Final Results

FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2013 * Overall trading for the Group in line with management's expectations * Proposed fully underwritten c.Â£615m capital raising transaction announced separately today to remove the constraints of the current balance sheet and enable the business to continue to invest for future returns, while reducing leverage * No final dividend proposed. New progressive dividend policy announced today. * First Student - recovery plan on track, building on progress made from a more efficient operating model and uniform practices * First Transit - strong growth underpinned by good contract wins, disposal of First Support Services consistent with our strategy to focus on core businesses * Greyhound - margin expansion despite economic headwinds, further expansion of Greyhound Express to new markets * UK Bus - completed portfolio reshaping with c.Â£100m of disposals, including sale of London depots announced in April. Comprehensive programme to restore performance and increase revenue and patronage delivering early positive results * UK Rail - continued strong performance, franchise extensions currently being negotiated and positioned for resumption of franchising process * Cash flow in line with expectations Continuing operations1: 2013. 2012 Change Revenue Â£6,900.9m Â£6,678.7m +3.3% Underlying2 - EBITDA3 Â£667.0m Â£742.9m -10.2% - operating profit Â£335.4m Â£428.5m -21.7% - profit before tax Â£172.4m Â£271.4m -36.5% - basic EPS 26.9p 40.0p -32.7% Statutory - operating profit Â£205.7m Â£448.0m -54.1% - profit before tax Â£37.2m Â£279.9m -86.7% - basic EPS 7.3p 42.7p -82.9% Final dividend per share4 Nil 16.05p Net debt5 Â£1,979.1m Â£1,837.5m +7.7% 1For all businesses excluding UK Railthis year includes 52 weeks compared to 53 weeks last year. 2Before amortisation charges, ineffectiveness on financial derivatives, exceptional items, (loss)/profiton disposal of properties and discontinued operations. All references to `underlying' figures throughout this report are defined in this way. 3 Underlying operating profit less capital grant amortisation plus depreciation. 4No final dividend is being proposed. An interim dividend of 7.62p was paid on 7 February 2013. 5Net debt is stated excluding accrued bond interest. Commenting, FirstGroup's Chief Executive, Tim O'Toole said: "With a fundamentally attractive portfolio of businesses and leading positions in each of our markets, we are focused on delivering outstanding services to our customers and communities, and harnessing the significant opportunities we have to create long term sustainable value. We have delivered a resilient trading performance in line with our expectations and have also achieved most of the other goals we had set ourselves during the year, including our c.Â£100m UK Bus disposal programme and divesting other non-core assets including First Support Services. "The real long term opportunity for us, however, arises from our business recovery programmes, particularly in First Student and UK Bus. We have clear plans in place for all of our divisions, and while there remains significant work to be done, our confidence continues to grow as a result of the progress to date. "The proposed c.Â£615m capital raising transaction we are announcing separately today will remove the constraints from our balance sheet and enhance our ability to invest in our businesses going forward. We plan to invest around Â£ 1.6 billion across our five divisions over the next four years to underpin growth and return our businesses to our target levels of profitability. Through these actions, combined with our scale and expertise, we are positioning the business for improved growth and returning it to a profile of consistent returns and cash generation. "We are targeting an appropriate, progressive and sustainable dividend policy with cover of 2.0 to 2.5x in the medium term. In the short term the Board proposes that no final dividend will be paid in respect of the year to 31 March 2013, nor an interim dividend for the year to 31 March 2014. Payments will recommence with a final dividend for the year to 31 March 2014, subject to performance in line with expectations, as a transition to re-establishing a progressive dividend policy thereafter. While the exact quantum will be determined at that time, the Board's intent is to pay a transitional final dividend of up to Â£50m in the year to 31 March 2014. "Martin Gilbert has today announced his intention to stand down as Chairman, once a successor has been appointed. On behalf of the Board and our 120,000 employees, I would like to pay tribute to Martin and thank him for his outstanding contribution to the company. As Chairman and founder his vision and drive have led the transformation of the Group and under his stewardship the business has grown to become one of the world's leading transport operators." Contacts: FirstGroup plc: Tim O'Toole, Chief Executive Chris Surch, Group Finance Director Tel: +44 (0) 20 7291 0512 Rachael Borthwick, Group Corporate Communications Director, Tel: +44 (0) 20 7291 0508 / +44 (0) 7771 945432 Stuart Butchers, Group Corporate Communications Manager, Tel: +44 (0) 20 7291 0507 / +44 (0) 7713 317979 Brunswick Group: Michael Harrison / Andrew Porter, 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 7725 3354 A PLAY BACK FACILITY WILL BE MADE AVAILABLE AT www.firstgroup.com/corporate/ investors/presentations.php PHOTOS FOR THE MEDIA CAN BE OBTAINED BY CALLING +44 (0) 20 7725 3354 Chairman's statement In a sector which is a key enabler of economic development, the Group's diverse portfolio of businesses offer an attractive platform for sustainable growth. During the year we continued to take action to mitigate the effects of the prolonged economic downturn and to place the business on a firmer footing to continue to invest for the future and deliver improved growth and returns. The Group has grown rapidly over the last twenty years through a combination of acquisition, organic growth and contract wins, and we have established a broad-based portfolio of market leading transport businesses in the UK and North America with unrivalled scale and breadth. We believe that our wide-ranging stakeholders benefit from the diversity of the Group which underpins our wealth of expertise and unique knowledge of the many different markets, networks, contracts and assets. The diversity of our portfolio also means that each of our businesses responds differently to changes in the economic cycle, although the core drivers of our industry to some extent transcend the ebbs and flows of macro-economic trends. As the problems of congestion from urban growth continue to multiply, the need for more efficient transport solutions is recognised as being ever more critical. The external headwinds we have faced this year have been considerable. The sustained economic weakness across the UK and North America continued to affect our passenger revenue businesses, and the impact of reduced Government support for the bus industry in the UK during the year has been marked. It has also been an exceptionally challenging period for the UK rail industry and for our rail business in particular, following the unexpected cancellation of the InterCity West Coast franchise competition. Notwithstanding the public statements from the Department for Transport (DfT) that we were not at fault, having followed due process and submitted a strong bid in strict accordance with their terms, we were frustrated that our employees and our shareholders had to endure this extraordinary series of events. In March, following the completion of two independent reviews, the DfT issued a detailed timetable for rail franchise awards over the next eight years and re-opened two of the live competitions to pre-qualified bidders, of which the Group was one. As the UK's largest and most experienced rail operator, we remain committed to maintaining a leading position in the market, and look forward to submitting further high quality bids that deliver for passengers, taxpayers and shareholders. As we continue to manage in a climate of uncertainty, we have taken significant steps this year to enhance our flexibility and strengthen our Group for the future. Across the business there is a resolute drive to harness our scale by developing and sharing our global expertise for the benefit of our local markets. Led by Tim O'Toole, the management team remain focused on plans to strengthen the business to address the challenges we are facing today, and to deliver sustainable growth for the future. During the year we took steps to further strengthen the Board through a number of new appointments. On 1 August 2012 we were pleased to welcome Brian Wallace and Jim Winestock to the Board as Independent Non-Executive Directors. Brian has held executive board positions within a number of FTSE 100 and FTSE 250 organisations, most recently as Group Finance Director of Ladbrokes plc. Prior to joining Ladbrokes he was Group Finance Director and Deputy Chief Executive of Hilton Group. Jim Winestock served in a number of senior roles and was a member of the Management Committee during his career at United Parcel Service, Inc. Most recently he was Senior Vice President and Director of US Operations and Global Security with responsibility for all US operations and 360,000 employees. Chris Surch was appointed to the Board as Group Finance Director on 1 September 2012. Chris joined from Shanks Group plc where he was Group Finance Director. Prior to that, he held a number of senior financial roles including at Smiths Group plc and TI Group plc. Together with strong financial leadership, he brings considerable operational, strategic and international knowledge and experience of significant business improvement programmes. On behalf of the Board, I'd like to extend our sincere thanks and gratitude to our 120,000 employees. They are the backbone of our organisation and our greatest strength. The engagement, support, and development of all our people is an important focus for management and vital to delivering our plans for the future. The Group remains a strong and profitable business with market leading positions. During the year we continued to take action to mitigate the effects of the prolonged economic downturn and to place the business on a firmer footing to continue to invest for the future. Having comprehensively reviewed other options, the Board is confident that the proposed capital raising transaction is the best solution for the Group, to remove the risk of a credit rating downgrade, right-size the balance sheet and give our management team the resources necessary to deliver their value-enhancing strategy for the Group. We are targeting an appropriate, progressive and sustainable dividend policy with cover of 2.0 to 2.5x in the medium term. In the short term the Board proposes that no final dividend will be paid in respect of the year to 31 March 2013, nor an interim dividend for the year to 31 March 2014. Payments will recommence with a final dividend for the year to 31 March 2014, subject to performance in line with expectations, as a transition to re-establishing a progressive dividend policy thereafter. While the exact quantum will be determined at that time, the Board's intent is to pay a transitional final dividend of up to Â£50m in the year to 31 March 2014. I am pleased to announce the fund-raising today, which will not only strengthen the Group and support its continued growth but also underpin the ability to remain a dividend paying stock as well as supporting our investment grade rating. When this project is complete, I intend to step down as Chairman once a successor has been identified. I have led the business for 27 years, from start-up to its current position as one of the world's great transport groups, and I am extremely proud of what we have achieved at FirstGroup in that time. I shall be sorry to leave, but I'm pleased that this fund-raising will open the way to the next stage of FirstGroup's development. Martin Gilbert Chairman 20 May 2013 * Operating profit referred to throughout this document refers to operating profit before amortisation charges, ineffectiveness on financial derivatives, exceptional items, (loss)/profit on disposal of properties and discontinued operations. EBITDA is underlying operating profit less capital grant amortisation plus depreciation. Business summary Notwithstanding sustained economic weakness we are focused on our objectives of improved performance and sustainable growth. We have taken a series of comprehensive actions to address specific issues, reform operating models to address performance and strengthen our businesses. * First Student, which faced pressure on operating margins driven by constraints on school board budgets, continues to respond well to the recovery programme which is now well established. While there remains work to be done, we are confident of the prospects to build on the actions we have taken and we are on track to achieve $100m of annual cost savings from a more efficient model. * In First Transit, we continue to focus on our core segments which delivered strong growth during the year with new contract wins, and consistent with that strategy we completed the sale of First Support Services, our military base facility management business, for a gross consideration of US$10.2m. We have grown to become the largest provider of shuttle bus services at airports and for universities, an area where we are developing further opportunities for expansion and focus on technological innovation. * Our Greyhound division continues to transform its operating model to become a more flexible and agile business, investing in technology, right sizing or relocating terminals and modernising the network to offer customers attractive, affordable and reliable long distance travel. Our unique national network underpins our success and, as we expand our popular Greyhound Express service, it underpins our ability to establish sustainable flows on new routes. Our BoltBus and new YO! Bus services have seen successful expansion during the year. * We are making good progress with our programme to transform our UK Bus business and equip it to deliver sustainable growth in patronage and revenue. We have repositioned our portfolio of operations with c.Â£100m of selected business and asset disposals. As we continue to work through our plans to improve efficiency by changing the commercial model to be more responsive locally and create stronger and more effective partnerships with local stakeholders, we are encouraged by the positive signs in the markets where our transformation is furthest along. * In UK Rail, we continue to focus on operating performance across our existing franchises while delivering major infrastructure and capacity upgrades in conjunction with our industry partners. We are in discussions with the Department for Transport (DfT) in respect of contract extensions for two of our existing franchises, First Great Western and First Capital Connect. We are poised to take part in the new franchising process as set out by the DfT and remain committed to retaining a leading position in the UK rail market, where we can utilise our vast bidding and operational experience to deliver for customers and taxpayers and provide an economic return for shareholders. Capital structure Our ability to deliver on the potential of all of our businesses depends on the continued strength of our balance sheet. We have maintained an investment grade credit rating since 2002, which we believe to be important in terms of financing, insurance and pensions costs. Although we currently have appropriate levels of covenant headroom and liquidity, the prolonged economic weakness and impact of government austerity have weighed on our recent cash generation and, coupled with the delays to the UK rail franchising programme, meant that we were unlikely to continue to support investment grade credit rating in the near term. We believe that the proposed c.Â£615m capital raising transaction announced separately today will remove the constraints of the current balance sheet and provide a sustainable capital structure going forward, reinforcing our objective to remain investment grade, increasing flexibility to continue our business transformation plans already underway and underpin our investment plans to create long term value. The Board believes this will: * remove the constraints of our current balance sheet and provide a sustainable capital structure going forward * support our objective to remain investment grade, and avoid the anticipated additional financing costs of becoming sub-investment grade * increase flexibility to continue our transformation and investment plans, to create sustainable long term value Investment plansand medium term targets Over the next four years, we intend to invest approximately Â£1.6 billion in our divisions to continue funding the operational transformation plans already underway, which will be financed from our existing cash resources, future cash generated from operations, and a portion of the proceeds of the capital raising transaction announced separately today. The key priorities for delivering our business plans and generating shareholder value over the medium term are as follows: * In First Student, to continue to execute the ongoing recovery plan by improving operational efficiency with a view to targeting double digit margins in the medium term, including by ultimately driving up contract retention rates above 90%, taking advantage of opportunities to win new contracts as state authorities and school boards continue to outsource their student bus services and returning to a selective acquisition strategy to enhance growth * In First Transit, to maintain margins while investing to take advantage of key outsourcing opportunities, including in the expanding shuttle bus business (particularly on university campuses and in Canadian oil fields) * In Greyhound, investing in infrastructure and IT, including new reservation and ticketing systems, to drive operational efficiencies, facilitate better yield management and thereby seek to achieve growth in excess of GDP, as we have done in BoltBus and Greyhound Express. Further capital expenditures will also be made to renew and refurbish its fleet and continue to fund the addition of new routes and services. * In UK Bus, to improve margins to double digit levels in the medium term, by continuing our depot transformation programme, network redesign plans, reducing the fleet age into line with sector average, as well as raising the information provision and smart ticketing capabilities of the business to support volume growth * Ensuring our capital strength continues to support the UK Rail division as it participates in a range of future franchise competitions to seek to maintain its market leading position. Following the proposed capital raising transaction, we will target the following objectives over the next four years: * increase Group revenue (excluding UK rail) at a faster rate than the economies we serve, improve margins in First Student and UK Bus to double digits, and achieve a post-tax ROCE in the range of 10% to 12% * maintain our investment grade rating and appropriate liquidity and covenant headroom * as the business performance improves, to re-establish a progressive dividend policy to target 2.0 to 2.5x cover Dividends The Board recognises that dividends are seen as an important component of equity returns by many of our shareholders. In the medium term, as the business performance improves, the Board intends to re-establish a progressive and sustainable dividend policy to target dividend cover of 2.0 to 2.5 times. In the short term, the Board intends that: * no final dividend will be paid in respect of FY 2013 * no interim dividend will be paid in respect of FY 2014 * dividend payments will recommence with a final dividend in FY 2014, subject to performance in line with business expectations, as a transition to re-establishing a progressive dividend policy thereafter * subject to the Board determining the exact amount, a transitional final dividend of up to Â£50 million in FY 2014 would be recommended; and * thereafter, a dividend cover of 2.0 to 2.5x would be targeted. Operating and financialreview Group revenue increased by 3.3% to Â£6,900.9m (2012: Â£6,678.7m), or 4.5% excluding the extra week of trading in the non-Rail businesses last year. Underlying operating profit was Â£335.4m (2012: Â£428.5m) reflecting the previously indicated reductions in UK Bus profits as a result of reduced Government support for the industry and external cost pressures and lower UK Rail profits as we entered the new franchise extension period for First TransPennine Express, at margins closer to the industry average, as well as the impact of one week less trading in the North American businesses. Statutory operating profit was Â£205.7m (2012: Â£448.0m) reflecting the lower underlying operating profit and a charge for exceptional items this year compared to a credit last year largely driven by the UK Bus pension scheme changes. Underlying basic EPS was 26.9p (2012: 40.0p) and EBITDA was Â£667.0m (2012: Â£ 742.9m). The net cash outflow for the year was Â£74.4m (2012: inflow of Â£119.2m). The exchange of contracts for the sale of eight of our London depots occurred just after the financial year end on 9 April 2013 and had been included in our expectation of cash flow being broadly neutral for the year. The net debt to EBITDA ratio was 3.0 times (2012: 2.5 times). The average debt duration at 31 March 2013 was 5.4 years (2012: 5.5 years) and there was Â£1,215.5m (2012: Â£ 795.8m) of headroom under committed revolver facilities and free cash, prior to the repayment of the Â£300m sterling April 2013 bond. During the year a new Â£ 325m bond was issued at an effective rate of 5.49% as part of our long term funding strategy. Year to 31 March 20131 Year to 31 March 2012 Revenue Operating Operating Revenue Operating Operating profit2 margin2 profit2 margin2 Divisional results Â£m Â£m % Â£m Â£m % First Student 1,503.1 109.9 7.3 1,567.2 107.1 6.8 First Transit 814.6 49.1 6.0 778.6 55.8 7.2 Greyhound 647.1 52.0 8.0 657.2 50.6 7.7 UK Bus 1,128.2 90.7 8.0 1,157.2 134.4 11.6 UK Rail 2,795.1 63.2 2.3 2,506.1 110.5 4.4 Group3 12.8 (29.5) - 12.4 (29.9) - Total Group 6,900.9 335.4 4.9 6,678.7 428.5 6.4 North America in US Dollars $m $m % $m $m % First Student 2,378.6 174.9 7.4 2,497.9 169.5 6.8 First Transit 1,286.8 77.7 6.0 1,242.6 89.1 7.2 Greyhound 1,022.0 81.5 8.0 1,049.3 81.0 7.7 Total North America 4,687.4 334.1 7.1 4,789.8 339.6 7.1 1For all businesses excluding UK Rail this year includes 52 weeks compared to 53 weeks last year. 2Underlying. 3Tram operations, central management and other items. First Student Revenue in our First Student division was $2,378.6m or Â£1,503.1m (2012: $2,497.9m or Â£1,567.2m). Adjusting for the extra week last year US Dollar revenues were 2.8% lower principally due to lost contracts as well as the impact of Hurricane Sandy, and further severe weather during the winter. Underlying operating profit was $174.9m or Â£109.9m (2012: $169.5m or Â£107.1m) with incremental savings from our recovery plan more than offsetting the profit impact of the reduced revenues. A significant amount of our operations were disrupted by Hurricane Sandy in late October 2012. The storm, which affected the entire eastern seaboard, parts of the Midwest and Eastern Canada, affected approximately 130 of our locations and led to the closure of schools for up to nine days. This adversely impacted operating profit by approximately $13m and further periods of severe weather in early 2013 saw a further $8m impact. A number of the lost operating days may potentially be recovered at the end of the summer term which occurs in our 2013 /14 financial year. We have made good progress in continuing our recovery programme in First Student to address performance and strengthen the operating model. Although there remains significant work to be done, and we remain cautious in respect of the sustained weakness of the US economy, we are seeing positive results from a more efficient model, and are on track to achieve our stated annual target of $100m in savings. A key milestone in our recovery programme has been the roll out of uniform practices which are achieving consistency and greater efficiency across our almost 600 locations. A guide featuring the best practices sourced from across the division is generating real and tangible benefits. This also gives First Student a more compelling, efficient and consistently high standard offering. We are extremely pleased to report that customer satisfaction scores are at the highest level for four years and the fourth year in a row we have seen a sustained improvement. Although state and local finances have stabilised overall, a number of large states and school districts continue to face substantial funding constraints. Against that backdrop, our recovery is on plan and we are making progress by leveraging our existing relationships to expand current operations, for example in Kansas City, Missouri and the Los Angeles Unified School District. Recent new contract wins have included competitions in Indian River, New York and a share shift win in Waukesha, Wisconsin where our winning proposal offered 150 propane fuelled buses and a system of swipe cards that allows parents to track when students get on and off the bus, which was welcomed by parents and the school district. Interest in conversion from in house operations to the private sector remains high as a result of a drive to improve municipal finances, although we remain suitably cautious since only a relatively small proportion of these inquiries result in outsourcing. Despite this, we continue to be very competitive in the conversion market, and new business starting in September 2012 included eight conversion contracts totalling more than 450 buses, out of a total amount of 860 new buses commenced during the 2012/13 financial year. We continue to promote the use of innovative and environmentally friendly technology, with 134 propane fuelled buses also now in use for Seattle and Portland Public Schools. Our FOCUS GPS software, which underwent an upgrade in October 2012, links on board data to back office systems which helps to eliminate excess mileage and fuel usage and provides customers with access to real time data. We completed the rollout of the system across our US locations during the year, as well as beginning our rollout in Canada which will complete in 2013/14. Our lean maintenance and engineering practices continue to be adopted, following the examples set by our eighteen reference workshops across the business. 92% of our workshops have achieved the initial level of lean certification. We are actively encouraging our technicians to attain their National Institute of Automotive Service Excellence qualification and, if 75% of technicians at each location do so, the workshop will be awarded the highly regarded Blue Seal award which was accomplished by twelve workshops during the year. We are consolidating our vehicle and parts purchasing processes and have developed a much more efficient online ordering system that has been well received by employees. The benefits of our transition to a more efficient organisation were particularly visible at the start of the school year in September. This is traditionally a challenging time for school bus operators but this year we saw consistently high levels of operating performance, including continued improvement in our safety metrics. Our industry leading safety performance is entrenched in our culture giving us a competitive advantage and forming an important consideration when bidding for contracts. Illinois, for example, recently passed legislation adding safety as a criterion, alongside low cost, for contract award. We continue to develop plans to increase our charter activity. Amongst charter business we were awarded this year was a contract to transport staff to Super Bowl XLVII in February in New Orleans, as well as work with the PGA golf tour and NASCAR auto racing. A significant milestone in the year was the celebration of the first student bus transportation contract in the USA, which began 100 years ago in Newman, California. A century after this first contract, First Student still serves the same district. We are now well positioned to leverage our scale as the market leader and deliver long term, sustainable growth. Whilst there remains work to be done in our recovery programme, the actions we have taken and positive results we have seen so far give us confidence that we will be able to build upon the competitive advantage we have developed for many years to come. First Transit First Transit continues to deliver strong revenue growth from a diverse portfolio of related businesses. Revenue increased to $1,286.8m or Â£814.6m (2012: $1,242.6m or Â£778.6m). Excluding the extra week last year and the First Support Services business which has been sold, US Dollar revenues increased by 7.7%. Underlying operating profit was $77.7m or Â£49.1m (2012: $89.1m or Â£55.8m) with the reduction principally due to the agreement to settle a $13.5m historic legal claim in California. In March we divested our First Support Services business, which provides military base operations support and facility management services, to Parsons for sale proceeds of US$10.2m, allowing First Transit to focus on its core transportation segments. First Transit and First Vehicle Services are the leading operators in their field with an unrivalled reputation for transport and fleet maintenance expertise. We operate a varied and extensive mix of 340 contracts across almost 40 US States, four Canadian Provinces/Territories and in Puerto Rico and the US Virgin Islands. We are the largest, or near largest, private operator in each of our core business segments - fixed route, paratransit, shuttle, transport call centres and vehicle maintenance services. The experienced management team have a strong reputation in the transit market, and it is this established credibility and track record that helps us win new business and continue to generate efficiencies through our commitment to our customers who are a mix of private and public transport authorities. We work collaboratively with our clients as they seek to improve their transit offering and we look to bring our global expertise and experience of best practice to those clients looking for transport solutions on any scale. We continued to develop new business from our strong pipeline of opportunity during the year. Key contracts won in the fixed route segment including Valley Metro in Mesa and Tempe, Arizona and expanding our contract with Foothill Transit in Arcadia, Southern California. In the paratransit segment we saw new contracts with the Maryland Transit Authority and Washington DC Metropolitan Transport Authority. An area of strong growth and focus for us is the shuttle bus market, and we were awarded contracts at airports across the USA including Detroit and Dallas/ Fort Worth. We extended our market leading university shuttle bus portfolio, the largest in the USA, with an $8m per annum eight year contract at Auburn University as well as further new business at the University of Tennessee, the State University of New York and the University of Alabama. Following last year's contract win at Yale and existing business at Princeton, we will be partnering with a further Ivy League university this year at Brown. College students are early adopters of new technology and we are working with our university partners to develop smart ticketing and real time passenger information solutions where possible, including joining with industry leading information provider Transloc. Experience from our campus shuttles helps us to extend and develop our offering to our other core businesses. We continue to work with our clients to promote the latest technological and environmental innovation and we demonstrate our commitment to our customers by promoting the DriveCam system, which monitors driving behaviour to provide real time feedback and coaching data to improve safety and fuel economy. On renewing our partnership with the University of Buffalo, we worked with them to introduce a new fleet, powered by biodiesel fuel and including the latest in clean engine technology to produce near zero emissions. This follows our introduction of the Austin area's first environmentally friendly hydrogen fuel cell bus to University of Texas students. The introduction of this bus assists Austin's Capital Metro in promoting its green initiatives to the community, as well as a new environmentally friendly form of local transit. Client relationships are key to our First Transit business and this can prove important when we seek to use our reputation in one area of First Transit to win business in another. During the past year, we have secured a new contract for the New York State Department of Transportation, building on the existing relationship we already undertook for the same authority. We also continue to build on the strong relationships we have with companies in Fort McMurray, Alberta, as we add more contracts to complement the existing work we already undertake in this non-traditional market and expanding oil industry location. During the year we also renewed several key contracts, including Houston Metropolitan Transit Authority's fixed route network, a large fixed route contract with the city of Phoenix, Arizona, a large commuter and fixed route operation at the Potomac and Rappahannock Transportation Commission in Virginia and large fixed route contracts in Colorado, Washington State and British Columbia. Other renewal contracts include paratransit work for NJ Transit AccessLink, Pierce Transit in Washington State and Chemung County in New York, as well as shuttle buses for the New York Department of Corrections. In First Vehicle Services, we were pleased to renew a significant contract this year with the town of Mount Pleasant, South Carolina, to maintain their fleet of 636 vehicles. First Vehicle Services sets the highest standards in the industry and has more maintenance workshops with National Institute for Automotive Service Excellence Blue Seal certification than our competitors, with around a quarter of our locations certified as such. Our support for the United States Army's Partnership for Youth Success (PaYS) program has entered its second year. The PaYS program is a nationwide Army initiative with corporate partners, offering potential jobs to returning or retiring soldiers. This relationship has assisted in increasing the number of veterans placed in First Transit and First Vehicle Services positions throughout North America by approximately 16%. First Transit is well placed to use our knowledge and wide ranging experience to pursue growth opportunities in our core areas, particularly the shuttle bus segment, going forwards. Greyhound Greyhound continues to be affected by the weakness in the sector of the US economy that it serves and during the year like-for-like revenue growth was 1.1% (2012: 4.1%). Revenue was $1,022.0m or Â£647.1m (2012: $1,049.3m or Â£ 657.2m) with the reduction principally due to the extra week last year as well as slimmed down operations in our Canadian business. Underlying operating profit was $81.5m or Â£52.0m (2012: $81.0m or Â£50.6m) with operating efficiencies and fixed cost savings more than offsetting the reduction in revenues. Notwithstanding recent headwinds, coach travel is the fastest growing mode of intercity transportation in the United States. Greyhound is an iconic business which is synonymous with affordable travel. The 99-year old business is in a unique position with the only national network in North America. Our challenge is to harness the commercial lessons from our smaller, faster growing BoltBus and Greyhound Express, in the operation of our legacy network. While Greyhound remains a cyclical business, the actions we have taken over recent years have enabled us to better position the division to leverage the benefits of a more flexible and agile operating model. This means that we have been able to mitigate the sustained softness in economic conditions in North America. We are making Greyhound a more modern and efficient network as well as redefining the customer experience. Our Greyhound Express product continues to go from strength to strength. We continue to develop these non-stop city to city services and saw passenger growth of around 10% in Greyhound Express markets during the second half of the year, as the concept continues to encourage a new passenger demographic and attract users back to bus travel. During the year we began operating Greyhound Express in new markets including California, Louisiana, Oklahoma, Nevada and Delaware as well as Ontario and British Columbia in Canada. With further rollouts taking place in states where we already had a presence, the Express network now serves more than 900 city pairs available in nearly 100 markets. We are building on this momentum and further expansion is planned in coming months. Although Greyhound has a national scale, the division also offers distinctive local products. Our BoltBus service expanded into the Pacific Northwest during the year, offering customers a viable alternative to Amtrak's Cascades service in the region and our subsidiary Crucero USA, serving the Hispanic market, also launched its first direct, non-stop services connecting key locations in Southern California during the summer. Our Chinatown connection service, YO! Bus, launched direct service between New York and Philadelphia in December 2012, providing a reliable alternative to Chinatown operators. After seeing impressive early success from YO! Bus we subsequently extended the service to Boston in March 2013. We added 60 new vehicles to our fleet during the year, and we also refurbished more than 200 vehicles to introduce more modern amenities for our customers. We have now refurbished more than 540 of our buses. In April we announced the $100m purchase of a further 220 new buses, the largest order in the company's recent history. These will be introduced over the course of 2013 and 2014. All the buses will feature our new look interiors with on-board amenities including Wi-Fi, power outlets, leather seats, three-point safety belts and extra legroom, and will be powered by clean diesel, low emission engines. Building on our experiences in First Student and First Transit, the new buses will also have the DriveCam video data and driver feedback system, improving fuel efficiency and lowering emissions. The introduction of these new vehicles will mean almost all of Greyhound's fleet is either new or refurbished. As well as changes to our network and vehicles, we have also been transforming the way our passengers interact with us. An improved website offers benefits for customers whilst we are encouraged by the take up of our partnership with PayNearMe and retailers including 7-Eleven and ACE Cash Express which allows customers without debit or credit cards to book attractive fares online and pay by cash in store. This is now our fifth largest sales channel and we are developing relationships with further partners. We are seeing high usage of our self service ticket kiosks and are rolling these out across the network, with ten further locations introduced this year. We continue to right size or relocate our terminals where appropriate. During the year we completed the move of all of our Washington, D.C. operations to the multi-modal hub at the city's Union Station, which allows customers from our networks to connect seamlessly to other transport modes. We opened a new, environmentally friendly terminal in Nashville and are continuing work on further city terminals. In Canada, our management team have been working with the provincial government of British Columbia to reduce uneconomic routes, and now that it is almost complete, we are expecting a return to profitability in 2013/14. Greyhound Express launched in Alberta, Ontario and British Columbia with successful results. Customers using Greyhound Package Express have also benefitted from the introduction of a new shipment management system which allows customers to track the status of their parcels en route. UK Bus Revenue in our UK Bus division was Â£1,128.2m (2012: Â£1,157.2m) and like-for-like passenger revenue growth was 2.4% (2012: 1.6%). Underlying operating profit was Â£90.7m (2012: Â£134.4m) with the reduction, as previously indicated, principally down to a fall in Government funding available to the industry as well as external cost pressures, particularly fuel and pension costs. In May 2012 we set out our clear and detailed strategy to fix and restore sustainable growth to the division. Following a detailed review of all of our businesses we launched comprehensive plans coordinated at a divisional level but tailored to each of our local operations, focussed around repositioning and rebalancing the portfolio; improving operating discipline and efficiencies and driving increased revenue and patronage growth. Repositioning and rebalancing the portfolio The vast majority of our bus operations generate good returns or have potential for significant further improvement. We have taken action to reposition and rebalance the portfolio in order to concentrate on these areas and throughout the year we have worked through a targeted disposal programme, selling 14 bus depots and outstations across the country for a total of almost Â£100m. Amongst the disposals of businesses we announced the sale of eight of our London bus depots in April. Whilst we have been a presence in London for many years, we have decided to focus our business on the deregulated market outside of the capital. We have a very constructive relationship with Transport for London and we will be working closely with them to ensure the transfer to the new operators goes ahead smoothly. Improving operating discipline and efficiencies We are making progress in improving operating discipline across the business in service quality and delivery through the application of best practices and standardisation. Since the launch of the programme in early 2012, we have rolled out upgraded diagnostic systems, improved our engineering and repair processes and are enhancing our training. Our programme to transform each of our depots will raise operating performance and optimise depot processes, leading to greater efficiency. This includes learning from the best practices that our First Student and Greyhound divisions have accumulated in recent years. Areas under focus include leadership development, optimising depot layout and reducing vehicle defects. Early positive outcomes include a 22% reduction in breakdowns since these initiatives were launched, and mileage lost due to engineering has significantly reduced in some areas by up to 50%. Driving increased revenue and patronage growth Whilst the Group standardises best practice and provides expertise and investment across the division, our strategy to drive increased revenue and patronage growth is focused on developing tailored local solutions that are most appropriate for each of the areas in which we operate, based on highest standards we have established at a national level. Our local management teams are introducing value for money fares structures in order to stimulate demand. These include better value day and period tickets, such as `eight days for the price of seven' promotions launched in Aberdeen. In Manchester we announced a range of fare reductions and on certain routes we have seen passenger growth of up to 50%. Our local networks are also being redesigned to deliver volume growth. For example, in Norwich our new colour coded routes are proving popular amongst existing customers as well as providing additional impetus to attract new passengers. First Glasgow launched a wide ranging consultation on SimpliCITY, a root-and-branch review of its network in the city, and after taking into account feedback will introduce the revised network on 26 May that is both simpler and improved for the majority of passengers. We have introduced 200 new vehicles in the Manchester and West Yorkshire markets and rebranded 750 buses on our high frequency interurban networks. With strong local route branding and targeted marketing we have seen up to 3% passenger volume uplift compared to the remaining network. We have been working with local authorities to implement schemes awarded money in the first phase of the DfT's Better Bus Area (BBA) fund last March. For instance, we have used BBA funds given to the Transport for South Hampshire coalition of councils to introduce Wi-Fi on all buses operating in the area. Hybrid buses are being introduced in services across the country, for instance in our park and ride services in Bath, Leeds and Glasgow. Funding from the Government's Green Bus Fund has been used to introduce hybrids on routes in Essex and to Heathrow. We are developing close partnerships with all local authorities in areas in which we operate. This will enable us to respond best to their needs as a reliable partner who can deliver solutions to congestion and help stimulate economic activity, in alignment with their aims. In Sheffield we are working closely with South Yorkshire Passenger Transport Executive, Sheffield City Council and other operators on radically improving bus services in the city, which has resulted in the DfT awarding the first BBA2 status whereby Government funding for fuel rebate is devolved back to the city and supplemented by a top up fund of an additional 20%. This money will be spent as agreed to tackle specific problems in the city. Our experience shows that partnership is by far the quickest and most effective way to achieve the changes that bus users wish to see and which deliver growth. Following the installation of smartcard enabled ticket machines across our fleet in England outside London in 2012/13, we are now working on introducing smartcard applications across our networks. We are party to a host of multi-operator ticketing schemes, which are all smartcard compatible, and we are keen to support the introduction of further such arrangements where they do not currently exist and where a clear market need can be identified. Further innovation includes fitting Wi-Fi to our new buses as standard, and we retrofitted Wi-Fi in certain areas, including Lowestoft, during the year. The Eclipse bus rapid transport network in South Hampshire, built on a former railway line, has been a great success in its first year of operation. Passenger numbers have risen steadily, with more than 1.3m journeys made since the service began while 12% more people now use it than the routes it replaced. The South Hampshire area was also the pilot for our innovative mobile phone app which is now live across the country providing up to the minute bus information for passengers. Over the past year, the excellence and innovation of First's UK Bus operations have been recognised by various awards. We picked up six accolades at the UK Bus Awards in categories which included marketing and community initiatives, whilst our operations in Aberdeen won the team of the year prize at the Scottish Transport Awards. We were delighted that around 2,000 of our employees were directly involved in the positive transport story at the London 2012 Games, as we provided successful spectator transport for hundreds of thousands of attendees. The new buses that formed part of our London 2012 offering have now been deployed intoour networks, as part of our Â£160m investment in 1,000 new vehicles over the last two years. We followed this up in February with a further order for 464 new buses worth Â£76m for delivery in 2013/14, with interior designs taking into account passenger and employee feedback. We have a strong platform from which to grow in UK Bus. Our networks are the backbone of the communities where we operate and contribute to vibrant and sustainable local economies, although the challenging economic environment continues to affect many of the urban areas in which we are based. There is still work to do but we are pleased by the progress so far and the early positive signs in some of our markets. UK Rail UK Rail continues to benefit from strong demand with like-for-like passenger revenue growth of 7.4% (2012: 8.4%). Revenue during the year was Â£2,795.1m (2012: Â£2,506.1m) with the increase due to higher passenger receipts as well as higher subsidy receipts at First ScotRail principally due to Network Rail changes which meant that both subsidy receipts and operating costs were Â£128m higher than in the preceding year. Underlying operating profit was Â£63.2m (2012: Â£110.5m) reflecting the expected reduction in profits at First TransPennine Express in the three year extension period at operating margins closer to the industry average. We have a diverse rail portfolio encompassing long distance, regional and commuter operators, and are the largest owning group in the UK with a quarter of the market. Our highly experienced management team has unrivalled knowledge in delivering major infrastructure improvements in partnership with stakeholders. For example, First ScotRail has entered into a new alliance agreement with Network Rail which is creating a much more efficient working relationship between the two organisations in order to better align overall objectives, deliver value for money and increase focus on passenger requirements. The first major project to be undertaken under this arrangement was a Â£12m joint investment to electrify the line between Glasgow Central and Paisley Canal. This award-winning project was delivered in just four months and at less than half of the original cost estimate of Â£28m, as a result of the effective alliance. We have a strong track record of investment with over 700 new vehicles introduced and punctuality and performance increasing across each of our franchises since we commenced operation. Our rail companies also played their part in the successful transport operation for the London 2012 Games, with First Great Western running a shuttle service connecting to First Games Transport's buses at Slough station for rowing events at Eton Dorney. First Capital Connect ran over a million extra seats during the Games, including later trains home after events, and established a successful 24/7 customer support centre which has now become a permanent feature of their customer service offering. This year the rail sector has been subject to a great deal of scrutiny following the cancellation of the DfT's franchising programme. We have the most experienced bidding team in the industry and our delight in being awarded the InterCity West Coast franchise in August was matched only by our disappointment in being notified in October that the DfT had cancelled the competition following the discovery of significant technical flaws in their franchise award process. The DfT made it clear that we were in no way at fault, having followed the due process correctly. We submitted a strong bid, in good faith and in strict accordance with the DfT's terms. Our bid would have delivered a better service for West Coast passengers, value for the taxpayer and an appropriate return for shareholders. Following various inquiries the DfT announced in January, as part of a new refranchising schedule, that it was to extend our First Capital Connect and First Great Western franchises by the 28-week period in the original contracts. Further extensions of six months for First Capital Connect and 33 months for First Great Western, as well as ten months for First TransPennine Express, were announced in March and we are progressing negotiations with the DfT in respect of these. The publication of the timetable setting out the return to refranchising is an important development for the industry, enabling the private sector to continue to provide effective and efficient passenger rail services with further performance and infrastructure improvements. During the year the Scottish Government also announced that the First ScotRail franchise will now be extended to March 2015, from its previous completion date of November 2014. As the UK's largest and most experienced rail operator, we remain committed to maintaining a leading position in the market. We look forward to reviewing the details of the upcoming franchise competitions, and submitting further high quality bids that deliver value for passengers, taxpayers and shareholders. First Capital Connect We continue to focus on performance at First Capital Connect, where our Public Performance Measurement (PPM) of reliability and punctuality stands at 88.3% on a Moving Annual Average (MAA) basis, a reduction of 1.6% from last year. During the London 2012 Games we recorded our highest-ever PPM score during the franchise with 94.6%. However, the main reason for the overall reduction has been significant disruption caused by infrastructure problems, with a number of incidents relating to the failure of the overhead line equipment supplying power to our trains during the winter. We are in dialogue with Network Rail over more effective partnership working going forwards, for example on more efficient engineering possessions for longer term network improvements. We continue to work closely with our industry partners on the Thameslink Programme of major improvement works which will deliver much needed capacity on the key cross-London route. During the year, a significant highlight was the resumption of full service between Brighton and Bedford throughout the day, evening and at weekends following the completion of three and a half years of engineering work. Major improvements were made with longer 12-car trains introduced at peak times, later trains and new services. First Great Western First Great Western's PPM MAA score stands at 88.9%, a slight decrease on last year. Severe weather, especially repeated flooding in the West Country, caused a number of Network Rail infrastructure failures impacting punctuality over a total of 21 days, and we have been working with them to help overcome these issues. During the year we completed the introduction of 48 new carriages as part of the DfT's High Level Output Specification programme. Refurbishments on the Class 180 fleet have also allowed us to trial Wi-Fi provision. In the past three years we have worked with the DfT to secure a total of 90 additional carriages, adding around ten per cent more space on trains for customers. This badly needed capacity increase has helped improve the customer experience and reduced the number of severely crowded trains that First Great Western operates. Major infrastructure work including gauge and signalling upgrades continues on the route, including an Â£850m improvement package at Reading station to ease the bottleneck and improve capacity at that key junction. From 2016 the vast majority of the eastern section of the route will be electrified, providing the opportunity for cleaner, longer and more reliable trains, and we are working with the DfT as that project begins. First ScotRail First ScotRail continues to perform well with a PPM MAA score of 92.9%, considerably above the national average. In Passenger Focus's independent National Passenger Survey (NPS) category of overall customer satisfaction, we scored 90% in Autumn 2012, an increase on 2011 and five points higher than the UK average. We began a Â£1m investment programme during the year into stations which will see increased patronage during the 2014 Commonwealth Games. As a result of a further Â£1m of Scottish Government funding, free Wi-Fi will be rolled out by December 2013 at 25 stations across Scotland, and all 38 of First ScotRail's Class 380 trains will have Wi-Fi by March 2014. First ScotRail and the Scottish Government are accelerating plans to offer smartcard season tickets to customers. After a successful initial pilot, an investment of approximately Â£2m has seen the installation and/or upgrade of equipment at 70 stations across the central belt, which will see key routes begin to accept smartcards. First TransPennine Express First TransPennine Express has continued to set and achieve high standards through 2012/13. Our PPM MAA is above the national average at 91.8%. This result was achieved despite severe disruption caused by a landslip at a colliery near Scunthorpe in February causing that part of our route to be closed for several months. We achieved a customer satisfaction rating of 88% in the latest NPS, a 14% increase since the start of the franchise, and during the year we achieved five star accreditation from the British Quality Foundation, the highest possible award. First TransPennine Express now has the second highest seat occupancy of any UK operator and has reduced taxpayer subsidy as a proportion of passenger revenue by 80% during the life of the franchise. Carrying nearly 25m passengers in 2012 /13, we have increased passenger income growth for the year by 10%, well ahead of the industry average. We are investing Â£60m in 40 new carriages which will form longer trains from December this year on the Manchester-Scotland routes. The new trains will provide a 30% uplift in capacity and a 25% increase in luggage space and their introduction will in turn release carriages to increase capacity on the popular Manchester-Leeds route. First Hull Trains In 2012 First Hull Trains carried almost 750,000 people, a new high, on our 90 services a week between Hull and London King's Cross and our class 180 fleet has seen improved performance. New initiatives such as M-Tickets, where travel documents are sent directly to customers' mobile telephones; a new, more interactive website; and print at home tickets have all improved the journey experience. Partly as a result of these initiatives, we scored 95% in overall customer satisfaction in the latest NPS - a seven per cent improvement on the autumn 2011 survey, and 2% better than the score achieved in spring 2012 compared with the national average for long distance operators of 89%. Outlook With a fundamentally attractive portfolio of businesses and leading positions in each of our markets, we are focused on delivering outstanding services to our customers and communities, and harnessing the significant opportunities we have to create long term sustainable value. We have delivered a resilient trading performance in line with our expectations and have also achieved most of the other goals we had set ourselves during the year, including our c.Â£100m UK Bus disposal programme and divesting other non-core assets including First Support Services. The real long term opportunity for us, however, arises from our business recovery programmes, particularly in First Student and UK Bus. We have clear plans in place for all of our divisions, and while there remains significant work to be done, our confidence continues to grow as a result of the progress to date. The proposed c.Â£615m capital raising transaction we are announcing separately today will remove the constraints from our balance sheet and enhance our ability to invest in our businesses going forward. We plan to invest around Â£ 1.6 billion across our five divisions over the next four years to underpin growth and return our businesses to our target levels of profitability. Through these actions, combined with our scale and expertise, we are positioning the business for improved growth and returning it to a profile of consistent returns and cash generation. We are targeting an appropriate, progressive and sustainable dividend policy with cover of 2.0 to 2.5x in the medium term. In the short term the Board proposes that no final dividend will be paid in respect of the year to 31 March 2013, nor an interim dividend for the year to 31 March 2014. Payments will recommence with a final dividend for the year to 31 March 2014, subject to performance in line with expectations, as a transition to re-establishing a progressive dividend policy thereafter. While the exact quantum will be determined at that time, the Board's intent is to pay a transitional final dividend of up to Â£50m in the year to 31 March 2014. Exceptional items and amortisation charges 2013 2012 Â£m Â£m Disposals UK Bus depot sales and closures (19.8) (10.7) First Transit FSS disposal and exit from (12.6) - Diego Garcia operations (32.4) (10.7) Onerous contracts/impairments UK Rail First Great Western contract (9.9) - provision UK Rail joint venture provision (DSB (5.0) - First) First Student onerous contract (2.7) - (17.6) - Legal claims First Student legal claims (19.8) - First Transit legal settlements (5.9) - First Transit Diego Garcia insurance claim 6.7 - (19.0) - Other UK Bus Pension Scheme changes - 73.3 UK Rail bid costs (6.0) (10.2) Competition Commission costs - (1.9) Other exceptional items - (1.1) (6.0) 60.1 Total exceptional items (75.0) 49.4 Amortisation charges (52.0) (30.9) (Loss)/profit on disposal of properties (2.7) 1.0 Operating profit (charge)/credit (129.7) 19.5 Ineffectiveness on financial derivatives (5.5) (11.0) (Loss)/profit before tax (135.2) 8.5 Tax credit 45.3 4.4 Loss on disposal of discontinued - (9.2) operations Net exceptional items for the year (89.9) 3.7 UK Bus depot sales and closures UK Bus depot sales and closures relate to measures taken by the Group to rebalance its portfolio in the UK Bus operations, which included selling or closing certain operations. Shortly after the end of the year we announced the agreements to sell all of our London depots with the exception of Dagenham. The principal charge in 2012/13 represents asset impairments and an onerous contract provision for the remaining Dagenham depot. First Transit FSS disposal and exit from Diego Garcia operations During the year the Group disposed of the First Support Services Division realising a loss on disposal of Â£7.7m. In addition operating profit to date of disposal of Â£1.0m has also been treated as part of the overall exceptional charge. The Diego Garcia operations were exited at the end of the year which resulted in a net exceptional charge of Â£5.9m. First Great Western contract provision The Group recorded a provision in 2010/11 in respect of the UK Rail First Great Western franchise agreement. This provision reflected the Group's best estimate of the likely losses on the franchise over the two years to 31 March 2013, which would arise due to the accelerated write off of assets dedicated to the First Great Western franchise due to the Group's decision not to exercise its option to extend the franchise agreement for a further three years beyond the original franchise end date. The Group recorded a further provision of Â£9.9m in 2012/13 due to incremental losses following the DfT exercising their option to extend the franchise by a further seven rail periods to October 2013. UK Rail joint venture provision The carrying value of Â£5.0m of the investment in DSBFirst, a joint venture with a Danish rail operator, was fully written-off during the year as current and projected trading indicates that there will be no recovery of this amount at the end of the franchise. First Student onerous contract During the year the Group provided a further Â£2.7m against a loss-making contract that was taken on as part of the Laidlaw acquisition undertakings in 2007. This contract is due to expire early in the year to 31 March 2014. First Student legal claims During the year, the Group incurred Â£2.6m of legal costs in defending old contractual claims and other litigations. In addition, the Group provided Â£ 17.2m to cover the estimated potential settlement amounts on certain of these historical claims. First Transit legal settlements The Group settled certain historical legal claims during the year principally a contractual dispute from 2009. The Group treated this cost as exceptional due to the size and age of the claims. The Group recognised an exceptional charge of Â£5.9m in respect of these settlements. First Transit Diego Garciainsurance claim The Group settled a historical insurance claim in relation to the DG21 contract in 2012/13 and recognised exceptional income of Â£6.7m. UK Bus Pension Scheme changes UK Bus Pension Scheme changes relate to measures the Group took to mitigate the risk of the pension schemes covering UK Bus employees. As a result of these changes, future pension liabilities of the Group decreased. In 2011/12, the Group linked pension increases to consumer price inflation ("CPI") rather than retail price inflation ("RPI"), which usually shows a higher rate of inflation, and also introduced a pensionable pay cap, along with lower pension accrual rates. As a result of these changes, future pension liabilities of the Group decreased in 2011/12, and the Group realised a one-off exceptional gain of Â£ 73.3m. UK Rail bid costs The Group's net UK Rail bid costs during the year represented franchise bid costs for all bids, less amounts recovered or recoverable from the DfT in respect of the InterCity West Coast franchise bid. The Group incurred UK Rail bid costs in both 2012/13 and 2011/12 in connection with the InterCity West Coast franchise bid as well as bids for Great Western, Thameslink and Essex Thameside rail franchises. Competition Commission costs Competition Commission costs relate to costs incurred by the Group in 2011/12 in responding to an investigation by the CC into the UK local bus market. The CC issued their final report in December 2011. Other exceptional items Other exceptional items include principally costs incurred in effecting the changes to the UK Bus Pension Scheme in 2011/12 described above. Amortisation charges The charge for the year was Â£52.0m (2012: Â£30.9m) with the increase mainly due to a higher level of contract amortisation at First Student as a result of a reassessment during the year of the remaining useful economic lives of the contracts acquired with the Laidlaw acquisition. Previously these contracts were being amortised over 20 years but are now being amortised over ten years. As a result of this, the income statement charge increased by Â£24.8m during the year. (Loss)/profit on disposal of properties During the year the Group realised Â£9.7m (2012: Â£40.3m) on the disposal of selected properties predominantly in Greyhound and UK Bus operations. These resulted in a net loss on disposal of Â£2.7m (2012: profit Â£1.0m). Ineffectiveness on financial derivatives Due to the ineffective element and undesignated fair value movements on financial derivatives there was a Â£5.5m non-cash charge (2012: Â£11.0m) 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 2013 to 2015. Tax on exceptional items and amortisation charges The tax credit as a result of these exceptional items was Â£43.3m (2012: Â£0.4m). In addition there was a one-off deferred tax credit of Â£2.0m (2012: Â£4.0m) as a result of the reduction in the UK corporation tax rate from 24% to 23% (2012: 26% to 24%). Finance Costs And Investment Income Net finance costs, before exceptional items, were Â£163.0m (2012: Â£157.1m) with the increase principally due to the issuance of a new Â£325m 10 year bond in November 2012. Profit Before Tax Underlying profit before tax was Â£172.4m (2012: Â£271.4m) with the decrease due principally to lower underlying operating profits. An overall charge of Â£135.2m (2012: Â£8.5m credit) for exceptional items and amortisation charges resulted in statutory profit before tax of Â£37.2m (2012: Â£279.9m). Tax The tax charge, on underlying profit before tax, for the year was Â£34.7m (2012: Â£54.5m) representing an effective rate of 20.1% (2012: 20.1%). There was a tax credit of Â£43.3m (2012: Â£0.4m) relating to amortisation charges and exceptional items. There was also a one-off credit adjustment of Â£2.0m (2012: Â£4.0m) to the UK deferred tax liability as a result of the reduction in the UK corporation tax rate from 24% to 23% (2012: 26% to 24%) which will apply from April 2013. This resulted in a total tax credit of Â£10.6m (2012: charge of Â£50.1m) on continuing operations. The actual tax paid during the year was Â£6.3m (2012: Â£17.7m). North American cash tax remains low due to tax losses brought forward and tax depreciation in excess of book depreciation. We expect the North American cash tax rate to remain low for the near term. The UK cash tax for the year was lower than last year principally due to lower profits in the Group's UK businesses. Discontinued Operations In September 2011 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, was classified within discontinued operations in the consolidated income statement in 2011/12. Dividends The interim dividend of 7.62p (2012: 7.62p) per share was paid during the year and amounted to Â£36.7m (2012: Â£36.6m). The Board has decided not to pay a final dividend. EPS The underlying basic EPS was 26.9p (2012: 40.0p), a reduction of 33%. Basic EPS was 7.3p (2012: 42.7p), a decrease of 83% principally due to lower underlying results and higher net exceptional items compared to last year. EBITDA EBITDA by division is set out below: Year to 31 March 20131 Year to 31 March 2012 Revenue EBITDA2 EBITDA2 Revenue EBITDA2 EBITDA2 Â£m Â£m % Â£m Â£m % First Student 1,503.1 258.8 17.2 1,567.2 255.8 16.3 First Transit 814.6 60.0 7.4 778.6 8.4 65.3 Greyhound 647.1 80.9 12.5 12.2 657.2 80.1 UK Bus 1,128.2 160.3 14.2 1,157.2 17.9 207.1 UK Rail 2,795.1 135.6 4.9 2,506.1 6.5 163.5 Group 12.8 (28.6) - 12.4 (28.9) - Total Group 6,900.9 667.0 9.7 6,678.7 11.1 742.9 North America in US Dollars $m $m % $m $m % First Student 2,378.6 409.9 17.2 2,497.9 406.9 16.3 First Transit 1,286.8 94.8 7.4 1,242.6 104.2 8.4 Greyhound 1,022.0 127.5 12.5 1,049.3 128.0 12.2 Total North America 4,687.4 632.2 13.5 4,789.8 639.1 13.3 1For all businesses excluding UK Rail this year includes 52 weeks compared to 53 weeks last year. 2Underlying operating profit less capital grant amortisation plus depreciation. Cash Flow The net cash outflow for the year was Â£74.4m (2012: inflow Â£119.2m). This contributed to a net debt increase of Â£141.6m (2012: reduction Â£111.9m) as detailed below: Year to Year to 31 March 31 March 2013 2012 Â£m Â£m EBITDA (including discontinued operations) 667.0 742.6 Exceptional items (75.0) 49.4 Impairment charge 13.3 - Other non-cash income statement charges 9.6 9.8 Working capital excluding FGW provision movement (6.8) 20.5 Working capital - FGW provision movement (23.0) 48.7 FGW provision movement - (48.7) Movement in other provisions (12.2) (29.1) Pension payments in excess of income statement (94.0) (87.1) charge Non-cash RPI to CPI pension gain - (73.3) Cash generated by operations 478.9 632.8 Capital expenditure (338.1) (293.6) Proceeds from disposal of property, plant & 14.7 57.7 equipment Interest and tax (144.4) (155.4) Dividends payable to Group shareholders (114.0) (108.8) Dividends payable to non-controlling minority (10.7) (19.0) shareholders Proceeds from sale of businesses 39.2 5.5 Net cash (outflow)/ inflow (74.4) 119.2 Foreign exchange movements (63.1) (7.7) Other non-cash movements in relation to financial (4.1) 0.4 instruments Movement in net debt in year (141.6) 111.9 The decrease in cash flow compared to last year was primarily due to: * EBITDA of Â£667.0m was Â£75.6m lower than last year. * Higher net exceptional items charges of Â£124.4m. * Working capital excluding FGW provision was Â£27.3m lower than last year principally due to the reversal of cost accruals created for the additional week of trading last year in the non-Rail businesses. * Working capital FGW provision movement outflow of Â£23.0m being the Â£32.9m utilisation for the operating losses in the year partly offset by the Â£9.9m increase in the provision due to incremental losses following the DfT exercising the option to extend the franchise by a further seven rail periods. * Higher pension payments in excess of income statement charge of Â£6.9m principally due to additional deficit contributions in Greyhound. * Higher capital expenditure primarily reflecting further investment in UK Bus and First Student. * Lower disposal proceeds of Â£43.0m with the reduction due to the sale of several Greyhound properties last year the largest of which was in Washington DC. * Higher dividend payments to Group shareholders of Â£5.2m. Partly offset by: * The impact of the 2012/13 asset impairments in relation to the Dagenham depot. * Movements in other provisions favourable by Â£16.9m primarily due to the additional First Student and First Transit legal claims provided for in the year but not paid out during the year. * The impact of last year's one-off non-cash benefit of Â£73.3m in relation to the UK Bus pension scheme changes. * Lower tax and interest payments of Â£11.0m principally due to lower UK tax payments as a result of lower profits in the UK businesses and slightly lower interest rates compared to last year. * Lower dividends payable to non-controlling minority shareholders primarily due to lower First TransPennine Express profits in UK Rail. * Higher proceeds from sale of business of Â£33.7m due to the impact of the UK Bus depot sales (primarily Wigan & Northumberland Park) and the sale of FSS in First Transit. Capital Expenditure Cash capital expenditure was Â£338.1m (2012: Â£293.6m) and comprised First Student Â£127.7m (2012: Â£115.6m), First Transit Â£18.0m (2012: Â£31.9m), Greyhound Â£51.3m (2012: Â£44.1m), UK Bus Â£72.4m (2012: Â£33.6m), UK Rail Â£66.1m (2012: Â£ 63.4m) and Group items Â£2.6m (2012: Â£5.0m). In addition during the year we entered into operating leases for passenger carrying vehicles in UK Bus and First Transit with a capital values of Â£21.6m (2012: Â£43.4m) and Â£12.5m (2012: Â£nil) respectively. Gross capital investment was Â£404.3m (2012: Â£366.9m) and comprised First Student Â£150.8m (2012: Â£135.6m), First Transit Â£30.5m (2012: Â£29.7m), Greyhound Â£51.3m (2012: Â£44.2m), UK Bus Â£103.0m (2012: Â£88.5m), UK Rail Â£63.9m (2012: Â£ 64.5m) and Group items Â£4.8m (2012: Â£4.4m). Funding And Risk Management The Group continues to have strong liquidity. At 31 March there was Â£1,215.5m (2012: Â£795.8m) of committed headroom and free cash comprising Â£821.6m (2012: Â£ 631.8m) of headroom under the committed revolving bank facility and free cash balances of Â£393.9m (2012: Â£164.0m). Largely due to seasonality in the North American school bus business, committed headroom typically reduces during the financial year up to October and increases thereafter. Treasury policy requires a minimum of Â£250m of committed headroom at all times. After the end of the year, the 2013 Â£300m bond was repaid in full, as planned. The Group's main revolving bank facility expires in December 2015. The average debt maturity was 5.4 years (2012: 5.5 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 more than 75% of net debt. At 31 March 2013 100% (2012: 100%) of net debt was fixed and in excess of 81% 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, 90% of crude oil costs were hedged at an average rate of $102 per barrel during the year. At the end of the year we have hedged 85% of our "at risk" UK crude requirements for the year to 31 March 2014 (1.9m barrels p.a.) at $105 per barrel and 33% of our requirements for the year to 31 March 2015 at $99 per barrel. In North America 69% of crude oil costs were hedged at an average rate of $94 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 2014 (1.6m barrels p.a.) at $93 per barrel. In addition we have hedged 37% of "at risk" volumes for the year to 31 March 2015 at $89 per barrel. Foreign currency risk Group policies on foreign currency risk affecting cash flow, profits and net assets are maintained to minimise exposures to the Group by using a combination of natural hedge positions and derivative instruments where appropriate. Translation risk relating to US Dollar earnings arising in the US is largely offset by US Dollar denominated costs incurred in the UK, principally UK fuel costs, US Dollar interest and tax costs so that exposure to EPS on a year to year basis is not significant. With regard to balance sheet translation risk, the Group hedges part of its exposure to the impact of exchange rate movements on translation of foreign currency net assets by holding currency swaps and net borrowings in foreign currencies. At 31 March 2013 foreign currency net assets were 39% (2012: 47%) hedged. Net Debt The Group's net debt at 31 March 2013 was Â£1,979.1m (2012: Â£1,837.5m) and comprised: 31 March 31 March 2013 2012 Fixed Variable Total Total Analysis of net debt Â£m Â£m Â£m Â£m Sterling bond (2013)1 299.4 - 299.4 298.5 Sterling bond (2018)2 343.0 - 343.0 325.1 Sterling bond (2019)1 - 249.6 249.6 249.4 Sterling bond (2021)3 339.0 - 339.0 331.6 Sterling bond (2022)1 319.1 - 319.1 - Sterling bond (2024)1 199.5 - 199.5 199.0 US Dollar bank loans - 358.1 358.1 369.7 Canadian Dollar bank loans - 15.5 15.5 113.9 Euro and other bank loans - 11.8 11.8 11.7 HP contracts and finance leases 330.4 87.8 418.2 335.3 Senior unsecured loan notes 98.3 - 98.3 93.3 Loan notes 8.7 1.0 9.7 9.7 Interest rate swaps 411.2 (411.2) - - Gross Debt Excluding Accrued Interest 2,348.6 312.6 2,661.2 2,337.2 Cash (393.9) (164.0) UK Rail ring-fenced cash and deposits (273.8) (323.2) Other ring-fenced cash and deposits (14.4) (12.5) Net Debt Excluding Accrued Interest 1,979.1 1,837.5 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 Rail franchise agreements, cash can only be distributed by these subsidiaries up to the lower of the amount of their retained profits or the amount determined by prescribed liquidity ratios. The ring-fenced cash represents cash which is not available for distribution and any additional amounts required to satisfy the liquidity ratios at the balance sheet date. Shares In Issue As at 31 March 2013 there were 481.8m shares in issue (2012: 481.6m), excluding treasury shares and own shares held in trust for employees of 0.3m (2012: 0.5m). 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 481.7m (2012: 481.4m). Balance Sheet Net assets have decreased by Â£61.7m 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£48.7m, dividends payments of Â£124.5m, unfavourable hedging reserve movements (net of deferred tax) of Â£45.1m, partly offset by favourable translation reserve movements of Â£103.2m and the retained profit for the year of Â£47.8m. 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. The First Student recovery plan is progressing in line with expectations and as a result the headroom on this business has increased modestly compared to last year. Assets Held For Sale These comprise principally the assets of the eight London depots which we announced the disposal of on 9 April 2013. Foreign Exchange The most significant exchange rates to Sterling for the Group are as follows: Year to 31 March Year to 31 March 2013 2012 Closing Effective Closing Effective rate rate rate Rate US Dollar 1.52 1.58 1.60 1.59 Canadian Dollar 1.55 1.59 1.60 1.59 The US Dollar rate was slightly lower in the year to 31 March 2013 compared to last year. Pensions The Group has updated its pension assumptions as at 31 March 2013 for the defined benefit schemes in the UK and North America. The net pension deficit of Â£268m at the beginning of the year has decreased to Â£248m at the end of the year principally due to better actual returns on assets partly offset by lower discount rates and higher inflation rates. The main factors that influence the balance sheet position for pensions and the sensitivities to their movement at 31 March 2013 are set out below: Movement Impact Discount rate +0.1% Reduce deficit by Â£ 33m Inflation +0.1% Increase deficit by Â£ 23m The changes to the Accounting Standard IAS 19 will apply from 2013/14 onwards and will have significant impact on certain profit measures including operating profit and EPS. We estimate that the new rules would reduce operating profit in the current year as follows: 2012/13 Â£m UK Bus (37) UK Rail (25) Greyhound 2 Total (60) The changes above have no cash impact and do not affect the Group's banking covenants as these are measured on a constant accounting basis. 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 2013 of 5.4 years (2012: 5.5 years) and which is largely represented by a medium-term to committed long term unsecured bond debt and finance leases. The Group has a $1,250m committed revolving banking facility of which $1,113m (2012: $1,011) 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 2014 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 Chris Surch Group Finance Director 20 May 2013 Consolidated income statement For the year ended 31 March 20131 2012 Underlying Underlying results2 Adjustments3 Total results2 Adjustments3 Total Notes Â£m Â£m Â£m Â£m Â£m Â£m Continuing operations Revenue 6,900.9 - 6,900.9 6,678.7 - 6,678.7 Operating costs before (loss)/profit on (6,565.5) (127.0) (6,692.5) (6,250.2) 18.5 (6,231.7) disposal of properties Operating profit before (loss)/profit on 335.4 (127.0) 208.4 428.5 18.5 447.0 disposal of properties Amortisation charges - (52.0) (52.0) - (30.9) (30.9) Exceptional items - (75.0) (75.0) - 49.4 49.4 - (127.0) (127.0) - 18.5 18.5 (Loss)/profit on - (2.7) (2.7) - 1.0 1.0 disposal of properties Operating profit 335.4 (129.7) 205.7 428.5 19.5 448.0 Investment income 1.8 - 1.8 2.0 - 2.0 Finance costs (164.8) (5.5) (170.3) (159.1) (11.0) (170.1) Profit before tax 172.4 (135.2) 37.2 271.4 8.5 279.9 Tax (34.7) 45.3 10.6 (54.5) 4.4 (50.1) Profit for the yearfrom continuing operations 137.7 (89.9) 47.8 216.9 12.9 229.8 Discontinued operations Loss for the year from 3 - - - (0.3) (9.2) (9.5) discontinued operations Profit for the year 137.7 (89.9) 47.8 216.6 3.7 220.3 Attributable to: Equity holders of the 129.4 (94.4) 35.0 192.3 3.9 196.2 parent Non-controlling 8.3 4.5 12.8 24.3 (0.2) 24.1 interests 137.7 (89.9) 47.8 216.6 3.7 220.3 Earnings per share Continuing operations Basic 4 26.9p (19.6)p 7.3p 40.0p 2.7p 42.7p Diluted 4 26.7p (19.5)p 7.2p 39.8p 2.7p 42.5p Continuing and discontinued operations Basic 4 26.9p (19.6)p 7.3p 39.9p 0.9p 40.8p Diluted 4 26.7p (19.5)p 7.2p 39.7p 0.8p 40.5p Dividends of Â£114.0m (2012: Â£108.8m) were paid during the year. Dividends of Â£ nil (2012: Â£77.3m) are proposed for approval in respect of the year. 1For all businesses excluding UK Rail this year includes 52 weeks compared to 53 weeks last year. 2Underlying trading results before items noted in 3 below. 3Amortisation charges, ineffectiveness on financial derivatives, exceptional items, (loss)/profit on disposal of properties and discontinued operations and tax thereon. Consolidated statement of comprehensive income Year ended 31 March 2013 2012 Â£m Â£m Profit for the year 47.8 220.3 Other comprehensive income/(expense) Derivative hedging instrument movements (52.7) (36.1) Deferred tax on derivative hedging instrument 7.6 13.2 movements Exchange differences on translation of foreign 103.2 (10.9) operations Actuarial losses on defined benefit pension schemes (63.1) (185.8) Deferred tax on actuarial losses on defined benefit 14.4 51.8 pension schemes Other comprehensive income/(expense)for the year 9.4 (167.8) Total comprehensive income for the year 57.2 52.5 Attributable to: Equity holders of the parent 44.4 28.4 Non-controlling interests 12.8 24.1 57.2 52.5 Consolidated balance sheet Year ended 31 March 2013 2012 2011 Notes Â£m Â£m Â£m Non-current assets Goodwill 5 1,665.8 1,599.3 1,608.0 Other intangible 6 281.8 318.8 348.6 assets Property, plant and 7 1,977.6 2,006.3 2,082.9 equipment Deferred tax assets 15 53.2 43.3 30.0 Retirement benefit 15.4 25.2 30.7 assets Derivative financial 14 63.3 72.6 58.1 instruments Investments 3.2 7.2 3.2 4,060.3 4,072.7 4,161.5 Current assets Inventories 8 79.9 91.0 91.4 Trade and other 9 641.0 601.9 555.5 receivables Cash and cash 682.1 499.7 388.0 equivalents Assets held for sale 44.7 3.7 4.6 Derivative financial 14 23.3 43.5 65.1 instruments 1,471.0 1,239.8 1,104.6 Total assets 5,531.3 5,312.5 5,266.1 Current liabilities Trade and other 10 1,250.7 1,261.0 1,129.9 payables Tax liabilities 28.7 21.8 49.0 Financial - bank loans 11 - 69.3 93.5 liabilities - bonds 11 378.6 73.6 73.3 - obligations under HP contracts and 12 62.7 52.4 42.8 finance leases Derivative financial 14 64.7 17.1 38.5 instruments 1,785.4 1,495.2 1,427.0 Net current 314.4 255.4 322.4 liabilities Non-current liabilities Financial - bank loans 11 385.4 426.0 554.9 liabilities - bonds 11 1,468.5 1,441.0 1,417.1 - obligations under HP contracts and 12 355.5 282.9 209.1 finance leases - loan notes 13 9.7 9.7 9.7 - senior unsecured 11 98.3 93.3 - loan notes Derivative financial 14 21.7 50.1 29.7 instruments Retirement benefit 263.2 293.1 273.9 liabilities Deferred tax 15 63.4 97.7 93.0 liabilities Provisions 16 260.9 242.5 300.8 2,926.6 2,936.3 2,888.2 Total liabilities 4,712.0 4,431.5 4,315.2 Net assets 819.3 881.0 950.9 Equity Share capital 17 24.1 24.1 24.1 Share premium 676.4 676.4 676.4 Hedging reserve (32.6) 12.5 35.4 Other reserves 4.6 4.6 4.6 Own shares (1.1) (1.1) (5.0) Translation reserve 248.9 145.7 156.6 Retained earnings (125.7) (3.6) 41.5 Equity attributable to equity holders of 794.6 858.6 933.6 the parent Non-controlling 24.7 22.4 17.3 interests Total equity 819.3 881.0 950.9 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 35.4 4.6 (5.0) 156.6 41.5 933.6 17.3 950.9 April 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 6.0 - 6.0 payments 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 22.4 881.0 March 2012 Total comprehensive - - (45.1) - - 103.2 (13.7) 44.4 12.8 57.2 income for the year Dividends - - - - - - (114.0) (114.0) (10.5) (124.5) paid Share-based - - - - - - 5.6 5.6 - 5.6 payments Balance at 31 24.1 676.4 (32.6) 4.6 (1.1) 248.9 (125.7) 794.6 24.7 819.3 March 2013 Consolidated cash flow statement Year ended 31 March 2013 2012 Note Â£m Â£m Net cash from operating activities 18 332.7 475.4 Investing activities Interest received 1.8 2.0 Proceeds from disposal of property, plant and 14.7 57.7 equipment Purchases of property, plant and equipment (213.1) (170.9) Disposal of subsidiary/business 39.2 5.5 Acquisition of businesses - (3.4) Net cash used in investing activities (157.4) (109.1) Financing activities Dividends paid (114.0) (108.8) Dividends paid to non-controlling shareholders (10.7) (19.0) Proceeds from bond issues 325.0 - Proceeds from senior unsecured loan notes - 90.2 Drawdowns from bank facilities 63.3 2.5 Repayment of bank debt (197.8) (179.8) Repayments under HP contracts and finance (55.8) (35.2) leases Fees for bank facility amendments and bond (6.2) (2.1) issues Net cash flow from financing activities 3.8 (252.2) Net increase in cash and cash equivalents 179.1 114.1 before foreign exchange movements Cash and cash equivalents at beginning of year 499.7 388.0 Foreign exchange movements 3.3 (2.4) Cash and cash equivalents at end of year per 682.1 499.7 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 2013 2012 Â£m Â£m Net increase in cash and cash equivalents in year 179.1 114.1 (Increase)/decrease in debt and finance leases (134.7) 122.3 Inception of new HP contracts and finance leases (125.0) (119.3) Fees capitalised against bank facilities and bond 6.2 2.1 issues Net cash flow (74.4) 119.2 Foreign exchange movements (63.1) (7.7) Other non-cash movements in relation to financial (4.1) 0.4 instruments Movement in net debt in year (141.6) 111.9 Net debt at beginning of year (1,837.5) (1,949.4) Net debt at end of year (1,979.1) (1,837.5) 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 2013 or 2012, but is derived from those accounts. Statutory Accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's Annual General Meeting. The auditors have reported on both sets of account; 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 2012. Copies of the Statutory Accounts for the year ended 31 March 2013 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. 2 BUSINESS SEGMENTS 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 2013 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 continuing 1,503.1 814.6 647.1 1,128.2 2,795.1 12.8 6,900.9 operations EBITDAÂ³ 258.8 60.0 80.9 160.3 135.6 (28.6) 667.0 Depreciation (148.9) (10.9) (28.9) (70.1) (105.0) (0.9) (364.7) Capital grant - - - 0.5 32.6 - 33.1 amortisation Segment resultsÂ³ 109.9 49.1 52.0 90.7 63.2 (29.5) 335.4 Amortisation charges (43.1) (3.9) (3.1) - (1.9) - (52.0) Exceptional items (22.5) (11.8) - (19.8) (20.9) - (75.0) (Loss)/profit on 0.2 - (0.2) (2.7) - - (2.7) disposal of properties Operating profit4 44.5 33.4` 48.7 68.2 40.4 (29.5) 205.7 Investment income 1.8 Finance costs (164.8) Ineffectiveness on (5.5) financial derivatives Profit before tax 37.2 Tax 10.6 Profit after tax 47.8 1Group items comprise Tram operations, central management and other items. 2For all UK Business excluding UK Rail this year includes 52 weeks compared to 53 weeks last year. 3Underlying. 4Although the Segmental results are used by the management to measure performance we have also disclosed Statutory operating profit by operating division for completeness. 2. BUSINESS SEGMENTS INFORMATION continued 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 - - - 0.5 13.2 - 13.7 amortisation 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 (0.3) - 5.0 (3.7) - - 1.0 disposal of properties Operating profit4 86.7 51.5 52.5 191.4 96.9 (31.0) 448.0 Investment income 2.0 Finance costs (159.1) Ineffectiveness on (11.0) financial derivatives Profit before tax 279.9 Tax (50.1) Profitfor the period from continuing 229.8 operations Discontinued operations (9.5) Profit after tax and 220.3 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. 3Underlying. 4Although the Segmental results are used by the management to measure performance we have also disclosed Statutory operating profit by operating division for completeness. 3 DISCONTINUED OPERATIONS On 30 September 2011 the Group disposed of FirstGroup Deutschland GmbH. As a consequence the result of this business has been classified as discontinued operations, as detailed below. 2013 2012 Â£m Â£m Revenue - 5.3 Operating costs - (5.6) Loss before tax - (0.3) Attributable tax expense - - Loss for the period from discontinued operations - (0.3) Loss on disposal of discontinued operations - (9.2) Net lossattributable to discontinued operations - (9.5) 4 EARNINGS PER SHARE (EPS) EPS is calculated by dividing the profit attributable to equity shareholders of Â£35.0m (2012: Â£196.2m) by the weighted average number of ordinary shares of 481.7m (2012: 481.4m). 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. 2013 2012 Number Number m m Weighted average number of share used in basic calculation 481.7 481.4 SAYE share options 0.2 0.3 Executive share options 2.3 2.4 484.2 484.1 The underlying basic EPS is intended to highlight the recurring results of the Group before amortisation charges, ineffectiveness on financial derivatives, exceptional items and loss/(profit) on disposal of properties. A reconciliation is set out below: 2013 2012 Â£m EPS(p) Â£m EPS (p) Basic profit/EPS from continuing operations 35.0 7.3 205.7 42.7 Basic profit/EPS from discontinued - - (9.5) (1.9) operations Basic profit/EPS 35.0 7.3 196.2 40.8 Amortisation chargesÂ¹ 51.8 10.7 30.7 6.4 Ineffectiveness on financial derivatives 5.5 1.1 11.0 2.2 Exceptional items 75.0 15.6 (49.4) (10.3) Non-controlling interests on exceptional 4.7 1.0 - - items Loss/(profit) on disposal of properties 2.7 0.6 (1.0) (0.2) Business disposals - - 9.2 1.9 Tax effect of above adjustments (43.3) (9.0) (0.4) (0.1) Deferred tax credit due to change in UK (2.0) (0.4) (4.0) (0.8) corporation tax rate Underlying profit/EPS 129.4 26.9 192.3 39.9 Underlying profit/EPS from discontinued - - 0.3 0.1 operations Underlying profit/EPS from continuing 129.4 26.9 192.6 40.0 operations 1Amortisation charges of Â£52.0m per note 6 less Â£0.2m (2012: Â£30.9m less Â£0.2m) attributable to equity non-controlling interests. 2013 2012 Diluted EPS pence pence Continuing operations Basic 7.2 42.5 Underlying 26.7 39.8 Continuing and discontinued operations Basic 7.2 40.5 Underlying 26.7 39.7 2013 2012 2011 5GOODWILL Â£m Â£m Â£m Cost At 1 April 1,604.3 1,613.0 1,754.9 Additions - 2.9 2.3 Disposals (11.5) (11.3) (14.2) Foreign exchange movements 77.0 (0.3) (130.0) At 31 March 1,669.8 1,604.3 1,613.0 Accumulated impairment losses At 1 April 5.0 5.0 - Impairment losses for the year (recorded 4.0 - 5.0 in exceptional items) Disposals (5.0) - - At 31 March 4.0 5.0 5.0 Carrying amount At 31 March 1,665.8 1,599.3 1,608.0 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 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 Foreign exchange movements 19.1 3.0 - 22.1 At 31 March 2013 400.3 64.8 57.7 522.8 Amortisation At 1 April 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 Charge for year 47.0 3.1 1.9 52.0 Foreign exchange movements 6.3 0.8 - 7.1 At 31 March 2013 167.6 18.3 55.1 241.0 Carrying amount At 31 March 2013 232.7 46.5 2.6 281.8 At 31 March 2012 266.9 47.4 4.5 318.8 At 31 March 2011 291.4 50.7 6.5 348.6 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 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 Additions in the year 12.6 249.3 108.2 370.1 Disposals (22.5) (96.6) (25.7) (144.8) Reclassified as held for sale (25.5) (96.7) (3.3) (125.5) Foreign exchange movements 12.7 89.6 10.7 113.0 At 31 March 2013 484.6 2,769.3 756.2 4,010.1 Accumulated depreciation and impairment At 1 April 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 Charge for year 11.3 217.9 135.5 364.7 Disposals (2.7) (92.8) (17.3) (112.8) Reclassified as held for sale (4.7) (64.7) (1.8) (71.2) Impairment (recorded in exceptional 5.6 3.7 - 9.3 items) Foreign exchange movements 2.1 42.5 6.9 51.5 At 31 March 2013 95.1 1,400.3 537.1 2,032.5 Carrying amount At 31 March 2013 389.5 1,369.0 219.1 1,977.6 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 2013 2012 2011 8 INVENTORIES Â£m Â£m Â£m Spare parts and consumables 79.7 90.6 91.1 Property development work in progress 0.2 0.4 0.3 79.9 91.0 91.4 In the view of the Directors there is no material difference between the balance sheet value of inventories and their replacement cost. There was no material write down of inventories during the current or prior year. The provision for stock obsolescence at the balance sheet date was Â£8.2m (2012: Â£ 8.0m; 2011: Â£8.2m). 2013 2012 2011 9 TRADE AND OTHER RECEIVABLES Â£m Â£m Â£m Amounts due within one year Trade receivables 340.2 299.8 319.4 Provision for doubtful receivables (3.2) (4.5) (7.5) Other receivables 52.4 72.8 53.4 Other prepayments 116.6 112.1 100.9 Accrued income 135.0 121.7 89.3 641.0 601.9 555.5 2013 2012 2011 10 TRADE AND OTHER PAYABLES Â£m Â£m Â£m Amounts falling due within one year Trade payables 402.0 397.6 312.2 Other payables 184.3 169.1 113.9 Accruals 509.1 547.5 573.1 Deferred income 82.1 78.7 67.4 Season ticket deferred income 73.2 68.1 63.3 1,250.7 1,261.0 1,129.9 2013 2012 2011 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) 319.8 20.3 20.2 Bond 8.125% (repayable 2018) 12.8 12.9 12.8 Bond 6.125% (repayable 2019) 3.0 3.0 3.0 Bond 8.75% (repayable 2021) 30.1 30.2 30.1 Bond 5.25% (repayable 2022) 5.7 - - Bond 6.875% (repayable 2024) 7.2 7.2 7.2 378.6 73.6 73.3 HP contracts and finance leases (note 12) 62.7 52.4 42.8 Total current financial liabilities 441.3 195.3 209.6 Non-current financial liabilities Syndicated and bilateral unsecured bank 385.4 426.0 554.9 loans 385.4 426.0 554.9 Bond 6.875% (repayable 2013) - 298.5 298.0 Bond 8.125% (repayable 2018) 297.1 296.7 296.4 Bond 6.125% (repayable 2019) 305.4 299.7 276.7 Bond 8.75% (repayable 2021) 347.4 347.1 347.0 Bond 5.25% (repayable 2022) 319.1 - - Bond 6.875% (repayable 2024) 199.5 199.0 199.0 1,468.5 1,441.0 1,417.1 HP contracts and finance lease (note 12) 355.5 282.9 209.1 Loan notes (note 13) 9.7 9.7 9.7 Senior unsecured loan notes 98.3 93.3 - Total non-current financial liabilities 2,317.4 2,252.9 2,190.8 Total liabilities 2,758.7 2,448.2 2,400.4 Gross borrowings repayment profile Within one year or on demand 441.3 195.3 209.6 Between one and two years 122.3 407.0 216.0 Between two and five years 637.7 564.9 796.1 Over five years 1,557.4 1,281.0 1,178.7 2,758.7 2,448.2 2,400.4 12 HP CONTRACTS AND FINANCE LEASES The Group had the following obligations under HP contracts and finance leases as at the balance sheet dates: 2013 2012 2011 2013 Present 2012 Present 2011 Present Minimum value of Minimum value of Minimum value of payments payments payments payments payments payments Â£m Â£m Â£m Â£m Â£m Â£m Due in less than one year 64.5 62.7 54.0 52.4 48.8 42.8 Due in more than one year 66.9 63.3 54.8 51.9 48.3 43.2 but not more than two years Due in more than two years 226.9 203.3 173.9 154.7 116.6 106.3 but not more than five years Due in more than five years 107.3 88.9 92.6 76.3 62.0 59.6 465.6 418.2 375.3 335.3 275.7 251.9 Less future financing (47.4) - (40.0) - (23.8) - charges 418.2 418.2 335.3 335.3 251.9 251.9 13 LOAN NOTES The Group had the following loan notes issued as at the balance sheet dates: 2013 2012 2011 Â£m Â£m Â£m Due in more than one year but not more than two 9.7 9.7 9.7 years 2013 2012 2011 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) 15.2 23.2 22.2 Coupon swaps (fair value hedge) 45.7 43.8 21.0 Fuel derivatives (cash flow hedge) 2.4 5.6 14.9 63.3 72.6 58.1 Current assets Cross currency swaps (net investment hedge) 3.6 4.3 4.6 Coupon swaps (fair value hedge) 13.2 9.5 6.7 Currency forwards (cash flow hedge) - - 1.2 Fuel derivatives (cash flow hedge) 6.5 29.7 52.6 23.3 43.5 65.1 Current liabilities Interest rate derivatives (cash flow hedge) 8.1 8.0 15.0 Cross currency swaps (net investment hedge) 47.6 1.2 23.3 Fuel derivatives (cash flow hedge) 4.8 3.5 0.1 60.5 12.7 38.4 Non-current liabilities Interest rate derivatives (cash flow hedge) 11.8 13.7 1.5 Cross currency swaps (net investment hedge) - 27.1 28.2 Fuel derivatives (cash flow hedge) 0.8 0.9 - 12.6 41.7 29.7 Derivatives classified as held for trading Current liabilities Interest rate swaps 4.2 4.4 0.1 Non-current liabilities Interest rate swaps 9.1 8.4 - Total non-current assets 63.3 72.6 58.1 Total current assets 23.3 43.5 65.1 Total assets 86.6 116.1 123.2 Total current liabilities 64.7 17.1 38.5 Total non-current liabilities 21.7 50.1 29.7 Total liabilities 86.4 67.2 68.2 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 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 (Credit)/charge to income (60.3) 17.8 21.3 (21.2) Credit to equity - (22.0) - (22.0) Foreign exchange movements 7.1 0.9 (9.0) (1.0) At 31 March 2013 175.5 3.1 (168.4) 10.2 Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes: 2013 2012 2011 Â£m Â£m Â£m Deferred tax assets (53.2) (43.3) (30.0) Deferred tax liabilities 63.4 97.7 93.0 10.2 54.4 63.0 2013 2012 2011 16 PROVISIONS Â£m Â£m Â£m Insurance claims 216.2 218.4 221.0 Legal and other 40.8 19.9 26.4 FGW contract provision - - 48.7 Pensions 3.9 4.2 4.7 Non-current liabilities 260.9 242.5 300.8 FGW Insurance Legal contract claims and provision Pensions Total other Â£m Â£m Â£m Â£m Â£m At 1 April 2012 336.0 24.1 56.9 4.2 421.2 Charged to the income statement 135.1 33.2 9.9 - 178.2 Utilised in the year (173.1) (8.1) (32.9) (0.3) (214.4) Notional interest 19.5 - - - 19.5 Foreign exchange movements 15.1 1.6 - - 16.7 At 31 March 2013 332.6 50.8 33.9 3.9 421.2 Current liabilities 116.4 10.0 33.9 - 160.3 Non-current liabilities 216.2 40.8 - 3.9 260.9 At 31 March 2013 332.6 50.8 33.9 3.9 421.2 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 2013 2012 2011 17 SHARE 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 2011, 31 March 2012 and 31 March 2013 482.1 24.1 2013 2012 18 NET CASH FROM OPERATING ACTIVITIES Â£m Â£m Operating profit before (loss)/profit on disposal of 208.4 447.0 properties Operating profit of discontinued operations - (0.3) Adjustments for: Depreciation charges 364.7 328.1 Capital grant amortisation (33.1) (13.7) Amortisation charges 52.0 30.9 Impairment charges 13.3 - Share-based payments 5.6 6.0 Loss on disposal of property, plant and equipment 4.0 3.8 Operating cash flows before working capital 614.9 801.8 Decrease in inventories 10.6 0.6 (Increase)/decrease in receivables (8.2) 34.0 (Decrease)/increase in payables (32.2) 34.6 Decrease in provisions (12.2) (77.8) Defined benefit pension payments in excess of income (94.0) (160.4) statement charge Cash generated by operations 478.9 632.8 Tax paid (6.3) (17.7) Interest paid (129.0) (130.9) Interest element of HP contracts and finance leases (10.9) (8.8) Net cash from operating activities 332.7 475.4 19 POST BALANCE SHEET EVENTS On 9 April 2013, the Group announced the sale of five of its London bus depots (and associated assets, including plant and vehicles) (the "Business") to Metroline Limited, an existing London bus operator. The purchase price for the Business, payable on completion, is a gross cash consideration of Â£57.5 million. The Business had a gross asset value as at 31 March 2013 of Â£21.3m, and earning before interest and tax for the year ended March 2013 were Â£7.0m. In addition on 9 April 2013 the Group announced the sale of a further three London bus depots to Transit Systems Group for a gross cash consideration of Â£ 21.3m. The proceeds of the sale of these depots (including the Business) will contribute to the Group's plan to recover performance in its UK Bus division. On 15 April 2013 the Â£300m Sterling April 2013 bond was repaid in full. On 20 May 2013 the Group announced a c.Â£615m rights issue which will remove the constraints of the current balance sheet and enable the business to continue to invest for future returns while reducing leverage to sustainable levels. 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 2013. Certain parts thereof are not included within the 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, liability, financial positions and profit of the Company and Group taken as a whole; and * The Directors Report contained in he 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. The responsibility statement was approved by the Board of Directors on 20 May 2013 and was signed on its behalf by: Tim O'Toole Chris Surch Chief Executive Finance Director Including proceeds from London bus disposals, which are expected in H1 2013/14 (pending Transport for London and Traffic Commissioner approval) 1

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