	2.00	-	2.55	2.55	-

23 Retirement benefit schemes (continued)

Amounts (charged)/credited to the condensed consolidated income statement in respect of these defined benefit schemes are as follows:

26 weeks to 25 September 2021	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Current service cost	(5.1)	(2.4)	(7.5)	(69.2)	(76.7)
Past service costs including curtailments and settlements	-	27.7	27.7	-	27.7
Impact of franchise adjustment on operating cost	-	-	-	42.2	42.2
Net interest cost	(0.7)	(1.1)	(1.8)	(8.4)	(10.2)
Impact of franchise adjustment on net interest cost	-	-	-	8.4	8.4
	(5.8)	24.2	18.4	(27.0)	(8.6)
Less discontinued operations	-	(21.7)	(21.7)	-	(21.7)
	(5.8)	2.5	(3.3)	(27.0)	(30.3)

26 weeks to 26 September 2020	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Current service cost	(5.3)	(4.4)	(9.7)	(54.4)	(64.1)
Impact of franchise adjustment on operating cost	-	-	-	28.4	28.4
Net interest cost	(0.8)	(3.0)	(3.8)	(9.5)	(13.3)
Impact of franchise adjustment on net interest cost	-	-	-	9.5	9.5
	(6.1)	(7.4)	(13.5)	(26.0)	(39.5)
Less discontinued operations	-	5.4	5.4	-	5.4
	(6.1)	(2.0)	(8.1)	(26.0)	(34.1)

52 weeks to 27 March 2021	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Current service cost	(8.2)	(8.0)	(16.2)	(115.1)	(131.3)
Past service gain including curtailments and settlements	(0.9)	(1.5)	(2.4)	-	(2.4)
Impact of franchise adjustment on operating cost	-	-	-	58.0	58.0
Net interest cost	(1.7)	(5.8)	(7.5)	(19.2)	(26.7)
Impact of franchise adjustment on net interest cost	-	-	-	19.1	19.1
	(10.8)	(15.3)	(26.1)	(57.2)	(83.3)
Less discontinued operations	-	10.7	10.7	-	10.7
	(10.8)	(4.6)	(15.4)	(57.2)	(72.6)

Actuarial gains and losses have been reported in the condensed consolidated statement of comprehensive income.

The amounts included in the condensed consolidated balance sheet arising from the Group’s obligations in respect of its defined benefit pension schemes are as follows:

As at 25 September 2021	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Fair value of schemes' assets	3,061.4	422.1	3,483.5	3,728.7	7,212.2
Present value of defined benefit obligations	(2,900.5)	(461.9)	(3,362.4)	(5,855.5)	(9,217.9)
Surplus/(deficit) before adjustments	160.9	(39.8)	121.1	(2,126.8)	(2,005.7)
Adjustment for irrecoverable surplus¹	(99.7)	(7.6)	(107.3)	-	(107.3)
First Rail franchise adjustment (60%)	-	-	-	1,272.3	1,272.3
Adjustment for employee share of RPS deficits (40%)	-	-	-	850.7	850.7
Liability recognised in the condensed consolidated balance sheet	61.2	(47.4)	13.8	(3.8)	10.0
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets	61.2	-	61.2	-	61.2
Non-current liabilities	-	(47.4)	(47.4)	(3.8)	(51.2)
	61.2	(47.4)	13.8	(3.8)	10.0

23 Retirement benefit schemes (continued)

As at 26 September 2020	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Fair value of schemes' assets	2,872.9	441.0	3,313.9	3,128.3	6,442.2
Present value of defined benefit obligations	(2,825.3)	(677.7)	(3,503.0)	(5,564.4)	(9,067.4)
Surplus/(deficit) before adjustments	47.6	(236.7)	(189.1)	(2,436.1)	(2,625.2)
Adjustment for irrecoverable surplus¹	(166.3)	-	(166.3)	-	(166.3)
First Rail franchise adjustment (60%)	-	-	-	1,457.2	1,457.2
Adjustment for employee share of RPS deficits (40%)	-	-	-	974.4	974.4
Liability recognised in the condensed consolidated balance sheet	(118.7)	(236.7)	(355.4)	(4.5)	(359.9)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets	52.5	-	52.5	-	52.5
Non-current liabilities	(171.2)	(236.7)	(407.9)	(4.5)	(412.4)
	(118.7)	(236.7)	(355.4)	(4.5)	(359.9)

As at 27 March 2021	First Bus £m	North America £m	Total non-rail £m	First Rail £m	Total £m
Fair value of schemes' assets	2,720.3	364.9	3,085.2	3,382.7	6,467.9
Present value of defined benefit obligations	(2,775.2)	(469.6)	(3,244.8)	(5,336.2)	(8,581.0)
Deficit before adjustments	(54.9)	(104.7)	(159.6)	(1,953.5)	(2,113.1)
Adjustment for irrecoverable surplus¹	(108.7)	-	(108.7)	-	(108.7)
First Rail franchise adjustment (60%)	-	-	-	1,168.8	1,168.8
Adjustment for employee share of RPS deficits (40%)	-	-	-	781.4	781.4
Liability recognised in the condensed consolidated balance sheet	(163.6)	(104.7)	(268.3)	(3.3)	(271.6)
The amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets	52.9	-	52.9	-	52.9
Non-current liabilities	(216.5)	(104.7)	(321.2)	(3.3)	(324.5)
	(163.6)	(104.7)	(268.3)	(3.3)	(271.6)

¹The irrecoverable surplus represents the amount of the surplus that the Group could not recover through reducing future company contributions to Local LGPS.

On 27 March 2021 a net pension liability of £24.7m (25 September 2021: £nil; 26 September 2020: £nil) comprising assets of £72.9m and liabilities of £97.6m was transferred to held for sale – discontinued operations in relation to First Student and First Transit, comprising the FirstGroup America scheme and the Executive Supplementary scheme. See note 14.

Total assets including Transit Management subsidiaries (see below) and discontinued operations are £7,488.7m (25 September 2020: £6,766.3m; 27 March 2021: £6,890.4m) and total liabilities are £9,596.0m (25 September 2020: £9,582.1m; 27 March 2021: £9,132.8m).

Transit management contracts

The Group has retained Transit Management Contacts which contain defined benefit pension arrangements. As these contracts expire, the number of pension arrangements are reducing. The number of single-employer pension schemes in the retained Transit Management subsidiaries has reduced from 7 to 6 over the period. The pension contributions and deficits relating to these schemes are fully indemnified by the contracting authority. Details of the assets and liabilities of these schemes is as follows:

	25 September 2021 £m	26 September 2020 (restated)¹ £m	27 March 2021¹ £m
Assets	276.5	324.1	349.6
Liabilities	(378.1)	(514.7)	(454.2)
Deficits in schemes	(101.6)	(190.6)	(104.6)
Amounts recoverable from contracting authorities	101.6	190.6	104.6
Net deficits in schemes	-	–	–

¹Defined benefit pensions for the Transit Management Contracts were not included or disclosed at 26 September 2020 but have been added above as a restatement to 26 September 2020.

24 Contingent liabilities

To support subsidiary undertakings in their normal course of business, the FirstGroup plc and certain subsidiaries have indemnified certain banks and insurance companies who have issued performance bonds for £139.3m (H1 2021: £1,055.5m, March 2021: £743.0m) and letters of credit for £185.0m (H1 2021: £458.3m, March 2021: £422.8m). The performance bonds relate to the North American and First Bus businesses of £47.2m (H1 2021: £753.1m, March 2021: £517.3m) and the First Rail franchise operations of £92.1m (H1 2021: £302.4m, March 2021: £225.7m). The letters of credit relate substantially to insurance arrangements in the UK and North America. The parent company has committed further support facilities of up to £20.8m to First Rail Train Operating Companies of which all remains undrawn. Following the sale of First Student and First Transit, the letters of credit, surety bonds and parent company guarantees relating to First Student and First Transit were cancelled.

The Group is party to certain unsecured guarantees granted to banks for overdraft and cash management facilities provided to itself and subsidiary undertakings. The Company has given certain unsecured guarantees for the liabilities of its subsidiary undertakings arising under certain loan notes, HP contracts, finance leases, operating leases and certain pension scheme arrangements. It also provides unsecured cross guarantees to certain subsidiary undertakings as required by VAT legislation. First Bus subsidiaries have provided unsecured guarantees on a joint and several basis to the Trustees of the First Bus Pension Scheme. The Company’s North American subsidiaries participate in a number of multi-employer pension schemes in which their contributions are pooled with the contributions of other contributing employers. The funding of these schemes is therefore reliant on the ongoing participation by third parties.

In its normal course of business the Group has ongoing contractual negotiations with Government and other organisations. The Group is party to legal proceedings and claims which arise in the normal course of business, including but not limited to employment and safety claims. The Group takes legal advice as to the likelihood of success of claims and counterclaims. No provision is made where due to inherent uncertainties, no accurate quantification of any cost, or timing of such cost, which may arise from any of the legal proceedings can be determined.

The Group’s operations are required to comply with a wide range of regulations, including environmental and emissions regulations. Failure to comply with a particular regulation could result in a fine or penalty being imposed on that business, as well as potential ancillary claims rooted in non-compliance.

The inquest relating to the death of seven passengers in the Croydon tram incident in November 2016 completed on 22 July 2021. The Office of Rail & Road (ORR) investigations into the incident are ongoing and it is uncertain when they will be concluded. The tram was operated by Tram Operations Limited (‘TOL’), a subsidiary of the Group, under a contract with a TfL subsidiary. TOL provides the drivers and management to operate the tram services, whereas the infrastructure and trams are owned and maintained by a TfL subsidiary. Management continue to monitor developments. To date, no formal ORR proceedings have been commenced and, as such, it is not possible to assess whether any financial penalties or related costs could be incurred.

First MTR South Western Trains Limited (FSWT), a subsidiary of the Company and the operator of the SWR rail franchise, is a defendant to collective proceedings before the UK Competition Appeal Tribunal (the CAT) in respect of alleged breaches of UK competition law. Stagecoach South Western Trains Limited (SSWT) (the former operator of the SWR rail franchise) is also a defendant to these proceedings. A separate set of proceedings has been issued against London & South Eastern Railway Limited (LSER) in respect of another rail franchise. The two sets of proceedings are being heard together. The class representative alleges that FSWT, SSWT and LSER breached their obligations under UK competition law by not making boundary fares sufficiently available for sale, and/or by failing to ensure that customers were aware of the existence of boundary fares and/or bought an appropriate fare in order to avoid being charged twice for part of a journey.

In November 2021, the CAT handed down a judgment in which it indicated it would make a collective proceedings order in both sets of proceedings allowing them to proceed. FSWT, SSWT and LSER applied for permission to appeal the decision but permission was refused by the CAT with written reasons provided on 3 December 2021. FSWT, SSWT and LSER have until 17 December 2021 to each renew their application for permission to appeal before the Court of Appeal, should one or more of them decide to do so. If such applications are made, it is likely that the Court of Appeal will decide whether to grant permission to appeal in late Q1 2022 or Q2 2022. In the meantime, the proceedings in the CAT have not been stayed pending appeals so the case will continue, the next step being that FSWT, SSWT and LSER will file defences. At present the Company cannot accurately determine the likelihood, quantum or timing of any damages and costs which may arise from these proceedings.

25 Related party transactions

There are no related party transactions or changes since the Group’s 2021 Annual Report which could have a material effect on the Group’s financial position or performance of the Group in the 26 weeks to 26 September 2021.

26 Post balance sheet events

On 4 October acquired the remaining 50% shareholding in Somerset Passenger Solutions Ltd (SPS) joint venture
On 21 October announced the sale of Greyhound Lines, Inc (see discontinued operations note 14) and completed on the sale on the same day
On 18 November three special resolutions and one ordinary resolution were passed to approve the tender offer to return £500m to shareholders. The tender offer was executed on 2 December
A number of legacy Greyhound properties were sold with proceeds totalling $6.8m (£4.9m)

Responsibility statement

The directors confirm that these half yearly results have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

an indication of important events that have occurred during the first 26 weeks and their impact on the half yearly results, and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year; and
material related-party transactions in the first 26 weeks and any material changes in the related-party transactions described in the last annual report.

The Directors of FirstGroup plc are listed on the Group's website at www.firstgroupplc.com.

David Martin Ryan Mangold

Executive Chairman Chief Financial Officer

8 December 2021 8 December 2021

Independent review report to FirstGroup plc

Report on the Half Yearly Results

Our conclusion

We have reviewed FirstGroup PLC’s Half Yearly Results (the “interim financial statements”) in the Half-Yearly Report of FirstGroup PLC for the 26 week period ended 25 September 2021 (the “period”).

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

the Condensed Consolidated Balance Sheet as at 25 September 2021;
the Condensed Consolidated Income Statement for the period then ended;

the Condensed Consolidated Statement of Comprehensive Income for the period then ended;

the Condensed Consolidated Cash Flow Statement for the period then ended;

the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
the explanatory notes to the interim financial statements.

The interim financial statements included in the Half-Yearly Report of FirstGroup PLC have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half-Yearly Report, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half-Yearly Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Half-Yearly Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half-Yearly Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Watford

8 December 2021

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