Final Results

Embargoed until 07:00hrs on Wednesday 12 May 2010 FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2010 ROBUST PERFORMANCE AND INCREASED CASH GENERATION IN CHALLENGING TRADING ENVIRONMENT * Resilient performance despite impact of recession on trading and increased hedged fuel costs of c.Â£90m * Successfully delivered cost reduction programme - exceeded target of Â£200m of annual savings * Flexible operating models - delivered mileage reductions to protect revenue per mile * Exceeded cash targets - Â£136m net cash generated and used to reduce net debt * Confident of further opportunities within Group to accelerate deleveraging plans * Increased net cash generation target to Â£150m in 2010/11 NORTH AMERICA - COST AND OPERATING EFFICIENCIES MAINTAINING INDUSTRY LEADING MARGINS * First Student - strong contract retention >90%, cost actions offsetting margin pressure from weaker economy * First Transit - further margin improvement - increasing market share through new contract wins GREYHOUND - FLEXIBLE MODEL, ENCOURAGING REVENUE TRENDS * A robust performance in toughest year - mileage reduced by >11% to protect margin and revenue per mile * Encouraging passenger revenue trends continue UK BUS - STEADY AND RESILIENT, COST AND MILEAGE REDUCTIONS PROTECT MARGIN * Like-for-like passenger revenue growth up 1.9% * Cost control and network management protecting margin despite fuel cost increase UK RAIL - STRONG PERFORMANCE AHEAD OF EXPECTATIONS * Like-for-like passenger revenue growth up 2.3% - encouraging trends continue * Cost actions underpin performance - operating profit margin broadly in line with prior year FINANCIAL SUMMARY 2009/10 ï‚§ Revenue Â£6,319.3m (2009: Â£6,187.3m) ï‚§ Adjusted operating profit1Â£453.9m (2009: Â£497.5m) ï‚§ Operating profit Â£368.5m (2009: Â£371.1m) ï‚§ Adjusted EBITDA2Â£769.6m (2009: Â£772.2m) ï‚§ Adjusted profit before tax1Â£264.0m (2009: Â£326.4m) ï‚§ Profit before tax Â£179.6m (2009: Â£200.0m) ï‚§ Adjusted basic earnings per share139.5p (2009: 48.6p) ï‚§ Basic earnings per share 27.5p (2009: 30.2p) ï‚§ Dividend per share 20.65p (2009: 18.75p) ï‚§ Net debt3Â£2,281.5m (2009: Â£2,503.5m) 1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties, as shown in the consolidated income statement on p.24. 2Adjusted operating profit as defined plus depreciation. 3.Net debt is stated excluding accrued interest. Commenting, FirstGroup's Chief Executive, Sir Moir Lockhead said: "The Group has delivered a resilient performance in line with management expectations against the backdrop of a challenging trading environment and significantly higher hedged fuel costs which increased by approximately Â£90m during the year. "Our clear strategy to lead the Group through this tough trading environment enabled us to take prompt and decisive action to mitigate the impact of the recession on trading. We have a strong track record in cost management and the actions we have implemented during the year have delivered annual savings of over Â£200m. Rigorous management of our networks on a route by route basis has ensured that service provision closely matched changing demand and revenue per mile was maintained. "Looking ahead we anticipate the new financial year will remain challenging. While we are encouraged by improving revenue trends in parts of our business, consistent with economic recovery, the global economic outlook remains uncertain and we expect the pressure on public spending in North America to continue. Despite these challenges we are confident that the Group will return to earnings growth in the coming year. The Group will continue to benefit from a diverse portfolio of businesses providing strength and resilience as they continue to trade robustly through the economic cycle. "We have set out our clear priorities to increase net cash generation and reduce net debt. We have increased the Group's net cash generation target to Â£ 150m for 2010/11. The continued strong cash generation supports our objectives of targeted capital investment, accelerating our deleveraging plans and delivering sustained real dividend growth for investors. "Looking ahead the Board is confident of the inherent strength and resilience of the Group, an expected return to earnings growth and strong cash generation supports the Board's commitment to dividend growth of at least 7% per annum over the next three years. "We have established leading positions and critical mass in all our core markets and believe that each of our businesses has significant potential for long-term growth. The actions we have taken have created a stronger, more efficient base and will ensure that the Group is well placed to continue to deliver long term value for shareholders." "While it is still early in the new financial year, overall the Group has continued to trade well and is in line with our expectations." Enquiries FirstGroup plc: Sir Moir Lockhead, Chief Executive Tel: +44 207 291 0512 Jeff Carr, Finance Director Tel: +44 207 291 0512 Rachael Borthwick, Corporate Communications Director Tel: +44 207 291 0508 / +44 7771 945432 A CONFERENCE CALL OF THE PRESENTATION TO ANALYSTS WILL BE HELD AT 9:00AM ON WEDNESDAY 12 MAY 2010 FOR DETAILS PLEASE CONTACT FIRSTGROUP TEL: 020 7291 0507 PHOTOGRAPHS FOR THE MEDIA ARE ALSO AVAILABLE NOTES TO EDITORS FirstGroup plc is the leading transport operator in the UK and North America with revenues of over Â£6 billion a year. We employ more than 130,000 staff and transport some 2.5 billion passengers a year. North America contract businesses Headquartered in Cincinnati, FirstGroup America Inc. operates across the US and Canada. The Group's contract businesses include Yellow School Buses (First Student), Transit Contracting and Management Services (First Transit), Vehicle Fleet Maintenance and Support Services (First Services). * First Student is the largest provider of student transportation in North America with a fleet of approximately 60,000 yellow school buses, carrying some 6 million students every day across the US and Canada. * First Transit is one of the largest private sector providers of transit management and contracting, managing public transport systems on behalf of city transit authorities. It is one of the largest providers of airport shuttle bus services in the US and also manages call centres, paratransit operations and other light transit activities. * First Services is the largest private sector provider of vehicle maintenance and ancillary support services in the US. Providing fleet maintenance for public sector customers such as the Federal Government and fire and police departments. It also provides support services to public and private sector clients. Greyhound Greyhound is the only national provider of scheduled intercity coach services in the US and Canada. Based in Dallas, Greyhound provides scheduled passenger services to approximately 3,800 destinations carrying approximately 20 million passengers a year. UK Bus The Group is Britain's largest bus operator running more than one in five of all local bus services. A fleet of some 8,000 buses carries approximately 3 million passengers a day in more than 40 major towns and cities. We also operate Greyhound UK providing regular services each way between London and Bournemouth, Portsmouth and Southampton. UK Rail The Group operates one quarter of the UK passenger rail network, with a balanced portfolio of intercity, commuter and regional services, carrying over 280 million passengers a year. * We are the UK's largest rail operator with four passenger franchises - First Capital Connect, First Great Western, First ScotRail and First TransPennine Express - and one open access operator, First Hull Trains. * We provide rail freight services through First GBRf and operate the London Tramlink network on behalf of Transport for London carrying over 28 million passengers a year. Europe In mainland Europe we operate some 150 buses in south west Germany and, with our partner DSB, we operate the Ã˜resund rail franchise which includes routes in and between Denmark and Sweden. Chairman's statement As we expected, the continued economic weakness presented a number of challenges for the Group during the year. The impact of the recession on passenger volumes in the UK and North America and pressures on public spending in North America were combined with significantly higher hedged fuel costs during the year. Our strategy to build a diverse portfolio of operations has delivered a resilient performance during the year despite the tough trading environment and, as parts of our business moved through the economic cycle at different times, ensured that the Group is not wholly dependent on one market. We had a clear strategy to lead the Group through these challenging times and took prompt and decisive action to mitigate the effects of the recession. A significant programme of cost reduction was delivered during the year together with rigorous network management to ensure that service provision was closely matched to changing demand. Against this backdrop we continued to focus on safety and customer service. The provision of safe, high quality and reliable services is our key priority and during the year we made further advances in these areas as we continue to develop our industry-leading initiatives. The Group's capital structure was further strengthened during the year as we made progress in executing our plan to extend the maturity profile of our net debt and reduce reliance on bank finance with the issue of Â£350m and Â£200m bonds in April and September 2009 respectively. Both bond issues attracted strong support from fixed income investors demonstrating the continued confidence in the underlying strength and resilience of the Group. The maturity profile of the Group's net debt is now 6.3 years. In addition the Group continues to have a strong liquidity position with over Â£1bn of headroom available under committed revolver facilities. Net debt reduction is a key priority for the Group. Despite the challenging trading environment during the year I am delighted that we have exceeded our target for net cash generation which will be used to reduce net debt. Furthermore, we are confident of the opportunities to increase net cash generation within the Group and to accelerate our deleveraging plans. In line with our stated commitment the Board has proposed a final dividend, subject to approval by shareholders, of 14.0p, an increase of 10%, making a full year payment of 20.65p. It will be paid on 20 August 2010 to shareholders on the register at 16 July 2010. The dividend is covered 1.9 times by adjusted basic EPS. Looking ahead, the Board recognises the importance of dividends to shareholders and we remain committed to delivering sustained real growth in the dividend. Our confidence in the inherent strength and resilience of the Group, an expected return to earnings growth and strong cash generation supports the Board's commitment to dividend growth of at least 7% over the next three years. In March 2010 Ellis Watson, Group Marketing and Business Development Director, stepped down from the Board to take up the position of Chief Executive Officer of Syco Entertainment. We thank him for his contribution and wish him every success in his new role. The performance of the Group is underpinned by the strong management team we have established. Their range of skills and experience, from both within and outside the industry, and track record of achievement have been fundamental to the performance of the Group this year and going forward will drive its successful future development. On behalf of the Board I would like to extend sincere thanks to all of our employees across the Group. Their ongoing commitment and professionalism have enabled us to report a resilient performance against the weaker economic backdrop. We recognise the vital role they have played during the year in establishing an even stronger base from which the Group will continue to build. Looking ahead we anticipate the new financial year will remain challenging as the global economic outlook remains uncertain. However, the Group will continue to benefit from the diverse portfolio of operations, with contract-backed and passenger revenues. Our management team have demonstrated their skill and experience in cost control and network management. We will continue to implement the necessary actions to reduce the cost base, increase operating efficiencies as well as closely manage service provision against changing demand. The Board is confident in the underlying strength and resilience of the business which, combined with the actions taken to mitigate the adverse impacts of the recession, will ensure the Group is well placed to continue to deliver long term value for our shareholders. Martin Gilbert Chairman * Operating profit referred to throughout the Chairman's statement, Chief Executive's operating review and Finance Director's review refers to operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/ profit on disposal of properties. EBITDA is adjusted operating profit plus depreciation. Chief Executive's operating review OVERVIEW Safety Within the Group safety is a core value. Ensuring that our customers and employees remain safe and secure while travelling on our services or working in our businesses lies at the heart of our strategy and underpins everything we do. The industry-leading initiatives that we have established support our zero tolerance approach to unsafe acts and practices. I am pleased to report that during the year lost time injuries reduced by 18%. During the year we continued to engage with our staff to ensure that support is provided through ongoing training and education. We continually monitor and review safety performance trends to inform the ongoing development of our safety programmes. Further details of our safety initiatives and achievements during the year can be found on our website www.firstgroup.com Results I am pleased to report a robust performance against a backdrop of economic weakness creating a difficult trading environment and higher hedged fuel costs which increased by approximately Â£90m in the year. Group revenue was Â£6,319.3m (2009: Â£6,187.3m) an increase of 2.1% and includes Â£176.3m of favourable foreign exchange movements. Operating profit reduced to Â£ 453.9m (2009: Â£497.5m) as a result of the impact of the recession on trading and increased fuel costs however, the effect was significantly mitigated by the positive impact of our cost reduction programme. The unusually severe weather which significantly disrupted our networks in the UK and North America during the fourth quarter of our financial year (Q4) also had an adverse impact on operating profit of Â£16m. Statutory profit before taxation was Â£179.6m (2009: Â£ 200.0m) reflecting the lower operating profit and higher net finance costs as a result of the issue of bonds in September 2008, April 2009 and September 2009. Adjusted basic EPS was 39.5p (2009: 48.6p). EBITDA was Â£769.6m (2009: Â£772.2m). We have set out our clear priorities of continuing to deliver strong cash generation and reducing the Group's net debt. I am delighted to report a strong performance with net cash generation of Â£136.3m which exceeded our targets and was used to reduce net debt. This performance is underpinned by the Group's diverse portfolio of operations together with the decisive and pre-emptive action we took to mitigate the effects of the weaker economy on trading and the increased fuel costs. During the year we successfully delivered a cost reduction programme which produced annual savings of over Â£200m. Reductions in overheads and increased operating efficiencies have been key to achieving our plans. Headcount across the Group was reduced by more than 5,000. NORTH AMERICA Contract Businesses Our North American contract businesses provide diversity alongside the passenger revenue dependent businesses within the Group. Revenue from our contract businesses was $3,704.8m or Â£2,333.7m (2009: $3,739.0m or Â£2,224.1m). Operating profit reduced to $365.5m or Â£233.9m (2009: $391.8m or Â£246.1m) reflecting the impact of reduced ancillary revenues as a result of budgetary pressure at school board level and increased hedged fuel costs. During Q4 the unusually severe weather which affected the vast majority of US states led to a higher than normal amount of lost operating days in our contract businesses. EBITDA was $608.7m or Â£386.4m (2009: $609.2m or Â£374.2m). First Student US Dollar revenue reduced by 3.2% to $2,544.7m (2009: $2,629.5m) and the operating margin reduced to 11.0% (2009: 12.6%). Our focus on customer service and operational performance, together with the value-added services and sustainable economies that we can pass on to customers, has delivered another period of strong contract retention of over 90%. The core provision of contracted services remained largely resilient during the year. However, we have seen the effects of economic weakness in North America as lower state and local tax receipts have resulted in unprecedented levels of pressure on school board budgets, particularly during the second half of the year. As a result ancillary revenues, from charter and additional routes to existing contracts, were reduced and pricing pressure has been a feature of the recent bid season. In this environment our focus is on managing our cost base and maintaining our industry leading margins. As the economy strengthens we expect revenues to recover although it is our view that the pressure on school board budgets will continue during 2010/11. We continued to win new business including contract awards to operate more than 600 buses in Wichita, Kansas and a contract to operate 300 buses in Detroit, Michigan where the school district chose to outsource transportation. With only 30% of the school bus market currently outsourced there remain significant growth opportunities. We continue to progress a pipeline of potential conversion contracts that are currently operated within the public sector. While the levels of interest around outsourcing are very high, particularly during this challenging economy, the quantity of conversions remains small in absolute terms and is often slow to materialise. As the market leader First Student is uniquely placed to pass on its significant scale benefits to new and existing customers through cost and operating efficiencies and procurement savings. The scope and breadth of our operations provides an overview of the marketplace and enables us to respond to the changing trends and the needs of our customers. Notwithstanding the current economic environment the North American school bus market provides significant opportunities for future growth. However, against the backdrop of public spending pressure, rigorous cost management to protect operating margin remains a key priority. The actions we are taking to reduce costs will build on the cost synergies already achieved across the business. We believe that there is further scope to develop a more efficient operation and to provide an enhanced platform for growth as the economy strengthens. First Transit First Transit now generates over $1.1bn of annual revenues and provides prospects to deliver further profitable growth with minimal capital investment. During the year we delivered a strong performance with US Dollar revenue increased by 4.6%. The operating margin increased to 7.3% (2009: 5.4%). While we have seen the effects of the recession also impacting Transit Authorities as they come under pressure to reduce their budgets, we have responded by implementing actions that have reduced our cost base and increased operating efficiencies, while retaining a strong focus on customer service and operational performance. I am pleased to report that contract retention remained high at over 90% and we were pleased to be awarded new business during the year including a significant conversion from the public sector in San Diego. We have also increased our share of the paratransit market with new contracts in New Jersey and Oregon. We are particularly pleased that First Transit is now the sole operator in both contracts where previously there were multiple providers of the paratransit services. First Vehicle Services continued to build on its market share during the year with the award of new business including two conversion contracts that were previously operated within the public sector in Michigan and Florida. GREYHOUND Greyhound performed in line with our expectations despite the significant impact of the weaker North America economy on trading. Revenue was $963.4m or Â£ 603.3m (2009: $1,114.0m or Â£642.4m), a reduction of 13.9% at constant US Dollar:Canadian Dollar exchange rates. Passenger revenue, on a like-for-like basis, increased during Q4 and we are encouraged by trends which show continuing progress. Despite the significant reduction in revenues a creditable operating profit was achieved of $39.6m or Â£23.9m (2009: $91.7m or Â£48.5m) supported by the cost reduction and network management actions taken. During the year we took prompt action to utilise the highly flexible operating model at Greyhound and match service provision to any changing demand. As a result bus miles were reduced by 11.4% in the US and 10.7% in Canada, while retaining capability to restore service levels when demand returns. Through rigorous management of the network and targeted mileage reductions we maintained revenue per mile which is now ahead of prior year despite the difficult trading environment. In Canada, where the market is more regulated, we made good progress during the year with some important agreements reached with the Canadian Provinces that enabled us to reduce mileage or receive a subsidy to operate certain routes that were not financially viable. As a result the Canadian business model has been significantly strengthened and is now more robust for the future. We also implemented a number of actions across the business which have considerably reduced our operating costs including overhead reductions and increased operating efficiencies. In addition we made further progress in lowering the cost of sale through agency commission rates. Whilst mitigating the impact of the weak economy and transforming Greyhound's operating model, we retained a strong focus on customer service and reliability. I am pleased to report that `On Time Performance' has continued to improve across Greyhound's US and Canadian operations. BoltBus, our low cost, high quality, point to point coach service operating between city pair destinations in the North East continues to perform well. We added 38 new coaches to support growth during the year. The customer response to BoltBus remains extremely positive with consistently good average loadings and we are actively developing plans to expand BoltBus to new destinations. The adjustments we made to the network enabled us to retire a number of the oldest buses in the fleet. In addition we recently implemented a programme of refurbishment for 250 coaches over the next year which will improve operational performance and greatly enhance the customer experience. The actions we have taken during the year have ensured the sustained cash generation and profitability of the business. As a result, we have established a considerably stronger and lower cost base. Greyhound is on a firmer footing with improved operating leverage and is well placed to realise the benefits of future economic recovery. UK BUS Results Our UK Bus division delivered a steady and resilient performance despite the challenging trading environment as we focused on cost control and mileage reduction to protect margin. Like-for-like passenger revenue increased by 1.9%. Total revenue was reduced slightly to Â£1,170.6m (2009: Â£1,182.0m) and operating profit was Â£124.6m (2009: Â£134.0m). However, despite the impact of the recession on revenues and increased hedged fuel costs, the actions we took to reduce costs and mileage delivered a strong operating margin performance of 10.6% (2009: 11.3%). The impact of lower economic activity in the towns and cities where we operate, together with increased hedged fuel costs, was mitigated by our management actions to reduce our cost base and increase operational efficiencies. Initiatives such as new DriveGreen technology, which we rolled out across our entire bus fleet, is delivering greater fuel efficiency as well as improving driving styles and reducing the carbon footprint of our buses. During the year driver turnover continued to reduce from 19% to below 17% as a result of our initiatives to improve recruitment and retention as well as reflecting the current labour market conditions. During the year, we made use of the flexible operating model to carry out targeted mileage reductions. This action to match service provision to changes in demand on a route by route basis led to an overall reduction in mileage of 5% across the business and protected revenue per mile. We will be able to increase the frequency of our services and grow our networks as the economic recovery continues and passenger journeys increase. Our customers We continue to focus on operational performance and delivering our promise to customers. In February we welcomed Passenger Focus as the new statutory watchdog for bus, coach and tram customers outside of London. The first research published by Passenger Focus into passengers' priorities for improvement highlighted `more punctual buses' as the top priority with `more frequent services to a wider range of destinations' and `better value for money fares' as important. We look forward to working with Passenger Focus as its bus passenger satisfaction survey is developed and we were pleased with the initial results which showed overall bus passenger satisfaction at 90% for all local bus services in the first six areas surveyed. The results of the research into both customer satisfaction and customers' priorities for improvement accord with feedback from our customers and the results of our own research carried out over a number of years. Despite the recessionary environment and increased hedged fuel costs, we are trialling fares initiatives to stimulate passenger revenue growth in many parts of the country. For example, in Bristol we are focusing on popular multi-journey tickets and are pleased with the encouraging results since the trial began in February. We are also working with the West of England Joint Transport Committee to develop plans for the introduction of a Travel+ smartcard for Bath & North East Somerset, Bristol, North Somerset and South Gloucestershire. The Committee received Â£2.2m of funding from the Department for Transport (DfT) to set up the necessary back office systems. In March 2010 we launched the First SuperBus ticket in Bristol, a groundbreaking integrated transport initiative. First SuperBus offers train passengers spending Â£25 or more on a ticket to Bristol from any station within the First Great Western network inclusive onward bus travel in the Bristol area at no extra cost. The scheme will operate for an initial three month trial period. We also launched a new ticket for young people aged 16-18 in Greater Glasgow offering discounted travel to the standard adult equivalent tickets. We are pleased with sales of this new product which is increasing loyalty in this key demographic group. In partnership with the other major public transport groups, we launched `Greener Journeys', a campaign encouraging people to get out of their cars and onto buses and coaches. The campaign aims to reduce carbon emissions by changing travel behaviour and by switching one in 25 journeys from car to bus or coach. This would mean one billion fewer car journeys on our roads over the next three years. Interurban services We are pleased with the performance of Greyhound UK, our high quality, low cost services operating between London and Portsmouth and London and Southampton. The first services were launched in September 2009 and we have built on the success of this new initiative with the introduction of a new service between London and Bournemouth in May 2010. We continue to develop opportunities for further interurban services and in April 2009 we introduced a new limited stop service between Leeds and York. During the year we also improved links between Liverpool and Chester and developed our successful interurban services in the East of England by extending the Stansted Aircoach route from Colchester to Clacton and by doubling the frequency of services between Norwich and Lowestoft on Sundays. London and other major contracts In London our priority remains to deliver excellent operational performance and improve operating and cost efficiencies. We retained a number of key contracts during the year and reached agreement with Transport for London to construct a new maintenance and refuelling facility at Lea Interchange depot and to operate five hydrogen fuel cell powered buses on a central London route. Following a competitive tender process, the Olympic Delivery Authority confirmed that the Group will transport spectators during the London 2012 Games. We will provide around 500 buses and coaches for venue shuttle services and venue Park and Ride, around 90 buses and coaches for Park and Ride services, aimed to connect parking sites on the periphery of the M25 with the Olympic Park and Ebbsfleet, and around 300 coaches (sub contracted from fleets up and down the country) to operate a network of express coach services to the Olympic Park and Weymouth and Portland. In addition, we will provide management of Direct Coach operations, a bus and coach reservations and ticketing system and operational support staff at all bus and coach locations to manage the fleet. Investment We continued to make selected capital investment to support future growth. Investment has been focused on the major towns and cities where our partnerships with local authorities can deliver sustained real passenger growth. During the period, we invested in new environmentally friendly vehicles for our operating companies in West and North Yorkshire, Bristol, Somerset and Avon, Glasgow and Hampshire and Dorset. Partnerships We believe that voluntary quality partnerships are the quickest and most effective route to increase bus patronage and address the twin challenges of climate change and congestion in our towns and cities. Some of our partnerships with local authorities have been tested this year as we had to reduce our mileage to match services to changing demand. During the year we continued to work with our partners in local government to deliver more bus priority measures to improve the punctuality and reliability of our services. Our experience demonstrates that bus priority improves customer satisfaction and also attracts car users to bus services by providing an attractive alternative to travelling by car. We have had constructive discussions with Metro, the West Yorkshire Passenger Transport Executive (PTE), on our Growth and Co-Investment proposal and look forward to working with our partners in the region to take this initiative forward. We are also supporting the DfT's Â£19.8m of funding for a Quality Bus Corridor in Leeds which will provide a real alternative to car travel and help tackle traffic congestion by reducing bus journey times at peak periods. We are also supporting Greater Manchester PTE's plans to facilitate cross-city bus journeys through investment in three of the busiest corridors in the region to improve reliability and end to end journey times. In Glasgow we continued to develop our network and are participating in a Bus Working Group chaired by Glasgow City Council with support from Strathclyde Partnership for Transport to progress bus travel and modal shift in the city. We were delighted to win Public Transport Operator of the Year in the Scottish Transport Awards. Our long term partnership with the City and County of Swansea has delivered a number of initiatives this year. In September 2009 we officially launched our ftrmetro project in Swansea. Together with the Council and the Welsh Assembly Government we delivered a Â£14m package to improve public transport in Swansea including dedicated infrastructure and new vehicles as well as upgrading the engineering and parking facilities at our depot. We are delighted that the ftrmetro is delivering increased passenger journeys and believe that the successful initiative demonstrates the benefits of working in partnership. Working with Government In early December the DfT announced the winners of the Â£30m Green Bus Fund. We are pleased that two of our submissions were successful and we will receive funding towards the cost of new `low carbon' buses in Leeds and Manchester. In January 2010 the Office of Fair Trading referred the local bus service market to the Competition Commission. We believe that there is intense competition both between bus operators and `for the road' between bus operators and other modes of transport, particularly the private car. We also believe that the Competition Commission should take into account the considerable effect of the Local Transport Act 2008 on deregulated services, for example by the greater use of voluntary partnerships. UK RAIL Results Our UK Rail division delivered a strong performance ahead of our expectations with a 2.3% increase in like-for-like passenger revenue for the year, despite the reduction in regulated fares from January 2010. Revenue was Â£2,188.4m (2009: Â£2,121.5m) and operating profit was Â£92.6m (2009: Â£94.2m). This strong performance was supported by the successful delivery of our programme to reduce addressable costs which substantially offset the impact of lower volume growth throughout the year. During the year, as our customers faced recessionary pressures we experienced strong demand for advance purchase and other discounted tickets and a reduced take up of First Class fares. Our portfolio of rail franchises, which includes London commuter, intercity and regional train services, provides a balanced mix of operations and mitigates reliance on any one specific market. All of our franchises are delivering growth, particularly First ScotRail and First TransPennine Express. In addition, the revenue support arrangements within our franchise agreements with the DfT continue to ensure significant insulation from passenger revenues that are lower than the target revenues in our franchise bids. First Capital Connect and First Great Western are receiving revenue support at the 80% level. Overall, our operational performance has improved during the year and the Public Performance Measure (PPM) on a moving annual average basis is over 90% at First Great Western, First ScotRail and First TransPennine Express. First Capital Connect's PPM is recovering after a period of significant disruption, caused by unofficial industrial action and damage to rolling stock as a result of severe weather, which impacted performance. We were delighted with our success at the Rail Business Awards in February with finalists in every category and a number of awards. First Capital Connect won Internal Communication Excellence for its innovative one-stop employee information shop and extranet and First TransPennine Express received the Environmental Innovation award for a unique Eco Drive and Driving Fuel Efficiency programme to save fuel and money and to reduce carbon emissions on our Class 185 trains. First Great Western won Train Operator of the Year and FirstGroup won the Rail Business of the Year award, which recognised our market leading position. We were also delighted that First ScotRail won Passenger Operator of the Year at the National Rail Awards in September, the only Train Operating Company to receive the award for two consecutive years. First ScotRail was also named Public Transport Operator of the Year at the National Transport Awards in July. We are the UK's largest rail operator and have established a track record of prudent bidding and delivering profitable growth. As a long term player in the rail market we are well positioned to continue to benefit from the exciting opportunities from future franchise competitions. First ScotRail Like-like-passenger revenue growth was 3.2% during the year. We celebrated the fifth anniversary of the First ScotRail franchise in October and, working with Transport Scotland and our other partners, we continue to invest in the future of Scotland's railways. We were delighted to record an overall customer satisfaction score of 90% in the National Passenger Survey. In May 2009 we delivered a new summer timetable with extra East Coast commuter services and improvements for our customers in Fife, the Highlands and on the West Coast. In December 2009 we added a new hourly service between Glasgow and Edinburgh via Shotts as part of an ambitious package of improvements between Glasgow and Edinburgh, identified in the Scottish Government's Strategic Transport Projects Review. The new timetable also included a much improved service between Glasgow and Kilmarnock and better connections from Ayr and Gourock into Glasgow and between Dumfries and Carlisle and North Berwick and Edinburgh for early morning services to London. During the year, we completed a series of investments across the business, including improvements to our rolling stock, new engineering equipment at our depots and upgrading stations and car parks to enhance reliability and customer service. We continue to work on a range of projects to deliver further improvements. We are trialling smartcard technology on the Edinburgh-Glasgow route and will issue 10,000 smartcards later this year. Transport Scotland is also funding the development of our Shields depot in preparation for the delivery of a new fleet of 38 Class 380 electric trains to run between Glasgow Central, Ayrshire, Inverclyde and Renfrewshire. The Â£200m investment by Transport Scotland will add some 7,500 seats to Scotland's rail network from September 2010. The new trains will allow other rolling stock to be released to the Â£300m Airdrie-Bathgate line, which will open in December 2010. First TransPennine Express Like-for-like passenger revenues increased by 5.6% and operational performance has continued to improve at First TransPennine Express throughout the year. We delivered our best ever levels of train punctuality and reliability improving PPM, on a moving annual average basis, to over 92%, despite the poor winter weather this year. We were pleased to achieve an overall customer satisfaction score of 89% in the National Passenger Survey, the best autumn result in the history of First TransPennine Express and a six point improvement year on year. Our areas of significant improvement included the frequency of trains, punctuality and reliability, connections and value for money. Strong passenger revenue growth at First TransPennine Express has been driven by the continued development of our services between Manchester Airport and Scotland and by achieving volume growth through modal shift on journeys to and from the airport, despite a fall in the number of air passengers. In December 2009 we increased the number of weekday services on this route which improved our competitive position and allowed us to stimulate further the high passenger demand that exists on this corridor. First TransPennine Express has stimulated passenger revenue growth through a range of successful marketing campaigns. With the Lake District and many seaside resorts on our network we continue to target our marketing efforts on leisure promotions and special offers including `Kids go Free' and `Club 55'. In January 2010 we offered passengers a 25% discount on advance purchase tickets. First Great Western Like-for-like passenger revenue increased by 1.3% and operational performance has consistently improved over the year. PPM, on a moving annual average basis, is over 92% and our National Passenger Survey results are also improving. The Autumn 2009 survey highlighted that 82% of First Great Western customers are satisfied with our service, an increase of two percentage points on last year and an improvement of eight percentage points on 2007. We continue to invest in the franchise and have started an Â£8m programme to improve our Class 16x fleet, which carry more than 36 million passengers a year in the London and Thames Valley area. We are upgrading on board facilities and refreshing the interior which will improve the environment for our customers. The first two vehicles were launched in April 2010 and the entire fleet will be upgraded by March 2012. We introduced WebCIS, our Customer Information System, to a number of smaller stations on our network including Hanborough, Ivybridge and Radley and ten stations on the Severn Beach Line in Bristol. Feedback from our customers has been very positive and we are developing plans to roll out the system further. Following the success of Volo TV on our Sleeper services, we introduced the on demand entertainment service to the back of seats in some Standard Class carriages on our High Speed Services in November 2009. All of our High Speed Trains will be fitted out with Volo TV by December 2010. We are also nearing completion of our programme to improve on board catering on High Speed Trains by introducing 19 Express CafÃ©s. In addition, the refresh of ten First Class Buffets will be complete by March 2010. In March 2010 we signed an agreement with the DfT to secure the long term future of 30 vehicles in our West fleet. These will replace the trains currently on short term lease from other Train Operating Companies which have allowed us to deliver extra capacity on the Cardiff-Portsmouth route and travel to work services in the Exeter area. First Capital Connect Like-for-like passenger revenue growth was 2.6% during the year. As a result of unofficial industrial action by our train drivers combined with damage to rolling stock and infrastructure caused by extreme winter weather, First Capital Connect's customers on the Thameslink route experienced an unacceptable level of service from October to January. During this period, we operated a reduced timetable with a high level of cancellations and a significant decline in PPM. This was reflected in an overall satisfaction score of 75% in the most recent National Passenger Survey. Operational performance has now improved with PPM on the Thameslink route at 92% in March and April 2010 and we will continue to work hard to restore customer confidence. In March 2010 First Capital Connect announced a programme of investment and customer benefits which, in total, are worth over Â£10m. The investment will be spread between improvements to the Customer Information Systems, a modification and renewal package for Class 319 trains on the Thameslink route to resolve reliability issues and introduction of ticket barriers at stations on our network. First Capital Connect also enhanced the discount scheme for Thameslink customers. We have introduced a comprehensive driver recruitment and training programme and are working with Network Rail through our Joint Performance Improvement Plan to return the Thameslink route to more stable levels of performance. The delivery of the final Class 377/5 Electrostar in January 2010 allowed First Capital Connect to fully resource the `Key Output 0' timetable on the Thameslink network and provide almost 5,000 additional seats at the busiest times of the day. Operational performance on the Great Northern route has been consistently strong, however peak time capacity remains a key issue for our customers. In May 2009 we introduced `Seats for You', a major timetable change on the route, to reduce overcrowding. The new timetable, together with additional carriages and upgraded infrastructure, allowed First Capital Connect to strengthen trains to eight or 12 car formations and introduce additional services with an overall 15% increase in peak seats. In March 2010 we reached an agreement with the DfT to implement further capacity enhancement schemes on the Great Northern route. The DfT has provided Â£27m of funding to secure 41 additional carriages which will create around 6,500 extra seats on peak time services into London Kings Cross and London Moorgate. The improvements will be implemented in stages from December 2010 to December 2013. First Hull Trains The number of passenger journeys on First Hull Trains continued to grow although the demand for first class fares was weaker as passengers sought value from discounted fares. We were pleased to conclude negotiations with the Office of Rail Regulation and Network Rail to extend our Track Access Contract to 2016. We have now started a Refresh project of our Class 180 trains and are currently at the tendering stage of this important investment programme. First GBRf We are pleased with the continued development of our rail freight business. During the year, First GBRf signed new contracts with Network Rail, MSC, EDF and Lafarge. We also signed a ten year contract with Drax Power Limited to operate four trains a day moving renewable biomass material by rail from the Port of Tyne to Drax Power Station in North Yorkshire. First GBRf is providing locomotives, carriages and train crew for passenger services between Taunton and Cardiff for First Great Western which is expected to continue until the end of July 2010. GROUP OUTLOOK Looking ahead we anticipate the new financial year will remain challenging. While we are encouraged by improving revenue trends in parts of our business, consistent with economic recovery, the global economic outlook remains uncertain and we expect the pressure on public spending in North America to continue. Against this backdrop we expect moderate earnings growth. The Group will continue to benefit from a diverse portfolio of businesses providing strength and resilience as they continue to trade robustly through the economic cycle. We have set out our clear priorities to increase net cash generation and reduce net debt. We have increased the Group's net cash generation target to Â£150m for 2010/11. The continued strong cash generation supports our objectives of targeted capital investment, accelerating our deleveraging plans and delivering sustained real dividend growth for investors. Looking ahead the Board is confident of the inherent strength and resilience of the Group, an expected return to earnings growth and strong net cash generation supports the Board's commitment to dividend growth of at least 7% per annum over the next three years. We have established leading positions and critical mass in all our core markets and believe that each of our businesses has significant potential for long term growth. The actions we have taken have created a stronger, more efficient base and will ensure that the Group is well placed to continue to deliver long term value for shareholders. Sir Moir Lockhead Chief Executive 12 May 2010 Finance Director's review Overview The Group has delivered a robust set of results against a challenging economic backdrop, approximately Â£90m of increased hedged fuel costs and the impact of severe weather conditions across the UK and North America during Q4. Cost reduction actions have delivered Â£228m of savings during the year to partially mitigate these issues and deliver adjusted EPS of 39.5p per share, in line with our expectations. The Group continues to prioritise improvements in cash performance and as a result generated net cash of Â£136.3m which was significantly ahead of our target. Next year's cash target has been raised to Â£150m. Strong cash generation underpins the Group's commitment to deliver sustained real growth in the dividend while also reducing net debt. Further progress was made with debt financing during the year. Two long term sterling bonds were issued for a total of Â£550m to replace short term bank debt, increasing average debt duration from 4.6 years to 6.3 years. Headroom under committed revolver facilities at March 2010 was in excess of Â£1bn. Results Group revenue was Â£6,319.3m (2009: Â£6,187.3m), an increase of 2.1% and includes Â£176.3m of favourable foreign exchange movements, representing a reduction of 0.7% at constant currencies. Operating profit was Â£453.9m (2009: Â£497.5m), a reduction of 8.8% principally due to the impact of the recession, in particular on Greyhound revenues, and the higher hedged fuel costs across the Group of approximately Â£90m which were partly mitigated by cost reduction actions across all the divisions. Statutory operating profit was Â£368.5m (2009: Â£371.1m). Year to Year to 31 March 2010 31 March 2009 Divisional results Revenue Operating Operating Revenue Operating Operating Â£m Profit1 margin1 Â£m profit1 margin1 Â£m % Â£m % UK Bus 1,170.6 124.6 10.6 1,182.0 134.0 11.3 UK Rail 2,188.4 92.6 4.2 2,121.5 94.2 4.4 North America 2,333.7 233.9 10.0 2,224.1 246.1 11.1 Greyhound 603.3 23.9 4.0 642.4 48.5 7.5 Group2 23.3 (21.1) - 17.3 (25.3) - Total Group 6,319.3 453.9 7.2 6,187.3 497.5 8.0 1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties. 2Tram operations, German Bus, central management and other items. North American contract business revenue was $3,704.8m or Â£2,333.7m (2009: $3,739.0m or Â£2,224.1m), an increase of 4.9% in Sterling terms but a reduction of 0.9% in US Dollar terms. Operating profit was $365.5m or Â£233.9m (2009: $391.8m or Â£246.1m), a decrease of 5.0% in Sterling terms and 6.7% in US Dollar terms. Revenue was marginally down on last year due to school board budgetary pressures resulting in lower levels of high margin charter work and contract "add ons". Operating profit was impacted by higher fuel costs and, during the fourth quarter, bad weather impacted results by $14m or Â£8.8m. In addition there were a lower number of student operating days due to the timing of school holidays. Greyhound revenue was $963.4m or Â£603.3m (2009: $1,114.0m or Â£642.4m) and operating profit was $39.6m or Â£23.9m (2009: $91.7m or Â£48.5m). Revenue fell as a result of the weak US economy and resultant increased unemployment. Encouragingly, revenue trends became positive in the final quarter of the year and network management ensured that the revenue per mile run-rate is ahead of prior year. Bus mileage was reduced by 11.3% during the year and there was an excellent performance on costs with reductions in overheads and swift actions taken on variable costs. UK Bus revenue was Â£1,170.6m (2009: Â£1,182.0m), a reduction of 1.0%. Like-for-like passenger revenue was up 1.9% on the preceding year. Operating profit was Â£124.6m (2009: Â£134.0m), a reduction of 7.0% principally due to the impact of the recession on revenues, mileage reduction of 5% as service provision was flexed in line with demand, together with significantly increased hedged fuel costs and severe weather which impacted results by approximately Â£ 6m in the second half of the year. However, despite this tough trading environment the actions we took to improve operating efficiencies and reduce overheads delivered a good operating margin performance of 10.6% (2009: 11.3%). UK Rail revenue was Â£2,188.4m (2009: Â£2,121.5m), an increase of 3.2%. A change in the Control Period (CP4) charging arrangements with Network Rail meant a Â£ 59.0m reduction in both DfT grant revenue and Network Rail charges with no impact on operating profit. Operating profit was Â£92.6m (2009: Â£94.2m), a decrease of 1.7%. Like-for-like passenger revenue growth across our rail business was 2.3%. Despite the clear impact of the weaker economy on the UK's railways, we were substantially insulated from the full effects of the recession by revenue support receipts at FGW and FCC. Revenue trends in the final quarter of the year were encouraging with adjusted revenue growth of 3.7% despite the reduction in regulated fares of 0.4%. The cost base continues to benefit from overhead cost reductions and other direct cost savings. Non-recurring items and amortisation charges 2010 2009 Â£m Â£m North America integration costs 15.5 70.1 North America restructuring costs 15.9 9.9 UK Bus restructuring costs 6.8 2.1 UK Rail restructuring costs 2.5 10.3 Fuel hedge ineffectiveness 4.8 23.1 Competition Commission costs 3.8 - European bid costs 0.3 3.5 Total non-recurring items 49.6 119.0 Amortisation charges 34.7 33.1 84.3 152.1 Loss/(profit) on disposal of properties 1.1 (25.7) Hedge ineffectiveness on financial derivatives (1.0) - 84.4 126.4 North America integration costs 2010 2009 Â£m Â£m Redundancy and staff related costs 1.1 17.3 IT costs 5.9 15.3 Legal and professional costs 2.3 14.8 Safety expenses 0.1 9.0 Rebranding costs 0.1 3.1 Relocation of offices - 2.9 Other integration costs 6.0 7.7 15.5 70.1 These costs reflect the conclusion of the Laidlaw integration process and we do not anticipate any further such costs to be separately disclosed in future. Restructuring costs Restructuring costs were Â£25.2m (2009: Â£22.3m) and represent redundancy and related costs in respect of headcount reductions across all businesses as part of the cost reduction action plan. Fuel hedge ineffectiveness During the year a charge of Â£4.8m (2009: Â£23.1m) was made in respect of reduced 2009/10 fuel volumes principally due to changes to the terms of certain First Student and First Transit contracts whereby the Group has less "at risk" fuel than it had when 2009/10 hedges were originally taken out. Competition Commission costs Costs of Â£3.8m (2009: Â£nil) have either already been incurred or are committed to be spent on the ongoing Competition Commission investigation into the local bus market in the UK. European bid costs Bid costs of Â£0.3m (2009: Â£3.5m) represent the non-recurring costs of business development opportunities in mainland Europe. Amortisation charges Amortisation charges for the year were Â£34.7m (2009: Â£33.1m) with the increase due to the impact of foreign exchange movements. Loss/(profit) on disposal of properties A loss on disposal of properties of Â£1.1m (2009: profit of Â£25.7m) was recorded during the year. Due to market conditions there were no significant disposals of properties during the year either in the UK or North America. The principal disposals in the prior year were the Southampton depot within UK Bus and a Greyhound site in Seattle. Hedge ineffectiveness on financial derivatives Due to the ineffective elements of the fair value movements on financial derivatives there was a Â£1.0m credit to the income statement during the year (2009: Â£nil). Finance costs and investment income The net finance cost was Â£188.9m (2009: Â£171.1m) with the increase principally due to the issue of long term bonds in September 2008, April 2009 and September 2009 and foreign exchange on US Dollar denominated interest costs. Profit before tax Adjusted profit before tax was lower than the prior year at Â£264.0m (2009: Â£ 326.4m) due principally to lower operating profit and higher net finance costs. Amortisation charges and net exceptional costs of Â£84.4m (2009: Â£126.4m) resulted in statutory profit before tax of Â£179.6m (2009: Â£200.0m). Tax The tax charge, on adjusted profit before tax, for the year was Â£59.1m (2009: Â£ 81.6m) and results in an effective rate of 22.4% (2009: 25.0%). The reduction in the effective rate is principally due to lower North American profits. There was a tax credit of Â£26.6m (2009: Â£38.6m) relating to amortisation charges and non-recurring items. This resulted in a total tax charge of Â£32.5m (2009: Â£ 43.0m). Last year there was a one-off deferred tax charge due to an increase in the UK deferred tax liability arising on the abolition of Industrial Buildings Allowances. The actual tax paid during the year was Â£1.3m (2009: Â£8.9m). North American cash tax remains low due to tax losses brought forward and tax depreciation in excess of book depreciation. We expect the North American cash tax rate to remain low for the medium term. The UK cash tax for the year was low mainly due to pension payments exceeding pension charges and interest payments. UK cash tax is likely to be higher in the year to March 2011. Dividends In line with our stated commitment the Board has proposed a final dividend, subject to approval by shareholders, of 14.0p, an increase of 10%, making a full year payment of 20.65p. It will be paid on 20 August 2010 to shareholders on the register at 16 July 2010. The dividend is covered 1.9 times by adjusted basic EPS. EPS The adjusted basic EPS was 39.5p (2009: 48.6 pence), a reduction of 18.7%. Basic EPS was 27.5p (2009: 30.2p), a reduction of 8.9%. Cash flow Net cash inflow was Â£136.3m (2009: Â£51.1m) during the year. This contributed to a net debt reduction of Â£222.0m (2009: increase of Â£342.5m) as detailed below: 2010 2009 Â£m Â£m Adjusted EBITDA 769.6 772.2 Non-recurring items (53.1) (67.6) Pension payments in excess of income statement charge (42.1) (50.7) Working capital outflow (76.0) (23.7) Other non-cash income statement items 6.3 9.5 Operational cash flow 604.7 639.7 Capital expenditure and acquisitions (201.7) (358.9) Interest, tax and other (154.5) (135.8) Dividends (112.2) (93.9) Net cash inflow 136.3 51.1 Foreign exchange and other 85.7 (624.4) Proceeds of share issue - 230.8 Reduction/(increase) in net debt 222.0 (342.5) EBITDA Adjusted EBITDA by division is set out below: Year to Year to 31 March 2010 31 March 2009 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 Â£m Â£m % Â£m Â£m % UK Bus 1,170.6 200.2 17.1 1,182.0 205.4 17.4 UK Rail 2,188.4 147.6 6.7 2,121.5 137.2 6.5 North America 2,333.7 386.4 16.6 2,224.1 374.2 16.8 Greyhound 603.3 52.6 8.7 642.4 76.6 11.9 Group 23.3 (17.2) - 17.3 (21.2) - Total Group 6,319.3 769.6 12.2 6,187.3 772.2 12.5 1Operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties plus depreciation. Operating Cash flow Cash generated by operations reduced slightly to Â£604.7m (2009: Â£639.7m). The principal reason for the reduction was the increased working capital outflow from Â£23.7m to Â£76.0m. The main reason for the increase was the timing of payments and cash receipts due to the change to the CP4 charging mechanism and the increased level of revenue support. However, working capital outflow was lower than management expectations for the year. Capital expenditure Efficient network management and lower passenger demand during the year enabled a reduction in fleet renewals. Accordingly capital expenditure was reduced across the Group. Cash capital expenditure was Â£201.7m (2009: Â£358.9m) and comprised UK Bus Â£32.5m (2009: Â£115.2m), UK Rail Â£36.3m (2009: Â£53.2m), North America Â£99.8m (2009: Â£180.8m), Greyhound Â£30.0m (2009: Â£4.0m) and Group items Â£3.1m (2009: Â£5.7m). Funding and risk management At the year end, total bank borrowing facilities amounted to Â£2,110.0m (2009: Â£ 2,401.6m) of which Â£2,066.4m (2009: Â£2,328.2m) is committed. Of these committed facilities, Â£1,053.1m (2009: Â£1,745.2m) were utilised at 31 March 2010 leaving committed headroom of Â£1,013.3m (2009: Â£583.0m). Largely due to seasonality in the North American school bus business, committed headroom typically reduces during the financial year up to October and increases thereafter. Group Treasury policy requires a minimum of Â£175m of committed headroom at all times. During the year we continued our strategy to extend the maturity profile of our debt whilst reducing reliance on the bank market. In April 2009 we issued Â£350m of 12-year bonds and in September 2009 we issued Â£200m of 15-year bonds. Both these issues were significantly oversubscribed. As a result of these actions the Group's average debt maturity has been increased to 6.3 years (2009: 4.6 years). The Group's main revolving bank facilities expire in February 2012 and we are planning to implement replacement facilities well in advance. As the Group is a net borrower, we minimise cash and bank deposits, which arise principally in the UK Rail companies. The Group can only withdraw cash and bank deposits from the UK Rail companies on a permanent basis to the lower of retained profits or the amount determined by prescribed liquidity ratios. The Group does not enter into speculative financial transactions and uses only authorised financial instruments for certain risk management purposes. Interest rate risk The Group reduces exposure by using a combination of fixed rate debt and interest rate derivatives to achieve an overall fixed rate position over the medium term of between 75% and 100% of net debt. At 31 March 2010 100% (2009: 94%) of net debt was fixed and in excess of 70% of net debt is fixed for the next two years. Fuel price risk In the UK, crude oil costs were hedged at an average rate of $111 per barrel during the year. At the end of the year we have hedged 84% of our "at risk" UK crude requirements for the year to 31 March 2011 (2.5m barrels p.a.) at $76 per barrel and 31% of our requirements for the year to 31 March 2012 at $85 per barrel. In North America crude oil costs were hedged at an average rate of $116 per barrel during the year. At the end of the year we have hedged 88% of the "at risk" volume for the year to 31 March 2011 (1.7m barrels p.a.) at $89 per barrel. In addition we have hedged 38% of "at risk" volumes for the year to 31 March 2012 at $101 per barrel. Foreign currency risk Group policies on foreign currency risk affecting cash flow, profits and net assets are maintained to minimise exposures to the Group by using a combination of natural hedge positions and derivative instruments where appropriate. Translation risk relating to US Dollar earnings arising in the US is largely offset by US Dollar denominated costs incurred in the UK, principally UK fuel costs, US Dollar interest and tax costs so that exposure to EPS on a year to year basis is not significant. With regard to balance sheet translation risk, the Group hedges part of its exposure to the impact of exchange rate movements on translation of foreign currency net assets by holding currency swaps and net borrowings in foreign currencies. At 31 March 2010 foreign currency net assets were 63% (2009: 81%) hedged. Net debt The Group's net debt at 31 March 2010 was Â£2,281.5m (2009: Â£2,503.5m) and comprised: Fixed Variable Total 2009 Â£m Â£m Â£m Â£m Cash - (76.0) (76.0) (109.7) UK Rail ring-fenced cash and deposits - (234.2) (234.2) (184.8) Other ring-fenced cash and deposits - (24.8) (24.8) (28.0) Sterling bond (2013)1 297.5 - 297.5 296.9 Sterling bond (2018)2 350.7 - 350.7 364.9 Sterling bond (2019)2 - 294.2 294.2 305.9 Sterling bond (2021)2 341.3 - 341.3 - Sterling bond (2024)1 198.9 - 198.9 - Sterling bank loans and overdrafts - 10.5 10.5 117.8 US Dollar bank loans and overdrafts3 - 699.0 699.0 1,350.4 Canadian Dollar bank loans and overdrafts - 156.3 156.3 122.9 Euro and other bank loans and overdrafts - 30.2 30.2 27.8 HP contracts and finance leases 116.7 110.7 227.4 228.9 Loan notes 8.7 1.8 10.5 10.5 Interest rate swaps 1,006.8 (1,006.8) - - Total 2,320.6 (39.1) 2,281.5 2,503.5 1 excludes accrued interest 2 stated excluding accrued interest, swapped or partially swapped to US Dollars and adjusted for movements on associated derivatives 3 includes Â£46.2m of Euro bank loans swapped into US Dollars We are focused on reducing our leverage. At 31 March 2010 net debt to EBITDA was 2.96 times (March 2009: 3.24 times) and it is expected that this ratio will continue to decrease in the year to 31 March 2011. Shares in issue As at 31 March 2010 there were 480.2m shares in issue (2009: 480.8m), excluding treasury shares and own shares held in trust for employees of 1.9m (2009: 1.3m). The weighted average number of shares in issue for the purpose of basic EPS calculations (excluding treasury shares and own shares held in trust for employees) was 480.5m (2009: 474.8m). Total equity Total equity has increased by Â£106.2m since the start of the year. The principal reasons for this are an increase in the hedging reserve of Â£238.8m, retained profits of Â£147.1m partly offset by actuarial losses on defined benefit pension schemes, net of tax, of Â£150.7m, dividend payments of Â£112.2m and an unfavourable movement in the translation reserve of Â£18.8m. Foreign exchange The most significant exchange rates to Sterling for the Group, for Balance Sheet and Income Statement translation, were as follows: Year to Year to 31 March 2010 31 March 2009 Closing Effective Closing Effective rate rate rate rate US Dollar 1.49 1.57 1.43 1.63 Canadian Dollar 1.53 1.60 1.78 1.95 Pensions The net pension deficit, before deferred tax, of Â£169m at the beginning of the year has moved to a deficit of Â£331m at the end of the year principally due to a reduction in the discount rate from 6.75% to 5.60%, partly offset by improvements in asset returns over the period. The main factors that influence the net balance sheet deficit or surplus for pensions and the sensitivities to their movement are set out below: Movement Impact Discount rate + 0.1% Reduce deficit by Â£32m Inflation + 0.1% Increase deficit by Â£25m Seasonality The First Student business generates lower revenues and profits in the first half of our financial year than in the second half as the school summer holidays fall into the first half. Going concern The Group has established a strong balanced portfolio of businesses with approximately 50% of Group revenues secured under medium term contracts with government agencies and other large organisations in the UK and North America. The Group has a diversified funding structure with an average life of 6.3 years at March 2010, and which is largely represented by medium term unsecured syndicated committed bank facilities and long term unsecured bond debt. The Group has Â£505m and $1,500m of committed revolving banking facilities of which Â£1,013m was undrawn at the year end. These facilities expire in February 2012 and the Directors believe that there is every likelihood that they will be replaced by similar financing arrangements. The Directors have carried out a detailed review of the Group's budget for the year to 31 March 2011 and medium term plans, with due regard for the risks and uncertainties to which the Group is exposed, the uncertain economic climate and the impact that this could have on trading performance. Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis, and details of the going concern review are shown in the Directors' Report in the Group's Annual Report and Accounts. Jeff Carr Finance Director 12 May 2010 Consolidated income statement Year ended 31 March 2010 Notes Adjusted Adjustments2 Total Adjusted Adjustments2 Total results1 results1 2010 2010 2009 2009 2009 2010 Â£m Â£m Â£m Â£m Â£m Â£m Revenue 6,319.3 - 6,319.3 6,187.3 - 6,187.3 Operating costs before (5,865.4) (84.3) (5,949.7) (5,689.8) (152.1) (5,841.9) (loss)/profit on disposal of properties Operating profit before 453.9 (84.3) 369.6 497.5 (152.1) 345.4 (loss)/profit on disposal of properties Amortisation charges - (34.7) (34.7) - (33.1) (33.1) Non-recurring bid costs - (0.3) (0.3) - (3.5) (3.5) Other non-recurring - (49.3) (49.3) - (115.5) (115.5) items - (84.3) (84.3) - (152.1) (152.1) (Loss)/profit on - (1.1) (1.1) - 25.7 25.7 disposal of properties Operating profit 453.9 (85.4) 368.5 497.5 (126.4) 371.1 Investment income 1.8 - 1.8 7.9 - 7.9 Finance costs (191.7) 1.0 (190.7) (179.0) - (179.0) Profit before tax 264.0 (84.4) 179.6 326.4 (126.4) 200.0 Tax (59.1) 26.6 (32.5) (81.6) 38.6 (43.0) Profit for the year 204.9 (57.8) 147.1 244.8 (87.8) 157.0 Attributable to: Equity holders of the 189.7 (57.6) 132.1 230.9 (87.6) 143.3 parent Minority interests 15.2 (0.2) 15.0 13.9 (0.2) 13.7 204.9 (57.8) 147.1 244.8 (87.8) 157.0 Adjusted/basic earnings 3 39.5p (12.0)p 27.5p 48.6p (18.4)p 30.2p per share Adjusted/diluted 3 39.3p (12.0)p 27.3p 48.3p (18.3)p 30.0p earnings per share All results relate to continuing operations. Dividends of Â£93.1m (2009: Â£84.6m) were paid during the year. Dividends of Â£ 67.2m (2009: Â£61.1m) are proposed for approval in respect of the year. 1 Adjusted trading results before items noted in 2 below. 2 Amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties. Consolidated statement of comprehensive income Year ended 31 March 2010 2010 2009 restated1 Â£m Â£m Profit for the period 147.1 157.0 Other comprehensive income Derivative hedging instrument movements 339.2 (539.6) Deferred tax on derivative hedging instrument movements (100.4) 137.1 Exchange differences on translation of foreign operations (18.5) 409.6 Unrealised losses on executive deferred compensation plans (0.5) (3.1) Actuarial losses on defined benefit pension schemes (204.3) (308.3) Deferred tax on actuarial losses on defined benefit pension 53.6 102.2 schemes Other comprehensive income for the period 69.1 (202.1) Total comprehensive income for the period 216.2 (45.1) Attributable to: Equity holders of the parent 200.9 (60.7) Minority interests 15.3 15.6 216.2 (45.1) 1Amounts disclosed in the consolidated statement of recognised income and expense in 2009 have been restated to include foreign exchange movements on minority interests as explained in note 1. Consolidated balance sheet As at 31 March 2010 Notes 2010 2009 2008 Â£m restated1 restated1 Â£m Â£m Non-current assets Goodwill 4 1,754.9 1,820.0 1,310.1 Other intangible assets 5 415.9 456.7 367.5 Property, plant and equipment 6 2,284.1 2,398.1 1,919.8 Deferred tax assets 14 30.4 50.2 - Retirement benefit assets 3.1 111.5 186.2 Derivative financial instruments 13 33.0 24.8 45.4 Investments 4.8 5.1 4.0 4,526.2 4,866.4 3,833.0 Current assets Inventories 7 92.7 110.0 82.7 Trade and other receivables 8 602.5 610.3 590.2 Cash and cash equivalents 335.0 322.5 242.3 Assets held for sale 3.9 4.2 10.2 Derivative financial instruments 13 32.1 3.1 78.1 1,066.2 1,050.1 1,003.5 Total assets 5,592.4 5,916.5 4,836.5 Current liabilities Trade and other payables 9 1,120.0 1,124.7 1,035.8 Tax liabilities 36.1 47.2 46.8 Financial liabilities - bank overdrafts 10 - 210.7 26.4 and loans - bonds 10 73.3 36.0 23.2 - obligations under HP contracts and finance leases 11 34.6 34.3 32.4 - loan notes 12 0.8 - 4.6 Derivative financial instruments 13 85.2 304.5 36.9 1,350.0 1,757.4 1,206.1 Net current liabilities 283.8 707.3 202.6 Non-current liabilities Financial liabilities - bank loans 10 896.0 1,408.1 1,745.1 - bonds 10 1,414.1 870.2 545.9 - obligations under HP contracts and finance leases 11 192.8 194.6 70.8 - loan notes 12 9.7 10.5 10.5 Derivative financial instruments 13 121.1 243.6 27.8 Retirement benefit liabilities 333.9 280.2 97.2 Deferred tax liabilities 14 63.9 20.6 159.9 Provisions 15 300.4 327.0 268.4 3,331.9 3,354.8 2,925.6 Total liabilities 4,681.9 5,112.2 4,131.7 Net assets 910.5 804.3 704.8 Equity Share capital 16 24.1 24.1 21.9 Share premium 676.4 676.4 447.8 Hedging reserve (114.0) (352.8) 49.7 Other reserves 4.6 4.6 4.6 Own shares (6.5) (3.4) (7.6) Translation reserve 318.6 337.4 (70.3) Retained earnings (8.4) 98.5 245.5 Equity attributable to equity holders of 894.8 784.8 691.6 the parent Minority interests 15.7 19.5 13.2 Total equity 910.5 804.3 704.8 1Presentation of certain line items has been revised as explained in note 1. Consolidated statement of changes in equity Share Share Hedging Other Own Trans-lation Retained Total Minority Total capital premium reserve reserves shares reserve earnings Â£m interests equity Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5 691.6 13.2 704.8 April 2008 Total - - (402.5) - - 407.7 (65.9) (60.7) 15.6 (45.1) comprehensive income for the period Issue of 2.2 228.6 - - - - - 230.8 - 230.8 share capital Dividends - - - - - - (84.6) (84.6) (9.3) (93.9) paid Movement in - - - - 4.2 - (3.9) 0.3 - 0.3 Employee Benefit Trust and treasury shares Share-based - - - - - - 6.3 6.3 - 6.3 payments Deferred tax - - - - - - (1.7) (1.7) - (1.7) on share-based payments Current tax - - - - - - 0.1 0.1 - 0.1 on share-based payments Current tax - - - - - - 2.7 2.7 - 2.7 on foreign exchange movements Balance at 31 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5 784.8 19.5 804.3 March 2009 Total - - 238.8 - - (18.8) (19.1) 200.9 15.3 216.2 comprehensive income for the period Dividends - - - - - - (93.1) (93.1) (19.1) (112.2) paid Movement in - - - - (3.1) - (0.6) (3.7) - (3.7) Employee Benefit Trust and treasury shares Share-based - - - - - - 5.5 5.5 - 5.5 payments Deferred tax - - - - - - 0.4 0.4 - 0.4 on share-based payments Balance at 31 24.1 676.4 (114.0) 4.6 (6.5) 318.6 (8.4) 894.8 15.7 910.5 March 2010 Consolidated cash flow statement Year ended 31 March 2010 Note 2010 2009 Â£m restated1 Â£m Net cash from operating activities 17 452.3 494.4 Investing activities Interest received 1.6 9.0 Proceeds of disposal of property, plant and 35.6 54.7 equipment Purchases of property, plant and equipment (205.6) (320.2) Disposal of subsidiary 0.4 - Acquisition of businesses (0.1) (6.5) Net cash used in investing activities (168.1) (263.0) Financing activities Shares purchased by Employee Benefit Trust (6.1) - Monies received on exercise of share options 2.4 0.5 Dividends paid (93.1) (84.6) Dividends paid to minority shareholders (19.1) (9.3) Repayments under HP contracts and finance leases (30.0) (43.3) Repayment of loan notes - (4.6) Fees for bank facility amendments and bond (5.0) (10.4) issues Proceeds from sale and leaseback of buses - 70.3 Net proceeds from issue of share capital - 230.8 Repayment of bank debt (707.4) (1,062.4) Proceeds from existing bank facilities 40.5 6.4 Proceeds from new bank facilities - 436.1 Proceeds from bond issues 550.0 300.0 Net cash flow from financing activities (267.8) (170.5) Net increase in cash and cash equivalents before 16.4 60.9 foreign exchange movements Cash and cash equivalents at beginning of year 322.5 239.7 Foreign exchange movements (3.9) 21.9 Cash and cash equivalents at end of year 335.0 322.5 Cash and cash equivalents are all included within current assets on the consolidated balance sheet. 1 Restated to show proceeds of bond issues on a gross basis as explained in note 1. Note to the consolidated cash flow statement - reconciliation of net cash flows to movement in net debt Year ended 31 March 2010 2010 2009 Â£m Â£m Increase in cash and cash equivalents in year before 16.4 60.9 foreign exchange movements Decrease in debt and finance leases 146.9 369.8 Inception of new HP contracts and finance leases (32.0) (155.9) Debt assumed on acquisition of businesses and - (1.3) subsidiary undertakings Fees capitalised against bank facilities and bond 5.0 8.4 issues Other non-cash movements in relation to financial (4.6) (9.5) instruments Foreign exchange movements 90.3 (614.9) Movement in net debt in year 222.0 (342.5) Net debt at beginning of year (2,503.5) (2,161.0) Net debt at end of year (2,281.5) (2,503.5) 1. General information The financial information set out above does not constitute the Company's Statutory Accounts for the year ended 31 March 2010 or 2009, but is derived from those accounts. Statutory Accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on both sets of accounts; their reports were unqualified and did not contain statements under section 498 (2), (3) or (4) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not in itself contain sufficient information to comply with IFRSs. The financial information has been prepared on the basis of the accounting policies as set out in the Statutory Accounts for 2009. The Directors have revised the balance sheet presentation of assets classified as held for sale to be shown within current assets and retirement benefit assets and deferred tax assets are now included as non-current assets. Prior year balance sheets have also been revised. The Directors have revised the consolidated cash flow statement for the year to 31 March 2009 to show proceeds from bond issues on a gross basis with an equal increase in fees for bond issue costs. The Directors have also revised the presentation of minority interests in the consolidated statement of comprehensive income to include foreign exchange gains and losses on translation of foreign minority interests. None of these revisions to the balance sheet have impacted the Group's net assets or the minority interests in the Group. Copies of the Statutory Accounts for the year ended 31 March 2010 will be available to all shareholders in early June and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP. 2. Business segments The segment results for the year to 31 March 2010 are as follows: UK Bus UK Rail North Greyhound Group Total America items2 Â£m Â£m Â£m Â£m Â£m Â£m Revenue 1,170.6 2,188.4 2,333.7 603.3 23.3 6,319.3 EBITDA 200.2 147.6 386.4 52.6 (17.2) 769.6 Depreciation (75.6) (55.0) (152.5) (28.7) (3.9) (315.7) Segment results1 124.6 92.6 233.9 23.9 (21.1) 453.9 Amortisation charges - (7.1) (24.6) (3.0) - (34.7) Non-recurring bid costs - - - - (0.3) (0.3) Other non-recurring (6.8) (2.5) (28.1) (8.1) (3.8) (49.3) items (Loss)/profit on (1.3) - - 0.2 - (1.1) disposal of properties Operating profit 116.5 83.0 181.2 13.0 (25.2) 368.5 Investment income 1.8 Finance costs (191.7) Hedge ineffectiveness on 1.0 financial derivatives Profit before tax 179.6 Tax (32.5) Profit for the year 147.1 1 Segment results are defined as operating profit before amortisation charges, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties. 2Group items comprise Tram operations, German Bus, central management and other items. The segment results for the year to 31 March 2009 are as follows: UK Bus UK Rail North Greyhound Group Total America items2 Â£m Â£m Â£m Â£m Â£m Â£m Revenue 1,182.0 2,121.5 2,224.1 642.4 17.3 6,187.3 EBITDA 205.4 137.2 374.2 76.6 (21.2) 772.2 Depreciation (71.4) (43.0) (128.1) (28.1) (4.1) (274.7) Segment results1 134.0 94.2 246.1 48.5 (25.3) 497.5 Amortisation charges - (7.1) (23.1) (2.9) - (33.1) Non-recurring bid costs - - - - (3.5) (3.5) Other non-recurring (9.5) (12.7) (70.1) (23.2) - (115.5) items Profit on disposal of 9.2 - 3.0 13.5 - 25.7 properties Operating profit 133.7 74.4 155.9 35.9 (28.8) 371.1 Investment income 7.9 Finance costs (179.0) Profit before tax 200.0 Tax (43.0) Profit for the year 157.0 1 Segment results are defined as operating profit before amortisation charges, non-recurring bid costs, other non-recurring items and profit on disposal of properties. 2Group items comprise Tram operations, German Bus, central management and other items. 3. Earnings per share (EPS) EPS is calculated by dividing the profit attributable to equity shareholders of Â£132.1m (2009: Â£143.3m) by the weighted average number of ordinary shares of 480.5m (2009: 474.8m). The numbers of ordinary shares used for the basic and diluted calculations are shown in the table below. The difference in the number of shares between the basic calculation and the diluted calculation represents the weighted average number of potentially dilutive ordinary share options. 2010 2009 No. No. m m Weighted average number of shares used in basic 480.5 474.8 calculation SAYE share options 0.2 0.6 Executive share options 2.5 2.6 Weighted average number of shares used in diluted 483.2 478.0 calculation Diluted EPS 2010 2009 pence pence Diluted EPS 27.3 30.0 Adjusted diluted EPS 39.3 48.3 3. Earnings per share (EPS) (continued) The adjusted basic EPS and adjusted cash EPS are intended to highlight the recurring results of the Group before amortisation charges, non-recurring bid costs, other non-recurring items and loss/(profit) on disposal of properties. A reconciliation of the earnings used in these bases is set out below: 2010 2009 Â£m Earnings Â£m Earnings per share per share (p) (p) Profit for basic EPS calculation 132.1 27.5 143.3 30.2 Amortisation charges1 34.5 7.2 32.9 6.9 Non-recurring bid costs 0.3 0.1 3.5 0.7 Other non-recurring items 49.3 10.3 115.5 24.3 Loss/(profit) on disposal of properties 1.1 0.2 (25.7) (5.4) Hedge ineffectiveness on financial (1.0) (0.2) - - derivatives Tax effect of adjustments (26.6) (5.6) (53.8) (11.3) Non-recurring tax charge 2 - - 15.2 3.2 Profit for adjusted basic EPS 189.7 39.5 230.9 48.6 calculation Depreciation3 314.9 65.5 273.6 57.7 Profit for adjusted cash EPS 504.6 105.0 504.5 106.3 calculation4 1 Amortisation charges of Â£34.7m per note 5 less Â£0.2m (2009: Â£33.1m less Â£ 0.2m) attributable to equity minority interests. 2 Tax charge in 2009 arising on abolition of Industrial Buildings Allowances in the UK. 3 Depreciation charge of Â£315.7m per note 6 less Â£0.8m (2009: Â£274.7m less Â£ 1.1m) attributable to equity minority interests. 4 Excludes working capital movements. 4. Goodwill 2010 2009 2008 Â£m Â£m Â£m Cost At 1 April 1,820.0 1,310.1 468.8 Additions - 6.5 829.0 Reclassifications (to)/from other intangible - (9.1) 3.0 assets (note 5) Foreign exchange movements (65.1) 512.5 9.3 At 31 March 1,754.9 1,820.0 1,310.1 Accumulated impairment losses At 31 March - - - Carrying amount At 31 March 1,754.9 1,820.0 1,310.1 5. Other intangible assets Customer Greyhound brand Rail Total contracts and trade name franchise Â£m Â£m Â£m agreements Â£m Cost At 1 April 2009 412.1 65.9 56.3 534.3 Foreign exchange movements (4.5) 0.1 - (4.4) At 31 March 2010 407.6 66.0 56.3 529.9 Amortisation At 1 April 2009 44.6 5.0 28.0 77.6 Charge for year 24.6 3.0 7.1 34.7 Foreign exchange movements 1.4 0.3 - 1.7 At 31 March 2010 70.6 8.3 35.1 114.0 Carrying amount At 31 March 2010 337.0 57.7 21.2 415.9 Customer Greyhound brand Rail Total contracts and trade name franchise Â£m Â£m Â£m agreements Â£m Cost At 1 April 2008 297.4 49.2 56.3 402.9 Reclassifications to 9.1 - - 9.1 goodwill1 Foreign exchange movements 105.6 16.7 - 122.3 At 31 March 2009 412.1 65.9 56.3 534.3 Amortisation At 1 April 2008 13.3 1.2 20.9 35.4 Charge for year 23.1 2.9 7.1 33.1 Foreign exchange movements 8.2 0.9 - 9.1 At 31 March 2009 44.6 5.0 28.0 77.6 Carrying amount At 31 March 2009 367.5 60.9 28.3 456.7 At 1 April 2008 284.1 48.0 35.4 367.5 1 The reclassification of contracts acquired shown above related to reassessments of provisional values within twelve months of acquisition during the year to 31 March 2009. These amounts have been reclassified from goodwill (note 4). 6. Property, plant and equipment Land and Passenger Other Total buildings carrying plant and Â£m Â£m vehicle equipment fleet Â£m Â£m Cost At 1 April 2009 531.5 2,598.1 514.4 3,644.0 Additions in the year 24.7 161.6 65.4 251.7 Disposals (4.7) (86.4) (23.1) (114.2) Transfers 5.0 (1.5) (3.5) - Reclassified as held for - (23.6) - (23.6) sale Foreign exchange movements (1.3) (3.9) (3.3) (8.5) At 31 March 2010 555.2 2,644.3 549.9 3,749.4 Accumulated depreciation and impairment At 1 April 2009 51.6 974.7 219.6 1,245.9 Charge for year 13.9 231.5 70.3 315.7 Disposals (1.6) (59.2) (20.5) (81.3) Transfers 4.2 (1.4) (2.8) - Reclassified as held for - (20.1) - (20.1) sale Foreign exchange movements 0.4 5.4 (0.7) 5.1 At 31 March 2010 68.5 1,130.9 265.9 1,465.3 Carrying amount At 31 March 2010 486.7 1,513.4 284.0 2,284.1 Land and Passenger Other Total buildings carrying plant and Â£m Â£m vehicle equipment fleet Â£m Â£m Cost At 1 April 2008 417.9 1,981.7 413.0 2,812.6 Subsidiary undertakings and - 2.2 0.1 2.3 businesses acquired Additions in the year 48.9 276.5 105.0 430.4 Disposals (13.7) (33.7) (36.7) (84.1) Reclassified as held for - (19.3) - (19.3) sale Foreign exchange movements 78.4 390.7 33.0 502.1 At 31 March 2009 531.5 2,598.1 514.4 3,644.0 Accumulated depreciation and impairment At 1 April 2008 35.3 700.8 156.7 892.8 Charge for year 14.3 201.3 59.1 274.7 Disposals (2.0) (32.6) (13.5) (48.1) Reclassified as held for - (14.9) - (14.9) sale Foreign exchange movements 4.0 120.1 17.3 141.4 At 31 March 2009 51.6 974.7 219.6 1,245.9 Carrying amount At 31 March 2009 479.9 1,623.4 294.8 2,398.1 At 1 April 2008 382.6 1,280.9 256.3 1,919.8 7. Inventories 2010 2009 2008 Â£m Â£m Â£m Spare parts and consumables 91.5 108.0 75.3 Property development work in progress 1.2 2.0 7.4 92.7 110.0 82.7 8. Trade and other receivables 2010 2009 2008 Â£m Â£m Â£m Amounts due within one year Trade receivables 462.2 461.8 429.8 Provision for doubtful receivables (6.5) (8.8) (5.0) Other receivables 57.3 67.2 95.1 Other prepayments and accrued income 89.5 90.1 70.3 602.5 610.3 590.2 9. Trade and other payables 2010 2009 2008 Â£m Â£m Â£m Amounts falling due within one year Trade payables 288.9 314.5 247.6 Other payables 145.1 129.2 115.7 Accruals and deferred income 627.5 623.0 616.3 Season ticket deferred income 58.5 58.0 56.2 1,120.0 1,124.7 1,035.8 10. Financial liabilities - borrowings 2010 2009 2008 Â£m Â£m Â£m Current financial liabilities Short-term bank loans - 210.7 23.8 Bank overdrafts - - 2.6 - 210.7 26.4 Bond 6.875% (repayable 2013) - accrued 20.2 20.2 20.2 interest Bond 6.125% (repayable 2019) - accrued 3.0 3.0 3.0 interest Bond 8.125% (repayable 2018) - accrued 12.8 12.8 - interest Bond 8.75% (repayable 2021) - accrued 30.1 - - interest Bond 6.875% (repayable 2024) - accrued 7.2 - - interest 73.3 36.0 23.2 HP contracts and finance leases (note 11) 34.6 34.3 32.4 Loan notes (note 12) 0.8 - 4.6 Total current financial liabilities 108.7 281.0 86.6 Non-current financial liabilities Syndicated and bilateral unsecured bank 896.0 1,406.6 1,742.3 loans Other loans - 1.5 2.8 896.0 1,408.1 1,745.1 Bond 6.875% (repayable 2013) 297.4 296.9 296.6 Bond 6.125% (repayable 2019) 274.8 277.3 249.3 Bond 8.125% (repayable 2018) 296.2 296.0 - Bond 8.75% (repayable 2021) 346.8 - - Bond 6.875% (repayable 2024) 198.9 - - 1,414.1 870.2 545.9 HP contracts and finance leases (note 11) 192.8 194.6 70.8 Loan notes (note 12) 9.7 10.5 10.5 Total non-current financial liabilities 2,512.6 2,483.4 2,372.3 Total financial liabilities 2,621.3 2,764.4 2,458.9 Gross borrowings repayment profile Within one year or on demand 108.7 281.0 86.6 Between one and two years 607.4 44.9 1,387.1 Between two and five years 720.4 1,798.3 438.3 Over five years 1,184.8 640.2 546.9 2,621.3 2,764.4 2,458.9 11. HP contracts and finance leases The Group had the following obligations under HP contracts and finance leases as at the balance sheet dates: 2010 2010 2009 2009 2008 2008 Minimum PV of Minimum PV of Minimum PV of payments payments payments payments payments payments Â£m Â£m Â£m Â£m Â£m Â£m Maturing in less than one 40.2 34.6 39.0 34.3 34.8 32.4 year Maturing in more than one 42.7 37.8 37.0 33.1 19.8 18.9 year but not more than two years Maturing in more than two 97.2 86.9 103.1 95.0 51.3 50.9 years but not more than five years Maturing in more than five 71.6 68.1 69.0 66.5 1.0 1.0 years 251.7 227.4 248.1 228.9 106.9 103.2 Less future financing (24.3) - (19.2) - (3.7) - charges Present value of minimum 227.4 227.4 228.9 228.9 103.2 103.2 lease payments 12. Loan notes The Group had the following loan notes issued as at the balance sheet dates: 2010 2009 2008 Â£m Â£m Â£m Due in less than one year 0.8 - 4.6 Due in more than one year but not more than 9.7 10.5 10.5 two years Total 10.5 10.5 15.1 13. Derivative financial instruments 2010 2009 2008 Â£m Â£m Â£m Derivatives designated and effective as hedging instruments carried at fair value Non-current assets Cross currency swaps (net investment hedge) 13.3 - 23.9 Coupon swaps (fair value hedge) 15.7 19.9 1.5 Fuel derivatives (cash flow hedge) 4.0 3.1 20.0 33.0 23.0 45.4 Current assets Cross currency swaps (net investment hedge) 3.6 0.9 10.5 Coupon swaps (fair value hedge) 10.6 2.1 - Fuel derivatives (cash flow hedge) 15.7 - 67.6 29.9 3.0 78.1 Current liabilities Interest rate swaps (cash flow hedge) 42.9 50.4 26.7 Cross currency swaps (net investment hedge) 2.9 2.0 - Coupon swaps (fair value hedge) - - 7.4 Fuel derivatives (cash flow hedge) 39.4 252.1 - Currency forwards (cash flow hedge) - - 0.5 85.2 304.5 34.6 Non-current liabilities Interest rate swaps (cash flow hedge) 10.7 38.1 27.8 Cross currency swaps (net investment hedge) 91.9 123.6 - Fuel derivatives (cash flow hedge) 18.5 81.9 - 121.1 243.6 27.8 Derivatives classified as held for trading Non-current assets Cross currency swaps - 1.8 - Current assets Cross currency swaps 2.2 0.1 - Current liabilities Interest rate collars - - 2.3 Total non-current assets 33.0 24.8 45.4 Total current assets 32.1 3.1 78.1 Total assets 65.1 27.9 123.5 Total current liabilities 85.2 304.5 36.9 Total non-current liabilities 121.1 243.6 27.8 Total liabilities 206.3 548.1 64.7 14. Deferred tax The major deferred tax liabilities and (assets) recognised by the Group and movements thereon during the current and prior reporting periods are as follows: Accelerated Other Tax Total temporary tax differences losses Â£m depreciation Â£m Â£m Â£m At 1 April 2008 248.9 70.8 (159.8) 159.9 Charge/(credit) to income 49.1 42.7 (56.1) 35.7 Credit to equity - (237.6) - (237.6) Foreign exchange movements 61.7 5.6 (54.9) 12.4 At 31 March 2009 359.7 (118.5) (270.8) (29.6) Charge/(credit) to income (39.9) 58.5 8.5 27.1 Charge to equity - 46.4 - 46.4 Foreign exchange movements (10.0) (2.5) 2.1 (10.4) At 31 March 2010 309.8 (16.1) (260.2) 33.5 Certain deferred tax (assets) and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) and for financial reporting purposes. 2010 2009 2008 Â£m Â£m Â£m Deferred tax assets (30.4) (50.2) - Deferred tax liabilities 63.9 20.6 159.9 33.5 (29.6) 159.9 15. Provisions 2010 2009 2008 Â£m Â£m Â£m Insurance claims 243.9 262.0 208.1 Legal and other 51.4 59.5 54.4 Pensions 5.1 5.5 5.9 Non-current 300.4 327.0 268.4 Insurance Legal and Pensions Total other Claims Â£m Â£m Â£m Â£m At 1 April 2009 262.0 59.5 5.5 327.0 Provided in the year 133.7 3.6 - 137.3 Utilised in the year (161.4) (17.8) (0.4) (179.6) Transfer from current - 8.2 - 8.2 liabilities Notional interest 17.5 - - 17.5 Foreign exchange movements (7.9) (2.1) - (10.0) At 31 March 2010 243.9 51.4 5.1 300.4 16. Called up share capital 2010 2009 2008 Â£m Â£m Â£m Authorised: 650m (2009: 650m; 2008: 4,600m) ordinary shares 32.5 32.5 230.0 of 5p each Allotted, called up and fully paid: 482.1m (2009: 482.1m; 2008: 438.3m) ordinary 24.1 24.1 21.9 shares of 5p each No. Â£m m At 1 April 2008 438.3 21.9 At 31 March 2010 and 31 March 2009 482.1 24.1 17. Net cash from operating activities 2010 2009 Â£m Â£m Operating profit before profit on disposal of properties 369.6 345.4 Adjustments for: Depreciation charges 315.7 274.7 Amortisation charges 34.7 33.1 Share-based payments 5.5 6.3 Loss on disposal of plant and equipment 0.8 3.2 Operating cash flows before working capital 726.3 662.7 Decrease/(increase)in inventories 14.8 (17.2) (Increase)/decrease in receivables (5.4) 114.7 Decrease in payables (54.8) (34.0) Decrease in provisions (34.1) (35.8) Defined benefit pension payments in excess of income (42.1) (50.7) statement charge Cash generated by operations 604.7 639.7 Corporation tax paid (1.3) (8.9) Interest paid (142.9) (129.0) Interest element of HP contracts and finance leases (8.2) (7.4) Net cash from operating activities 452.3 494.4 Responsibility Statement of the Directors on the Annual Report The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 31 March 2010. Certain parts thereof are not included within this announcement. We confirm to the best of our knowledge: * the Company and Group financial statements, prepared in accordance with UK GAAP and IFRS respectively, give a true and fair view of the assets, liabilities, financial position and profit of the Company and Group taken as a whole; and * the Directors Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties they face. This responsibility statement was approved by the Board of Directors on 12 May 2010 and was signed on its behalf by: Sir Moir Lockhead Jeff Carr Chief Executive Finance Director

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