Interim Management Statement

FIRSTGROUP PLC - Interim Management Statement

PR Newswire

London, January 23

FirstGroup plc ("the Group") the leading transport operator in the UK and NorthAmerica, reports the following update on trading from 1 October to 31 December2012 ("the period" or "the third quarter").

Overview

Trading for the Group, excluding the one-off effect of Hurricane Sandy, duringthe third quarter was in line with our expectations. Despite the economicconditions that prevail, we continue to strengthen the business for the futureby taking actions that will lead to improved performance and sustainablegrowth.

We were pleased by continued strong support from fixed income investors inNovember, which led to our issue of £325m of 10-year bonds being significantlyoversubscribed. The proceeds were used to pay down debt, as part of ourstrategy to reduce reliance on bank borrowings and extend our debt maturityprofile.

First Student

The roll out of management actions across the business continues to underpinperformance and strengthen the operating model of First Student. Although thereis significant work still to be done, we remain on track with our plans and thebusiness is set on the path to recovery. A significant amount of our operationswere disrupted by Hurricane Sandy in late October. The storm, which affectedthe entire eastern seaboard, parts of the Midwest and Eastern Canada, impactedsome 130 of our locations and led to the closure of schools for up to ninedays. This is expected to adversely impact operating profit by approximately$15m in 2012/13. Nevertheless, our current expectations for underlying marginperformance for the full year remain broadly unchanged.

First Transit

Our transit division generated good operating results from its range ofoperations, the majority of which require low capital investment. A strongperformance was achieved with good revenue growth particularly within our coreoperations. We continue to see good contract retention rates and developopportunities from a healthy pipeline of new contract bids. We are proactivelyworking through a small number of historic legal claims within First Transit.As a result, settlement discussions have now been scheduled for February 2013in respect of historic meal and rest break claims in the Fixed Route andParatransit businesses which date back to 2003.

Greyhound

During the period like-for-like revenue growth was 1.6%, with Greyhound's USoperations continuing to achieve a strong performance. Against the backdrop ofa sluggish economy, operating margin performance remains in line with ourexpectations as a result of the actions we have taken. These actions havetransformed the business and created a more flexible and agile operating model.We continue to expand our popular Express product and build on the uniquestrength of our national network in providing support for sustainable flows onnewly launched services as we roll out across more destinations. During theperiod we expanded Express service to new states including Louisiana, Oklahoma,Nevada and Ontario, Canada.

UK Bus

Like-for-like passenger revenue growth was 2.1% in the period. Notwithstandingthe challenging economic environment which continues to affect many of theurban areas in which we operate, we are making headway with our detailed planto recover performance and equip the business to achieve increased revenue andpatronage growth. We continue to work through our programme of disposals. InNovember 2012 we agreed the sale of our Birkenhead and Chester operations for £4.5m and today we are pleased to announce the sale of our Kidderminster andRedditch bus businesses to Rotala PLC for a gross consideration of £1.5m. Whilethere remains considerable work to be done across our UK Bus division, we areencouraged by early positive signs in some of our markets. As previouslystated, we expect UK Bus operating margin to be approximately 8% for the fullyear.

UK RailOur rail division continues to benefit from strong passenger growth across allof our franchises and like-for-like revenue increased by 8.1% in the period. Wewelcomed the publication of the independent review by Richard Brown on 10January which called for an early return to refranchising so that the privatesector can continue to provide effective and efficient passenger rail serviceswith further performance and infrastructure improvements. As the UK's largestand most experienced rail operator, we remain committed to maintaining aleading position in the market. We look forward to receiving details on therecommencement of the franchise process and submitting further high qualitybids that deliver for passengers, taxpayers and shareholders. During the periodthe Scottish Government announced that the ScotRail franchise will now end on31 March 2015, from its previous end date of 9 November 2014.

Outlook

Commenting, Tim O'Toole, Chief Executive said:

"Trading for the Group, excluding the one-off effect of Hurricane Sandy, duringthe third quarter was in line with our expectations. We have leading positionsin a sector that is a key enabler of economic growth and the backbone ofvibrant and sustainable local economies. Demand for high quality, attractiveservices that offer value for money remains and we are confident that theactions we are taking will strengthen our business and its prospects for longterm growth. While there is significant work still to do, we are satisfied withthe progress of the actions taken so far, though we remain cautious in respectof continued economic weakness.

"As previously stated, following the uncertainty caused by the Department forTransport's decision to delay its refranchising programme the Board held theinterim dividend at last year's level. We will consider the full year dividendin May 2013, by which time the prospects for our rail division are expected tobe clearer."

A conference call for analysts and investors will be held at 9:30am today.

Please call +44 20 7291 0507 in advance of the call to register and to receive

Contacts FirstGroup plc:

Chris Surch, Group Finance Director

Rachael Borthwick, Group Corporate Communications Director Tel: + 44 20 72910512 / +44 7771 945 432

Stuart Butchers, Group Corporate Communications Manager Tel: + 44 20 7291 0507/ +44 7713 317 979

Brunswick PR:

Michael Harrison/Andrew Porter

Tel: +44 20 7404 5959

FirstGroup plc is the leading transport operator in the UK and North America.With approximately 124,000 employees we carry 2.5 billion passengers every yearacross our bus and rail networks in the UK and our school bus, transit andintercity coach operations in the US and Canada. Our vision is to providesolutions for an increasingly congested world...keeping people moving andcommunities prospering.