Firstgroup Regulatory News (FGP)

EMBARGOED UNTIL 7:00am on Wednesday 21 May 2014 FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2014 Group overview: * Overall trading in line with expectations for the year, excluding the £14m operating profit impact of unprecedented weather conditions on First Student and Greyhound in the fourth quarter * Adjusted operating profit increased by 5.5%, reflecting improved underlying operating performances in four divisions, partially offset by slower progress in First Student and the extreme weather * Adjusted EPS fell 31.8% due to the dilutive effect of the rights issue completed in June 2013 * Statutory operating profit and EPS substantially improved * Net cash flow broadly flat for the year (excluding the proceeds of the rights issue), in line with expectations * Balance sheet strengthened, net debt: EBITDA ratio reduced to 2.2 times from 3.4 times last year and new £800m five-year revolving credit facility signed * Disciplined investment programme underway, with gross capital expenditure increasing by 15% in the period * ROCE increased to 8.2% (2013: 7.0%) in line with expectations. Medium term 10-12% ROCE target and other financial targets maintained * Dividend - taking together the current stage of the turnaround programmes and our commitment to our capital programme, the Board has decided to refrain from reinstating a dividend at this point * Board changes - including the appointment of three new non-executive directors with effect from 24 June 2014 2014 2013 Change Restated1 Revenue £6,717.4m £6,900.9m (2.7)% Adjusted2 - EBITDA3 £579.8m £585.7m (1.0)% - Operating profit £268.0m £254.1m +5.5% - Profit before tax £111.9m £90.9m +23.1% - Attributable profit £79.3m £65.1m +21.8% - EPS 7.5p 11.0p (31.8)% Statutory - Operating profit £232.2m £139.8m +66.1% - Profit/(loss) before tax £58.5m £(28.9)m n/m - Attributable profit/(loss) £54.2m £(17.8)m n/m - EPS 5.1p (3.0)p n/m Net debt4 £1,303.8m £1,979.1m (34.1)% 1Restated for adoption of IAS19 (revised) on pensions, the reclassification ofcertain exceptional items and the impact of the rightsissue on EPS as explainedin note 2. 2Before amortisation charges, ineffectiveness on financial derivativesandexceptional items. Allreferences to `adjusted' figures throughout this documentare defined in this way. 3Adjustedoperating profit less capital grant amortisation plus depreciation. 4Net debt is stated excluding accrued bond interest. Operating summary: * First Student - performance affected by historically severe weather; accelerated programmes to address contract portfolio pricing and deliver further cost savings * First Transit - record of good growth and margin performance maintained * Greyhound - underlying improvement in demand trends and continuation of profitable expansion of Greyhound Express, partially offset by weather disruption to the network * UK Bus - step-by-step transformation plan progressing and delivering sustainable improvements in key metrics * UK Rail delivering solid revenue growth underpinned by continued passenger volume increases and strong operational delivery Commenting, FirstGroup's Chief Executive, Tim O'Toole said: "We have made satisfactory progress on our key priorities in the year,delivering earnings growth despite the historically severe weather in NorthAmerica. We saw good performances in four of our divisions partially offset byslower progress in First Student, where driving forward our detailed recoveryplan is a key priority. Although part way through the current bid season, ourprogramme to address contract portfolio pricing has made encouraging progress,though we recognise that we still have some way to go. "The Group is broadly on track to achieve our medium term targets and, while weare encouraged by progress so far, there remains a significant amount of workahead. We are confident that we have the right plans underway to build on ourmarket leading positions, strengthen the resilience of the Group, and return toa profile of sustainable cash generation and value creation for the long term." Contacts: FirstGroup plc: Rachael Borthwick, Group Corporate Communications DirectorFaisal Tabbah, Group Investor Relations ManagerStuart Butchers, Group Media Relations ManagerTel: +44 (0) 20 7291 0512 Brunswick PR: Michael Harrison/Andrew PorterTel: +44 (0) 20 7404 5959 A PRESENTATION TO INVESTORS AND ANALYSTS WILL BE HELD AT 9:00AM TODAY ATTENDANCE IS BY INVITATION ONLY A LIVE TELEPHONE `LISTEN IN' FACILITY IS AVAILABLE, FOR JOINING DETAILS PLEASE CONTACT +44 (0) 20 7725 3354 A PLAYBACK FACILITY WILL BE AVAILABLE AT WWW.FIRSTGROUP.COM/INVESTORS PHOTOS FOR MEDIA ARE AVAILABLE, PLEASE CALL +44 (0) 20 7725 3354 CHAIRMAN'S STATEMENT I am pleased to have joined FirstGroup as Chairman, at a key stage of itsevolution. This is an important company, operating in five major divisions,providing services to millions of customers in the UK and North America, is oneof the largest corporate employers, and a major contributor to the communitiesin which we operate. Since taking on the role at the beginning of the year, I have reviewed thebusiness plans and actively engaged on major decisions and forward plans withthe senior team. Essentially, I have found the challenges and opportunitiesfacing the company to be broadly in keeping with my initial expectations. Ihave also met all of our major shareholders. It is fair to say that they arevery supportive of the Group, but are disappointed we have not matched thissupport with appropriate returns. Turning this situation around is thereforethe first priority of the Board. I am encouraged that the Group has an attractive portfolio of transportbusinesses - each a leader in its market, and each with good growth and returnsprospects, particularly as the economies recover from the global financialcrisis. With the correct decisions and actions, we should be able to turn thisinto acceptable returns for shareholders in the form of appropriate dividendsand capital growth that has eluded us more recently. First Transit, Greyhound and UK Rail are delivering returns broadly in linewith what I would expect, though clearly we have significant opportunity forfurther improvement. On the other hand, two of our businesses, First Student and UK Bus, have notperformed, and are well short of their potential and delivering lower marginsthan their competitors. Although both divisions have faced challenging economicconditions in their respective markets, we cannot escape that we should havemanaged them better. Progress has been made in addressing the performance ofthese two divisions, with headway being made in UK Bus in particular, but thereremains much to do still. Fixing these and delivering the business plans weannounced recently is the Group's key priority. Also, as a result of past acquisitions, and notwithstanding the rights issuelast year, Group leverage remains higher than its optimal long term leveldespite the good strides made to reduce it over the past five years, and theinterest burden continues to weigh on the income statement. It will take someyears of good operating cash flow to bring this down to a more prudent level,but we will consider ways to accelerate this. At the same time, some of thebusinesses have, in the past, suffered from a lack of appropriate capitalinvestment and this has been boosted significantly in our business plans. Taking together the current stage of the First Student and UK Bus recoveryprogrammes and our commitment to the capital investment programme, it will takesome time before the Group is able to deliver a profile of consistent surpluscash that can be distributed to shareholders. As a result, the Board hasdecided that we should refrain from reinstating a dividend at this point.Having consulted with our major shareholders I am confident they will supportthis decision. We will keep shareholders advised of progress in this respect. The task of extracting greater value from First Student and UK Bus isfundamental. Turning around performance in both of these divisions, as well asdelivering profitability and returns at least in line with our peers, wouldgenerate additional cash flow to enable us to reduce leverage and increaseshareholder returns. Central to this is the need to make disciplined decisionson pricing, productivity and capital allocation. I am confident these issuesare resolvable over time and my own experience in corporate recovery situationsshould assist in this. Turning to performance for the year, while below our ultimate potential, theGroup has performed broadly in line with expectations, once account is takenfor the extraordinary weather particularly in North America. Excludingbusinesses sold this and last year, Group revenues have increased modestly, butmore importantly from a strategic perspective, adjusted operating profitincreased by 5.5%, adjusted profit before tax is 23.1% greater, and adjustedprofit attributable to ordinary shareholders has increased by 21.8%. AdjustedEPS has fallen by 31.8%, principally due to the increased number of sharesfollowing the rights issue. Adjusting for the proceeds of the rights issue,Group cash flow was in line with guidance, reflecting the planned increase incapital investment. The Board was particularly encouraged by the performance of First Transit,Greyhound, UK Bus and UK Rail this year. UK Bus, while still working throughits transformation programme, is beginning to show that it is on the righttrack. First Student's slower progress however, which was heavily affected bythe unusual winter weather, was disappointing. A strong, experienced and diverse Board with the right mix of skills andexperience will be essential to the successful execution of the transformationprogramme, by providing strategic oversight to management as well as rigorousand robust challenge. It is a natural process after periods of long service for Directors to retireand for the Board to be refreshed. Accordingly, we have announced that JohnSievwright, David Begg, and Colin Hood will retire from the Board, and WarwickBrady, Drummond Hall and Imelda Walsh will join the Board as Non-ExecutiveDirectors, with effect from 24 June 2014. I am pleased to welcome Warwick,Drummond and Imelda to the Board and I am delighted that such distinguisheddirectors have placed their faith in us. I would like to thank John, David andColin for their dedication and contribution to the company, and particularlyfor their support to me as incoming Chairman. On behalf of the Board I would also like to pay tribute to my predecessorMartin Gilbert who stepped down from the Board on 31 December 2013 and, havingbeen involved with the Group since its formation, was instrumental inestablishing its position as the leading transport operator in the UK and NorthAmerica. I have been impressed by the commitment and dedication of our people who remainfocused on the task of delivering high quality services to our customers. TheBoard is grateful for the continued efforts and dedication of our 117,000employees, particularly during what has been a challenging period for theGroup. As I have spent time reviewing and challenging the strategy of the Group, myearly impression is that this is the right one for current conditions. We willhowever continue to review other options that are financially compelling, as Iwork with management and the Board over the coming months. Clearly it isdisappointing that we have not been in a position to declare a dividend for theyear, but we ask for shareholders' patience while we return the Group to adividend paying position. Looking forward, although it is early days for me as your Chairman, I believewe have correctly assessed the situation, are putting the right programmes inplace, and are taking the appropriate action to improve profitability, cashgeneration and to strengthen the balance sheet. With a resolute focus on bringing these issues to a successful conclusion, Isincerely look forward to playing a pivotal role in the next stage of theGroup's evolution. John McFarlaneChairman21 May 2014 Note: Operating profit referred to throughout this document refers to operatingprofit before amortisation charges, ineffectiveness on financial derivativesandexceptional items. EBITDA is adjustedoperating profit less capital grantamortisation plus depreciation. CHIEF EXECUTIVE'S REVIEW Our services help to create strong, vibrant and sustainable local economies andour opportunity is to be the provider of choice for our customers andcommunities. We have a unique competitive advantage as a result of our scaleand the diversity of our portfolio of market leading transport businesses: wedesign and operate more networks, we hire and train more employees, we procure,maintain and deploy more vehicles, and we work with more local communities thanany other operator. Our vision is to provide solutions for an increasinglycongested world… keeping people moving and communities prospering. Our strategy Our overall strategy is designed to leverage our scale by developing andsharing our global expertise for the benefit of our local markets. In recentyears, although we have excelled in particular ways and at different times, wehave not delivered the overall financial performance that would reflect ourleading market positions. As a consequence, we are repositioning the Group forimproved growth and to restore us to a profile of consistent financial returns.Last year, we strengthened the balance sheet to give us the flexibility toinvest in our transformation programme and set out detailed medium termfinancial targets. Our strategic objectives under the transformation programmeare: focused and disciplined bidding in our contract businesses (First Student,First Transit and UK Rail), driving growth through attractive commercialpropositions in our passenger revenue businesses (Greyhound and UK Bus),continuous improvement in operating and financial performance, prudentinvestment in our key assets (fleets, systems, and people), and responsiblepartnerships with our customers and communities who rely on us and on whom, inturn, we depend. We are confident that successful execution of our strategy will deliver our keymedium term financial targets, which are to increase Group revenue (excludingUK Rail) at a faster rate than the economies we serve, improve margins in FirstStudent and UK Bus to double digit levels and in Greyhound to 12%, and toachieve a post-tax return on capital employed (ROCE) in the 10 to 12% range forthe Group as a whole. As importantly, our plans will create a more robustcompany and one that is better placed to deliver on its potential. Year in review The year to 31 March 2014 has been one of repositioning and investing in theGroup to drive greater value from our market leading portfolio of businesses,focusing on our people, our divisional performance and priorities and ourfinancial position. Our people In December 2013 we were delighted to announce the appointment of JohnMcFarlane as Chairman. The Group is already benefitting from his extensiveinternational experience and track record of strategic change and valuecreation. The experience, skills and perspectives of our new Non-ExecutiveDirectors Warwick Brady, Drummond Hall and Imelda Walsh will also be invaluableto the Group as we drive forward our plans. In January 2014 Dennis Maple joined the Group as President of First Student.The wealth of experience that Dennis brings will be important as we build onthe cost savings actions already taken and accelerate our contractrepositioning programme to deliver double digit margins in the medium term.During the year, UK Bus restructured its senior leadership team to ensure thatthe necessary commercial and operational expertise is focused on our localoperations and to bring in new talent (over 30% of the management within thedivision have been changed in the last two years). In the year, we have alsolaunched important Group-wide employee professional development, engagement anddiversity initiatives, which will strengthen our ability to deliver ourtransformation programme. Divisional performance and priorities In the year, we made satisfactory progress with our key divisional priorities,with good performances in four of our divisions partially offset by slowerprogress in First Student. We also have clear plans in place for each of thedivisions to contribute to the Group's overall progress towards its medium termtargets: First Student made progress in its recovery plan, achieving the $100m p.a. incost savings as planned. However, current cost inflation that marginallyexceeds the pricing adjustments provided for in our multi-year contracts,together with an unprecedented amount of school closures due to the severity ofthe North American winter season, meant that our rate of progress toward ourmedium term objective of double digit margins was slower than we had targeted.Going forward, First Student is accelerating its programme to address contractportfolio pricing and focus capital on higher returning opportunities, andtargeting a further $50m p.a. of identified cost efficiencies. First Transit delivered another year of strong growth and good margins, withcontinued bid success across all segments. Going forward, First Transit willcontinue to invest in its market leading people and solutions to deliverfurther growth with attractive returns. Although its reported results were negatively affected by the severe weatherwhich caused significant disruption to the network this winter, the underlyingperformance in Greyhound indicates signs of a modestly improving market for itstraditional coach services. Our Greyhound Express and BoltBus point-to-pointbrands continued to achieve strong profitable growth, benefitting from theunique feed from our national network. Going forward, the modernisation ofGreyhound's IT infrastructure and web presence will deliver improved ticketing,real-time pricing and yield management, and this, together with the continuedprofitable growth of our point-to-point brands, will deliver our medium termmargin target of 12% for the division. UK Bus has achieved overall passenger volume growth for the first time inseveral years, as a result of the network transformations, fare reviews andsignificant investments in fleet and service during the year. Going forward, wewill continue to improve our commercial proposition to drive passenger volumegrowth and revenues, while continuing to strengthen operational discipline aswe make progress with our step-by-step plan to raise margins to double digits. During the year, UK Rail delivered continued revenue growth underpinned byrobust passenger volume growth. Our train operating companies worked closelywith our industry partners to deliver both planned infrastructure and fleetupgrades, and remedial work to restore services on parts of the network damagedby flooding. First Great Western and First Capital Connect extended their rolesthrough direct awards from the Department for Transport (DfT) in the year. UKRail is currently shortlisted on five franchising competitions. Going forward,UK Rail will participate in a range of franchise competitions to achieve profiton a par with the last round of franchising, with an acceptable level of risk. Our financial position In June 2013, we received the net £584m proceeds of the rights issue whichstrengthened our balance sheet and provided the necessary flexibility tocontinue our transformation programme and invest to create sustainable value. In May 2014, we signed a 5 year, £800m revolving credit facility with ourrelationship banks. In addition to achieving better pricing and increasedflexibility in certain areas, the new facility gives us strong liquidity and astable financing platform to drive forward our transformation programme, withour next debt maturity in October 2016. Group outlook We have made satisfactory progress on our key priorities in the year,delivering earnings growth despite the historically severe weather in NorthAmerica. We saw good performances in four of our divisions partially offset byslower progress in First Student, where driving forward our detailed recoveryplan is a key priority. Although part way through the current bid season, ourprogramme to address contract portfolio pricing has made encouraging progress,though we recognise that we still have some way to go. The Group is broadly on track to achieve our medium term targets and, while weare encouraged by progress so far, there remains a significant amount of workahead. We are confident that we have the right plans underway to build on ourmarket leading positions, strengthen the resilience of the Group, and return toa profile of sustainable cash generation and value creation for the long term. Tim O'TooleChief Executive21 May 2014 OPERATING AND FINANCIAL REVIEW Group revenue was £6,717.4m (2013: £6,900.9m), a decrease of 2.7%. Adjustingfor the UK Bus portfolio changes, the disposal of First Support Services (FSS)in First Transit and the non-recurring London 2012 Games, like-for-like Grouprevenue increased by 1.2%. Adjusted operating profit increased 5.5% to £268.0m(2013: £254.1m), reflecting higher profits in UK Rail and First Transitpartially offset by reductions in the other divisions, including £14m profitimpact of unprecedented weather conditions on First Student and Greyhound inthe fourth quarter. Group margins increased, with improvements in UK Bus, FirstTransit, and UK Rail more than offsetting declines in First Student andGreyhound. Statutory operating profit was £232.2m (2013: £139.8m) reflectingthe increased adjusted operating profit and a much reduced charge forexceptional items this year. Adjusted basic EPS decreased to 7.5p (2013:11.0p), reflecting the increased number of shares in issue following the rightsissue, whereas attributable profit for the adjusted EPS calculation increasedby 21.8% from £65.1m to £79.3m in the year. EBITDA decreased 1.0% to £579.8m(2013: £585.7m). ROCE1 improved to 8.2%, compared with 7.0% (as restated) forthe year to 31 March 2013. The Group has reviewed its treatment of exceptional items, in particulargenerally recurring costs associated with UK Rail bids and profit/(loss) onproperty disposals. As a result, these items have been included in our measureof adjusted results in this document and the prior year has also been restatedaccordingly. The net cash inflow for the year, excluding the net proceeds of £584.4m fromthe rights issue, was £26.9m (2013: outflow of £74.4m). The net debt to EBITDAratio was 2.2 times (2013: 3.4 times). The average debt duration at 31 March2014 was 6.1 years (2013: 5.4 years) and there was £988.5m (2013: £1,215.5m) ofheadroom under committed facilities and free cash. During the year gross capital expenditure of £464.7m (2013: £404.3m) wasinvested in our business to continue the transformation programme and invest infuture growth. We continue to anticipate investing approximately £400m p.a. incapital expenditure over the next three financial years in our businesses as wepursue our medium term financial objectives, which are as follows: * The Group aims to increase Group revenue (excluding UK Rail) at a faster rate than the economies we serve, through careful investment in our passenger revenue-based services, and disciplined bidding in our contract-based businesses. * First Student and UK Bus will improve margins to double digit levels through the detailed recovery plans underway, Greyhound targets a margin of approximately 12%, First Transit will continue its record of growth while maintaining margins, and in UK Rail we will participate in a range of future franchise competitions to achieve profit on a par with the last round of franchising, with an acceptable level of risk. * Overall the Group's objective is to achieve ROCE in the range of 10% to 12% in the medium term, compared to 8.2% in the 2013/14 financial year. * We also aim to maintain an investment grade credit rating and appropriate balance sheet liquidity and headroom. The Group has net debt : EBITDA of 2.2 times as at 31 March 2014, and is targeting net debt : EBITDA of 2.0 times in the medium term. 1 Return on capital employed (ROCE) is calculated by dividing adjustedoperating profit after tax by all assets and liabilities excluding debt items. Divisional results Restated Year to 31 March 2014 Year to 31 March 2013 Operating Operating Operating Operating Revenue profit1 margin1 Revenue profit1 margin1 £m £m % £m £m % First Student 1,467.4 93.5 6.4% 1,503.1 110.1 7.3% First Transit 811.9 60.3 7.4% 814.6 49.1 6.0% Greyhound 624.6 46.4 7.4% 647.1 54.3 8.4% UK Bus 930.2 44.4 4.8% 1,128.2 50.8 4.5% UK Rail 2,870.1 55.2 1.9% 2,795.1 19.3 0.7% Group2 13.2 (31.8) 12.8 (29.5) Total Group 6,717.4 268.0 4.0% 6,900.9 254.1 3.7% North America in $m $m % $m $m %US Dollars First Student 2,339.3 152.8 6.5% 2,378.6 175.2 7.4% First Transit 1,290.5 95.7 7.4% 1,286.8 77.7 6.0% Greyhound 990.6 73.2 7.4% 1,022.0 85.2 8.3% Total North 4,620.4 321.7 7.0% 4,687.4 338.1 7.2%America 1Adjusted. 2Tramlink operations, central management and other items. First Student Revenue in our First Student division was $2,339.3m or £1,467.4m (2013:$2,378.6m or £1,503.1m), 1.7% lower on a US Dollar basis, principally due to anunprecedented number of school closures due to the abnormal weather conditionsacross North America in the second half of our financial year. Operating profitwas $152.8m or £93.5m (2013: $175.2m or £110.1m), resulting in a margin of 6.5%(2013: 7.4%), which also reflects school closures and the higher associatedoperating costs during the unusually severe weather. 75% of our territorysuffered some impact from the extraordinary snow falls and extremely coldconditions, with more than 4,000 school days lost, approximately twice theimpact we would expect to see in a typical year. A number of the lost operatingdays may potentially be recovered in the summer term, which occurs in our 2014/15 financial year. On an underlying basis, excluding the approximately $25m ofnet weather impact for the year, First Student's margin would have been flatcompared with the prior year, reflecting the achievement of the $100m in annualcost savings as planned, offset by cost inflation running slightly ahead ofprice indexation in our multi-year contracts. Focused and disciplined bidding State and local finances have continued to improve modestly in the year; overthe 2013 bid season we achieved organic growth from within existing contractsof more than 470 buses, almost double the rate of organic growth in the prioryear and equating to approximately 1% growth. We continue to be competitive inthe conversion market from in-house to the private sector, winning 55% of thecontracts bid for-and-awarded. We remain cautious about conversion growthhowever, as only a small proportion of contracts put out to tender convert tothe outsourced sector, a trend we do not envisage changing in the medium term.A number of our `share shift' contract wins were cost-effective expansions ofexisting operations, such as for the Los Angeles Unified School District andfor Kansas City, Missouri. Our continuing focus on returns resulted in somecontract losses including several where, although the numbers of buses operatedwere significant, their contribution to profits was limited. Overall contractretention for the 2013 bidding season was around 90%, and the number of busesoperated fell by around 550. Continuous improvement in operating and financial performance We have continued to focus on delivering cost efficiencies during the year, anarea which remains an important component of First Student's recovery plan.Having delivered $100m p.a. in cost savings in the year - through implementinguniform best practice in driver operating procedures, maintenance, fuel use andprocurement - the business is enhancing its ability to generate returns,despite continued cost inflation in the industry. The next phase of costsavings, amounting to c.$50m, have been identified, and focus on optimising theoverhead structures of the business, together with ensuring full compliance ofever more consistent operating procedures throughout our more than 500locations. Two thirds of our engineering workshops have now achieved silver orgold `lean' certification, up from a quarter in the prior year. Althoughnon-school charter results were impacted by the weather, growing 9.5% in theperiod, we are pleased with the progress of our more structured approach tothis business, which delivers a very strong incremental return on capitalemployed. Prudent investment in our key assets We continue to invest in technology to differentiate our offering, raisecustomer service levels and promote environmental benefits. The roll out of ourFOCUS GPS system (which links on board data to back office systems) has beencompleted and is delivering savings to plan, and the DriveSmart system (whichprovides real-time fuel use feedback to drivers) is being fitted throughout thefleet. In the second half we launched the MyFirstPass system in selectedlocations, which gives parents and customers real-time information aboutstudent ridership as they swipe on and off the bus. We invested approximately$300m in new buses, refurbishments, on-board technology and facilitiesimprovements in the year; our average fleet age remains around 7.5 years. Responsible partnerships with our customers and communities First Student achieved a fifth consecutive year of improved customer servicescores, with particularly pleasing results in the important start up phase ofthe school year. We are achieving fuel efficiency improvements of around 5% across the divisionthrough the DriveSmart system, and added approximately 500 alternative fuelbuses (mainly propane) to the fleet in the year. First Student's safetyperformance is both a source of competitive advantage and, more fundamentally,is deeply embedded in our culture and values. Future priorities First Student is a leader in its market in terms of both its size and thequality and safety of the services it provides. Although the recovery plancontinues to make progress, more work remains to be done to ensure the divisiondelivers its medium term double digit margin target. At present, the divisiondeploys significant capital across parts of its contract portfolio that doesnot attract a fair margin for the quality of service provided or an appropriaterate of return on that capital. Therefore the division is working through aprogramme to address contract portfolio pricing, focus capital on higherreturning opportunities and continues to drive further cost efficienciesthrough the business. We remain confident in the ability of our detailedrecovery plan to improve margins to double digits over the medium term. In thelonger term, First Student will be increasingly well placed for growth throughfurther share shift, in-fill acquisitions, and organic opportunities. Outlook During the 2014 bid season, First Student is intensifying its focus onretaining or winning contracts that deliver an appropriate level of return oncapital employed, which may result in some further losses of lower margincontracts. To the extent this is the case, the division will cascade the freedup vehicles to other opportunities, with a commensurate saving in capitalexpenditure. Although this approach may result in a modestly smaller revenuebase and some short term costs, over the medium term this approach - coupledwith the further cost savings - will result in a more sustainably attractivecontract portfolio, which will deliver double digit margins and better returnson capital. Although part way through the current bid season, our programme toaddress contract portfolio pricing has made encouraging progress, though werecognise that we still have some way to go. First Transit Revenue in our First Transit division was $1,290.5m or £811.9m (2013: $1,286.8mor £814.6m). Adjusting for the disposal of FSS, US Dollar revenue increased by8.0%, reflecting continued new business wins and organic growth within existingcontracts. All key segments saw growth in the year, led by fixed route,paratransit and shuttle. Operating profit was $95.7m or £60.3m (2013: $77.7m or£49.1m), resulting in a margin of 7.4% (2013: 6.0%), which reflects a strongoperating performance and the absence of the significant historic legal claimsettlement in the prior year. Focused and disciplined bidding During the year, First Transit continued to leverage its longstandingmanagement reputation and expertise to win new work. At the same time, throughits collaborative approach with its public transit authority and privatecustomers, the division also generated growth from increased utilisation of itsservices under existing contracts. Contract retention remained above 90%,reflecting high customer regard for our capabilities and the competitivepricing of our services. The largest award in the year was a paratransit contract for PACE, part of theregional transport authority of Chicago, Illinois. We were also successful inexpanding our call centre work with an important win for the Chicago RegionalTransit Authority's Travel Information Center. Our shuttle business continuesto be successful, with further contract wins at Auburn University and theUniversity of Alabama at Birmingham joining other recent contracts includingfor the University of Tennessee Knoxville and Brown University in our marketleading university portfolio. First Transit transitioned several largecontracts from other operators including the newly unified fixed route contractfor Valley Metro RPTA in Mesa/Tempe, Arizona, the MetroACCESS paratransitcontract in Washington, DC, and the Maryland Transit Administration paratransitcontract in Baltimore, MD. Important contract retentions this year includedfixed route services for the Potomac and Rappahannock Transportation Commissionin Woodbridge, VA, fixed and route and paratransit services for Johnson County,Kansas, and shuttle services at the Baltimore/Washington International Airport.Collaborating with our Fort McMurray oil industry partners resulted in furtherrevenue growth under existing contracts. Continuous improvement in operating and financial performance A significant proportion of First Transit's opportunities will continue toarise from business outsourced to the private sector for the first time, whereour national service platform, technology infrastructure and managementexpertise can deliver substantial cost savings compared to public provision.Through a culture of continuous improvement and technology insertion, FirstTransit has continued to maintain our ability to provide both exceptionalservice and low cost for new and existing customers. For example, First Transithas continued to improve operational efficiencies, including through therefinement of our fixed route mileage optimisation programme which results inreduced non-revenue time and mileage, paratransit productivity which improvesvehicle routing and scheduling efficiency, and direct and indirect costreductions through the negotiation of more competitive purchasing agreements. Prudent investment in our key assets First Transit focuses investment spending on three principal areas: people,technology solutions and on vehicles for the shuttle segment, where typicallywe own the fleet as well as delivering a service. To ensure we maintain thedepth and breadth of expertise required to consistently deliver high-qualitybid submissions and a subsequent service that meets customer expectations, wemaintained our significant investment in recruitment, retention and continuoustraining of our people. The division successfully initiated the roll out throughout the US of itsmanagement IT system providing automated operational, maintenance and financialinformation in the year, which will deliver significant cost savings. Thissystem will also allow us to offer real-time vehicle location information toour customers. In shuttle, we continue to invest in state-of-the-art fleetthrough a combination of direct investment and operating leases, wherecommercially appropriate. Responsible partnerships with our customers and communities Our customer service trends continue to be positive, with our commitment tosafety, technical and operational knowledge and professionalism particularlyrecognised by our customers. We have enhanced our industry leading safety programme through the continuedroll out of DriveCam technology, an event capture and driver behaviourmonitoring system, which has the added benefit of improving fuel efficiency. Future priorities The continued success of First Transit depends on maintaining our competitiveadvantage, which resides in the expertise of our people and the quality of ourtechnology. Both are vital components in delivering services that continue toinnovate and to deliver cost efficiencies, which in turn ensures we will be thelow cost supplier of choice for our customers. We see continued growthpotential in all of our existing segments, together with emerging outsourcingopportunities in light rail, commuter rail, high speed rail and Bus RapidTransit (BRT) in the US and internationally. Over the coming years, weanticipate there will also be opportunities for targeted acquisitions ofcomplementary businesses, which would immediately increase market share,leverage our scale and enhance profits and returns. We look forward toleveraging our market position and reputation to deliver continued growth atattractive margins. Outlook The pipeline of potential new business remains attractive, with a wide range ofbid opportunities to add to our portfolio of over 370 contracts. As we lookahead to next year, current identified opportunities are weighted to fixedroute, paratransit and shuttle segments. Greyhound Greyhound's overall US Dollar revenue was $990.6m or £624.6m (2013: $1,022.0mor £647.1m) with the reduction of 3.1% including the impact of severe weatherwhich caused significant disruption to the network in the fourth quarter.Excluding weather, like-for-like revenue over the financial year wasapproximately 0.7% lower, although the revenue growth trajectory improved overthe course of the year. Adjusted operating profit was $73.2m or £46.4m (2013:$85.2m or £54.3m), resulting in a margin of 7.4% (2013: 8.3%). This marginperformance in part reflects the modestly improving economic conditions overthe course of the year and the continued profitable growth of ourpoint-to-point services, offset by the impact of weather-related disruption andhigher associated operating costs in the final quarter. Driving growth through attractive commercial propositions Greyhound's iconic brand is synonymous with long distance coach travel in NorthAmerica and our unique national network provides a significant competitiveadvantage and an established base for future growth, by providing passengerfeed from the 42,000 city pairs that we offer as operating leverage to ourpoint-to-point services. Whilst traditional Greyhound remains a largely cyclical business, our programmeof expansion in Greyhound Express and our other point-to-point brands continuedeven during recent periods of economic fragility in North America. GreyhoundExpress continues to perform well, with like-for-like revenue increasing bymore than 10% for the year. The multiple price points we now offer gives usbroader market potential and helps us to attract users back to coach travel aswell as encouraging new customer demographics. Greyhound Express now coversmore than 30% of our US network including most of the major city pairs. Duringthe year we launched Greyhound Express in additional markets including routesaround Vancouver, Edmonton to Grand Prairie, Dallas to Memphis, and fromJacksonville to Miami and New Orleans. Our BoltBus services also expanded inCalifornia, adding Los Angeles to San Francisco, San Jose to Oakland and LosAngeles to Las Vegas, and our YO!Bus brand, which links Chinatowns in theNortheast, saw positive year on year performance. We are taking the experience from our point-to-point services and introducingbest practice across our traditional network. Greyhound is re-engaging with ourcustomers through increased marketing and has improved the amenities of ourfleet with multiple new and refurbished vehicles that provide leather seats,WiFi and power sockets. We are further developing our dynamic pricingproposition and opening up innovative ways to interact with both new andexisting customers through additional sales channels, such as ourmobile-enabled website which came online in 2013/14 with print at hometicketing functionality, and the ability to book online and pay cash fortickets in over 10,000 Seven Eleven and Ace Cash Express kiosks. In the lasttwo years, the proportion of tickets purchased online has increased from 34% to47%. Continuous improvement in operating and financial performance Over the last five years we have significantly improved our operatingflexibility, in part through depot and location rationalisation. Our ongoingefforts to right size our terminal footprint continues, and over the next fewmonths we expect to open new terminals in Miami, Seattle and Baltimore. We arerestructuring our Canadian business, have launched our Greyhound Expressproduct in four provinces, and are improving our package delivery offering,which over time will deliver a more commercially viable service. Prudent investment in our key assets Our disciplined fleet investment has led to improved amenities for ourcustomers and prolonged the life of our buses, enabling us to reducemaintenance costs and become more coordinated in the scheduling of preventivemaintenance programmes. Our move towards a revitalised fleet continues withthree quarters of our vehicles now either new or refurbished. We continue tointroduce new vehicles from our April 2013 order of 220 coaches, and during2014/15 we will have completed our refurbishment programme. Our investment in information technology will allow us to offer many new waysto better leverage and monetise the existing network capacity through yield andcapacity optimisation, including the development of new dynamic pricing andyield management systems across our core network. We are developing thearchitecture needed to introduce a loyalty programme and increasing ourmarketing, helping us to engage further with our customers. Responsible partnerships with our customers and communities With an increased emphasis on customer service training across the division,our customer satisfaction scores have maintained their long term improvingtrend. Our new fleet now operates using some of the most fuel efficient engines in theindustry, and we continue to promote initiatives including a focus on reducedidling and, through DriveCam, a more effective fuel consumption strategy.DriveCam's event capturing and driver behaviour monitoring also provides uswith safety data. New terminals that we have opened recently or will open inthe short term have the most up to date environmental credentials and are LEEDcertified by the US Green Buildings Council. Future priorities Since FirstGroup acquired Greyhound in 2007 we have transformed the operatingmodel, making the business more flexible and introducing a reduced cost baseand improved capital profile, which means that we are now poised for growthboth within our existing network and with new demographics through GreyhoundExpress and our other point-to-point brands. We are on track with ourinvestment programme, which will transform our offering principally throughapplying the yield management, real-time pricing and more consumer friendlyticketing features of Greyhound Express to the traditional network. Thisfocused investment, together with the continued growth of our successfulpoint-to-point products, gives us confidence in achieving our medium termmargin target of 12%. Outlook Our main priority for the year ahead includes the further roll out of GreyhoundExpress routes and progress on our IT transformation. During the first half ofthe 2014/15 year we expect to begin piloting yield managed pricing on ourtraditional network. We will also complete our programme of fleetrevitalisation; by the end of the financial year, all of our vehicles will benew or refurbished, further increasing the attractiveness of our customeroffer. In 2014, Greyhound celebrates its centennial, and we plan to increasemarketing to ensure that as the economy improves, more and more of ouraddressable market uses the services provided by our transformed iconicAmerican brand. UK Bus Revenue in our UK Bus division was £930.2m (2013: £1,128.2m) and like-for-likepassenger revenue growth (adjusting for the sale of our London business) was1.8%. Adjusted operating profit was £44.4m (2013: £50.8m), resulting in amargin of 4.8% (2013: 4.5%). This encouraging performance is despite thecontinued challenges posed by economic conditions in some of our local marketsas well as further reductions in public funding. During the year we completed the first stages of our transformation plan,including the previously announced disposals of certain bus businesses in orderto rebalance the portfolio. As a result of this we exited the London market inorder to focus on our commercial deregulated businesses elsewhere. Ourtransformation plans to return the division to double-digit margin performancein the medium term are focused on: stimulating passenger volume throughimproving our customer proposition (fares, networks, local partnerships),delivering improved service quality and cost savings through rigorous focus ondisciplined operations and investment in our employees' capabilities; andinvesting in our fleet, ticketing and other customer-facing technologies tostimulate growth and loyalty. Driving growth through attractive commercial propositions A typical approach in a market is to rebase certain fares products to ensurecompetitiveness and value for money, which encourages volume growth andmaintains revenue levels in the early stages. This acts as a platform fromwhich to build further volume and pricing growth in future years. Following oursuccess in the first half of the year principally in markets in the Northregion, the full year passenger volume growth across the division of 2.6% isthe first full year of commercial passenger volume growth for a decade.Tailored fares reductions in Manchester have persuaded an extra 150,000 peopleper week to travel with First and contributed to an improvement of more than30% in customer perceptions of our value for money. In the second half of theyear we expanded our fares reviews to other markets including Leeds,Portsmouth, Southampton and Bristol, where we worked with the elected Mayor ofBristol to undertake a wide ranging consultation that we used to inform our newfares structure introduced in November. In many areas we coupled changes to the fares structure with improved networkdesigns, allowing us to maximise growth opportunities and increase marketshare. We have completed ten major redesigns so far, including our SimpliCITYnetwork in Glasgow which has restored frequencies of ten minutes or better tocore services and coordinated these routes to create simpler links to the citycentre. Against the backdrop of an economy that struggled in 2013/14,SimpliCITY outperformed the rest of the network, delivering a growth rate 1.0%higher. Effective partnerships, which foster better and stronger coordination withlocal authorities and other stakeholders, are hugely important for us in termsof our customer proposition. We are a key partner in two new Better Bus Areasannounced in 2013, York and the West of England Partnership, receiving enhancedfunding from the DfT. Working closely with our partners, we seek to alignagendas and through this deliver greater passenger growth to the networks. Ofthe five areas across the country that have now secured this funding, we havebeen at the forefront of three, reflecting how important we consider fosteringpowerful partnerships are to the future success of local bus services. We are working hard with local authorities to ensure they make best use oftheir limited funds particularly for tendered services. In Cornwall, we haveworked with the council to ensure that the network maximises the coordinationbetween commercial and tendered services. In West Yorkshire we, along withother local operators, have developed a compelling proposition to enable busesto support the growth of the local economy, which will now be considered by thenewly formed Combined Authority. In Portsmouth we have worked closely with theCity Council to introduce bus priority measures including bus lanes and a parkand ride system. Continuous improvement in operating and financial performance We have continued to focus on cost optimisation and disciplined operationsduring the year. Adoption of best practice operating procedures and standardshave led to cost efficiencies including a 27% reduction in breakdowns and lostmileage reducing by 21%. This focus on disciplined operations has alsodelivered an increase in punctuality and reliability standards. With the optimisation of our depot operations making good progress, we haveintensified our focus on leadership development. Our programmes aim to give ourmanagement teams the support to develop local initiatives, seek developmentopportunities and stimulate commercial initiatives. During the year, thedivision restructured its senior leadership team to refresh talent and ensurethat the necessary commercial and operational expertise is in place to supportour local operations. Prudent investment in our key assets In January we announced our biggest ever investment in vehicles outside Londonand we plan to introduce 425 vehicles during the 2014/15 financial year at acost of £70m, taking our total investment in new vehicles to £310m invested in2,000 new vehicles over four years. Almost all of these buses will bemanufactured in the UK, with 274 Wrightbus StreetLite Micro Hybrid busesforming the bulk of the latest order. These diesel-based vehicles incorporatean innovative onboard hybrid system which improves fuel efficiency by around10%, and we will be the first company to operate these new buses. Capitalinvestment into our fleet will continue in the coming years, further reducingour average fleet age and improving customer experience. In both Aberdeen and Worcester we launched mobile ticketing during the year andthrough 2014 all of our networks will be equipped with this technology. We arealso introducing smartcard schemes, with multi-operator capability whereappropriate, allowing us to offer a more sophisticated pricing model and giveus more information about who are customers are and how they use our services.This will give us a strong platform from which to launch customised loyaltyinitiatives based on a detailed understanding our customers' needs. Responsible partnerships with our customers and communities Our efforts to improve the quality of our fleet and the reliability of ourservices was recognised in the recent independent Passenger Focus Autumn 2013survey of customer satisfaction. The results showed a 5% rise in overallpassenger satisfaction across our services to 86%, including an increase inscore in 34 of the 35 variables measured. We were particularly pleased that ourGlasgow network achieved an overall satisfaction score of 91% following thelaunch of the SimpliCITY network this year. Our close partnership working also extends to ensuring our services areaccessible for all. For example, in Glasgow we are offering job seekerssignificant discounts on single fares, our child fare of 60p in the same cityis one of the cheapest in the UK, while in Bristol we offer a 30% discount toall young people under 21. We became the first national bus operator to pledgeour support for a charter, developed by the Royal National Institute of BlindPeople, to ensure services are accessible for customers with sight loss. Ourongoing partnership with Disability Rights UK, and other disabilityorganisations, is helping our drivers meet the needs of those living withdisability and health conditions. We also support Greener Journeys' annualCatch the Bus Week initiative, which promotes the benefits of bus travelincluding environmental considerations and the importance of bus services tolocal economies. We were pleased to be awarded the contract to offer bus services for the 2014Commonwealth Games in Glasgow, which follows two years of planning. OurSimpliCITY network across the city will be supplemented by new services andshuttles linking principal Games venues with the city centre. We will also beproviding bus and coach services for all client groups during the Gamesincluding the athletes, technical officials, media and sponsors. Future priorities In the 2013/14 year we saw each component of our transformation plans comingtogether to enable the full potential in each market to begin to be realised.Each of our core initiatives are being rolled out across our bus businesses ina tailored local way. Our customers are beginning to recognise and welcome theimprovements we are making to services across our operations, and we are seeingpositive signs of passenger satisfaction scores improving and passenger volumesincreasing. In combination, our strategies are building a more resilientbusiness and we continue to move towards achieving double digit margins overthe life of the plan. Outlook In 2014/15 we will continue to work through our network and fares optimisationprogrammes, and will be embedding the benefits of changes already made as someof the early schemes reach their first anniversary during the first half of thefinancial year. During 2014/15 the introduction of smart and mobile ticketing,together with enhancements to customer information channels, are designed tospur further volume growth. Although the local economies in some of our marketscontinue to be challenging, and local authority concessionary fare budgetsremain under pressure, we have confidence that we will harness our compellingmarket positions to deliver sustained volume and revenue growth underpinned bytight cost disciplines over the coming years. UK Rail Our UK Rail division saw like-for-like passenger growth of 5.9% during the year(2013: 7.4%) as the strong demand that has been seen across the industry sinceprivatisation continued into 2013/14. Revenue during the year was £2,870.1m(2013: £2,795.1m), with the increase principally due to the strong passengervolume growth across all of our train operating companies. Adjusted operatingprofit was £55.2m (2013: £19.3m), representing a margin of 1.9% (2013: 0.7%),in part reflecting First Great Western moving from a loss-making position tonormal commercial terms under the direct award agreed in October 2013 and thesuccessful delivery of a number of important fleet and infrastructure projectsin conjunction with industry partners. Focused and disciplined bidding This year the DfT and Transport Scotland have made significant progress in thethird generation of their rail re-franchising programmes, which will see £8bnp.a. of long term contract-backed passenger revenue available through 19 majorfranchise opportunities in the coming years. We are shortlisted for theScotRail, Caledonian Sleeper, Essex Thameside, InterCity East Coast, andThameslink Southern and Great Northern (TSGN) franchises, the only owning groupto do so. We have submitted compelling bids for the first four of these whichdemonstrate value for money for passengers, the taxpayer and our shareholders,and expect to submit a competitive bid for the InterCity East Coast competitionin the summer. We are also investigating contract opportunities from otherfranchising authorities, and during the year we were pleased to be shortlistedfor the tender to operate the Luas light rail system in Dublin by the RailwayProcurement Agency of the Republic of Ireland. The contract award decision isexpected in the third quarter of 2014. Following the review of the re-franchising programme completed in 2012/13, theDfT announced a new timetable in March 2013 which was subsequently updated inApril 2014. As part of this new timetable, we agreed shorter direct awards withthe DfT to run our First Capital Connect franchise for an additional six monthsuntil September 2014 and our First Great Western franchise for an additionaltwo years until September 2015, securing continuity of rail services forpassengers and retaining our experience in managing the impact of themulti-billion pound investment programme already underway on these networks. Weare progressing negotiations with the DfT to continue operating our FirstTransPennine Express franchise until February 2016, and working with theDepartment to explore whether a longer direct award with First Great Westernmay offer better value for money and better services for passengers during thesignificant programme of works to improve services on the Greater Westernnetwork. Continuous improvement in operating and financial performance Our UK Rail teams have a depth of expertise and a record of delivery. Ouroperating companies have outperformed the industry in delivering punctualityand customer satisfaction improvements since 2006, despite infrastructurechallenges. We continue to work closely with Network Rail where we can in orderto both help them reduce infrastructure issues, which in some of our operatingareas accounts for two thirds of delays, and also to ensure upgrades aredelivered in an efficient manner which causes the least possible disruption toour passengers. By far the most visible impact of infrastructure failures werethe various incidents associated with the severe winter weather in December2013 and February 2014, which led to significant and high profile damage to theGreat Western Mainline at Dawlish, Bridgwater and Maidenhead. We worked closelywith Network Rail as they undertook repairs to the line at Dawlish, duringwhich time trains were unable to travel between Exeter and Plymouth. Weintroduced a revised timetable and our rail replacement bus teams were able toprovide comprehensive support including a direct coach link between Exeter andkey Cornish towns and cities. The line reopened on 4 April 2014. Amongst the infrastructure upgrades we are currently involved in are the £7.5bnGreat Western Mainline upgrade in preparation for the introduction of theInterCity Express Programme, Crossrail and a new fleet of local electrictrains. This upgrade includes the £850m Reading station remodelling project,which is due to finish a year ahead of schedule thanks in part to excellentworking relationships with our industry partners. Following our success atsecuring additional services in Wiltshire in partnership with the DfT and localauthorities, we began a consultation on improving the timetable between Londonand the South West for introduction later in the year. First Capital Connect were involved in the unveiling of brand new Class 700trains which will be introduced from 2016 and the beginning of significant workto improve the busy London Bridge station, as part of the £6bn ThameslinkProgramme which will double capacity on the key cross-London route. We are also a key partner within the industry to deliver rolling stock andcapacity upgrades with four successful fleet introductions in recent years. Weare currently involved in programmes to deliver a further 1,500 new vehicles.The previously announced investment in 40 new carriages for First TransPennineExpress saw the first new longer electric trains run on the Manchester-Scotlandroute in December, as part of the Government's Northern Hub electrificationproject. By May 2014 all of the new vehicles will be in service permitting animproved timetable and in turn freeing up carriages to increase capacity on thepopular Manchester-Leeds route. Prudent investment in our key assets First Capital Connect's fleet of Class 365 trains is being transformed withfresh interiors and enhanced accessibility features as part of a £31minvestment by Eversholt Rail, whilst we are deep cleaning 221 carriages to ahigh standard. More than 20 First ScotRail trains have been upgraded with newfittings and lighting by Eversholt, with another 21 vehicles set to berefurbished and repainted by 2016. The customer app for our operating companies has been downloaded more than onemillion times, providing journey planning and mobile retailing capabilities.Our First ScotRail smart ticketing trial is proving successful, and we areusing the outputs to determine how best to introduce smart ticketing across ourother franchises. Between First ScotRail and First Great Western we are leading the largest rollout of free WiFi on the UK rail network. Our Class 180 trains at both FirstGreat Western and First Hull Trains are already WiFi equipped. First ScotRaillaunched a new responsive website in mid-March and more people are visiting thewebsite using smartphones than computers for the first time ever. Responsible partnerships with our customers and communities The latest twice-yearly Passenger Focus survey was completed during the autumn.Amongst the results were some notable improvements for our train operatingcompanies - as scores for our stations have increased across the board, ouremployees at First ScotRail and First TransPennine Express saw increasedsatisfaction scores, and specific initiatives such as our refreshed traininteriors at First Capital Connect saw improved results. We have studied all ofthese findings and are acting on what our customers tell us is important. First ScotRail is the Official Supporter - Passenger Rail Services for the 2014Commonwealth Games in Glasgow and is planning the most extensive traintimetable that Scotland has ever seen in support of the event. Extra carriagesand more frequent services will be provided until late at night to helpjourneys run as smoothly as possible for spectators as well as regularcustomers. We have been preparing the timetable with Glasgow 2014 and industrypartners for more than two years - with more than a million extra journeysexpected on our trains during the 11 days of sport. First ScotRail secured the UK's most recognised people award during the yearfor its sustained investment in staff training, being accredited with Investorsin People (IIP) Gold status. First ScotRail is now the largest IIPGold-accredited company in the UK, measured by the number of people employed. We became the first UK rail operator to partner with a national loyalty pointsscheme during the year as we joined Nectar, the country's largest suchprogramme. This allows us to reward our customers by giving them additionalincentives when booking online. During the year we were recognised for our successes, with First ScotRailwinning the national Rail Business of the Year Award and First TransPennineExpress awarded European InterCity Operator of the Year at the European RailCongress. Future priorities We have been running rail services in the UK since 1997 and currently operatearound a quarter of the rail market, with the delivery of rail services alignedwith our customers' needs at the heart of our offer. We are the only UK railowning group whose services include long distance, regional, commuter andsleeper operations. Our well regarded management team has strong commercial,rolling stock and major infrastructure project upgrade expertise and we have ahighly experienced bidding team which aims to replenish our franchise portfolioto deliver profit on a par with the last round of franchising, with anacceptable level of risk. Outlook Rail passenger volumes across the industry continue to see strong growth, withpassenger numbers more than doubling since 1996. We have seen consistent strongperformance and have a highly successful record of delivery, outperforming theindustry in achieving punctuality and customer satisfaction improvements. Weremain committed to maintaining a leading position in this market and have aclear focus on meeting the needs of passengers, taxpayers and delivering aneconomic return for shareholders. Group outlook We have made satisfactory progress on our key priorities in the year,delivering earnings growth despite the historically severe weather in NorthAmerica. We saw good performances in four of our divisions partially offset byslower progress in First Student, where driving forward our detailed recoveryplan is a key priority. Although part way through the current bid season, ourprogramme to address contract portfolio pricing has made encouraging progress,though we recognise that we still have some way to go. The Group is broadly on track to achieve our medium term targets and, while weare encouraged by progress so far, there remains a significant amount of workahead. We are confident that we have the right plans underway to build on ourmarket leading positions, strengthen the resilience of the Group, and return toa profile of sustainable cash generation and value creation for the long term. Exceptional items and amortisation charges Restated1 Year to Year to 31 March 31 March 2014 2013 £m £m Disposals UK Bus depot sales and closures 13.0 (19.8) First Transit FSS disposal and exit from Diego Garcia - (12.6)operations 13.0 (32.4) Onerous contracts/impairments UK Rail First Great Western contract provision 4.6 (15.9) UK Rail joint venture provision (DSBFirst) - (5.0) First Student onerous contract - (2.7) 4.6 (23.6) 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 Rail bid cost recoveries - 12.7 - 12.7 Exceptional itemscharged to operating profit 17.6 (62.3) Amortisation charges (53.4) (52.0) Operating profit charge (35.8) (114.3) Ineffectiveness on financial derivatives charged to (17.6) (5.5)finance costs Net charge before tax credit (53.4) (119.8) Tax credit 28.1 41.4 Net charge (25.3) (78.4) 1 Restated as set out in note 2. UK Bus depot sales and closures UK Bus depot sales and closures relate to measures taken by the Group torebalance its portfolio in the UK Bus operations, which included selling orclosing certain operations. The principal amount represents a £16.5m gain onthe disposal of the eight London bus depots, which completed during the yearoffset by £3.5m of losses on depots sold or closed. UK Rail First Great Western contract provision The total loss in the final seven periods of the franchise was not as high asinitially projected partly due to contractual changes agreed with the DfT. As aresult £4.6m has been released as an exceptional credit. UK Rail bid cost recoveries The group received £12.7m of bid cost recoveries during the year to 31 March2013 representing cost reimbursement from the DfT following the cancellation ofthe InterCity West Coast Franchise process. Amortisation charges The charge for the year was £53.4m (2013: £52.0m) with the increase mainly dueto the amortisation of the First Great Western contract intangible recognisedas a result of the contract extension, partly offset by the impact of foreignexchange movements. Ineffectiveness on financial derivatives Due to the ineffective element and undesignated fair value movements onfinancial derivatives there was a £17.6m non-cash charge (2013: £5.5m) to theincome statement during the year. The principal component of this non-cashcharge relates to certain US Dollar interest rate swaps, which are no longerrequired as the underlying US Dollar debt was repaid from the proceeds of therights issue. Tax The tax credit as a result of these amortisation charges and exceptional itemswas £24.9m (2013: £39.4m). In addition there was a one-off deferred tax creditof £3.2m (2013: £2.0m) as a result of the reduction in the UK corporation taxrate from 23% to 20% (2013: 24% to 23%). Finance costs and investment income Adjusted net finance costs were £156.1m (2013: £163.2m) with the reductionprincipally reflecting the lower level of debt as a result of repaymentsfollowing the rights issue, partly offset by the additional £8.7m of intereston pensions due to the impact of IAS 19 (revised). Profit before tax Adjusted profit before tax was £111.9m (2013: £90.9m) with the increase dueprincipally to higher adjusted operating profit and lower net finance costs. Anoverall charge of £53.4m (2013: £119.8m) for exceptional items and amortisationcharges resulted in statutory profit before tax of £58.5m (2013: loss of £28.9m). Tax The tax charge, on adjusted profit before tax, for the period was £22.4m (2013:£17.5m) representing an effective rate of 20.0% (2013: 19.3%). There was a taxcredit of £24.9m (2013: credit of £39.4m) relating to amortisation charges andexceptional items. There was also a one-off credit adjustment of £3.2m (2013: £2.0m) to the UK deferred tax liability as a result of the reduction in the UKcorporation tax rate from 23% to 20% (2013: 24% to 23%), which will apply fromApril 2016. This resulted in a total tax credit of £5.7m (2013: £23.9m) oncontinuing operations. The actual tax paid during the period was £8.2m (2013: £6.3m). North American cash tax remains low due to tax losses brought forwardand tax depreciation in excess of book depreciation. We expect the NorthAmerican cash tax rate to remain low for the near term. EPS The adjusted basic EPS was 7.5p (2013: 11.0p). Basic EPS was 5.1p (2013: (3.0)p), with the improvement primarily due to higher operating profit, lower netfinance costs and lower net exceptional items compared to last year. EBITDA EBITDA by division is set out below: Restated Year to 31 March 2014 Year to 31 March 2013 Revenue EBITDA1 EBITDA Revenue EBITDA1 EBITDA margin1 margin1 £m £m £m £m % % First Student 1,467.4 241.1 16.4% 1,503.1 259.0 17.2% First Transit 811.9 72.0 8.9% 814.6 60.0 7.4% Greyhound 624.6 74.9 12.0% 647.1 83.2 12.9% UK Bus 930.2 105.9 11.4% 1,128.2 120.4 10.7% UK Rail 2,870.1 117.1 4.1% 2,795.1 91.7 3.3% Group 13.2 (31.2) 12.8 (28.6) Total Group 6,717.4 579.8 8.6% 6,900.9 585.7 8.5% North America in $m $m % $m $m %US Dollars First Student 2,339.3 387.2 16.6% 2,378.6 410.2 17.2% First Transit 1,290.5 114.4 8.9% 1,286.8 94.8 7.4% Greyhound 990.6 118.4 12.0% 1,022.0 131.2 12.8% Total North 4,620.4 620.0 13.4% 4,687.4 636.2 13.6%America 1Adjusted operating profit less capital grant amortisation plus depreciation. Cash flow The net cash inflow for the year was £26.9m (2013: outflow £74.4m). The cashinflow combined with the £584.4m net proceeds from the rights issue and themovements in debt due to foreign exchange contributed to a net debt decrease of£675.3m (2013: increase £141.6m) as detailed below: Restated Year to Year to 31 March 31 March 2014 2013 £m £m EBITDA 579.8 585.7 Cash exceptional items - (0.6) Other non-cash income statement charges 7.8 9.6 Working capital excluding FGW provision movement (37.0) (52.5) Working capital - FGW provision movement (current (35.3) (17.0)liabilities) Movement in other provisions (36.1) (12.2) Pension payments in excess of income statement charge (27.7) (34.1) Cash generated by operations 451.5 478.9 Capital expenditure (334.5) (338.1) Proceeds from disposal of property, plant and equipment 14.1 14.7 Interest and tax (157.2) (144.4) Dividends payable to Group shareholders - (114.0) Dividends payable to non-controlling minority (21.3) (10.7)shareholders Proceeds from sale of businesses 76.3 39.2 Other (2.0) - Net cash inflow/(outflow) 26.9 (74.4) Net proceeds from rights issue 584.4 - Foreign exchange movements 68.2 (63.1) Other non-cash movements in relation to financial (4.2) (4.1)instruments Movement in net debt in the year 675.3 (141.6) The net cash inflow compared to the outflow last year was primarily due to: * No equity dividend payments (2013: £114.0m). * Proceeds from sale of businesses were £37.1m higher, reflecting the London depots disposal completion in the year. * Working capital excluding FGW provision movement was £15.5m favourable to the prior year principally due to the timing of certain receipts in UK Rail. Partly offset by: * Higher planned FGW provision utilisation of £18.3m during the year. * Higher interest and tax payments of £12.8m primarily due to the timing of interest payments on the bonds, offset by a lower bank interest charge as a result of the rights issue. * Higher movement in other provisions of £23.9m due to the benefit last year of First Student and First Transit legal claims provided for but not paid in the year. * Higher dividends payable to non-controlling minority shareholders of £ 10.6m. * EBITDA of £579.8m was £5.9m lower than last year. Capital expenditure Cash capital expenditure was £334.5m (2013: £338.1m) and comprised FirstStudent £130.8m (2013: £127.7m), First Transit £18.1m (2013: £18.0m), Greyhound£45.8m (2013: £51.3m), UK Bus £67.4m (2013: £72.4m), UK Rail £68.5m (2013: £66.1m) and Group items £3.9m (2013: £2.6m). In addition during the year we entered into operating leases for passengercarrying vehicles in First Student with capital values of £25.2m (2013: £nil),First Transit with capital values of £19.5m (2013: £12.5m), Greyhound withcapital values £14.7m (2013: £nil) and UK Bus with capital values of £24.3m(2013: £21.6m). Gross capital investment was £464.7m (2013: £404.3m) and comprised FirstStudent £194.3m (2013: £150.8m), First Transit £37.2m (2013: £30.5m), Greyhound£60.5m (2013: £51.3m), UK Bus £101.7m (2013: £103.0m), UK Rail £69.4m (2013: £63.9m) and Group items £1.6m (2013: £4.8m). Funding and risk management Liquidity within the Group has remained strong. At the 31 March there was £988.5m (2013: £1,215.5m) of committed headroom and free cash, being £796.2m(2013: £821.6m) of committed headroom and £192.3m (2013: £393.9m) of free cash.Largely due to seasonality in the North American school bus business, committedheadroom typically reduces during the financial year up to October andincreases thereafter. Treasury policy requires a minimum of £250m of committedheadroom at all times. During the year the 2013 £300m bond was repaid in full as planned. As at 31March 2014 the Group's average debt maturity was 6.1 years (2013: 5.4 years).In May 2014, we signed a 5 year, £800m revolving credit facility with ourrelationship banks. The Group does not enter into speculative financialtransactions and uses only authorised financial instruments for certain riskmanagement purposes. Interest rate risk The Group reduces exposure by using a combination of fixed rate debt andinterest rate derivatives to achieve an overall fixed rate position over themedium term of more than 75% of net debt. Fuel price risk The Group uses a progressive forward hedging programme to manage commodityrisk. In 2013/14 in the UK, 93% of the `at risk' crude requirements (2.2mbarrels p.a.) were hedged at an average rate of $105 per barrel. At the end ofthe period we have hedged 92% of our `at risk' UK crude requirements for theyear to 31 March 2015 at $101 per barrel and 58% of our requirements for theyear to 31 March 2016 at $98 per barrel. In North America 69% of 2013/14 `at risk' crude oil volumes (1.6m barrels p.a.)were hedged at an average rate of $93 per barrel. At the end of the period wehave hedged 55% of the volumes for the year to 31 March 2015 at $90 per barreland 39% of our volumes for the year to 31 March 2016 at $87 per barrel. Foreign currency risk Group policies on foreign currency risk affecting cash flow, profits and netassets are maintained to minimise exposures to the Group by using a combinationof natural hedge positions and derivative instruments where appropriate.Translation risk relating to US Dollar earnings arising in the US is largelyoffset by US Dollar denominated costs incurred in the UK, principally UK fuelcosts, US Dollar interest and tax costs so that exposure to EPS on a year toyear basis is not significant. Net debt The Group's net debt at 31 March 2014 was £1,303.8m (2013: £1,979.1m) andcomprised: Year to Year to 31 March 31 March 2014 2013 Fixed Variable Total Total £m £m £m £m Sterling bond (2013)1 - - - 299.4 Sterling bond (2018)1 297.5 - 297.5 343.0 Sterling bond (2019)1 - 249.5 249.5 249.6 Sterling bond (2021)1 347.5 - 347.5 339.0 Sterling bond (2022)1 319.5 - 319.5 319.1 Sterling bond (2024)1 199.5 - 199.5 199.5 US Dollar bank loans - - - 358.1 Canadian Dollar bank loans - - - 15.5 Euro and other bank loans - - - 11.8 HP contracts and finance leases 311.1 33.5 344.6 418.2 Senior unsecured loan notes 89.9 - 89.9 98.3 Loan notes 8.7 1.0 9.7 9.7 Gross debt excluding accrued interest 1,573.7 284.0 1,857.7 2,661.2 Cash (192.3) (393.9) UK Rail ring-fenced cash and deposits (360.9) (273.8) Other ring-fenced cash and deposits (0.7) (14.4) Net debt excluding accrued interest 1,303.8 1,979.1 1Excludes accrued interest. Under the terms of the UK Rail franchise agreements, cash can only bedistributed by the TOCs either up to the lower amount of their retained profitsor the amount determined by prescribed liquidity ratios. The ring-fenced cashrepresents that which is not available for distribution or the amount requiredto satisfy the liquidity ratio at the balance sheet date. Shares in issue As at 31 March 2014 there were 1,204.2m shares in issue (2013: 481.8m),excluding treasury shares and own shares held in trust for employees of 0.7m(2013: 0.3m). The weighted average number of shares in issue for the purpose ofbasic EPS calculations (excluding treasury shares and own shares held in trustfor employees) was 1,059.3m (2013: 590.8m). Balance sheet Net assets have increased by £408.5m since the start of the period. Theprincipal reasons for this are the net proceeds from the rights issue of £584.4m, the retained profit for the year of £64.2m, favourable hedging reservemovements of £40.4m partly offset by unfavourable translation reserve movementsof £231.1m and actuarial losses on defined benefit pension schemes (net ofdeferred tax) of £30.5m. Goodwill The carrying value (net assets including goodwill but excluding intercompanybalances) of each cash generating unit (CGU) was tested for impairment duringthe year and there continues to be sufficient headroom in all of the CGUs. Foreign exchange The most significant exchange rates to Sterling for the Group are as follows: Year to 31 March Year to March 2013 2014 Closing Effective Closing Effective rate rate rate rate US Dollar 1.66 1.61 1.52 1.58 Canadian Dollar 1.84 1.69 1.55 1.59 Pensions Comparative figures for the year to 31 March 2013 have been restated for IAS 19(revised) as explained in note 2. The Group has updated its pension assumptions as at 31 March 2014 for thedefined benefit schemes in the UK and North America. The net pension deficit of£247.8m at the beginning of the year has increased to £260.9m at the end of theyear, principally due to a lower net discount rate in the UK. The main factors that influence the balance sheet position for pensions and thesensitivities to their movement at 31 March 2014 are set out below: Movement Impact Discount rate +0.1% Reduce deficit by £29m Inflation +0.1% Increase deficit by £21m Seasonality The First Student business generates lower revenues and profits in the firsthalf of the year than in the second half of the year as the school summerholidays fall into the first half. Greyhound operating profits are typicallyhigher in the first half of the year due to demand being stronger in the summermonths. Going concern The Group has established a strong balanced portfolio of businesses withapproximately 50% of Group revenues secured under medium term contracts withgovernment agencies and other large organisations in the UK and North America. The Group has a diversified funding structure with average debt duration at 31March 2014 of 6.1 years (2013: 5.4 years) and which is largely represented by amedium term to committed long term unsecured bond debt and finance leases. Asat 31 March 2014 the Group had a $1,250m committed revolving banking facilityof which $1,200m (2013: $1,113m) was undrawn at the year end. This facility wasrefinanced in May 2014 and now has a maturity of June 2019. The Directors have carried out a detailed review of the Group's budget for theyear to 31 March 2015 and medium term plans, with due regard for the risks anduncertainties to which the Group is exposed, the uncertain economic climate andthe impact that this could have on trading performance. Based on this review,the Directors believe that the Company and the Group have adequate resources tocontinue in operational existence for the foreseeable future. Accordingly, thefinancial statements have been prepared on a going concern basis. Tim O'Toole Chris SurchChief Executive Group Finance Director21 May 2014 21 May 2014 Consolidated income statement For the year ended 31 March Restated 2014 2013 1 Adjusted Adjusted results2 Adjustments3 Total results2 Adjustments3 Total Notes £m £m £m £m £m £m Revenue 6,717.4 - 6,717.4 6,900.9 6,900.9 - Operating costs (6,449.4) (35.8) (6,485.2) (6,646.8) (114.3) (6,761.1) Operating profit 268.0 (35.8) 232.2 254.1 (114.3) 139.8 Amortisation charges (53.4) (53.4) (52.0) (52.0) - - Exceptional items 17.6 17.6 (62.3) (62.3) - - (35.8) (35.8) (114.3) (114.3) - - Investment income 1.7 - 1.7 1.8 1.8 - Finance costs (157.8) (17.6) (175.4) (165.0) (5.5) (170.5) Profit/(loss) before tax 111.9 (53.4) 58.5 90.9 (119.8) (28.9) Tax (22.4) 28.1 5.7 (17.5) 41.4 23.9 Profit/(loss) for the year 89.5 (25.3) 64.2 73.4 (78.4) (5.0) Attributable to: Equity holders of the 79.3 (25.1) 54.2 65.1 (82.9) (17.8)parent Non-controlling interests 10.2 (0.2) 10.0 8.3 4.5 12.8 89.5 (25.3) 64.2 73.4 (78.4) (5.0) Earnings per share Basic 4 7.5p (2.4)p 5.1p 11.0p (14.0)p (3.0)p Diluted 4 7.5p (2.4)p 5.1p 10.9p (13.9)p (3.0)p Dividends of £nil (2013: £114.0m) were paid during the year. Dividends of £nil(2013: £nil) are proposed for approval in respect of the year. 1Restated for adoption of IAS19 (revised) on pensions, the reclassification ofcertain exceptional items and the impact of the rights issue on EPS asexplained in note 2. 2Adjusted trading results before items noted in 3 below. 3Amortisation charges, ineffectiveness on financial derivatives, exceptionalitems and tax thereon. Consolidated statement of comprehensive income Year ended 31 March Restated 2014 2013 £m £m Profit/(loss) for the year 64.2 (5.0) Items that will not be reclassified subsequently toprofit or loss Actuarial (losses)/gains on defined benefit pension (33.5) 7.5schemes Deferred tax on actuarial losses/gains on defined 3.0 0.2benefit pension schemes (30.5) 7.7 Items that may be reclassified subsequently toprofit or loss Derivative hedging instrument movements 44.3 (52.7) Deferred tax on derivative hedging instrument (3.9) 7.6movements Exchange differences on translation of foreign (231.1) 103.2operations (190.7) 58.1 Other comprehensive (expense)/income for the year (221.2) 65.8 Total comprehensive (expense)/income for the year (157.0) 60.8 Attributable to: Equity holders of the parent (167.0) 48.0 Non-controlling interests 10.0 12.8 (157.0) 60.8 Consolidated balance sheet Year ended 31 March Restated1 Restated1 2014 2013 2012 Notes £m £m £m Non-currentassets Goodwill 5 1,509.5 1,665.8 1,599.3 Other intangible 6 217.9 281.8 318.8assets Property, plant 7 1,864.9 1,977.6 2,006.3and equipment Deferred tax 15 35.8 53.2 43.3assets Retirement 29.9 15.4 25.2benefit assets Derivative 14 25.9 63.3 72.6financialinstruments Investments 2.8 3.2 7.2 3,686.7 4,060.3 4,072.7 Current assets Inventories 8 71.4 79.9 91.0 Trade and other 9 663.6 641.0 601.9receivables Cash and cash 553.9 682.1 499.7equivalents Assets held for 6.2 44.7 3.7sale Derivative 14 26.0 23.3 43.5financialinstruments 1,321.1 1,471.0 1,239.8 Total assets 5,007.8 5,531.3 5,312.5 Currentliabilities Trade and other 10 1,219.8 1,256.7 1,271.5payables Tax liabilities 34.2 28.7 21.8 Financial 11 127.8 441.3 195.3liabilities Derivative 14 17.7 64.7 17.1financialinstruments 1,399.5 1,791.4 1,505.7 Net current 78.4 320.4 265.9liabilities Non-currentliabilities Financial 11 1,823.9 2,317.4 2,252.9liabilities Derivative 14 9.2 21.7 50.1financialinstruments Retirement 290.6 263.2 293.1benefitliabilities Deferred tax 15 37.0 62.2 95.6liabilities Provisions 16 224.6 260.9 242.5 2,385.3 2,925.4 2,934.2 Total liabilities 3,784.8 4,716.8 4,439.9 Net assets 1,223.0 814.5 872.6 Equity Share capital 17 60.2 24.1 24.1 Share premium 676.4 676.4 676.4 Hedging reserve 7.8 (32.6) 12.5 Other reserves 4.6 4.6 4.6 Own shares (1.8) (1.1) (1.1) Translation 17.8 248.9 145.7reserve Retained earnings 446.4 (130.5) (12.0) Equity 1,211.4 789.8 850.2attributable toequity holders ofthe parent Non-controlling 11.6 24.7 22.4interests Total equity 1,223.0 814.5 872.6 1 Restated as set out in note 2. Consolidated statement of changes in equity Share Share Hedging Other Own Translation Retained Total Non-controlling Total capital premium reserve reserves shares reserve earnings interests equity £m £m £m £m £m £m £m £m £m £m Balance at 1 24.1 676.4 12.5 4.6 (1.1) 145.7 (3.6) 858.6 22.4April 2012 as 881.0previouslyreported Prior year - - - - - - (8.4) (8.4) - (8.4)adjustment Balance at 1 24.1 676.4 12.5 4.6 (1.1) 145.7 (12.0) 850.2 22.4April 2012 872.6restated Total - - 103.2 (10.1) 48.0 12.8 60.8comprehensiveincome for - - (45.1)the year Dividends - - - (114.0) (114.0) (10.5) (124.5)paid - - - Share-based - - - 5.6 5.6 - 5.6payments - - - Balance at 31 24.1 676.4 (32.6) 4.6 (1.1) 248.9 (130.5) 789.8 24.7March 2013 814.5 Rights issue1 36.1 - - - - - 548.3 584.4 - 584.4 Total - - 40.4 - - (231.1) 23.7 (167.0) 10.0 (157.0)comprehensiveincome forthe year Movement in - - - - (0.7) - 0.3 (0.4) - (0.4)EBT andtreasuryshares Dividends - - - - - - - - (23.1) (23.1)paid Share-based - - - 4.6 4.6 - 4.6payments - - - Balance at 31 60.2 676.4 7.8 4.6 (1.8) 17.8 446.4 1,211.4 11.6 1,223.0March 2014 1 The rights issue which completed in June 2013 was effected through a legalstructure that resulted in the excess of the proceeds over the nominal value ofthe share capital being recognised within retained earnings as a distributablereserve. Consolidated cash flow statement Year ended 31 March 2014 2013 Note £m £m Net cash from operating activities 18 292.3 332.7 Investing activities Interest received 2.0 1.8 Proceeds from disposal of property, plant 14.1 14.7and equipment Purchases of property, plant and equipment (277.0) (213.1) Disposal of subsidiary/business 76.3 39.2 Net cash used in investing activities (184.6) (157.4) Financing activities Dividends paid - (114.0) Dividends paid to non-controlling (21.3) (10.7)shareholders Shares purchased by Employee Benefit Trust (2.0) - Proceeds from rights issue 614.4 - Fees paid on rights issue (30.0) - Proceeds from bond issues - 325.0 Repayment of bonds (300.0) - Drawdowns from bank facilities 20.1 63.3 Repayment of bank debt (416.9) (197.8) Repayments under HP contracts and finance (101.8) (55.8)leases Fees for bank facility amendments and bond - (6.2)issues Net cash flow from financing activities (237.5) 3.8 Net (decrease)/increase in cash and cash (129.8) 179.1equivalents before foreign exchangemovements Cash and cash equivalents at beginning of 682.1 499.7year Foreign exchange movements 1.6 3.3 Cash and cash equivalents at end of year per 553.9 682.1consolidated balance sheet Cash and cash equivalents are included within current assets on theconsolidated balance sheet. Note to the consolidated cash flow statement - reconciliation of net cash flow to movement in net debt 2014 2013 £m £m Net (decrease)/increase in cash and cash equivalents (129.8) 179.1in year Decrease/(increase) in debt and finance leases 798.6 (134.7) Inception of new HP contracts and finance leases (57.5) (125.0) Fees capitalised against bank facilities and bond -issues 6.2 Net cash flow 611.3 (74.4) Foreign exchange movements 68.2 (63.1) Other non-cash movements in relation to financial (4.2) (4.1)instruments Movement in net debt in year 675.3 (141.6) Net debt at beginning of year (1,979.1) (1,837.5) Net debt at end of year (1,303.8) (1,979.1) Net debt excludes all accrued interest. Notes to the consolidated financial statements 1 BASIS OF PREPARATION The financial information set out above does not constitute the Company'sStatutory Accounts for the year ended 31 March 2014 or 2013, but is derivedfrom those accounts. Statutory Accounts for 2013 have been delivered to theRegistrar of Companies and those for 2014 will be delivered following theCompany's Annual General Meeting. The auditors have reported on both sets ofaccount; their reports were unqualified and did not contain statements undersection 498 (2), (3) or (4) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not in itself contain sufficient information tocomply with IFRSs. The financial information has been prepared on the basis ofthe accounting policies as set out in the Statutory Accounts for 2013 with theexception of the adoption of IAS 19 (Revised) as explained in note 2. Onadoption of IAS 19 (revised) the Group now presents interest on pensions in thefinance costs line whereas previously such items were presented in operatingcosts. In addition the Group has adopted IFRS 13 - Fair Value Measurement. Copies of the Statutory Accounts for the year ended 31 March 2014 will beavailable to all shareholders in June and will also be available thereafter atthe Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP. 2 Restatement of prior YEAR numbers The tables below show restated prior year comparative figures for the divisionsand for the Group for the financial year ended 31 March 2013. The restatementreflects (a) the retrospective adjustment from the adoption of the changes inIAS 19 `Employee Benefits' (revised), (b) the reclassification of certainexceptional items and (c) the retrospective adjustment of earnings per sharefigures as required by IAS 33 `Earnings Per Share', reflecting the rights issuecompleted in June 2013. (a) IAS 19 (revised) IAS 19 (revised) applies to financial years beginning 1 January 2013 or later.The key impact on the Group from the revised standard will be to remove theseparate assumptions for expected return on plan assets and discounting ofscheme liabilities and replace them with one single discount rate for the netdeficit. The actual benefits and the cash contributions for these plans are notimpacted by IAS 19 (revised). (b) Exceptional items The directors have decided to reclassify certain generally recurring costs thatwere previously treated as exceptional. Principally these relate to costsincurred relating to bidding for rail franchises and the profit/(loss) ondisposal of properties. (c) Rights issue Pursuant to the rights issue, on 10 June 2013, 722,859,586 new ordinary sharesof 5 pence each were issued, with three new ordinary shares issued for everytwo existing ordinary shares held. As a result the total issued share capitalincreased to 1,204.9m ordinary shares. For the calculation of earnings pershare, the number of shares held prior to 10 June 2013 has been increased by afactor of 1.227 to reflect the bonus element of the rights issue. Year to 31 March 2013 Adjusted results1: Reported Impact Exceptional Impact Restated of items of IAS 19 rights issue £m £m £m £m £m First Student 109.9 - 0.2 110.1 First Transit 49.1 - - 49.1 Greyhound 52.0 2.5 (0.2) 54.3 UK Bus 90.7 (37.2) (2.7) 50.8 UK Rail 63.2 (25.2) (18.7) 19.3 Group items (29.5) - - (29.5) Adjusted operating profit 335.4 (59.9) (21.4) 254.1 Net finance costs (163.0) (0.2) - (163.2) Adjusted profit before tax 172.4 (60.1) (21.4) 90.9 Tax (34.7) 12.1 5.1 (17.5) Adjusted profit for the year 137.7 (48.0) (16.3) 73.4 Attributable to: Equity holders of the parent 129.4 (48.0) (16.3) 65.1 Non-controlling interests 8.3 - - 8.3 137.7 (48.0) (16.3) 73.4 Weighted average number of shares 481.7 - - 109.1 590.8(million) Adjusted EPS (p) 26.9p (10.0)p (3.4)p (2.5)p 11.0p Adjusted profit/(Loss) 129.4 (48.0) (16.3) 65.1attributable to equity holders ofthe parent Adjustments2: Amortisation charges (52.0) - - (52.0) Exceptionals, property disposals (83.2) (6.0) 21.4 (67.8) Tax thereon 45.3 1.2 (5.1) 41.4 Non-controlling interests (4.5) - - (4.5) Profit/(loss) for the year 35.0 (52.8) - (17.8) Basic EPS (p) 7.3p (10.8)p - p 0.5p (3.0)p 1 IAS 19 (revised) increases the accounting losses on the FGW contract. Theincremental loss for the year to 31 March 2013 of £10.5m has been treated as aprior year adjustment as at 1 April 2012 with utilisation of £10.5m in the yearto 31 March 2013. 2 The incremental loss of £6.0m for the 7 period extension to October 2013 hasbeen included in the restatement of the exceptional charge for the year to 31March 2013. 2 RESTATEMENT OF PRIOR YEAR NUMBERS continued Condensed consolidated statement of comprehensive income Year to 31 March 2013 Reported Impact FGW IAS Restated of 19 IAS 19 £m £m £m £m Profit/(loss) for the year 47.8 (48.0) (4.8) (5.0) Items that will not be reclassifiedsubsequently to profit or loss Actuarial (losses)/gains on defined (63.1) 60.1 10.5 7.5benefit pension schemes Deferred tax on actuarial losses/gains on 14.4 (12.1) (2.1) 0.2defined benefit pension schemes (48.7) 48.0 8.4 7.7 Items that may be reclassifiedsubsequently to profit or loss Derivative hedging instrument movements (52.7) - - (52.7) Deferred tax on derivative hedging 7.6 - - 7.6instrument movements Exchange differences on translation of 103.2 - - 103.2foreign operations 58.1 - - 58.1 Other comprehensive income for the year 9.4 48.0 8.4 65.8 Total comprehensive income for the year 57.2 - 3.6 60.8 Attributable to: Equity holders of the parent 44.4 - 3.6 48.0 Non-controlling interests 12.8 - - 12.8 57.2 - 3.6 60.8 FGW contract provision At 31 March 2013 Reported Impact Impact Restated of IAS of 191 IAS 192 £m £m £m £m At 1 April 2012 56.9 10.5 - 67.4 Provided in the period 9.9 - 6.0 15.9 Utilised in the period (32.9) (10.5) - (43.4) At 31 March 2013 33.9 - 6.0 39.9 1 IAS 19 (revised) increases the accounting losses on the FGW contract. Theincremental loss for the year to 31 March 2013 of £10.5m has been treated as aprior year adjustment as at 1 April 2012 with utilisation of £10.5m in the yearto 31 March 2013 respectively. 2 The incremental loss of £6.0m for the 7 period extension to October 2013 hasbeen included in the restatement of the exceptional charge for the year to 31March 2013. 3 BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION For management purposes, the Group is organised into five operating divisions -First Student, First Transit, Greyhound, UK Bus and UK Rail. These divisionsare managed separately in line with the differing services that they provideand the geographical markets which they operate in. The principal activities ofthese divisions are described in the operating and financial review. The segment results for the year to 31 March 2014 are as follows: First First Group Student Transit Greyhound UK Bus UK Rail items1 Total £m £m £m £m £m £m £m Revenue 1,467.4 811.9 624.6 930.2 2,870.1 13.2 6,717.4 EBITDA2 241.1 72.0 74.9 105.9 117.1 (31.2) 579.8 Depreciation (147.6) (11.7) (28.5) (61.5) (94.3) (0.6) (344.2) Capital grant - - - - 32.4 - 32.4amortisation Segment results2 93.5 60.3 46.4 44.4 55.2 (31.8) 268.0 Amortisation charges (41.5) (3.9) (3.0) - (5.0) - (53.4) Exceptional items - - - 13.0 4.6 - 17.6 Operating profit3 52.0 56.4 43.4 57.4 54.8 (31.8) 232.2 Investment income 1.7 Finance costs (157.8) Ineffectiveness on (17.6)financialderivatives Profit before tax 58.5 Tax 5.7 Profit after tax 64.2 The restated segment results for the year to 31 March 2013 are as follows: Restated4 First First Group Student Transit Greyhound UK Bus UK Rail items1 Total £m £m £m £m £m £m £m Revenue 1,503.1 814.6 647.1 1,128.2 2,795.1 12.8 6,900.9 EBITDA2 259.0 60.0 83.2 120.4 91.7 (28.6) 585.7 Depreciation (148.9) (10.9) (28.9) (70.1) (105.0) (0.9) (364.7) Capital grant - - - 0.5 32.6 - 33.1amortisation Segment results2 110.1 49.1 54.3 50.8 19.3 (29.5) 254.1 Amortisation charges (43.1) (3.9) (3.1) (1.9) (52.0) - - Exceptional items (22.5) (11.8) (19.8) (8.2) - (62.3) - Operating profit3 44.5 33.4` 51.2 31.0 9.2 (29.5) 139.8 Investment income 1.8 Finance costs (165.0) Ineffectiveness on (5.5)financial derivatives Loss before tax (28.9) Tax 23.9 Loss after tax (5.0) 1Group items comprise Tram operations, central management and other items. 2Adjusted. 3Although the segmental results are used by management to measure performance,statutory operating profit by operating division is also disclosed forcompleteness. 4Restated for adoption of IAS19 (revised) on pensions and the reclassificationof certain exceptional items as explained in note 2. 4 EARNINGS PER SHARE (EPS) EPS is calculated by dividing the profit attributable to equity shareholders of£54.2m (2013: loss £17.8m) by the weighted average number of ordinary shares of1,059.3m (2013: 590.8m). The numbers of ordinary shares used for the basic anddiluted calculations are shown in the table below. The difference in the number of shares between the basic calculation and thediluted calculation represents the weighted average number of potentiallydilutive ordinary share options. Restated 2014 2013 Number Number m m Weighted average number of share used in basic 1,059.3 590.8calculation SAYE share options - 0.2 Executive share options 3.0 2.9 Weighted average number of shares used in the 1,062.3 593.9diluted calculation The Adjusted EPS is intended to highlight the recurring results of the Groupbefore amortisation charges, ineffectiveness on financial derivatives andexceptional items. A reconciliation is set out below: 2014 Restated 2013 £m EPS(p) £m EPS (p) Basic profit/(loss)/EPS 54.2 5.1 (17.8) (3.0) Amortisation charges¹ 53.2 5.0 51.8 8.8 Ineffectiveness on financial derivatives 17.6 1.7 5.5 0.9 Exceptional items (17.6) (1.7) 62.3 10.5 Non-controlling interests on exceptional - - 4.7 0.8items Tax effect of above adjustments (24.9) (2.3) (39.4) (6.7) Deferred tax credit due to change in UK (3.2) (0.3) (2.0) (0.3)corporation tax rate Adjusted profit/EPS 79.3 7.5 65.1 11.0 1Amortisation charges of £53.4m per note 6 less £0.2m (2013: £52.0m less £0.2m)attributable to equity non-controlling interests. 2014 Restated 2013 Diluted EPS Pence pence Basic 5.1 (3.0) Adjusted 7.5 (10.9) 5 GOODWILL 2014 2013 2012 £m £m £m Cost At 1 April 1,669.8 1,604.3 1,613.0 Additions - - 2.9 Disposals (7.7) (11.5) (11.3) Foreign exchange movements (148.6) 77.0 (0.3) At 31 March 1,513.5 1,669.8 1,604.3 Accumulated impairment losses At 1 April 4.0 5.0 5.0 Impairment losses for the year (recorded - 4.0 -in exceptional items) Disposals - (5.0) - At 31 March 4.0 4.0 5.0 Carrying amount At 31 March 1,509.5 1,665.8 1,599.3 6 OTHER INTANGIBLE ASSETS Customer Greyhound Rail Total contracts brand and franchise trade agreements name £m £m £m £m Cost At 1 April 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 Additions 1.6 - 13.7 15.3 Disposals - - (35.3) (35.3) Foreign exchange movements (39.7) (6.7) - (46.4) At 31 March 2014 362.2 58.1 36.1 456.4 Amortisation At 1 April 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 Charge for year 45.4 3.0 5.0 53.4 Disposals - - (35.3) (35.3) Foreign exchange movements (18.5) (2.1) - (20.6) At 31 March 2014 194.5 19.2 24.8 238.5 Carrying amount At 31 March 2014 167.7 38.9 11.3 217.9 At 31 March 2013 232.7 46.5 2.6 281.8 At 31 March 2012 266.9 47.4 4.5 318.8 7 PROPERTY PLANT & EQUIPMENT Land and Passenger Other Total carrying plant and buildings vehicle equipment fleet £m £m £m £m Cost At 1 April 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 Additions in the year 15.4 259.1 106.5 381.0 Disposals (10.1) (98.0) (16.9) (125.0) Reclassified as held for sale (10.2) (69.2) - (79.4) Foreign exchange movements (27.8) (204.9) (20.4) (253.1) At 31 March 2014 451.9 2,656.3 825.4 3,933.6 Accumulated depreciation andimpairment At 1 April 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) Impairments (recorded in exceptional 5.6 3.7 - 9.3items) 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 Charge for year 9.9 209.5 124.8 344.2 Disposals (3.5) (97.2) (15.9) (116.6) Reclassified as held for sale (6.9) (62.0) - (68.9) Foreign exchange movements (5.2) (103.7) (13.6) (122.5) At 31 March 2014 89.4 1,346.9 632.4 2,068.7 Carrying amount At 31 March 2014 362.5 1,309.4 193.0 1,864.9 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 8 INVENTORIES 2014 2013 2012 £m £m £m Spare parts and consumables 71.3 79.7 90.6 Property development work in progress 0.1 0.2 0.4 71.4 79.9 91.0 9 TRADE AND OTHER RECEIVABLES 2014 2013 2012 £m £m £m Amounts due within one year Trade receivables 361.9 340.2 299.8 Provision for doubtful receivables (2.9) (3.2) (4.5) Other receivables 54.3 52.4 72.8 Other prepayments 117.6 116.6 112.1 Accrued income 132.7 135.0 121.7 663.6 641.0 601.9 10 TRADE AND OTHER PAYABLES 2014 Restated Restated 2013 2012 Amounts falling due within one year £m £m £m Trade payables 372.3 402.0 397.6 Other payables 212.4 184.3 169.1 Accruals 497.6 515.1 558.0 Deferred income 59.4 82.1 78.7 Season ticket deferred income 78.1 73.2 68.1 1,219.8 1,256.7 1,271.5 11 FINANCIAL LIABILITIES -BORROWING 2014 2013 2012 £m £m £m On demand or within 1 year Short term loans - - 69.3 Finance leases (note 12) 68.9 62.7 52.4 Bond 6.875% (repayable 2013) - 319.8 20.3 Bond 8.125% (repayable 2018) 12.9 12.8 12.9 Bond 6.125% (repayable 2019) 3.0 3.0 3.0 Bond 8.75% (repayable 2021) 30.1 30.1 30.2 Bond 5.25% (repayable 2022) 5.7 5.7 - Bond 6.875% (repayable 2024) 7.2 7.2 7.2 Total Current Liabilities 127.8 441.3 195.3 Within 1- 2 years Syndicated loans - 49.3 46.9 Finance leases (note 12) 70.4 63.3 51.9 Bond 6.875% (repayable 2013) - - 298.5 Loan notes (note 13) 9.7 9.7 9.7 80.1 122.3 407.0 Within 2 - 5 years Syndicated loans - 336.1 379.1 Finance leases (note 12) 159.7 203.3 154.7 Bond 8.125% (repayable 2018) 297.4 - - Bond 6.125% (repayable 2019) 284.5 - - Senior unsecured loan notes 89.9 98.3 31.1 831.5 637.7 564.9 Over 5 years Finance leases (note 12) 45.6 88.9 76.3 Bond 8.125% (repayable 2018) - 297.1 296.7 Bond 6.125% (repayable 2019) - 305.4 299.7 Bond 8.75% (repayable 2021) 347.6 347.4 347.1 Bond 5.25% (repayable 2022) 319.6 319.1 - Bond 6.875% (repayable 2024) 199.5 199.5 199.0 Senior unsecured loan notes - - 62.2 912.3 1,557.4 1,281.0 Total non-current liabilities at 1,823.9 2,317.4 2,252.9amortised cost 12 HP CONTRACTS AND FINANCE LEASES The Group had the following obligations under HP contracts and finance leasesas at the balance sheet dates: 2014 2014 2013 2013 2012 2012 Minimum Present Minimum Present Minimum Present payments value of payments value of payments value of payments payments payments £m £m £m £m £m £m Due in less than one year 70.9 68.9 64.5 62.7 54.0 52.4 Due in more than one year 74.6 70.4 66.9 63.3 54.8 51.9but not more than two years Due in more than two years 178.9 159.7 226.9 203.3 173.9 154.7but not more than fiveyears Due in more than five years 55.0 45.6 107.3 88.9 92.6 76.3 379.4 344.6 465.6 418.2 375.3 335.3 Less future financing (34.8) - (47.4) - (40.0) -charges 344.6 344.6 418.2 418.2 335.3 335.3 13 LOAN NOTES The Group had the following loan notes issued as at the balance sheet dates: 2014 2013 2012 £m £m £m Due in more than one year but not more than two 9.7 9.7 9.7years 14 DERIVATIVE FINANCIAL INSTRUMENTS 2014 2013 2012 £m £m £m Derivatives designated and effective as hedginginstruments carried at fair value Non-current assets Cross currency swaps (net investment hedge) - 15.2 23.2 Coupon swaps (fair value hedge) 24.1 45.7 43.8 Fuel derivatives (cash flow hedge) 1.8 2.4 5.6 25.9 63.3 72.6 Current assets Cross currency swaps (net investment hedge) - 3.6 4.3 Coupon swaps (fair value hedge) 11.1 13.2 9.5 Fuel derivatives (cash flow hedge) 6.4 6.5 29.7 17.5 23.3 43.5 Current liabilities Interest rate derivatives (cash flow hedge) - 8.1 8.0 Cross currency swaps (net investment hedge) - 47.6 1.2 Fuel derivatives (cash flow hedge) 5.1 4.8 3.5 5.1 60.5 12.7 Non-current liabilities Interest rate derivatives (cash flow hedge) - 11.8 13.7 Cross currency swaps (net investment hedge) - - 27.1 Fuel derivatives (cash flow hedge) 1.3 0.8 0.9 1.3 12.6 41.7 Derivatives classified as held for trading Current assets Interest rate swaps 8.5 - - Current liabilities Interest rate swaps 12.6 4.2 4.4 Non-current liabilities Interest rate swaps 7.9 9.1 8.4 Total non-current assets 25.9 63.3 72.6 Total current assets 26.0 23.3 43.5 Total assets 51.9 86.6 116.1 Total current liabilities 17.7 64.7 17.1 Total non-current liabilities 9.2 21.7 50.1 Total liabilities 26.9 86.4 67.2 15 DEFERRED TAX The major deferred tax liabilities/(assets) recognised by the Group andmovements thereon during the current and prior reporting periods are asfollows: Accelerated Retirement Other Tax Total tax benefit temporary losses depreciation schemes differences £m £m £m £m £m At 1 April 2012 as previously 228.7 (84.2) 90.6 (180.7) 54.4reported Prior year adjustment - - (2.1) - (2.1) At 1 April 2012 restated 228.7 (84.2) 88.5 (180.7) 52.3 (Credit)/charge to income (60.3) 9.7 (5.2) 21.3 (34.5) Credit to equity - (0.2) (7.6) - (7.8) Foreign exchange movements 7.1 (3.4) 4.3 (9.0) (1.0) At 31 March 2013 175.5 (78.1) 80.0 (168.4) 9.0 (Credit)/charge to income (28.1) 2.1 43.3 (28.3) (11.0) (Credit)/charge to equity - (3.0) 3.9 - 0.9 Foreign exchange movements (11.0) 6.8 (11.4) 17.9 2.3 At 31 March 2014 136.4 (72.2) 115.8 (178.8) 1.2 Certain deferred tax assets and liabilities have been offset. The following isthe analysis of the deferred tax balances for financial reporting purposes: 2014 Restated Restated 2013 2012 £m £m £m Deferred tax assets (35.8) (53.2) (43.3) Deferred tax liabilities 37.0 62.2 95.6 1.2 9.0 52.3 No deferred tax asset has been recognised in respect of £nil (2013: £4m; 2012:£5m) of capital losses. 16 PROVISIONS 2014 2013 2012 £m £m £m Insurance claims 191.6 216.2 218.4 Legal and other 29.6 40.8 19.9 Pensions 3.4 3.9 4.2 Non-current liabilities 224.6 260.9 242.5 Insurance Legal and Restated Pensions Restated claims other FGW Total contract provision £m £m £m £m £m At 1 April 2013 332.6 50.8 39.9 3.9 427.2 Charged/(credited) to 144.5 2.0 (4.6) - 141.9the income statement Utilised in the year (176.1) (8.8) (35.3) (0.5) (220.7) Notional interest 19.5 - - - 19.5 Foreign exchange (25.7) (4.1) - - (29.8)movements At 31 March 2014 294.8 39.9 - 3.4 338.1 Current liabilities 103.2 10.3 - - 113.5 Non-current liabilities 191.6 29.6 - 3.4 224.6 At 31 March 2014 294.8 39.9 - 3.4 338.1 Current liabilities 116.4 10.0 39.9 - 166.3 Non-current liabilities 216.2 40.8 - 3.9 260.9 At 31 March 2013 332.6 50.8 39.9 3.9 427.2 Current liabilities 117.6 4.2 67.4 - 189.2 Non-current liabilities 218.4 19.9 - 4.2 242.5 At 31 March 2012 336.0 24.1 67.4 4.2 431.7 17 CALLED UP SHARE CAPITAL 2014 2013 2012 £m £m £m Allotted, called up and fully paid 482.1m ordinary shares of 5p each 24.1 24.1 24.1 722.8m new ordinary shares of 5p each issued 36.1 - - 1,204.9m ordinary shares of 5p each 60.2 24.1 24.1 18 NET CASH FROM OPERATING ACTIVITIES 2014 Restated 2013 £m £m Operating profit 232.2 139.8 Adjustments for: Depreciation charges 344.2 364.7 Capital grant amortisation (32.4) (33.1) Amortisation charges 53.4 52.0 (Gain)/loss on disposal of businesses and (16.5) 8.8subsidiary undertakings Impairment charges - 13.3 Share-based payments 4.6 5.6 Loss on disposal of property, plant and equipment 3.2 4.0 Operating cash flows before working capital 588.7 555.1 Decrease in inventories 4.8 10.6 Increase in receivables (60.0) (8.2) Decrease in payables (18.2) (32.3) Decrease in provisions (36.1) (12.2) Defined benefit pension payments in excess of (27.7) (34.1)income statement charge Cash generated by operations 451.5 478.9 Tax paid (8.2) (6.3) Interest paid (138.1) (129.0) Interest element of HP contracts and finance (12.9) (10.9)leases Net cash from operating activities 292.3 332.7 Responsibility Statement of the Directors on the Annual Report The directors are responsible for preparing the Annual Results Announcement inaccordance with applicable laws and regulations. The responsibility statementbelow has been prepared in connection with the Company's full Annual Report forthe year ended 31 March 2014. Certain points thereof are not included withinthis Annual Results Announcement. The directors confirm to the best of their knowledge: a. the consolidated financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and b. the Management Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. The directors consider that the annual report and accounts, taken as a whole,is fair, balanced and understandable and provides information necessary for theshareholders to assess the Company's and the Group's performance, businessmodel and strategy. By order of the Board. Tim O'Toole Chris SurchChief Executive Group Finance Director21 May 2014 21 May 2014