Welcome to the presentation of FirstGroup plc's results for the 52 weeks to the 25th of March- 2023. Presenting today are Graham Sutherland, Chief Executive Officer, and Ryan Mangold, Chief Financial Officer. All participants will be in listen-only mode during the presentation. Afterwards, there will be a question- and -answer session, in which registered attendees may ask questions by raising their hands on the Zoom app or website. Just to remind you, this event is being recorded and will appear in due course on the FirstGroup website, where you can also find today's presentation slides and other materials. I will now hand over to Graham.
Okay, thank you, good morning, everyone, welcome to the FirstGroup 2023 full year results presentation. If we move on to the first slide. 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 and our plans before we take your questions at the end. Let me start by saying that we have delivered a strong set of results in 2023 and ahead of our expectations, despite a challenging economic and industrial relations environment. Group adjusted attributable profit has more than doubled to GBP 82 million, driven by good progress in Bus and excellent performance in our Rail Open Access operations.
Our strategy continues to deliver as we focus on improvement in operational performance, continued investment in growth opportunities, leading on decarbonization and public transport, and delivering value to our shareholders. We have deployed GBP 37 million of growth capital in Bus, mainly acquisitions, and invested capital expenditure of GBP 94 million. Our final dividend recommendation of GBP 0.029 per share, GBP 0.038 for the full year, reflects our progressive dividend policy and earnings growth in full year 2023. Following realization of some of the proceeds of our North America exit, we launched a GBP 75 million on-market share buyback program in December 2022. Today, we have proposed an additional buyback program of GBP 115 million, subject to the usual approvals at the annual general meeting in July.
This is aligned to the realization of receipts from the sale of Greyhound properties in December 2022, and the anticipated receipt of the First Transit earn-out over the next few months. Our focus is on delivering for our customers, and we remain positive about the future opportunities for FirstGroup. We have an organization with deep expertise and experience, and this will stand us in good stead as we further develop and deliver growth opportunities for our business, which has a vital role to play in the sustainability and economic growth agendas. I will now hand over to Ryan, who will take us through our financial results.
Thank you, Graham. Good morning, everyone. This has been another period of strong financial delivery, despite the macro and economic headwinds that we faced during the year. In my presentation, I'll be covering the following 3 areas. Firstly, the strong progress in the financial performance across the group. Secondly, the delivery of the vast majority of the contingent value from the exit of North America. Finally, the guidance for full year 2024 and the capital allocation, including the additional share buyback of GBP 115 million announced today, bringing the total surplus capital to be returned to GBP 190 million following the exit from the legacy North America.
Turning to the financial summary on slide 5, the group's continuing business revenues are up GBP 163.9 million year-over-year, as passenger demand improved and net fare increases were implemented, that were partly offset by lower government grant funding as passenger volumes continued to recover. The revenue improvements have, however, been partly offset by cost increases, and our key financial performance measure of adjusted attributable profit that adjusts profits to include only the net attributable earnings from the management fee-based rail contracts, more than doubled to GBP 82.1 million.
Adjusted operating profit at GBP 161 million was up GBP 54.3 million, or 51%, and combined with lower interest costs due to the deleveraging in the prior year and the partial buyback of the GBP 200 million 2024 bond in the current year, meant that adjusted profit before tax at GBP 104.2 million is up GBP 79.4 million year-on-year. Adjusted EPS were 10.6 pence, up 9 pence on the prior year, with the current year benefiting from the impact of the reduced number of shares in issue following the share buyback that commenced in December 2022, and by year-end, 4% of the shares in issue were acquired.
This robust underlying business performance and strength of the balance sheet have resulted in the board recommending a final dividend of 2.9 pence per share, in line with the current policy, meaning that for the full year, a total dividend of 3.8 pence per share is being paid, having recommenced paying a dividend in the prior year. The adjusted net cash for the group ended the year at GBP 109.9 million, versus a net debt of GBP 3.9 million at full year 2022, and this benefiting from strong underlying cash generation as well as the proceeds from Greyhound being partially offset by the capital deployment. Turning to Bus performance on slide 6.
Bus revenues are up GBP 112.6 million, or 14%, with higher commercial and complementary business revenues only partially offset by lower government revenue grants, where these were down GBP 42.8 million year-on-year. The increase in revenue has been underpinned by solid passenger demand growth, as well as continued expansion into the B2B and contract market in both organic and inorganic activities. Passenger volumes were up 20% to 390 million, with 168 million miles being run, which is down 9% year-on-year. The mileage and passenger volumes include First Scotland East to the point of sale and at Southampton to the point of closure during the year.
The passenger volume growth, combined with the inflationary fare increases, has resulted in revenue per mile increasing 26% as the business progressed the realignment of the network to a more fully commercial demand model. Revenue growth has also benefited from the full year impact of the acquisition of the remaining 50% stake in SPS in the prior year, and further progress in the B2B market, with revenues of GBP 175 million, up GBP 54 million year-on-year. The strong revenue growth, however, has been partially offset by inflationary cost increases of circa GBP 48 million, particularly in driver wages. Looking ahead, 85% of full year 2024 and 55% of full year 2025 has been hedged.
We have also commenced electricity hedging this calendar year, given the greater exposure with the increased electrification of the fleet. Details of both the fuel and electricity hedging is in the appendix to the presentation. Bus delivered an operating profit of GBP 58.4 million at a margin of 6.5%, versus GBP 45.2 million at 5.7% in the prior year, with the prior year margin benefiting from how the grant funding was applied. The sequential margin improvement reflects a decent trend in the second half at 7.9% and good progress towards the 10% target. Turning to Rail on slide 7. The rail business consists of 3 components, each with different value and returns profiles.
Firstly, the contracted rail for the management fee TOCs, where the group takes no revenue risk and limited cost risk. Secondly, the open access business of Hull Trains and Lumo, with both open access service focused more on the stronger leisure market. Finally, the additional services contracts business, where First Rail provides services into the wider rail market. For the management fee TOCs, these delivered an attributable earnings after tax and minority interests of GBP 38.7 million to the group. This is marginally down on the prior year. This result benefited from stronger actual performance scores from full year 2022 than was initially accrued, and TPE benefiting from the Transpennine Route Upgrade project that was entered into in the second half of full year 2022, where the group earned additional fees.
These strong performances were offset by GWR moving to an NRC in the current year at lower margin versus the previous EMA, but now also includes Heathrow Express management as an additional service, and the impact on certain performance scores as a result of industrial action. The open access businesses made a combined profit of GBP 19.6 million in the year due to the strong demand versus a loss of GBP 16.6 million in the prior year, with the prior year impacted by the start-up costs at Lumo that launched in October 2021, and the pandemic impact at Hull Trains.
This materially improved performance of GBP 36.2 million year-over-year is a significant driver for the group's profit growth in the year, and both businesses are performing ahead of our expectations, with stronger than anticipated passenger demand, providing the ability to drive further yield improvements. The additional services in Rail delivered an operating profit of GBP 11.9 million, up GBP 5 million on the prior year, with the tram business benefiting from settlements relating to prior periods and strong performance in the First Contact Center as passenger volumes grow. Turning to Slide 8 on our key financial performance metric of underlying earnings generated that are attributable to shareholders. It's pleasing that all divisions have contributed to the more than doubling of attributable profit during the year.
At First Bus, the increase in operational leverage during the year contributed GBP 13.2 million to the improvement, and at Rail, the more diversified portfolio, with a greater proportion of earnings coming from outside of the management fee TOCs, has meant that First Rail contributed strongly to FirstGroup's financial growth overall. At the corporate center, FirstGroup costs have decreased GBP 4.1 million, and cash interests were GBP 6.6 million lower against the pro forma of the prior year. Given the significant deleveraging following the business disposals that concluded in full year 2022, and the GBP 16 million bond buyback in the current year. The interest for this measure consists of the interest on the 2024 bond and interest incurred on bus finance leases, which are partly offset by interests earned on FirstGroup's cash deposits.
The effective tax rate for the year was 19.6%, slightly ahead of the statutory rate due to the impact of prior year adjustments in the current year. As a result of the significantly higher profitability, this has meant that there is an additional GBP 12.4 million tax in the current year. This results in a GBP 45.9 million increase in attributable profits to GBP 82.1 million being delivered in the year. This increase in earnings momentum, combined with the confidence and continued business delivery, has meant that the board has recommended a final dividend of GBP 20 million. Turning to the cash flow for the year on slide 9.
Given the rail management fee, franchises take no revenue risk and limited cost risk, hence the related IFRS 16 leases and rail ring-fenced cash movements, that is a material impact on the reported financial statements, is not really relevant to the overall group underlying performance. We have separately identified the underlying adjusted cash movements, ignoring the ring-fenced cash and IFRS 16. The group generated GBP 116.3 million in EBITDA for management fee talks and received GBP 48.7 million in distributions and arrears from the management fee talks. Working capital was a net GBP 3.3 million inflow, with this being fairly stable position and has resulted in a total of GBP 168 million in capital generated from operations.
This underlying capital generated was deployed in investing GBP 96.6 million in CapEx, primarily in bus, on the electrification of the fleet, with the average age now in bus down to 9.1 years from 10.1 years in the prior year, as well as investing GBP 36.8 million in growth, including the Ensignbus acquisition in Essex, Metrobus in Bristol, deferred payment for the SPS acquisition following the contract extension and Airporter acquisition in Ireland. First Bus generated GBP 24.4 million of disposals in the year, which includes First Scotland East, as well as certain bus batteries relating to the first EV deliveries in Caledonia. The bus battery ownership and financing structures remains an interesting space that we continue to evaluate as the business ramps up electrification scale, and Graham will cover this later in his presentation.
GBP 40 million was paid in cash interest and a nominal amount of cash tax was paid, with the low level of cash tax driven by historical losses and the accelerated capital allowances that should be able to apply for several years yet. GBP 14.7 million was paid by way of ordinary dividend in the year, and GBP 116.4 million was realized from legacy Greyhound asset receipts in the year, partially offset by pension and insurance payments and legacy environmental remediation costs. GBP 31.6 million of the GBP 75 million share buyback program was executed by year-end.
The other movements outflow of GBP 1.6 million include shares acquired of circa GBP 9 million over and above the share scheme cost in EBITDA, partially offset by, excuse me, partially offset by a GBP 12 million return from the Aberdeen Local Government Pension Scheme that's in surplus. This resulted in the group ending the year with GBP 109.9 million net cash versus a net debt of GBP 3.9 million in the prior year. Turning to slide 10. As a reminder for the UK pensions exposure, the bus and group scheme, IAS 19 surplus, was GBP 15 million before the GBP 117 million that has been contributed into escrow through a limited partnership, of which 95, excuse me. Of which GBP 95 million relates to the bus scheme and GBP 22 million relates to the group scheme.
The funding levels of the group and bus scheme combined versus the low dependency targets, has improved roughly GBP 60 million year on year, to a funding deficit of around GBP 146 million. Whilst there's no certainty as to how the financial actuarial markets may perform in the coming years, this trend in funding levels, on an agreed basis, provides a certain level of confidence in receiving some of the escrow monies back. The local government pension schemes and bus are also in a reported restricted surplus of GBP 22 million, with some further opportunity in this area, as has been demonstrated by the GBP 12 million surplus returned to date. At Greyhound, we are in the process of effectively buying out the pension liabilities at an anticipated cost, broadly in line with the IAS 19 valuations of circa $11 million.
The legacy self-insurance obligations have been de-risked, with circa $7 million remaining, that is, in run-off. The remaining assets of Greyhound, including a few residual properties, means that on a net basis, we do not expect any material cash flows from Greyhound in total, with the remaining assets broadly sufficient to discharge the remaining liabilities. EQT have also completed the disposal of the transit business to Transdev, and based on the draft information provided, it is estimated that the group will receive circa $89 million from the earn-out to be paid to us in the coming months. Turning to slide 11 and the disciplined capital allocation and balance sheet strength.
The group's capital allocation decisions are based on delivering value for shareholders, with all investment decisions required to exceed the group's pre-tax WACC of 10%, with the IRRs required appropriately adjusted for any risk of deploying the capital on a project-by-project basis. At Bus, we deployed GBP 94.3 million net CapEx, including the electrification of the fleets and depots, where this remains a priority after successfully applying for funding in both England and Scotland. This is an area that the group will continue to accelerate to the extent that government funding is available, given the substantially greater upfront CapEx costs for electrification versus diesel equivalents. As demonstrated in full year 2023, inorganic growth is also a priority, given the relatively fragmented nature of the sector and the opportunities that exist.
At Rail, the model remains capital light in terms of group investment and given the scale and diversity of both the three management PTOCs and open access operations, combined with additional services business, the rail division should continue to be materially cash generative for investors. In terms of capital available for deployment, the financial policy is net debt to adjusted EBITDA of less than two times, meaning that the business retains substantial flexibility to be opportunistic for capital deployment. It's pleasing to note that Fitch have recognized the strength of the balance sheet and the quality of the business, and this, combined with the financial framework that the group applies, has resulted in upgrading the group to [uncertain]BBB- with a stable outlook, as well as an improved short-term credit quality to being good.
The dividend policy is set at 3 times cover against the group's attributable adjusted profits. For this to be a progressive policy in both policy terms as well as value per share over time, with the absolute values per share anticipated to benefit from both the growth in profitability as well as the reducing number of shares following the share buyback program. Finally, the financial outlook for full year 2024 on slide 12. The group has made significant progress year-on-year. The outlook for the year is in line with our expectations, with the benefit of the continued improvement in the mix of earnings. This progress is despite the continued macro and economic headwinds.
The bus business is anticipating to make sequential progress in operating profits in full year 2024, despite the wider inflation and economic challenges that lie ahead and anticipating to deploying CapEx of GBP 130 million net of grants, mainly on the electrification of peaks and depots. At Rail, we anticipate delivering a result in full year 2024 in line with our expectations, despite TPE not being extended. We expect to continue earning management fees from the 3 TOCs in line with expectations, recognizing the challenges as a result of industrial action that are being addressed. At the Open Access and additional rail services businesses, we anticipate to deliver results at least in line with full year 2023, given the strong demand in Open Access, partially offset by inflationary cost pressures and track access charges that come into effect this year.
In Lumo, we anticipate incurring GBP 70 million in interest, of which GBP 60 million relates to IFRS 16 charges, due mainly to new rail leases. Taxation for the current year is anticipated to be at 25%, in line with government announcements. We anticipate to end the year in a net cash position of roughly GBP 10 million-GBP 20 million, after paying ordinary dividends in line with the 3 times policy, and assuming the completion of circa GBP 158 million of the outstanding share buyback program, with the GBP 115 million extension subject to shareholder approval at the AGM. The strong, well-capitalized balance sheet provides the group with great flexibility and options for driving future value creation for our shareholders. I'll hand back to Graham for the business review.
Thank you, Ryan, for the comprehensive financial update and a clear articulation of the financial progress made during full year 2023. I will now move on to cover the business re-review, moving to slide 14. We called out at the half year results that both divisions were in a period of transition, but our strong foundations and capability put us in a strong position to grow and create value. Our belief still holds, despite short-term challenges, that medium to long-term government policy, demographics, and environmental and social trends will support public transport growth. Full year 2023 has turned out to be a year of delivery against our strategy and operational plans. We have made significant progress, but still have much more to do over the coming years.
Our sustainability credentials continue to develop with a fourth consecutive appearance in the Clean200 report. The only U.K. public transport operator to be included in the 2022 S&P Global Sustainability Yearbook. I will be covering all the key takeaways on this slide on Bus and Rail in detail in the upcoming slides. Turning now to Bus on slide 15. It's been a challenging year for the Bus team as we transition to a more commercial model, as funding support reduces across the sector, and industry-wide inflationary pressures remains. Considerable progress has been made in aligning our operated mileage with passenger demand, and this has resulted in running 9% less miles than full year 2022. As you can see on the bridge, Bus adjusted operating profit reflects significant movements in several key items.
It is worth noting that we've improved adjusted operating profit from GBP 21 million in half one, to GBP 38 million in the second half of the year. Passenger volumes have grown more strongly in the second half and are up 20% compared to full year 2022. This growth has been aided by free under 22 travel in Scotland and the GBP 2 fare cap in England. Volumes in Scotland are up 19.8%, in England up 19.5%, and Wales, 33%. We welcomed the recent announcement of further funding clarity in England, and we believe it will continue to support passenger demand in full year 2024. We have yet to receive final confirmation on the detailed funding proposal, but believe it will be broadly positive for the remainder of full year 2024.
The bus team has effectively managed the significant pressure on inflation on our cost base, with an average driver, pays settlements of 7% during the year. We expect inflationary pressures to continue in full year 2024, as just over half of our wage agreements are in the process of renewal this year. Operational performance has continued to improve in the second half of the year, with stable operated mileage and increased driver availability. We were able to add net 324 drivers over the last 7 months, as our recruitment and retention activities have started to deliver really positive outcomes. We also continue to work on the rebalancing of the bus portfolio to improve our operating margin, with the sale of First Scotland East and the closure of our Southampton-based operations completed during the year.
This work will continue in full year 2024, as we drive to improve margins across the whole portfolio. Working closely with government, we've been able to obtain funding to support the order of around 400 electric buses and to support significant investment in electric infrastructure at four depots. Moving on to slide 16. First Bus, we're also focused on opportunities for growth in areas that leverage our capability, assets, and overall footprint. We have created a solid base in workplace shuttles and corporate transport, airport city express services, and rail replacement services. We're able to differentiate our service capability by making use of our national footprint, our core bus assets, and First Travel Solutions subcontracted network, and our capability to effectively manage large customers.
During the year, we've been able to achieve growth in adjacent services businesses through successful contract bids, as well as through acquisition, namely Ensign bus and Airporter. We've grown revenue during the year to GBP 175 million, which is promising progress, and we are encouraged by the opportunity for further growth in this area of the market. Turning now to slide 17. The group's decarbonization goals are a key part of our strategy, and we've made significant progress in bus during the year. Working closely with government, we've been able to accelerate our investment in our electric bus fleet and the related infrastructure required at our depots. We took delivery of 83 electric buses, installed 58 chargers, and also installed solar panels on 20 depots during the year.
The solar panels will ensure that our depots will be largely self-sufficient on all non-bus power requirements. We've also placed orders for circa 400 buses to be delivered by March 2024, with the vast majority being manufactured in the U.K. A number of these new bus orders also have different battery packs, extending route length capability. This will enable us to have circa 14% of our fleet electric by the end of this financial year. We have also been developing opportunities for future value creation on the back of the transition to an electric fleet and fully electric depot infrastructure. It is early days, but we want to maintain optionality to participate in this value chain and to optimize our own depot assets.
We expect to make progress over the next year in the areas of B2B and B2C charging, and also in participation in residual battery value. We will also gain significant knowledge and insight on our operational costs as we transition four depots in England to a wholly electric infrastructure. Moving on to rail on slide 18. The Lumo Open Access operation has made significant progress in full year 2023, and exceeded our expectations. It has also demonstrated that First Rail has the experience, capability, and entrepreneurial spirit to resolve challenges and innovate in the rail sector, deliver green transport, and grow passenger demand. Revenue reached GBP 38.6 million in its first few full year of operation, and continues to perform well in the first few months of the financial year 2024.
Seat capacity utilization at 71% has reached encouraging levels, and passenger yields have continued to improve during the year. The service has helped to facilitate a modal shift from air to rail on the Edinburgh to London route, which has also benefited other rail operators on this route. The fully electric service ensures 95% lower carbon emissions compared to flying for an Edinburgh to London journey. The establishment of the Lumo brand has also been a success. Our people have embraced the new travel experience and ways of working, and we were delighted when they recently received Best Overall Operator based on customer sentiment at the World Passenger Awards. Our track access agreement will run to 2033, and given the progress over the last year, we continue to review options to expand the customer offering. Moving on to slide 19.
Hull Trains also had a positive year, exceeding our expectations, with revenues reaching GBP 32.1 million, driven by growth in passenger journeys, following the fall in volumes during the pandemic. We have seen a strong recovery in leisure volumes and also in business volumes, specifically in the last few months. As recently as March, Hull Trains led the industry recovery in passenger volumes when compared to 2019-2020 pre-pandemic levels. Seat utilization has materially improved to 59% from 45% in the previous year. We are seeing the benefit from investing in a new fleet of bi-mode trains, which has reduced carbon emissions by 57%, improved reliability, enabled us to run more services and more seats as we support increased customer demand.
We're also benefiting from both Lumo and Hull Trains being run as one management team, where we can leverage both marketing and service experience to enhance the overall open access business. Our track access agreement for Hull Trains runs to December 2032. Now moving on to slide 20. It has been a challenging year for our management fee-based train operating companies, given the continuing industrial action. Attributable net income from management fee operations was circa GBP 39 million for the full year 2023, down from circa GBP 45 million in the previous year. As Ryan has already covered, this was largely due to GWR moving from an EMA to an NRC in June 2022. We were extremely disappointed that the TransPennine Express contract was not extended last month.
As we said before, the withdrawal of rest day working had a severe impact on our customers and our ability to run a full schedule. Our service recovery plan, agreed by the Department for Transport, was working, and we'd reduced cancellations by 40% by the time the contract expires. We continue to work with TPE, supplying support services through First Rail and our additional services businesses, FCC and Mistral. GWR had a strong year after we signed the NRC to 2028, which includes a 3-year extension period. The recent timetable changes increased services by 5%, providing better choice and flexibility for GWR customers. We're also encouraged with SWR extending its NRC by 2 years to 2025, as they commence a major introduction of new trains in the H2 of full year 2024.
Avanti has made a strong recovery in operational performance in the second half of full year 2023, are running approximately 98% of all services. There's been a 40% increase in services compared to last summer, we remain in discussion with the Department for Transport on a longer-term contract from October 2023. Moving on to slide 21. We're a leading rail operator in the U.K., with a strong platform to grow and diversify our earnings base. Our additional services businesses delivered an operating profit of almost GBP 12 million in full year 2023, versus GBP 7 million in the previous year. These are scalable businesses that we will be able to market to other rail operators.
We welcome the recent position articulated by the Secretary of State, highlighting that going forward, there will be an enhanced role for the private sector to reinvigorate the rail industry, drive innovation, and attract more customers to the railway. As a leading operator, we will remain a key partner in the development of government contracts and to identify opportunities for increased revenue focus in the current management fee-based contracts. We are also actively reviewing opportunities to expand our portfolio with other contracting authorities. Moving on to slide 23. It's been a challenging year for FirstGroup as we dealt with high levels of inflation and industry-wide industrial action in rail. That said, the business is in good shape, with significant progress made in our financial performance.
The group-adjusted attributable profit has more than doubled to reach GBP 82 million, together with delivery of material improvements in dividend per share and earnings per share. This is a testament to the resilience and capability of our people across the whole business. Bus remains on track to deliver a 10% margin after making good progress in the H2 of full year 2023. Investment in decarbonization has accelerated our drive towards greener transport, supporting our own and the government's goals, and also opens up the potential to create adjacent value opportunities. Rail's excellent financial performance in full year 2023 was a step forward as we began to deliver on the full potential of our open access operations, and we remain firmly focused on operational delivery and securing longer-term national rail contracts for our management fee-based operations.
Our leading role in the decarbonization of public transport remains on track. We're investing and remain committed to delivering our net zero goals by 2035. Our credentials continue to be recognized with recent endorsements in the Clean200 report and the S&P Global Sustainability Yearbook. In closing, we've delivered a significant improvement in our financial performance during full year 2023. We remain committed to financial discipline, our capital allocation policy, and we will continue to scan the market for growth opportunities that will deliver value to our shareholders. Thank you for your time today, and we will now open up for questions.
Thank you. If you wish to ask a question, please raise your hand using the functionality on the Zoom app or website. There will be a brief pause while questions are being registered. The first question comes from Ruairidh Cullinane. Please accept, unmute, and ask your question.
Yeah, good morning. Congratulations on the strong results. My first question is on open access, where there was quite impressive sequential improvement in H2, which was notable, given you might think this would be a summer-weighted business. Was that sort of primarily driven by yield, and is there upside from annualizing that into the full year this year? Perhaps in addition, you could touch on which options to expand the customer offering are under consideration. Secondly, on shareholder returns, the dividend remains well covered, but the buyback looks higher than what you may receive from North American proceeds. Could we read into this, that the buyback may be one of your options in addition to a regular dividend in years beyond the current financial year?
Perhaps finally on bus, where bus CapEx is relatively high relative to current levels of EBITDA, does this reflect confidence in the potential returns or payback periods that you may expect from investments in electrification? I'd just be interested in any comments on the economics of the investments in electrification. Thank you.
Okay, well, thanks for the significant number of questions. We appreciate that. I mean, on open access, I think, you know, I guess our first impressions, if you go back a year, we would have thought there would be more seasonality in open access, but that's not really how it's played out. I mean, leisure volumes during the majority of 2023 were, you know, were maintained through the whole year. Obviously on that route, you know, there is a lot of travel between Edinburgh and London. You know, it's stayed very consistent.
Yield has improved and continued to improve during the year because we've had high demand for our services, and we effectively, you know, we manage every individual train service from 8, 10 weeks out. You know, we obviously, you know, manage through the whole process as seats are booked, you know, quite similar to an airline. You know, we've seen strong yield improvement in the second half. Hull Trains obviously has had, you know, good improvement in seat capacity. You know, we've seen strong leisure volumes on that, on those routes, too.
Obviously, you know, so if you sum up, I mean, I think, you know, Lumo's been driven, you know, by continual improvement in seat capacity and yield, and Hull Trains has been driven by, you know, by volumes fundamentally. As we've entered this year, we've, you know, we've seen that continue to move forward. I think that's, you know, it's been a fairly robust performance right all the way through the year. We, you know, think it will remain fairly consistent as we look forward.
In terms of, you know, ability to expand customer offering, you know, we're, you know, in case of Hull Trains, we've got the option to put, you know, to put more cars on, and we have done that on high demand routes already. As we continue to improve and push forward with our marketing, you know, we've got the flexibility to do that, and we still have seats that, you know, available to sell on the existing capacity. You know, on Lumo, we're looking at a number of options. You know, but fundamentally, we still have, you know, we still feel we can improve our utilization as we go forward. I think, you know, I think the outlook is encouraging. You know, we're not complacent.
It takes hard work to run these services at the level we've managed to do over the last few months, and we think that will continue. In terms of the. Rand, do you want to take the dividend capsule? I'll give you the question.
Sure, sure.
Yeah.
Hello, Ruairi. On the shareholder returns, just a reminder, we exited the Greyhound properties for about GBP 122 million, and we've got the Transit earn-out due to us in the next few months of roughly about GBP 70 million, broadly speaking. The way that you should kind of look at that more is that that capital return relates to the North American exit. In terms of the optionality on a go-forward basis, would we look at share buybacks rather than ordinary dividend as an alternative? I mean, I think we'll just keep things under review as a board, and decide the right approach at the time.
For, you know, for the time being, we've got a progressive ordinary dividend policy, 3 times cover, progressive on cover over time, as well as progressive on scale at the time, is the intention.
Yeah, we're comfortable with the, with the current position that we have on dividend and, you know, it will continue to be progressive. I think just to reinforce the point, you know, the buyback reflects the return of North American proceeds. It's as simple as that.
Yeah. On bus CapEx and the EBITDA ratio?
I mean, I think on bus CapEx, I think, you know, we've been very successful in the last year of attracting government funding and, you know, we feel it's commercially a strong proposition. We've effectively upped our CapEx in 2024 on the back of our success in gaining government funding. That acceleration, you know, is above the level, the kind of normalized level of GBP 80 million-GBP 90 million that we called out before. We feel, you know, with a strong balance sheet, we're able to take advantage, you know, of the funding available. We think it's a big step forward for the business and will bring us lots of learnings and lots of benefits in future years.
It's an attractive value proposition for us to do that at this point.
Great. Thank you very much.
The next question comes from Gerald Khoo.
Morning, everyone. A few from me, if I can. Starting in bus, I was wondering whether you could give an indication of what you think the size of the adjacent services market is, how the margins in that activity compare with, shall we say, normal commercial bus operations? More broadly in bus, what do you think needs to be done to get to your long-standing 10% margin targets? Finally, one in rail, in open access, you made reference to sort of seat capacity utilization. What's the practical upper limit for seat capacity utilization in open access? I'm assuming you don't actually sell. You only sell, like an airline, you sell enough tickets to fill the seats, and therefore, you don't allow standing. What's the practical limit? Because presumably, it's below 100%.
Okay. Thanks, Gerald. I appreciate the questions. I mean, the adjacent services market, I mean, we've done our kind of own internal assessment of that, you know, build up from knowledge of contracts and, you know, regional insight, et cetera. We think that market is, you know, well north of a GBP 1 billion. You know, we obviously, you know, as we started looking into this, you know, over the last 12, 18 months, you know, we felt we had the opportunity to grow. We've done that, you know, through organic and inorganic means. You know, I think we've made really good progress, but we still feel there's a way to go.
I mean, we're one of the major bus operators in the U.K. you know, we should have a decent share of that market. We've got a footprint that we can leverage, which is attractive, and we've got very strong management capabilities. You know, we've called out what we've achieved, which we think is promising progress. We're going to work hard to improve it. That's what we intend to do. You know, in terms of margins in that area, you know, I think, you know, we can attain, you know, margins in line with our regional bus business. You know, I think we've got the ability to do that, given the assets that we have to deploy.
In terms of the 10% margin target, we're certainly encouraged by progress in the second half. You know, we have a plan, you know, a detailed operating plan, and we're working at it. You know, I think realistically, we're kind of halfway through the opportunities we have internally to work on and resolve. I think the team have done a good job, you know. To me, it's more of the same. I mean, you know, the message is good progress, but much more to do fundamentally. I think a lot of this is within our own gift. You know, and we're going to, you know, work hard on our execution going forward. Our confidence is, you know, we called it out, you know, this is a target a few years ago.
I think the progress in the last 6 months reiterates that this is something we can achieve and, you know, potentially improve on as we go forward. In terms of open access capacity, you know, I think it's, you know. Clearly, it's unlikely to be 100%. I mean, our kind of general management view would be somewhere around 80%, would be reasonable and something that would still work from a passenger perspective. You know, some trains might be higher, some trains might be lower, but we feel that's not unreasonable number to, you know, to push for and try and achieve over time.
Okay, great. Thanks.
The next question comes from Alexander Paterson.
Alex, I think you just need to go unmute if you haven't done yet.
Hopefully I'm unmuted now. Really, really great to see. Fantastic performance, superb. I was gonna keep the multiple questions theme going. One, just on open access, you've talked a lot about load factors, what you can do there, but is there an opportunity over time to extend Lumo beyond the current geographical area? Can you, for example, move on to, you know, where you've done TPE? Can you use some, you know, get onto those, that network, that kind of thing? Is there an opportunity? If so, what would the kind of timeframe be to looking at that, and would you need to sort of invest any capital to make that happen? Secondly, just on your reporting, you've given more numbers on passenger volumes and that kind of thing.
Are you gonna continue to do that, and would you suggest that we look at that as kind of main, you know, drivers to forecast? Thirdly, just on the pension escrow, obviously, things look like they've moved more in your favor on that. Is there any change to your expectation from when you last updated of what you might be able to recover from that? Finally, just on your net debt guidance, is that including or excluding the GBP 41.8 million of TPE ring-fenced cash? I'm guessing it probably isn't, and if it isn't, how much of that might you get, and when might that happen, please?
Thanks, Alex. I appreciate the questions. I mean, on open access, Lumo expansion, timeframes, investment. I mean, you know, we actually, you know, we feel the Lumo brand has really gained traction. You know, in terms of open access, we are constantly looking at where opportunities might lie. I mean, obviously, that, you know, there's, as you're obviously well aware, there's, you know, effectively, you know, restrictions around running over, you know, the same lines where you have, you know, train operating companies. Obviously, with the TPE not being extended, that in theory could potentially create an opportunity. I guess all I would say at this point is we look at, you know, we look at all opportunities for open access. You know, we have a quality team.
This, we understand end-to-end how to run this type of business. We're going to constantly screen and look for opportunities. I mean, the timeframe from start to finish is probably 3-5 years. That's the reality of it to go through the whole market assessment, everything that's required, regulatory approval, train, lead times, et cetera, et cetera. It's in that range. In terms of capital investment, I mean, it's obviously significant, but as in the case of Lumo, a lot of this goes on lease anyway.
Yeah. You know, we can manage the cash flows in relation to that. You know, that's really how I would sum open access up, but clearly something that, you know, we've made significant progress on and want to continue to do so. In terms of passenger volumes, KPIs you've seen today, I mean, we, you know, we intend to continue with that. We wanted to give a little bit more flavor of what's driving performance and also, a little bit more insight into our businesses and how they're running. You know, we want to be transparent. We want to hold ourselves to account on performance, and therefore, you know, you can expect to see those going forward. Pensions?
On pensions, Alex, I think it hasn't really changed in terms of where ultimately we think that we will land on this. Just as a reminder, the bus scheme is subject to a triennial valuation in April 2024, the post sort of valuation experience will apply as well. The progress year-over-year in terms of funding of being GBP 60 million lower, I think is a positive indication of trend. You know, we kind of designed the escrow in such a way that we didn't want to overcapitalize the scheme over time, give us the ability to be able to at least get some capital back rather than putting too much in. On the group scheme, it's slightly more longer dated than that.
That GBP 22 million goes all the way out to 2031. you know, if we can kind of bring that forward because the group scheme is in a different sort of position to the bus scheme, it's a much stronger health. I think, you know, it's definitely the trend is positive. It hasn't changed our mind on the sort of broad timing and scale. We would expect currently, based on what we're seeing today, we'd expect to get some of that back. On the cash guidance for the year, our on adjusted net cash number that we talk to always excludes ring-fenced cash. From a financial modeling perspective, we've given you what the TPE cash balance was, as well as the IFRS 16 balances were as at the end of fully 2023.
Those effectively will just simply be handed over to the new operator of last resort during the course of this year. What we should benefit from for the next sort of 18 months or so, is the fees that we've earned in arrears, because the model is to kind of finish the audited accounts for the year. We then kind of agree on the distribution with the DfT, that money gets paid through to us. There'll be an overhang of about 15-18 months on the cash generated over the last 12 months and the next sort of 3 months until TPE comes to an end. Ring-fenced cash is never included in our guidance for our cash number.
No, sorry, is the ring-fenced cash, this is entirely sort of season tickets and that sort of thing? It's not any cash that could accrue to yourself from operational performance.
Yeah. The way that it would work in practice, Alex, is that by the time we finalize the accounts for the year and do the audits, we will get paid an amount from that ring-fenced cash, which will then come into group cash. The balance, whatever the residual balance is, which is kind of working capital, which also covers the season tickets, will then be handed over to the operator of last resort. I mean, that's how it will work in practice. Basically, the cash that's left behind in the SDV will be the cash that belongs to us, that will then be distributed in the normal course.
Got it. Thank you very much.
Okay.
The next question comes from Kishan Parmar
Hi. Thanks very much, and great results, guys. We're one of your larger bondholders, so great to see the balance sheet management over the year. A couple of questions on my side on that front. In terms of, I know you guys bought back some of the bonds last year. Just wondering what your plans are in relation to refinancing next year, if you're able to share? My second question was in relation to the sustainability of the passenger growth. Obviously, with the government support that's taking place, just, you know, kind of keen to get your thoughts once that does ease, what your thoughts are for passenger volumes on that front.
Yeah.
Yeah.
Yeah. Good morning. Morning, Kishan. For the bond, as you're right to point out, we have bought back GBP 16 million through the Bank of England auction at the back end of last year. You know, we're sitting in a position where we are in a strong net cash position, and we'll continue to do so for the balance of this year, despite the material deployment. I think in terms of refinancing, it's a lot more driven by sort of opportunities rather than necessarily just simply refinancing for the sake of it, given the sort of strong position that our balance sheet is in.
Okay, on passenger growth sustainability, I mean, I think we're, you know, we're reasonably comfortable that, you know, that that will be maintained. You know, I think there's a couple of things to note, really, on the particularly GBP 2 fare is, I mean, the largest benefit is on slightly longer journeys, you know, that, you know, coming in and out of larger urban areas where you maybe had a GBP 7 fare that's gone to a GBP 2 fare. I mean, obviously, with our business, you know, we don't have so much of that, so the kind of gap between the GBP 2 fare and what, you know, our normalized pricing would be is not that significant.
You know, we don't we're not concerned about the withdrawal of the 2 pound fare or the 2 pound fare 50 rising. I mean, obviously, like any business, you know, the strength of your marketing, you know, what you're doing commercially, all those things have an impact on volume. The frequency of your service, your routes, you know, aligning, you know, you know, your mileage to your demand, all those things have an impact. We look at this in the round, and we feel we've, you know, got the capability and the techniques and the access to data and knowledge to make the right decisions to maintain the passenger volumes.
Also over time, you know, we're, as I said earlier, we're, you know, we're confident in the demographic trends and public policy and, you know, we see, you know, we see a tailwind on volumes over time on public transport.
Great, thanks. Sorry, just final question in terms of the bond. Do you expect to stay active in the public bond market?
I think that'll be very much sort of opportunity led. To the extent that there are good, you know, good opportunities for us to deploy capital into, then we would remain active in the bond market.
Thank you.
This concludes our event this morning. Thank you all for attending. You may now disconnect.
Thank you very much.
Thank you very much.