FirstGroup plc

Good morning and welcome to First Group's 2026 half-year results presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the first half of the year. I will then provide an update on business performance in bus and rail before we take your questions at the end. Moving on to slide three. I'm pleased to report another strong half for the group, despite several economic and policy headwinds. Strong execution has ensured that we've been able to fully counter the negative impacts of lower bus funding in England, above inflation wage pressures and higher levels of employer national insurance contributions. Group adjusted revenue, which does not include the national rail contract revenues, where we take substantially no revenue risk, has increased by 30% to £834 million. This was largely driven by growth in First Bus due to the acquisition of First Bus London which completed in February. Adjusted earnings per share for the half year has increased by 16% to £9.9 with earnings growth supported by the repurchase of circa 22 million shares during the period. As a result of her strong performance in the first half, the Board has proposed an interim dividend of 2.2 pence per share, up 29% against the prior year. As a result of her continued strategic delivery and the restructuring of the business completed earlier this year, we are on track to deliver modest growth in our adjusted earnings per share for the full year. We expect to then at least maintain adjusted earnings per share in full year 2027 as both Avanti West Coast and GWR are nationalised. This leaves us well positioned for the remainder of the year. Our focus will continue on operational delivery and the successful execution of our UK growth and diversification strategy. Turning now to slide four, which sets out some of the key highlights against our strategic framework. Delivering day in and day out remains a key priority for the group. We continue to drive operational efficiencies in first bus with a 24% reduction in lost mileage to 1.3%. We have also increased our net promoter score to plus 15 as service delivery remains core to our strategy. We have also completed our business restructure to deliver annualised overhead savings of around £15 million which will help offset the impact on the group of increased national insurance contributions. We will see the full benefit of the restructuring in the second half. Looking at modal shifts, generating additional demand for our service is a commercial driver of our business and also crucial for reducing congestion, improving air quality and supporting government decarbonisation goals. In open access rail, our seek miles capacity utilization of 67% remains significantly above the industry average. And we've also secured rolling stock for our new Stirling to London Euston service, which we expect to be fully operational in mid-calendar year 2026. Turning to our sustainability pillar, we're at the forefront of bus fleet and infrastructure electrification. and are working to capitalise on opportunities to unlock adjacent electrification revenue streams. In the first half, this has included the launch of First Charge and a small investment in Palmer Energy Technology to bring battery storage capability to our sites. We continue to diversify our portfolio with the First Bus London performing ahead of our expectations and we continue to grow our business and coach asset footprints with high quality value accretive acquisitions. In Open Access Rail, we were pleased to have been awarded extra paths on our existing services and the extension of some of LUMO's services to Glasgow. We've also submitted applications for new routes where we can commit further material investment and utilise our proven expertise to drive economic growth through connecting underserved communities. I will now hand over to Ryan, who will take us through the financial results for the half year.

Thank you, Graham, and good morning, everybody. This has no doubt been a more challenging half year, given the headwinds of inflation and employers' national insurance increases. However, the early actions that we have taken have helped mitigate some of these pressures, and the group has continued to make progress across the business. In my presentation, I'll be covering the following three areas. Strong growth in adjusted revenue, the improvement in adjusted EPS with further progress on a much better balance of earnings distribution, and finally, reinforcing our capital allocation policy and our financial guidance for full year 2026 as well as full year 2027. So turning to the financial summary on slide 6, where we have made progress across all financial KPIs despite the headwinds. The group's adjusted revenue is up over 30%, driven by both organic and inorganic growth, and decent performances across the business. The revenue improvements in bus and open access rail have largely been offset by inflationary cost pressures, as well as the national insurance impact, as well as business development costs in open access with the mobilisation of our Stirling route, which is now underway. As a result, group-adjusted operating profit of 103.6 million pounds is up 2.8%. Our positive operating profit performance has benefited somewhat by the IFRS 16 adjustment in rail being lower given SWR ending, partially offset by higher net finance costs, resulting in the group delivering 55.5 million pounds in adjusted earnings, up 7.1%. The ongoing share buyback program has reduced the average share count, and as a result, the group's adjusted EPS has increased by 16.5% to 9.9 pence. This robust underlying business performance and strength of the balance sheet has resulted in the board proposing an interim dividend of 2.2 pence per share, an increase of 29.4%. The dividend is in line with the group's current progressive dividend policy of around three times adjusted earnings per share, with around one-third in the interim and two-thirds at the final. The free cash flow generation before acquisitions and returns to shareholders has been impacted by the timing of a more material investment in bus electrification in the half year, and this is us taking advantage of the available government funding, resulting in an above-normal spend in the half year. The group's adjusted net debt position was £207.6 million, with a strong free cash generation offset by the accelerated capex, as well as about £10 million in acquisitions and £76 million returned to shareholders through the buyback programme and the final dividend for the year. At the bus business, despite the material organic and inorganic growth investments in the year, the post-tax return on capital employed was 9.4%, which was impacted by the acquisition of the London business in February. And as expected, the profitability is initially lower from this business. Turning to the 30% growth in adjusted revenue on slide seven, the material increase in adjusted revenue has been mostly driven by the capital deployment in the second half of full year 25, with London in particular performing well and is operating ahead of the investment expectations. The regional bus business passenger demand has, however, been marginally weaker, with a number of factors contributing to this, which Graham will cover later. However, despite the marginally lower volumes, the bus business has been able to deliver some yield growth that has been partially offset by lower government funding. First, rail's open access operations delivered some revenue growth, with this progress marginally impacted by the strike action that we saw in Hull Trains. The rail services business also delivered a strong performance in the half year, And what is pleasing to note now is that more than 30% of the current contracted revenues are now with external parties, demonstrating the continued strong value creation from these businesses. Looking at the 16.5% adjusted EPS growth on slide 8, this chart shows our adjusted EPS progression on a post-tax basis for all the variances. Open access and rail services contributed 0.5 pence in growth, with this now at 3.6 pence of our EPS, representing a materially higher proportion of earnings in rail now from more sustainable business streams. H1 has, however, had a marginal benefit from one sort of rail centre provision releases. First bus increased operating profits contributed 0.2 pence to the improvement, and central costs are 0.3 pence lower year on year, driven by the cost efficiencies and the group restructure executed earlier. Despite SWR ending in May 2025, the earnings from the DFT TOCs are 0.1 pence higher than the prior year. with the first half benefiting from once-off enhanced variable management fees as well as lower disallowable costs. Interest costs were 0.5 pence higher due mainly to lower interest received on cash balances and the group now being in an adjusted net debt position. The buyback programs that have now run for several years has resulted in a low number of average shares, and this contributed 0.8 pence per share. As can be seen, the work that we have been doing over the past few years, together with our disciplined capital allocation approach, has grown our adjusted EPS to 9.9 pence per share. But equally as important, we are continuing to drive a far better distribution in the quality of our earnings as we look ahead. Turning to the adjusted cash flow movements for the past 12 months on slide 9. As a reminder, our adjusted measures excludes the ring fence cash as well as the impact of IFRS 16 from the DFT train operating companies. The group generated EBITDA of £181.4 million before the DFT TOC cash inflows where we have received £37.9 million in distributions. Just as a reminder, These DFT top management fees are paid by way of dividends generally in the second half of the following year after completion of the top statutory audited accounts. Working capital was a net inflow of £4.4 million in the 12 months, resulting in a total of £223.7 million of capital generated from operations versus the full year of 2025 of £207.4 million. The capital generated was deployed in investing £126.5 million in CAPEX, net of grant funding and battery sales into the Itachi strategic joint venture. £6.5 million was paid in cash interest and tax, mainly relating to interest on the new finance leases and arrangements for the electric fleet and first bus, offset by interest earned on the cash balances. There was a nominal amount of cash tax paid, with the low level of cash tax being driven by the historical losses, as well as the accelerated capital allowances that should apply for several years, given our decarbonisation investment programme. Other movements include payments to acquire shares for the Employee Benefit Trust that continues to hold around 20 million shares for share award settlements and small cash payments into the pension schemes, mainly to cover costs. This has meant that the business has generated a total of £78.3 million in cash, despite the accelerated investment in electrification of bus. Just short of £150 million was deployed in growth capital, with the acquisition of RATP London for £90 million being the major contributor to that, as well as several Bolton acquisitions in First Bus, mainly in the business and coach market, but also includes investment into several innovative energy businesses, as well as combined with the two open access rail businesses with Stirling in mobilisation phase. £37.1 million has been paid by way of dividends in the 12 months, and £99.1 million was spent on the share buyback programs. What is clear from the chart is that the group continues to deploy a very balanced approach to capital allocation, focusing on both organic and inorganic growth opportunities, as well as meaningful returns to shareholders in line with our strategy. This results in the group ending the half year with £207.6 million in adjusted net debt and a debt cover ratio of 0.95 times, which is well below our leverage policy parameters, despite being a fairly busy 12 months combined with a seasonally high level of adjusted net debt at the half year. Turning to our capital allocation framework on slide 10, as we look ahead, we have a leverage policy of less than two times adjusted net debt to EBITDA With our forecast year-end position being well below one times, there's plenty of capacity for the UK growth for the right opportunities where the post-tax IRR from these investments exceeds our WAC. On an underlying basis, pre-deployment of capital for acquisitions, we expect to maintain our leverage below one times for the time being. We have a strong focus on decarbonisation in First Bus. With the additional cost and efficiency benefit this brings, and we will continue to deploy capital in this area, particularly where this is supported by government funding to help deliver the UK's wider decarbonisation strategy. At First Bus London, we continue to expect this business to be operating cash positive from full year 27 onwards, and we are very pleased with the business performance to date. For the DFT tax, we now estimate that £125 million will be received in cash from October 2025 onwards to the end of the contract, and this includes the anticipated continued support as required under contract from the rail services businesses. This is effectively higher than the £120 million that we guided in June, due mainly to the longer-dated contracts agreed in rail services business, slightly better DFT TOC end dates, and partially offset by the cash that we received in the first half of the year. Our current dividend policy remains around three times adjusted earnings per share, with this ratio and quantum being progressive over time. And finally, in line with our disciplined capital allocation approach, the group is committed to any surplus cash that cannot be effectively deployed in growth will be returned to shareholders. Given the current adjusted net debt and the pipeline of UK opportunities that are currently being evaluated, we are not announcing an extension to the buyback program at this stage, and this will be reviewed again with the full year results. To end with, on slide 11, looking ahead for the financial outlook for full year 2026, as well as adding in guidance now for full year 2027, given the transition of the remaining DFT TOCs at some stage within the next 12 to 18 months. The group expects to deliver modest growth in adjusted EPS for full year 2026, and then to at least maintain this level into full year 27 or for higher base. The bus business anticipates making sequential operating profit progress year on year, with growth being driven by the material change in the business following the acquisitions, including London, with bus now consisting of three strong business segments, delivering a combined annual revenue that anticipated to be above £1.4 billion for full year 26. In First Rail, the open access businesses are anticipated to deliver results ahead of full year 2025, reflecting strong demand and yield management being offset by inflationary cost pressures, as well as the costs for mobilising the sterling business. The rail services businesses are expected to make progress year on year, given the continued support provided to previous and existing DFT TOCs, as well as growth in new customers. For the DFG TOCs, the fees are anticipated to be at more normal levels going forwards, and combined with SWR ending, means that the underlying management fees will be lower. The IFRS 16 positive impact to EBIT for the year is expected to be circa 36 million in full year 2036. At the sensor, we anticipate costs to be circa 8 million pounds lower, benefiting from the central restructuring that was completed in the first half. Below operating profits, we anticipate incurring £60 million worth of interest, of which £34 million relates to IFRE 16 charges mainly due to the DFT rail leases. We anticipate deploying a net circa £180 million of capex in the first bus after taking into account grant funding and the benefit of £10 million cash from the Hitachi Strategic Battery Partnership. This capex of £180 million now includes £30 million of capex in London for electric vehicles, where the group is trialling an outright ownership model rather than an operating lease model on a specific large route that commences late in 2025, due to the operating margin benefit that the ownership model delivers. The current level of capex in bus is above the expected normal levels, given the success the business has had in accessing grant funding, and annual capex is anticipated to be around £100 million per annum as we look ahead, depending on the model that may be applied in London. First rail remains capital light, but with some investment expected on the inorganic growth in open access as we mobilise these routes. For the pensions escrow, we have now finalised the bus section 2024 tri-annual valuation. This resulted in £20 million of cash being returned to the group in November, with £20 million paid into the scheme and the balance of £43 million retained in escrow. The escrow will be reviewed with the 2030 valuation. where a number of medium-term actuarial and asset judgements will be clarified in the scheme's performance. And when this is combined with the group section, it means that £65 million is now in escrow that will continue to explore de-risking options that will be tested in the 2030 valuations. We anticipate ending the year with circa £125 to £135 million worth of adjusted net debt. And this guidance is before any further inorganic growth opportunities where there's a decent pipeline in the UK that we continue to evaluate. As you can see, the group retains a very strong balance sheet position with a much improved quality of earnings trajectory where we expect modest growth in EPS for full year 2026 and then to at least maintain this higher level for full year 2027. And I'll hand over to Graham for the business review.

Thank you, Ryan, for the update. Much appreciated. Moving on to slide 13. It's been a solid half year for First Bus with operating profit growth of 4% driven by yield management, cost efficiencies and the benefits of recent acquisitions. This has come in a challenging environment where the transition to a £3 fair cap in England resulted in lower funding levels down £17 million on last year. This, combined with related pricing activity and generally a softer economy, has negatively impacted regional bus volumes. Concessionary volumes are up 4%, but this has been more than offset by a 7% decline in commercial volumes, leaving overall volumes down by 4%. As well as the move to the £3 fare cap, economic factors are impacting demand. It's worth noting that just over 40% of all bus trips are for shopping and leisure purposes and around 20% are for commuting. And we're seeing these journeys impacted by lower levels of consumer confidence. To offset the drop in funding and softer demand, we introduced a new simple distance-based fare structure, resulting in a circa 10% yield improvement in the first half. Inflationary pressures remain, with cost increases due to inflation of circa 3%, mainly in wages, where there was a 4% average increase in driver pay awards. We have now settled the majority of our largest bargaining units, with two-year awards achieved in most cases. We have also delivered £7 million of efficiencies through the electrification progress and overhead savings, including a £2 million saving in fuel costs. We've also benefited from our new businesses in London and a business on coach where we also continue to extend and win value accretive contracts. Adjusted operating profit margin of 6.1% after absorbing 1.4% impact from higher national insurance contributions. Regional bus operating profit margin was 8.2%, slightly lower than the prior year. Moving now to slide 14. The First Bus portfolio is evolving as we grow our business and coach segment and develop our franchising capability centred on First Bus London and our operations in Rochdale. In business and coach, we are actively growing our operational footprint and asset base. In the first half, this included the acquisition of Tetley's Coaches, an established profitable operator with a large own depot in Central Leeds. This segment's revenue grew by 30% in the first half, due to contract wins and extensions, the launch of Flixbus services and the contribution of our new businesses, which are trading in line with expectations. This is an attractive market worth an estimated £3 billion and we have a strong pipeline of opportunities to further grow our market share. The significant increase in our franchising segments revenue reflects the addition of First Bus London, which contributed £150 million in the first half. Thanks to our focus on service delivery to drive customer satisfaction and performance incentives, both our London and Rochdale franchise businesses consistently hold top positions in the operator league tables. Looking ahead, a number of mayoral authorities outside London are progressing with bus franchising schemes. These include Liverpool City Region, West Yorkshire, South Yorkshire, Wales and the West Midlands, representing an opportunity for us to enter new markets. There is still some uncertainty over which franchising models will be deployed, in particular around fleet and depot ownership. This could lead to potential capex savings and property disposals should authorities opt for an ownership model. Our track record of delivering quality bus operations under contract in London and Greater Manchester leaves us well positioned to actively take part in franchising growth. Moving on to slide 15. The electrification of our fleet and infrastructure is a key part of our strategy to transform our bus business and to unlock potential adjacent revenue streams. We continue to make good progress with circa 23% of our fleet zero emission, with three fully and 17 partially electrified depots across the UK. As I applied on a previous slide, we're benefiting from electrification efficiencies, including through fuel costs. This has led to a net fuel cost per mile reduction of 20% over the last three years. We're also making good progress identifying and capitalizing on opportunities to further monetize our electrification assets. We recently launched the first charge brand, giving access to chargers at 15 of our depots. We also made a small investment in Palmer Energy Technology to bring battery storage capability to some of our depots. This included the launch of a battery energy storage facility in Holford, and we expect to launch a second facility in Aberdeen next year. Over time, this will drive further cost efficiencies and provide a potential platform for commercial second life use of bus batteries. And now moving on to open access rail on slide 16. Our two open access rail operations Hull Trains and Lumo delivered adjusted operating profit of £16.3 million in the first half. This is lower than the prior year with some impact from industrial action at Hull Trains and £1.3 million of mobilisation costs for our new Stirling to London Euston service. Lumo saw strong demand during the summer months and Hull Trains had a good ramp up in business traveller demand in September. Seat miles operated were 3% lower than the prior year, reflecting higher levels of engineering works on the East Coast mainline and industrial action. Seat miles utilisation remains high for both operators and still well above the rail industry benchmarks. Looking ahead, the mobilisation of our new Stirling to London Euston service is progressing well, and we expect the service to be fully operational in mid-calendar year 2026. As you can see on the slide, we've set out our current rail open access seat miles capacity and how we see this developing over the coming years. We were pleased to announce in July that the ORR had approved our applications for extra paths on our existing services from December 2025, as well as the extension of some of Lumo's services to Glasgow. These extensions will add an additional 118 million seat miles, a 13% increase to our existing capacity. This, together with our new Stirling and Carmarthen services, will see us more than double our existing seat miles capacity over the next two to three years. We've also lodged a number of applications with the ORR. This includes services from Paynton to London Paddington, Hereford to London Paddington, extension of the Stirling Track Access Agreement to December 2038 with the addition of new battery electric trains, a revised Rochdale to London Euston application and an application for a new route between Cardiff and New York. We've committed significant investment to facilitate the growth of our open access services including our circa £500 million agreement for 14 new Hitachi trains that are being manufactured in County Durham, securing the skills base and jobs in the local area. If our ongoing applications are successful, we will make use of our option to commit further investment in new Hitachi trains, representing a further UK manufacturing investment of around £300 million. And moving on to slide 17. Our teams managing the national rail contracts at Avanti West Coast and DWR continue to focus on enhanced service delivery and effective cost management. Both teams are performing well and attributable net income from the national rail contracts has been in line with our expectations at £15.3 million in the first half. In line with government policy, the DFT train operating companies are moving into public ownership Our SWR team worked tirelessly with the DFT operator to ensure a smooth transition, with the business exiting the group on schedule in May. The dates for the transfer of Avanti West Coast and GWR have not yet been announced by the government, but are anticipated to be in full year 2027. Our rail services businesses, FCC, Mistral and Consultancy continue to progress and perform well, with revenue showing encouraging growth. Almost a third of the current contracted revenues are now from external customers. We continue to look at opportunities to scale these businesses as we believe private sector expertise will continue to be vital to the success of the rail industry. Moving on to conclude on slide 19. A robust performance in the first half in a challenging economic and policy environment is testament to the work we have done to transform, grow and diversify our business. We are on track to deliver modest growth and adjusted earnings per share for the full year and we expect to then at least maintain adjusted earnings per share in full year 2027 as we transition our train operating companies to the government. In First Bus, we're an experienced operator with a large, well-capitalised fleet and a network of own depots that will allow us to continue to improve performance and to grow in attractive markets. The electrification of our fleet and infrastructure continues at pace as we look to unlock cost efficiencies and potential adjacent revenue streams. We will also be able to leverage these capabilities when bidding for new contracts. In First Rail, we will continue to work to grow our open access capacity and revenues, look to optimise our rail services businesses, and to bid for contracts where we can bring forward our experience and capability. In our remaining two DFT train operating companies, we continue to prioritise contractual and operational delivery, together with the work required to ensure a professional handover to the DFT operator. Our strong balance sheet allows us to evaluate a good pipeline of value-inclusive UK growth opportunities. We remain committed to our discipline on capital allocation and will continue to return any surplus cash to our shareholders. As a leading UK public transport operator, we have a critical role to play in the delivery of the UK's wider economic, social and environmental goals. We will continue to be proactive, demonstrate our strengths as an experienced partner, underpinned by our significant investment in growth and decarbonisation. To close, the work we have done over the last few years has allowed us to maintain our positive earnings trajectory as the UK bus and rail markets partially transition to new models. We aim to continuously improve performance, to drive more demand for bus and rail services and to capitalise on strategic UK growth opportunities. Thank you for your time this morning, and we will now open for questions. We will take questions from the room first, and then from the webcast.

Morning, everyone. Joel Poole from Pamela Liberum. Three, if I can. Firstly, on bus franchising. You set out the regions that are moving towards franchising. I was wondering whether you could quantify the revenue opportunity and also what's potentially at risk in, I think, just West Yorkshire is the area that you're in amongst those. Secondly, there's quite a big increase in the CapEx guidance for the year, but not a very big increase in the adjusted net debt guidance. I was wondering what the... reconciling item there is. And finally, you talked about having a look at owning electric buses in London. What are the challenges around that versus owning diesel buses in London? Is it significantly more challenging to cascade electric buses into the regions or onto other London bus contracts?

Thank you, Gerald. And it was good to see the question starting before I even sat down. So I'm very impressed. I'll maybe take the first one on bus franchising. Look, I mean, you know, obviously we are in West and South Yorkshire, so that's clearly a risk for us, you know, particularly given how some of these bids are formed with the ability only to win certain depots. But when we look at the opportunities outside, we kind of feel that we can balance the kind of risk reward scenario here. And the fact that we've worked very hard to strongly capitalize our assets over the last few years with improved fleet. improved depot, I think it leaves us in a strong position in discussions with the local authorities in terms of how those assets are positioned in the future use within franchising. So I'm not going to quote individual sub-sector numbers, but I think the general feeling in the team is that we will come out of this process We're likely to release some capital from the business in the areas where we have strong asset base and we feel we've got the qualities and the experience now within our business, particularly bringing in the London business and what we've learned from that to be competitive in the bidding process. You know, that has started, you know, the results of the first phase of Liverpool around the end of this calendar year. So we'll begin to get some insight as to where we stand in pretty short order. Ron, do you want to take the second question on CapEx and MedTech?

So CapEx is higher by $30 million. It's primarily driven by us trialing the $30 million. It's 59 EVs that we're trialing on a specific route in London. which is all electric that the business effectively retained and one that starts later this year. So the guidance is better than what we previously gave effectively with that sort of 30 million going out and a couple of reasons for that. One is the 20 million pounds of escrow cash that's come into the business in the second half of the year. as well as some underlying sort of cash, stronger cash generation, particularly coming out of the rail business than what we originally anticipated. So a combination of those two factors offset against the CAPEX in London is where the net debt guidance has ended up being slightly higher but better off. And just also a reminder, we deployed £10 million in growth M&A in the first half of the year as well. So we've got effectively 40 out and 20 back on the pensions escrow, but our net debt is slightly better than that, obviously, mathematically.

And then on the bus ownership in London.

So the EVs in London, I mean the TFL is committed to electrification in London. I think that the sort of risk of transition of technology in terms of how these EVs work and the warranties that the OEMs are now providing has kind of gone beyond the kind of risk factor that you previously I think would have taken and hence kind of moving those to operating leases. I think the world also moving to more post-IFRS 16 basis in terms of financial judgements and I think there's quite a few bankers in the room. I think the banks eventually will also start moving to covenants to be sort of a post-IFRS 16 basis. Your net debt, your EBITDA, and your total cost of borrowing is going to be all kind of caught into one thing rather than just being simply off balance sheets. And a combination of sort of commitment by TFL to go to electric, so we'll always have a use for those buses one way or the other, is a positive. Technology improvements on the OEMs in terms of length of warranty is a positive. And if we can use our strong balance sheets to effectively kind of fund our business model in London at our whack of 9% versus the whack of the Roscos, then which is much much higher, then we can sort of in theory kind of capture that benefit and that capture of that benefit really kind of translates into slightly higher margins. But we're just trialling this on a specific route so we don't want people to think that we are just buying buses now in London, we're not going to up-release them. We're just trialling them on a specific route to just see that the kind of financial benefits are as we expect them to be over time. Alex?

Morning, everyone. Three from me as well, please. Firstly, just in the remote possibility that the budget doesn't like the blue touch paper of the UK economy and the consumer still doesn't feel great on the 27th of September, if commercial bus volumes remain somewhat subdued and the trend you saw in the first half continues, what sort of levers have you got? Should we expect more mileage reduction there? Secondly, if I can just elaborate on the bus franchise in question, Manchester has obviously bought depots and fleet from previous operators. Birmingham has acquired a depot, look like they're going to buy more and fleet as well. What do you expect in the regions where you think they may franchise? You talked about capital release. I don't know if you can quantify that at all. And then finally, just on the rail services, it sounds like you've had a very positive outcome on those continuing for longer. What do you think the end game is? Should we expect government provision of these services or private? If it's private, is there actually an opportunity for you to increase your market share?

Okay, thanks, Alex. Very comprehensive questions. I mean, the budget, obviously, when you look back a year, we obviously had to deal with national insurance contributions. I think the team worked very hard to manage that. The reality is when you're running a large business, you don't always deal with these issues in a three-month period. So The reality is it's probably taken us right through to the end of the half year to do all the work that we wanted to to offset those increased costs. And we will now see that in the second half. When we look at this budget, you know, again, we will just deal with what comes our way. I mean, on volumes, you know, we began to see volumes begin to, you know, this time last year we were talking about volumes being up 4%. Clearly, there's been a number of impacts that have affected them, but we did see them begin to drop off in the January to March period and have largely been around the 4% level since then. We begin to cycle that effect out in January this year. We're obviously working with various initiatives to stimulate more demand as well, including having put more frequency on in some of our larger urban areas to try and stimulate more demand. You know, it's difficult to gauge where volumes will be next year. But, you know, we still have, you know, population growth. We still have some macro tailwinds. So, you know, we do think it will settle down a bit. But, you know, we're prepared, you know, to deal with it if we see softer volumes next year. So, you know, it's hard to call. But, you know, we do expect some improvement from the current level. In terms of bus franchising, we have seen the signal from a number of areas that they want to own depot and fleet in total, but we have also seen discussions around potentially a split fleet in certain areas given the lack of available funding to do the whole thing. So I don't think it's clear how that will completely play out. A lot of it will be down to, you know, choices at a mayoral authority level as to where they invest their money. I think the fact that we have a well-capitalized business is helpful, and also we have available capital if the opportunity arises. You know, I think, you know, we'll lean into each individual situation, you know, as it kind of prevails. And as I said, you know, if in West and South Yorkshire, you know, they're looking at, you know, an ownership model, you know, certainly the depots and maybe partially for the buses. then we're in a strong position to work with them to make that happen. So, yeah, so I think, you know, relatively positive in our ability to work there. But it's very hard to call out numbers because, you know, these are active negotiations and they're not concluded at this point. And I think then on rail services, you know, the team have done a good job, there's no doubt about that. And, you know, we provide... some high-quality expertise into the train operating companies, and we've been able to broaden some of these services beyond our – obviously into the external market, which is a positive. You know, it's difficult to fully assess where GBR will go, but it's – The reality is they may bring some in-house. They may combine and consolidate and look for one or two private sector partners. And at the end of the day, our job at the moment is to provide quality services, put good contracts in place, and then we'll respond to how the market evolves. But I think we have optionality here. And within the number, the 125 million of cash receipts, that It includes an assumption of how much real services cash will be there. And, you know, we're more than comfortable with giving that guidance at this point. So evolving area. But since we last spoke, you know, we have a better contract position now than we would have had six months ago, and that's encouraging.

Good morning, it's Rory Cullinane from RBC. The first question, I think the M&A was described as a UK-focused growth strategy. Should we infer from that that you're likely to continue primarily buying businesses in the UK and is there still a reasonable pipeline of opportunities there? Secondly, I was quite struck that bus capex could normalize towards 100 million in the medium term. Does that come back to the shift to franchising and more regions opting to own assets? And then finally, What have you assumed in terms of the timing of the exit of the remaining TOCs in terms of the upgrade of the cash inflow from DFT TOCs from 120 million to 125 million? Thank you.

Thanks very much. On M&A, we are solely focused at this point in time on our UK pipeline of opportunity. We've been able to do, you know, last 18 to 24 months, seven or eight acquisitions. And, you know, we have a pipeline that at the moment is made up of live opportunities under discussion and, you know, some more medium-term opportunities that we feel could come to the market. So our job right now is to run down those opportunities. They're a good fit. with the strategy of the business in terms of more growth in bus and the potential to obviously completely optimize what's there on open access. So we feel there is enough there to have a strong growth story around bus and open access rail for the next two to three years. You know, we, as I've said before, we, you know, given the type of organisation we are, stuff comes our way to assess and look at. So we will continue to look at, you know, opportunities outside the UK, but we have absolutely, you know, at the moment, you know, that's really just from a kind of good corporate citizen perspective. You know, we are solely focused on driving and delivering. the UK pipeline we have, and until that pipeline weakens, we've no real intention of looking elsewhere. Bus capex, Ryan, do you want to maybe take that one?

On the capex, there's a number of sort of variables on that. One of them being, obviously, as we transition towards franchising some of the markets, our own fleet in terms of our regional bus operations will be slightly smaller as a result of that. Now, we kind of spoke a little bit earlier on one of the questions in terms of is it going to be depots and buses owned by the combined authorities or whether we can have a partnership. Clearly, if we're going to have to own the buses under that scenario, then clearly the capex number will be higher. That should then be reflected in the margins that those bids will go for in terms of cost of capital pricing. So that $100 million doesn't include the fact that we might have to buy buses under the franchising model and we'll obviously update the market as and when that happens in terms of how the structure is going to end up. The other factor is that we've got a lot more confidence now on the electrification of our existing diesel fleet in terms of transitioning it from being a diesel fleet to an electric bus by just doing the electric, putting in an electric drier train and battery. Normally with a diesel bus about midlife they'd have a massive engine replacement and a big refurbishment. And that happens instead of putting a diesel engine back into the bus, you're now putting an electric drivetrain as well as the batteries. And that then gives us a sort of more limited amount of capex that we need to then spend to be able to electrify those fleets. And so that's a... I think we've got sort of 40, I think, in operation now, Jeanette, I think, from 30 in operation already, and we've got sort of an investment in a business called Clean Drive, which is another one of these sort of adjacencies where we're trying to use our sort of scale and expertise to be able to help monetize the benefits of being a leader in this electrification journey for large fleets. And it's those sort of factors combined means that our overall capex therefore should be a low number on a go-forward basis. But clearly in the shortest term, you know, whilst we've been successful in accessing government funding, which is very important to us in order to be able to continue this accelerated journey, then that capex level is generally higher. And you can see it from my average fleet age being down sort of to 8 point, you know, just over 8.8 years currently versus starting out 11 years, you know, as early as four years ago.

And then on the talk access, I mean, as we said during the presentation, we expect both of them to be transferred by the end of full year 27. You know, nothing has been announced by the government, but that's a kind of working assumption at this point. And as Ryan said on the kind of cash upgrade number that we put out there, it's really a function of of better operating performance and a little bit more longevity of some of our contracts, you know, which is a positive. And I think, you know, it is worth saying as well that, you know, operational performance, you know, particularly Avanti in terms of what they can control outside of, you know, infrastructure failures has been very, very good as a significant step forward over the last 12 months and all credit to the team. performing well above the industry averages on those metrics in terms of cancellations. So that obviously has a benefit as well in the short term. So I think general just improved performance and contract longevity is really what's driving that upgrade. Any further questions on the route? Okay, any questions on the web?

There are currently no questions on the webcast, so I'll hand back for closing remarks.

Okay, well, Luke, thanks, everyone, for coming along today. And thanks for all the questions. It's been fantastic to deal with them. And, Luke, you know, the company continues to push forward and grow its key financial metrics, and we intend to continue doing that. So thank you very much for your time today.