FirstGroup : Strategic Framework

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework

Deliver day in,
day out
Deliver a consistently safe and	Our
reliable customer experience
Read more on page 18
strategic
	pillars

FirstGroup Annual Report and Accounts 2024

17

Lead in environmental and social sustainability

Deliver our decarbonisation commitments and support prosperity, growth and green jobs in the communities we serve

Read more on page 24

Diversify our portfolio

Drive modal shift

Drive a step change from car and air travel to bus and train

Read more on page 21

FirstGroup's four strategic pillars, introduced at the end of 2023, will support us to drive value-accretive sustainable growth and lead

the way in our sector. They are underpinned by our strong balance sheet and disciplined capital allocation policy.

Invest to grow and diversify our portfolio and ensure our business is resilient

Read more on page 27

Introduction	Strategic report	Governance report	Financial statements	FirstGroup Annual Report and Accounts 2024	18

Our strategic framework continued

Win/extend key contracts in First Bus and First Rail

	Pricing strategies
	to enhance customer
	value, drive demand
Deliver	and improve yield
and cost efficiency
	Operational excellence
	to improve customer
	experience, reliability
day in,
day out

Deliver a consistently safe and reliable customer experience

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework continued

Deliver day in, day out Innovating for our customers and communities

We are focused on operational excellence

as we deliver vital services for our communities and partners. We strive to provide a consistently safe and reliable customer experience, implement pricing strategies to enhance value, drive demand and improve yield, and to win and extend contracts in both Bus and Rail.

9.4%

First Bus H2 2024 adjusted operating profit margin (FY 2024: 8.3%; FY 2023: 6.5%)

96%

First Rail Lumo and Hull Trains customer satisfaction

£117.6m

returned via share buyback in FY 2024

Providing the best possible services for our partners and communities

In First Bus, we will continue to drive operational, cost and network efficiencies, evolve our pricing strategy to enhance customer value, drive demand and improve yield, and progress the decarbonisation of our fleet and infrastructure.

In First Rail, we will maximise the variable performance-based fees in DfT contracted operations and continue to deliver savings for the DfT, build on the success of our open access operations and grow our Additional Services businesses.

Read more about our principal risks on page 85

Read more about our KPIs on page 30

FirstGroup Annual Report and Accounts 2024

19

FY 2024 highlights

• First Bus reported an adjusted operating profit margin of 9.4% in H2 2024
• Over £100m invested in First Bus decarbonisation as we progress towards the First Bus 2035 zero emissions fleet target
• Award of West Coast Partnership National Rail Contract in September 2023
• First Rail's DfT TOCs received final FY 2023 variable fee awards c.£13m ahead of amount accrued
• Hull Trains and Lumo are two of the most reliable train operators in the UK (2.2% and 2.0% of trains cancelled for any cause according to ORR Jan-Mar 2024 data)

FY 2025 objectives

• Achieve an operating margin of 10% in First Bus in H2 2025
• Continue the implementation of the Prospective software across First Bus operations to drive further operational efficiencies
• Grow the First Bus market share in Adjacent Services and participate in attractive franchising and partnership opportunities
• Evaluate pipeline of value-accretive growth opportunities in line with Group's disciplined capital allocation policy
• Focus on delivery on our First Rail National Rail Contracts
• Actively pursue and execute opportunities to grow our First Rail open access businesses
• Scale the First Rail Additional Services businesses

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework continued

Case study

FirstGroup Annual Report and Accounts 2024

20

Using AI

to improve

our bus services

First Bus recently signed a three-year partnership with Prospective, an artificial intelligence (AI) company whose software can automatically generate optimal timetables, schedules and real-time fleet instructions. The software allows full timetables to be created or adjusted and buses to be scheduled in minutes, a process that would typically take days to complete. Passengers have experienced improved service quality, with punctuality improving considerably in many cases. Prospective's software can also be used to identify where bus priority interventions such as parking enforcement and restrictions,

bus lanes, priority signals and traffic removal would have the biggest impact on travel times.

We're not only looking

to drive improvements for our existing customers, but to make bus an affordable, more reliable and attractive part of everyone's everyday transport mix. The results we've achieved in West Yorkshire and the West of England have been incredible in such a short space of time, but we're only scratching the surface of its potential. We're excited to roll out this software and see the benefits it brings

to our customers.

Simon Pearson

First Bus Chief Commercial Officer

Introduction	Strategic report	Governance report	Financial statements	FirstGroup Annual Report and Accounts 2024	21

Our strategic framework continued

	Drive
Add capacity to	modal
rail open access
businesses
	shift

Increase First Bus adjacent services where car is becoming less attractive

Reposition First Bus customer proposition to drive demand/focus on car usage

Drive a step change from

car and air travel to bus and train

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework continued

Drive modal shift Growing demand for bus and rail

We are entering the next phase of our development as we aim to drive a step change from car and air travel to bus and train. This will be supported by increasing capacity in our open access rail operations and focusing on our First Bus proposition to drive demand and increase usage.

7%

increase in First Bus passenger volumes (excluding the extra week in FY 2024)

74%

Seat capacity utilisation on Lumo in FY 2024 (Hull trains: 69%)

2.5 million

Lumo has now carried more than 2.5 million passengers since launching in October 2021

Driving modal shift from car and air travel to bus and train

We are repositioning our core customer proposition in First Bus and First Rail to stimulate demand, focusing on car usage.

This includes improving and scaling our services to match and grow demand, increasing the First Bus share in adjacent services markets where car travel will not work in the future, and building

on the success of our First Rail open access operations through efficiency improvements, adding capacity and identifying new routes and markets with capacity and demand.

Read more about our principal risks on page 85

Read more about our KPIs on page 30

FirstGroup Annual Report and Accounts 2024

22

FY 2024 highlights

• First Bus have won and extended a number of key Adjacent Services contracts during the year
• First Bus passenger volumes (excluding the extra week in FY 2024) grew by 7% compared to FY 2023
• Hull Trains has added 14% more capacity since December 2022, by introducing ten-car services to match growing demand (typically a five-car service)
• Lumo has now carried more than 2.5 million passengers since its launch in October 2021

FY 2025 objectives

• Focus on First Bus service offering to encourage more people to use the bus
• Identify further opportunities to grow our Adjacent Services portfolio in First Bus and grow patronage on our services
• Grow our First Rail open access operations to serve areas where there is proven demand, and as a result, drive modal shift to train travel

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework continued

Case study

FirstGroup Annual Report and Accounts 2024

23

Enhanced bus

partnership

with Leicester City Council

In May 2022, an eight-year Enhanced Partnership Plan and three-year funded Scheme was launched in collaboration with Leicester City Council, First Bus and other operators. With c.£100m of private and public funding secured for the Scheme, the optimised multi-operator network ensures frequent and reliable services for customers. First Bus, working in conjunction with the Council and other operators, has also worked on a range of complementary projects designed to make a more efficient and accessible service for passengers with real-time information displays and an integrated website, additional bus lanes throughout the city and various fare offers.

The Partnership has an ambition for the whole city network to be electric by 2030. To date, approximately £60m has been invested in electric buses and infrastructure in the city, as illustrated at the recent analyst and investor site visit to our Leicester depot.

By the end of 2023, 116 electric buses were in operation from four charging depots, saving over 5,000 tonnes of CO2 and by July 2024, over half of the city's network will be electric. Bus travel will not only be the environmental choice for customers, but also the most reliable mode of transport to navigate the city, with an estimated increase in modal share for bus, to 32% by 2025.

Introduction	Strategic report	Governance report	Financial statements	FirstGroup Annual Report and Accounts 2024	24

Our strategic framework continued

Secure innovative financing and continue First Bus fleet and infrastructure decarbonisation

Lead	Support prosperity,
	growth and green jobs
	in the communities
	we serve
in environmental
social
&sustainability

Build out electrification adjacent revenue opportunities

Deliver our net zero commitments and support prosperity, growth and green jobs in the communities we serve

Introduction	Strategic report	Governance report	Financial statements

Our strategic framework continued

Lead in environmental and social sustainability A focus on sustainability

We are focused on delivering on our commitments, working to support growth and green jobs in the communities we serve and investing in and securing innovative financing for bus decarbonisation to meet our 2035 target and build out adjacent electrification opportunities.

Zero emission

First Bus now has three fully electric bus networks and c.13% of its fleet is zero emission

65%

Hull Trains has decreased CO2 emissions by 65% following introduction of new bi-mode fleet in 2019

Real Living Wage

First Bus is the UK's largest national bus operator to receive Real Living Wage employer accreditation

Delivering on our decarbonisation commitments and supporting our people and communities

We are rapidly establishing ourselves as

a leader in decarbonisation as we progress towards our commitment of a zero emissions bus fleet by 2035 and support industry aims of removing all diesel-only trains from service by 2040.

We are successfully electrifying our bus fleet and infrastructure, including through our landmark strategic partnership with Hitachi. In Rail we are demonstrating our expertise as we lead an innovative FastCharge battery-only train trial. We are also actively supporting growth and job creation in our communities.

Read more about our principal risks on page 85

Read more about our KPIs on page 30

FirstGroup Annual Report and Accounts 2024

25

FY 2024 highlights

• c.13% of the First Bus fleet are zero emissions vehicles, and we have three fully electrified depots in England, with six further depots across the UK partially electrified
• Hull Trains has reduced CO2 emissions by 65% following the introduction of a new bi-mode fleet in 2019
• A journey on Lumo's 100% electric fleet emits 21 times less carbon than a journey by petrol car
• £100m strategic decarbonisation joint venture with Hitachi and £150m Green Hire Purchase Financing Facility to support First Bus electrification
• First Bus received Real Living Wage employer accreditation
• FirstGroup joined the UN Global Compact
• The Group was the only UK bus and train company listed in S&P's Sustainability Yearbook in FY 2024

FY 2025 objectives

• Progress the electrification of the First Bus fleet and infrastructure and unlock adjacent earnings streams, including third party charging at our depots
• Continue the GWR fast-chargebattery-only train trial in First Rail
• Publish the first Group-wide climate transition plan in line with the Transition Plan Taskforce Disclosure Framework
• Maintain strong relationships with our communities and charitable partners
• Develop new and diverse talent through our apprenticeship, recruitment and retention schemes

IntroductionStrategic reportGovernance report Financial statements

Our strategic framework continued

Case study

First Bus, the UK's

largest national bus operator, to be accredited as a

Living Wage employer

On 1 April 2024, First Bus gained Real Living Wage (RLW) employer accreditation.

As a result, colleagues across the UK business in various roles will benefit from a rise in wages. Although the RLW accreditation does not require employers to include apprentices, we will also raise our apprentices' wages

to the RLW level over the next 18 months, recognising the value we place on a diverse and inclusive apprenticeship population.

FirstGroup Annual Report and Accounts 2024

26

Case study

New environmentally friendly Avanti West Coast fleet

First Rail is delivering a £350m project for the DfT which will see a fleet of ten seven-car electric trains and 13 five-carbi-mode trains introduced across the Avanti Network, with the ability to switch seamlessly between electric and diesel power. The fleet upgrade is an integral part of Avanti's net-zero ambitions given that it will deliver substantial carbon emissions savings. It will also help us deliver on our wider commitment to transform the customer experience and to a more sustainable operation.