FirstGroup plc (‘FirstGroup’ or the ‘Group’) provides the following update on the rapidly evolving impact of the Coronavirus (‘COVID-19’) pandemic on the business, our response to the UK government’s announcement of emergency measures to support the rail industry which is vital in keeping key workers moving, and the other actions the Group is taking to manage the risks to passengers, employees and its operations.
Our first priority since the start of the COVID-19 outbreak has been the health and safety of the Group’s passengers, employees and communities. The Group continues to rigorously apply the advice of governments and health authorities throughout our businesses, including implementing additional cleaning regimes and the provision of advice to passengers. At the same time, we recognise our leading role in providing essential transportation services, to ensure that key workers and people who need to travel have the ability to do so.
In recent days the Group has seen unprecedented changes in the market environments for all its businesses. There have been substantial volume reductions in our passenger demand businesses in North America and the UK. First Student has been impacted by the closure of almost all of the schools which it serves, while First Transit is experiencing significantly reduced service requirements. Government advice and policy in our markets is changing rapidly, and we are in very active discussions with many of our customers about future service levels and full or partial payments in lieu of reduced service. Given these changes are all taking place during a significant trading period for the Group, we are no longer able to provide guidance on the outturn for the remainder of the financial year to 31 March 2020.
However, the Group’s resilience in this situation reflects:
• The Group’s diverse portfolio of market-leading businesses
- Benefit from contractual structures and protections already in place in several businesses
- The fast and comprehensive emergency measures the UK Government has put in place for the next six months, in order to support the continuity of critical rail industry services during this unprecedented period of demand reductions
- Productive engagements with our major customers, including school boards throughout North America, and local, state and national governments in the UK, US and Canada
- Customers recognise the need to rapidly adjust services to fit current demand including for key workers, whilst preserving ability to restore service when required
• The Group has significant current liquidity
- £400m in committed undrawn facilities and free cash as at end of February 2020
- Access to additional sources of financing, including a £250m bank bridge facility signed 19 March 2020
- The Group’s net debt: EBITDA ratio was 1.5 times on the banking covenant test which requires less than 3.75 times at the end of the first half, and typically improves in the second half
• Immediate and significant management actions to preserve cash
- Actions already implemented across entire Group to reduce operating expenditure
- Future capital expenditure orders on hold and managing existing commitments accordingly
- Decisive management actions include a range of salary deferrals and sacrifice, hiring freezes, and halting of consultant and contract labour where possible across the Group
- We welcome the emergency support programmes to protect jobs and businesses that governments have announced in our markets, and will access them as appropriate
- Will continue to take all necessary actions to preserve cash through period of uncertainty
Matthew Gregory, FirstGroup Chief Executive said: “The health and safety of our people, our passengers and their communities is our top priority and across all of our businesses we are working hard to support the response to the growing pandemic, and closely following all government and health authority guidance. I want to thank my colleagues across the Group for their outstanding effort and commitment in providing vital services for our customers and communities in the face of a rapidly changing environment.
“Continuity of transport is essential to governments, local services and many of our customers throughout this time, and they will also be critical to a restoration of normal life when the present uncertain and extremely difficult situation is overcome. We welcome and have accepted the UK Government’s swift and comprehensive offer of emergency measures which provides certainty for all of the Group’s franchises and the continuity of our vital rail networks during this time.
“We have taken immediate and significant actions to preserve cash and protect our financial position. Our customers recognise this is an unprecedented situation, and we have led constructive and positive engagement with them, including with school boards throughout North America and across all levels of government in the UK and North America. Currently, the situation is changing day by day, and accordingly we are fully utilising all levers at our disposal to ensure the most effective management of our cost base through this intense period of uncertainty.
“We have significant liquidity, and a diverse portfolio of leading transportation assets that are critical to the 2.1 billion passengers we carry and for the communities we serve, both now and in the future. The long-term fundamentals of our businesses are sound, we have taken immediate action and will continue to do all that is necessary to ensure the Group emerges from this exceptional situation in the most robust position possible.”