Trading Statement

Embargoed until 7:00am on Thursday 3 October 2013 3 October 2013 FIRSTGROUP PLC PRE-CLOSE TRADING UPDATE FirstGroup plc ("FirstGroup" or the "Group") reports the following tradingupdate for the six months to 30 September 2013 ("the period" or "the firsthalf"), ahead of our half-yearly results due to be announced on Wednesday 6November 2013. Summary • Overall trading in line with management's expectations • First Student continues to make progress in reforming the operating model • Continued good performance by First Transit, with strong growth in shuttleand paratransit businesses • US economic conditions continue to affect core Greyhound customers thoughtrends improved in Q2, continued focus on cost management. Successful expansionof Greyhound Express continues • UK Bus transformation plan on track • UK Rail delivered further solid passenger revenue growth • First Great Western franchise agreement to September 2015 signed withDepartment for Transport. Negotiations to extend First Capital Connect areunderway First Student We continue to work through our recovery plan for First Student, and theprocess of improving our efficiency and implementing uniform practices acrossour operations throughout North America continues to deliver incremental marginimprovements. Like-for-like US Dollar revenue growth for the period, which isexpected to be 1.2%, is likely to moderate through the second half, as wecontinue to focus on winning or retaining only those contracts that meet ourreturns criteria. We continue to expect margins for the first half of the yearto be ahead of the equivalent period last year. First Transit First Transit delivered a good first half trading performance, with US Dollarrevenues expected to increase by 8.4% on a like-for-like basis (as adjusted forthe disposal of FSS). Contract retention rates were maintained at over 90%, andwe were particularly pleased with several significant retentions including twoparatransit contracts in Kansas and Wisconsin, a shuttle bus contract for BWIAirport in Baltimore, and several new business wins which included a callcentre contract award for the Chicago Regional Transportation Authority. Greyhound Greyhound's core market continued to feel the effects of the prolonged USeconomic downturn, with like-for-like revenue expected to be down 2.4% for thesix month period. However, trading during the recent summer months has showntentative signs of improvement, although we remain focused on cost control. Wecontinue to work to optimise our Greyhound Canada network and cost base todeliver a commercially viable service across the country. Greyhound Expresscontinues to grow robustly, and will shortly add new routes or increasefrequencies from major markets in Illinois, Tennessee, Georgia and Florida, andlaunch services in new markets in Arkansas. We are continuing to invest toensure the experiences gained from Greyhound Express and BoltBus support themodernisation and improve the yield management capability of the traditionalGreyhound service. UK Bus During the period, like-for-like passenger revenue in the division is expectedto increase by 1.6%, with particularly positive results from those operationsfurthest along the transformation programme. While the pace and approach beingtaken to fares and network changes is deliberately tailored to local marketconditions, it is pleasing that overall the division is expected to reportpassenger volume growth, of 0.6%, for the first six month period in severalyears. Where changes to our commercial proposition have been in place longestor have changed most significantly, such as in Sheffield, Rotherham, Doncasterand Manchester, we are seeing particularly pleasing increases in commercialpassenger volumes. A number of our local markets continue to face challengingeconomic conditions, and there remains considerable work to be done to meet ourmedium-term objective of double digit margins for the division, but as weprogress through our transformation plans, our confidence continues toincrease. UK Rail UK Rail achieved another solid performance in the period, with like-for-likepassenger revenue expected to increase by 5.7%. During the period theinvitations to tender for the Essex Thameside and the Thameslink, Southern andGreat Northern franchises were issued by the Department of Transport (DfT). Asa shortlisted bidder on both processes, we look forward to submittingcompetitive bids that deliver for passengers, taxpayers and shareholders. Wecontinue to challenge Network Rail on infrastructure failures and are workingwith them to ensure they deliver on their plans to minimise major disruptionand the impact this has on our passengers' journeys. We have signed an agreement with the DfT to operate the First Great Westernfranchise for a further 23 months to 20 September 2015, securing continuity ofrail services for passengers and retaining our experience in managing theimpact of the multi-billion pound investment programme already underway on thenetwork. We will also work with the DfT on delivery of a fleet of electrictrains for the Thames Valley routes, the roll out of Wi-Fi, enhanced capacityfor the Night Riviera sleeper and there is scope for us to discuss furtherimprovements. In addition we will continue working toward the introduction ofthe new InterCity Express fleet from 2017. Outlook Commenting, Tim O'Toole, Chief Executive said: "I am pleased to report overall trading for the first half of the year is inline with our expectations, despite continued economic headwinds in some of ourmarkets. While it is still early days, we are on track with our plans to returnthe Group to a position of strength. The foundations have been laid for a morerobust company, and we intend to continue the hard work and relentless focusthat is needed to improve our operating performance, deliver enhanced growthand drive sustainable returns over the medium term. "Today's agreement with the Department for Transport is good news for FirstGreat Western passengers, taxpayers and our shareholders as it providescontinuity and consistency, building on the improvements our experienced teamhas already made over the last franchise period. We have seen significantimprovements in customer satisfaction and punctuality, and working with the DfTwe have delivered additional capacity on the busiest morning peak trains. Wewill work closely with stakeholders and partners along the route to explorefurther ways to support our local communities. As the UK's largest and mostexperienced rail operator we remain committed to maintaining a leading positionin the market, and look forward to the rail re-franchising programme gatheringpace in the coming months. 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." A conference call for analysts and investors will be held at 9:00am today. Please call +44 20 7291 0507 in advance of the call to register and to receive joining details. Contacts at FirstGroup: Rachael Borthwick, Group Corporate Communications DirectorStuart Butchers, Group Media Relations ManagerFaisal Tabbah, Group Investor Relations ManagerTel: +44 20 7291 0507 / 0508 Contacts at Brunswick PR: Michael Harrison/Andrew Porter, Tel: +44 20 7404 5959 Indicative restated prior period comparatives due to adoption of IAS 19(revised) and the rights issue The tables below show restated prior period comparative figures for thedivisions and for the Group for the six months to 30 September 2012 and thefinancial 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 per sharefigures as required by IAS 33 Earnings Per Share, reflecting the rights issuecompleted in June 2013. (a) IAS 19 (revised) IAS 19 (revised) applies to financial years beginning 1 January 2013 or later.It is adopted by the Group as of the financial year 2014. The key impact on theGroup from the revised standard will be to remove the separate assumptions forexpected return on plan assets and discounting of scheme liabilities andreplace them with one single discount rate for the net deficit. The actualbenefits and the cash contributions for these plans are not impacted by IAS 19(revised). (b) Rights issue Pursuant to the rights issue, On 10 June 2013, 722,859,586 new ordinary sharesof 5 pence each were issued, with three new ordinary shares issued for everytwo existing ordinary shares held. As a result the total issued share capitalincreased to 1,204.9m ordinary shares. The weighted average number of sharesfor the six months to 30 September 2013 is expected to be approximately 916mshares, and the weighted average number of shares for full year to 31 March2014 is expected to be approximately 1,060m shares. For the calculation ofearnings per share, the number of shares held prior to 10 June 2013 has beenincreased by a factor of 1.227 to reflect the bonus element of the rightsissue. 6 months Year to to 30 Sep 31 March 2012 2013 Underlying Reported Impact Impact Unaudited Reported Impact Impact Unauditedcontinuing of IAS of restated of IAS of restatedresults1: 19 rights 19 rights issue issue £m £m £m £m £m £m £m £m First Student 5.2 - 5.2 109.9 - 109.9 First Transit 28.8 - 28.8 49.1 - 49.1 Greyhound 33.5 1.3 34.8 52.0 2.5 54.5 UK Bus 39.6 (18.6) 21.0 90.7 (37.2) 53.5 UK Rail 35.4 (11.6) 23.8 63.2 (25.2) 38.0 Group items (13.8) - (13.8) (29.5) - (29.5) Underlying 128.7 (28.9) 99.8 335.4 (59.9) 275.5operatingprofit Net finance (80.0) (0.1) (80.1) (163.0) (0.2) (163.2)costs Underlying 48.7 (29.0) 19.7 172.4 (60.1) 112.3profit beforetax Tax (9.8) 5.8 (4.0) (34.7) 12.1 (22.6) Underlying 38.9 (23.2) 15.7 137.7 (48.0) 89.7profit for theyear Attributableto: Equity holders 34.5 (23.2) 11.3 129.4 (48.0) 81.4of the parent Non-controlling 4.4 - 4.4 8.3 - 8.3interests 38.9 (23.2) 15.7 137.7 (48.0) 89.7 Weighted 481.6 - 109.1 590.7 481.7 - 109.1 590.8average numberof shares Underlying 7.2p (4.8)p (0.5)p 1.9p 26.9p (10.0) (3.1)p 13.8pearnings per pshare (p) Adjustments2: Amortisation (13.6) - (13.6) (52.0) - (52.0)charges Exceptionals, (26.7) - (26.7) (83.2) - (83.2)propertydisposals, etc. Tax credit 13.9 - 13.9 45.3 - 45.3thereon Discontinued - - - - - -operations Non-controlling 0.1 - 0.1 (4.5) - (4.5)interests Basic profit 8.2 (23.2) (15.0) 35.0 (48.0) (13.0)for the year Basic EPS (p) 1.7p (4.8)p 0.6p (2.5)p 7.3p (10.0) 0.5p (2.2)p p 1 Underlyingtrading resultsbefore itemsnoted in 2below. 2 Amortisationcharges,ineffectivenesson financialderivatives,exceptionalitems, (loss)/profit ondisposal ofproperties anddiscontinuedoperations andtax thereon. The financial and other information provided in this update is preliminary andhas not been reviewed by the Group's auditors. FirstGroup plc (LSE: FGP.L) is the leading transport operator in the UK andNorth America. With revenues of more than £6 billion and around 120,000employees, we transport more than 2.5 billion passengers every year. Each ofour five divisions is a leader in its field: First Student is the largestprovider of student transportation in North America with a fleet of around50,000 yellow school buses, First Transit is one of the largest providers ofoutsourced transit management and contracting services in the US, whileGreyhound is the only national operator of scheduled intercity coach servicesacross North America. In the UK, FirstGroup is one of Britain's largest busoperators running a fleet of some 6,500 buses, and we operate approximately aquarter of the UK passenger rail network, carrying over 310 million passengersa year. Our vision is to provide solutions for an increasingly congested world…keeping people moving and communities prospering. Visit our website at:www.firstgroup.com