Interim Management Statement

17 January 2014
                                

                                FIRSTGROUP PLC                                 

                  THIRD QUARTER INTERIM MANAGEMENT STATEMENT                   


FirstGroup plc ("the Group") reports the following update in respect of trading
since 1 October 2013.  Unless otherwise stated, all financial figures refer to
the three months ended 31 December 2013 ("the period").

Summary

• Overall trading in line with management's expectations, with good performance
in four divisions offset by slower progress in First Student

• First Student - recovery plan helping to mitigate tough market conditions,
medium term targets unchanged

• Continued strong performance in First Transit

• Greyhound - focus on cost management ensures margin performance remains on
course.  Successful expansion of Greyhound Express continues

• UK Bus - transformation plan is on track, with positive signs from local
market growth initiatives

• UK Rail - continues to deliver solid passenger revenue and volume growth
across all our franchises

First Student

We continue to progress our recovery plan for First Student and deliver ongoing
cost savings.  The market remains challenging overall with limited growth
opportunities and pricing power.  Against that backdrop we continue to drive
adoption of and compliance with more efficient, uniform practices across 550
locations; use technology to drive down cost and differentiate our service
capability; and manage the portfolio closely to focus on winning or retaining
only those contracts that meet our returns criteria.  Adverse weather impacted
revenue and operating profit in both core school bus operations and our charter
business in the period.  Despite this, we continue to expect revenues for the
full year to be broadly in line with the prior year.  We remain on track to
deliver $100m in annual cost savings in this financial year but current cost
inflation that marginally exceeds the pricing adjustments provided for in our
multi-year contracts, and school closures as a result of poor weather
conditions, mean the rate of progress this year toward our medium term margin
objective will be slower than we had targeted.  We expect that margins for the
full year will be only slightly ahead of the prior year.

As we advance our programme to embed efficiency and improve returns, we remain
confident there is significant opportunity to achieve further savings and that
First Student will deliver double-digit margins and sustainable returns over
the medium term.  In early January, we announced the appointment of a new
President of First Student, who will build on the actions already taken and
drive the transformation programme on to the next phase.

First Transit

First Transit delivered a further period of strong trading.  Our market leading
portfolio continues to strengthen with several new business wins, including a
major new paratransit service for the City of Chicago, and contract retention
for the year to date is 95%.  We expect revenue growth for the full year of
over 7%.

Greyhound

Greyhound's like-for-like revenue grew by 0.3% during the period, with robust
Thanksgiving and Christmas sales partially offset by poor weather and the
continued effects of the subdued US economic environment, particularly on those
value focused consumers who form a substantial portion of traditional
Greyhound's customer base.  Cost containment remains a strong focus and the
actions taken to increase the flexibility of the operating model have enabled
operating margins to remain resilient.  Greyhound Express continues to grow
strongly with like-for-like revenues increasing by 12.6% in the period.  We
continue to build on this success, rolling out further routes, while also
ensuring that the experiences we gain in our newer point-to-point brands
continue to support the modernisation of the traditional Greyhound network. 
The programme to upgrade traditional Greyhound's technology infrastructure to
support profitable growth through improved yield management, real-time pricing
and more consumer friendly ticketing is on track.

UK Bus

During the period, like-for-like passenger revenue increased by 2.0%
underpinned by good passenger volume growth, continuing the encouraging trends
achieved in the first half of the financial year.  We continue to see positive
results from those operations furthest along the transformation programme,
despite the challenging economic conditions that prevail in a number of our
local markets.  We are on track with our plans to return the division to
double-digit margins in the medium term through further cost optimisation from
more disciplined operations; market-by-market improvements to our network
designs and fares structures to drive improved volume growth; and further
investment in our bus fleets and technology to improve customer experience.  We
recently confirmed a £70m investment in 425 new buses, helping to improve
reliability, reduce fuel and maintenance costs as well as significantly enhance
the quality of our service offering to customers.

UK Rail

UK Rail performed well in the period.  Like-for-like passenger revenue
increased by 6.3%, with further strong volume growth across all of our train
operating companies, with successful delivery on a number of important fleet
and infrastructure projects where we worked in partnership with equipment
manufacturers and Network Rail.  During the period we submitted
pre-qualification proposals for the Essex Thameside and the Thameslink,
Southern and Great Northern franchises.   We have been shortlisted for the
upcoming ScotRail, Caledonian Sleeper and Luas light rail franchise
competitions. 

Outlook

Commenting, Tim O'Toole, Chief Executive said:

"I am pleased to report that overall trading in the period is in line with our
expectations, with a good performance in four of our divisions offset by slower
progress in First Student.  While there remain a number of short term
challenges to overcome, the programmes are in place that will enable the Group
to benefit from its market leading positions.  The slowing of our margin
progression in First Student during the period was disappointing, however we
remain confident in achieving our medium term objectives for the division as we
refresh the management team and drive further cost efficiencies and improve
returns across the business.  As we work through the current bidding season,
which is just commencing, our focus remains on those markets where our superior
offering is valued.  The performance of the other divisions in the period was
encouraging.  In UK Bus, we are pleased with the tangible results we are seeing
from our comprehensive transformation plans, and although challenging economic
conditions continue in some of our local markets, our confidence continues to
grow.   

"I am confident we are on the right track to increasing the resilience of the
Group and improving returns and growth prospects for the benefit of all our
stakeholders.  I am very pleased to welcome John McFarlane to the Board as
Chairman.  He joins at an important time for the Group and his extensive
international experience and track record of value creation will be invaluable
as we work to deliver sustainable long term value for shareholders."
                                                                               

  A conference call for analysts and investors will be held at 9:00am today.   

Please call [phone] in advance of the call to register and to receive 
                               joining details.                                

 

Contacts at FirstGroup:
Rachael Borthwick, Group Corporate Communications Director
Faisal Tabbah, Group Investor Relations Manager
Stuart Butchers, Group Media Relations Manager
Tel: [phone] / 0512

Contacts at Brunswick PR: 
Michael Harrison/Andrew Porter, Tel: [phone]