Embargoed until 7:00am on Wednesday 29 September 2010
FIRSTGROUP PLC
PRE-CLOSE TRADING UPDATE
FirstGroup plc ("FirstGroup" or `the Group') reports the following update on
trading for the six months ended 30 September 2010 ahead of its half-yearly
results to be announced on 3 November 2010.
Summary
* Current trading in line with management's expectations
* On track to deliver moderate earnings growth target for the full year
* Strong cash generation - confident of achieving Group's target of 2.5x net
debt:EBITDA by March 2011
Overall trading
The Group provided an update on trading as part of its Interim Management
Statement on 8 July 2010. Since then overall trading for the Group has remained
in line with management's expectations.
The Group continues to benefit from a balanced mix of contract-backed and
passenger revenue operations in the UK and North America. During the first half
of the year we retained our strong focus on increasing cash generation as well
as maintaining and improving margins across the Group through rigorous cost
control, closely matching service provision to demand and continuing to drive
out further operating efficiencies.
UK Bus
Our UK Bus business has continued to perform steadily during the first half of
the year with like-for-like passenger revenues increased by 1.3% during the
period. While the trading environment in many towns and cities across the UK
remains challenging, we continue to take action to reduce costs and manage our
local networks, and where necessary reduce mileage in line with passenger
demand. These actions will enable the business to deliver a robust operating
margin performance. As volumes recover we retain the capability to increase the
frequency of services and to grow our bus networks.
UK Rail
We are pleased with the performance of our UK Rail business which has seen a
continued strengthening in passenger volumes across all of our rail franchises.
Like-for-like passenger revenues grew by 4.4% in the period, despite the
reduction in regulated fares from January 2010. First Class ticket sales are
showing encouraging signs of improvement particularly with Advance purchase
fares, and we are seeing growth across all of our franchises on Anytime, full
flexible tickets. Across all of our franchises we continue to focus on lowering
the addressable cost base which has achieved substantial savings in direct
costs and reduced overheads.
North America
First Student
Full year revenues in our Student business are expected to remain broadly in
line with prior year. School boards continue to experience budgetary pressure
as a result of lower tax revenues. We remain confident that, as the market
leader in student transportation in North America, we have unrivalled scope to
provide innovative and practical solutions and increase operating efficiencies
to help customers overcome their budgetary constraints and enable First Student
to maintain its industry-leading position.
In this lower-revenue growth environment we continue to prioritise cost
reductions and efficiency improvements to protect operating margin. During the
period we made good progress with our plan to roll out FOCUS software which
provides fast, accurate data to enhance the management of our fleet and
operations performance and labour costs.
During August and September we had a successful `start up' to the new school
year including a number of conversion contracts following the decision by their
school boards to outsource the provision of school transportation.
First Transit
Our Transit business continued to perform well with US Dollar revenues
increased by 4.5% during the period. Following a period of new business wins,
First Transit successfully commenced the start up of a number of new contracts
during the first half. First Transit has established an excellent reputation
within its growing and diverse market. With good opportunities for further
profitable expansion with minimal capital investment, we remain encouraged by
the prospects for this business.
Greyhound
Greyhound continued to deliver growth, despite the challenging economic
conditions and continued high unemployment in North America, with like-for-like
passenger revenue increased by 1.6% during the period. A relentless and
rigorous management of the network has delivered revenue per mile ahead of
prior year and enables the business to achieve an improvement in operating
margin performance.
Cash generation
During the first half of the year we made good progress to increase cash
generation within the Group including initiatives that are delivering
improvements in working capital. The net proceeds from the sale of GB
Railfreight in June further contributed to our net debt reduction programme.
We remain confident of achieving our target ratio of 2.5x net debt: EBITDA by
March 20111.
Outlook
The Group has successfully built a leading position in all of its core markets
providing both resilience and opportunity through the challenging economic
environment. The Board is confident of the Group's prospects to continue to
deliver safe, high quality services for customers and long term value for
shareholders. The trading performance in the first half of the year is in line
with management's expectations; our drive to improve cash generation is
yielding good results and, as previously reported, we expect moderate earnings
growth in the current financial year which supports the Board's commitment to
dividend growth of at least 7% per annum.
Contacts FirstGroup plc:
Jeff Carr, Finance Director
Rachael Borthwick, Group Corporate Communications Director
Tel: +44 (0) 20 7291 0512 / mobile + 44 (0) 7771 945432
1 Based on current US Dollar : Pound Sterling exchange rates
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