Trading Statement

FIRSTGROUP PLC

FIRST QUARTER 2016/17 TRADING UPDATE

FirstGroup plc (the 'Group'), a leading transport operator in the UK and North America, today reports the following update on trading since the start of our 2016/17 financial year (the 'current year').

Summary:

• Trading performance as outlined at recent full year results in June has continued during the first quarter

• Group revenue in the first quarter decreased by 1.4% in constant currency, with revenue growth in First Student, First Transit and First Rail offset by decreases in First Bus and Greyhound

• No change to overall outlook for the current year, recognising that the degree to which potential net currency benefits as a result of our significant US dollar based businesses will be offset by a more challenging macroeconomic outlook for our UK businesses is uncertain, following the outcome of the EU referendum

Increase/(decrease) vs comparable period, in constant currency	First quarter 2016/17
First Student revenue	+1.1%
First Transit revenue	+1.0%
Greyhound like-for-like passenger revenue	(5.0)%
First Bus like-for-like passenger revenue	(1.4)%
First Rail like-for-like passenger revenue	+2.3%

Divisional update in the first quarter:

The third year of First Student's contract pricing programme continues to progress. With approximately two thirds of negotiations completed in the current bid season, we are achieving average price increases above the prior year while our contract retention rate is as targeted. Early in the first quarter we realigned our regional management and central service structures, resulting in the elimination of 130 positions, which will assist in meeting our cost efficiency targets for the current year. We remain on track to benefit from a higher number of operating days and a reduction in our fuel costs due to our hedging profile. We continue to work to offset the driver shortage cost headwinds we are experiencing, and expect significant margin progression in the current year.

First Transit delivered a solid financial performance in the first quarter, continuing to benefit from growth opportunities in our core service markets, as well as exploring additional avenues for future growth. As anticipated, we are experiencing further reductions in demand for our shuttle services to the Canadian oil sands sector due to the oil price and the wildfire which devastated the city of Fort McMurray. However, we expect First Transit will deliver overall growth in the current year, while maintaining margins.

As expected, Greyhound has continued to experience muted passenger demand in the first quarter, with fuel prices lower than in the comparable period in the prior year. Like-for-like revenue decreased by 5.0% in the first quarter, and we expect year-on-year growth to remain challenging throughout the first half of the current year. We continue to take actions to reduce cost in response to the demand environment, and to make progress with our business model transformation.

In the first quarter, First Bus like-for-like revenue decreased by 1.4%, with passenger volumes continuing to be affected by lower high street retail footfall and congestion impairing services in several of our markets. We continue to take action to offset the challenging market backdrop by merging or closing a number of depots and other cost efficiencies, and expect to deliver margin progression during the current year from the benefits of past cost saving actions, additional cost and operational efficiency initiatives and reduced fuel costs.

Our First Rail division delivered like-for-like passenger revenue growth of 2.3% in the first quarter with volume growth moderating, consistent with recent industrywide trends. This slowdown in growth has been mainly evident on our Great Western Railway ('GWR') franchise, where the network infrastructure is undergoing substantial upgrade work. Meanwhile revenue performance at TransPennine Express ('TPE') has been better than the industry average in the quarter. We continue to expect our divisional margin to rebase toward industry norms in the current year, reflecting the terms of the new TPE franchise and new GWR direct award. In the recent National Rail Passenger Survey, our rail franchises maintained or improved their customer satisfaction ratings, during a period when the industry average satisfaction score fell.

EU referendum

It is too soon to judge the overall effect of the EU referendum decision on the Group. More than two thirds of Group adjusted operating profit was generated in North America in the last financial year, and the weakening of sterling since the referendum outcome would, if maintained, result in translation benefits from our US Dollar denominated businesses, albeit partly mitigated by some US Dollar denominated costs incurred in the UK divisions (principally for fuel), and some US Dollar interest and tax costs. Like other business sectors, our UK-based First Bus and First Rail operations are affected by trends in the wider economy, including factors such as weakening economic growth and lower consumer confidence. The degree to which the net currency benefit from our US-based operations will be offset by more challenging UK economic conditions for our UK-based businesses is uncertain at this stage.

Financial position

As in previous years, the Group’s results in the current year will be significantly weighted to the second half principally due to the timing of school summer holidays on First Student's business compared with our financial year. First Rail’s results in the current year will also be more second half weighted as a result of the new GWR direct award, which took effect towards the end of the first half of the prior year.

On 5 July, credit rating agency Standard & Poor’s reaffirmed their BBB-/A-3 rating on the Group.

Commenting on today's announcement, FirstGroup Chief Executive Tim O'Toole said:

"Our trading performance as outlined at the recent full year results in June has continued during the first quarter, and the Group expects to make strong progress in the current year despite a challenging and uncertain trading environment in several of our markets. This will come from our continued focus on disciplined contract bidding and rigorous cost efficiency programmes, as well as lower fuel costs and more First Student operating days compared with the prior year. Overall, we expect to deliver a significant improvement in our profile of sustainable returns and cash generation going forward."

Contacts at FirstGroup:

Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Media
Tel: [phone]

Contacts at Brunswick PR:

Michael Harrison / Andrew Porter, Tel: [phone]

Notes

Unless otherwise stated, all financial figures for the 'period' or the 'first quarter' include the results of the rail business for the twelve weeks to 27 June 2016 and the results of all the other businesses for the three months to 27 June 2016, with growth compared to the comparable period in the prior year. References to ‘like-for-like’ revenue adjust for changes in the composition of the divisional portfolio, holiday timing, severe weather and other factors that distort the year-on-year trends in our passenger revenue businesses. No account is taken of foreign exchange translation effects in the descriptions of divisional performances and outlook.

Figures presented in this announcement are not audited. Certain statements included or incorporated by reference within this announcement may constitute ‘forward-looking statements’ with respect to the business, strategy and plans of the Group and our current goals, assumptions and expectations relating to our future financial condition, performance and results. By their nature, forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors which cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Shareholders are cautioned not to place undue reliance on the forward-looking statements. Except as required by the UK Listing Rules and applicable law, the Group does not undertake any obligation to update or change any forward-looking statements to reflect events occurring after the date of this announcement. The information contained in this announcement is or may be inside information.

FirstGroup plc (LSE: FGP.L) is a leading transport operator in the UK and North America. With £5.2 billion in revenues and 110,000 employees, we transported around 2.2 billion passengers last year. Each of our five divisions is a leader in its field: In North America, First Student is the largest provider of student transportation with a fleet of around 47,000 yellow school buses, First Transit is one of the largest providers of outsourced transit management and contracting services, while Greyhound is the only nationwide operator of scheduled intercity coach services. In the UK, FirstGroup is one of Britain's largest bus operators running a fleet of some 6,200 buses, and we are one of the country's most experienced passenger rail operators, carrying around 140 million passengers last year.

Our vision is to provide solutions for an increasingly congested world... keeping people moving and communities prospering.

Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.