Final Results

Embargoed until 07:00hrs on Wednesday 23 May 2012 FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2012 Overall trading for the Group in 2011/12 in line with our expectations; net cash inflow of Â£119.2m * First Student - now well set on path to recovery; plan delivering in line with targets, stabilised operating margin in H2 * First Transit - continued good returns from low capital requirements and established credentials * Greyhound - business is now transformed, strong growth with operating profit more than doubled over last 2 years * UK Rail - solid performance; entering transition period for UK rail, only operator shortlisted for all four of the current competitions * UK Bus - steady performance during year; expect margins in 2012/13 to be significantly affected by deteriorating economic conditions particularly in the North of England and Scotland and reduced funding to the industry; executing comprehensive plan to reposition the portfolio and restore performance * Dividend increase of 7.0% in line with current policy 2012 2011 Change Continuing operations1: Restated 2 Revenue Â£6,678.7m Â£6,416.7m +4.1% Adjusted EBITDA3 Â£742.9m Â£768.9m (3.4)% Operating profit Â£448.0m Â£308.6m +45.2% Adjusted operating profit4 Â£428.5m Â£456.7m (6.2)% Profit before tax Â£279.9m Â£126.5m +121.3% Adjusted profit before tax4 Â£271.4m Â£274.3m (1.1)% Basic EPS 42.7p 20.0p +113.5% Adjusted basic EPS4 40.0p 41.1p (2.7)% Full year dividend 23.67p 22.12p +7.0% Net debt5 Â£1,837.5m Â£1,949.4m (5.7)% 1 For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year. 2 Restated to exclude discontinued operations and incorporating a revised calculation of EBITDA as explained in note 1 to the preliminary results announcement. 3 Adjusted operating profit less capital grant amortisation plus depreciation. 4 Before amortisation charges, ineffectiveness on financial derivatives, exceptional items, profit/(loss) on disposal of properties and discontinued operations. All references to `adjusted' figures throughout this document are defined in this way. 5 Net debt is stated excluding accrued bond interest. Commenting, FirstGroup's Chief Executive, Tim O'Toole said: We have a fundamentally strong and diverse portfolio of operations with four out of five of our divisions performing in line with our expectations and actions we have taken will lead to improved growth and returns. Notwithstanding the steady performance from our UK Bus division in 2011/12 we have seen a further deterioration of economic conditions particularly in our urban operations in Scotland and the North of England. As result, we do not expect revenue growth and cost efficiencies in 2012/13 to be sufficient to offset the impact of reduced government subsidies and funding to the industry, which are more acute than originally estimated, and increased fuel costs. In response we are accelerating a comprehensive plan that will deliver sustainable growth in revenue and patronage and improved returns. This includes repositioning our UK Bus portfolio through a programme of business and asset disposals to focus on those areas where the greatest potential for growth exists. Our North American operations continue to progress and we believe that improving trends in the US economy will be positive for our businesses. First Student is now well set on the path to recovery with our plan to reform the business delivering in line with our expectations. First Transit delivers good returns from typically low capital investment which is underpinned by its established credentials and strong track record. Greyhound's enhanced performance from a transformed operating model demonstrates our ability to implement the necessary actions to deliver strong growth and margin improvement. The UK rail market is in a period of transition with eight franchises due to be let by the Government over the next two years. We are the only operator to have pre-qualified for all four of the rail franchises that have come to the market so far and we believe we are well placed to progress opportunities from the refranchising programme. The combined effect of the outlook for trading together with the actions to reposition the UK Bus portfolio is expected to result in the Group's net cash flow being broadly neutral in 2012/13. Our market leading positions in a sector that is a key enabler of economic growth together with the actions we are taking to strengthen the business give the Board confidence that the Group has good prospects to deliver long term value for shareholders. Therefore, reflecting our longer term view, the Board remains committed to its current policy of dividend growth of 7.0% through to the end of the financial year 2012/13. Contacts: FirstGroup plc: Tim O'Toole, Chief Executive Nick Chevis, Acting Finance Director Tel: +44 (0) 20 7291 0512 Rachael Borthwick, Corporate Communications Director Tel: +44 (0) 20 7291 0508 / +44 (0) 7771 945432 Brunswick Group: Mike Harrison, Tel: +44 (0) 20 7404 5959 A PRESENTATION TO INVESTORS AND ANALYSTS WILL TAKE PLACE AT 9:00AM TODAY ATTENDANCE IS BY INVITATION ONLY A LIVE TELEPHONE `LISTEN IN' FACILITY IS AVAILABLE, FOR DETAILS PLEASE CONTACT +44 (0) 20 7291 0512 A PLAYBACK FACILITY WILL BE MADE AVAILABLE AT WWW.FIRSTGROUP.COM PHOTOS FOR THE MEDIA CAN BE OBTAINED BY CALLING +44 (0) 20 7291 0512 Chairman's statement The Group, which has grown rapidly through a programme of acquisitions over the past 20 years, is going through an important phase in its development. Under the leadership of Tim O'Toole there is a resolute focus to drive greater operating performance and discipline; increase management capability and to harness our vast knowledge and expertise to attract customers in ever greater numbers through the consistent and reliable provision of high quality, value for money services. During the year our portfolio continued to provide diversity with separate businesses moving at different stages through the economic cycle. While addressing the challenges of the current trading environment in certain markets in which we operate, management has a clear focus to create a stronger business and is taking the necessary action to ensure the Group is firmly placed to deliver sustainable growth for the longer term. We continue to prioritise cash generation to support capital investment, debt reduction and dividend growth. Notwithstanding the period of transition in UK Rail and the impact of the current weak economic environment and reduced Government funding to the industry on our UK Bus business, the Group maintains market leading positions and across our operations we are taking action to strengthen our businesses for the future. We are the only operator to have pre-qualified for all four of the rail franchises that have come to the market so far and believe that we are well placed to develop these and future opportunities from refranchising. Therefore, at this time and reflecting our longer term view, the Board remains committed to its current policy of dividend growth through to the end of the financial year 2012/13. The Board has proposed a final dividend per share, subject to approval by shareholders, of 16.05p, an increase of 7.0% making a full year payment of 23.67p. The dividend is covered 1.7 times by adjusted basic EPS and will be paid on 17 August 2012 to shareholders on the register at 13 July 2012. On 14 May 2012 we announced the appointment of Chris Surch as Group Finance Director replacing Jeff Carr, who left the Group in November to take up the role of Chief Financial Officer of Royal Ahold NV based in the Netherlands. Chris joins us from Shanks Group plc where he has been Group Finance Director since May 2009. Prior to joining Shanks he held senior financial roles at Smiths Group plc and TI Group plc. He began his career at PricewaterhouseCoopers where he qualified as an accountant. Together with a strong track record of financial leadership and budgetary planning, he has extensive operational, strategic and international experience. I am delighted to welcome Chris to the Board of FirstGroup and I am confident that his considerable experience and record of achievement will be of great benefit to the Group. It is anticipated that he will join the Group on 1 September 2012. We are grateful to Nick Chevis for his support and valuable contribution as Acting Finance Director. We are reviewing Board composition and a formal international search process is underway to recruit additional fully independent Non-Executive Directors to further strengthen the Board and support the Group through this important stage of its development. During the year the following Board changes took place. Sid Barrie, Commercial Director, retired at the end of March. Having joined the Board in 2005 he had a long association with the Group, in an advisory capacity, going back to the original employee buy-out of GRT Bus Group PLC and played a significant part in the success of the Group over many years. We thank him for his contribution and wish him a long and happy retirement. Audrey Baxter, Independent Non-Executive Director, stepped down from the Board on 31 December 2011. We thank Audrey for her support and advice since she joined the Board in 2006 and we wish her every success for the future. Mick Barker joined the Board on 1 January 2012 as Non-Executive Employee Director, replacing Martyn Williams who retired from the role at the end of his term on 31 December 2011. We thank Martyn for his important contribution and also welcome Mick to his new role. I am confident that he will continue to provide the valuable input to the Board on behalf of the Group's employees. Finally on behalf of the Board I would like to extend our sincere thanks and gratitude to our employees across the UK and North America. Their professionalism and ongoing commitment to serving the 2.5 billion passengers that we transport each year is vital to our success now and for the future. Notwithstanding the prolonged period of economic uncertainty and the impact of challenging trading conditions in certain areas in which we operate, the Group has leading positions in its core markets. With experienced management that is focused on creating a stronger business for the future, the Board is confident that the Group is well positioned to deliver sustainable long term value for shareholders. Martin Gilbert Chairman 23 May 2012 * Operating profit referred to throughout this document refers to operating profit before amortisation charges, ineffectiveness on financial derivatives, exceptional items,profit/(loss)on disposal of properties and discontinued operations. EBITDA is operating profit less capital grant amortisation plus depreciation. Operating and Financial review Against the backdrop of continued economic uncertainty and the impact of weaker economic conditions in certain markets in which we operate, we have taken action to address specific issues, improve performance and strengthen the business. * In First Student, which faced substantial pressure on its operating margin driven by constraints on school board budgets, we have implemented a comprehensive programme to reform the operating model and the business is now well set on the path to recovery. * As a result of actions we took to transform the business and strengthen the operating model, Greyhound is now delivering strong growth and improved returns, with operating profit more than doubled over the last two years. * First Transit continues to generate good returns from low capital investment across a range of business segments and is established in a sector that depends on proven credentials and a strong track record. * In UK Rail, as we transition to a new generation of rail franchises, we are encouraged to be the only operator to have pre-qualified for all four franchises that the Government has tendered so far. We look forward to submitting competitive proposals which meet the requirements of customers and taxpayers and provide an economic return for shareholders. * Notwithstanding the steady performance from our UK Bus division in 2011/12 we have seen a further deterioration of economic conditions particularly in our urban operations in Scotland and the North of England and, as a result, we do not expect revenue growth and cost efficiencies in 2012/13 to be sufficient to offset the impact of reduced government subsidies and funding to the industry, which are more acute than originally estimated, and increased fuel costs. New management in our UK Bus division has a clear strategy and is executing a detailed plan to recover performance and equip the business to achieve increased revenue and patronage growth. This will include repositioning our UK Bus portfolio which, together with a transformed approach to the management of our operations, will create a far more robust base from which to generate improved returns and sustainable growth. * The Group is committed to its public investment grade credit rating which it has maintained since 2002. Since March 2009 we have consistently driven down leverage, reducing our net debt: EBITDA ratio from 3.2 times at March 2009 to 2.5 times at March 2012. We are focused on further leverage reduction to increase financial flexibility. The Group has significant levels of liquidity headroom and maintains prudent levels of headroom under its financial covenants. Group revenue increased by 4.1% to Â£6,678.7m (2011: Â£6,416.7m), or 2.9% excluding the extra week of trading. Operating profit was Â£428.5m (2011: Â£ 456.7m) reflecting the expected reduction in First Student and UK Bus profits partly offset by higher profits in Greyhound and UK Rail. All of our operating divisions experienced higher fuel costs during the year, which amounted to an additional Â£31.8m compared to prior year. Statutory operating profit increased to Â£448.0m (2011: Â£308.6m) reflecting lower levels of net exceptional items compared to last year. Adjusted basic EPS was 40.0p (2011: 41.1p) a reduction of 2.7% with the reduction in operating profit partially offset by lower net finance costs due to lower interest rates on US Dollar denominated debt. The net cash inflow for the year was Â£119.2m (2011: Â£209.8m). As expected, the net debt to EBITDA ratio was 2.5 times, in line with last year. The average debt duration at 31 March 2012 was 5.5 years (2011: 6.1 years) and headroom under the committed revolver facility was Â£631.8m (2011: Â£526.7m) and free cash balances were Â£164.0m (2011: Â£89.4m). Year to 31 Year to 31 March 20121 March 2011 4 Operating Operating Operating Operating Revenue profit2 margin2 Revenue profit2 margin2 Divisional results Â£m Â£m % Â£m Â£m % First Student 1,567.2 107.1 6.8 1,594.4 128.3 8.0 First Transit 778.6 55.8 7.2 57.2 771.5 7.4 Greyhound 50.6 7.7 40.2 657.2 634.6 6.3 UK Bus 1,157.2 134.4 11.6 1,137.5 148.8 13.1 UK Rail 2,506.1 110.5 4.4 2,269.8 108.7 4.8 Group3 12.4 (29.9) (26.5) - 8.9 - Total Group 6,678.7 428.5 6.4 6,416.7 456.7 7.1 1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year. 2Adjusted. 3Tram operations, central management and other items. 4 Restated to exclude discontinued operations. First Student In First Student our plan to address performance and strengthen the operating model is delivering in line with our expectations and we are pleased with the good progress made so far. The annual cost savings as a result of our recovery plan are now expected to be around $100m, exceeding our original target of $65m per annum. Trading has developed in line with our expectations with revenue of $2,497.9m or Â£1,567.2m (2011: $2,480.2m or Â£1,594.4m), an increase of 0.7% in US Dollars but a reduction of 1.7% in Sterling terms. Adjusting for the extra week US Dollar revenues were reduced by 1.3% year on year. Operating profit was $169.5m or Â£107.1m (2011: $200.2m or Â£128.3m). The reduction in operating profit included additional one-time costs including, as anticipated, a field management coaching programme supporting the good momentum in the recovery plan. The US Dollar operating margin in the second half of the year was 11.5% compared with 11.4% for the corresponding period last year, indicating a stabilisation in line with our expectations. Pressure on school board budgets continues to present challenges although we are encouraged by signs of wider economic recovery in the US. During the current bid season we have continued to see more rational bidding behaviour in the marketplace. Our strategy to strengthen our commercial team, focus on contract retention and reduce contract churn in our portfolio continues to deliver a performance in line with our plan and we are on track to achieve our target retention rate of over 90%. During the year we started new contracts to operate more than 1,000 buses, one third of which came from conversions, where operations are transferred to the outsourced market for the first time. Conversion interest continues to increase during the current bid season and we are seeing record levels of activity. However, as the pace of conversions industry-wide remains slow, we continue to focus our activity in those areas where there is greatest potential. As part of the recovery programme we have introduced improvements in working practices and culture across many areas of the business, helping us to deliver on our objectives and embed a standard way of operating across our business. As we harmonise best practices across almost 600 locations we are delivering a more agile and sustainable operating model. We have removed a layer of organisational management, providing closer links between the local operations and central management team, and continue to streamline systems to reduce bureaucracy. Through this period of change we were pleased to receive a record number of responses to our annual customer survey with an increase in overall satisfaction scores. A key goal within our transformation of the business is the improvement in labour productivity. Across all our locations we are driving full adoption of a range of initiatives to ensure greater efficiency, accuracy and fairness. For example, applying best practices to the pre-trip inspections performed by drivers has reduced time taken and saved on average five minutes per driver, per location, per day throughout the business, achieving a cost reduction of $2m for each minute saved. We have enhanced our FOCUS software system to enable greater productivity savings. This proprietary system, which links on-board data with engineering, payroll and back office systems, allows us to manage standard driving hours more accurately as well as eliminate excess miles and reduce non-driving time. We will also be utilising GPS software to help us to encourage improved driving behaviour and practices; reduce fuel usage and provide customers with direct access to real time information and performance metrics. We are also driving efficiency improvements across the business. In the key areas of engineering and maintenance we have worked with our technicians to reorganise our workshop layouts for maximum efficiency. Two lean reference workshops have now been created in each of our operating regions with training to support a unified direction with more efficient and consistent practices. As a result we are now saving on average 12 minutes per preventative maintenance inspection, of which we perform over 200,000 a year. Initiatives such as lean practices will increase our productivity by more than 10% and our best performing locations have demonstrated that these types of improvements are capable of producing ongoing cost efficiencies. First Student is now positioned to leverage its scale as the market leader. Our recovery programme is restoring performance and is demonstrating marked improvement across many areas. There is some way to go but our steady progress, consistent with our plan, gives us confidence that we will create a sustainable competitive advantage for the future. First Transit First Transit continues to develop in line with our expectations. Revenue was $1,242.6m or Â£778.6m (2011: $1,199.0m or Â£771.5m), an increase of 3.6% and 0.9% in US Dollar and Sterling terms respectively. Adjusting for the extra week US Dollar revenues were up 2.0% year on year. Operating profit was $89.1m or Â£ 55.8m (2011: $89.5m or Â£57.2m). During the year we invested in DriveCam technology which will allow us to offer customers a system to manage their fleets more efficiently. With typically low capital investment required, this business depends on established credibility and a solid track record. We have successfully demonstrated our strong credentials in this market which has helped us succeed in working collaboratively with our customers to help improve their transport offering. We have a solid core of experienced transport managers with an unrivalled reputation for professionalism and innovation. First Transit is the leading operator in its field and we operate a wide and diverse mix of different size and types of transport services across approximately 360 different contracts. In each of the core business segments - fixed route, paratransit, shuttle, transport call centres and municipal fleet maintenance services - we are the largest, or near largest, operator and consequently are able to bring to bear our scale and expertise to clients looking for transport solutions. We continue to seek out and stimulate further conversion opportunities and actively encourage and promote outsourcing by demonstrating the benefits of partnership and the range of solutions we can offer prospective clients. During the year we continued to win new business including contracts to provide fixed route services for Foothill Transit in Arcadia, California; services in Fort Bend County, Texas and the city of Rochester, Minnesota. We were also awarded contracts to provide paratransit services in Louisville, Kentucky, in Yamhill County, Oregon and in Hunterdon County, New Jersey. Our shuttle bus business delivered a strong performance during the year and we were awarded the contract for the consolidated rental car centre at Chicago's Midway Airport. We continue to be the largest provider of university shuttle bus services and during the year extended our portfolio with new business added for universities including Yale, Southern Connecticut State and Kennesaw State. We also continue to pursue further growth in the transportation call centre market and were pleased to be awarded contracts in Colorado, Louisiana and Illinois during the year. We have been able to successfully utilise our reputation and strong client relationships in one area of First Transit to win business for another. For example we were able to expand our vehicle maintenance work with the Williamsburg Area Transit Authority in Virginia through cross marketing our fixed route and fleet maintenance expertise. Similarly in Fort McMurray, Alberta, our expertise and flexibility were the primary reasons we were initially awarded a contract to provide transportation during the first construction phase of a large industrial complex. Since then we have built on our strong business relationships in the area to complement this work as well as add several other oil industry related transportation contracts. First Transit continues to develop opportunities that enable our clients to become as efficient as possible. We have partnered with DriveCam to implement their innovative product across a number of locations. By combining video data with real-time driver feedback this gives our customers access to information that can help to manage their fleet more effectively, improve fuel efficiency and lower emissions. Greyhound Greyhound is an iconic business that is synonymous with affordable long-distance travel. We are delivering strong growth and improved performance, as a result of the actions we took to reform the operating model and transform the business, with operating profit that has more than doubled over the last two years. Revenue was $1,049.3m or Â£657.2m (2011: $985.0m or Â£634.6m), an increase of 6.5% and 3.6% in US Dollar and Sterling terms respectively. Like-for-like revenue growth for the year was 4.1%. Operating profit was $81.0m or Â£50.6m (2011: $62.3m or Â£40.2m), an increase of 30% and 25.9% in US Dollar and Sterling terms respectively. Encouraging passenger revenue growth, including the successful expansion of Greyhound Express, supported the improvement in operating profit which was partly offset by higher fuel costs during the year. The most significant development for Greyhound in recent times is the launch of Greyhound Express. As well as transforming our customer proposition, the service is attracting passengers back to bus travel and encouraging a new demographic of passenger. Customers are able to travel non-stop on high quality, new or refurbished coaches on high volume routes between major cities and take advantage of yield managed fares and reserve guaranteed seats online. During the year Greyhound Express went from strength to strength. In addition to the two original Greyhound Express networks serving the Midwest and Northeast, we expanded services to the Southeast from a hub in Atlanta in the autumn, from where the network now reaches into Florida. As a result we now serve the vast majority of the east coast from Massachusetts to Miami. Heading west, Greyhound Express connects the main cities in Texas and from May 2012 the network is being rolled out into California. Since its launch in December 2010, Greyhound Express has grown rapidly and now represents more than 20% of Greyhound's business. We have converted some schedules on high frequency lanes between urban locations to Greyhound Express services, with other schedules remaining as the traditional service. The strong feeder traffic from Greyhound's national network allows us to create sustainable new services, while minimising the cost of operating additional miles across the network, which also helps Greyhound Express routes achieve profitability quickly following the launch. Our traditional Greyhound business is also seeing the benefits of a transformed operating model. We introduced ticket kiosks at ten of our locations which gave customers greater choice from a self-service alternative with additional options such as checking luggage, as well as helping to reduce our cost of sale. These kiosks proved very popular with over 60% of sales transacted through them. As a result we will be rolling out further ticket kiosks to ten additional locations in the coming months. Our highly successful BoltBus service, serving city pairs in the Northeast, is offering customers a high quality, viable alternative to rail services. From May 2012 we will be expanding into the Pacific Northwest, introducing routes between Seattle and Portland. During the year we added more than 80 new vehicles to our fleet, including 14 for our operations which serve the Hispanic market domestically and internationally along and across the southwest border with Mexico. Our refurbishment programme completed over 220 coaches in the year, bringing the total to almost 350 so far, significantly improving the passenger experience. As we continue to make Greyhound a more modern and efficient network we are delivering improved service quality at the same time. `On Time Performance' has increased from 79.8% to 89.1% over the last five years. New and refurbished coaches along with improvements in maintenance processes have also contributed to this improvement. We are reviewing our terminals and, where appropriate, taking up opportunities to right-size and relocate Greyhound's properties to more appropriate, accessible and convenient sites for passengers across the network. So far we have right-sized or relocated around 50% of our US locations. During the year we completed the sale of our Washington DC terminal and will relocate our services to the multimodal hub at the city's Union Station by early 2013. In November 2011 we launched a national initiative with another household name, 7-Eleven, and PayNearMe which has been highly successful and opened up online fares and discounts to a new market. Customers, including those without access to credit cards, can now order their tickets online and pay in cash at one of 6,400 7-Eleven stores nationwide and we are encouraged by the strong volume of daily transactions already achieved through this new sales channel. PayNearMe has concluded a deal with ACE Cash Express, which has 1,650 outlets, to start offering the same payment option from summer 2012 and we are in negotiations with several retailers across the US to continue to increase the breadth of our sales footprint. Greyhound in Canada is undergoing a transformation and network modernisation programme, drawing on the positive changes we have already made in the US. Part of our strategy is to work with the provincial governments to reduce uneconomic, predominantly rural, routes. As a result we were pleased that Greyhound Canada returned to profitability during the year. Greyhound Express was also launched in four of the largest cities in Alberta during November 2011 and we are developing further opportunities to expand the service in Ontario and Quebec. Our redesigned Canadian website provides more options and a better online experience, and consequently we have seen Canadian web sales up by over 40% since its launch in September 2011. UK Bus Our UK Bus division delivered a steady performance during the year. Revenue was Â£1,157.2m (2011: Â£1,137.5m), an increase of 1.7%. Like-for-like passenger revenues grew by 1.6%. Operating profit was Â£134.4m (2011: Â£148.8m), a decrease of 9.7% principally due to challenging trading conditions in certain major urban areas where we operate, as well as increased fuel costs. Notwithstanding the stable performance in 2011/12, we recognised the need to reform the operating model in UK Bus in order to achieve sustainable growth. During the year a new management team was brought in and, following a root and branch review of our operations, initiated a detailed plan to deliver a consistent, efficient and effective service across all of our networks and equip the business to generate sustainable growth and improved returns. As a result of a further deterioration in economic conditions during the year our capacity to absorb the reductions in Government funding, which are now expected to be more acute than originally estimated, through revenue growth and cost efficiencies is significantly reduced. As a consequence we currently expect UK Bus operating margin to be approximately 8% in 2012/13. In response we have accelerated our comprehensive plan to reform the operating model and restore performance which is focused around three main areas: * Repositioning and rebalancing our portfolio of operations * Driving increased passenger revenue and patronage growth * Improving operating discipline and efficiencies We have a very strong platform from which to grow in UK Bus. The vast majority of our bus operations generate good growth and returns with opportunities to improve further. However, there is scope to reposition our portfolio to concentrate on those areas with the greatest potential. In February we announced the sale of our bus operations in North Devon and at the end of March 2012 we completed the sale of our Northumberland Park depot in North East London. This followed the sales of our King's Lynn operations in April 2011 and our German bus subsidiary in September last year. We also announced our withdrawal from depots in Bury St Edmunds and Dalkeith, as well as scaling back our operations in Musselburgh. In addition to these small asset and business disposals we are now accelerating our plans to significantly reposition and rebalance our UK Bus operations in the coming year to restore operating margins and help to facilitate improved growth and returns. A comprehensive plan that will stimulate growth in revenue and patronage is being rolled out across our networks. Centred on five core elements it encompasses service quality and delivery; network design; pricing and ticketing; tailored local market solutions and building more effective partnerships with stakeholders. In January we launched our new customer brand promise, Better Journeys for Life. Setting out our plans for greater engagement with customers, employees and stakeholders, it is supported by ongoing customer satisfaction reviews, commissioned internally and also by Passenger Focus. One of the first visible signs will be a new livery, which establishes greater local identities, and is now being rolled out on our buses across the UK. This is the first stage in a fleet modernisation programme including the investment of Â£160m in approximately 1,000 new vehicles together with a Â£4m refurbishment programme for our mid-life vehicles. This will deliver a step change to our profile and incorporates a complete refresh of our interior and exterior designs developed from extensive customer feedback. We are also investing Â£27m in new ticketing technology. This equipment which will be rolled out further during the year provides us an ITSO smartcard platform. Looking ahead, the technology will also enable us to offer customers "touch in, touch out" contactless payment using their bank cards. Helping to reduce the barriers to bus travel, this next-generation ticketing will not only reduce both cash transactions and boarding times but will enable us to offer a wide range of ticket products including the ability to cap daily and weekly fares. The equipment also has the capability to accept payment by mobile phone. Creating more effective partnerships with our stakeholders is a key focus. It is essential that we work closely with Local Authorities and stakeholders across our networks to create successful relationships that will realise maximum efficiencies and greater benefits for customers particularly through reduced journey times. Through our joint partnership proposals we were successful in 12 out of the 24 awards made by the Department for Transport (DfT) from the Better Bus Area Fund. We also secured support from the DfT's Green Bus Fund for a second round of 40 hybrid vehicles to be deployed in Berkshire, Essex and Bath; in addition to the original 40 buses being introduced on services in Leeds, Manchester and Glasgow. Initial reactions to these vehicles have been very positive and we continue to expand our knowledge and experience of this type of technology. During the year in the Bristol area, where the level of tendered work has reduced as a result of reductions in Local Authority funding, we reinvested the mileage saved to enhance frequencies on our key corridors which have the potential for further strong growth. Fare promotions have also been introduced and, alongside the delivery of highway infrastructure improvements by our Local Authority partners, we have seen an encouraging increase in patronage to date. Similarly, in South Yorkshire we introduced a new service linking Rotherham and Barnsley which has seen over 1 million customer journeys in 11 months. There is considerable opportunity to increase efficiency through the rolling out of best practices and standardisation in areas such as maintenance and engineering. For example, the operational effectiveness of our fleet is being reviewed following a successful pilot in Oldham to reduce unproductive hours. In addition, our engineering teams are introducing lean management practices in workshops as well as examining ways to improve service and repair processes. This work was supported by further investment in depots including a Â£6m replacement site in Wigan which opened in August 2011. In London, where we provide contracted services on behalf of Transport for London (TfL) we do not take revenue risk and consequently operating margins are lower than in our deregulated bus business. We continue to be encouraged by our operational performance which is achieving better than the network average and, across a number of measures, is near the top of TfL performance league tables. Further contract wins in West London will see us take over routes 70, 206 and 266 in early summer 2012. We are pleased that TfL awarded us funding to purchase 22 hybrid buses for route 23 and the vehicles came into service in April 2012. We look forward to the London 2012 Games where we will be the main provider of spectator transport. We are providing the buses for shuttle services at Games venues and Park & Ride services from sites around the edge of London to the Olympic Park as well as those for the sailing venue in Weymouth, the rowing venue in Eton Dorney and the football stadia in Glasgow, Manchester and Coventry. We will also be operating a network of express coach services from across the country to the Olympic Park and Weymouth. The contract includes a reservation and ticketing system as well as support staff at all bus and coach locations to assist passengers. We were pleased that the Competition Commission's report on the industry, published in December 2011, recognised that no fundamental change to the structure or regulation of the industry was required. The Commission supported many of the innovations that we are already developing across the country, including partnerships with local authorities and multi-operator ticketing. In March 2012 the Government published its response to the Commission's report. This wide-ranging policy statement puts emphasis on the importance of greater partnership between operators and transport authorities. We have a core of fundamentally strong networks. Our comprehensive recovery plan is being executed from an established and diversified platform with market leadership in territories where propensity for bus travel is high. We are confident that the actions we are taking will equip the business to deliver sustainable growth and improved returns from a stronger, more robust foundation. UK RAIL Our rail businesses continued to enjoy strong demand during the year with revenue increased by 10.4% to Â£2,506.1m (2011: Â£2,269.8m). In a year which saw historic high numbers of passengers on the UK rail network like-for-like passenger revenue growth across our franchises was 8.4%. Operating profit was Â£ 110.5m (2011: Â£108.7m), an increase of 1.7%. First TransPennine Express made a significant contribution during the year as a result of continued strong trading. However, as previously indicated, this franchise has now entered the extension period with margins closer to the industry average. The year marked the start of a period of transition in the UK rail market, with eight franchises due to be re-let by the Government over the next two years. We were pleased to be the only operator to pre-qualify for all four of the rail franchises that have been tendered so far (InterCity West Coast, Great Western, Thameslink and Essex Thameside) demonstrating the depth of our strength and expertise in the rail market. As the current operator of two of these franchises - First Great Western and First Capital Connect - we have a strong track record of delivery and investment in our rail operations. We look forward to submitting competitive proposals which meet the requirements of customers and taxpayers and provide an economic return for shareholders. During the year Vernon Barker was appointed Managing Director of the UK Rail division. Vernon's proven track record in railway management, most recently as Managing Director of First TransPennine Express, and strong focus on customer service will be invaluable as we develop our existing and new rail interests. First Capital Connect The focus for First Capital Connect during the year has been the preparation for and delivery of the major change programmes by continuing to drive further improvement across the business. Improved engagement and communication with our staff, customers and stakeholders has helped us deliver improvements in customer satisfaction and employee engagement (both achieving record results). Our operating performance also improved with the Public Performance Measurement (PPM) of reliability and punctuality at 90.0% on a Moving Annual Average (MAA) basis. A significant highlight last year was the successful delivery of the initial stage of the Thameslink Programme providing the first 12-carriage services on the Thameslink route in December 2011. Refurbishment and transformation work was ongoing at various stations along the route, as part of the programme of upgrades. We worked together with Network Rail and TfL to successfully reopen Blackfriars station, the first ever cross-river hub with a new link to London Underground and an exit on the South Bank. Transport Minister Theresa Villiers joined us in opening a dedicated ticket hall and longer 12-car platforms at Farringdon station in December, and we also supported the introduction of a new station at West Hampstead. On the Great Northern route, where we have significantly increased capacity, we added a further 2,200 seats on weekdays through our `More Seats for You' initiative. We introduced 12-car services on the route and in March 2012 our customers began using the impressive new concourse at London King's Cross station. During the year the DfT announced that the end date for the First Capital Connect franchise has been bought forward to September 2013. This provides the best opportunity in the major Thameslink transformation programme to allow an effective transition to a potential new franchisee, particularly in relation to the introduction of new rolling stock which will be completed after the end date of the current franchise. Our unrivalled knowledge and experience of managing this major project gives us a strong foundation to continue to help deliver this important programme in the future. First Great Western We continue to drive further improvements in performance across our network. Punctuality during the year has been improving, with our PPM MAA at 90.6%, and we continue to challenge Network Rail to reduce infrastructure failures. We are committed to delivering further improvements for passengers and in December 2011 we agreed a major Â£28.9m deal with the DfT for 48 new carriages to be added to our High Speed Train fleet, providing an extra 4,500 seats for customers on peak services into and out of London. As part of this agreement we leased five Class 180 trains to replace Turbo services on the Cotswold line between London Paddington and Hereford providing a more comfortable journey on this long-distance route. We continue to introduce further capacity across our network. In the West of England we worked with the DfT to secure extra trains and carriages which will provide an additional 924 seats on Bristol peak services, while customers in Torbay and between Truro and Falmouth will see almost 650 additional seats on peak weekday services and 1,275 at weekends. There have also been major improvements to stations along the route. The Â£10m redevelopment of Bath Spa station has continued and Exeter Central station has received a refresh, bringing the original ticket hall back into use and improving the station as a focal point. Slough station has had a complete overhaul costing Â£1m, as a result of a joint project with Network Rail and the local council ahead of this summer when the station will also serve the Olympic rowing venue. First ScotRail Our PPM score rallied strongly towards the end of the year, to finish at 94.8% after the severe weather affecting the country's rail infrastructure impacted First ScotRail and Network Rail's ability to achieve acceptable levels of operating performance at certain points during the year. Following the introduction of further improvement plans in the autumn and minor timetable changes made in December 2011, we have seen performance start to exceed planned levels. First ScotRail signed one of the first alliance agreements between a train operating company and Network Rail to better align overall objectives and provide more cost effective ways of delivering rail services. The agreement allows more efficient and effective management through a closer working relationship to deliver improvements in quality for passengers and other stakeholders. Under the agreement a joint Board of First ScotRail and Network Rail members has been established. We are confident that long term cost savings for the industry and the Scottish Government will be achieved. Successful marketing and promotions activity has helped to stimulate further demand for our services. Offering customers great value for money through initiatives such as our popular Club 55 tickets providing discount travel for the over 55's, continued to prove highly successful during the year. Strong partnerships with Passenger Transport Executives and Local Authorities have led to station improvements across Scotland including the installation of innovative solar powered customer information screens into Highland stations in partnership with Highland & Island Regional Transport Partnership. First TransPennine Express First TransPennine Express achieved record performance this year with PPM MAA above the national average at 93.3%. We were delighted that the DfT took the decision during the year to extend the current franchise. We will operate First TransPennine Express for a further three years from February 2012 at an operating margin closer to the industry average. Since we commenced operation of the franchise in 2004 we have worked hard to deliver consistent improvements for customers, including the introduction of a Â£260m new train fleet, and during that time passenger numbers have risen from 13m to 24m a year. We will work closely with the DfT and our stakeholders on the route over the remaining life of the franchise to progress plans for the future of rail in the North of England and to further develop our Anglo-Scottish services. We successfully negotiated for 10 new build Class 350 trains to be brought into service from December 2013. These will provide an 80% increase in customer capacity between Manchester and Scotland and will allow for a 30% increase in seat availability across the rest of the network. We launched a suite of technology solutions during the year, including a mobile website with geo-location technology providing customers with detailed information about station facilities. We also released a smartphone ticketing app with purchasing and mobile ticket display facilities and were also the first train operator in the UK to launch a customer service based Twitter account which is operated by front line employees. First Hull Trains During the year work commenced on an overhaul of the fleet which will help to significantly improve reliability and punctuality. We are working with business, councils and planners to help better integrate our services with wider transport operations along the East Coast Main Line, as well as with other train operating companies and Network Rail to improve performance and interconnectivity along the route. Outlook We have a fundamentally strong and diverse portfolio of operations with four out of five of our divisions performing in line with our expectations and actions we have taken will lead to improved growth and returns. Notwithstanding the steady performance from our UK Bus division in 2011/12 we have seen a further deterioration of economic conditions particularly in our urban operations in Scotland and the North of England. As result, we do not expect revenue growth and cost efficiencies in 2012/13 to be sufficient to offset the impact of reduced government subsidies and funding to the industry, which are more acute than originally estimated, and increased fuel costs. In response we are accelerating a comprehensive plan that will deliver sustainable growth in revenue and patronage and improved returns. This includes repositioning our UK Bus portfolio through a programme of business and asset disposals to focus on those areas where the greatest potential for growth exists. Our North American operations continue to progress and we believe that improving trends in the US economy will be positive for our businesses. First Student is now well set on the path to recovery with our plan to reform the business delivering in line with our expectations. First Transit delivers good returns from typically low capital investment which is underpinned by its established credentials and strong track record. Greyhound's enhanced performance from a transformed operating model demonstrates our ability to implement the necessary actions to deliver strong growth and margin improvement. The UK rail market is in a period of transition with eight franchises due to be let by the Government over the next two years. We are the only operator to have pre-qualified for all four of the rail franchises that have come to the market so far and we believe we are well placed to progress opportunities from the refranchising programme. The combined effect of the outlook for trading together with the actions to reposition the UK Bus portfolio is expected to result in the Group's net cash flow being broadly neutral in 2012/13. Our market leading positions in a sector that is a key enabler of economic growth together with the actions we are taking to strengthen the business give the Board confidence that the Group has good prospects to deliver long term value for shareholders. Therefore, reflecting our longer term view, the Board remains committed to its current policy of dividend growth of 7.0% through to the end of the financial year 2012/13. EXCEPTIONAL ITEMS AND AMORTISATION CHARGES 2012 2011 Â£m Â£m UK Bus Pension Scheme changes 73.3 - UK Rail bid costs (10.2) (2.7) UK Bus depot sales and closures (10.7) - Competition Commission costs (1.9) (1.4) UK Rail claim - 22.5 UK Rail First Great Western contract - (59.9) provision First Student recovery plan - (39.5) First Transit goodwill impairment and - (16.6) contract provision UK Rail joint venture provision - (1.8) UK Bus restructuring costs - (1.0) Other exceptional items (1.1) (0.4) Total exceptional items 49.4 (100.8) Amortisation charges (30.9) (42.9) Profit/(loss) on disposal of properties 1.0 (4.4) Operating profit credit/(charge) 19.5 (148.1) Ineffectiveness on financial derivatives 0.3 (11.0) Profit/(loss) before tax credit/(charge) 8.5 (147.8) Tax credit 4.4 43.0 (Loss)/profit on disposal of discontinued (9.2) 6.7 operations Net exceptionalitems for the year 3.7 (98.1) UK Bus Pension Scheme changes During the year we took actions to de-risk the UK Bus Pension Scheme, the most significant of which is that pension increases will be linked to consumer price inflation (CPI) rather than retail price inflation (RPI). In addition a pensionable pay cap was introduced along with lower pension accrual rates. As a result of these changes future pension liabilities have decreased and a one-off exceptional gain of Â£73.3m (2011: Â£nil) was realised. UK Rail bid costs We are now entering a transition period for UK Rail with eight franchises expected to be retendered in the next two years. Bid costs of Â£10.2m (2011: Â£ 2.7m) were incurred during the year. These costs covered the preparation of the Intercity West Coast bid which was submitted on 4 May 2012. They also include the cost of pre-qualification for three further rail franchises - Great Western, Thameslink, and Essex Thameside. We are the only operator to pre-qualify for all the franchises that are currently out to bid. UK Bus depot sales and closures As part of our programme to rebalance our portfolio in UK Bus operations we have taken the decision to sell or close certain operations. Net losses of Â£ 8.2m were incurred during the year comprising Â£6.7m of operating losses for the year and Â£1.5m of closure costs. In addition a loss on the disposal of the Northumberland Park depot in North East London of Â£2.5m was recorded in the year representing gross proceeds of Â£14.2m less the carrying value of net assets including Â£5.2m of goodwill as well as transaction costs. The proceeds of the disposal were received in the first week of 2012/13. Competition Commission costs During the year we incurred a further Â£1.9m (2011: Â£1.4m) of costs responding to and representing our position to the Competition Commission investigation into the UK Bus market. The Competition Commission issued their final report in December 2011 and since the start of the investigation we have incurred total costs of Â£7.1m. Other exceptional items Costs of Â£1.1m were incurred principally on effecting the changes to the UK Bus Pension Scheme as described above. Amortisation charges The charge for the year was Â£30.9m (2011: Â£42.9m) with the reduction mainly due to the write off of the remaining balance of the First Great Western franchise intangible asset (Â£7.6m) in the previous year. Profit/(loss) on disposal of properties During the year we realised Â£40.3m (2011: Â£10.1m) on the disposal of selected properties predominantly in Greyhound operations. These resulted in a net profit on disposal of Â£1.0m (2011: loss of Â£4.4m). Ineffectiveness on financial derivatives Due to the ineffective element and undesignated fair value movements on financial derivatives there was a Â£11.0m non-cash charge (2011: Â£0.3m credit) to the income statement during the year. The principal component of this non-cash charge relates to fixed interest rate swaps which do not qualify for hedge accounting but do provide a cash flow hedge against variable rate debt from 2012 to 2015. It is anticipated that the charge in respect of these swaps will reverse over their contractual term. Tax on exceptional items and amortisation charges The tax credit as a result of these exceptional items was Â£0.4m (2011: Â£41.3m). In addition there was a one-off deferred tax credit of Â£4.0m (2011: Â£1.7m) as a result of the reduction in the UK corporation tax rate from 26% to 24% (2011: 28% to 26%). FINANCE COSTS AND INVESTMENT INCOME Net finance costs, before exceptional items, were Â£157.1m (2011: Â£182.4m) with the reduction principally due to lower interest rates on US Dollar denominated debt. PROFIT BEFORE TAX Adjusted profit before tax was Â£271.4m (2011: Â£274.3m). An overall credit of Â£ 8.5m (2011: Â£147.8m charge) for exceptional items and amortisation charges resulted in a substantial increase in profit before tax to Â£279.9m (2011: Â£ 126.5m). TAX The tax charge, on adjusted profit before tax, for the year was Â£54.5m (2011: Â£ 59.7m) representing an effective rate of 20.1% (2011: 21.8%). There was a tax credit of Â£0.4m (2011: Â£41.3m) relating to amortisation charges and exceptional items. There was also a one-off credit adjustment of Â£4.0m (2011: Â£1.7m) to the UK deferred tax liability as a result of the reduction in the UK corporation tax rate from 26% to 24% (2011: 28% to 26%) which will apply from April 2012. This resulted in a total tax charge of Â£50.1m (2011: Â£16.7m) on continuing operations. The actual tax paid during the year was Â£17.7m (2011: Â£25.0m). North American cash tax remains low due to tax losses brought forward. We expect the North American cash tax rate to remain low for the near term. The UK cash tax for the year was lower than last year principally due to higher cash pension payments in UK Bus. DISCONTINUED OPERATIONS A loss on disposal of Â£9.2m arose on the sale of FirstGroup Deutschland GmbH representing gross consideration of Â£5.5m less the carrying value of net assets, including goodwill, and transaction costs. This, as well as the operating loss after tax to the date of disposal of Â£0.3m (2011: profit of Â£ 0.6m), has been classified within discontinued operations in the consolidated income statement. DIVIDENDS In line with our stated commitment the Board has proposed a final dividend per share, subject to approval by shareholders, of 16.05p (2011:15.0p), an increase of 7.0%, making a full year payment of 23.67p (2011: 22.12p). It will be paid on 17 August 2012 to shareholders on the register at 13 July 2012. The dividend is covered 1.7 times (2011: 1.9 times) by adjusted basic EPS. EPS The adjusted basic EPS was 40.0p (2011: 41.1p), a reduction of 2.7%. Basic EPS was 42.7p (2011: 20.0p), an increase of 113.5% due to a significant reduction in net exceptional items compared to last year. EBITDA EBITDA by division is set out below: Year to 31 Year to 31 March 20121 March 20113 Revenue EBITDA2 EBITDA2 Revenue EBITDA2 EBITDA2 Â£m Â£m % Â£m Â£m % First Student 1,567.2 255.8 16.3 1,594.4 278.1 17.4 First Transit 778.6 8.4 66.3 8.6 65.3 771.5 Greyhound 12.2 68.7 657.2 80.1 634.6 10.8 UK Bus 1,157.2 17.9 1,137.5 220.0 19.3 207.1 UK Rail 2,506.1 6.5 2,269.8 158.6 7.0 163.5 Group 12.4 (28.9) (22.8) - 8.9 - Total Group 6,678.7 11.1 6,416.7 768.9 12.0 742.9 1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year. 2Adjusted operating profit less capital grant amortisation plus depreciation. 3Restated to exclude discontinued operations and incorporating a revised calculation of EBITDA as explained in note 1 to the preliminary results announcement. CASH FLOW The net cash inflow for the year was Â£119.2m (2011: Â£209.8m). This contributed to a net debt reduction of Â£111.9m (2011: Â£332.1m) as detailed below: Year to Year to 31 March 2012 31 March 2011 Â£m Â£m EBITDA (including discontinued operations) 742.6 770.7 Exceptional items 49.4 (100.8) Impairment charges - 19.5 Other non-cash income statement items 9.8 11.4 Working capital excluding FGW 20.5 75.2 provision movement Working capital - FGW provision 48.7 11.2 movement FGW provision movement (48.7) 48.7 Movement in other provisions (29.1) (48.3) Pension payments in excess of income (87.1) (43.5) statement charge Non-cash RPI to CPI pension gain (73.3) - Cash generated by operations 744.1 632.8 Capital expenditure and acquisitions (293.6) (283.6) Disposal proceeds 57.7 21.8 Interest, tax and other (155.4) (183.6) Dividends payable to Group (108.8) (101.4) shareholders Dividends payable to non-controlling (19.0) (11.8) minority shareholders Proceeds from sale of businesses 5.5 24.3 Net cash inflow 119.2 209.8 Foreign exchange movements (7.7) 129.2 Other non-cash movements in relation to financial instruments 0.4 (6.9) Movement in net debt in year 111.9 332.1 The principle adverse movements compared to last year were as follows: * Higher pension payments in excess of income statement charge of Â£43.6m principally due to additional deficit cash contributions in Greyhound and UK Bus. In addition there was a one-off non-cash benefit of Â£73.3m in relation to the UK Bus pension scheme changes. * The FGW provisions put up last year has been transferred to creditors due within one year, resulting in a movement on provisions of Â£97.4m. * EBITDA of Â£742.6m was Â£28.1m lower than last year. * No impairment charges in 2011/12. * Proceeds from sale of business represents Germany at Â£5.5m this year compared to Â£24.3m for GB Railfreight last year. * Working capital excluding FGW provision movement for last year of Â£75.2m included the benefit of the timing of certain UK Rail payments as well the First Student recovery plan provision and the First Transit contract provision. This year working capital is still positive at Â£20.5m despite the reversal of the UK Rail payment timing and the expected usage of the Student and Transit provisions. * Higher dividend payments to Group shareholders of Â£7.4m and non-controlling minority shareholders of Â£7.2m. * Higher capital expenditure and acquisitions of Â£10.0m. Partly offset by: * Lower net exceptional items and impairment charges of Â£150.2m as explained above. * Lower interest, tax and other payments of Â£28.2m principally due to lower interest rates on US Dollar denominated debt. * Favourable movement in other provisions of Â£19.2m mainly due to lower insurance claims payments compared to last year. * Disposal proceeds of Â£57.7m (property Â£40.3m and non-property, mainly buses, Â£17.4m) compared to Â£21.8m (property Â£10.1m and non-property Â£11.7m) last year with the increase principally due to the Washington DC property sale in Greyhound. NET DEBT The Group's net debt at 31 March 2012 was Â£1,837.5m (2011: Â£1,949.4m) and comprised: 31 March 31 March 2012 2011 Fixed Variable Total Total Analysis of net debt Â£m Â£m Â£m Â£m Sterling bond (2013)1 298.5 298.5 298.0 - Sterling bond (2018)2 325.1 325.1 325.9 - Sterling bond (2019)2 249.4 249.4 273.4 - Sterling bond (2021)3 331.5 331.5 331.1 - Sterling bond (2024)1 199.0 199.0 199.0 - US Dollar bank loans 369.8 369.8 506.3 - Canadian Dollar bank loans 113.9 113.9 113.1 - Euro and other bank loans 11.7 11.7 29.0 - HP contracts and finance 260.6 74.7 335.3 251.9 leases Senior unsecured loan notes 93.3 - 93.3 - Loan notes 8.7 1.0 9.7 9.7 Cash (164.0) (164.0) (89.4) - UK Rail ring-fenced cash and (323.2) (323.2) (283.8) deposits - Other ring-fenced cash and (12.5) (12.5) (14.8) deposits - Interest rate swaps 368.6 (368.6) - - Total 1,885.3 (47.8) 1,837.5 1,949.4 1 excludes accrued interest. 2 stated excluding accrued interest, swapped to US Dollars and adjusted for movements on associated derivatives. 3 stated excluding accrued interest, partially swapped to US Dollars and adjusted for movements on associated derivatives. Under the terms of the UK Rail franchise agreements, cash can only be distributed by the train operating companies either up to the lower amount of their retained profits or the amount determined by prescribed liquidity ratios. The ring-fenced cash represents that which is not available for distribution or the amount required to satisfy the liquidity ratio at the balance sheet date. The level of ring-fenced cash at 31 March 2012 is higher than would normally be expected due to the timing of government receipts at FSR and the temporary impact of liquidity ratios at FCC. Accordingly the balance at 31 March 2011 is more indicative of the expected level of ring-fenced cash. Maintaining our investment grade status is a key priority and we have consistently reduced leverage to support this. The net debt:EBITDA ratio has reduced from 3.2 times at 31 March 2009 to 2.5 times at 31 March 2012 (2011: 2.5 times). CAPITAL EXPENDITURE AND ACQUISITIONS Cash capital expenditure and acquisitions was Â£293.6m (2011: Â£283.6m) and comprised First Student Â£115.6m (2011: Â£117.2m), First Transit Â£31.9m (2011: Â£ 6.8m), Greyhound Â£44.1m (2011: Â£45.0m), UK Bus Â£33.6m (2011: Â£66.7m), UK Rail Â£ 63.4m (2011: Â£46.7m) and Group items Â£5.0m (2011: Â£1.2m). In addition during the year we entered into operating leases for passenger carrying vehicles in UK Bus with a capital value of Â£43.4m (2011: Â£23.6m). FUNDING AND RISK MANAGEMENT The Group continues to have strong liquidity. At 31 March there was Â£795.8m (2011: Â£616.1m) of committed headroom and free cash comprising Â£631.8m (2011: Â£ 526.7m) of headroom under the committed revolving bank facility and free cash balances of Â£164.0m (2011: Â£89.4m). 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. Treasury policy requires a minimum of Â£250m of committed headroom at all times. The Group's main revolving bank facility expires in December 2015. The average debt maturity was 5.5 years (2011: 6.1 years). The Group does not enter into speculative financial transactions and uses only authorised financial instruments for certain risk management purposes only. 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 2012 100% (2011: 87%) of net debt was fixed and in excess of 85% of net debt is fixed for the next two years. Fuel price risk We manage the commodity price risk on fuel through a progressive forward hedging policy. In the UK, 86% of crude oil costs were hedged at an average rate of $88 per barrel during the year. At the end of the year we have hedged 83% of our "at risk" UK crude requirements for the year to 31 March 2013 (2.5m barrels p.a.) at $103 per barrel and 46% of our requirements for the year to 31 March 2014 at $105 per barrel. In North America 59% of crude oil costs were hedged at an average rate of $95 per barrel during the year. At the end of the year we have hedged 69% of the "at risk" volume for the year to 31 March 2013 (1.7m barrels p.a.) at $94 per barrel. In addition we have hedged 40% of "at risk" volumes for the year to 31 March 2014 at $95 per barrel. Foreign currency risk 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 2012 foreign currency net assets were 47% (2011: 62%) hedged. 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. FOREIGN EXCHANGE The most significant exchange rates to Sterling for the Group are as follows: Year to 31 Year to March 2012 31 March 2011 Closing Effective Closing Effective Rate rate rate Rate US Dollar 1.59 1.60 1.60 1.56 Canadian Dollar 1.60 1.59 1.57 1.56 The US Dollar rate was slightly higher in the year to 31 March 2012 compared to last year. This resulted in the Sterling equivalent of North American US Dollar revenues being approximately 3% lower than last year. Similarly this also resulted in a small reduction in North American operating profit but this was more than offset by lower US Dollar denominated fuel costs in the UK and lower US Dollar denominated interest costs. SHARES IN ISSUE As at 31 March 2012 there were 481.6m shares in issue (2011: 480.8m), excluding treasury shares and own shares held in trust for employees of 0.5m (2011: 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 481.4m (2011: 480.4m). INVESTMENT IN DSBFIRST The funding of the joint venture of rail operations in Sweden and Denmark was agreed with DSB during the year and a further Â£4.2m was invested by the Group. As a result of this the guarantees issued by the Group reduced to Â£7.0m. Subsequently the Swedish franchise was transferred to another operator in December 2011. BALANCE SHEET Net assets have decreased by Â£69.9m since the start of the year. The principal reasons for this are actuarial losses on defined benefit pension schemes (net of deferred tax) of Â£134.0m, dividends payments of Â£127.8m, unfavourable hedging reserve movements (net of deferred tax) of Â£22.9m, and unfavourable translation reserve movements of Â£10.9m partly offset by the retained profit for the year of Â£220.3m. GOODWILL The carrying value (net assets including goodwill but excluding intercompany balances) of each cash generating unit (CGU) was tested for impairment during the year and there continues to be sufficient headroom in all of the CGUs. Headroom on the UK Bus business has reduced to Â£512m (2011: Â£796m) reflecting the reduction in projected operating profits and margins compared to this time last year. The First Student recovery plan is progressing in line with expectations and as a result the headroom on this business is in line with last year. PENSIONS The Group has updated its pension assumptions as at 31 March 2012 for the defined benefit schemes in the UK and North America. The net pension deficit of Â£243m at the beginning of the year has increased to Â£268m at the end of the year principally due to changes in actuarial assumptions, in particular lower discount rates than last year, partly offset by the one-off benefit of de-risking the UK Bus Pension Scheme described above and higher cash payments into the schemes. The main factors that influence the balance sheet position for pensions and the sensitivities to their movement at 31 March 2012 are set out below: Movement Impact Discount rate +0.1% Reduce deficit by Â£ 25m Inflation +0.1% Increase deficit by Â£ 18m SEASONALITY The First Student business generates lower revenues and profits in the first half of the year than in the second half of the year as the school summer holidays fall into the first half. Greyhound operating profits are typically higher in the first half of the year due to demand being strongest in the summer months. 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 average debt duration at 31 March 2012 of 5.5 years (2011: 6.1 years) and which is largely represented by committed medium to long term unsecured bond debt and finance leases. The Group has a $1,250m committed revolving banking facility of which $1,011m was undrawn at the year end. This facility expires in December 2015. The Directors have carried out a detailed review of the Group's budget for the year to 31 March 2013 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. Tim O'Toole Chief Executive Nick Chevis Acting Finance Director 23 May 2012 Consolidated income statement For the year ended 31 March 20121 2011 Adjusted Adjusted Total results2 Adjustments3 Total results2 Adjustments3 restated4 Notes Â£m Â£m Â£m Â£m Â£m Â£m Continuing operations Revenue 6,678.7 6,678.7 6,416.7 - 6,416.7 - Operating costs before profit/(loss) on disposal (6,250.2) 18.5 (6,231.7) (5,960.0) (143.7) (6,103.7) of properties Operating profit before profit/(loss)on disposal 428.5 18.5 447.0 456.7 (143.7) 313.0 of properties Amortisation charges (30.9) (30.9) (42.9) (42.9) - - Exceptional items 49.4 49.4 (100.8) (100.8) - - 18.5 18.5 (143.7) (143.7) - - Profit/(loss) on disposal 1.0 1.0 (4.4) (4.4) of properties - - Operating profit 428.5 19.5 448.0 456.7 (148.1) 308.6 Investment income 2.0 2.0 1.9 1.9 - - Finance costs (159.1) (11.0) (170.1) (184.3) 0.3 (184.0) Profit before tax 271.4 8.5 279.9 274.3 (147.8) 126.5 Tax (54.5) 4.4 (50.1) (59.7) 43.0 (16.7) Profit for the yearfrom continuing operations 216.9 12.9 229.8 214.6 (104.8) 109.8 Discontinued operations (Loss)/profit for the year from discontinued 3 (0.3) (9.2) (9.5) 0.6 6.7 7.3 operations Profit for the year 216.6 3.7 220.3 215.2 (98.1) 117.1 Attributable to: Equity holders of the 192.3 3.9 196.2 198.0 (94.8) 103.2 parent Non-controlling interests 24.3 (0.2) 24.1 17.2 (3.3) 13.9 216.6 3.7 220.3 215.2 (98.1) 117.1 Earnings per share Continuing operations Basic 4 40.0p 2.7p 42.7p 41.1p (21.1)p 20.0p Diluted 4 39.8p 2.7p 42.5p 40.7p (20.9)p 19.8p Continuing and discontinued operations Basic 4 39.9p 0.9p 40.8p 41.2p (19.7)p 21.5p Diluted 4 39.7p 0.8p 40.5p 40.9p (19.6)p 21.3p Dividends of Â£108.8m (2011: Â£101.4m) were paid during the year. Dividends of Â£ 77.2m (2011: Â£72.1m) are proposed for approval in respect of the year. 1For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year. 2Adjusted trading results before items noted in 2 below. 3Amortisation charges, ineffectiveness on financial derivatives, exceptional items, profit/(loss) on disposal of properties and discontinued operations and tax thereon. 4Restated to exclude discontinued operations as explained in note 1. Consolidated statement of comprehensive income Year ended 31 March 2012 2011 Â£m Â£m Profit for the year 220.3 117.1 Other comprehensive income/(expense) Derivative hedging instrument movements (36.1) 193.4 Deferred tax on derivative hedging instrument 13.2 (44.0) movements Exchange differences on translation of foreign (10.9) (143.9) operations Unrealised losses on executive deferred - (0.1) compensation plans Actuarial losses on defined benefit pension (185.8) (55.5) schemes RPI to CPI change in defined benefit pension - 84.9 arrangements Deferred tax on actuarial losses and RPI to CPI 51.8 (5.9) change on defined benefit pension schemes Other comprehensive (expense)/incomefor the (167.8) 28.9 year Total comprehensive income for the year 52.5 146.0 Attributable to: Equity holders of the parent 28.4 132.6 Non-controlling interests 24.1 13.4 52.5 146.0 Consolidated balance sheet Year ended 31 March 2012 2011 2010 Notes Â£m Â£m Â£m Non-current assets Goodwill 5 1,599.3 1,608.0 1,754.9 Other intangible 6 318.8 348.6 415.9 assets Property, plant and 7 2,006.3 2,082.9 2,284.1 equipment Deferred tax assets 15 43.3 30.0 30.4 Retirement benefit 25.2 30.7 3.1 assets Derivative 14 72.6 58.1 33.0 financial instruments Investments 7.2 3.2 4.8 4,072.7 4,161.5 4,526.2 Current assets Inventories 8 91.0 91.4 92.7 Trade and other 9 601.9 555.5 602.5 receivables Cash and cash 499.7 388.0 335.0 equivalents Assets held for 3.7 4.6 3.9 sale Derivative 14 43.5 65.1 32.1 financial instruments 1,239.8 1,104.6 1,066.2 Total assets 5,312.5 5,266.1 5,592.4 Current liabilities Trade and other 10 1,261.0 1,129.9 1,120.0 payables Tax liabilities 21.8 49.0 36.1 Financial - bank loans 11 69.3 93.5 - liabilities - bonds 11 73.6 73.3 73.3 - obligations under HP contracts and 12 52.4 42.8 34.6 finance leases - loan notes 13 - - 0.8 Derivative 14 17.1 38.5 85.2 financial instruments 1,495.2 1,427.0 1,350.0 Net current 255.4 322.4 283.8 liabilities Non-current liabilities Financial - bank loans 11 426.0 554.9 896.0 liabilities - bonds 11 1,441.0 1,417.1 1,414.1 - obligations under HP contracts and 12 282.9 209.1 192.8 finance leases - loan notes 13 9.7 9.7 9.7 - senior unsecured 13 93.3 - - loan notes Derivative 14 50.1 29.7 121.1 financial instruments Retirement benefit 293.1 273.9 333.9 liabilities Deferred tax 15 97.7 93.0 63.9 liabilities Provisions 16 242.5 300.8 300.4 2,936.3 2,888.2 3,331.9 Total liabilities 4,431.5 4,315.2 4,681.9 Net assets 881.0 950.9 910.5 Equity Share capital 17 24.1 24.1 24.1 Share premium 676.4 676.4 676.4 Hedging reserve 12.5 35.4 (114.0) Other reserves 4.6 4.6 4.6 Own shares (1.1) (5.0) (6.5) Translation reserve 145.7 156.6 300.0 Retained earnings (3.6) 41.5 10.2 Equity attributable to equity holders 858.6 933.6 894.8 of the parent Non-controlling 22.4 17.3 15.7 interests Total equity 881.0 950.9 910.5 Consolidated statementof changes in equity Non-controlling Share Share Hedging Other Own Translation Retained interests Total capital premium reserve reserves shares reserve earnings Total equity Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Balance at 1 24.1 676.4 (114.0) 4.6 (6.5) 300.0 10.2 894.8 15.7 910.5 April 2010 Total comprehensive - - 149.4 - - (143.4) 126.6 132.6 13.4 146.0 income for the year Dividends - - - (101.4) (101.4) (11.8) (113.2) paid - - - Movement in - - - - 1.5 - (1.7) (0.2) - (0.2) EBT and treasury shares Share-based - - - - payments - - - 7.7 7.7 7.7 Deferred tax - - - - - - 0.1 0.1 - on 0.1 share-based payments Balance at 31 24.1 676.4 35.4 4.6 (5.0) 156.6 41.5 933.6 17.3 950.9 March 2011 Total comprehensive - - (22.9) - - (10.9) 62.2 28.4 24.1 52.5 income for the year Dividends - - - (108.8) (108.8) (19.0) (127.8) paid - - - Movement in - - - - 3.9 - (3.9) - - - EBT and treasury shares Share-based - - - 6.0 - payments - - - 6.0 6.0 Deferred tax on - - - - - - (0.6) (0.6) - (0.6) share-based payments Balance at 31 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4 March 2012 881.0 Consolidated cash flow statement Year ended 31 March 2012 2011 Note Â£m Â£m Net cash from operating activities 18 475.4 555.7 Investing activities Interest received 2.0 1.7 Proceeds from disposal of property, 57.7 21.8 plant and equipment Purchases of property, plant and (170.9) (210.3) equipment Disposal of subsidiary 5.5 24.3 Acquisition of businesses (3.4) (3.1) Net cash used in investing activities (109.1) (165.6) Financing activities Monies received on exercise of share - 3.1 options Dividends paid (108.8) (101.4) Dividends paid to non-controlling (19.0) (11.8) shareholders Proceeds from senior unsecured loan notes 90.2 - Proceeds from bank facilities 2.5 124.1 Repayment of bank debt (179.8) (307.7) Repayments under HP contracts and (35.2) (35.9) finance leases Repayment of loan notes - (0.8) Fees for bank facility amendments and (2.1) (6.3) bond issues Net cash flow from financing (252.2) (336.7) activities Net increase in cash and cash 114.1 53.4 equivalents before foreign exchange movements Cash and cash equivalents at 388.0 335.0 beginning of year Foreign exchange movements (2.4) (0.4) Cash and cash equivalents at end of 499.7 388.0 year per consolidated balance sheet Cash and cash equivalents are included within current assets on the consolidated balance sheet. Note to the consolidated cash flow statement - reconciliation of net cash flow to movement in net debt 2012 2011 Â£m Â£m Net increase in cash and cash equivalents in year 114.1 53.4 Decrease in debt and finance leases 122.3 220.3 Inception of new HP contracts and finance leases (119.3) (70.2) Fees capitalised against bank facilities and bond 2.1 6.3 issues Net cash flow 119.2 209.8 Foreign exchange movements (7.7) 129.2 Other non-cash movements in relation to financial 0.4 (6.9) instruments Movement in net debt in year 111.9 332.1 Net debt at beginning of year (1,949.4) (2,281.5) Net debt at end of year (1,837.5) (1,949.4) Net debt includes the value of derivatives in connection with the bonds maturing in 2018, 2019 and 2021 and excludes all accrued interest. These bonds are included in non-current liabilities in the consolidated balance sheet. Notes to the consolidated financial statements 1 GENERAL INFORMATION The financial information set out above does not constitute the Company's Statutory Accounts for the year ended 31 March 2012 or 2011, but is derived from those accounts. Statutory Accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 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 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 2011. Copies of the Statutory Accounts for the year ended 31 March 2012 will be available to all shareholders in June and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP. Restatement of prior years numbers The income statement and segmental amounts for the year to 31 March 2011 have been restated to show the results of FirstGroup Deutschland GmbH, which was sold during the year, within discontinued operations. The results of discontinued operations are set out in note 3. The calculation of adjusted EBITDA has been revised to exclude capital grant amortisation whereas previously EBITDA was calculated as adjusted operating profit plus depreciation. As a result of this EBITDA for the year to 31 March 2011 has been restated as follows: Â£m EBITDA as previously stated 778.2 Discontinued operations (1.3) Capital grant amortisation (8.0) EBITDA as restated 768.9 2 BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION For management purposes, the Group is organised into five operating divisions - First Student, First Transit, Greyhound, UK Bus and UK Rail. These divisions are managed separately in line with the differing services that they provide and the geographical markets which they operate in. The principal activities of these divisions are described in the operating and financial review. The segment results for the year to 31 March 2012 are as follows: First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total2 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Revenue 1,567.2 778.6 657.2 1,157.2 2,506.1 17.7 6,684.0 Discontinued operations - - (5.3) (5.3) - - - Revenue continuing 1,567.2 778.6 657.2 1,157.2 2,506.1 12.4 6,678.7 operations EBITDA3 255.8 65.3 80.1 207.1 163.5 (28.9) 742.9 Depreciation (148.7) (9.5) (29.5) (73.2) (66.2) (1.0) (328.1) Capital grant amortisation - - - 0.5 13.2 - 13.7 Segment results3 107.1 55.8 50.6 134.4 110.5 (29.9) 428.5 Amortisation charges (20.1) (4.3) (3.1) (3.4) (30.9) - - Exceptional items - - 60.7 (10.2) (1.1) 49.4 - Profit/(loss) on disposal (0.3) 5.0 (3.7) - 1.0 of properties - - Operating profit 86.7 51.5 52.5 191.4 96.9 (31.0) 448.0 Investment income 2.0 Finance costs (159.1) Ineffectiveness on financial derivatives (11.0) Profit before tax 279.9 Tax (50.1) Profit for the period from continuing operations 229.8 Discontinued operations (9.5) Profit after tax and 220.3 discontinued operations The segment results for the year to 31 March 2011 are as follows: First First Group Student Transit Greyhound UK Bus UK Rail Items1 Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Revenue 1,594.4 771.5 634.6 1,137.5 2,279.7 21.4 6,439.1 Discontinued operations - (9.9) (12.5) (22.4) - - - Revenue continuing operations 1,594.4 771.5 634.6 1,137.5 2,269.8 8.9 6,416.7 EBITDA3 278.1 66.3 68.7 220.0 158.6 (22.8) 768.9 Depreciation (149.8) (9.1) (28.5) (71.7) (57.4) (3.7) (320.2) Capital grant amortisation - - - 0.5 7.5 - 8.0 Segment results3 128.3 57.2 40.2 148.8 108.7 (26.5) 456.7 Amortisation charges (20.4) (4.7) (3.1) (14.7) (42.9) - - Exceptional items (39.5) (16.6) (2.4) (41.9) (0.4) (100.8) - Loss on disposal of (0.1) (1.2) (3.1) (4.4) properties - - - Operating profit 68.3 35.9 35.9 143.3 52.1 (26.9) 308.6 Investment income 1.9 Finance costs (184.3) Ineffectiveness on financial derivatives 0.3 Profit before tax 126.5 Tax (16.7) Profit for the period from continuing 109.8 operations Discontinued operations 7.3 Profit after tax and 117.1 discontinued operations 1Group items comprise Tram operations, central management and other items. 2For all businesses excluding UK Rail this year includes 53 weeks compared to 52 weeks last year. 3Adjusted. 3 DISCONTINUED OPERATIONS On 28 May 2010 FirstGroup plc disposed of GB Railfreight and on 30 September 2011 the Group disposed of FirstGroup Deutschland GmbH. As a consequence the results of these businesses have been classified as discontinued operations, as detailed below. 2012 2011 Â£m Â£m Revenue 5.3 22.4 Operating costs (5.6) (21.4) (Loss)/profit before tax (0.3) 1.0 Attributable tax expense - (0.4) (Loss)/profit for the period from discontinued (0.3) 0.6 operations (Loss)/profit on disposal of discontinued (9.2) 6.7 operations Net (loss)/profit attributable to discontinued (9.5) 7.3 operations 4 EARNINGS PER SHARE (EPS) EPS is calculated by dividing the profit attributable to equity shareholders of Â£196.2m (2011: Â£103.2m) by the weighted average number of ordinary shares of 481.4m (2011: 480.4m). 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. 2012 2011 Number Number m m Weighted average number of share used in basic 481.4 480.4 calculation SAYE share options 0.3 0.5 Executive share options 2.4 3.7 484.1 484.6 The adjusted basic EPS is intended to highlight the recurring results of the Group before amortisation charges, ineffectiveness on financial derivatives, exceptional items and loss on disposal of properties. A reconciliation is set out below: 2012 2011 Â£m EPS(p) Â£m EPS (p) Basic profit/EPS from continuing 205.7 42.7 95.9 20.0 operations Basic profit/EPS from discontinued (9.5) (1.9) 7.3 1.5 operations Basic profit/EPS 196.2 40.8 103.2 21.5 Amortisation chargesÂ¹ 30.7 6.4 42.7 8.9 Ineffectiveness on financial derivatives 11.0 2.2 (0.3) (0.1) Exceptional items (49.4) (10.3) 100.8 21.0 Non-controlling interests on exceptional - - (3.1) (0.6) items (Profit)/Loss on disposal of properties (1.0) (0.2) 4.4 0.9 Business disposals 9.2 1.9 (6.7) (1.4) Tax effect of above adjustments (0.4) (0.1) (41.3) (8.6) Deferred tax credit due to change in UK (4.0) (0.8) (1.7) (0.4) corporation tax rate Adjusted profit/EPS 192.3 39.9 198.0 41.2 Adjusted profit/EPS from discontinued 0.3 0.1 (0.6) (0.1) operations Adjusted profit/EPS from continuing 192.6 40.0 197.4 41.1 operations 1Amortisation charges of Â£30.9m per note 14 less Â£0.2m (2011: Â£42.9m less Â£ 0.2m) attributable to equity non-controlling interests. 2012 2011 Diluted EPS pence pence Continuing operations Basic 42.5 19.8 Adjusted 39.8 40.7 Continuing and discontinued operations Basic 40.5 21.3 Adjusted 39.7 40.9 2012 2011 2010 5 GOODWILL Â£m Â£m Â£m Cost At 1 April 1,613.0 1,754.9 1,820.0 Additions 2.9 2.3 - Disposals (11.3) (14.2) - Foreign exchange movements (0.3) (130.0) (65.1) At 31 March 1,604.3 1,613.0 1,754.9 Accumulated impairment losses At 1 April 5.0 - - Impairment losses for the year - 5.0 - At 31 March 5.0 5.0 - Carrying amount At 31 March 1,599.3 1,608.0 1,754.9 Greyhound Rail Customer brand and franchise contracts trade agreements Total name 6OTHER INTANGIBLE ASSETS Â£m Â£m Â£m Â£m Cost At 1 April 2010 407.6 66.0 56.3 529.9 Foreign exchange movements (26.1) (4.1) - (30.2) At 31 March 2011 381.5 61.9 56.3 499.7 Additions - - 1.4 1.4 Foreign exchange movements (0.3) (0.1) - (0.4) At 31 March 2012 381.2 61.8 57.7 500.7 Amortisation At 1 April 2010 70.6 8.3 35.1 114.0 Charge for year 25.1 3.1 14.7 42.9 Foreign exchange movements (5.6) (0.2) - (5.8) At 31 March 2011 90.1 11.2 49.8 151.1 Charge for year 24.3 3.2 3.4 30.9 Foreign exchange movements (0.1) - - (0.1) At 31 March 2012 114.3 14.4 53.2 181.9 Carrying amount At 31 March 2012 266.9 47.4 4.5 318.8 At 31 March 2011 291.4 50.7 6.5 348.6 At 31 March 2010 337.0 57.7 21.2 415.9 Passenger Other Land and carrying plant and buildings vehicle equipment Total fleet 7PROPERTY PLANT & EQUIPMENT Â£m Â£m Â£m Â£m Cost At 1 April 2010 555.2 2,644.3 549.9 3,749.4 Subsidiary undertakings acquired - 1.0 - 1.0 Subsidiary undertakings disposed of (2.8) (2.3) (4.0) (9.1) Additions in the year 27.3 145.8 89.5 262.6 Disposal (15.2) (59.5) (30.8) (105.5) Transfers (8.5) - 8.5 - Reclassified as held for sale - (56.1) - (56.1) Foreign exchange movements (19.5) (108.0) (16.4) (143.9) At 31 March 2011 536.5 2,565.2 596.7 3,698.4 Subsidiary undertakings disposed of (2.8) (4.0) (0.6) (7.4) Additions in the year 15.6 202.7 105.2 323.5 Disposals (41.6) (72.1) (23.8) (137.5) Transfers - 11.3 (11.3) - Reclassified as held for sale - (77.6) - (77.6) Foreign exchange movements (0.4) (1.8) 0.1 (2.1) At 31 March 2012 507.3 2,623.7 666.3 3,797.3 Accumulated depreciation and impairment At 1 April 2010 68.5 1,130.9 265.9 1,465.3 Subsidiary undertakings disposed of (1.2) (2.3) (1.8) (5.3) Charge for year 14.1 228.4 78.5 321.0 Impairment - 13.3 - 13.3 Disposals (4.3) (47.7) (27.3) (79.3) Reclassified as held for sale - (46.4) - (46.4) Foreign exchange movements (2.1) (44.6) (6.4) (53.1) At 31 March 2011 75.0 1,231.6 308.9 1,615.5 Subsidiary undertakings disposed of (0.3) (2.0) (0.4) (2.7) Charge for year 12.0 220.3 95.8 328.1 Disposals (3.1) (70.1) (14.5) (87.7) Transfers - (24.0) 24.0 - Reclassified as held for sale - (61.6) - (61.6) Foreign exchange movements (0.1) (0.5) - (0.6) At 31 March 2012 83.5 1,293.7 413.8 1,791.0 Carrying amount At 31 March 2012 423.8 1,330.0 252.5 2,006.3 At 31 March 2011 461.5 1,333.6 287.8 2,082.9 At 31 March 2010 486.7 1,513.4 284.0 2,284.1 2012 2011 2010 8 INVENTORIES Â£m Â£m Â£m Spare parts and consumables 90.6 91.1 91.5 Property development work in progress 0.4 0.3 1.2 91.0 91.4 92.7 2012 2011 2010 9 TRADE AND OTHER RECEIVABLES Â£m Â£m Â£m Amounts due within one year Trade receivables 421.5 408.7 462.2 Provision for doubtful receivables (4.5) (7.5) (6.5) Other receivables 72.8 53.4 57.3 Other prepayments and accrued income 112.1 100.9 89.5 601.9 555.5 602.5 2012 2011 2010 10TRADE AND OTHER PAYABLES Â£m Â£m Â£m Amounts falling due within one year Trade payables 397.6 312.2 288.9 Other payables 169.1 113.9 145.1 Accruals and deferred income 626.2 640.5 627.5 Season ticket deferred income 68.1 63.3 58.5 1,261.0 1,129.9 1,120.0 2012 2011 2010 11FINANCIAL LIABILITIES - BORROWING Â£m Â£m Â£m Current financial liabilities Short-term bank loans 69.3 93.5 - 69.3 93.5 - Bond 6.875% (repayable 2013) - accrued 20.3 20.2 20.2 interest Bond 8.125% (repayable 2018) - accrued 12.9 12.8 12.8 interest Bond 6.125% (repayable 2019) - accrued 3.0 3.0 3.0 interest Bond 8.75% (repayable 2021) - accrued 30.2 30.1 30.1 interest Bond 6.875% (repayable 2024) - accrued 7.2 7.2 7.2 interest 73.6 73.3 73.3 HP contracts and finance leases (note 12) 52.4 42.8 34.6 Loan notes (note 13) - - 0.8 Total current financial liabilities 195.3 209.6 108.7 Non-current financial liabilities Syndicated and bilateral unsecured bank 426.0 554.9 896.0 loans 426.0 554.9 896.0 Bond 6.875% (repayable 2013) 298.5 298.0 297.4 Bond 8.125% (repayable 2018) 296.7 296.4 296.2 Bond 6.125% (repayable 2019) 299.7 276.7 274.8 Bond 8.75% (repayable 2021) 347.1 347.0 346.8 Bond 6.875% (repayable 2024) 199.0 199.0 198.9 1,441.0 1,417.1 1,414.1 HP contracts and finance lease (note 12) 282.9 209.1 192.8 Loan notes (note 13) 9.7 9.7 9.7 Senior unsecured loan notes 93.3 - - Total non-current financialliabilities 2,252.9 2,190.8 2,512.6 Total liabilities 2,448.2 2,400.4 2,621.3 Gross borrowings repayment profile Within one year or on demand 195.3 209.6 108.7 Between one and two years 407.0 216.0 607.4 Between two and five years 564.9 796.1 720.4 Over five years 1,281.0 1,178.7 1,184.8 2,448.2 2,400.4 2,621.3 12 HP CONTRACTS AND FINANCE LEASES The Group had the following obligations under HP contracts and finance leases as at the balance sheet dates: 2012 2011 2010 Present 2012 Present 2011 present 2010 value of Minimum value of Minimum value of minimum payments payments payments payments payments payments Â£m Â£m Â£m Â£m Â£m Â£m Due in less than one year 54.0 52.4 42.8 40.2 34.6 48.8 Due in more than one year 54.8 51.9 48.3 43.2 42.7 37.8 but not more than two years Due in more than two years 173.9 154.7 116.6 106.3 97.2 86.9 but not more than five years Due in more than five 92.6 76.3 62.0 59.6 71.6 68.1 years 375.3 335.3 275.7 251.9 251.7 227.4 Less future financing (40.0) - (23.8) - (24.3) charges - 335.3 335.3 251.9 251.9 227.4 227.4 13 LOAN NOTES The Group had the following loan notes issued as at the balance sheet dates: 2012 2011 2010 Â£m Â£m Â£m Due in less than one year - - 0.8 Due in more than one year but not more than two 9.7 9.7 9.7 years 9.7 9.7 10.5 2012 2011 2010 14DERIVATIVE FINANCIAL INSTRUMENTS Â£m Â£m Â£m Derivativesdesignated and effective as hedging instruments carried at fair value Non-current assets Cross currency swaps (net investment hedge) 23.2 22.2 13.3 Coupon swaps (fair value hedge) 43.8 21.0 15.7 Fuel derivatives (cash flow hedge) 5.6 14.9 4.0 72.6 58.1 33.0 Current assets Cross currency swaps (net investment hedge) 4.3 4.6 3.6 Coupon swaps (fair value hedge) 9.5 6.7 10.6 Currency forwards (cash flow hedge) - 1.2 - Fuel derivatives (cash flow hedge) 29.7 52.6 15.7 43.5 65.1 29.9 Current liabilities Interest rate derivatives (cash flow hedge) 8.0 15.0 42.9 Cross currency swaps (net investment hedge) 1.2 23.3 2.9 Fuel derivatives (cash flow hedge) 3.5 0.1 39.4 12.7 38.4 85.2 Non-current liabilities Interest rate derivatives (cash flow hedge) 13.7 1.5 10.7 Cross currency swaps (net investment hedge) 27.1 28.2 91.9 Fuel derivatives (cash flow hedge) 0.9 - 18.5 41.7 29.7 121.1 Derivatives classified as held for trading Current assets Cross currency swaps - - 2.2 Current liabilities Interest rate swaps 4.4 0.1 - Non-current liabilities Interest rate swaps 8.4 - - Total non-current assets 72.6 58.1 33.0 Total current assets 43.5 65.1 32.1 Total assets 116.1 123.2 65.1 Total current liabilities 17.1 38.5 85.2 Total non-current liabilities 50.1 29.7 121.1 Total liabilities 67.2 68.2 206.3 15 DEFERRED TAX The major deferred tax liabilities/(assets) recognised by the Group and movements thereon during the current and prior reporting periods are as follows: Accelerated Other tax temporary depreciation differences Tax Total losses Â£m Â£m Â£m Â£m At 1 April 2010 309.8 (16.1) (260.2) 33.5 (Credit)/charge to income (30.0) (21.7) 31.7 (20.0) Charge to equity - 49.8 - 49.8 Disposal of subsidiary - 1.6 - 1.6 Foreign exchange movements (14.9) (3.9) 16.9 (1.9) At 31 March 2011 264.9 9.7 (211.6) 63.0 Charge/(credit) to income (36.9) 61.0 31.3 55.4 Credit to equity - (64.4) - (64.4) Foreign exchange movements 0.7 0.1 (0.4) 0.4 At 31 March 2012 228.7 6.4 (180.7) 54.4 Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes: 2012 2011 2010 Â£m Â£m Â£m Deferred tax assets (43.3) (30.0) (30.4) Deferred tax liabilities 97.7 93.0 63.9 54.4 63.0 33.5 2012 2011 2010 16PROVISIONS Â£m Â£m Â£m Insurance claims 218.4 221.0 243.9 Legal and other 19.9 26.4 51.4 FGW contract provision - 48.7 - Pensions 4.2 4.7 5.1 Non-current liabilities 242.5 300.8 300.4 FGW Insurance Legal contract claims and provision Pensions Total other Â£m Â£m Â£m Â£m Â£m At 1 April 2011 340.5 37.6 59.9 4.7 442.7 Charged to the income statement 139.0 7.5 - - 146.5 Utilised in the year (162.8) (21.1) (3.0) (0.5) (187.4) Notional interest 18.9 - - - 18.9 Foreign exchange movements 0.4 0.1 - - 0.5 At 31 March 2012 336.0 24.1 56.9 4.2 421.2 Current liabilities 117.6 4.2 56.9 - 178.7 Non-current liabilities 218.4 19.9 - 4.2 242.5 At 31 March 2012 336.0 24.1 56.9 4.2 421.2 Current liabilities 119.5 11.2 11.2 - 141.9 Non-current liabilities 221.0 26.4 48.7 4.7 300.8 At 31 March 2011 340.5 37.6 59.9 4.7 442.7 Current liabilities 131.3 5.4 - - 136.7 Non-current liabilities 243.9 51.4 - 5.1 300.4 At 31 March 2010 375.2 56.8 - 5.1 437.1 2012 2011 2010 17SHARE CAPITAL Â£m Â£m Â£m Allotted, called up and fully paid: 482.1m Ordinary shares of 5p each 24.1 24.1 24.1 Number Â£m m At 31 March 2010, 31 March 2011 and 31 March 2012 482.1 24.1 2012 2011 18NET CASH FROM OPERATING ACTIVITIES Â£m Â£m Operating profit before loss on disposal of 447.0 313.0 properties Operating profit of discontinued operations (0.3) 1.0 Adjustments for: Depreciation charges 328.1 321.0 Capital grant amortisation (13.7) (8.0) Amortisation charges 30.9 42.9 Impairment charges - 19.5 Share-based payments 6.0 7.7 Loss on disposal of property, plant and equipment 3.8 3.7 Operating cash flows before working capital 801.8 700.8 Decrease/(increase) in inventories 0.6 (3.2) Decrease in receivables 34.0 25.9 Increase in payables 34.6 63.7 (Decrease)/increase in provisions (77.8) 0.4 Defined benefit pension payments in excess of (160.4) (43.5) income statement charge Cash generated by operations 632.8 744.1 Tax paid (17.7) (25.0) Interest paid (130.9) (155.2) Interest element of HP contracts and finance (8.8) (8.2) leases Net cash from operating activities 475.4 555.7 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 2012. 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 23 May 2012 and was signed on its behalf by: Tim O'Toole Nick Chevis Chief Executive Acting Finance Director

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Christmas Eve sees a profit warning from Vistry and Atlas Metals pressured after planned purchase deal is on the brink of collapse, but Windward jumps as all cash acquisition agreed.

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