FirstGroup plc (FGP.L) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to FirstGroup's 2025 Full Year Results Presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the year, after which I will provide an update on the business performance in First Bus and First Rail before we take your questions at the end. And on to Slide 3. It has been another very strong year for the group with further growth and diversification of earnings. Group adjusted revenue, which does not include the National Rail contract revenues, where we take substantially no revenue risk, has grown by 7% to GBP 1.4 billion. Adjusted earnings per share has risen by 16% to 19.4p. This performance reinforces the considerable progress made in recent years as we continue to strengthen our business to deliver long-term sustainable growth. As a result of our strong cash conversion and financial performance in the year, the Board has proposed a final dividend of 4.8p per share, resulting in a full year dividend of 6.5p per share, up 18% from last year. We have also announced an additional GBP 50 million share buyback in line with the Board's commitment to return any excess capital to shareholders. A key component of the group's strategy is to grow and diversify our earnings. Significant progress has been made in both bus and open access rail with the recent acquisition of RATP's London bus operations and the acquisition of 2 track access agreements to run open access rail services from Carmarthen and Stirling to London. We have also placed a GBP 500 million order for U.K. manufactured Hitachi trains, highlighting the value of private sector investment in U.K. rail whilst also supporting the U.K. growth agenda. To conclude on this slide, our focus on the successful execution of our strategy and strong operational delivery positions us well for the financial year 2026. We remain on course to at least maintain adjusted earnings per share. Turning now to Slide 4 and setting out some of the key highlights of the year against our strategic framework. Delivering day in and day out remains a key priority for the group. We are delighted to have reached our 10% margin target in bus in the second half of the year. This has been a journey of continuous improvement by the bus team over a number of years, and we still see opportunities for further progress. We also remain focused on our customers with bus Net Promoter Score averaging plus 11 for the year. In First Rail, thanks to strong revenue growth in SWR and GWR, the variable fees for the DfT train operating companies were ahead of expectation. We've also flagged here that we are on course to deliver around GBP 15 million of annualized overhead savings. We've been working since March to restructure our businesses ahead of a period of transition for the group as the government nationalizes the train operating companies and some regional bus franchising is set to commence. Looking at modal shift, this is increasingly a commercial driver for the group as we look to generate additional demand for our services and it's also crucial for reducing congestion, improving air quality. In First Bus, we have reinforced our focus on our customers with a clear consistent refresh brand that is easier to recognize and engage with. In First Rail, we continue to grow open access rail due to strong demand for our services, and we have submitted applications to the office of rail and road to further increase our capacity. During the year, we have continued to be recognized for our very strong sustainability credentials and we have highlighted two of these on the slide, the upgrade to MSCI's highest possible ESG ranking of AAA and the recent inclusion in Corporate Knights' top 50 most sustainable companies in Europe. We have also published our first climate transition plan, setting out a comprehensive strategy to meaningfully reduce emissions manage climate-related risks, drive modal shift and contribute to social and economic growth in the communities we serve. We also continue to make substantial progress in the electrification of our bus fleet and infrastructure. We've continued to invest in value-accretive opportunities to ensure we have a higher quality and sustainable earnings base, less affected by changes in government policy. Key highlights in the year have been the acquisitions of First Bus, including entering the London market at scale. At First Rail, we have demonstrated our expertise, successfully taking over the operation of the London cable car and acquiring truck access rights for 2 new open access rail services. And we still have a strong pipeline of growth opportunities. I will now hand over to Ryan who will take you through our financial results for the year.

Thank you, Graham, and good morning, everyone. Our good progress in the first half of the year has continued across all our businesses, including further improvement in the mix of earnings following the acquisitions that we've made. In my presentation, I'll be covering the following 3 areas: strong growth in adjusted revenue; the improvement in adjusted EPS with a much better balance of earnings distribution going forward; and finally, the strong cash conversion, capital allocation policy and our financial guidance for full year '26. So turning to the financial summary on Slide 6. In First Bus, full year 2024 included an extra week that has a small impact on the variances of an additional GBP 19 million in revenue and GBP 1.4 million in operating profit for full year 2024. Despite this, the group reported adjusted revenues up 7.1% driven by both organic and inorganic growth and strong performances across all businesses. The revenue improvements in bus and open access rail were only partly offset by inflationary cost increases and business development costs. As a result, group adjusted operating profit of GBP 222.8 million is up 9.1%. Our positive operating profit performance has been somewhat impacted by IFRS 16 adjustments in rail being lower combined with higher net financing costs as resulting in the group delivering GBP 115.8 million in adjusted earnings, up 4.6%. The share buyback program that ran for most of full year 2025 has reduced the average share count and the group's adjusted EPS has increased by 16.2% to 19.4p. This robust underlying business performance and strength of the balance sheet has resulted in the Board proposing a final dividend of 4.8p per share, resulting in a full year dividend of 6.5p per share, being up 18.2%. The dividend is in line with the group's current dividend policy of around 3x adjusted earnings per share, with 1/3 paid at the interim. The free cash flow generation before acquisitions and returns to shareholders has more than doubled to GBP 113.5 million and the group's year-end adjusted net debt position was GBP 86.9 million versus net cash of GBP 64.1 million in the prior year. With the strong free cash generation from the business, offset by GBP 139 million in acquisitions, and returning GBP 126 million to shareholders through the buyback program and dividends. At the bus business, despite the material organic and inorganic growth investments during the year, the post-tax return on capital employed was 11.1%, in line with -- broadly in line with full year 2024 and well above the group's post-tax weighted average cost of capital. Turning to the drivers for growth and adjusted revenue on Slide 7. Excluding the prior year extra week of GBP 19 million in revenue, the underlying adjusted revenues for the group was up 9%. The increase in adjusted revenue has been underpinned by solid passenger demand and yield growth, partially offset by lower government funding. The GBP 34.5 million from acquisitions in First Bus mainly relates to the growth in adjacent services and the contract market. These include the RATP London acquisition that completed in February and contributed revenues of GBP 23 million into full year 2025, with the other bolt-on acquisitions also competing in the second half of the year. The timing of these acquisitions means that we anticipate strong revenue growth in First Bus going into full year 2026. First Rail open access operations delivered revenue growth of GBP 6.6 million through yield management, underlying passenger demand and additional capacity added at hull trains. The First Rail additional services businesses also delivered strong performances for the year, which Graham will discuss later. Turning now to adjusted EPS growth on Slide 9. This chart shows our adjusted EPS progression on a post-tax basis for the variances. Our strong revenue growth has translated to a 16.2% increase in adjusted EPS. And our focus on diversifying our portfolio over the past few years has meant there has been good progress towards a better quality earnings underpin coupled with a much better diversification of earnings contribution. The earnings from the DfT TOCs are 0.1p lower with both full year 2024 and full year 2025 benefiting from one-off enhanced variable management fees being recognized in the year. As we look ahead and we continue to grow our adjusted EPS with the nationalization of the DfT TOCs, we anticipate that the relative contribution to earnings will decrease with SWR now transferred to public ownership and GWR and Avanti anticipates to be transferred from full year 2027 onwards. Open Access and additional services contributed 0.3p in growth, with this now at 5.2p, representing a materially higher proportion of earnings in rail now from more sustainable business streams. First Bus increased operating profits contributed 1.2p to the improvement and the central costs were 0.1p lower year-on-year, driven by cost efficiencies, but partially offset by higher spend on the strategic growth initiatives that we executed in the year as well as the restructuring cost provision that we've made in full year '25 that Graham highlighted earlier. Interest costs were 0.7p higher due mainly to low interest received on lower cash deposits and the group now being in an adjusted net debt position following the acquisitions and buybacks completed during the year. The buyback programs that have run for several years resulted in a lower number of average shares, adding 1.9p to EPS. As you can see on the chart, 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 19.4p but equally as important, has resulted in a far better distribution and the quality of our earnings as we look ahead. Turning to the adjusted cash flow movements for the year on Slide 9. As a reminder, our adjusted measure excludes the ring-fenced cash and the impact of IFRS 16 in the DfT TOCs. The group generated EBITDA of GBP 163.4 million before the DfT TOC cash inflows, where we received GBP 37.9 million in distributions in the year. As a reminder, these TOC management fees are paid by way of dividends generally in the second half of the following year after the completion of the TOCs statutory audited accounts. Working capital was a net inflow of GBP 6.1 million in the year, mainly relating to the timing differences in receivables that reversed in the second half of the year as expected, resulting in a total of GBP 207.4 million in capital generated from operations for the year. This underlying capital generated was deployed by investing GBP 92.6 million in CapEx, net of grant funding, primarily in the First Bus on the electrification of the fleet and infrastructure, where we now have the largest EV fleet in the bus market following the London acquisition. Disposals generated GBP 17.1 million, mainly relating to the battery sales into the Hitachi joint venture and pension payments of GBP 8.7 million included GBP 3 million in costs relating to the pension settlement from the exit of the local government pension scheme from the prior year, GBP 3 million contribution into the hull pension scheme as a one-off and $6 million paid in the Greyhound U.S.A pension buyout. GBP 9.5 million was paid in cash, interest and tax, mainly relating to the interest on the now repaid 2024 bond and new finance lease arrangements for the electric fleet and bus, offset by interest earned on cash balances, which was lower. There was a nominal amount of cash tax paid with the low level of cash tax driven by historical losses and the accelerated capital allowances that should not apply for several years yet given our decarbonization investment program. Other movements include payments to acquire shares for the Employee Benefit Trust that now holds circa 20 million shares for the settlement of share scheme awards, central net inflows and cash flows relating to the legacy North America. GBP 138.5 million was deployed in growth capital with the acquisition of RATP in London for GBP 90 million, several bolt-on acquisitions in First Bus mainly in the adjacent services market and 2 open access rail businesses, which will near double our seat capacity when these are in operation in the years ahead. GBP 34.2 million was paid by way of dividends in the year and GBP 91.8 million was spent on the share buyback program. What is clear from the chart is that the group has deployed 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 GBP 86.9 million in adjusted net debt well below our leverage policy parameters despite it being a fairly busy year. Turning to our capital allocation framework. As we look ahead on Slide 10. Over the past 3 years, following the exit from North America in full year 2022, the business has generated over GBP 750 million in cash, invested over GBP 320 million in CapEx, mostly in the decarbonization of the bus fleet, with the average age of the bus fleet down now to 8.8 years. We've deployed GBP 190 million in accretive acquisitions and returned GBP 320 million to shareholders. As we look ahead, we have a leverage policy of less than 2x adjusted net debt to EBITDA. With our full year 2025 year-end position, at 0.4x, there is plenty of capacity for growth for the right opportunities where the post-tax IRR from these investments exceeds our weighted average cost of capital. We have a strong focus on decarbonization in First Bus with the additional cost and efficiency benefit that this brings. And we will continue to deploy capital in this area, particularly where it is supported by government funding. As guided before, the London bus business we acquired is cash loss-making. However, there is a clear trajectory to cash profitability. Over the next 2 years, we now anticipate funding circa GBP 20 million into this business versus the GBP 30 million previously thought as London progresses on its recovery journey. We expect First Bus London to be operating cash positive from full year 2027 onwards. Now that we have some more clarity on the timing of the transition of the DfT TOCs, albeit not yet definitively, we now estimate that circa GBP 120 million will be received in cash from April 2025 onwards to the end of the contract, including the anticipated continued support as required under contract from the additional services business. This is higher than the circa GBP 80 million we guided to in November last year due to the assumption that GWR will be operated by the group for longer than previously assumed and the timing of the full year 2024 dividend from SWR that is still due to be received. Our current dividend policy remains around 3x adjusted earnings per share and in light of the group's strong performance in full year 2025, the Board has proposed a final dividend of 4.8p per share, meeting the total dividend for the year at 6.5p per share. Circa GBP 100 million remains in escrow relating to the now merged group pension scheme and an update will be provided in due course as we finalize the triennial valuation for the bus section in the coming months, covering circa GBP 77 million of the escrow with the balance of GBP 23 million to be reviewed at the 2030 valuation for the group section. And then finally, in line with our disciplined capital allocation approach, any surplus cash that cannot be effectively deployed in growth will be returned to shareholders as per the additional GBP 50 million buyback announced today. So to end with, looking ahead at the financial outlook for full year 2026 on Slide 11. The group expects to continue to make earnings progress and at least maintain adjusted EPS despite SWR being nationalized. The bus business anticipates making sequential operating profit progress year-on-year, having reached the 10% adjusted operating profit margin in the second half of full year 2025. With a material change in the business following the London acquisition, which is initially lower operating margins, bus operating margins overall will now be lower going forward, but offer materially higher annual revenues than anticipated to be circa GBP 1.4 billion in full year 2026. For First Rail, the open access business anticipated to deliver results ahead of full year 2025, reflecting strong demand and yield management, partly offset by inflationary costs. This is before any of the business development costs that will be incurred relating to the start-up of Stirling open access route that should be commercially operational from mid-2026. The additional services business should also make progress year-on-year given the continued support provided to the previous and existing DfT TOCs as well as growth from new contracts and customers. For the DfT TOCs, the fees are anticipated to return to more normal levels in full year 2026. And combined with SWR ending its contract in May means underlying management fees will be lower. The IFRS 16 positive impact to EBIT is anticipated to be circa GBP 40 million. However, this may be amended when specific timing for GWR and Avanti transition are known that impacts how we recognize the right-of-use assets. At the same side, we anticipate costs to be circa GBP 7 million lower, benefiting from the GBP 5 million of cost savings following the central restructuring that has been completed, with these costs having been fully provided for in full year 2025. We anticipate incurring circa GBP 60 million in interest, of which GBP 38 million relates to the IFRS 16 charge on the DfT rail leases. We remain on track to deploy circa GBP 150 million of CapEx net of grants in First Bus mainly on electrification of fleets and depots after taking into account the cash benefit of circa GBP 10 million from the Hitachi strategic battery partnership. This number includes the CapEx in London, albeit we are not fully yet concluded on the optimal capital structure for the fleet, where ownership of the new EVs may be better than the operating leases given the additional benefits you get from ownership. First Rail remains capital light, but with some investment expected for the inorganic growth in Open Access as these are progressed. We anticipate ending the year with GBP 120 million to GBP 130 million of adjusted net debt after paying ordinary dividends and assuming the GBP 50 million share buyback program announced today is completed. This guidance is before any further inorganic growth opportunities that we continue to evaluate. As you can see, the group remains in a very strong balance sheet position and with a far better quality earnings trajectory where we expect to at least maintain EPS going to full year 2026. I'll now hand back to Graham for the business review.

Thank you, Ryan. I will now move on to cover the business review. Moving to Slide 13. Another good year for First Bus with operating profit growth of 15% despite a challenging economic climate and lower levels of government funding. Revenue in First Bus has grown from just under GBP 800 million in financial year '22 to GBP 1.1 billion in 2025. As previously guided, the 10% margin target has also been delivered in half 2. This is a positive achievement and a testament to the work the team has done to strengthen and grow the business over the past few years. The GBP 2 fare cap in England transitioned to a new GBP 3 fare cap scheme in January and is due to run until the end of December. We acted quickly to mitigate the impact introducing clear and simple distance-based fare structures with yield increases offsetting the impact on passenger volumes. Industry-wide inflationary pressures continued in the financial year where circa 3.5% cost inflation impact was mostly in wages, where we saw a 5% average increase in driver pay awards. This was offset by pricing changes and network and operational efficiencies. In financial year 2026, we expect to mitigate the GBP 15 million impact of the increased employer's national insurance contributions with yield management and cost savings resulting from the restructuring of the business. Moving on now to Slide 14. This slide gives more detail on the progress made in bus during the year, including the strategic priority to further grow and diversify revenues and earnings. Looking at passenger volumes, the team successfully managed the impact of the move to the GBP 3 fare cap in England with the introduction of a new fare structure. Despite some weaknesses in the second half, passenger volumes, excluding London and Coach, were up 2% versus the prior year. We continue to focus on driving demand for our services. This included the launch of a refresh brand under everyday actions internal program to drive service improvements. Revenue per mile in regional bus was up 4%, thanks to yield improvements and passenger growth. As you can see, revenue from adjacent services was up 23% for the year as we retained and won a number of contracts and benefit from the contribution of recently acquired businesses. We continue to bolster our adjacent services portfolio and geographical reach with the acquisitions of well-established profitable businesses. We've also recently started operations for FlixBus under a 5-year contract to operate 8 routes across the U.K. These businesses and the FlixBus contract represent combined annual revenues of around GBP 37 million. Our franchise revenue was GBP 35 million, including GBP 23 million from First Bus London for March 2025. The GBP 90 million acquisition has allowed us to enter London at scale with anticipated material earnings contribution in the medium term. The integration of the business is going as planned with trading ahead of our expectations. We have a strong management team at First Bus London, delivering market-leading operational performance, which is reflected in the transport for London league table rankings. And moving on to Slide 15, we continue to see opportunities to grow our bus business in the U.K. A number of developmental authorities have indicated that franchising is their preferred future option. We have a large, well-capitalized fleet, makes sense, extensive depot footprint and strong decarbonization credentials, leaving us well placed to take part in opportunities as they arise. The first process has commenced with Liverpool City region. There is still some uncertainty over which franchising models will be deployed in particular around fleet and depot ownership. Different areas could have different models, but there will be potential CapEx savings and property disposals, should authorities opt for an ownership model. We have also flagged on this slide the positive experience we have had under the enhanced partnership model with example of Leicester and Portsmouth, where with comparatively lower funding, passenger volumes have grown quite considerably. Regardless of the model, we are committed to working with our partners to deliver thriving local bus networks. We continue to see both organic and inorganic growth opportunities in adjacent services, primarily in airport services, workplace shuttles and B2B and B2C coach services, where it's possible to secure longer-term contracts and attractive margins. The electrification of our fleet and infrastructure is a key part of our strategy to transform our bus business. We continue to make good progress due to significant capital investment over recent years and our in-house expertise, we now have circa 20% of our fleet zero emission. Moving on to Rail on Slide 16. Our teams managing the national rail contracts at Avanti West Coast and GWR have continued to focus on enhanced service delivery, innovation, investment and effective cost control. Attributable net income from our national rail contracts has been in line with expectations and broadly flat compared to last year. In line with government policy, the DfT train operating companies are moving to public ownership. Our SWR team worked effectively with the new DfT operator to ensure a smooth transition with the business exiting the group on schedule last month. The dates for the transfer of Avanti and GWR have not yet been announced by the government. We also continue to manage several significant investment programs, including the introduction of new fleets for Avanti which has helped facilitate the introduction of more passenger services. Avanti returned to paying a premium to the treasury in the year, we'll need a second operator to do so and while subsidies are increasing at some other operators. Our additional services businesses continue to progress and perform well with revenues seeing encouraging growth. We also had the successful launch of our operation of the London cable car in June last year, continuing our close links with TfL. And moving now to Open Access on Slide 17. Hull trains and Lumo continue to deliver material improvements in financial performance, with operating profit up 14% on the prior year. Revenue and passenger growth continues to be encouraging with seat miles utilization improving and well above the industry average. We're showing what open access operators can deliver for customers and the industry. They are stimulating demand and providing competitive, sustainable and reliable services to underserved markets. It is encouraging that Hull trains and Lumo have continued high levels of customer satisfaction with Net Promoter Score at plus 60, a market-leading response across the whole travel sector. We continue to pursue open access growth with the acquisition of track access rights for 2 new services. Stirling to London, Euston will begin operations in mid-2026 with Carmarthen to London Paddington likely to start in December 2027. These 2 new services will increase overall seat miles operated by circa 80%. They've also allowed us to invest GBP 500 million in new U.K. built Hitachi trains with potentially more to come and also to help shape Lumo as a national brand and operator. As you're aware, we have several other open access applications that have been in progress with the regulator for some time. We expect to hear outcomes on our existing proposals in the next few months. We continue to look for more opportunities and last week submitted a proposal for a new route from Hereford to London Paddington via Cwmbran. We will work closely with all stakeholders as we build our application and support for these services. Moving on to Slide 19 to conclude. Thanks to our robust performance in 2025 and the work we've been doing over the last few years to grow and diversify our portfolio. We expect to at least maintain our adjusted earnings per share. Whilst we also continue to navigate a period of transition in U.K. bus and rail. In First Bus, we have a clear plan to continue to improve performance, to grow and diversify our portfolio and to deliver sustainable earnings growth. As the electrification of our fleet and infrastructure continues at pace, we will look to unlock cost efficiencies and leverage our capabilities when bidding for new contracts. In First Rail, we will continue to work to materially expand our open access capacity, look to optimize our additional services businesses and to bid for contracts where we can bring forward our experience and capability. And our remaining 2 DfT train operating companies, we will prioritize contractual and operational delivery. Our strong balance sheet and available capacity allows us to continue to evaluate a pipeline of value-accretive growth opportunities. We remain committed to this disciplined approach on capital allocation, and we'll continue to return any surplus cost to our shareholders. Okay. To close, our progress in financial year 2025 has reinforced our track record for delivery, but we still have much, much more to do. We remain well placed to participate in future opportunities in U.K. bus and rail and continue our significant investment in growth and decarbonization. We will continue to take a proactive approach, demonstrating our strengths as a trusted and experienced partner. So thank you for your time this morning. We will now open for questions and we will take them from the room first and then the webcast. Thank you.

Gerald Khoo from Panmure Liberum, 2 if I can. Starting in Bus. Obviously, a number of areas moving towards franchising. I was wondering whether you could give a rough indication of the revenue that you have in the areas which are moving towards franchising over the next 2 to 3 years? And secondly, I think in the statement you talked about third-party charging initiatives. It feels like there's been some progress there. I was just wondering what the revenue model there is? And do you -- are the customers committing to sort of multiyear contracts. Basically, how do you make money in that?

Okay. Look, on bus franchising, we have a fairly clear line of sight of 5 areas that are likely to franchise over the next 3 to 5 years. First being Liverpool then West Yorkshire loop to be coming next. We have business in 2 of those 5 areas. So we have more to bid for them than we have at risk over that period. We don't disclose sublevel revenues in our business, probably not appropriate to do today. But I think the message really is that we think we're well placed, we are trying to strengthen the position we have in the areas that are going to be subject to franchising, and that's been going well, including decarbonization. And we're pretty positive that we can maintain our position of no improvement during that process. And also, if it tends to be a capital-light model, it will potentially unlock cash flows as we go through that process, whether it's selling of depots or selling of buses and also gives us the ability to potentially move buses around our fleet and reduce abrogation. So we're leaning into franchising in a positive way and obviously, with bids, it's competitive, but I'm comfortable with the position we're in at the moment. And we'll see how we get on Liverpool and then we'll see how we get on in West Yorkshire. Ryan, you may want to maybe talk about third-party charging.

On the EV charging, I mean, we're trialing a number of models. I think it's fair to say that the pace of uptake has been a little bit slower than what we originally thought but it still represents a decent opportunity for us as the wide electrification, decarbonization happens, particularly in logistics vehicles. You're aware of a number of trials that be running from police authorities all the way through to a few sort of more sort of logistic providers through to other service providers. I mean I think it's still a useful opportunity for us, but the pace of growth has been slightly slower and as far as the sort of revenue model is concerned, we are still trialing a number of options there. It's one thing to be able to have a charging infrastructure available, but if it's not being used for a price to be used, then there's sort of a redundancy cost that we need to take into account and we'll bring it back to market once we know a bit more and we've got something more substantial to talk about.

And it builds with scale. I mean that's the other thing I was saying. I mean somewhere like Glasgow, where we have a large facility. We have quite a wide range of people now using it, including a general public space as well. So -- but as we build scale in other cities, I think that brings in more of the national providers in terms of the potential to use it during the day.

Ruairi Cullinane from RBC I've got a question here about open access applications. Would a reasonable base case scenario be that you sort of -- some of them are approved, but not all? Or could it be more binary than that? And in terms of the margin potential of these applications, are the new routes any lower in terms of margin potential than the extensions or the additions of capacity on existing routes. And then secondly, considerable headroom to adjusted net debt EBITDA of 2x. I was wondering if the growth of open access and decline of the TOCs had any bearing on sort of optimal leverage across the group and your attitude towards lease debt?

Okay. I'll maybe take the first 2, and then Ryan, you can maybe take the third one. I mean on the applications, I mean, we've had a number of them in for quite a while now. So our expectation is we're relatively close to getting feedback. It's hard to say what the outcomes will be. We feel they're quality applications, dealing with underserved areas and good optionality for customers. So we hope they'll be looked upon favorably. But I think we'll have a pretty clear view within a few months. I don't think it's going to be any longer than that from what we understand. And in terms of margins, I think on the 2 services where we bought the track access rights, and we'll be launching in '26 and '27. We have said they'll be low double-digit margins and we're confident about that. I mean obviously, as time passes, a lot depends on inflation, the market, et cetera, what the train operating companies will be doing, what GWR might do. But we feel we've got a good model that's efficient and effective. We have a good way of utilizing the capacity on our trains. So we have high confidence in the services that we're putting out there. And the ones to come, I don't think our view will change. We've obviously done all the business modeling and economic analysis on those. So I think if we get them approved, we would expect the same. I would say on some of the smaller ones where we've got an extension of existing services, then the incremental revenue you generate from those is likely to be at a higher margin just given the fact that it's utilizing existing -- better utilizing existing capacity. So yes, so I think that's where we are on margins. And obviously, when Stirling is up and running, we'll get a clearer view. But they're a relatively light capital-light model. So the bulk of our margin will flow to cash.

Yes. That's sort of a linked question to your capital structure point. Our existing operations of Hull and Lumo, those trains were ordered at a time when capital pricing is very low, where interest rates were very low. And so our lease costs on those are very low, which is making them cheap and much more enhanced margin relative to any new business. With the GBP 500 million train order, we've obviously locked that in terms of pricing and how that's going to work from a lease perspective. And we've got those to match the track access agreements so we don't have any kind of risk there. But it's a fair point that we will continue to consider if we are going to be building a open access national business of scale under a common brand with trains that are -- can be used all over the network, then it might be a question mark as to whether the better model for us is ownership rather than lease. But that's several years off before we make that decision.

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