Chief Executive Officer’s Q&A

During the last two years, I have seen our businesses continue to make excellent progress and to deliver day in, day out, despite a challenging external environment. This is thanks to the extremely experienced, capable, hard-working and ambitious people we have across FirstGroup at all levels, and I am very excited for our future as I know we have considerable opportunities to continue to develop our platform and to grow further, underpinned by our strong balance sheet.

To achieve this, we have identified four key strategic pillars to drive us forward. Delivering for our customers must be at the heart of everything we do; we must encourage more people to make the switch from car and plane travel to bus and rail; we must maintain our leading position in environmental and social sustainability; and we must grow and diversify our portfolio to create more value and ensure that our business remains resilient. I am confident that if we consistently deliver on all four of these strategic pillars, we will create even more value and sustainable growth for the benefit of the Group, our people, the communities we serve, and all of our stakeholders.

The strategy was agreed at our Board meetings in the summer of 2023. We followed a structured process to develop our strategies at both Group and divisional level and to ensure they are aligned. We first assessed our external environment and its implications on the Group, looked at our capital position and constraints, filtered and prioritised opportunities, and confirmed our financial and non-financial ambitions. We then developed our main Group strategic priorities and established our key divisional strategic priorities aligned to those of the Group.

I now use the four pillars as the basis of my reports to the Board ahead of every meeting. The four pillars of our strategy have also been fundamental in our internal management conferences during the year, and we have continued to communicate about the pillars in our internal and external messages since the autumn.

I firmly believe that innovation is key to further improving our performance, delivering the best possible services for our customers and ensuring we remain market leaders in bus and rail. We are already doing a great deal in this area and have plenty of scope to do more.

In First Bus, we have more granular customer data than we have ever had, and coupled with this, we are using new and innovative software tools. These are helping us to improve our service delivery, increase efficiencies and implement pricing strategies to enhance customer value, drive demand and improve yield.

We are also rapidly establishing ourselves as leaders and true innovators in bus fleet and infrastructure decarbonisation. We have formed a landmark joint venture with Hitachi and signed a pioneering Green Hire Purchase Finance Facility for buses during the year. This will provide greater financial visibility and capital efficiency and by making use of smart technologies we will be able to extend the life of our batteries, ensure we use power as efficiently as possible and unlock adjacent electrification revenue streams such as the use of our charging infrastructure by third parties.

In First Rail, the huge success of our two open access operations has demonstrated that we have the expertise to innovate and create growth in the rail sector. We are managing yield effectively, implementing successful targeted marketing campaigns and delivering good value, reliable services. All of our train operating companies are also benefiting from our affiliate businesses, including Mistral Data, and we are now successfully marketing these products to other operators and manufacturers. Finally, earlier this year we began a successful trial of a battery‑only train, part of which included setting a UK battery train distance record without recharging.

Not only do millions of people rely on us to keep them moving safely and on time, every day, but delivering a consistently reliable service is also crucial to protecting and growing our core UK business.

In First Bus, by delivering reliable services, data-driven operational and cost efficiencies and customer-centric marketing and pricing strategies we will drive profit growth, retain and win key contracts. In First Rail, by focusing on operational excellence, we will maximise the variable fees and revenue incentivisation in our National Rail Contracts, build on the success of our open access businesses and establish ourselves as a credible operator to bid for non-DfT contracts.

We believe that favourable demographics and changing attitudes to public transport will support growth in bus and rail travel. Modal shift also offers a huge opportunity for us to increase volumes and drive asset utilisation which will positively affect our bottom line.

As one of the largest rail and regional bus operators in the UK, we have a huge responsibility to deliver vital services that connect people and communities, to support economic growth and help lower emissions.

We have ambitious net zero targets and must continue to work hard to deliver them. This is key to our strategy and will realise environmental, social and economic benefits not only for the Group, but for all of our stakeholders and the country as a whole.

We will lead in environmental and social sustainability through the electrification of our bus fleet and infrastructure to close the cost and funding gap that still currently exists between electric and diesel buses, and unlock what we believe is significant adjacent value. In First Rail, we will continue to deliver environmentally-friendly train travel, stimulate demand and identify underserved markets to drive modal shift and to support prosperity, growth and green jobs in the communities we serve.

Diversifying our portfolio is critical, both in our core and affiliate markets. We must invest to ensure our business is resilient and to create sustainable growth and value for all of our stakeholders.

To do this, we will pursue partnership and franchising opportunities in First Bus and in First Rail we will grow our open access businesses and bid for non-DfT contracts. We are also making use of our deep expertise and capabilities in both First Bus and First Rail to scale and grow their affiliate businesses.