FirstGroup plc

Good morning, everyone, and welcome to First Group's 2026 full-year results presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the year. I will then provide an update on bus and rail before we take your questions at the end. Moving on now to slide three. I'm pleased to report another strong year for the group. The successful execution of our UK-focused growth and diversification strategy has driven further earnings momentum and material shareholder returns, reinforcing our track record for delivering on our commitments. Group adjusted revenue, which does not include the national rail contracts, where we take substantially no revenue risk, has grown by 25% to over £1.7 billion. This was largely driven by growth in first bus revenues, aided by the acquisition of First Bus London, which completed in February 2025. The group adjusted earnings per share for the year has increased by 5% to 20.3 pence, with earnings per share growth supported by the repurchase of 22 million shares during the year. As a result of our strong performance in cash generation, the Board has proposed a full year dividend of 7.2 pence per share, an increase of 11% against the prior year. We're also tightening our dividend policy, and over time, we expect our dividend cover ratio to move towards 2.5 times We're also delighted to announce a further £100 million share buyback programme which we expect to complete over the next 12 months. The UK bus and rail markets will continue to evolve during full year 27 with the transfer of our national rail contracts to public ownership and as bus franchising begins to gather pace. The work we have done to improve performance and restructure our business will allow us to maintain our adjusted earnings per share in full year 27 following a stronger outturn in full year 26. We also continue to see a strong pipeline of inorganic UK growth opportunities building on our execution capability of previous years. Moving now to slide four. This sets out some of the key highlights against our strategic framework. Delivering day in and day out remains a key priority. In first bus, our expertise and delivery focus has driven further operational improvement and lost mileage and a higher net promoter score, which has improved from plus 11 to plus 17. Our two successful open access operations have continued to lead and rail customer satisfaction rankings. Looking at modal shift, generating additional demand for our service is a key commercial driver of our business and also crucial for reducing congestion, improving air quality and supporting government decarbonisation goals. During pool year 26, we have put more capacity into the market in both bus and rail. In bus, we have increased operated miles in regional bus and added capacity in our business and coach network. We have delivered on our commitment to increase capacity in open access in both Hull Trains and Lumo during the second half of the year. Turning to our sustainability pillar, we continue to be recognised for our market-leading credentials. We remain at the forefront of bus fleet and infrastructure electrification and are working to capitalize on opportunities to unlock adjacent electrification revenue streams. This has included launch of first charge across 15 of our depots together with the introduction of battery storage capability to some of our sites. Diversifying our portfolio in attractive markets is a key strategic priority. We continue to make good progress building a diverse, resilient portfolio, less exposed to changes in public policy. Over the last four years, we have invested around £230 million on intergranite growth in First Bus. This includes the acquisition of RITP London, which is performing ahead of our acquisition expectations in its first full year. We have also acquired a number of well-established, profitable coach businesses, to extend our operational footprint and geographical reach in key markets. We were also delighted to have been awarded the contract to run the London Overground Rail Network, building on our existing relationship with Transport for London. We successfully took over the operation on the 3rd of May. Moving now to slide five. Looking ahead, we're now entering a phase of higher levels of pre-cash generation and expect to deliver around £400 million over the next three years. This is supported by further earnings growth in bus and open access rail, together with the anticipated cash flow of £90 million as the DFT talks transition to public ownership and our rail services businesses continue to provide support post transfer. We have recapitalised the business as we invested in decarbonisation and portfolio growth. This has made This has been made possible by the work we've done to transform business performance over the last few years while still maintaining a strong balance sheet and leverage comfortably below our threshold. Looking ahead, annual capital expenditure and first bus will normalise in full year 28 to a range of 80 to 100 million pounds, following a period of accelerated investment and decarbonisation whilst government co-funding was available. Our disciplined capital allocation policy remains unchanged, balancing investment and growth and returns to our shareholders. The first group team have achieved a lot over the last few years, and I remain excited about the potential for meaningful growth and material returns to our shareholders. I will now hand over to Ryan, who will take us through our financial results for the year.

Thank you, Graham, and good morning, everyone. In my presentation, I'll be covering the following three areas, the strong growth in adjusted revenue, the improvement and underpinning progress in adjusted EPS, and finally, the financial guidance for full year 2027 and the application of our capital allocation policy. So turning to the financial summary on slide seven, where we have made progress across all of the relevant financial KPIs. The group-adjusted revenue is up over 25%, driven by both organic and inorganic growth. The revenue improvements in bus and open-access rail have largely been offset by inflationary cost increases, the circa £16 million impact from the national insurance change, and circa £6 million business development costs in open access for the mobilisation of the Stirling route, as well as SWR being nationalised in May 2025. Despite this, the group adjusted operating profits of £219.4 million was broadly flat year on year, but from a much stronger, more sustainable base. Our strong operating profit performance has been partially offset by higher net finance costs, resulting in the group delivering £104.6 million in adjusted earnings. The Shared Buyback Programme has reduced the average share count And as a result, the group adjusted EPS has increased by 4.6% to 20.3 pence. This robust underlying business performance and strength of the balance sheet has resulted in the board proposing a final dividend of 5 pence per share, resulting in a total dividend for the year of 7.2 pence, an increase of 10.8%. This dividend has been declared in line with the current progressive dividend policy of around three times adjusted earnings per share. Despite the accelerated investment in decarbonisation in bus, the business generated just short of £74 million in free cash flow, and ended the year with £137.7 million in adjusted net debt, and this is after £35 million in bus acquisitions and £89 million in shareholder returns. We have added a new measure, return on invested capital employed, reflecting a post-tax adjusted EBIT return against our total invested capital which also contemplates IFRS 16 leases. The 10.7% ROIC delivered in the year is up 80 basis points and well above the group's WAC. Turning to the 25% growth in adjusted revenue on slide eight, the material increase in adjusted revenue has been mostly driven by the capital deployment in the second half of the full year 2025. most notably with London Bus, in particular performing well and delivering ahead of our investment expectations. In regional bus, the significantly reduced fair funding and marginally lower volumes have been more than offset by yield growth. Strong progress has been delivered in our business and coach through the investments we've completed, as well as some organic growth through, for example, the fixed contract. Bus franchising growth includes the full-year effect of London that was acquired in February 2025. First Rail's open access and contracted rail operations delivered some revenue growth, with this progress marginally impacted by the December timetable change and increased competition from LNER on the East Coast mainline in the final quarter. The rail services business delivered strong revenue growth for the year, with this growth offset by lower variable incentive fee opportunities at the DFT talks and SWR being nationalised in May. Turning to slide nine, showing the 7% improvement in bus operating profit. The government policy changes that were effective for the whole of the year had a material impact on the business. These policy changes combined with a softer, wider economic backdrop affecting volumes impacted the business by circa 69 million pounds. However, the strength and quality of the bus business combined with strong performance in certain geographies meant that the team were able to offset these policy headwinds through £66.8 million in yield improvements. Cost inflation resulted in a £32.7 million increase in operating costs, with the majority of these being labour costs, representing about 50% of the bus P&L, and these were up 4% year-on-year, with the balance of costs increasing largely in line with CPI. Offsetting the inflation was £25.9 million that has been taken out of the cost base, through network and cost efficiency improvements, including the restructure of the business, as well as a further drive to use technology to help with business performance. The acquisitions and inorganic growth added 15.6 million pounds to profitability, reflecting successful capital deployments in driving results, with London bus acquisition in particular performing well, along with the several Bolton coach acquisitions. Turning to the rail performance in slide 10, where we are changing how we report the segments going forwards, reflecting our success in the award of the London Overground contract, which we are combining with our open access business, London Tram and the cable car contracts. Given the upcoming nationalisation of our remaining two DFT TOCs, they are being combined with our rail services business for ease of valuation as the TOCs transition over the coming year. In total, rail adjusted operating profits is down £18.9 million, driven mostly by SWR being nationalised in May and the £6.8 million lower IFRS 16 adjustment. The rail services business has continued to grow, with progress year on year driven by new business in Mistral and first customer contact revenue growth driven by higher levels of activity. The open access and contracted business revenues are up £4.8 million, with additional services that came into effect with the December timetable change and the extension of Edinburgh to Glasgow in the fourth quarter being partially offset by increased competition from LNER. £6.3 million costs were incurred in the mobilisation for the new Stirling route that launched in May 2026, and £1.8 million was higher infrastructure charges were incurred at LUMO, where this is now at the full rate. The 3.3 million pound other movement primarily relates to the improved rail services business profits, partially offset by lower performance measures. For the BFT TOCs, net fees post-tax and minority interest accrued in the year were 29.3 million pounds. This is down 9.7 million pounds, reflecting the lower variable fee opportunity and SWR ending. There are further details in the appendices and related to BFT TOC accounting. Looking at the 5% growth in adjusted EPS on slide 11, this chart shows our adjusted EPS progression on a post-tax basis for the variances. Open access and contracted rail reduced by one pence, due mainly to the revenue growth being offset by the additional circa 8 million costs for mobilization and infrastructure charges. The DFT tox and rail services added 0.2 pence, with the reduction in the top fees being more than offset by growth in the services businesses. The DFT top net fees earned in full year 2026 of 29.2 million pounds translates to circa 5.3 pence of the 7.9 pence total for the year. And this is down 1.3 pence year on year. With this reduced contribution, EPS being more than offset by the rail services growth. First bus increased operating profits contributed 1 pence to the improvements and the low essential costs added 1.1 pence driven by cost efficiencies and the group restructure. Interest costs were 1.9p higher, due mainly to lower interest received on lower cash balances, and the group now being in an adjusted net debt position. The buyback program resulted in a lower number of average shares in issue, which added 1.5p. 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 20.3p. with the continued improvement in the balance of the quality of the earnings generation. Turning to the cash generation by the group on slide 12. As a reminder, our adjusted measures exclude the ring-fenced cash and the impact of IFRS 16 mainly in the DFT TOCs. The group generated EBITDA of 24.8 million pounds before the DFT TOC cash inflows where we received 45.4 million pounds in distributions. Working capital was a net inflow of 16 million pounds, resulting in a total of 266.2 million pounds in cash-generated operations, up 25% year-on-year. The cash flow operations was deployed in investing 189.9 million pounds in CapEx, net of grant funding, and the battery sales into the Apache strategic joint venture. Disposal proceeds of 21.2 million pounds relate mainly to depot sales completed following the closure of our operations in Cornwall, and the sale of a depot in South Yorkshire as this market transitions to franchising. £20 million was received from the bus pension escrows following the completion of the 2024 train evaluation. £12.9 million was paid in cash, interest and tax, and this is mainly related to interest in the new finance lease arrangements for the electric fleet and first bus, offset by interest earned on cash balances. There was a nominal amount of cash tax paid in the period, with a low level of cash tax driven by the historical losses and accelerated capital allowances relating to the decarbonisation investment programme. £84 million has been recognised on the balance sheet relating to the deferred tax assets for historical losses that will provide future cash tax shield for several years to come. Other movements include the payment to acquire shares for the Employee Benefit Trust, that holds circa 23 million shares for future share award settlements, and small cash payments into the pension schemes mainly to cover costs. Looking at how we've deployed the capital generated, £30 million has been paid by way of dividends, £35 million was invested in growth capital on several Bolton acquisitions in first bus, mainly in the business and coach market, and £50 million was deployed in the share buyback programme during the year. What is clear from the chart is that the group continues to play a very balanced approach to capital allocation, focusing on both organic and inorganic growth opportunities, as well as meaningful returns to shareholders in line with our strategy. This resulted in the group ending the year with an adjusted net debt cover ratio of 0.6 times, which is well below our leverage framework parameters. To end with, on slide 13, looking ahead at the financial outlook for the year, Despite the stronger outturn for full year 2026, the group expects to maintain adjusted EPS in full year 2027, with the balance continuing to be more weighted to sustainable income sources as the remaining BFT talks transition. The bus business anticipates sequential operating profit progress year on year, with growth being driven by material change in the business following the acquisitions, as well as the underlying business improvement with an anticipated more stable policy backdrop. Bus revenues are expected to be above £1.5 billion, demonstrating continued growth. At First Rail, the open access revenues are expected to grow to £130 to £150 million in full year 27, with Stirling continuing to ramp up, only having just launched. Open access margins are anticipated to be mid-teens when Stirling and the Carmarthen route are fully operating, and this is expected in full year 2029. The rail services businesses are expected to make progress year on year, given the continued support provided to the previous and existing DFT TOCs, as well as growth from new customers. For the DFT TOCs, GWR has been confirmed to transition in December 2026, and we expect Avanti to contribute for the full year. The IFRS 16 positive adjustment to EBIT is anticipated to be circa 23 million pounds in 2027 versus 39 million pounds in 2026. For the DFT TOCs and related services we provide, The expected cash flows from April 2026 onwards are circa £90 million, with the fees being paid a year in arrears. This £90 million does not include the services we continue to provide to former TOCs and the new businesses that have been contracted. At the centre, we expect costs to be largely in line with fully 26. We anticipate incurring circa £45 million in interest, of which £14 million relates to the IFRS 16 charges on the DFT rail leases, meaning the net negative £7 million adjustment in earnings relating to IFRS 16 that is not included in our adjusted earnings. We anticipate deploying a net £140 million of CapEx in first bus, alongside co-funding of circa £15 million and taking into account circa £10 million of cash benefit from the Hitachi Strategic Factory Partnership. The full year 2027 CAPEX and BUS continues to be ahead of expected normal levels of 80 to 100 million pounds, given the success the business has had in accessing government co-funding, allowing for the acceleration of our decarbonisation journey. First Rail remains capitalised, with some investment expected on inorganic growth and open access as the new routes are progressed. And for the pension escrow, just a reminder, their 65 million pounds remains in escrow to be reviewed with the 2030 tri-annual valuation, and we continue to review options to de-risk through potentially applying some of the escrow monies. The group retains a very strong balance sheet, with further progress anticipated in ROIC of an improved quality of earnings base. The group is now moving into a phase of higher cash conversion over the next three years, supporting the anticipated $400 million free cash generation after CAPEX interest and tax. but before the deployment of growth capital where we continue to evaluate a pipeline of opportunities. At the end of the three years, the business has anticipated to be in a stronger position and equally as important as a well-capitalized fleet with a better quality of earning space. And I hand over to Graham for the business review.

Thank you, Ryan. There's clearly quite a lot going on. And I will now take you through the business review, moving to slide 15. I'll start with First Bus, which as you can see from this slide, is a very different business today, both in terms of performance and portfolio mix. FY2026 has been another good year. Despite a challenging environment, we've grown revenue to 1.4 billion pounds. with a strong pipeline of further growth opportunities. BUS adjusted operating profit of £103 million was 7% up, driven by yield management, cost efficiencies and the benefit from recent acquisitions. Over the last four years, BUS adjusted operating profit has grown by circa £60 million per annum. Our adjusted operating profit margin of 7.1% was lower than the prior year, reflecting the near £300 million increase and lower margin London franchise revenues, and the policy impact from increased national insurance contributions and lower regional bus fare funding. Our bus portfolio will continue to evolve, and in the medium term, we anticipate bus adjusted operating profit margin to be in a range of around 8% to 9%. Moving on now to slide 16. We've grown regional bus revenue by 3% despite the really unprecedented headwinds in full year 26. Obviously, Ryan covered this in his review. This was driven by strong yield management as we actively dealt with the transition to a £3 fair cap in England. Adjusted operating profit margin of 8.8% was lower than full year 25 and materially impacted by the increase in national insurance contributions, which had a negative impact of 1.7%. We continue to make good progress on operational and customer metrics with improvements in revenue per mile, loss mileage, and a sustained improvement in our customer net promoter score. Concessionary volumes were up 4%, but this was more than offset by a 6% decline in commercial volumes. The chart shows how we are broadly tracking the wider market with the decline in passenger volumes largely due to the fair cap changes in England and lower levels of consumer confidence leading to fewer discretionary journeys. We've seen the rate of decline ease in the first quarter of our 2027 financial year. On cost inflation, the team have worked hard to manage industry-wide inflationary pressures with multi-year pay awards delivered in full year 26 that flow into full year 27. and the continuation of our proactive fuel and electricity hedging programme. We enter full year 27 with materially less headwinds than we experienced in full year 26. Moving on to business and coach on slide 17. We've had a good year in business and coach with revenue up nearly 30% to £230 million, supported by a strong contracted base. The platform now has around 1,000 vehicles, which includes a well-capitalized fleet of nearly 600 coaches, providing the scale that will allow us to efficiently cascade our coaches across our businesses. We continue to extend existing contracts and win new business, and full year 26 also saw the successful launch and subsequent expansion of our services for Flixbus. We are now operating 11 routes for Flixbus using vehicles based across seven of our depots. As you can see from the map, we have made significant progress in growing our depot and operational footprint in key markets. Full year 2026 acquisitions included J&B Travel and Tech Lease Coaches and Lease and Hills Coaches in Wolverhampton, which have bolstered our position in two key regions that are transitioning to franchising. Post-year end, we have also completed two more acquisitions in Bristol and Doncaster, again, key markets for us. These are all well-established, profitable businesses with strong local relationships, and we maintain a strong pipeline of opportunities to grow our share of this attractive market. Moving on to bus franchising. The addition of First Bus London has had a positive impact on our bus division, providing growth, diversification, and the delivery of excellent operational performance. First Bus London contributed revenues of 310 million pounds in full year 2026, and we expect this to grow to circa 350 million pounds in full year 2027. Looking ahead, the acquisition of RATP's UK sightseeing operations and its Wandsworth depot in December 2025 provides scope to grow our London route contracts over time. A number of regions have continued to progress bus franchising during full year 2026. We estimate that annual revenues of around £1 billion are expected to be competitively franchised over the next five years. This includes Liverpool and West Midlands where we don't currently operate and South Yorkshire, West Yorkshire and Wales where we currently earn annual revenues of around £250 million. We are working alongside our local authority partners to support the transition to franchising demonstrated through the recent sale of depots in South Yorkshire and Wales. There's 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 disposal should authorities opt for an all-in ownership model. Our track record of delivering quality bus operations under contract in London and Greater Manchester leaves us well positioned to actively take part in franchising growth. Moving on to conclude on bus, we continue to make strong progress, not only in the decarbonisation of our fleet and infrastructure, but also in positioning ourselves to benefit from future adjacent revenue streams. Over a quarter of our bus fleet is now zero emission, over 40% of our London red buses, and we have four fully and 17 partially electrified depots. We expect at least four more to be electrified this financial year, and we continue to roll out our first charge brands with third party charging underway at 15 of our depots. Our accelerated decarbonisation spend has helped to maturely reduce our fleet age, facilitating lower levels of bus capex from full year 2028 onwards. Our leading credentials continue to be recognised with further co-funding secured in Scotland and the work we are doing in South Yorkshire to electrify two depots ahead of franchising. Turning now to rail on slide 20. It's been a pivotal year in First Rail with the award of London Overground and the work completed to deliver capacity growth and open access. We've also made further progress in our rail services businesses, FCC, Mistral, consultancy, all have delivered performance improvement during full year 2026. Looking ahead in line with government policy, the DFT train operating companies are moving to public ownership. Our SWR team worked tirelessly with the DFT operator to ensure a smooth transition with the business exiting the group on schedule in May 2025. TWR, as Ryan has said, is now set to transfer on the 13th of December, 2026, and we anticipate that Avanti Coast will transfer around the end of full year 2027. TWR and Avanti West Coast have also performed well in full year 2026. Moving on to open access. Open access revenues were up 3% on full year 2025 despite increased LNER capacity and more intense price competition after December 2025 East Coast mainline timetable change. Open access adjusted operating profit declined to £26 million wholly due to £6 million of mobilisation costs for our new Stirling to London Euston service and a 2 million schedule increase in Lumos infrastructure charge. We're also seeing some impact as lower levels of consumer confidence affect leisure passenger demand. Despite that, seat mile utilisation remains stable at 65% and well above the long distance rail industry levels. Competition continues to provide great value for customers and looking ahead, our attractive open access proposition will continue to attract demand. Moving on to slide 22. Growing our open access capacity remains a key priority for the group and we're on track to more than double seat miles in the next two to three years. The chart sets out how we see this developing over the coming years, including the pipeline of applications currently being assessed by the ORR. We have committed significant investments to facilitate the growth of our open access services, including our circa £500 million agreement for 14 new Hitachi trains. They're being manufactured in County Durham, securing the skills base and jobs in the local area. Hull Trains and Lumo have demonstrated the benefits that open access can bring to the rail industry, as well as the UK taxpayer. They drive economic growth. without government subsidy, bring considerable private sector investment, pay for access to infrastructure, and connect previously underserved communities. As Great British Railways takes shape over the next few years, we firmly believe there is a continued role for private sector operators in the future railway, with fair competition bringing significant benefits to passengers through new sustainable fleet investment, affordable fares, and much greater choice So moving on to slide 24 to conclude. Our strong performance in full year 26 in a challenging economic and policy environment is testament to the skill and commitment of all our people. Following a stronger financial outturn in full year 20, in full year 2026, we're in course to maintain adjusted earnings per share in full year 2027. The quality of our earnings base continues to improve as we grow and diversify our portfolio. Looking ahead, we will remain focused on delivery as we position the group for sustained value creation and material returns to our shareholders. We continue to position the group as a leading UK transport company. We have the commitment, expertise, scale and financial strength to build active long-term partnerships that will create better transport services. The UK transport sector is clearly evolving and changing at pace. Our strong balance sheet and capital allocation policy gives us the flexibility to take advantage of value-increasing growth opportunities in bus and rail. Our discipline will ensure we work to achieve the right balance between growth investment and returns. Thank you for your time this morning. It's much appreciated. We will now open for questions, firstly from the room and then from the webcast. Thank you very much.

Yep. Good morning. It's Rory Cunningham from RBC. The first – actually, I think they're all on bus. But firstly, on the expectation that bus capex moderates to 80 to 100 million, should we think of that as a sort of sub-maintenance level? Would that imply aging of the fleet? How should we think about that? And then secondly, on the expectations that bus margins trend towards 89%, I suppose that would be impacted by franchising. You'd expect margins to be lower than that under franchising. So what have you assumed there in terms of the models or percentage of revenues that go that way? And then finally, on bus passenger volumes, obviously encouraging the trends have improved Perhaps the concern may be that there was some help from higher fuel costs encouraging people to switch away from cars. Now fuel is coming down again. Is that too negative? Do you think there's an underlying improvement in excluding the fuel? Thank you.

Okay. On fleet age, we've worked hard over the last few years to bring it down. We felt the business wasn't well enough capitalised three or four years ago, and we've made significant efforts to move that forward. We're comfortable with where we are at this point in time, and we will look to maintain that into the future, and we feel that the CapEx envelopes we're setting out will enable us to do that. On bus margins, Yeah, clearly, I mean, you know, where we ended up at 7.1% this year, you know, was obviously lower than what we had done, but, you know, there's significant headwinds and we're also growing rapidly. As we said before, the London bus story is a turnaround story, you know, moving from loss-making contracts to profitable contracts. And as we laid out before, that journey will take three years. The first year has gone exceptionally well. The team in London have done a really, really good job And, you know, we expect, you know, that to continue to improve. So, when you look at the mix of the business changes, you know, what we're really saying is, you know, some parts of our business will have higher margins in that range and franchising will obviously be lower in a capital-wide model. And really, where it ends up will really be dependent on the mix of the portfolio. What we're committing to obviously here is that, you know, we still think there's continued growth opportunities. I think we're in a position now where we can grow margin percentage but also grow the revenue. So we think it's an attractive place to be. And on volumes, I don't think we've seen any significant shift to bus over the last few months given the geopolitical situation. I think what we're seeing is really a cycling out of of the impact of the shift to £3 fare and, you know, a flattening off of the loss of discretionary volume that took place in a challenging economic situation for many, many people. So, you know, we're cautious at this point, but we have seen improvement over the last few months.

Morning, everyone. Joel Dew from Cameroon Librem. Three on boss from me as well. What happens when the current £3 fair cap expires? I think, correct me if I'm wrong, that runs till March next year. Should we expect another last-minute extension? Is this actually going to fall away? How do you position yourselves against that uncertainty? Is it actually better to get away from a series of short-term support mechanisms and sort of get back to normal. Secondly, on Liverpool franchising, have you had any feedback in terms of your bids in the first tranche? What do you think the winners are doing that you're not? And finally, on business and coach, how big a portion of the business is Flixbus and what opportunities are there for you to do more with them do you want to limit how big a customer they are, given their ambitions, isn't there one significant upside potential?

Okay, great questions. On the fair cap, when it runs out in March 27, you probably have as much idea as I have, Gerald, as to what's going to happen. I mean, we're seeing lots of, the first point to note is that the relative levels of funding now that we receive on the £3 fair cap are very, very small. and they wouldn't be material, you know, if they disappeared, you know, it would clearly, you know, we would have to look at our commercial situation, but it wouldn't have a major impact on our business. What we are seeing is, you know, lots of potential initiatives being slated in lots of different areas, like £2 per capita in Scotland, for instance, under 22, free travel, you know, child free travel, et cetera. You know, I think, you know, we lean in and we have good relationships with government. We're in constant discussion around options and, you know, what might work, what might not work. So we will just lean into it. But, you know, the real point to note is the business is materially less dependent. on that source of funding than it was a year, two, three years ago. So it's more about finding the right initiatives that are good for the government, good for the public, and that we can help support and facilitate. I think that's our approach there. At Liverpool Franchising, we got very detailed feedback on the first transfer on the combined authority, which was very helpful. The winners, you know, it was very competitive from a financial perspective. We maintained our usual discipline that we were not the cheapest bid. And on quality, there was a high bar and high standards. You know, we know where we, you know, I'm not going to go into the details, obviously commercially sensitive, but we know where the differences were and we've had really good feedback from the local authorities. So we're obviously acting on that as we look into the second phase. But the key message is we're always going to be financially disciplined. You know, we're not going to do franchising for nothing. So, you know, we'll see how it plays out. But, you know, a good experience and lots of great feedback. And on business and coach, Flix is a very small part of that portfolio today. You know, we're working really well with them. And, you know, we're very happy with the contracts that we've signed and how they're developing. And as you've seen how our depot footprint is expanding, that gives us lots of optionality. One of the reasons we began to put this portfolio together was that there would be additional benefits from having that network. And Flix is a prime example. It's the first real prime example of seeing it. As we look at that platform, we're obviously going to look at technology and other options to make this a really attractive platform. That's kind of well integrated. And we're on that journey. It's still early days. But as you can see from the revenue growth, it's a very fragmented market. You know, there's a lot of contracts out there. And if you have good quality local relationships and good assets, then I think there's no reason why you wouldn't do well. So we're quite upbeat about the progress and obviously a lot more to do.

Thank you. Luca Pinochek from Barenburg. So just two from me. So first on open access rail, you mentioned increased competition on the East Coast mainline. Could you give us some color on how you maintain competitiveness and profitability in FY27? And then just on free cash flow generation, you said you anticipate 400 million of free cash flow over the next three years. Could you give us some color on the phasing of that 400 million and maybe how much you expect to spend on growth opportunities in proportion to that? Thank you.

Okay, great. Well, I'll take the open access rail and then maybe Brian can go through the cash flow. I mean, what's happened on the East Coast mainline, obviously with the December timetable change, one of the outcomes from that was additional hourly services on LNER from London to Newcastle. That effectively put in one shift 50% extra capacity into that market. which is very, very significant. And, you know, that has driven more intense price competition. You know, as you know, we run this business. We look at every service every day from eight weeks out. You know, and our whole ethos is seat-mile utilization because, you know, we have a clear understanding, you know, of the utilization required to make a profit, and we work accordingly. So, you know, we've seen... little impact on our volumes so far, and we've managed to maintain our seed malutilization, which is good, but that's come at the expense of lower yields. So, what does that mean for us going forward? We have a very competitive platform, we have great people, we run a brilliant service, and we're a value player, so we will always look to fill our seats and make our profits that way. We think competition will, at this level, will continue for a while. But, you know, how sustainable that is, you know, when you're an organisation, you know, that's, you know, growing a public subsidy, I'm not sure. So we'll see. But I have no concerns about our competitiveness and open access going forward. We have a really, really good operation performing well.

And then on the cash flow in terms of phasing of the 400 million pounds, I suppose you could kind of look at it in a few buckets. One bucket is the 90 million pounds we're expecting to get from the DFT train operating companies in terms of that cash flow over the next 24 to 36 months. That almost, if that starts to decline, the level of investment in bus almost more than compensates for that, as well as a continued improvement trend in bus profitability. So it's reasonably balanced. The bus capex commitment for next year is slightly higher than our 80 to 100 million pound guide in terms of more sustainable level in terms of same business capex, but that's primarily driven by success that we've had in accessing grant funding. It's a fairly smoothish transition to the $400 million. The key point to note, and I sort of touched on in the presentation, is at the end of the three-year cycle, it's not like we're kind of extracting cash out of the business. It's just simply the cash generation where we will still continue to invest. And so the quality of the business at the end of that is even better than when we actually start, given the transition away from the DF detox, if that makes sense. And in terms of sort of capital allocation to growth, there's a number of acquisitions that we've got in the pipeline as a target. We're generally doing Bolton acquisitions in bus between sort of 5 to 10 million pounds or so in terms of the scale of what we're investing and we're deploying on average if you sort of take out RACP London deal that we did in 2025, we're generally doing about 30 to 30 million pounds and it's really opportunity led rather than us necessarily driving and we've got quite a high bar from our return expectations. If we can't take the business forward from what we're doing, then we won't do it. And arguably, the Share Bargain Program gives us a decent amount to sort of flex against that to almost sort of keep us honest to ensure that we're investing wisely, if that makes sense.

Any more questions from the room? Gerald, come back for extras.

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

Okay, good questions. Yeah, no, it would be more helpful if we, you know, if we had more people publishing NPS scores. You know, it's a tough measure, as you know, and, you know, my opinion, you know, once you get north of plus 20, you're in a strong kind of loyalty environment, and... You know, we've made really good progress over the last couple of years and, you know, we have strong linkages between improvements in operational performance and what our NPS number is saying. So, the read-through for us is, you know, the more reliability we have, effectively, you know, the more relative effective cost base we have, the higher NPS, more revenues, and that's our read-through. You know, my personal view, once we get north of plus 20, I think we're in good territory for the type of industry we are, given it's a high-volume, dynamic, almost 24-7 business. So, you know, I think the team have done a really good job, and, you know, we have an awful lot of detail here, and we're using it in terms of how we're making operational decisions on the ground. In terms of open access applications, without... Without trying to overcommit, I think some of them are imminent. So I expect over the next couple of months we will get an indication on quite a few of the pending applications.

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

On the WACC currently, our calculations suggest it's 8.8%, so delivering over 10 is substantially ahead of that, which should in theory mean that we're creating a lot of value for shareholders. I think at the upturn of the $400 million of cash generation, I don't think that our balance sheet structure is going to be that different at the end of it than it is at the beginning. 16 leases in the train operating companies will be gone. You know, I mean in theory if you look at the statutory measures for this last fiscal year we've deleveraged by £260 million, you know, but it's not our risk those contracts, it's for the account in terms of how those work. So if those sort of cycle out because they're sort of counted into our ROIC and they're replaced by a balance sheet which doesn't have such a high level of lease generating such a low level of margin in theory based on the earnings that we get out of the that should drive a substantially greater improvement in return on capital employed from an investment point of view. But overall, our leverage is sitting at sort of 0.6 times adjusted EBITDA measure. We kind of think that's probably slightly too low. We'd be comfortable being sort of at 1 times in the current cycle. But we also want to maintain a strong balance sheet, so should there be something more meaningful that we can target from an acquisition point of view, provided we can kind of get the returns right and it's a decent deal for our shareholders, then we've got the balance sheet capacity to be able to do that. And I think you had a question on sort of dividend cover.

Yeah, just, I mean, obviously, dividend cover three, you're talking about bringing it down to two and a half. Sort of what's the thinking behind that and how does it interrelate with the plans around share buybacks?

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

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