Embargoed until 7:00am on Thursday 24 January 2013
INTERIM MANAGEMENT STATEMENT
FirstGroup plc ("the Group") the leading transport operator in the UK and North
America, reports the following update on trading from 1 October to 31 December
2012 ("the period" or "the third quarter").
Trading for the Group, excluding the one-off effect of Hurricane Sandy, during
the third quarter was in line with our expectations. Despite the economic
conditions that prevail, we continue to strengthen the business for the future
by taking actions that will lead to improved performance and sustainable
We were pleased by continued strong support from fixed income investors in
November, which led to our issue of £325m of 10-year bonds being significantly
oversubscribed. The proceeds were used to pay down debt, as part of our
strategy to reduce reliance on bank borrowings and extend our debt maturity
The roll out of management actions across the business continues to underpin
performance and strengthen the operating model of First Student. Although there
is significant work still to be done, we remain on track with our plans and the
business is set on the path to recovery. A significant amount of our operations
were disrupted by Hurricane Sandy in late October. The storm, which affected
the entire eastern seaboard, parts of the Midwest and Eastern Canada, impacted
some 130 of our locations and led to the closure of schools for up to nine
days. This is expected to adversely impact operating profit by approximately
$15m in 2012/13. Nevertheless, our current expectations for underlying margin
performance for the full year remain broadly unchanged.
Our transit division generated good operating results from its range of
operations, the majority of which require low capital investment. A strong
performance was achieved with good revenue growth particularly within our core
operations. We continue to see good contract retention rates and develop
opportunities from a healthy pipeline of new contract bids. We are proactively
working through a small number of historic legal claims within First Transit.
As a result, settlement discussions have now been scheduled for February 2013
in respect of historic meal and rest break claims in the Fixed Route and
Paratransit businesses which date back to 2003.
During the period like-for-like revenue growth was 1.6%, with Greyhound's US
operations continuing to achieve a strong performance. Against the backdrop of
a sluggish economy, operating margin performance remains in line with our
expectations as a result of the actions we have taken. These actions have
transformed the business and created a more flexible and agile operating model.
We continue to expand our popular Express product and build on the unique
strength of our national network in providing support for sustainable flows on
newly launched services as we roll out across more destinations. During the
period we expanded Express service to new states including Louisiana, Oklahoma,
Nevada and Ontario, Canada.
Like-for-like passenger revenue growth was 2.1% in the period. Notwithstanding
the challenging economic environment which continues to affect many of the
urban areas in which we operate, we are making headway with our detailed plan
to recover performance and equip the business to achieve increased revenue and
patronage growth. We continue to work through our programme of disposals. In
November 2012 we agreed the sale of our Birkenhead and Chester operations for
4.5m and today we are pleased to announce the sale of our Kidderminster and
Redditch bus businesses to Rotala PLC for a gross consideration of £1.5m.
there remains considerable work to be done across our UK Bus division, we are
encouraged by early positive signs in some of our markets. As previously
stated, we expect UK Bus operating margin to be approximately 8% for the full
Our rail division continues to benefit from strong passenger growth across all
of our franchises and like-for-like revenue increased by 8.1% in the period. We
welcomed the publication of the independent review by Richard Brown on 10
January which called for an early return to refranchising so that the private
sector can continue to provide effective and efficient passenger rail services
with further performance and infrastructure improvements. 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 receiving details on the
recommencement of the franchise process and submitting further high quality
bids that deliver for passengers, taxpayers and shareholders. During the period
the Scottish Government announced that the ScotRail franchise will now end on
31 March 2015, from its previous end date of 9 November 2014.
Commenting, Tim O'Toole, Chief Executive said:
"Trading for the Group, excluding the one-off effect of Hurricane Sandy, during
the third quarter was in line with our expectations. We have leading positions
in a sector that is a key enabler of economic growth and the backbone of
vibrant and sustainable local economies. Demand for high quality, attractive
services that offer value for money remains and we are confident that the
actions we are taking will strengthen our business and its prospects for long
term growth. While there is significant work still to do, we are satisfied with
the progress of the actions taken so far, though we remain cautious in respect
of continued economic weakness.
"As previously stated, following the uncertainty caused by the Department for
Transport's decision to delay its refranchising programme the Board held the
interim dividend at last year's level. We will consider the full year dividend
in May 2013, by which time the prospects for our rail division are expected to
A conference call for analysts and investors will be held at 9:30am today.
Please call +44 20 7291 0507 in advance of the call to register and to receive
Contacts FirstGroup plc:
Chris Surch, Group Finance Director
Rachael Borthwick, Group Corporate Communications Director Tel: + 44 20 7291
0512 / +44 7771 945 432
Stuart Butchers, Group Corporate Communications Manager Tel: + 44 20 7291 0507
/ +44 7713 317 979
Michael Harrison/Andrew Porter
Tel: +44 20 7404 5959
FirstGroup plc is the leading transport operator in the UK and North America.
With approximately 124,000 employees we carry 2.5 billion passengers every year
across our bus and rail networks in the UK and our school bus, transit and
intercity coach operations in the US and Canada. Our vision is to provide
solutions for an increasingly congested world...keeping people moving and
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