Half-yearly Report

EMBARGOED UNTIL 7:00am on Wednesday 6 November 2013 FIRSTGROUP PLC HALF-YEARLY RESULTS FOR SIX MONTHS TO 30 SEPTEMBER 2013 H1 2012 Restated1 H1 2013 ChangeRevenue £3,300.7m £3,250.0m +1.6% Underlying2- EBITDA3 £269.2m £262.3m +2.6%- Operating profit £109.9m £99.8m +10.1%- Profit before tax £28.3m £19.7m +43.7%- Attributable profit £17.1m £11.3m +51.3%- EPS 1.9p 1.9p - Statutory- Operating profit £90.6m £62.8m +44.3%- Loss before tax £(8.0)m £(20.6)m n/m- Attributable loss £(1.1)m £(15.0)m n/m- EPS (0.1)p (2.5)p n/m Net debt4 £1,446.8m £2,081.8m (30.5)%1Prior year financial information throughout this statement has been restateddue to the adoption of changes in IAS 19 and the rights issue - see note 1 fordetails. 2Before amortisation charges, ineffectiveness on financial derivatives,exceptional items and loss on disposal of properties. All references to`underlying' figures throughout this document are defined in this way. 3 Underlying operating profit less capital grant amortisation plusdepreciation. 4Net debt is stated excluding accrued bond interest. Group overview: - Trading in line with management's expectations, despite continued headwindsin some markets - Progress at the revenue, underlying and statutory operating profit andunderlying attributable profit levels; underlying EPS in line with the sameperiod last year - Strengthened balance sheet following the rights issue completed in June,seasonally higher mid-year net debt: EBITDA ratio reduced to 2.4 times from3.2 times last year - £1.6bn investment plan over four years underway, with capital expenditureincreasing in the period - Progress in transformation plans, though much remains to be done - Remain confident in achieving our medium term financial targets set out inMay 2013 Operating highlights: - First Student - on track with recovery programme; original $100m run ratecost saving target achieved, with further efficiency actions ongoing toachieve double digit margins in the medium term - First Transit - continued good growth in both renewals and new business,particularly in shuttle and paratransit, with margin performance maintained - Greyhound - US economic conditions affected core market though summer trendsshow signs of improvement. Further significant Greyhound Express expansion - UK Bus - early positive signs from areas where we have reset our commercialproposition to enhance volume growth. Benefits of our transformation planlargely counterbalanced the anticipated headwinds during the period - UK Rail - solid passenger revenue growth and operating performance.Franchise renewal programme now underway with 23-month First Great Westerncontract in place Commenting, FirstGroup's Chief Executive, Tim O'Toole said: "Over the past six months, we have worked hard to ensure we are positioned todeliver on our potential. We have strengthened our balance sheet through therights issue, continued to drive the significant number of incrementaloperational enhancements required to yield better financial returns, and aremaking disciplined investments to benefit from the opportunities we see in ourmarkets. We are focused on the task of meeting our medium term financialobjectives including our revenue, margin and return on capital targets, whilecontinuing to improve the services we deliver for our customers. "We have a fundamentally attractive portfolio of market-leading transportbusinesses, and our unrivalled scale and breadth gives us significantopportunities to share best practice and expertise, to deliver outstandingservices to our customers and to create long term, sustainable value for ourshareholders. We remain confident that the trends toward increasedurbanisation and greater congestion will generate significant opportunitiesfor our business, and that we are returning to the strength necessary to drivesustainable, long term growth and increased shareholder value. "Although it is early days in our multi-year plan to improve our returns,resilience and growth prospects, we are seeing clear indications that we aremaking progress. While there remains a significant amount to be done, webelieve the foundations are now in place to deliver on our market-leadingpotential." For further information please contact: FirstGroup plc: Rachael Borthwick, Group Corporate Communications Director Faisal Tabbah, Group Investor Relations Manager Stuart Butchers, Group Media Relations Manager Tel: +44 (0) 20 7291 0512 Brunswick PR: Michael Harrison/Andrew Porter Tel: +44 20 7404 5959 A PRESENTATION TO INVESTORS AND ANALYSTS WILL BE HELD AT 8:30AM TODAY ATTENDANCE IS BY INVITATION A LIVE TELEPHONE `LISTEN IN' FACILITY IS AVAILABLE FOR JOINING DETAILS PLEASE CONTACT +44 (0) 20 7725 3354 A PLAYBACK FACILITY WILL BE AVAILABLE AT WWW.FIRSTGROUP.COM/INVESTORS PHOTOS FOR MEDIA ARE AVAILABLE, PLEASE CALL +44 (0) 20 7725 3354 CHAIRMAN'S STATEMENT FirstGroup has established a broad-based portfolio of market-leading transportbusinesses in the UK and North America over many years. We have a wealth ofexpertise and unique knowledge of many different markets, networks, contracts,operations and assets, and we believe our stakeholders benefit from ourdiversity and experience. Effective transport links are a key enabler ofeconomic growth, and the interlinked trends of increasing urbanisation andcongestion mean experienced providers of efficient transport solutions such asFirstGroup have an increasingly important role to play - and consequentlysignificant commercial opportunities - in today's economy. In recent years, the external headwinds from the global economic downturn,reduced government support for public transport and the pausing of the UK railre-franchising programme have been significant. We took action across a numberof fronts to mitigate the effects of these headwinds: we have repositioned thebusiness portfolio where necessary, activated root-and-branch transformationprogrammes throughout our underperforming divisions, strengthened the balancesheet through the recent rights issue, and committed to a substantial £1.6billion investment programme over the next four years to raise returns,enhance growth and put the Group on a sustainable path to increased valuecreation. The response of our people throughout this time has been extraordinary, and onbehalf of the Board I would like to extend our thanks to employees throughoutthe Group, who have remained committed, professional and steadfastly focusedon serving the millions of customers who rely on us every day. I am pleased to say that during the first half of this financial year we havebegun to see early signs that our initiatives to strengthen the Group arebearing fruit, and I have confidence that, as we move to the next phase of ourdevelopment, FirstGroup will continue to build on this success. As indicatedin May, the Board is not proposing an interim dividend in respect of thisfinancial period, but subject to performance remaining in line with ourexpectations for the rest of the year, expects to propose a final dividend ofup to £50 million for the year to 31 March 2014, as a transition to aprogressive dividend policy thereafter, with dividend cover of 2.0 to 2.5x inthe medium term. As I announced in May, it is my intention to step down as Chairman on theappointment of a successor, a process that is well underway and makingprogress. I have been involved with the company from its earliest days, whenas a newly deregulated Scottish municipal bus operator FirstGroup embarked onan ambitious programme of acquisitions and contract bids to deliver profitablegrowth. From the merger with Badgerline, through privatisation of British Railand our first rail franchise bids, and later expansion into North America,FirstGroup has always maintained a resolute focus on growing the breadth andattractiveness of the transportation services we provide for our diverse rangeof customers. The actions we have taken in recent times will ensure that theGroup will continue to play a leading role in providing efficient and costeffective passenger transport services for our customers, while being anattractive and sustainable investment for our shareholders, for many years tocome. Martin Gilbert Chairman 6 November 2013 Note: Operating profit referred to throughout this document refers tooperating profit before amortisation charges, ineffectiveness on financialderivatives, exceptional items and loss on disposal of properties. EBITDA isunderlying operating profit less capital grant amortisation plus depreciation. OPERATING AND FINANCIAL REVIEW Earlier in 2013, the Group set out its objectives to deliver improved growthand return to a profile of consistent financial returns and cash generation inconjunction with the rights issue to provide the balance sheet flexibility tocontinue our transformation and investment plans. Over the next four years weaim to increase Group revenue (excluding UK Rail) at a faster rate than theeconomies we serve, to improve margins in First Student and UK Bus to doubledigit levels, and to achieve a post-tax return on capital employed (ROCE) inthe 10% to 12% range. We aim to maintain an investment grade credit rating andappropriate balance sheet liquidity and headroom and, as the businessperformance improves, to re-establish a progressive dividend policy to target2.0 to 2.5 times dividend cover in the medium term. The actions we are takingin each of the divisions will create a more robust company and one that isbetter placed to face its challenges, deliver on its promises and takeadvantage of future opportunities. Although many of the actions are at arelatively early stage, and a great deal remains to be done to achieve thesetargets, the six months to 30 September 2013 represents a period of solidprogress on our medium term plans to return to strength. Group results Group revenue increased by 1.6% to £3,300.7m (2012: £3,250.0m), or by 5.4% asadjusted for the UK Bus portfolio changes, the disposal of the First SupportServices (FSS) business in First Transit and the non-recurring London 2012Games revenues. Underlying operating profit increased 10.1% to £109.9m (2012:£99.8m), reflecting reductions in UK Bus and Greyhound profits offset byhigher profits in First Student and UK Rail. Group margins increased, withimprovements in First Student, First Transit and UK Rail more than offsettingdeclines in Greyhound and UK Bus margins. Statutory operating profit was£90.6m (2012: £62.8m) reflecting the increased underlying operating profit anda reduced charge for exceptional items this half year, partially offset byhigher amortisation. Underlying basic EPS was flat at 1.9p (2012: 1.9p),reflecting the increased number of shares in issue following the rights issue,whereas profit for the underlying EPS calculation increased from £11.3m to£17.1m in the period. EBITDA increased 2.6% to £269.2m (2012: £262.3m). ROCEimproved modestly to 8.0%, compared with 7.6% at end of March 2013. Restated Restated Year to 31 March 2013 6 months to 30 September 2013 6 months to September 2012 Operating Operating Operating Operating Operating Operating Revenue profit1 margin1 Revenue profit1 margin1 Revenue profit1 margin1Divisional £m £m % £m £m % £m £m %resultsFirst 666.4 11.0 1.7 640.3 5.2 0.8 1,503.1 109.9 7.3StudentFirst 408.7 31.4 7.7 397.2 28.8 7.3 814.6 49.1 6.0TransitGreyhound 333.7 31.8 9.5 337.3 34.8 10.3 647.1 54.5 8.4UK Bus 490.7 17.3 3.5 572.9 21.0 3.7 1,128.2 53.5 4.7UK Rail 1,395.2 32.8 2.4 1,296.4 23.8 1.8 2,795.1 38.0 1.4Group2 6.0 (14.4) - 5.9 (13.8) - 12.8 (29.5) -Total Group 3,300.7 109.9 3.3 3,250.0 99.8 3.1 6,900.9 275.5 4.0 North $m $m % $m $m % $m $m %America inUS DollarsFirst 1,029.7 18.1 1.8 1,017.2 10.8 1.1 2,378.6 174.9 7.4StudentFirst 630.8 48.6 7.7 627.8 45.5 7.2 1,286.8 77.7 6.0TransitGreyhound 514.7 49.1 9.5 532.6 54.5 10.2 1,022.0 85.5 8.4Total North 2,175.2 115.8 5.3 2,177.6 110.8 5.1 4,687.4 338.1 7.2America 1Underlying. 2 Tramlink operations, central management and other items. FIRST STUDENT Revenue in our First Student division was $1,029.7m or £666.4m (2012:$1,017.2m or £640.3m), 1.2% higher on a US Dollar basis year-on-year due inpart to the recovery of some operating days lost to severe weather from lastyear. Operating profit was $18.1m or £11.0m (2012: $10.8m or £5.2m), and USDollar margins of 1.8% in the half were higher than the equivalent period lastyear (2012: 1.1%), as expected. Overall contract retention rates remain around90%, although we continue to focus on winning or retaining only thosecontracts that meet our returns criteria. For the full year, we expect thatthe number of buses operated will reduce by around 450, although revenue willbe broadly in line with prior year. State and local finances improved modestly in the period but the marketremains challenging overall with limited growth opportunities; nevertheless wesaw some organic growth within existing contracts of more than 450 buses,almost double the rate of organic growth in the prior year. Although thisorganic growth remains at relatively low levels, it compares with contractionin our 2010, 2011 and 2012 financial years. We completed a small in-fillacquisition in Canada, and continue to be successful in the conversion marketfrom in-house operations to the private sector, winning 55% of the businessbid for-and-awarded, although we remain cautious about growth from this partof the market, since only a small number of contracts tendered convert to theoutsourced sector. Accordingly we do not anticipate a significant change tothis trend in the medium term. Our continued focus on returns resulted in somecontract losses including several where, although the numbers of busesoperated were significant, their contribution to profits was modest. A numberof "share shift" contract wins, including some which were cost-effectiveexpansions of existing operations for our customers such as for the LosAngeles Unified School District and for Kansas City, Missouri, were sufficientto largely offset other contract losses. During the period, we passed a number of milestones in the ongoing process ofimproving our operating performance and delivering cost efficiencies in FirstStudent. All of our workshops have now achieved an initial level of leancertification, and we are well advanced with embedding the next level ofimprovements to our procurement, engineering and maintenance processes. Ourprogrammes to drive uniform best practice and improve cost management coupledwith the near-completion of the roll out of our FOCUS GPS system in the US(which links on board data to back office systems) produced another period ofimproved labour cost and other operating efficiencies. We also signed aframework agreement with one of our key suppliers which will furtherrationalise our supply chain and lead to additional savings in the future. Wehave been investing to build our non-school charter business, which grew 11%in the period, with a more structured approach to targeting and marketing tonon-school accounts, yielding significant business from one-off events such asthe President's Cup golf and Alberta Summer Games, and repeat businessincluding for the Tough Mudder adventure challenges and providingtransportation for construction companies. In the period, we surpassed our$100m per annum cost saving target for the division on a run rate basis, andwe expect to drive significant further savings as we continue to embedefficiency at the heart of the business through a continuous process ofincremental cost savings. We are increasing our use of technology to differentiate our offering, raisecustomer service levels and promote environmental benefits. We are achievingfuel efficiency improvements of around 5% across the division through theDriveSmart system, and in the second half of the year we will launchMyFirstPass, a system giving parents and customers real-time information aboutstudent ridership as they swipe on and off the bus, in selected locations. Ouralternative fuel bus fleet continues to grow, with more than 500 propane busesbeing added to the fleet this year, mainly in the Pacific North West. FIRST TRANSIT First Transit continues to deliver a strong performance. Revenue increased to$630.8m or £408.7m (2012: $627.8m or £397.2m). After adjusting for the sale ofFSS, US Dollar revenues increased by 8.8% from the same period last year.Operating profit was $48.6m or £31.4m (2012: $45.5m or £28.8m) and operatingmargin was maintained at 7.7% after adjusting for the sale of FSS. Growth inthe first half of the year has been driven principally by contractopportunities in paratransit and shuttle segments and, while we remainconfident in First Transit's medium term outlook, the pipeline of bidopportunities slows slightly in the second half, meaning that growth for thefull year is expected to be closer to last year's 7%. Over the course of the last six months, we have strengthened ourmarket-leading customer portfolio with the commencement of several largecontracts. We successfully added more than 300 fixed route buses for a newlyunified bus operations contract in Arizona. For our customer, Valley MetroRPTA, the contract has streamlined and brought economies of scale benefits. Wealso began a paratransit services contract in Washington DC with more than 220vehicles serving MetroAccess' door-to-door transportation service for disabledpassengers. Client relationships are fundamental in this market, and key contract renewalsduring the first half of the year included a ten year fixed route contractwith PRTC in Woodbridge, VA, operating 169 vehicles for this community justsouth of Washington, DC. We were also successful in renewing our contract withthe Maryland Aviation Administration to operate the shuttle buses atBaltimore/Washington International Airport. Other large renewals includedparatransit services for New Jersey Transit Region 6, fixed route andparatransit services for Johnson County, Kansas, and fleet maintenanceservices for the District of Columbia Metropolitan Police Department. Our knowledge and wide-ranging experience have also helped us deliver numerouscontract wins over the last six months. We are the largest operator ofuniversity shuttle buses in the US and further campus contract wins have added122 buses during the period including at Brown University, Auburn University,the University of Tennessee, University of Alabama at Birmingham and ChapmanUniversity, California. We have increased our call centre work with the awardof a five year contract to operate the Chicago RTA's Travel InformationCentre. First Vehicle Services also saw an expansion of its fleet maintenanceactivity with a contract win for the Greater Orlando Airport Authority. We continue to progress our ongoing pipeline of opportunities, including inthe shuttle bus segment as well as developing new offerings such as Bus RapidTransit (BRT). We recently secured an expansion of our contract with CapitalMetro in Austin, Texas, to operate their BRT system, in which FirstGroup'ssuccess with BRT in the UK played an important part in winning the bid. We areseeing further growth in the Fort McMurray market in support of the fastgrowing oil industry of northern Alberta. We are working with our clients to promote innovation, including alternativevehicle technology, and have been operating three electric powered vehiclesfor Foothill Transit in Southern California. This successful pilot programmehas led to their recent decision to place an order for additional vehiclesbringing their electric fleet size to fifteen. We are also implementing a newmanagement IT system providing automated safety, maintenance and forecastinginformation and we expect to roll this out to all of our US locations by theend of the year, as well as sharing best practice with other similarinitiatives within FirstGroup. GREYHOUND During the first half of the year like-for-like revenue decreased by 2.5% andrevenue was $514.7m or £333.7m (2012: $532.6m or £337.3m). Operating profitwas $49.1m or £31.8m (2012: $54.5m or £34.8m) and US dollar operating marginwas slightly lower at 9.5% (2012: 10.2%). In common with reports from theretail industry, value-focused consumers - which form a substantial portion oftraditional Greyhound's customer base - remain cautious, as they continue tofeel the effects of the prolonged US economic downturn. However, a generallysoft sales trend in the first quarter of the year was to some extent counteredby stronger trading during the summer months, with our point-to-point brandsperforming particularly well. In the US, which accounts for around 80% ofGreyhound's revenues, margins remained largely resilient compared with thesame period last year despite the revenue contraction, reflecting the actionstaken to increase the cost and operating flexibility of the business. Howeverwe continue to restructure our business in Canada where further changes to ournetwork and cost base are necessary to deliver a more commercially viableservice. This will include further expansion of Greyhound Express in Canada,which currently serves 12 routes in four provinces. Greyhound Express continues to grow strongly with revenues increasing by 9.6%during the period. In October Greyhound Express added new routes or increasedfrequencies from major markets in Illinois, Tennessee, Georgia and Florida,and launched services in new markets in Arkansas. We continue to build on thismomentum with plans to roll out Greyhound Express on further routes. In October we also expanded our BoltBus operations in the Pacific Northwest,where the service offers a high-quality alternative to Amtrak's routes and hasoutperformed expectations since its launch in autumn 2012. We are nowdeveloping other markets, including California, for further BoltBus expansion.YO! Bus continues to attract ridership in the Northeast Chinatown market,without impacting our Greyhound Express passenger figures, which continue toincrease over the same corridors, demonstrating that our multi-brand strategyis broadening the demographics that are using intercity coach transportation. During the period we also introduced improvements to Greyhound PackageExpress, which moves a million shipments per year in the US, so that customerscan now take advantage of a door-to-door service rather than collection from alocal terminal. A further 109 new vehicles were acquired during the first half of the year aspart of our previously announced $100m order of new buses. Disciplined capitalinvestment is supported by a significant refurbishment programme, which saw uscomplete a further 100 vehicles in the period. At the end of 2012/13 more than50% of the fleet was new or refurbished and we expect to increase the numberto around 75% by March 2014. On some buses we are trialling a new Wi-Fienabled entertainment system so that customers can download content to theirown mobile devices and we have seen immediate strong usage during the trial. Whilst we will continue to maintain our cost flexibility to withstand furthercyclical pressures, we are increasingly focused on investing to ensure thatthe experiences gained from Greyhound Express and BoltBus support themodernisation of the traditional Greyhound service. We have adjusted ouronline pricing discounts for traditional Greyhound so that it more closelymatches the Express model and are progressing with development of yieldmanagement systems that will underpin Greyhound's future success. UK BUS Revenue was £490.7m (2012: £572.9m) during the period, although adjusting forthe disposals of our London businesses and the London 2012 Games, passengerrevenues on a like-for-like basis increased by 1.7%. As we anticipated,operating profit decreased, to £17.3m (2012: £21.0m) and operating margindecreased to 3.5% (2012: 3.7%). This expected decrease was the result of theabsence of the disposal businesses and the one-off benefit of the London 2012Games contract, and the adverse impact of higher fuel costs and reducedcentral government funding, changes to pension service costs andauto-enrolment, largely counterbalanced by the effects of our transformationprogramme. We completed our portfolio rebalancing project with the previously announceddisposals of certain bus businesses during the period, resulting in our exitfrom the London market in order to focus on our commercial deregulatedbusiness elsewhere, and have made significant changes to the structure andstrengthened the management across the business. Our plans to return thedivision to double-digit margins performance in the medium term are focused onthree areas: further cost optimisation through disciplined operations; amarket-by-market reassessment of our network designs and fares structures todrive improved volume growth, in conjunction with local stakeholders; andfurther investment in our bus fleets and technology to improve our customerexperience. Each of these initiatives is being rolled out in stages across thebusiness in an iterative way, and is highly tailored to local marketconditions. The first phase of our operating and cost optimisation programme is nearingcompletion in each of our depots, and is already having a measurable impact onworking practices and customer service delivery, particularly on punctualityscores and vehicle breakdowns. Lost mileage has improved by around a quarterin those depots that are furthest along the process. We have now begun thesecond phase with a strong focus on development and training for localmanagement. Our programme to drive revenue and patronage growth is at an earlier stageacross the division, but we have begun to see positive results from our firstsuch actions. A typical approach in a market is to rebase the moreuncompetitive elements of our basket of fares so as to stimulate sufficientvolume growth to maintain revenue levels in the early stages. These volumeincreases then act as a platform on which to build further volume and pricinggrowth in future. Overall the division reported passenger volume growth of0.7% in the period, which is our first six month period of volume growth in anumber of years. We are seeing particularly pleasing increases in commercialpassenger volumes where improvements to our service proposition have been inplace longest or have changed most significantly, notably in our North regionwhere commercial passenger volumes grew by 7.8% during the period. A newapproach to certain fares in South Yorkshire has helped lead to volume growthof 5.0% overall, whilst a changed fares structure including better value dayand weekly season tickets across Greater Manchester has led to 7.4% overallpatronage growth. In many markets, changes to the fares structures are coupled with adjustmentsto the network design. York, for example, has seen route changes and selectedfares reduced by up to 25% after a consultation with our customers andpartners. In Bristol we held a wide ranging consultation with passengers andstakeholders on the fares structure and route system. We received more than7,500 responses which were used to inform our new fares structure that isbeing implemented from early November. The new structure is simpler and easierto use and delivers greater value for money for the majority of passengers. Wehave been working closely with the elected Mayor of Bristol and he hasendorsed all of our initiatives including increased night-time and Sundayservices. A particular feature of both the Bristol and York fares change arediscounted offerings for young people. The pace and approach being taken to fares and network changes is deliberatelytailored to local market conditions, and in many areas will be an ongoingprocess. For example, we overhauled our network and fares structure in Glasgowin May following considerable consultation, supported by widespread marketing.However the macroeconomic environment in that city remains tough with thepercentage of economically active people falling in the last 18 months byaround 5%, compared with a modest improvement across the UK as a whole. Wetherefore have further work to do, although we are encouraged by the volumetrends on those city centre routes where significant changes have beenintroduced. Scotland remains a challenging market overall, with retailfootfall for example down by as much as 5% in recent months compared to lastyear. We are strengthening our partnerships with local authorities in the areaswhere we operate in order to foster deeper stakeholder relationships and raisevolumes through making bus travel more attractive. Working with our localauthority partners in York and the West of England, we pulled togethersuccessful bids for the DfT's Better Bus Area (BBA) funding, with customers atthe heart of our proposals. We are proud of the pioneering efforts we made inthe Sheffield BBA with our partners, and we have been at the forefront of afurther two of the four areas across the country that have now secured thisfunding. We continue to highlight our successful voluntary partnership withthe Passenger Transport Executive and other operators in the Sheffield area asan excellent example of how strong stakeholder partnerships can improvejourney numbers, reliability and customer satisfaction figures, for thebenefit of all. Significant progress has also been made during the period indeveloping a full partnership agreement in West Yorkshire. Finally, we are also progressing opportunities that flow from our increasedinvestment. Our previously announced £76m order for 464 new buses to bedelivered during the current financial year is on track and helping to reducemaintenance expense. As an example of this investment and to drive growth, werebranded a key route in Portsmouth in conjunction with our partners HampshireCounty Council and Portsmouth City Council. The city is the most denselypopulated in the UK outside London, and The Star route will feature new lookvehicles with free Wi-Fi, leather seats and information screens. We alsocontinue to roll out environmentally friendly hybrid buses, including on agrowing route between Chelmsford and Lakeside shopping centre and also onroutes to Heathrow Airport where we leveraged funding both from the airportoperator and the DfT. Meanwhile, we are introducing electric buses to our parkand ride contract in York in partnership with the local authority and DfT. Wework with stakeholders, including disability groups such as the Royal NationalInstitute of Blind People, to improve our fleet and also to support our drivertraining programme. A number of our local markets continue to face challenging economicconditions, and there remains considerable work to be done to meet our mediumterm objective of double digit margins for the division, but as we progressthrough our comprehensive transformation plans and see volumes increasing, ourconfidence continues to grow. UK RAIL Our UK Rail division continued to benefit from steady growth across all of ourfranchises with revenue increasing to £1,395.2m (2012: £1,296.4m). Operatingprofit increased to £32.8m (2012: £23.8m). The industry continues todemonstrate strong growth with passenger numbers more than doubling since thelast years of British Rail. Demand for our services remains good withlike-for-like passenger revenues increasing by 5.7% during the period, broadlyin line with the industry average. Underlying passenger volume growthincreased by 3.6% in the half. We have a diverse rail portfolio encompassing long distance, regional andcommuter operations and are the largest operator in the UK with around aquarter of the market. We continue to focus on service delivery for ourcustomers and are working with Network Rail to ensure they progress theirinfrastructure improvement plans, while minimising major disruption for ourpassengers. During the period important steps were taken in the UK's rail refranchisingprogramme, enabling the private sector to continue to provide effective andefficient passenger rail services with further rolling stock andinfrastructure improvements. We signed an agreement with the DfT in October tooperate the First Great Western franchise for a further 23 months to 20September 2015, securing continuity of rail services for passengers andretaining our experience in managing the impact of the multi-billion poundinvestment programme already underway on the network. We are working with theDfT to deliver further fleet enhancements and other passenger benefits such asthe roll out of Wi-Fi. The DfT issued invitations to tender for the Essex Thameside and theThameslink, Southern and Great Northern franchises in September. As ashortlisted bidder in both processes, we look forward to submittingcompetitive bids that deliver for passengers, taxpayers and shareholders. Wehave been shortlisted for the next ScotRail franchise and the new 15 yearCaledonian Sleeper franchise, both of which will be awarded next year by theScottish Government. We have also been shortlisted to tender for Luas, thelight rail network in Dublin, by the Railway Procurement Agency of theRepublic of Ireland. We also intend to submit our interest in participating inthe East Coast Mainline tender process, which will move to the invitation totender stage in February 2014. At First Capital Connect we continue to focus on improving performance underthe leadership of a new management team. We have provided assistance toNetwork Rail as they carry out a one-off programme of maintenance and upgradesto the track, power and signalling systems, to help create a more reliableservice for our customers. The fleet of Class 365 trains is to be transformedwith fresh interiors and enhanced accessibility features as part of a £31minvestment by Eversholt Rail, which will also include heavy maintenance toensure their continued reliability. During the period we unveiled stationimprovements at St Albans, Kings Lynn and, working with our partners, atLondon King's Cross, as well as announcing a major initiative to improve traincleanliness. First Great Western is working hard with our partners on improvements to theroute. Reading station is undergoing an £850m improvement programme to easebottlenecks, increase capacity and improve punctuality. In part thanks to ourclose involvement with the scheme, the works are due to finish a year ahead ofschedule. We have been working with Transport for London (TfL) on theCrossrail project on the approach to London Paddington, and upgrade works withNetwork Rail are progressing well on the redoubling of the South Cotswoldline. Following the signing of the agreement with the DfT to continue tooperate the Great Western franchise, we worked with the DfT, Wiltshire Counciland other local stakeholders to secure additional services in the county,which are expected to be underway by the end of the calendar year. First ScotRail has introduced Wi-Fi to more than 50 trains linking Scotland'slargest cities since April and is continuing to roll out the servicethroughout the year. More than 500,000 people have used onboard Wi-Fi,exceeding original expectations. The service will be introduced to a furtherfleet of trains by March 2014, and the first ScotRail stations will get Wi-Fiin the coming months. More than 20 trains have been upgraded with new toilets,lights and wheelchair bays as part of an £18m investment by Eversholt Rail,with another 21 vehicles set to be refurbished and repainted by 2016. Weworked hard to provide extra trains for sporting and cultural events duringthe period, particularly the Edinburgh Festival where the largest ever specialtimetable was run, and many of the changes have been made permanent. We arenow liaising with Transport Scotland and other partners on plans for theCommonwealth Games and the Ryder Cup in 2014. We are particularly pleased thatour ground-breaking partnership with Network Rail and Transport Scotland onthe Paisley Canal line electrification project has now been recognised at theNational Transport Awards, National Rail Awards and Network Rail PartnershipAwards. First TransPennine Express services suffered disruption during the first partof the period following a landslip at a former colliery near Scunthorpe. Weworked with Network Rail to restore service to the line connecting the seasideresort of Cleethorpes to the rest of the North of England ahead of the busysummer holiday season. The completion of the first stage of the £400m northwest electrification plan in July paves the way for the introduction of a £60mfleet of new four-car trains between Manchester and Scotland that will startto come into service from December 2013, substantially increasing capacity.Customers will benefit from more journey options, faster trains and betterconnectivity and accessibility. First Hull Trains continues to see good growth as the operator with thehighest customer satisfaction scores on the UK rail network. The open accessoperator worked with the city's sports teams and university to promoteservices and worked together with First TransPennine Express to begin offeringa discounted ticket for passengers from East Yorkshire to travel to London aspart of a new promotion. The company is also working in partnership withschools and colleges to help young people develop skills and experiencethrough its Employability Charter. OUTLOOK Over the past six months, we have worked hard to ensure we are positioned todeliver on our potential. We have strengthened our balance sheet through therights issue, continued to drive the significant number of incrementaloperational enhancements required to yield better financial returns, and aremaking disciplined investments to benefit from the opportunities we see in ourmarkets. We are focused on the task of meeting our medium term financialobjectives including our revenue, margin and return on capital targets, whilecontinuing to improve the services we deliver for our customers. We have a fundamentally attractive portfolio of market-leading transportbusinesses, and our unrivalled scale and breadth gives us significantopportunities to share best practice and expertise, to deliver outstandingservices to our customers and to create long term, sustainable value for ourshareholders. We remain confident that the trends toward increasedurbanisation and greater congestion will generate significant opportunitiesfor our business, and that we are returning to the strength necessary to drivesustainable, long term growth and increased shareholder value. Although it is early days in our multi-year plan to improve our returns,resilience and growth prospects, we are seeing clear indications that we aremaking progress. While there remains a significant amount to be done, webelieve the foundations are now in place to deliver on our market-leadingpotential. EXCEPTIONAL ITEMS AND AMORTISATION CHARGES 6 months to 6 months to Year to 30 September 2013 30 September 2012 31 March 2013 £m £m £mDisposalsUK Bus depot sales and closures 15.3 (3.3) (19.8)First Transit FSS disposal and exit from - - (12.6)Diego Garcia operations 15.3 (3.3) (32.4)Onerous contracts/impairmentsUK Rail First Great Western contract provision - - (15.9)UK Rail joint venture provision (DSBFirst) - - (5.0)First Student onerous contract - - (2.7) - - (23.6)Legal claimsFirst Student legal claims - - (19.8)First Transit legal settlements - (5.9) (5.9)First Transit Diego Garcia insurance claim - - 6.7 - (5.9) (19.0)OtherUK Rail bid costs (7.0) (12.3) (6.0) (7.0) (12.3) (6.0)Total exceptional items 8.3 (21.5) (81.0)Amortisation charges (25.9) (13.6) (52.0)Loss on disposal of properties (1.7) (1.9) (2.7)Operating profit charge (19.3) (37.0) (135.7)Ineffectiveness on financial derivatives (17.0) (3.3) (5.5)Loss before tax credit (36.3) (40.3) (141.2)Tax credit 18.0 13.9 46.5Net exceptional items for the period (18.3) (26.4) (94.7) UK Bus depot sales and closures UK Bus depot sales and closures relate to measures taken by the Group torebalance its portfolio in the UK Bus operations, which included selling orclosing certain operations. The principal amount in the period represents a£16.5m gain on the disposal of the eight London bus depots, which completedduring the period. UK Rail bid costs The Group incurred UK Rail bid costs of £7.0m (2012: £12.3m) principally inconnection with the ScotRail, Essex Thameside and Thameslink, Southern andGreat Northern rail franchises as well as costs incurred on the First GreatWestern and First Capital Connect single tender action bids. Amortisation charges The charge for the period was £25.9m (2012: £13.6m) with the increase mainlydue to a higher level of contract amortisation at First Student as a result ofthe reassessment last full year of the remaining useful economic lives of thecontracts acquired with the Laidlaw acquisition. Loss on disposal of properties During the year the Group realised £1.3m (2012: £40.3m) on the disposal ofselected properties. These resulted in a net loss on disposal of £1.7m (2012:£1.9m). Ineffectiveness on financial derivatives Due to the ineffective element and undesignated fair value movements onfinancial derivatives there was a £17.0m non-cash charge (2012: £3.3m) to theincome statement during the period. The principal component of this non-cashcharge relates to certain US Dollar interest rate swaps, which are no longerrequired as the underlying US Dollar debt was repaid from the proceeds of therights issue. Tax The tax credit as a result of these amortisation charges and exceptional itemswas £14.3m (2012: £11.9m). In addition there was a one-off deferred tax creditof £3.7m (2012: £2.0m) as a result of the reduction in the UK corporation taxrate from 23% to 20% (2012: 24% to 23%). FINANCE COSTS AND INVESTMENT INCOME Net finance costs, before exceptional items, were £81.6m (2012: £80.1m) withthe increase principally reflecting an additional £3.5m of interest onpensions due to the impact of IAS 19 (revised). Although Greyhound had asimilar interest charge for pensions in the last half year this was offset bythe impact on the loss-making First Great Western contract which underaccounting rules was treated as a prior year adjustment at 1 April 2012. PROFIT BEFORE TAX Underlying profit before tax was £28.3m (2012: £19.7m) with the increase dueprincipally to higher underlying operating profit. An overall charge of £36.3m(2012: £40.3m) for exceptional items and amortisation charges resulted instatutory loss before tax of £8.0m (2012: loss of £20.6m). TAX The tax charge, on underlying profit before tax, for the period was £6.2m(2012: £4.0m) representing an effective rate of 22.0% (2012: 20.1%). There wasa tax credit of £14.3m (2012: credit of £11.9m) relating to amortisationcharges and exceptional items. There was also a one-off credit adjustment of£3.7m (2012: £2.0m) to the UK deferred tax liability as a result of thereduction in the UK corporation tax rate from 23% to 20% (2012: 24% to 23%),which will apply from April 2015. This resulted in a total tax credit of£11.8m (2012: £9.9m) on continuing operations. The actual tax paid during theperiod was £4.2m (2012: £4.8m). North American cash tax remains low due to taxlosses brought forward and tax depreciation in excess of book depreciation. Weexpect the North American cash tax rate to remain low for the near term. EPS The underlying basic EPS was 1.9p (2012: 1.9p). Basic EPS was (0.1)p (2012:(2.5)p), with the improvement primarily due to higher operating profit. EBITDA EBITDA by division is set out below: Restated Restated 6 months to 30 September 2013 6 months to September 2012 Year to 31 March 2013 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 £m £m % £m £m % £m £m %First 666.4 86.1 12.9 640.3 78.6 12.3 1,503.1 258.8 17.2StudentFirst 408.7 37.3 9.1 397.2 34.0 8.6 814.6 60.0 7.4TransitGreyhound 333.7 46.1 13.8 337.3 50.1 14.9 647.1 83.4 12.9UK Bus 490.7 48.2 9.8 572.9 55.9 9.8 1,128.2 123.1 10.9UK Rail 1,395.2 65.6 4.7 1,296.4 57.1 4.4 2,795.1 110.4 3.9Group 6.0 (14.1) - 5.9 (13.4) - 12.8 (28.6) -Total 3,300.7 269.2 8.2 3,250.0 262.3 8.1 6,900.9 607.1 8.8Group North America in US Dollars $m $m % $m $m % $m $m %First Student 1,029.7 133.9 13.0 1,017.2 126.8 12.5 2,378.6 409.9 17.2First Transit 630.8 57.8 9.2 627.8 53.8 8.6 1,286.8 94.8 7.4Greyhound 514.7 71.0 13.8 532.6 78.6 14.8 1,022.0 131.5 12.9Total North America 2,175.2 262.7 12.1 2,177.6 259.2 11.9 4,687.4 636.2 13.61Underlying operating profit less capital grant amortisation plusdepreciation. CASH FLOW The seasonality of our Student business combined with the phasing of interestand dividend payments typically results in a cash outflow at the half year.The net cash outflow for the period was £103.0m (2012: outflow £250.2m). Thecash outflow combined with the £584.4m net proceeds from the rights issue andthe movements in debt due to foreign exchange contributed to a net debtdecrease of £532.3m (2012: increase £244.3m) as detailed below: 6 months to 6 months to Year to 30 September 2013 30 September 2012 31 March 2013 £m £m £mEBITDA 269.2 262.3 607.1Cash exceptional items (6.7) (18.4) (22.0)Other non-cash income statement charges 4.2 3.0 9.6Working capital excluding FGW provision movement (62.6) (110.9) (52.5)Working capital - FGW provision movement (30.8) (17.2) (17.0)(current liabilities)Movement in other provisions (22.8) (22.3) (12.2)Pension payments in excess of income statement (23.1) (25.5) (34.1)chargeCash generated by operations 127.4 71.0 478.9Capital expenditure (194.7) (154.7) (338.1)Proceeds from disposal of property, plant and 5.3 3.2 14.7equipmentInterest and tax (106.9) (100.9) (144.4)Dividends payable to Group shareholders - (77.3) (114.0)Dividends payable to non-controlling minority (10.4) (5.7) (10.7)shareholdersProceeds from sale of businesses 76.3 14.2 39.2Net cash outflow (103.0) (250.2) (74.4)Net proceeds from rights issue 584.4 - -Foreign exchange movements 53.5 8.1 (63.1)Other non-cash movements in relation to financial (2.6) (2.2) (4.1)instrumentsMovement in net debt in period 532.3 (244.3) (141.6) The decrease in net cash outflow compared to the equivalent period last yearwas primarily due to: - No dividend payments (2012: £77.3m). - Proceeds from sale of businesses were £62.1m higher, reflecting the Londondepots disposal completion in the period. - Working capital excluding FGW provision movement was £48.3m favourable tothe prior period principally due to the timing of TPE profit share and highercapital grant receipts in UK Rail. - EBITDA of £269.2m was £6.9m higher than prior period. Partly offset by: - Higher planned capital expenditure of £40.0m. - Higher planned FGW provision utilisation of £13.6m during the period. - Higher interest and tax payments of £6.0m. We expect full year net cash flow to be broadly neutral, excluding theproceeds of the rights issue. CAPITAL EXPENDITURE We continue to invest in our businesses. During the period cash capitalexpenditure was £194.7m (2012: £154.7m) and comprised First Student £96.5m(2012: £29.4m), First Transit £8.1m (2012: £7.8m), Greyhound £32.6m (2012:£24.9m), UK Bus £35.6m (2012: £58.7m), UK Rail £21.1m (2012: £31.8m) and Groupitems £0.8m (2012: £2.1m). FUNDING AND RISK MANAGEMENT Liquidity within the Group has remained strong. At the period end there was£1,003.3m (2012: £717.7m) of committed headroom and free cash, being £803.8m(2012: £624.0m) of committed headroom and £199.5m (2012: £93.7m) of free cash. The Group's average debt maturity was 6.5 years (2012: 5.1 years). The Group'smain revolving bank facilities require renewal in December 2015. INTEREST RATE RISK The Group reduces exposure by using a combination of fixed rate debt andinterest rate derivatives to achieve an overall fixed rate position over themedium term of more than 75% of net debt. FUEL PRICE RISK The Group uses a progressive forward hedging programme to manage commodityrisk. In the current year in the UK, 93% of the "at risk" crude requirements(2.2m barrels p.a.) are hedged at an average rate of $105 per barrel. At theend of the period we have hedged 74% of our "at risk" UK crude requirementsfor the year to 31 March 2015 at $100 per barrel and 39% of our requirementsfor the year to 31 March 2016 at $97 per barrel. In North America 69% of current year "at risk" crude oil volumes (1.6m barrelsp.a.) are hedged at an average rate of $93 per barrel. At the end of theperiod we have hedged 55% of the volumes for the year to 31 March 2015 at $90per barrel and 19% of our volumes for the year to 31 March 2016 at $87 perbarrel. FOREIGN CURRENCY RISK Group policies on foreign currency risk affecting cash flow, profits and netassets are maintained to minimise exposures to the Group by using acombination of natural hedge positions and derivative instruments whereappropriate. Translation risk relating to US Dollar earnings arising in the USis largely offset by US Dollar denominated costs incurred in the UK,principally UK fuel costs, US Dollar interest and tax costs so that exposureto EPS on a year to year basis is not significant. NET DEBT The Group's net debt at 30 September 2013 was £1,446.8m (2012: £2,081.8m) andcomprised: 30 September 30 September 31 March 2013 2012 2013 Fixed Variable Total Total TotalAnalysis of net debt £m £m £m £m £mSterling bond (2013)1 - - - 299.1 299.4Sterling bond (2018)1 297.5 - 297.5 322.2 343.0Sterling bond (2019)1 - 249.6 249.6 249.4 249.6Sterling bond (2021)2 330.9 - 330.9 330.5 339.0Sterling bond (2022)1 319.1 - 319.1 - 319.1Sterling bond (2024)1 199.5 - 199.5 199.1 199.5Sterling bank loans - - - 90.0 -US Dollar bank loans - - - 335.8 358.1Canadian Dollar bank loans - - - 100.0 15.5Euro and other bank loans - - - 11.1 11.8HP contracts and finance leases 328.8 37.6 366.4 359.3 418.2Senior unsecured loan notes 92.6 - 92.6 92.4 98.3Loan notes 8.7 1.0 9.7 9.7 9.7Gross debt excluding accrued interest 1,577.1 288.2 1,865.3 2,398.6 2,661.2Cash (199.5) (93.7) (393.9)UK Rail ring-fenced cash and deposits (218.2) (210.1) (273.8)Other ring-fenced cash and deposits (0.8) (13.0) (14.4)Net debt excluding accrued interest 1,446.8 2,081.8 1,979.11 excludes accrued interest. 2 stated excluding accrued interest, partially swapped to USDollars and adjusted for movements on associated derivatives. At 30 September 2013 the net debt to EBITDA ratio was 2.4 times (2012: 3.2times). The seasonality of our Student business combined with the phasing ofcertain cash flows typically means net debt at the half year is higher than atthe full year. We continue to target a net debt to EBITDA range of 2.0 to 2.2times in the medium term. SHARES IN ISSUE As at 30 September 2013 there were 1,203.8m shares in issue (2012: 481.8m),excluding treasury shares and own shares held in trust for employees of 1.1m(2012: 0.3m). The weighted average number of shares in issue for the purposeof basic EPS calculations (excluding treasury shares and own shares held intrust for employees) was 915.7m (2012: 590.7m). BALANCE SHEET Net assets have increased by £487.9m since the start of the period. Theprincipal reasons for this are the net proceeds from the rights issue of£584.4m, favourable hedging reserve movements of £36.3m and actuarial gains ondefined benefit pension schemes (net of deferred tax) of £7.6m, partly offsetby unfavourable translation reserve movements of £134.0m. FOREIGN EXCHANGE The most significant exchange rates to Sterling for the Group are as follows: 6 months to 6 months to 30 September 2013 September 2012 Year to 31 March 2013 Closing Effective Closing Effective Closing Effective rate rate rate rate rate rateUS Dollar 1.61 1.56 1.62 1.62 1.52 1.58Canadian Dollar 1.66 1.59 1.59 1.61 1.55 1.59PENSIONS Comparative figures for the six months to 30 September 2012 and the year to 31March 2013 have been restated for IAS 19 (revised) as explained in note 1. The Group has updated its pension assumptions as at 30 September 2013 for thedefined benefit schemes in the UK and North America. The net pension deficitof £248m at the beginning of the period has decreased to £205m at the end ofthe period principally due changes in actuarial assumptions, in particularhigher discount rates in the US and Canada. The main factors that influence the balance sheet position for pensions andthe sensitivities to their movement at 30 September 2013 are set out below: Movement ImpactDiscount rate +0.1% Reduce deficit by £32mInflation +0.1% Increase deficit by £24mSEASONALITY The First Student business generates lower revenues and profits in the firsthalf of the year than in the second half of the year as the school summerholidays fall into the first half. Greyhound operating profits are typicallyhigher in the first half of the year due to demand being stronger in thesummer months. PRINCIPAL RISKS AND UNCERTAINTIES FOR THE REMAINING SIX MONTHS OF THEFINANCIAL YEAR There are a number of risks and uncertainties facing the Group in theremaining six months of the financial year. These are the same as disclosed inthe 2013 Annual report. The principal risks and uncertainties, which are setout in detail on pages 46 to 51 of the Annual Report and Accounts 2013, are: - Economic and political conditions - Pensions - Terrorism, man-made and natural disasters - Competitive pressures - Information technology - Rail refranchising - Contracted businesses - Legislation and regulation - Customer service - Litigation and claims - Treasury risks - Labour costs and employee relations - Fuel costs - Retention of key management - Environmental RESPONSIBILITY STATEMENT We confirm to the best of our knowledge: - The condensed set of financial statements has been prepared in accordancewith IAS34 `Interim Financial Reporting'; - The interim management report includes a fair review of the informationrequired by DTR 4.27R (indication of important events during the first sixmonths and description of principal risks and uncertainties for the remainingsix months of the year); and - The interim management report includes a fair review of the informationrequired by DTR 4.28R (disclosure of related parties' transaction and changestherein). Condensed consolidated income statement For the 6 months to 30 September based on unaudited figures Unaudited Restated1 Unaudited Restated1 Year to 6 months to 30 September 2013 6 months to 30 September 2012 31 March Underlying Underlying 2013 Results2 Adjustments3 Total Results2 Adjustments3 Total Total Notes £m £m £m £m £m £m £m Revenue 2, 3 3,300.7 - 3,300.7 3,250.0 - 3,250.0 6,900.9Operating costs before loss ondisposal of properties (3,190.8) (17.6) (3,208.4) (3,150.2) (35.1) (3,185.3) (6,752.4)Operating profit before loss ondisposal of properties 109.9 (17.6) 92.3 99.8 (35.1) 64.7 142.5Amortisation charges - (25.9) (25.9) - (13.6) (13.6) (52.0)Exceptional items - 8.3 8.3 - (21.5) (21.5) (81.0) - (17.6) (17.6) - (35.1) (35.1) (133.0)Loss on disposal of properties - (1.7) (1.7) - (1.9) (1.9) (2.7)Operating profit 3 109.9 (19.3) 90.6 99.8 (37.0) 62.8 139.8Investment income 4 0.7 - 0.7 1.0 - 1.0 1.8Finance costs 4 (82.3) (17.0) (99.3) (81.1) (3.3) (84.4) (170.5)(Loss)/profit before tax 28.3 (36.3) (8.0) 19.7 (40.3) (20.6) (28.9)Tax 5 (6.2) 18.0 11.8 (4.0) 13.9 9.9 23.9Profit/(loss) for the period 22.1 (18.3) 3.8 15.7 (26.4) (10.7) (5.0)Attributable to:Equity holders of the parent 17.1 (18.2) (1.1) 11.3 (26.3) (15.0) (17.8)Non-controlling interests 5.0 (0.1) 4.9 4.4 (0.1) 4.3 12.8 22.1 (18.3) 3.8 15.7 (26.4) (10.7) (5.0)Earnings per share4Basic 7 1.9p (2.0)p (0.1)p 1.9p (4.4)p (2.5)p (3.0)pDiluted 1.9p (2.0)p (0.1)p 1.9p (4.4)p (2.5)p (3.0)p Dividends of £nil (2012: £77.3m) were paid during the period. Dividends of£nil (2012: £36.7m) are proposed in respect of the interim dividend for theyear to 31 March 2014. 1 Restated for adoption of IAS 19 (revised) on pensions and theimpact of the rights issue on EPS as explained in note 1. 2 Underlying trading results before items noted in 3 below. 3 Amortisation charges, ineffectiveness on financial derivatives, exceptionalitems and loss on disposal of properties and tax thereon. 4 Earning per share have been restated to reflect the rights issue as requiredby IAS 33 `Earnings per Share'. Condensed consolidated statement of comprehensive income Restated Unaudited Unaudited Restated 6 months to 6 months to year to 30 September 30 September 31 March 2013 2012 2013 £m £m £mProfit/(loss) for the period 3.8 (10.7) (5.0)Other comprehensive income/(expense)Derivative hedging instrument movements 39.7 (14.0) (52.7)Deferred tax on derivative hedging instrument movements (3.4) 5.2 7.6Exchange differences on translation of foreign operations (134.0) (15.2) 103.2Actuarial gains/(losses) on defined benefit pension schemes 16.0 (43.9) 7.5Deferred tax on actuarial gains/(losses) on defined benefitpension schemes (8.4) 13.7 0.2Other comprehensive (expense)/income for the period (90.1) (54.2) 65.8Total comprehensive (expense)/income for the period (86.3) (64.9) 60.8Attributable to:Equity holders of the parent (91.2) (69.2) 48.0Non-controlling interests 4.9 4.3 12.8 (86.3) (64.9) 60.8Condensed consolidated balancesheet Restated Unaudited Unaudited Restated 30 September 30 September 31 March 2013 2012 2013 Notes £m £m £mNon-current assetsGoodwill 8 1,564.2 1,586.4 1,665.8Other intangible assets 9 241.5 303.5 281.8Property, plant and equipment 10 1,936.2 2,019.9 1,977.6Deferred tax assets 45.2 62.0 53.2Retirement benefit assets 19 17.1 13.5 15.4Derivative financial instruments 14 39.4 78.1 63.3Investments 3.0 8.1 3.2 3,846.6 4,071.5 4,060.3Current assetsInventories 78.4 89.7 79.9Trade and other receivables 11 639.2 645.8 641.0Cash and cash equivalents 418.5 316.8 682.1Assets held for sale 12 4.3 3.1 44.7Derivative financial instruments 14 33.8 29.6 23.3 1,174.2 1,085.0 1,471.0Total assets 5,020.8 5,156.5 5,531.3Current liabilitiesTrade and other payables 13 1,177.8 1,220.4 1,256.7Tax liabilities 28.4 30.4 28.7Financial liabilities - bank loans - 22.6 -- bonds 40.7 334.8 378.6- HP contracts and finance leases 58.2 59.2 62.7Derivative financial instruments 14 17.5 48.6 64.7 1,322.6 1,716.0 1,791.4Net current liabilities 148.4 631.0 320.4Non-current liabilitiesFinancial liabilities - bank loans - 514.3 385.4- bonds 1,455.0 1,151.5 1,468.5- HP contracts and finance leases 308.2 300.1 355.5- loan notes 9.7 9.7 9.7- senior unsecured loan notes 92.6 92.4 98.3Derivative financial instruments 14 14.9 28.3 21.7Retirement benefit liabilities 19 222.3 303.0 263.2Deferred tax liabilities 53.2 81.5 62.2Provisions 15 239.9 232.2 260.9 2,395.8 2,713.0 2,925.4Total liabilities 3,718.4 4,429.0 4,716.8Net assets 1,302.4 727.5 814.5EquityShare capital 17 60.2 24.1 24.1Share premium 676.4 676.4 676.4Hedging reserve 3.7 3.7 (32.6)Other reserves 4.6 4.6 4.6Own shares (2.0) (1.1) (1.1)Translation reserve 114.9 130.5 248.9Retained earnings 425.4 (131.7) (130.5)Equity attributable to equity holders of the parent 1,283.2 706.5 789.8Non-controlling interests 19.2 21.0 24.7Total equity 1,302.4 727.5 814.5 Condensed consolidated statement of changes in equity Non-controlling Share capital Share premium Hedging Other Own Translation Retained interests reserve reserves shares reserve earnings Total Total equity £m £m £m £m £m £m £m £m £m £mBalance at 1April 2013 aspreviouslyreported 24.1 676.4 (32.6) 4.6 (1.1) 248.9 (125.7) 794.6 24.7 819.3Prior yearadjustment - - - - - - (4.8) (4.8) - (4.8)Balance at 1April 2013restated 24.1 676.4 (32.6) 4.6 (1.1) 248.9 (130.5) 789.8 24.7 814.5Rights issue1 36.1 - - - - - 548.3 584.4 - 584.4Totalcomprehensiveincome for theperiod - - 36.3 - - (134.0) 6.5 (91.2) 4.9 (86.3)Dividends paid - - - - - - - - (10.4) (10.4)Movement in EBTand treasuryshares - - - - (0.9) - (0.8) (1.7) - (1.7)Share-basedpayments - - - - - - 2.1 2.1 - 2.1Deferred tax onshare-based payments - - - - - - (0.2) (0.2) - (0.2)Balance at 30September2013(unaudited) 60.2 676.4 3.7 4.6 (2.0) 114.9 425.4 1,283.2 19.2 1,302.4Balance at 1April 2012 aspreviously 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4 881.0reported Prior yearadjustment - - - - - - (8.4) (8.4) - (8.4)Balance at 1April 2012restated 24.1 676.4 12.5 4.6 (1.1) 145.7 (12.0) 850.2 22.4 872.6Totalcomprehensiveincome for the - - (8.8) - - (15.2) (45.2) (69.2) 4.3 (64.9)period Dividends paid - - - - - - (77.3) (77.3) (5.7) (83.0) Share-basedpayments - - - - - - 2.8 2.8 - 2.8Balance at 30September2012 24.1 676.4 3.7 4.6 (1.1) 130.5 (131.7) 706.5 21.0 727.5(unaudited)Balance at 1 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4 881.0April 2012 aspreviouslyreported Prior year - - - - - - (8.4) (8.4) - (8.4)adjustmentBalance at 1 24.1 676.4 12.5 4.6 (1.1) 145.7 (12.0) 850.2 22.4 872.6April 2012restatedTotal - - (45.1) - - 103.2 (10.1) 48.0 12.8 60.8comprehensiveincome for theyearDividends paid - - - - - - (114.0) (114.0) (10.5) (124.5)Share-based - - - - - - 5.6 5.6 - 5.6paymentsBalance at 31 24.1 676.4 (32.6) 4.6 (1.1) 248.9 (130.5) 789.8 24.7 814.5March 20131 The rights issue which completed in June 2013 was effected through a legalstructure that resulted in the excess of the proceeds over the nominal valueof the share capital being recognised within retained earnings as adistributable reserve. Condensed consolidated cash flowstatement Unaudited Unaudited Audited 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 2013 Note £m £m £mNet cash from operating activities 18 19.8 (30.9) 332.7 Investing activitiesInterest received 0.7 1.0 1.8Proceeds from disposal of property, plant and equipment 5.3 3.2 14.7Purchases of property, plant and equipment (156.3) (89.8) (213.1)Disposal of business/subsidiary 76.3 14.2 39.2Net cash used in investing activities (74.0) (71.4) (157.4)Financing activitiesDividends paid - (77.3) (114.0)Dividends paid to non-controlling shareholders (10.4) (5.7) (10.7)Proceeds from rights issue 614.4 - -Fees paid on rights issue (30.0) - -Repayment of bonds (300.0) - -Proceeds from bond issue - - 325.0Proceeds from bank facilities - 153.3 63.3Repayment of bank debt (416.9) (110.1) (197.8)Repayments under HP contracts and finance leases (70.9) (38.6) (55.8)Fees for bank facility amendments - (0.2) (6.2)Net cash flow from financing activities (213.8) (78.6) 3.8Net (decrease)/increase in cash and cash equivalents beforeforeign exchange movements (268.0) (180.9) 179.1Cash and cash equivalents at beginning of period 682.1 499.7 499.7Foreign exchange movements 4.4 (2.0) 3.3Cash and cash equivalents at end of period per condensedconsolidated balance sheet 418.5 316.8 682.1 Cash and cash equivalents are included within current assets on the condensedconsolidated balance sheet. Note to the condensed consolidated cash flow statement - reconciliation of net cashflow to movement in net debt 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 2013 £m £m £mNet (decrease)/increase in cash and cash equivalents in period (268.0) (180.9) 179.1Decrease/(increase) in debt and finance leases 787.8 (4.6) (134.7)Inception of new HP contracts and finance leases (38.4) (64.9) (125.0)Fees capitalised against bank facilities and bond issues - 0.2 6.2Net cash flow 481.4 (250.2) (74.4)Foreign exchange movements 53.5 8.1 (63.1)Other non-cash movements in relation to financial instruments (2.6) (2.2) (4.1)Movement in net debt in period 532.3 (244.3) (141.6)Net debt at beginning of period (1,979.1) (1,837.5) (1,837.5)Net debt at end of period (1,446.8) (2,081.8) (1,979.1) Net debt includes the value of derivatives in connection with thebonds maturing in 2019 and 2021 and excludes all accrued interest. These bondsare included in non-current liabilities in the condensed consolidated balancesheet. Notes to the half-yearly financial report 1 BASIS OF PREPARATION This half-yearly financial report does not constitute statutoryaccounts as defined in section 434 of the Companies Act 2006. The statutoryaccounts for the year ended 31 March 2013 have been delivered to the Registrarof Companies. The auditor reported on those accounts; their report wasunqualified, did not draw attention to any matters by way of emphasis and didnot contain a statement under section 498(2) or (3) of the Companies Act 2006. The figures for the six months to 30 September 2013 include theresults of the UK Rail division for the period ended 14 September 2013 and theresults for the other divisions for the 26 weeks ended 28 September 2013. Thecomparative figures for the six months to 29 September 2012 include theresults of the UK Rail division for the period ended 15 September 2012 and theresults of the other divisions for the 26 weeks ended 30 September 2012. The accounting policies used in this half-yearly financial reportare consistent with International Financial Reporting Standards. The sameaccounting policies, presentation and methods of computation are followed inthis condensed set of financial statements as applied in the Group's latestannual audited financial statements with the exception of the adoption of IAS19 (Revised) as explained below. On adoption of IAS 19 (revised) the Group nowpresents interest on pensions in the finance costs line whereas previouslysuch items were presented in operating costs. In addition the Group hasadopted IFRS 13 - Fair Value Measurement. The condensed set of financial statements included in thishalf-yearly financial report has been prepared in accordance withInternational Accounting Standard 34, `Interim Financial Reporting', asadopted by the European Union. These results are unaudited but have been reviewed by the auditor.The comparative figures for the six months to 30 September 2012 are unauditedand are derived from the half-yearly financial report for that period, whichwas also reviewed by the auditor. The Group's debt maturity increased over the period with therepayment of the April 2013 Bond and the repayment of the shorter dated bankdebt out of the proceeds from the rights issue. After taking this into accountand the committed liquidity headroom available under the $1.25bn committedrevolver facility, making enquiries and reviewing the outlook for 2013/14 andmedium term plans, the directors have a reasonable expectation that the Grouphas adequate resources to continue in operational existence for theforeseeable future. Accordingly they continue to adopt the going concern basisin preparing this half-yearly financial report. The operating and financial review statement contained in thishalf-yearly report, including the summarised principal risks anduncertainties, has been prepared by the Directors in good faith based on theinformation available to them up to the time of their approval of this reportsolely for the Company's shareholders as a body, so as to assist them inassessing the Group's strategies and the potential for those strategies tosucceed and accordingly should not be relied on by any other party or for anyother purpose and the Company hereby disclaims any liability to any such otherparty or for reliance on such information for any such other purpose. The operating and financial review considers the impact ofseasonality on the group and also the principal risks and uncertainties facingit in the remaining six months of the financial year. This half-yearly report has been prepared in respect of the Groupas a whole and accordingly matters identified as being significant or materialare so identified in the context of First Group plc and its subsidiaryundertakings taken as a whole. This half-yearly financial report will be available to allshareholders and the public later in November 2013 from the FirstGroup website www.firstgroup.com/corporate/investors/annualreports.php. This half-yearly financial report was approved by the Board on 6November 2013. Restatement of prior period numbers The tables below show restated prior period comparative figures forthe divisions and for the Group for the six months to 30 September 2012 andthe financial year ended 31 March 2013. The restatement reflects (a) theretrospective adjustment from the adoption of the changes in IAS 19 `EmployeeBenefits' (revised), and (b) the retrospective adjustment of earnings pershare figures as required by IAS 33 `Earnings Per Share', reflecting therights issue completed in June 2013. (a) IAS 19 (revised) IAS 19 (revised) applies to financial years beginning 1 January2013 or later. The key impact on the Group from the revised standard will beto remove the separate assumptions for expected return on plan assets anddiscounting of scheme liabilities and replace them with one single discountrate for the net deficit. The actual benefits and the cash contributions forthese plans are not impacted by IAS 19 (revised). (b) Rights issue Pursuant to the rights issue, on 10 June 2013, 722,859,586 newordinary shares of 5 pence each were issued, with three new ordinary sharesissued for every two existing ordinary shares held. As a result the totalissued share capital increased to 1,204.9m ordinary shares. For thecalculation of earnings per share, the number of shares held prior to 10 June2013 has been increased by a factor of 1.227 to reflect the bonus element ofthe rights issue. 6 months to 30 September 2012 Year to 31 March 2013Underlying results1: Impact of Impact of Impact of rights Impact of rights Reported IAS 19 issue Restated Reported IAS 19 issue Restated £m £m £m £m £m £m £m £mFirst Student 5.2 - 5.2 109.9 - 109.9First Transit 28.8 - 28.8 49.1 - 49.1Greyhound 33.5 1.3 34.8 52.0 2.5 54.5UK Bus 39.6 (18.6) 21.0 90.7 (37.2) 53.5UK Rail 35.4 (11.6) 23.8 63.2 (25.2) 38.0Group items (13.8) - (13.8) (29.5) - (29.5)Underlying operating profit 128.7 (28.9) 99.8 335.4 (59.9) 275.5Net finance costs (80.0) (0.1) (80.1) (163.0) (0.2) (163.2)Underlying profit before tax 48.7 (29.0) 19.7 172.4 (60.1) 112.3Tax (9.8) 5.8 (4.0) (34.7) 12.1 (22.6)Underlying profit for the period 38.9 (23.2) 15.7 137.7 (48.0) 89.7Attributable to:Equity holders of the parent 34.5 (23.2) 11.3 129.4 (48.0) 81.4Non-controlling interests 4.4 - 4.4 8.3 - 8.3 38.9 (23.2) 15.7 137.7 (48.0) 89.7 Weighted average number of shares 481.6 - 109.1 590.7 481.7 - 109.1 590.8(million)Underlying EPS (p) 7.2p (4.8)p (0.5)p 1.9p 26.9p (10.0)p (3.1)p 13.8p Adjustments2:Amortisation charges (13.6) - (13.6) (52.0) - (52.0)Exceptionals, property disposals, etc. (26.7) - (26.7) (83.2) (6.0) (89.2)Tax credit thereon 13.9 - 13.9 45.3 1.2 46.5Non-controlling interests 0.1 - 0.1 (4.5) - (4.5)Basic profit for the period 8.2 (23.2) (15.0) 35.0 (52.8) (17.8)Basic EPS (p) 1.7p (4.8)p 0.6p (2.5)p 7.3p (10.8)p 0.5p (3.0)p1 Underlying trading results before items noted in 2 below.2 Amortisation charges, ineffectiveness on financial derivatives, exceptional itemsand loss on disposal of properties and tax thereon. Restatement of prior period numbers Condensed consolidated statement of comprehensive income 6 months to September 2012 Year to March 2013 Impact of FGW IAS Impact of FGW IAS Reported IAS 19 19 Restated Reported IAS 19 19 Restated £m £m £m £m £m £m £m £mProfit for the period 12.5 (23.2) - (10.7) 47.8 (48.0) (4.8) (5.0)Other comprehensive income/(expense)Derivative hedging instrument movements (14.0) - - (14.0) (52.7) - - (52.7)Deferred tax on derivative hedginginstrument movements 5.2 - - 5.2 7.6 - - 7.6Exchange differences on translation offoreign operations (15.2) - - (15.2) 103.2 - - 103.2Actuarial losses on defined benefit pensionschemes (77.7) 29.0 4.8 (43.9) (63.1) 60.1 10.5 7.5Deferred tax on actuarial losses on definedbenefit pension schemes 20.5 (5.8) (1.0) 13.7 14.4 (12.1) (2.1) 0.2Other comprehensive (expense) for theperiod (81.2) 23.2 3.8 (54.2) 9.4 48.0 8.4 65.8Total comprehensive (expense)/incomefor the period (68.7) - 3.8 (64.9) 57.2 - 3.6 60.8Attributable to:Equity holders of the parent (73.0) - 3.8 (69.2) 44.4 - 3.6 48.0Non-controlling interests 4.3 - - 4.3 12.8 - - 12.8 (68.7) - 3.8 (64.9) 57.2 - 3.6 60.8FGW Contract Provision 6 months to September 2012 Year to March 2013 Impact of Impact of Impact of Reported IAS 191 Restated Reported IAS 191 IAS 192 Restated £m £m £m £m £m £m £mAt 1 April 2012 56.9 10.5 67.4 56.9 10.5 - 67.4Provided in the period - - - 9.9 - 6.0 15.9Utilised in the period (17.2) (4.8) (22.0) (32.9) (10.5) - (43.4)At end of the period 39.7 5.7 45.4 33.9 - 6.0 39.91 IAS 19 (revised) increases the accounting losses on the FGWcontract. The incremental loss for the year to 31 March 2013 of £10.5m hasbeen treated as a prior year adjustment as at 1 April 2012 with utilisation of£4.8m and £10.5m in the six months to 30 September 2012 and year to 31 March2013 respectively. 2 The incremental loss of £6.0m for the 7 period extension to October 2013 hasbeen included in the restatement of the exceptional charge for the year to 31March 2013. £5.1m of this incremental contract provision was utilised in thesix months to 30 September 2013. 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 20132 REVENUE £m £m £m Services rendered 2,846.0 2,859.3 6,080.8UK Rail franchise subsidy receipts 262.0 232.4 504.2UK Rail revenue support 192.7 158.3 315.9 3,300.7 3,250.0 6,900.9Investment income 0.7 1.0 1.8Total revenue as defined by IAS 18 3,301.4 3,251.0 6,902.73 SEGMENT INFORMATION The segment results for the six months to 30 September 2013 are asfollows: First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total £m £m £m £m £m £m £mRevenue 666.4 408.7 333.7 490.7 1,395.2 6.0 3,300.7EBITDA2 86.1 37.3 46.1 48.2 65.6 (14.1) 269.2Depreciation (75.1) (5.9) (14.3) (30.9) (49.2) (0.3) (175.7)Capital grant amortisation - - - - 16.4 - 16.4Segment results2 11.0 31.4 31.8 17.3 32.8 (14.4) 109.9Amortisation charges (21.5) (2.0) (1.6) - (0.8) - (25.9)Exceptional items - - - 15.3 (7.0) - 8.3(Loss)/profit on disposal ofproperties (0.6) - 0.3 (1.4) - - (1.7)Operating profit (11.1) 29.4 30.5 31.2 25.0 (14.4) 90.6Investment income 0.7Finance costs (82.3)Ineffectiveness on financialderivatives (17.0)Loss before tax (8.0)Tax 11.8Profit for the period 3.8 The restated segment results for the six months to 30 September 2012 are asfollows: First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total £m £m £m £m £m £m £mRevenue 640.3 397.2 337.3 572.9 1,296.4 5.9 3,250.0EBITDA2 78.6 34.0 50.1 55.9 57.1 (13.4) 262.3Depreciation (73.4) (5.2) (15.3) (35.2) (45.6) (0.4) (175.1)Capital grant amortisation - - - 0.3 12.3 - 12.6Segment results2 5.2 28.8 34.8 21.0 23.8 (13.8) 99.8Amortisation charges (9.2) (2.0) (1.5) - (0.9) - (13.6)Exceptional items - (5.9) - (3.3) (12.3) - (21.5)(Loss)/profit on disposal ofproperties 0.1 - (0.2) (1.8) - - (1.9)Operating profit (3.9) 20.9 33.1 15.9 10.6 (13.8) 62.8Investment income 1.0Finance costs (81.1)Ineffectiveness on financialderivatives (3.3)Loss before tax (20.6)Tax 9.9Loss for the period (10.7)1Group items comprise Tramlink operations, central management and other items. 2Underlying. 3 SEGMENT INFORMATION continued The restated segment results for the year to 31 March 2013 are as follows: First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total £m £m £m £m £m £m £mRevenue 1,503.1 814.6 647.1 1,128.2 2,795.1 12.8 6,900.9EBITDA2 258.8 60.0 83.4 123.1 110.4 (28.6) 607.1Depreciation (148.9) (10.9) (28.9) (70.1) (105.0) (0.9) (364.7)Capital grant amortisation - - - 0.5 32.6 - 33.1Segment results2 109.9 49.1 54.5 53.5 38.0 (29.5) 275.5Amortisation charges (43.1) (3.9) (3.1) - (1.9) - (52.0)Exceptional items (22.5) (11.8) - (19.8) (26.9) - (81.0)(Loss)/profit on disposal ofproperties 0.2 - (0.2) (2.7) - - (2.7)Operating profit 44.5 33.4 51.2 31.0 9.2 (29.5) 139.8Investment income 1.8Finance costs (165.0)Ineffectiveness on financialderivatives (5.5)Loss before tax (28.9)Tax 23.9Loss for the year (5.0)1Group items comprise Tramlink operations, central management and other items. 2Underlying. 30 September 30 September 31 March 2013 2012 2013Total assets £m £m £mUnited Kingdom 4,637.1 4,299.5 4,504.8United States of America 2,950.5 2,908.2 3,134.6Canada 493.4 522.1 543.3Eliminations (3,105.4) (2,635.3) (2,704.6)Unallocated corporate items 45.2 62.0 53.2 5,020.8 5,156.5 5,531.3 Restated Restated 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 20134 INVESTMENT INCOME AND FINANCE COSTS £m £m £mInvestment incomeBank interest receivable (0.7) (1.0) (1.8)Finance costsBonds 45.6 46.2 97.7Bank borrowing costs and facility fees 13.3 17.5 31.8Senior unsecured loan notes 2.0 2.0 4.1Loan notes 0.5 0.5 1.0Finance charges payable in respect of HPcontracts and finance leases 7.3 5.1 10.7Notional interest on long term provisions 10.0 9.7 19.5Notional interest on pensions 3.6 0.1 0.2Finance costs before exceptional items 82.3 81.1 165.0Ineffectiveness on financial derivatives 17.0 3.3 5.5 99.3 84.4 170.5Net finance costs 98.6 83.4 168.7 Restated Restated 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 20135 TAX ON LOSS ON ORDINARY ACTIVITIES £m £m £mCurrent tax 2.0 3.0 10.6Deferred tax (13.8) (12.9) (34.5)Total tax credit (11.8) (9.9) (23.9)The tax effect of the adjustments disclosed in the condensedconsolidated income statement was a credit of £18.0m (2012: credit of £13.9m). 6 months to 6 months to Year to 30 September 30 September 31 March 2013 2012 20136 DIVIDENDS £m £m £mFinal dividend per share paid for the year ended31 March 2013 of nil (2012: 16.05p) - 77.3 77.3Interim dividend per share paid for the year ended31 March 2014 of nil (2013: 7.62p) - - 36.7Amounts recognised as distributions to equity holders in the period - 77.3 114.0 Proposed interim dividend per share for the year ended31 March 2014 of nil (2013: 7.62p) - 36.7 -7 EARNINGS PER SHARE (EPS) Basic EPS is calculated by dividing the loss attributable to equityshareholders of £1.1m (2012: £15.0m; full year 2013: £17.8m) by the weightedaverage number of ordinary shares in issue (excluding own shares held in theEBT and treasury shares) of 915.7m (2012: 590.7m; full year 2013: 590.8m).Both the 2012 and full year 2013 weighted average number of ordinary shareshave been restated to reflect the Rights Issue as required by IAS 33 `Earnings per Share' and both the 2012 and full year 2013 loss attributable toequity shareholders have been restated for adoption of IAS 19 (revised) onpensions. The underlying basic EPS is intended to highlight the recurringresults of the Group before amortisation charges, ineffectiveness on financialderivatives, exceptional items and loss on disposal of properties. Areconciliation is set out below: Restated Restated 6 months to 6 months to Year to 30 September 2013 30 September 2012 31 March 2013 £m EPS (p) £m EPS (p) £m EPS (p)Basic loss/EPS (1.1) (0.1) (15.0) (2.5) (17.8) (3.0)Amortisation charges1 25.8 2.8 13.5 2.3 51.8 8.7Ineffectiveness on financial derivatives 17.0 1.9 3.3 0.6 5.5 0.9Exceptional items (8.3) (0.9) 21.5 3.6 81.0 13.7Non-controlling interests on exceptional items - - - - 4.7 0.8Loss on disposal of properties 1.7 0.2 1.9 0.3 2.7 0.5Tax effect of above adjustments (14.3) (1.6) (11.9) (2.1) (44.5) (7.5)Deferred tax credit due to change in UKcorporation tax rate (3.7) (0.4) (2.0) (0.3) (2.0) (0.3)Underlying profit/EPS 17.1 1.9 11.3 1.9 81.4 13.8 1Amortisation charges of £25.9m (2012: £13.6m; full year 2013:£52.0m) per note 10 less £0.1m (2012: £0.1m; full year 2013: £0.2m)attributable to equity non-controlling interests. Diluted EPS is based on the same earnings and on a weighted averagenumber of ordinary shares in issue of 917.3m (2012: 593.4m; full year 2013:593.9m). The difference in the number of shares between the basic calculationand the diluted calculation represents the weighted average number ofpotentially dilutive ordinary shares from the share options. 8 GOODWILL £mCostAt 1 April 2013 1,669.8Disposals (7.7)Foreign exchange movements (93.9)At 30 September 2013 1,568.2Accumulated impairment lossesAt 1 April 2013 and 30 September 2013 4.0 Carrying amountAt 30 September 2013 1,564.2At 31 March 2013 1,665.8At 30 September 2012 1,586.4 Disclosures including goodwill by cash generating unit, details ofimpairment testing and sensitivities thereon are set out on page 97 of the2013 Annual Report. The projections for First Student assume the incrementalbenefits of the recovery plan together with an economic recovery. Based onthese projections the First Student margin would need to fall in excess of1.6% compared to the projections and carrying values at 31 March 2013 forthere to be an impairment on the business. Projections for all businesses are currently being updated anddetailed disclosures as described above will be included in the 2014 AnnualReport. Greyhound Rail Customer brand and franchise contracts trade name agreements Total9 OTHER INTANGIBLE ASSETS £m £m £m £mCostAt 1 April 2013 400.3 64.8 57.7 522.8Additions 1.6 - - 1.6Foreign exchange movements (24.3) (3.9) - (28.2)At 30 September 2013 377.6 60.9 57.7 496.2 AmortisationAt 1 April 2013 167.6 18.3 55.1 241.0Charge for period 23.5 1.6 0.8 25.9Foreign exchange movements (11.0) (1.2) - (12.2)At 30 September 2013 180.1 18.7 55.9 254.7 Carrying amountAt 30 September 2013 197.5 42.2 1.8 241.5At 31 March 2013 232.7 46.5 2.6 281.8At 30 September 2012 254.3 45.6 3.6 303.5 Intangible assets include customer contracts and the Greyhoundbrand and trade name which were acquired through the purchases of businessesand subsidiary undertakings. These are being amortised on a straight-linebasis over their useful lives which are between nine and 20 years. The rail franchise agreements' intangible asset represents the partof the economic benefit that is realised as a result of recognising our shareof the rail pension deficit on the date of commencement of each respectivefranchise and is amortised on a straight-line basis over the initial term ofeach respective franchise. Passenger Other Land and carrying plant and buildings vehicle fleet equipment Total10 PROPERTY, PLANT AND EQUIPMENT £m £m £m £mCostAt 1 April 2013 484.6 2,769.3 756.2 4,010.1Additions 6.1 177.5 35.6 219.2Disposals (3.0) (59.5) (4.0) (66.5)Reclassified as held for sale - (42.7) - (42.7)Foreign exchange movements (16.2) (121.3) (12.9) (150.4)At 30 September 2013 471.5 2,723.3 774.9 3,969.7 Accumulated depreciation and impairmentAt 1 April 2013 95.1 1,400.3 537.1 2,032.5Charge for period 5.3 106.4 64.0 175.7Disposals (2.4) (58.8) (3.5) (64.7)Reclassified as held for sale - (38.3) - (38.3)Foreign exchange movements (2.9) (60.4) (8.4) (71.7)At 30 September 2013 95.1 1,349.2 589.2 2,033.5 Carrying amountAt 30 September 2013 376.4 1,374.1 185.7 1,936.2At 31 March 2013 389.5 1,369.0 219.1 1,977.6At 30 September 2012 421.8 1,355.8 242.3 2,019.9 30 September 30 September 31 March 2013 2012 201311 TRADE AND OTHER RECEIVABLES £m £m £mAmounts due within one yearTrade receivables 304.4 327.7 340.2Provision for doubtful receivables (3.5) (4.9) (3.2)Other receivables 60.5 58.4 52.4Other prepayments 125.2 147.8 116.6Accrued income 152.6 116.8 135.0 639.2 645.8 641.0 30 September 30 September 31 March 2013 2012 201312 ASSETS HELD FOR SALE £m £m £mAssets held for sale 4.3 3.1 44.7 These comprise First Student yellow school buses which are surplusto requirements and are being actively marketed for sale. Gains or lossesarising on the disposal of such assets are included in arriving at operatingprofit in the condensed consolidated income statement. Assets held for sale at 31 March 2013 also included the assets inrelation to the sale of eight London bus depots which were sold during theperiod to 30 September 2013. Restated Restated 30 September 30 September 31 March 2013 2012 201313 TRADE AND OTHER PAYABLES £m £m £mAmounts falling due within one yearTrade payables 364.1 372.4 402.0Other payables 213.1 205.2 184.3Accruals 470.6 517.9 515.1Deferred income 62.4 61.5 82.1Season ticket deferred income 67.6 63.4 73.2 1,177.8 1,220.4 1,256.7 30 September 30 September 31 March 2013 2012 201314 DERIVATIVE FINANCIAL INSTRUMENTS £m £m £mDerivatives designated and effective ashedging instruments carried at fair valueNon-current assetsCross currency swaps (net investment hedge) - 18.1 15.2Coupon swaps (fair value hedge) 38.2 56.1 45.7Fuel derivatives (cash flow hedge) 1.2 3.9 2.4 39.4 78.1 63.3Current assetsCross currency swaps (net investment hedge) 18.0 3.0 3.6Coupon swaps (fair value hedge) 11.1 13.0 13.2Fuel derivatives (cash flow hedge) 4.7 13.6 6.5 33.8 29.6 23.3Current liabilitiesInterest rate derivatives (cash flow hedge) - 6.7 8.1Cross currency swaps (net investment hedge) - 35.6 47.6Fuel derivatives (cash flow hedge) 4.1 2.7 4.8 4.1 45.0 60.5Non-current liabilitiesInterest rate derivatives (cash flow hedge) - 15.1 11.8Fuel derivatives (cash flow hedge) 1.6 1.6 0.8 1.6 16.7 12.6Derivatives classified as held for tradingCurrent liabilitiesInterest rate swaps 13.4 3.6 4.2Non-current liabilitiesInterest rate swaps 13.3 11.6 9.1 Total non-current assets 39.4 78.1 63.3Total current assets 33.8 29.6 23.3Total assets 73.2 107.7 86.6Total current liabilities 17.5 48.6 64.7Total non-current liabilities 14.9 28.3 21.7Total liabilities 32.4 76.9 86.4The fair value measurements of the financial derivatives held by the Grouphave been derived based on observable market inputs (as categorised withinLevel 2 of the fair value hierarchy under IFRS 7 (2009)). 30 30 September September 31 March 2013 2012 201315 PROVISIONS £m £m £mInsurance claims 202.4 208.3 216.2Legal and other 33.7 19.7 40.8Pensions 3.8 4.2 3.9Non-current liabilities 239.9 232.2 260.9 Restated Insurance Legal FGW contract Restated claims and other provision Pensions total £m £m £m £m £mAt 1 April 2013 332.6 50.8 39.9 3.9 427.2Provided in the period 72.4 1.0 - - 73.4Utilised in the period (89.3) (4.3) (30.8) (0.1) (124.5)Notional interest 10.0 - - - 10.0Foreign exchange movements (17.0) (2.9) - - (19.9)At 30 September 2013 308.7 44.6 9.1 3.8 366.2At 30 September 2012 320.4 28.6 45.4 4.2 398.6 Current liabilities 106.3 10.9 9.1 - 126.3Non-current liabilities 202.4 33.7 - 3.8 239.9At 30 September 2013 308.7 44.6 9.1 3.8 366.2 Current liabilities 116.4 10.0 39.9 - 166.3Non-current liabilities 216.2 40.8 - 3.9 260.9At 31 March 2013 332.6 50.8 39.9 3.9 427.2 Current liabilities 112.1 8.9 45.4 - 166.4Non-current liabilities 208.3 19.7 - 4.2 232.2At 30 September 2012 320.4 28.6 45.4 4.2 398.6 The current liabilities above are included within accruals anddeferred income in note 13. The insurance claims provision arises from estimated exposures forincidents occurring prior to the balance sheet date. It is anticipated thatthe majority of such claims will be settled within the next six years. Theutilisation of £89.3m (2012: £85.2m) represents payments made largely against the currentliability of the preceding year. Legal and other provisions relate to estimated exposures for casesfiled or thought highly likely to be filed for incidents that occurred priorto the balance sheet date. It is anticipated that most of these items will besettled within 10 years. Also included are provisions in respect of costsanticipated on the exit of surplus properties which are expected to be settledover the remaining terms of the respective leases. The pension's provision relates to unfunded obligations that aroseon the acquisition of certain UK Bus companies. It is anticipated that thiswill be utilised over five to 10 years. 30 September 30 September 31 March 2013 2012 201316 Disposal of businesses and subsidiary undertakings £m £m £mFair values of net assets disposed of:Goodwill 7.7 - 6.5Property, plant and equipment 41.2 - 17.4Current assets 1.9 - 7.9Cash and cash equivalents - - 1.8Other liabilities (0.1) - (1.6) 50.7 - 32.0Redundancy and other 9.6 - -Professional fees 2.3 - 1.5Gain/(loss) on disposal 16.5 - (8.8)Satisfied by cash received and receivable 79.1 - 24.7 On 22 June 2013, the Group completed the disposal of eight Londonbus depots. The £79.1m consideration represent £76.3m cash received in theperiod and £2.8m of deferred consideration. On 8 March 2013, the Group disposed of the First Shared Servicesbusiness in addition to the sale of the bus depots in Wigan,Chester/Birkenhead and Redditch/Kidderminster during the year to March 2013. 30 September 30 September 31 March 2013 2012 201317 Share capital £m £m £mAllotted, called up and fully paid:482.1m ordinary shares of 5p each 24.1 24.1 24.1722.8m new ordinary shares of 5p each issued 36.1 - -1,204.9m ordinary shares of 5p each 60.2 24.1 24.1The number of ordinary shares of 5p each in issue, excludingtreasury shares and shares held in trust for employees, at the end of theperiod was 1,203.8m (2012: 481.8m). At the end of the period 1.1m shares(2012: 0.3m shares) were being held as treasury shares and own shares held intrust for employees. Restated Restated 30 September 30 September 31 March 2013 2012 201318 Net cash from operating activities £m £m £mOperating profit before loss on disposal of properties 92.3 64.7 148.5Adjustments for:Depreciation charges 175.7 175.1 364.7Capital grant amortisation (16.4) (12.6) (33.1)Amortisation charges 25.9 13.6 52.0(Gain)/loss on disposal of businesses and subsidiary undertakings (16.5) - 8.8Impairment charges - - 13.3Share-based payments 2.1 2.8 5.6Loss on disposal of property, plant and equipment 2.1 0.2 4.0Operating cash flows before working capital 265.2 243.8 563.8(Increase)/decrease in inventories (0.5) 1.1 10.6Increase in receivables (24.4) (42.7) (8.2)Decrease in payables (67.0) (83.4) (41.0)Decrease in provisions (22.8) (22.3) (12.2)Defined benefit pension payments in excess of income statement charge (23.1) (25.5) (34.1)Cash generated by operations 127.4 71.0 478.9Tax paid (4.2) (4.8) (6.3)Interest paid (96.1) (92.0) (129.0)Interest element of HP contracts and finance leases (7.3) (5.1) (10.9)Net cash from operating activities 19.8 (30.9) 332.719 RETIREMENT BENEFIT SCHEMES The Group operates or participates in a number of defined benefitpension schemes which cover the majority of UK employees and certain NorthAmerican employees. The scheme details are described in page 119 of the AnnualReport and Accounts for the year ended 31 March 2013. First Greater Western Limited, First Capital Connect Limited, FirstScotRail Limited, Hull Trains Limited and First/Keolis TransPennine ExpressLimited have sections in the Railways Pension Scheme (RPS), which is anindustry-wide arrangement. Under the terms of the RPS, any fund deficit orsurplus is shared by the employer (60%) and the employees (40%). Incalculating the Group's pension obligations in respect of the RPS the Grouphas calculated the total pension deficits in each of the RPS sections inaccordance with IAS 19. These deficits are reduced by a "franchise adjustment"which is that portion of the deficit which is projected to exist at the end ofthe franchise and for which the Group will not be required to fund. Thefranchise adjustment, which has been calculated by the Group's actuaries, isoffset against the present value of the RPS liabilities so as to fairlypresent the financial performance, position and cash flows of the Group'sobligations. The market value of the assets at 30 September 2013 for all definedbenefit schemes totalled £3,741m (2012: £3,445m; full year 2013: £3,777m). Contributions are paid to all defined benefit pension schemes inaccordance with rates recommended by the schemes' actuaries. The valuationsare made using the Projected Unit Credit Method. The key assumptions were as follows: UK UK North UK UK North UK Rail North UK Rail America Bus Rail America Bus 30 America Bus 31 31 30 Sept 30 Sept 30 Sept 30 Sept Sept 30 Sept 31 March March March 2013 2013 2013 2012 2012 2012 2013 2013 2013 % % % % % % % % %Key assumptions used:Discount rate 4.5 4.5 4.65 4.5 4.5 3.6 4.5 4.5 4.0Expected return on scheme 6.17 7.76 5.8 6.7 8.2 6.3 6.17 7.76 5.8assetsExpected rate of salary 2.1/3.1/3.6 3.6 2.5 3.4 3.4 3.25 2.16/3.2 3.7 2.5increasesInflation - RPI 3.1 3.1 2.0 2.4 2.4 2.25 3.2 3.2 2.0Inflation - CPI 2.05 2.05 - 1.65 1.65 - 2.15 2.15 -Future pension increases¹ 2.05/1.95/3.0 2.05 - 1.65/1.55/2.3 1.65 - 2.05/2.15/3.1 2.15 -¹UK Bus refers to LGPS, UK Bus Scheme and Group scheme respectively. Amounts (charged)/credited to the condensed consolidated incomestatement before exceptional items in respect of these defined benefit schemesare as follows: North UK Bus UK Rail America Total6 months to 30 September 2013 £m £m £m £mCurrent service cost (12.4) (24.5) (3.7) (40.6)Interest cost 0.1 0.2 (3.9) (3.6) (12.3) (24.3) (7.6) (44.2) North UK Bus UK Rail America Total6 months to 30 September 2012 £m £m £m £mCurrent service cost (13.7) (25.9) (2.4) (42.0)Interest cost as restated 0.1 5.2 (5.4) (0.1) (13.6) (20.7) (7.8) (42.1) North UK Bus UK Rail America TotalYear to 31 March 2013 £m £m £m £mCurrent service cost (25.0) (55.7) (4.9) (85.6)Interest cost as restated 0.3 10.3 (10.8) (0.2) (24.7) (45.4) (15.7) (85.8) Actuarial gains and losses have been reported in the condensedconsolidated statement of comprehensive income. 19 RETIREMENT BENEFIT SCHEMES continued The amounts included in the condensed consolidated balance sheetarising from the Group's obligations in respect of its defined benefit pensionschemes are as follows: North UK Bus UK Rail America TotalAt 30 September 2013 £m £m £m £mFair value of schemes' assets 1,936.1 1,333.7 471.4 3,741.2Present value of defined benefit obligations (1,948.0) (1,771.6) (623.4) (4,343.0)Deficit before adjustments (11.9) (437.9) (152.0) (601.8)Adjustment for irrecoverable surplus1 (33.4) - - (33.4)UK Rail franchise adjustment (60%) - 254.8 - 254.8Adjustment for employee share of RPS deficits (40%) - 175.2 - 175.2Liability recognised in the condensed consolidated balance sheet (45.3) (7.9) (152.0) (205.2)This amount is presented in the condensedconsolidated balance sheet as follows:Non-current assets 17.1 - - 17.1Non-current liabilities (62.4) (7.9) (152.0) (222.3) (45.3) (7.9) (152.0) (205.2) North UK Bus UK Rail America TotalAt 30 September 2012 £m £m £m £mFair value of schemes' assets 1,772.8 1,200.0 472.7 3,445.5Present value of defined benefit obligations (1,792.6) (1,530.3) (696.0) (4,018.9)Deficit before adjustments (19.8) (330.3) (223.3) (573.4)Adjustment for irrecoverable surplus1 (28.9) - - (28.9)UK Rail franchise adjustment (60%) - 180.7 - 180.7Adjustment for employee share of RPS deficits (40%) - 132.1 - 132.1Liability recognised in the condensed consolidated balance sheet (48.7) (17.5) (223.3) (289.5)This amount is presented in the condensedconsolidated balance sheet as follows:Non-current assets 13.5 - - 13.5Non-current liabilities (62.2) (17.5) (223.3) (303.0) (48.7) (17.5) (223.3) (289.5) North UK Bus UK Rail America TotalAt 31 March 2013 £m £m £m £mFair value of schemes' assets 1,965.4 1,307.2 504.8 3,777.4Present value of defined benefit obligations (1,954.6) (1,730.0) (715.0) (4,399.6)(Deficit)/surplus before adjustments 10.8 (422.8) (210.2) (622.2)Adjustment for irrecoverable surplus1 (35.5) - - (35.5)UK Rail franchise adjustment (60%) - 240.8 - 240.8Adjustment for employee share of RPS deficits (40%) - 169.1 - 169.1Liability recognised in the condensed consolidated balance sheet (24.7) (12.9) (210.2) (247.8)This amount is presented in the condensedconsolidated balance sheet as follows:Non-current assets 15.4 - - 15.4Non-current liabilities (40.1) (12.9) (210.2) (263.2) (24.7) (12.9) (210.2) (247.8)1 The irrecoverable surplus represents the amount of the surplusthat the Group could not recover through reducing future company contributionsto Local Government Pension Schemes.