FGP: £100m buyback alongside slight FY26 beat, backed by ~£400m FCF expected over FY27E-FY29E

Research evidence excerpt

FGP: £100m buyback alongside slight FY26 beat, backed by ~£400m FCF expected over FY27E-FY29E

PS, Ops Diluted 20.35 20.72 22.04 26.75

£100m buyback supported by £400m of anticipated FCF over 3 years: Prev. 19.62 21.26 22.16

FirstGroup has announced a £100m buyback, expected to complete over

the next 12 months. Free cash generation of £400m is anticipated over the EPS,Net Income,Ops Diluted:Adj: GroupA functionadjustedof groupearningsadjustedshown.earnings and average sharecount.

next three years (over 40% of the market cap). This includes a £90m cash EBIT, Adj: EBIT from continuing operations

inflow from DfT TOCs and Rail services, and is supported by a normalization AllPricedmarketas ofdatapriorintradingGBp; allday'sfinancialmarketdataclose,in GBP;ESTdividends(unless otherwisepaid in GBp.noted).

in First Bus capex to £80m-£100m from FY28 (from £188m in FY26/ £140m

guided in FY27E). First Bus is now relatively well capitalized with 26% of the

fleet zero emission as of the end of FY26.

Firming FCF forecasts and shareholder returns: We firm our FCF forecasts

(largely on lower bus capex) and reflect the higher buyback (vs £50m

forecast in total over FY27E-FY28E previously). We forecast modest growth

in FY27E EPS to 20.7p, in line with consensus. We reduce open access

EBIT reflecting pricing following LNER capacity and pricing competition, and

mobilization costs on new routes. We forecast significantly higher Bus FCF

on similar Bus EBIT forecasts. We continue to forecast a pick up in Bus EBIT

growth in FY27E, given reduced policy headwinds vs FY26, and an easing in

Bus passenger volume decline at the start of FY27E.

Valuation attractive, firming PT to 255p: FirstGroup trades on <7x EV/EBIT

below sector medians of ~8-11x EV/EBIT, and on <9x PE. We now forecast