First Group Trading Statement October 2012 - dividend growth policy confirmed

DividendMax Ltd.

First Group Trading Statement October 2012 - dividend growth policy confirmed


FirstGroup plc ("the Group") reports the following update on trading for the six months to 30 September 2012 ("the period") ahead of its half-yearly results to be announced on 7 November 2012.

Overall trading

Despite continued economic uncertainty, overall trading for the Group during the first half of the year is in line with our expectations. With a resolute focus on creating a stronger business for the future we have taken action to improve performance and deliver sustainable growth.

First Student

First Student has made good progress in addressing performance and strengthening its operating model. Although there remains significant work to be done, the business is now set on the path to recovery. We achieved a retention rate of 90% and delivered a successful start up to the new school year. US Dollar revenues on a like-for-like basis are expected to be down by 3.8 % for the period and as previously stated, we expect the operating margin for the full year to exceed the 2010/11 performance.

First Transit

First Transit continues to deliver a steady trading performance in line with our expectations. US Dollar revenues are expected to increase by 3.2 % on a like-for-like basis. We continue to achieve strong contract retention rates of over 90% and progress a pipeline of new business opportunities.


We continue with the modernisation of Greyhound including the roll out of our popular Express service. During the period like-for-like revenue growth is expected to be 1.7% reflecting the impact of the sluggish economic environment and lower fuel prices on summer trading. We have however, mitigated this impact through the actions we have taken over recent years which has enabled us to leverage the positive effects of a more flexible operating model. Our Greyhound Express product continues to prove popular with customers and, having rolled out services to Texas and California during the summer, we are developing plans to extend to further new cities in the autumn.

UK Bus

Our UK Bus division is expected to deliver like-for-like passenger revenue growth of 2.5% in the period. Challenging economic conditions continue to impact a number of our urban operations however, during the period our operations in the North of England and Scotland saw improved revenue growth whereas, in keeping with industry trends, we saw a reduction in concessionary volumes in our businesses in the South. We were delighted to successfully complete the smooth delivery of our contract to provide spectator transport to the London 2012 Games. While there remains considerable work to be done in our UK Bus division, we have seen some early positive signs in some of our markets.
We have a clear direction and are executing a detailed plan to recover performance and equip the business to achieve increased revenue and patronage growth, including continuing to work through our programme of disposals. As previously stated, we expect UK Bus operating margin to be approximately 8% in the full year.

UK Rail

Our UK Rail division achieved a further period of solid performance with like-for-like passenger revenue expected to increase by 8.1%. All of our rail franchises made a strong contribution to this performance and we remain focused on ensuring the quality of our existing operations while continuing to develop opportunities from the re-franchising programme. We are shortlisted for all three rail franchises currently out for tender.

On 15 August, the Department for Transport (DfT) announced that we have been awarded the contract to operate the InterCity West Coast franchise. The incumbent operator Virgin Rail Ltd, a joint venture between Virgin Group and Stagecoach Group plc, is pursuing a legal challenge against the DfT in relation to the franchise award. We have every confidence in the DfT's process which is rigorous, detailed and fair and in which bids are thoroughly tested. Our focus is to ensure a smooth transition with continuity for staff and passengers alike and to deliver the many benefits and improvements we are offering without delay or disruption. We continue to prepare for a successful mobilisation on 9 December 2012.


Commenting, Tim O'Toole, Chief Executive said:

"I am pleased to report overall trading for the first half of the year is in line with our expectations. With a fundamentally strong and diverse portfolio of operations we are focused on driving a greater performance and delivering improved growth and returns. While there is significant work to do we are satisfied with the progress of the actions we have taken, though we remain mindful of the uncertain economic backdrop.

"We have leading positions in a sector that is a key enabler of economic growth and we are confident that the actions we are taking will strengthen the business for the future. Therefore, reflecting its longer term view, the Board remains committed to its current policy of dividend growth of 7.0% through to the end of the financial year 2012/13."

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