It's great to be doing this live and to meet you in person. You know, we have spoken many times, but it's so great to meet you in person. I'm first going to take you through the highlights of what has been a strong first half performance. Chris will then go through the financial review, and I will come back to talk about the progress we are making with our Evolve strategy and the exciting opportunities ahead. I will focus on four key areas today. The first one is that we have delivered revenue growth, a strong revenue growth. Actually, a record revenue result for the first half of the year. Group revenue is up 34% to GBP 1.3 billion.
We are seeing a strong growth across all divisions, but particularly in our coach business in the U.K. and Spain. Momentum is building, with Q2 stronger than Q1. Secondly, this positive momentum is converting both to profit and cash. We're seeing significant operational leverage as we return to scale and have generated more profit in the first half of this year than in the whole of 2021. We have delivered a step up in margin to 7%, and cash conversion has risen to 70%. Thirdly, the Evolve strategy is delivering, and there is more to come. Our pipeline of bid and M&A opportunities continue to grow, now worth GBP 2.1 billion.
We continue to win new contracts, adding 16 in the first half, worth GBP 150 million over the contract life. We have successfully mobilized our first contract in Portugal, and we're down to the last two bidders for a sizable urban bus contract in Dubai, which would be another new market for us. We're also progressing well in transitioning our fleet to zero-emission vehicles. Our U.K. bus business is on track to be 50% zero emissions by 2025. Fourthly, the strong progress we have made in the first half and the positive momentum we are seeing provides confidence for the full year.
With the management actions we have taken across the group, we are well positioned to manage inflationary pressures and the potential impact of an economic downturn. Our UK Coach business will see further recovery in the second half, with the U.K. division expected to return to profit for the full year. Finally, we continue to anticipate reinstating a full-year dividend with our full-year 2022 results. We have made good progress across each division. In Alsa, a strong performance in both long haul and Morocco were key drivers of the 60% growth in revenue. The 172% growth we have seen in long haul has driven a record result for revenue per kilometer, up 19% year-on-year.
With the acquisition of paratransit business in Madrid, we have entered a new market that is worth GBP 1.4 billion, and we successfully mobilized in Lisbon, the first of two contracts in Portugal, our 11th country. We hope to be entering a 12th with the Dubai contract. Being the employer of choice is also a target outcome for Evolve, so it's great to see that we have been awarded the best place to work in Morocco, as well as being recognized by the Ministry of Labor for our work in diversity and inclusion. In North America, our shuttle business had a great first half, with revenue up 28% and profit ahead of 2019 levels. We also won nine new contracts in the hub.
Our transit business is growing organically and will be further boosted by an asset-light paratransit contract win in Richmond, Virginia, worth $80 million over the life of the contract. In school bus, we are achieving rate increases ahead of expected wage inflation, and it's encouraging to see that our relentless focus on safety has driven 25% reduction in speeding events. In the U.K., patronage on our buses is continuing to outperform the industry average, and like Alsa, the UK C oach is seeing a big recovery with a strong tailwind into the second half. We are also seeing an improving trend in the Net Promoter Score, customer satisfaction. We are transforming public transport in Coventry. The first tranche of electric buses have arrived, creating the first all-electric city.
We'll have 130 operating by year end. What's really encouraging is that our first batch of zero-emission vehicles are delivering efficiencies ahead of our expectations. Independent analysis from DfT shows that the fuel consumption is 37% better than the U.K. average for emissions efficiency. Our zero-emission vehicles are also 39% more reliable than a comparable diesel bus, saving us almost 60% in expenditure on parts. Finally, in Germany, we have successfully mobilized two emergency rail contracts at very short notice. This underlines our growing reputation for reliability with the local PTA and should strengthen our credentials for future bidding opportunities. I will now hand over to Chris, who will talk through the financials.
Thanks, Ignacio.
It's great to be back up here again. Let me start with a summary. We delivered strong top-line growth across the business. As Ignacio said, grew revenue by a third to over GBP 1.3 billion, and that is the highest level of first-half revenue we've delivered in well over a decade. As we've built back scale, we've then benefited strongly from operational leverage so that 34% revenue increase flowed to a near 300% increase in underlying operating profit of GBP 91 million. A 54% increase in EBITDA to nearly GBP 200 million drove free cash flow of GBP 64 million. A very strong 70% cash conversion. Covenant net debt of GBP 947 million was up GBP 74 million versus last year, but as I've come to, most of that is FX.
To round off, the group returned to statutory profit, recording GBP 16 million for the year, which is an improvement of GBP 40 million year-on-year. I'll now talk you through by division. As Ignacio said, Alsa delivered very strong growth, both in revenue and underlying profit. Revenue up 60% to GBP 444 million on a constant currency basis, driven by a very strong recovery in passenger demand across all businesses, particularly long haul, where passenger journeys were up 162%. Urban bus revenue grew by 38%. That largely reflects the acquisition of Rober in 2021. Regional was also up strongly with revenue up 22%.
Morocco delivered 25% revenue growth, where we had organic growth in every single one of the cities boosted by the increase, the finalization of the mobilization of Casablanca. Underlying operating profit and margin have recovered very strongly, in part driven by our revenue management systems, which drove an increase in both occupancy and yield and drove revenue per kilometer 19% up higher year-on-year, so effectively price. Underlying operating profit of GBP 50 million represents a GBP 33 million improvement versus the same period last year, with margin up 530 basis points to 11.3%. In North America, we again delivered strong growth in both revenue and underlying profit in the first half, and that reflected the continuing improvement of trading throughout the business.
Revenue was up 7.5% to GBP 519 million on a constant currency basis, which was driven by strong growth in both our school bus and shuttle operations. While we delivered revenue growth of 8% in school bus in the first half, that rate of growth has been impacted by the ongoing industry-wide driver shortages, which resulted in about 10% of our contracted routes not being run. I’ll come back to that point a little later. Transit grew revenue by 5% with service levels now running at about 83% of 2019 levels. We have a very strong pipeline in both transit and shuttle. We’ve got bidding opportunities coming up over the next 18 months worth of $600 million.
We won't win all of them, but we won 10 of them in the first half worth $80 million. Underlying operating profit rose by 30%- GBP 57 million on a constant currency basis, and margin was up by 190 basis points to just over 11%. In the U.K., and the U.K. also delivered strong growth in revenue, together with a vastly improved underlying operating result. Revenue grew by 37%- GBP 237 million, and that was driven predominantly by coach, which saw a rapid rise from April onwards. The first quarter was impacted by the Omicron variant. I'll come back to that a little later. Coach revenue grew by 359% and is now running at over 80% of 2019's level. Occupancy levels are now approaching 70%.
Yields are up 9% versus 2019 as the dynamic revenue management system improves returns. UK bus operations have also seen improving trajectory with passenger demand, with passenger commercial passenger revenue now running at about 87% of pre-pandemic levels, and that's still ahead of the industry average. That's driven by the combination of our low fare strategy and our ongoing partnership with Transport for West Midlands, which has delivered upgraded bus priority infrastructure to reduce journey times. Now, we did make a loss in the half. The underlying operating loss in the U.K. of GBP 13 million represents a GBP 7 million improvement versus the same period last year. Within that, really a tale of 2/4 and strongly improving momentum, which I will come back to in a couple of slides time.
German rail business delivered a very strong performance in revenue and profit. Revenue is up 59% to GBP 124 million. Now, that's largely reflective of the emergency contract awards at the beginning of the year. Underlying operating profit of GBP 3 million marks a return to profitability in that business and reflects the phasing of some subsidies which hampered us in 2021, together with those two new contracts. As Ignacio said, the award of those contracts really does reflect our strong and growing reputation with the local passenger transport authorities. Together, those contracts will give us about EUR 200 million of revenue across 2022 and 2023.
What's really key is their successful mobilization at really short notice, further strengthens our credibility and credentials for further bidding opportunities. Now, I know I've spoken to a number of you so far this morning, and you've all asked me about separately disclosed items, so we'll hit those straight on. GBP 48 million in total, of which GBP 23 million represent cash outflows. And look, as we've signaled previously, the directly attributable gains and losses due to COVID only includes changes in estimates to items previously recorded. So there's nothing new in that. There is a GBP 3 million, you know, reassessment of items previously recorded. The new item is during the period we identified a number of onerous contracts in North America, which have been driven by the national driver shortages.
What we have done in the half is provided till the end of the life of those contracts until the renewal point of those contracts, and that is an exceptional expense of GBP 19.7 million, which we've recorded exceptional because of its size and nature. In the first half, only GBP 2 million of that has been utilized. In the second half, maybe another GBP 6 million, the balance in 2023 and then going on 2024 and beyond. It's not distorting these numbers. It's a charge we've taken for future, you know, future contract usage. At the end of 2021, you may remember we recorded an onerous contract provision for the RRX contract within German rail. This has been reassessed with a further charge of nearly GBP 5 million recognized in the period.
That is all reflective of the increase in long-term energy costs, where the accounting makes you sort of, you know, look at what you're paying now and factor that over the life of those contracts. But look, this is a single aspect of a single contract, and we remain increasingly confident in the current and future profitability of our entire German rail franchise. Finally, other up there is the transaction fees of the aborted Stagecoach deal. As you can see on this chart, we have continued to build back operating margin driven by that operational leverage as we build back scale. Underlying operating margin is up 450 basis points to around 7%. As expected, in the near term, that continues to be below the level we generated in 2019 for a couple of reasons.
Almost a full percentage point of that margin difference comes from business mix, and the chief factor there is the relative growth of German rail within our overall business. As you know, that is an asset light business with a consequently really high return on capital employed. Also in the first half, the main driver actually of the difference now versus 2019 was clearly the U.K. As I said, it reported an operating loss in the period that was driven by Omicron in Q1. Q2 has rebounded very strongly, and I'll show you that in the next slide.
Now countering that in the full year, we do expect North American margins to come off the first half level a little as we are not forecasting full resolution of the driver shortages issue. In the first half, those driver shortages were somewhat offset by CERTS funding, and that funding is no longer available to the industry. You wrap all of that together, overall, we are expecting group margin for the full year to be slightly ahead of the first half, and resulting in, you know, around 7% as previously guided. Now this is based on a central forecast of what our proposed wage investments will do to the vacancies. We are assuming there will be sufficient to recover around a third of the school bus routes lost from the driver shortages in the first half.
Clearly there is both upside, hopefully, and potentially downside to that central forecast if we do better or worse than nailing a third of the vacancies. Look, as I said earlier, U.K. business recorded an operating loss for the period, but this disguises a sharply different quarterly profile as you can see in the chart. There was a significant uplift in trading in Q2 versus Q1, delivering a swing in underlying operating profit of GBP 29 million between the quarters and building really significant momentum for the balance of this year and beyond. Again, I don't wanna labor the point, but it was driven by the Omicron variant in the first quarter and was, you know, most pronounced in the discretionary coach business, which you can see on the right.
You can clearly see how demand has rebounded in both airport and intercity travel. As it does, you know, we benefit from that operational leverage as our fixed costs are covered. That is then compounded by the active yield and occupancy management that we talked about earlier. UK Coach was profitable in June, and we expect to see further improvements in the second half as services ramp up over the summer period and fully expect the U.K. to return to strong profitability for the full year. Now, I wanna say a few words about school bus driver shortages, the consequent wage inflation and the pricing power we have to offset this with rate increases through the contract renewal cycle. A bit of math.
Driver wages amount to around 40% of school bus revenue, and we anticipate average driver wage increases of 10%-12% across our portfolio of school bus operations. Where the contracts have been renewed this year, which is around 40% of our total portfolio, we've secured average increases of 10%. Across the non-expiring contracts, we either have fixed rate or CPI-linked increases in the contractual terms. Across all of those contracts, that will yield an average price increase of around 4%. Therefore, together, that nets to a rate increase of around 7% across that entire portfolio. Now assuming all other cash costs, which are about another 30% of revenue, inflate at around 5%, and that's probably conservative, that 7% increase on price would cover most of that cost inflation.
Most of the contracts not expiring this year are up for renewal over the next 18 months, and we are confident, very confident, that we will recover wage inflation through price in those negotiations as we have done this year. In summary, and this, you know, is a key point, school bus is a relatively inflation-resistant business due to the non-discretionary nature, which gives us a high degree of pricing power. Now we do expect some temporary margin impact over the next year, which is factored in already to the guidance we've given, but that is more about driver shortages than it is about inflationary worries. As I said earlier, our central forecast is that those wage increases that I've talked about are sufficient to close about a third of that driver shortage that we suffered in H1.
Over the first few months of the schools reopening, and then the balance of that shortage closed over the next 18 months. I'd like to make a brief, but important comment too on weakening economic conditions here. The industry-wide shortage of school bus drivers is perhaps the number one business risk that we face in the near term, and a softening of the U.S. economy could prove very helpful to recruiting and retaining those drivers. Let me now give you a sense of how the rest of the portfolio is positioned against inflationary pressures, because I know that's on everybody's mind at the moment.
What we've tried to show simplistically in this chart is a breakdown of our group by revenue into major business lines, and we've color-coded it green, where we have high levels of contractual inflation protection and amber, where we are more reliant on passing cost to consumers. Now on the cost side, as you know already, our fuel is hedged in a rolling three-year cycle. We've got 2022 fully covered, 2023 75% covered, 2024 35% covered, all at an average price lower than we paid in 2021. You know that staff costs are typically covered in multi-year collective bargaining agreements and other input costs are subject to long-term supply agreements. That's the cost side.
Our contracted businesses typically benefit from a good level of protection against that inflation, containing either annual fixed price or inflation-linked price increases, and in some cases, a direct pass-through of cost. In total, two-thirds of our group revenue is contracted, and all of that contracted revenue has some form of annual escalator allowing the passing through of cost increases. Around half of that contracted revenue is effectively fully inflation protected. Outside our contracted businesses, the rising yields in our coach operations demonstrate our ability to flex pricing to rapidly adapt to changing travel patterns. You know, our U.K. coach business delivered a 20% increase in yield year-on-year. Alsa delivered a 19% increase in revenue per kilometer.
It's worth noting that while demand elasticity is important in these businesses, in an environment where the cost of fuel, and hence private motoring is escalating, this is supportive. Finally, if I created the same kind of chart for resilience to a weakening economy, it would look very similar. We have got relatively high defensive characteristics in the face of a possible economic downturn. In North America, much of what we do is essential service. You know, children have to go to school. Mobility for less able people is government protected. In Alsa, around half of our revenue is protected with no demand risk. No demand risk in urban bus and about 70% in regional bus.
In Morocco, our biggest contract has no demand risk, and across the rest of those cities, there are few options other than public transport for people going to work, and school, et cetera. Now in the U.K., both coach and bus are the cheapest forms of transport. In Germany, the majority of our rail contracts have no demand risk. You know, we have uncertain times in front of us. I think our business is about as well positioned against those uncertain terms as you might hope to be. Now let me turn to cash flow. As I said earlier, we generated EBITDA of close to GBP 200 million in the first half. GBP 88 million of maintenance capital expenditure, as you know, is primarily fleet replacement, higher year-over-year as we have returned to normalized operations.
That maintenance CapEx is about 0.8 times depreciation as we guided at the start of the year. 25 million outflow on working capital. A strong cash collection was more than offset by the utilization of the CERTS deferred income disclosed last year. We booked it last year. We've utilized it this year. Net interest paid decreased by GBP 4 million over the period. Some of the bankers in the room won't like that, of course. That was driven by saving on the private placement facility that matured in August 2021 and some timing of interest rate swap payments. The net impact of all of that was Free Cash Flow of GBP 64 million, representing a strong Free Cash Flow conversion of 70%.
To round off on cash, growth capital expenditure here of GBP 29 million is predominantly related to the Casablanca fleet. Acquisitions of GBP 18 million are predominantly the further 10% stake in WeDriveU and the GBP 6 million acquisition of Vitalia in Spain. We've got the GBP 23 million of cash outflow on exceptionals that I talked about before, primarily utilized through onerous contract provisions. That other cash flow number there of GBP 62 million is primarily the movement in exchange rates and therefore overall accounts for about 2/3 of our net funds outflow for the period. That all results in covenant net debt of GBP 947 million, with gearing falling back well within pre-amendment covenant levels back at 3.1 times EBITDA.
By the way, in terms of liquidity, we still have GBP 1.9 billion of debt and capital committed facilities with an average maturity of nearly five years. At the period end, we had a total of about GBP 0.8 billion in cash and undrawn facilities. There's a slide in the back if you need. I did wanna take a minute just to reiterate quickly on our capital allocation model. This is unchanged, but I think it's worth reiterating. We seek to broadly balance this business in three areas. First, to invest for growth, target investments that deliver 15% returns. In the near term, as Ignacio said, we are focused on asset-light bid opportunities, but we have a total of GBP 0.8 billion of those type of opportunities within our GBP 2.1 billion current opportunity pipeline.
Second, do we wanna pay a dividend? You know, targeted cover of at least 2x, and we fully intend to restate that dividend for the full year, based on our expected outturn at the moment. Third, to get that net debt to EBITDA level back down to within our range of 1.5x-2x. I expect to be somewhere between 2.5x-3x by the end of 2022, with FX being the driving factor of exactly where we sit in that range. Let me finish just by reiterating the guidance, or at least the bits I haven't already covered, as we've gone through those slides. These strong first half results really increase our conviction in the guidance we've previously provided.
Look, there are challenges to overcome in filling school bus driver vacancies, but we still expect 2022 revenue to be at least at 2019 levels in constant currency. We expect operating margin to be around 7%. In summary, we are really pleased with our first half performance and our prospects remain strong. I'm gonna hand you back to Ignacio to hear more about those prospects and how we're progressing with Evolve.
Well, thank you, Chris. Let me return to our progress against our Evolve strategy. Let me start with a reminder of Evolve, which we set out in our Capital Markets Day presentation last October. It has our vision at its center to be the world's premier shared mobility operator and our purpose to lead modal shift from cars to mass transit. We have five clear customer propositions underpinned by technology, and we are ruthlessly focused on the outcomes. I'm pleased with the progress we have made in the first half on each of our customer propositions. I will talk through a couple of case studies to show how we are reinvigorating public transport in Lisbon and delivering operational transformation through our emergency rail contracts in Germany.
Elsewhere, in terms of multimodal expansion, we have been awarded an urban bus contract in Geneva, expanded our multimodal hub. It's our first all-electric bus contract, so an exciting milestone for us. In the U.K., our transport solutions business has launched operations in the West Midlands, leveraging existing infrastructure to deliver cost efficiencies as well as growing revenue. We are also making progress in filling the gap, the transit gap, winning 10 new contracts in North America in the first half, 9 in shuttle and 1 paratransit, and most of these are asset light. I promise you a couple of slides to show Evolve in action. Firstly, I want to talk about our highly successful mobilization of Lisbon, our first contract in Portugal.
As I mentioned before, we were the only new operator when the contracts were awarded last year. It's really pleasing, therefore, that we not only met all the contractual milestones on time, but we did this ahead of incumbent operators. Although this was a completely new market for us, really underlying our reputation for reliability. While it is early days, we are exceeding initial expectations. Equally important, it demonstrate our strong and growing credentials which position us for bidding for the contract in Portugal and other new markets.
I'm really hopeful that we will be entering another new market shortly, which will be our 12th, as we are one of only two bidders in the final stage of bidding for an urban bus contract in Dubai, which is of a sizable one. The second example I want to highlight is the successful mobilization of the two-year German rail emergency contract. They were awarded in December. These contracts were awarded after the failing incumbent operator had to hand them back, meaning that we had to mobilize them both in a matter of weeks, rather than the usual two, three years planning. Not only did we do this on very short notice, but we did it seamlessly, delivering a safe, reliable service from day one.
A true example of reinvigorating public transport. We're also achieving operating efficiencies with our existing contract in North Rhine-Westphalia with the operating leverage improving financial returns. Digitization is playing its part here too. When we took over these contracts, we used scheduling tools to analyze historic scheduling data. We have already identified waste and inefficiency that will deliver operating savings of over EUR 1 million. As with Portugal, this successful mobilization only serves to build our reputation for reliability with the PTA. Again, strengthening our position for further contract bids and contract renewals in 2024. A key enabler of our above strategy, and I'm very passionate about this, is digitization to achieve ongoing improvement in our outcomes. Here again, we are making good progress. Let me focus on just a few.
We have implemented virtual reality simulation training for drivers in Alsa and Morocco, and now we are rolling it out in the U.K. This is increasing safety awareness and performance before they go out on the road. This reduces risks for new drivers and enables dynamic testing. We continue to roll out transformation programs across all operations to make us a more efficient and drive improvements for our customers. In North America, we're implementing Bytec urve, a program which automates and optimizes many processes, such as the daily scheduling and dispatching. This is now rolled out to around 50% of our locations, and we are already seeing results with 15% better scheduling compliance.
That's enabling us to better manage driver cost, and once completed, achieve around $6 million in cost and efficiency savings from this one platform. We are rolling out the apps to enhance our customer experience. For example, in Alsa, we launched Mobi4U, a Mobility-as-a-Service app, and to be used for travel on all types of mobility service in a local area. This makes it more convenient for customers to plan their journeys with real-time information on services, journey times, connections. We have rolled out the app in more cities and towns this year across Spain and Morocco, and we have also introduced QR codes, making payments easier and more convenient for our customers. Ultimately, making travel more convenient will help to drive the model shift.
We are focused on building scalable digital assets that can be applied on a group-wide basis to make us safer and more efficient and improve the customer experience. It will also drive revenue growth and improve financial returns. As you can see from this slide, there are a huge number of areas where we can apply digitization, from the development and improvement of operational tools, platform management, distribution channels and customer information, through to data management, developing new ways of doing business and improving central processing. A good example is Salesforce, which we're using across the group. This not only automates sales processes and customer invoicing, but will also improve revenue collection and customer satisfaction.
Moreover, it provides a single customer view for B2C that is being used in UK Coach and rolling out in Bus to replace an old bespoke system. We're also using artificial intelligence and analytics to inform operational and commercial decisions. For example, in fleet management, we're using IBM's Maximo to transform our engineering processes across the group. This was first introduced in Alsa, and now we're rolling out in the U.K. and North America. This is using artificial intelligence predictive maintenance tools to optimize performance of our fleet, which will reduce fleet downtime, extend vehicle life, and enable a reduction in parts inventory. We're continuing to make good progress on more Evolve outcomes. In terms of satisfying customers, our UK Coach business has seen a 7% improvement in the Net Promoter Score.
In Spain Long Haul has seen a 5% increase in customer satisfaction. On safety, our fatalities and weighted injuries per million miles score has improved 50%. It's particularly pleasing to see the results in Morocco, where the significant improvement we have made in safety in Casablanca since we started have resulted in 28% reduction in at-fault accidents. We continue to lead the way on the environmental front with plans approved for 1,500 zero-emission vehicles by 2025. In the U.K., we'll have half of our bus fleet transitioned by 2025. What is also encouraging is that we are delivering great efficiencies from our original zero-emission vehicles than we had expected with the total cost of ownership now 15% lower compared to a diesel bus.
It is not just nice to do, but also a solid economic choice. Turning to our ambitions, we have got a strong and growing pipeline of bid and M&A opportunities now at GBP 2.1 billion. This is up, if you remember, from GBP 1.5 billion when I spoke to you at the Capital Markets Day last year. As you can see, from the chart, these opportunities are broadly spread in each division, with more than half being organic bid opportunities. Of the GBP 1.2 billion organic pipeline, it is important to emphasize that 2/3 or GBP 800 million are asset-light opportunities.
We have got some sizable and strategic opportunities on the horizon, particularly in transit in North America, with paratransit contract coming up for bid in Las Vegas, Houston and Orlando. Asset-light contracts offer, as you know, a range of operating margin, depending particularly on the level of demand risk. More importantly, they have the benefit of offering both higher returns on capital and minimal cash outlay, allowing us to grow our business and deleverage at the same time. We have shown our ability to win this contract, securing 7, as I mentioned before, in the first half.
Mm-hmm.
This slide summarizes our unique and attractive investment case, as set out in our Capital Markets Day. I won't go through all six of those points, but I wanted to highlight how the progress we're making aligns to this investment case. In particular, we have talked today about the long-term structural growth opportunities. We're making strong progress in our Evolve off-lease to be the best-in-class operator, and we're moving quickly to the decarbonized fleet. Let me reinforce that we have a uniquely diversified and balanced portfolio. To wrap up, coming back to the four key areas I talked about at the start of the presentation.
We have seen a strong revenue growth in the first half, and momentum is building across the group, and this is translating into strong profit and cash conversion. We are continuing to make progress with our Evolve strategy across each of our businesses, and the path forward will not be without challenges. Not least in North America, where we have significant resources, as explained, focus on ensuring we can hire sufficient drivers and, of course, the current inflationary environment. However, as we have shown, we are well positioned to manage inflationary pressures and barring any unforeseen global shocks. I'm confident we can deliver on growth ambitions for the full year and beyond. We will now be happy to take your questions.
Morning, it's Joe Thomas from HSBC. Three please. Just on that pipeline issue, if you could just give us a bit more granularity on that, please. First of all, Ignacio said it's grown at 2.1, I think from 1.5 at the Capital Markets Day. What's behind that? Is it a broader scope or is more stuff coming out to market now and why? Is there any sort of detail you can give about what that GBP 2.1 billion might mean on an annual basis? Because I guess it's lifetime value.
Yeah. Okay.
That'd be the first question. The second thing is, in Alsa, there's been some news about Renfe offering free fares around Spain, at the moment, j ust wonder what the thoughts are, on that and how we should expect that to play through. Then finally, on the subject of driver availability, if I recall correctly, the American schools start going back before too long now.
Yeah.
When do you start getting visibility on when those drivers start turning up?
Yeah. Okay. Writing down before I forget. On pipeline, it is annualized revenue, the pipeline, and it also only considers the next 18 months. The growth from GBP 1.5- GBP 2.1 is thanks to the sales processes that we have introduced since the beginning of last year, and scaling up some of the teams, sales teams and business development teams. We now have a much more strong process and consistent visibility on that. 2.1, you have 800 we have said out of the 1.1 of organic which are asset light. The rest is through M&A.
We always, as you know, look at the market and we have some options for the future. Again, you know, I say good, well-balanced, a lot of options, very disciplined and rigorous process. As I said, it's only 18 months. We now have something that we didn't have in the past, visibility on what is coming in 2023, 2024, 2025, 2027, you know. We are starting, as I said, you know, introducing also Salesforce and all these tools help us to start working on the account management plan to make sure that when they come out, we're ready for it. Again, as you have seen, we're translating that into actual new wins.
Joe, annual divided by five. Average contract length. Alsa, Renfe fares, I mean, Paco could expand, but it's quite limited. It's only for certain ticket types on certain types of line. It's also not been implemented. We think worst case, if it is GBP mid-single-digit millions, worst case. Drivers, you're absolutely right. Schools start in August. By mid-August, we'll have a very good sense of where we'll be.
The last question was on when will we see how many drivers are coming back? Is that? That was, that basically we won't know until mid-August when the school restart. Mm-hmm.
Morning. Joel Spungin from Berenberg. First question was just on U.S. school bus. How rationally are peers behaving both in terms of recruiting drivers and also the prices they're putting through on new contracts? Secondly, on fuel, when do you start covering 2023 and 2024 at these levels? 'Cause I think you'd sort of paused temporarily. Maybe if I can sort of put two into one on bus. You've mentioned Manchester and Dubai. Kind of confidence levels on those timelines and any context on potential size?
Okay, good. I mean, I have Gary with us today, you know, so maybe on the recruitment, can you give a little bit of light on the question?
Sure. As far as what we're seeing from competitors, we're seeing driver wage increases in line with what we're doing, so we're pretty comparable in the markets that we operate in. From a pricing perspective, they're also pushing through price increases to recover the costs that we're seeing both in fuel and driver wages. You know, they're not out of line with what we're seeing in our portfolio.
Before passing to fuel hedge, there's two things. There is recruiting and retention, and we are focusing on both directions. It's more a retention issue than recruiting. We streamlined the process, we reinforce the recruitment, and we're having a good pipeline of new drivers. Actually, we have reasonable size now on behind the wheel training. It's on the recruitment on the retention time. Now, what have we done? Before they left on holidays, we have announced the wage increases. We expect a better retention this year than the previous. It's not only that. It's about leadership, about being, you know, follow on them, be attentive with them, recognize them, you know, and we have introduced a lot of actions in that respect as well.
On the fuel hedge, would you like to take that one?
Yeah, sure. We did pause for a little bit, and we're back on. Dangerous one to answer in this audience of experts, but the futures curves have come down quite a bit. You know, there's still slightly elevated spots, but with fears of sort of Chinese recession or what have you, the futures curves have come back down. Actually, the price we're looking at paying now in 2023, 2024, and even 2025 is 10% or 12%, 15% max higher than we were paying in 2021. We'll restart.
What it has done is Tom and I in the U.K., Paco and I in Spain, and Gary and I in the U.S. have just put a little bit to make sure the senior guys are having a chat rather than letting the machine do it. We're rolling on in all three markets now.
The third question was on Dubai and Manchester. I will answer Dubai and maybe Tom being here can take the Manchester. Dubai, we are. I mean, we're very hopeful now because we're well positioned and in the buffer, so we have the finalist with another competitor. There are basically two lots. The combined two lots are GBP 156 million for a 10-year contract, annualized per year. And there's the option of getting one lot, two lots, you know, on the combined operations or. And that's where we are. We will know very soon the outcome of the decision of the PTA.
Okay. Sorry, GBP 160 per annum.
Per annum?
Yes. Yeah.
10-year contract.
Mid-single-digit margin.
In terms of the U.K., the Manchester piece, I think we're in a good position. I mean, we have a great reputation in the U.K. bus market for our engagement with the local authorities, but it will be hard fought. We're well engaged with designing the competition. We're deeply in it. There are two lots. I think the total around, we expect around about GBP 100 million turnover. Again, we should know before the year is out. Although there has been a wee bit of slippage in the process already, as this is the first time this has happened in the market.
It's worth pointing out, Tom is personally engaged in helping Manchester design the process. That is really important that you understand that. That has done things like allowed Manchester to change the process so that we will be allowed to run EVs under availability contracts. You know, had Tom not been engaged in designing as well as bidding, we would not have got that in.
Good morning. It's Ruairi Cullinane from RBC. Firstly, how should we expect growth CapEx to evolve in the medium term given the greater weighting towards asset-light contracts in your pipeline? Secondly, quite an impressive margin in Alsa, 11% in H1. Should we expect that to continue to grow as passengers and revenues recover? Finally, I think Chris mentioned on the RRX onerous contract provision that that was a function of the energy costs which you're paying currently. Does that mean the accounting rules compel you to increase the onerous contract provision if energy prices spike and then release it? Is that how it works?
Yes, broadly. That's the answer to three.
Can you take the other two?
Growth CapEx this year will do about GBP 100 million. It will spike up a little bit in the second half. Most of our growth CapEx this year is vehicle CapEx for new contracts. Most of our vehicle CapEx has got about a one-year payment term on it. Frankly, the cash flow in the second half is for vehicles we're already driving. As you look at our Evolve strategy towards the sort of end of 2026, 2027, it peaks at about GBP 300 million a year. We think that's about the. If you think about a GBP 2 billion pipeline of opportunities and you think about somewhere between 10%-20% conversion rate on that.
We think three hundred is about the max we could ever really eat in a year. You're absolutely right to say that, as we move to asset light, it will be less about buying new vehicles. As we sort of get back into the M&A swing, that growth CapEx and M&A together is the GBP 300 million. You'll see us, I hope, you know, consolidating and compounding more. Alsa margin, there's nothing untoward in that 11% margin. There's no funnies. There are no, you know, one-offs. There's a little bit of phasing of some concessionary income. I think it will be a tad back on the full year. A tad, nothing major.
As we run into the multiple years, it's all about as we've been saying for a decade, it's all about concession renewal. You know, I think the margin that Paco and the team have delivered, this half is good for your models at least until the end of 2024. After which I think you'll see a little dip and then it'll build back to about that level.
Anything else online? Let's go on to line questions. We're now ready to take questions from online.
Go on, Joe.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypads. We have our first question on the phone lines from Gerald Khoo of UBS. Your line is open. Please go ahead when you're ready.
Thank you. Good morning, gentlemen. Just two from me. Firstly, just on school bus shortages. Obviously it's difficult to complete the existing contracts, or some of the existing contracts. What does this mean in terms of bidding for new contracts? You know, are schools approaching you and you're turning away the business? Kind of related, you know, what is happening with competitors in terms of their ability to service contracts or indeed possible failures? I guess that was two questions already. The third, just looking ahead into next year, what are you thinking in terms of how U.K. bus prices might evolve? Thanks very much.
Thank you for the question. Maybe you can take, Gary, the first two ones on the shortages and the competitors' ability to recruit.
Yeah. You know, the shortages are affecting our ability to bid new contracts. You know, we have taken a very conservative approach on looking for new work, basically because of the uncertainty around labor shortages and the ability to start that up. We're seeing that from our competitors as well. It's been a very quiet two bid seasons. The bid season before was quiet due to COVID, and this year it was quiet due to uncertainty around driver shortages. What we are seeing recently is a bit of an easing. Ignacio mentioned that we're seeing a growth in our pipeline of drivers, driver trainees. As that pressure eases, my expectation is that the new bid season will be a bit more back to normal.
As far as competitors are struggling with drivers the same as we are. I think last year was difficult for a lot of contractors. Again, as the pressure eases, I think the risk of seeing contractors fail is probably lessening this year. It'll be a difficult few months anyway.
Tom, would you like to take the U.K. bus question?
Yeah. In terms of U.K. bus pricing, the government's National Bus Strategy, and in particular the Bus Service Improvement Plans actually funds price stability. At a headline level, sort of day tickets are pretty flat, but underlying that is a simplification and a change of mix. We are achieving yield increases without, if you like, headline grabbing top-line fares changes. Quite a nice place to be that we can be getting that patronage through the top line, the advertised fare, but then underneath it, the yields are creeping up constantly.
Thank you.
Thanks.
Thank you. Next question on the phone lines comes from Sathish Sivakumar of Citi. Please go ahead when you're ready.
Thank you. I got two questions here. Firstly on the U.K. market. Given the recent news flows around some of your peers, what's your thoughts around the consolidation in the U.K.? Do you still see further opportunity here? Second, on Alsa, again, any changes to the concession renewal timeline that you've said that you previously guided, which is more like end of, you don't expect anything till end of next year. Also within Alsa, if you could share the trends around the utilization levels, in the long-haul network, especially in the last few months. How does the pricing dynamic compare to versus, say, 2019? Thank you.
Let me take the first one on the U.K. consolidation. I can only comment on what we have. It's not part of our Evolve strategy and we had an attempt with the, you know, the company that we thought strategically fit and had synergies and since then, well, you know also what's happening in the market, so would be nonsense to think about that. That's what I would say. You know, we have good plans in the U.K. and Evolve is a very strong framework, you know, to deliver progress as we have committed. Paco, would you like to take the question on the concessions renewal prospect, the planning and the utilization levels?
Yes, yes, of course. On the renewal of concession, there is no any change in terms of the timing of the process. The current government is working, as you could know about a new map for the franchises. It's revisiting all the routes, but it will take some time to be finished. We don't expect any change, any movement in the next two years. We don't expect any change. In terms of utilization of the fleet is clear that we are now in a very mature state of our revenue management system.
We are now reaching in the peak season, in the end of the Q2 of the year, we are reaching about 60%-70% in most of the long-haul routes. I expect that this is part of the success of the margins that all of the partners have asked previously. I don't know if you, Ignacio, want to add something on this.
No, no, I think you mentioned all. You know, this is 60% is the overall one, then you have a specific corridors where we have a much better utilization. But, as I said, you know, the both in the UK and the Alsa team, I think we are extremely ahead in the sector in revenue management. It's if there's something that I really love is sitting in the weekly planning meetings in the U.K. and also where you have revenue management, you have marketing, you have operations, you have engineering, and you know those decisions they're implemented. You know, you have visibility, you have you're using very powerful tools, you know, for forecasting, and that that's the key.
The utilization and the yield is the success that we're seeing in Coach and these strong results.
Okay. Yeah. Thank you. That's very helpful.
Thank you. As a reminder, if you would like to ask any more questions, please press star followed by one on your telephone keypad. We now have another question on the line from Alex Paterson of Peel Hunt. Please go ahead when you're ready.
Morning, everyone. Can I just ask three or four questions, actually. Firstly, Chris, could you just reiterate you were talking about what were the cash element of the exceptionals. Could you just say what that was again, please? Secondly, on the North American costs, you were saying driver wages were 40% of revenues going up 10-12. Other cash was 30% going up 5. What are the other elements that take you to 100%, and what sort of inflation should we expect there? What benefit do you expect from the Commonwealth Games in the U.K.?
Lastly, can I just ask on non-controlling interest, clearly you've been buying out WeDriveU, and probably one or two other things as well, but we've also got recovery in trading and profitability. What, you know, should we be looking at for the full year charge?
Thank you. Can you take all on the finance, and then we leave for the end the benefit on the Commonwealth Games, and Tom can comment.
Thanks, Alex, for being the first analyst in five years to ever ask me about NCI. Thank God I've got my group controller in the front row. Look, the cash elements of exceptionals are broadly the utilization of the onerous contracts put up last year and some of the onerous contracts put up this year. That's the big cash issue. When you put an onerous contract provision up, obviously you take a charge to profitability at the time you take it up, and then you know the cash goes out as you spend it. I simplified the North American P&L, so as not to give you an easy run in your model.
Basically, a very rough rule of thumb of a normalized year, think of the school bus business as a billion-dollar business. 40% of that, so you know, $400 million is in driver and wages and associated costs. You know, somewhere like 30% of that is all other cash costs. The delta between that and the margin is obviously their non-cash costs, i.e., depreciation. You know, depreciation obviously doesn't inflate, which is why I break it down that way. NCI, I mean, is broadly WeDriveU, and we are, you know, clearly gonna buy out, 'cause we have the symmetrical put call, so that does go. But there's quite a lot of non-controlling interest in Alsa.
Alsa make use of partnerships in many of their contracts. I mean, a very large number of Alsa contracts where they're working in partnership with other small local operators to have yeah, really good local understanding. A chunk of that NCI is Alsa. It never disappears to zero. Just before I hand back to Adam. Adam, did I get any of that wrong?
No, I think that's all right. I think the key thing is. I think the first half charge was GBP 3.5 million of the profit was attributable to non-controlling. You can see that probably being broadly around the same in half two. If we buy out the remaining 20% of WeDriveU at the end of the year, you'll see that drop off. As Chris says, there are bits in Alsa which will carry on over the next few years.
Yeah. The Commonwealth Games start today, so we're benefiting in a couple of ways. We have a number of bespoke contracts supporting the games, both for paratransit type services and coach services and a few support services. Also coupled with all our domestic networks are running fully and supporting the games in that way. We do expect some revenue tick-up. Also probably more importantly is rebuilding confidence in public transport across the U.K. that we will be seeing, you know, people using coaches and buses who don't normally, and that is something which we expect to long-term benefit from.
Thank you.
Great. Thank you very much indeed.
Thank you. We have no further questions on the line.
Well, thank you very much to all of you for coming.
See you.