Firstgroup Regulatory News (FGP)

4 Nov 2009 07:00

Embargoed until 07:00hrs on Wednesday 4 November 2009

FIRSTGROUP PLC HALF-YEARLY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2009

GOOD PERFORMANCE UNDERPINNED BY DIVERSE, RESILIENT PORTFOLIO AND COST REDUCTION PROGRAMME

* Robust results against a tough economic backdrop * 50% of Group revenues contract backed - greater insulation against fast changing economy * Cost reduction actions largely mitigate impact on operating profit of increased fuel costs and reduced Greyhound revenues

* Increase in hedged fuel costs this year c. 100m - set to recover in 2010/11

* Cost reduction programme implemented - annual savings of at least 200m

* Demonstrated ability to flex operating models to match changing demand

* On course to achieve cash generation targets - 100m per annum to reduce

net debt

* Debt duration now extended to 6.4 yrs, no major re-financing requirement

until 2012

* Actions taken ensure Group is well placed for future economic recovery

NORTH AMERICA - 75% OF REVENUES FROM CONTRACT BUSINESSES

* First Student: + Strong contract retention >90% + Good progress with margin improvement programme * First Transit: + Good margin development and new contract wins

GREYHOUND - FLEXING BUSINESS MODEL TO PROTECT REVENUE PER MILE

* Revenue trends stabilising, beginning to show some improvement towards end

of Q2

* Matching supply to demand through flexible business model - mileage reduced

by 13%

UK BUS - STEADY PERFORMANCE, CONTINUED REVENUE GROWTH

* Like-for-like passenger revenue growth up 2.4% * Management actions ensure profits in line with our expectations

* Flexible operating model mitigating changing demand - mileage reduced by 4%

UK RAIL - PASSENGER REVENUE GROWTH, BALANCED MIX OF FRANCHISES

* Like-for-like passenger revenue growth up 1.7% despite clear impact of economy * Revenue trends stabilising over period, particularly in Q2 * Unique position of revenue support provides substantial insulation

FINANCIAL SUMMARY

* Revenue 2,902.6m (2008: 2,768.5m)

* Adjusted EBITDA2 319.4m (2008: 306.0m)

* Operating profit 123.1m (2008: 128.5m)

* Adjusted operating profit1 166.5m (2008: 181.2m)

* Profit before taxation 30.3m (2008: 54.4m)

* Adjusted profit before taxation1 69.7m (2008: 107.1m)

* Basic earnings per share 3.9p (2008: 5.0p)

* Adjusted basic earnings per share 9.3p (2008: 15.6p)

* Interim dividend per share up 10% to 6.65p (2008: 6.05p)

1 Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and loss on disposal of properties, as shown in the condensed consolidated income statement on p.21.

2 Adjusted operating profit as defined plus depreciation.

Commenting on the results for the six months to 30 September 2009, FirstGroup's Chief Executive, Sir Moir Lockhead said:

"The Group has delivered a good performance in the first half against a tougheconomic backdrop and increased fuel costs. During the full year the Group willabsorb a significant increase of approximately 100m in its hedged fuel costswhich is set to recover in 2010/11."The successful implementation of our cost reduction plan, which will achieveannual savings of at least 200m in this financial year, and the action we havetaken to mitigate changing patterns of passenger demand have ensured that weremain on course to achieve our earnings targets and cash generation of 100mper annum to reduce net debt."Our strategy to build a diverse portfolio of operations in the UK and NorthAmerica, that are well balanced between contract-backed and passenger revenues,underpins the strength and resilience of the Group and provides greaterinsulation against a fast changing economic environment. In those areas of ourbusiness where we are dependent on passenger demand we have demonstrated ourability to flex the operating models to respond rapidly to changing marketconditions."While the current economic environment presents a number of challenges for thetransport industry, the Board remains confident in the underlying strength andresilience of the Group. The actions we have taken across the business toreduce costs will ensure the Group is well placed to benefit from futureeconomic recovery and has a robust and efficient base from which to continue todeliver long-term value for shareholders. After a resilient performance in thefirst half of the year, overall trading remains in line with our expectations."

Enquiries FirstGroup plc:

Sir Moir Lockhead, Chief Executive

Jeff Carr, Finance Director

Tel: +44 207 291 0512

Rachael Borthwick, Corporate Communications Director

Tel: +44 207 291 0508 / +44 7771 945432

A CONFERENCE CALL OF THE PRESENTATION TO ANALYSTS WILL BE HELD AT 9:00AM FOR DETAILS PLEASE CONTACT FIRSTGROUP TEL: 020 7291 0507

PHOTOGRAPHS FOR THE MEDIA ARE ALSO AVAILABLE

FIRSTGROUP PLC

NOTES TO EDITORS

FirstGroup plc is the leading transport operator in the UK and North Americawith annualised revenues of over 6 billion a year. We employ more than 130,000staff and transport some 2.5 billion passengers a year.

UK Bus

The Group is Britain's largest bus operator running more than one in five ofall local bus services. A fleet of nearly 8,500 buses carries approximately 3million passengers a day in more than 40 major towns and cities. We alsooperate Greyhound UK providing regular services each way between London andPortsmouth and London and Southampton.

UK Rail

The Group operates one quarter of the UK passenger rail network, with a balanced portfolio of intercity, commuter and regional services, carrying over 280 million passengers per annum.

* We are the UK's largest rail operator with four passenger franchises - First Capital Connect, First Great Western, First ScotRail and First TransPennine Express - and one open access operator, First Hull Trains.

* We provide rail freight services through First GBRf and operate the London

Tramlink network on behalf of Transport for London carrying nearly 28

million passengers a year.

North America contract businesses

Headquartered in Cincinnati, FirstGroup America Inc. operates across the US andCanada. The Group's contract businesses include Yellow School Buses (FirstStudent), Transit Contracting and Management Services (First Transit), VehicleFleet Maintenance and Support Services (First Services).

* First Student is the largest provider of student transportation in North

America with a fleet of approximately 60,000 yellow school buses, carrying

nearly 4 million students every day across the US and Canada.

* First Transit is one of the largest private sector providers of transit

management and contracting, managing public transport systems on behalf of

city transit authorities. It is one of the largest providers of airport

shuttle bus services in the US and also manages call centres, paratransit

operations and other light transit activities. * First Services is the largest private sector provider of vehicle maintenance and ancillary support services in the US. Providing fleet

maintenance for public sector customers such as the Federal Government and

fire and police departments it also provides support services to public and

private sector clients. GreyhoundGreyhound is the only national provider of scheduled intercity coach servicesin the US and Canada. Based in Dallas, Greyhound provides scheduled passengerservices to approximately 3,800 destinations throughout the US and Canadacarrying approximately 22 million passengers annually.

Europe

In mainland Europe we operate some 150 buses in south west Germany and, withour partner DSB, we operate the Oresund rail franchise which includes routes inand between Denmark and Sweden.

Chairman's statement

While there can be no doubt that the current global economic climate presents anumber of challenges I am pleased that our management team has demonstratedtheir ability to respond swiftly to changing demand and take the necessaryaction to reduce our cost base. Our strategy to build a balanced, diverseportfolio of operations in the UK and North America, with some 50% of Grouprevenues underpinned by medium term contracts, has provided stability andinsulation against a fast changing economic environment and ensured that theGroup is not dependent on one particular market.We are committed to providing safe, high quality and reliable services. Thesafety and security of our passengers and employees is our chief priority and acontinued focus was rigorously applied to this key area during the period as westrive to advance our industry-leading programmes and initiatives.We have made further progress in realising our strategy to extend the maturityprofile of the Group's debt and reduce reliance on bank borrowings. Followingthe issue of 350m 12-year bonds in April, we issued 200m of 15-year bonds inSeptember, both of which were substantially oversubscribed. The proceeds wereused to repay existing bank debt and our average debt duration has beenextended to 6.4 years. We are delighted by the continued support from fixedincome investors demonstrating confidence in the strength and resilience of theGroup.In line with our commitment to increase dividends, the Board has proposed aninterim dividend of 6.65p (2008: 6.05p) an increase of 10%. It will be paid on3 February 2010 to shareholders on the register on 8 January 2010.During the period we added further strength and experience to the Group withthe appointment of two new executive directors. Ellis Watson was appointed tothe Board as Business Development and Marketing Director in July 2009. InSeptember 2009, Jeff Carr joined the Board as Finance Director. Both bringconsiderable experience together with a track record of achievement in theirrespective careers and I am confident they will make a significant contributionto the ongoing success of the Group.This has been a period of considerable change for our employees. On behalf ofthe Board I would like to extend sincere thanks to all our staff across theGroup for their continued commitment and dedication to providing safe, highquality and reliable services. There is no doubt that the weaker economicenvironment and the process of change can create a sense of uncertainty forstaff. However, the action taken by management has provided a strong foundationfor the Group to continue to build and benefit from economic recovery in thefuture.Looking ahead the Group will continue to benefit from a diverse revenue streamthat is well balanced between contract-backed and passenger revenues. In thoseareas of our business that are dependent on passenger revenues we haveresponded quickly to match supply to demand and reduce our cost base. Thisaction, combined with a rigorous focus on budgetary control, has ensured thatwe remain on course to achieve our cash generation and earnings targets. TheBoard remains confident in the underlying strength and resilience of thebusiness and its ability to continue to deliver long-term value for ourshareholders.Martin GilbertChairman

* Operating profit referred to throughout this document refers to operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/ profit on disposal of properties. EBITDA is adjusted operating profit plus depreciation.

Chief Executive's operating review

OVERVIEW

Safety

The safety and security of our customers and our employees is at the heart ofour business and underpins everything we do. While we have made significantprogress in achieving our aim to embed a rigorous culture of safety throughoutthe Group, there is still more to be done. A zero tolerance approach to unsafeacts and practices is supported by the industry-leading initiatives, such asInjury Prevention, that we have firmly established across the Group. Despitethis good progress we are never complacent and constantly seek new ways toensure that we achieve the safest possible way of conducting our business forour customers and our staff.

Results

I am pleased to report a good performance during the first half of the yearparticularly against the backdrop of continued global economic weakness andsignificant cost headwinds. Group revenue was 2,902.6m (2008: 2,768.5m), anincrease of 4.8% in Sterling terms after 230.2m of favourable foreign exchangemovements. Operating profit reduced to 166.5m (2008: 181.2m) as a result ofincreased fuel costs and the impact of the recession on Greyhound's revenue butwas significantly mitigated by the positive impact of our cost reductionactions. Statutory profit before taxation was 30.3m (2008: 54.4m) reflectingthe lower operating profit and higher net finance costs as a result of theissue of bonds in September 2008 and April 2009. Adjusted basic earnings pershare was 9.3p (2008: 15.6p). EBITDA rose by 4.4% to 319.4m (2008: 306.0m).The good performance is underpinned by the Group's diverse portfolio ofoperations together with prompt actions we have taken, particularly in UK Busand Greyhound, to utilise the flexible business models that exist and matchsupply to demand. The cost actions we have taken across all areas of the Groupwill deliver annual savings of at least 200m starting this year. As part ofthis cost reduction programme we have reduced headcount by 4,400 throughout theGroup. During this year the Group will absorb a significant increase ofapproximately 100m in its hedged fuel costs which we anticipate will recoverin 2010/11.We have outlined our key priorities to continue to deliver strong cashgeneration and reduce the Group's leverage. The actions we have taken haveensured that we remain on course to achieve our cash generation targets of 100m per annum in this current financial year and for 2010/11, which will beapplied to reduce net debt.NORTH AMERICAThe Group is the leading provider of transport services in North America. FirstStudent is the largest provider of student transportation with approximately60,000 yellow school buses operating every day across the US and Canada. Weoperate a transit contracting and management business in North Americaandprovidevehicle fleet maintenance and support services.

Contract Businesses

In our North American division approximately 75% of revenues derive from the less cyclical contracted businesses of Student, Transit and Services.

Revenue from our contract businesses was marginally reduced to $1,649.9m or 1,047.1m (2008: $1,730.1m or 895.9m) however operating profit increased to$89.1m or 60.2m (2008: $83.9m or 44.4m) reflecting the positive impact of thecost reduction actions and margin improvement programme, which has more thanoffset the increase in hedged fuel costs. EBITDA grew to $208.9m or 135.4m(2008: $192.8m or 100.7m).It is now two years since we completed the acquisition of Laidlaw and I am verypleased with the excellent progress made in integrating the contract businessesof both companies. While the initial synergy target has already been achievedwe continue to drive out opportunities for further cost and operatingefficiencies throughout the North American operations.The actions we have taken across our North American contract businesses willensure that the operations remain resilient and in a strong position for futuregrowth through unrivalled quality, a greater range of products, operating andcost efficiencies and significant scale benefits.

First Student

We are the largest operator of school transportation with a fleet ofapproximately 60,000 yellow buses providing home to school transport on behalfof school boards and authorities across the US and Canada. The resilient schoolbus market is estimated to be worth some $22 billion per annum and is backed bya local government requirement for schools to provide transportation throughthe provision of contracts averaging approximately three to five years inlength. I am pleased to report that our focus on customer service andoperational performance, together with the sustainable economies that we canpass on to customers, has delivered another period of strong contract retentionof over 90%.In the current recessionary environment we have seen school districts underpressure to reduce their budgets and, as a result, scale back on the level oforganic growth, primarily new services added to an existing contract, we wouldexpect in a normal year. Against this backdrop, we expect that the number ofbuses operated to be similar to last year.After adjusting for the impact of movements in the US Dollar:Canadian Dollarexchange rate and the lower number of operating days in the current year, USDollar revenue was reduced by 3.3%. This is largely as a result of our businessin the Fort McMurray area now being reported as part of First Transit and theprogress made with our margin enhancement programme, which saw First Studentexit a number of contracts where an acceptable margin could not be secured.First Student is uniquely placed to pass on its significant scale benefits tonew and existing customers through cost and operating efficiencies andprocurement savings. We continue to develop the opportunities to win newcontracts including `converting' those that were previously operated within thepublic sector. Our expectation is that despite the pressures on public spendingand increased expressions of interest in outsourcing, conversions will remainslow to materialise.

We continue to focus on improving operational performance and delivered a successful `start up' for the new school year supported by good staff availability. We were pleased to commence operation of a number of contracts including in Cincinnati, Ohio where we won the tender to become the sole provider of services for a contract that was previously operated by three separate contractors.

During the period we advanced the roll-out of GPS equipment to our fleet whichwill help us to deliver greater customer service, improved operatingperformance and continue to deliver increased efficiencies in scheduling androuting.Notwithstanding the challenges of the current economic climate, we believe thatthe North American school bus market provides a significant opportunity forfuture growth. Our scale efficiencies, together with the actions we have takento reduce our cost base and drive out greater efficiencies, will provide astrengthened base from which to continue to grow, particularly as the economyrecovers.First Transit

Our Transit division has delivered another successful period of growth with USDollar revenue increased by 2.2%. The operating margin increased to 5.9% (2008:3.2%), having been impacted last year by additional costs incurred in respectof a small number of Services contracts that expired during the period and theloss of a legal dispute.Strong contract retention rates of over 90% were achieved and we continued toincrease our share of the outsourced transit market with a number of newcontract wins including the provision of transit management services in NewYork and Connecticut. In line with our strategy to grow our presence in thetypically higher margin light transit markets we were delighted to win a numberof new contracts to provide shuttle bus services at the Universities ofAlabama, Chicago and Louisiana and at Savannah College.

During the period First Services won a further contract to provide support and ancillary services on behalf of the US military.

GREYHOUND

Greyhound is the only national provider of intercity coach transportationservices in the US and Canada. Greyhound provides scheduled passenger servicesto approximately 3,800 destinations throughout the US and Canada carrying some22 million passengers annually.As previously indicated Greyhound continues to be impacted by the weak economicenvironment and increased unemployment in North America. Revenue was $493.5m or 309.4m (2008: $632.9m or 326.0m), a reduction of 20.1%, at constant USDollar:Canadian Dollar exchange rates. Revenue trends stabilised over theperiod and began to show some improvement towards the end of the secondquarter. We are encouraged that the trends continue to improve.Greyhound contributes less than 10% of the Group's operating profit. Its uniquecharacteristics, in particular the highly flexible business model, have enabledus to take prompt, direct action to mitigate the impact of recession.Approximately 60% of the cost base is variable therefore we have been able torapidly match supply to demand and reduce overheads to protect revenue permile. We have reduced mileage by 13% in the US and by 10% in Canada.

We have also taken a number of actions to considerably reduce our operating costs including the integration of several back office functions with existing FirstGroup America operations. It has also been necessary to implement a programme to substantially decrease headcount which has now reduced by 1,845.

Despite the actions to moderate the impact of the economy and to moderniseGreyhound's operating model, our focus on customer service and reliability hasremained a key priority. I am pleased to report that On Time Performance hascontinued to improve across both Greyhound's US and Canadian operations.BoltBus, our low cost, high quality, point to point coach service from New Yorkto Boston, Washington and Baltimore continues to attract new customers and grownew markets. The response from customers continues to be extremely positive andwe are developing opportunities to expand BoltBus to new city pairdestinations.While the economy remains weak we are delaying any major capital investment forGreyhound and will continue to dynamically manage the business to moderate theimpact of recession. The measures we have taken at Greyhound have transformedthe operating model and will ensure that the business has a stronger foundationfor future growth and well placed to benefit from economic recovery.

UK BUS

The Group is the largest bus operator in the UK with a market share of approximately 23%. Our fleet of approximately 8,500 buses carries 3 million passengers every day.

Our UK Bus division has delivered a robust performance during the perioddespite challenging economic conditions. Total revenue increased by 1.2% to 585.6m (2008: 578.6m) and like-for-like passenger revenue increased by 2.4%.Passenger volumes were reduced by approximately 1% as a result of thechallenging economic climate and increased unemployment. The increase to ourhedged fuel costs impacted operating profit which was reduced by 15.3% to 50.8m (2008: 60.0m).UK Bus, outside of London, has a highly flexible operating model. In responseto the current economic environment we are matching our services to changes indemand to protect revenue per mile and as a result have reduced mileage by 4%during the period. This together with the cost reduction programme we haveimplemented has ensured that profitability has remained on course.Driver turnover has continued to improve and has now reduced to approximately17%. As well as our initiatives to promote retention, the current labour marketconditions and in particular higher levels of unemployment have contributed tothe low levels of staff turnover.

We recognise that value for money is a key driver for our customers in this current economic climate and we continue to introduce ticketing and travel initiatives designed to promote the cost and environmental benefits of bus travel. Our focus remains on improving service quality and operational performance. Punctuality and reliability has improved during the period with further reductions in lost mileage.

Despite the recessionary pressures, we have continued to invest in our peopleand our business to maintain our industry leading position. During the periodwe made selected investment and targeted capital expenditure on the major townsand cities where our partnerships with local authorities have deliveredpassenger growth including new environmentally friendly vehicles for ouroperating companies in West and North Yorkshire, Bristol, Somerset and Avon,Glasgow and Hampshire and Dorset. We also invested in 14 new buses for the fiveChester Park and Ride services. We are pleased to renew this contract and withour continued good performance in winning Park and Ride contracts across theUK.Following successful trials at depots in London, Bradford and Glasgow we areinstalling new `DriveGreen' technology across our entire bus fleet to improvedriving styles and reduce the carbon footprint of our buses through greaterfuel efficiency. The rollout will be complete by the summer of 2010.This summer we launched our `Staycations' marketing campaign to promote bustravel by linking with local attractions to provide travel and entry offers toour customers. The major public transport groups also launched `GreenerJourneys', a campaign encouraging people to get out of their cars and ontobuses and coaches. The campaign aims to reduce carbon emissions by changingtravel behaviour and by switching one in 25 journeys from car to bus or coach.This would mean one billion fewer car journeys on our roads over the next threeyears.

In September we launched Greyhound UK, operating high quality, low cost services between London and the two cities of Portsmouth and Southampton with yield managed fares starting from as low as 1 plus booking fee. We are encouraged by the early progress of this new initiative.

We believe that voluntary quality partnerships offer the most effective way toincrease public transport usage, meet the carbon challenge and reducecongestion in towns and cities. We continue to work with local authoritiesacross the UK on joint initiatives to improve the punctuality and reliabilityof bus services and to promote bus services to car users.We support Greater Manchester Passenger Transport Executive's (GMPTE) plans toimprove three major routes into and through Manchester city centre includinghighway, bus priority and congestion management measures. Our customers wantpunctual and reliable journeys and GMPTE's proposals would ensure that largenumbers of bus passengers in Greater Manchester benefit from more reliable busjourney times and quicker cross-city journeys.Working closely with Strathclyde Partnership for Transport we continue todevelop our network in Greater Glasgow with new services to work, retail andleisure centres and the launch of new `Hampden Express' services which offer apremium fare express route to large events at Scotland's national stadium. Weare also developing key commuter markets through investments in servicesincluding the `Lanarkshire Express' and a new express service from Cumbernauldto Glasgow city centre.In September we officially launched our ftrmetro project in Swansea. Our longterm partnership with the City and County of Swansea and the Welsh AssemblyGovernment has delivered a 14m package to improve public transport in Swanseaincluding dedicated infrastructure and new vehicles as well as upgrading theengineering and parking facilities at our depot. ftrmetro will encourage modalshift by providing state of the art vehicles and punctual and reliable journeysas a result of the many priority measures on its route through Swansea citycentre via the railway station.In May we completed the integration of Truronian into our Devon and Cornwallbusiness to improve the network for our Cornish customers with changes thatwill deliver increased frequency and more capacity. In October we extended the`ugobus' network in Plymouth with four new routes. The changes build on thesuccess of the network launched in April 2008 to provide our customers withsimplified routes, timetables and fares.We were pleased to officially open our new state-of-the-art bus depot inAberdeen in October. The new depot includes many features to lessen itsenvironmental impact and provides improved facilities for customers and staff.In June, our partnership with Bath and North East Somerset Council successfullydelivered the transition to the new bus station in Bath which is now providingcustomers with better facilities and easier connections to Bath Spa railwaystation.

UK RAIL

Our UK Rail division operates passenger and freight services. Passenger railfranchises consist of First Capital Connect, First Great Western, FirstScotRail and First TransPennine Express. We also operate Hull Trains, anon-franchised open access intercity passenger train operator, and provide railfreight services through First GBRf. We are the UK's largest rail operatorcarrying over 280 million passengers per annum.

Results

The weaker economy and increased unemployment has had a clear impact on theUK's railways. Despite this we continue to deliver growth with like-for-likepassenger revenue increased by 1.7% during the period. We are substantiallyinsulated from the effects of the recession on passenger demand through theunique position of our contractual revenue support and share arrangements. Weare currently receiving revenue support at the highest level of 80% for both ofour London based passenger rail franchises.Revenue from our UK Rail division was 949.1m (2008: 960.6m) reflecting achange in the Network Rail access charging regime which reduced revenue by 81.5m with no impact on operating profit. Operating profit increased to 50.8m(2008: 48.3m). As we anticipated demand for services slowed during the period,particularly in the London commuter market, as a result of higher unemploymentand lower levels of economic activity. However, trends remained relativelystable over the period particularly in the second quarter. We have a diverserange of rail franchises including London commuter, intercity and regional,which provide a balanced mix of operations and mitigate reliance on any onespecific market.We experienced strong demand for advance purchase and other discounted ticketswith weaker demand for First Class fares reflecting the recessionary pressuresour customers are facing. We continue to focus on operating performance and allof our rail franchises are achieving a Public Performance Measure (PPM) scoreof over 90% on a moving annual average.

First ScotRail

We were pleased to record an overall customer satisfaction score of 89% in theNational Passenger Survey and continue to deliver further improvements to thefranchise. In May we introduced a new timetable with additional East Coastcommuter services and improvements to services in Fife, the Highlands and theWest Coast. We also launched a new direct morning commuter service from Alloato Edinburgh to build on the successful reintroduction of passenger services toAlloa. We were delighted that Laurencekirk station reopened in May after 42years providing a real boost to the local community, improving access to jobs,education and leisure. The number of passengers using the station is higherthan predicted.In partnership with Transport Scotland we are launching a new timetable inDecember to introduce a new hourly service between Glasgow and Edinburgh viaShotts, a much improved service between Glasgow and Kilmarnock and betterconnections from Ayr and Gourock into Glasgow and between Dumfries and Carlisleand North Berwick and Edinburgh for early morning services to London.We are working with Transport Scotland and other partners to deliver a newfleet of 38 Class 380 electric trains to run between Glasgow Central, Ayrshire,Inverclyde and Renfrewshire. The 200m investment by Transport Scotland willadd 9,000 seats to Scotland's rail network from September 2010. We are alsotrialling smartcard technology on the Edinburgh-Glasgow route and plan to issue10,000 smartcard tickets over the next two years with the roll out to customersplanned for the autumn.We are delighted that First ScotRail won Passenger Operator of the Year at theNational Rail Awards in September, the only Train Operating Company to receivethe award for two consecutive years. First ScotRail was also named PublicTransport Operator of the Year at the National Transport Awards in July.

First TransPennine Express

During the period First TransPennine Express delivered its best ever levels of train punctuality and reliability improving PPM, on a moving annual average basis, to almost 92%.

For 11 weeks over the summer we had significant engineering work on our routebetween Doncaster and Cleethorpes to allow Network Rail to remove a severetemporary speed restriction in place on our network. The work was completed ontime and we have welcomed customers back with a fares promotion.In December we will provide two additional Monday to Friday services betweenManchester Airport and Scotland, increasing service provision to 11 trains ineach direction. These additional services will improve our competitive positionand allow us to stimulate further the high passenger demand that exists on thiscorridor.We continue to promote rail travel to and from Manchester Airport and we haveseen continued passenger journey growth to the airport despite falling numbersof air passengers. With some of the UK's leading tourist destinations on ournetwork including the Lake District and many seaside resorts we continue totarget our marketing efforts on leisure promotions and special offers including`Kids go Free' and `Club 55'.We strengthened key services to popular leisure destinations including earlierand additional weekend services to Windermere and Scarborough and increasedcapacity on trains to Blackpool. We also added capacity to services for keyevents such as the Edinburgh Festival and provided effective promotion of theseevents and opportunities to travel.

First Great Western

First Great Western's operational improvement has continued during the periodand our PPM, on a moving annual average basis, is over 92%. Our customers havewelcomed the improved punctuality and reliability of our services and reflectedthis in the National Passenger Survey where 81% of customers were satisfied, anine point improvement on results in the same period last year.We have continued to invest in improving customer service and introduced a newCustomer Information System to a number of smaller stations. Feedback fromcustomers has been extremely positive and we are installing enhanced HelpPoints at ten more stations on the Severn Beach Line in Bristol. As part of ourinitiative to improve on-board catering for longer distance services, weintroduced the first of our fleet of 19 Express Cafes in June. The remainingbuffet carriages are being introduced progressively and the programme isexpected to complete early next year. We are also updating the buffet carriageson a further ten of our High Speed Trains.The branch lines on our Devon and Cornwall services have seen significantgrowth as a result of our successful partnerships with local authorities andcommunity groups to promote use of the routes. We were delighted that some ofthis work was recognised at the Community Rail Awards in September with a largenumber of winners and highly commended initiatives from across our network. Inaddition we were pleased to be presented with the Operations Award at theRailway Industry Innovation Awards in June.

First Capital Connect

The Thameslink Programme continues with work progressing well at Blackfriarsand Farringdon stations in London. Our campaign to communicate the ThameslinkProgramme to customers won two awards at the Railway Industry Innovation Awardsin July and was highly commended in the `Putting Passengers First' category atthe National Rail Awards in September. However, the late delivery of the newfleet of Class 377 trains by Bombardier and ongoing reliability problems areaffecting operational performance on our Thameslink route. The continueddelivery of the additional trains will enable us to add a further 900 seats inDecember and help reduce overcrowding on the route.Punctuality and reliability on the Great Northern route has been consistentlyabove 95% during the period and in May we implemented `Seats for You', a majortimetable change on the route. Five extra trains and changes to stoppingpatterns created over 5,000 additional seats, which we targeted at some of themost overcrowded services in the UK. The changes were implemented as a resultof our Peterborough and Cambridge Capacity Study and our work with Network Railand the Department for Transport.We introduced a new Super Off-Peak ticket offering 25% off weekend travel toLondon from mid-June to September. Following the success of the campaign, ourSuper Off-Peak fares are now permanent. We continue to build our partnershipswith airlines operating at both Gatwick and Luton airports.

First Hull Trains

We introduced two successful marketing campaigns during the period. Our familycampaign led to an increase in bookings from Hull to London over the summer.Our ongoing `London for less than a tenner' campaign promotes our `eveningexpress' services and has continued to increase passenger loadings on our newseventh path.First GBRfIn April we signed new contracts with Network Rail to continue to operate andmanage its Whitemoor terminal and to run infrastructure trains in the southeast of England. We also signed a contract with MSC to run intermodal trainsfrom the Port of Felixstowe and, in September, extended our services at theport with an agreement to move containers to the Birmingham Intermodal andDoncaster Europort freight terminals. We continue to build our share of thecoal market with a five year deal with EDF and an extension of our contractwith Drax. We also signed a new contract with Lafarge Aggregates to movematerials across the Midlands. In September we introduced new services to carrymail order returns for Royal Mail.

GROUP OUTLOOK

The Group has delivered a good performance in the first half against a tougheconomic backdrop and increased fuel costs. During the full year the Group willabsorb a significant increase of approximately 100m in its hedged fuel costswhich is set to recover in 2010/11.The successful implementation of our cost reduction plan, which will achieveannual savings of at least 200m in this financial year, and the action we havetaken to mitigate changing patterns of passenger demand, have ensured that weremain on course to achieve our earnings targets and cash generation of 100mper annum to reduce net debt.Our strategy to build a diverse portfolio of operations in the UK and NorthAmerica, that are well balanced between contract-backed and passenger revenues,underpins the strength and resilience of the Group and provides greaterinsulation against a fast changing economic environment. In those areas of ourbusiness where we are dependent on passenger demand we have demonstrated ourability to flex the operating models to respond rapidly to changing marketconditions.While the current economic environment presents a number of challenges for thetransport industry, the Board remains confident in the underlying strength andresilience of the Group. The actions we have taken across the business toreduce costs will ensure the Group is well placed to benefit from futureeconomic recovery and has a robust and efficient base from which to continue todeliver long-term value for shareholders. After a resilient performance in thefirst half of the year, overall trading remains in line with our expectations.Sir Moir LockheadChief Executive3 November 2009Finance Director's reviewOverview

We are pleased to announce a good set of half year numbers despite the economic headwinds that have continued to affect certain parts of the business. Additionally, we have experienced increased hedged fuel costs across our businesses most of which will reverse in 2010/11.

To counter the effects of the economic weakness and increased fuel costs we continue to focus on the delivery of our 200m cost reduction programme. In the period headcount reductions of 2,700 were implemented bringing the total headcount reductions to 4,400 which represents significant progress in achieving the full benefits of the programme.

Headcount reductions: UK Bus UK Rail North Greyhound Total America Period to 31 March 2009 390 215 170 925 1,700 Six months to 30 740 395 645 920 2,700September 2009 Total 1,130 610 815 1,845 4,400In addition to cost reductions our UK Bus and Greyhound businesses haveflexible models and we have been reviewing and optimising our networks. As aconsequence mileage reductions of 4% and 13% have been implemented at UK Busand Greyhound respectively. Similarly, in our First Student business we haveadopted a policy of either improving or exiting low margin contracts which hasresulted in a small reduction in growth rates.During the period we continued our strategy to extend the maturity profile ofour debt whilst at the same time reducing reliance on the banking market. InApril 2009 we issued 350m of 12-year bonds and in September 2009 we issued 200m of 15-year bonds. Both of these bonds were significantly oversubscribed.As a result of these actions our average debt duration has increased to 6.4years (full year 2009: 4.6 years). Group leverage continues to improve andliquidity headroom under committed bank facilities was increased further to

826m at 30 September 2009.Results

Group revenue rose to 2,902.6m (2008: 2,768.5m), an increase of 4.8% inSterling terms after 230.2m of favourable foreign exchange movements.Operating profit was 166.5m (2008: 181.2m), a reduction of 8.1% principallydue to Greyhound revenue weakness and higher hedged fuel costs across the Groupof 74m. We anticipate that the additional hedged fuel costs for the currentfinancial year will be approximately 100m which we expect to reverse in 2010/11. 6 months to 6 months to Year to 30 September 2009 30 September 2008 31 March 2009 Divisional Revenue Operating Operating Revenue Operating Operating Revenue Operating Operatingresults GBPm Profit1 margin1 GBPm profit1 margin1 GBPm profit1 margin1 GBPm % GBPm % GBPm % UK Bus 585.6 50.8 8.7 578.6 60.0 10.4 1,182.0 134.0 11.3 UK Rail 949.1 50.8 5.4 960.6 48.3 5.0 2,121.5 94.2 4.4 North America 1,047.1 60.2 5.7 895.9 44.4 5.0 2,224.1 246.1 11.1 Greyhound 309.4 13.9 4.5 326.0 41.6 12.8 642.4 48.5 7.5 Group2 11.4 (9.2) - 7.4 (13.1) - 17.3 (25.3) -

Total Group 2,902.6 166.5 5.7 2,768.5 181.2 6.5 6,187.3 497.5 8.0

1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties.

2Tram operations, German Bus, central management and other items.

North American contract business revenue was 1,047.1m or $1,649.9m (2008: 895.9m or $1,730.1m), an increase of 16.9% in Sterling terms but a reduction of4.6% in US Dollar terms. Operating profit was 60.2m or $89.1m (2008: 44.4m or$83.9m), an increase of 35.6% in Sterling terms and 6.2% in US Dollar terms.Our North America contract businesses performed well over the period with highcontract retention rates of over 90%. The reduction in US Dollar revenuesincludes a lower number of First Student operating days in the current halfyear and the impact of movements in the US Dollar:Canadian Dollar exchangerate. Excluding these effects revenue was down 1.2% in US Dollar terms.Additionally we are seeing the positive results of our margin enhancementprogramme, where we aim to improve margins on or exit low margin contracts, inboth First Student and First Transit.Greyhound revenue was 309.4m or $493.5m (2008: 326.0m or $632.9m) andoperating profit was 13.9m or $23.5m (2008: 41.6m or $81.1m). Revenue hasfallen as a result of the weak US economy and increased unemployment. Inconstant currency terms revenue fell by approximately 20% during the first sixmonths with bus miles operated being reduced by 13% in order to protect revenueper mile. Additional management actions will further reduce the cost base andincrease efficiencies while continuing to focus on improving customer serviceand On Time Performance. Greyhound now has a stronger foundation on which tobuild and is well placed to benefit from economic recovery when it arises.UK Bus continues to grow, albeit at lower rates than previously achieved.Revenue was 585.6m (2008: 578.6m), an increase of 1.2%. Operating profit was 50.8m (2008: 60.0m), a reduction of 15.3% principally due to higher fuelcosts. Like-for-like passenger revenues grew by 2.4% however passenger volumesdecreased by approximately 1% largely as a result of the recession. We expectlike-for-like passenger revenue growth for the full year to be between 1% and2%. We have utilised the flexible operating model outside of London byoptimising our network and matching our services to the reduction in demand toprotect operating margins. Consequently we have reduced mileage by 4% duringthe period, while ensuring a continued focus on service quality, operationalperformance and cost efficiencies. This, together with our cost reductionprogramme, has ensured that profitability has remained in line with ourexpectations. We expect that there will be a positive impact on the second halfmargin as the cost initiatives are fully realised.UK Rail revenue was 949.1m (2008: 960.6m), a decrease of 1.2%. A change inthe Control Period (CP4) arrangements with Network Rail meant an 81.5mreduction in both DfT grant revenue and Network Rail charges with no impact onoperating profit. Operating profit was 50.8m (2008: 48.3m), an increase of5.2%. Like-for-like passenger revenue growth across all TOCs was 1.7%. Despitethe clear impact of the weaker economy on the UK's railways, we aresubstantially insulated from the full effects of the recession by thecontractual revenue support mechanisms in place. We are currently receivingrevenue support at the highest level of 80% for both First Great Western andFirst Capital Connect. In addition, significant progress was made during theperiod to deliver cost savings in the addressable cost base. We anticipate thatsecond half passenger revenues will be broadly flat compared to last year withregulated fares reducing by 0.4% from January 2010.Net Group costs were 9.2m (2008: 13.1m) with the improvement being due tolower central costs as a result of headcount reductions and a lower share-basedpayment charge as the performance criteria on certain executive shareincentives, which were set prior to the current economic decline, are nowconsidered unlikely to be achieved.

Non-recurring items and amortisation charges

Six months Six months Year to to 30 to 30 September September 31 March 2009 2008 2009 GBPm GBPm GBPm North America and Greyhound integration costs 7.0 34.5 70.1 Fuel hedge provision 4.8 - 23.1 UK Rail restructuring costs 0.1 - 10.3

North America and Greyhound restructuring 5.8 -

9.9costs UK Bus restructuring costs 3.6 - 2.1 European bid costs - 1.5 3.5 Other non-recurring costs 3.8 0.4 - Total non-recurring items 25.1 36.4 119.0 Amortisation charges 17.1 13.5 33.1 42.2 49.9 152.1 Loss/(profit) on disposal of properties 1.2 2.8

(25.7)

Hedge ineffectiveness on financial (4.0) -

-derivatives 39.4 52.7 126.4

North America and Greyhound integration costs

North America and Greyhound integration costs were 7.0m (2008: 34.5m). These reflect major IT integration projects and the conclusion of the Greyhound back-office consolidation which commenced last year.

Fuel hedge provision

Fuel hedge provision was 4.8m (2008: nil) and represents a reduction in 2009/10 fuel requirements due to changes to contractual terms in certain FirstStudent and First Transit contracts whereby the Group now has less "at risk"fuel.Restructuring costsRestructuring costs were 9.5m (2008: nil) and represent redundancy costs inrespect of the headcount reductions across all businesses as part of the 200mcost reduction action plan.Other non-recurring costs

The 3.8m charge includes the non-capital costs of the roll out of a new vehicle tracking system in the North American contract businesses.

Amortisation charges

Amortisation charges were 17.1m (2008: 13.5m) with the increase mainly due to foreign exchange movements.

Property

Losses on disposals of 1.2m (2008: 2.8m) were incurred during the period and relate to minor property disposals in both the UK and North America.

Hedge ineffectiveness on financial derivatives

Due to the ineffective element of the fair value movements on cross-currencyswaps there was a 4.0m credit to the income statement during the period (2008: nil). Any future ineffectiveness on these financial instruments will bedisclosed in this way.

Finance costs and investment income

The net finance cost was 92.8m (2008: 74.1m) with the increase principally due to the September 2008 and April 2009 long term bond issues and foreign exchange on US Dollar denominated interest cost.

Profit before tax

Adjusted profit before tax was 69.7m (2008: 107.1m) due principally to loweroperating profit and higher net finance costs. Exceptional costs of 39.4m(2008: 52.7m) resulted in statutory profit before tax of 30.3m (2008: 54.4m).TaxThe tax charge, on adjusted profit before tax, for the period was 17.0m (2008: 26.0m) and is based on the estimated effective rate for the full year of 24.4%(2008: 24.3%). Amortisation charges, hedge ineffectiveness on financialderivatives, non-recurring bid costs, other non-recurring items and loss ondisposal of properties amounting to 39.4m generated a tax credit of 13.6mthat reduced the total tax charge to 3.4m (2008: total tax charge 23.1m).Last year there was a one-off deferred tax charge due to an increase in the UKdeferred tax liability arising on the abolition of Industrial BuildingsAllowances.The actual tax paid during the period was 1.3m (2008: 6.6m). North Americancash tax remains low due to tax losses brought forward and tax depreciation inexcess of book depreciation. We believe this will remain low for the mediumterm. The UK cash cost of tax remains low due to pension payments exceedingpension charges and tax relief on interest payments.

Dividends

The interim dividend of 6.65 pence (2008: 6.05 pence) per ordinary sharerepresents an increase of 10%. The interim dividend will be paid on 3 February2010 to shareholders on the register of members at the close of business on

8January 2010EPS

The adjusted basic EPS, before amortisation charges, hedge ineffectiveness onfinancial derivatives, non-recurring bid costs, other non-recurring items andloss on disposal of properties was 9.3 pence (2008: 15.6 pence), a reduction of40.4%. Basic EPS was 3.9 pence (2008: 5.0 pence), a reduction of 22.0%.

EBITDA

Adjusted EBITDA by division is set out below:

6 months to 6 months to Year to 30 September 2009 30 September 2008 31 March 2009 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 GBPm GBPm % GBPm GBPm % GBPm GBPm % UK Bus 585.6 88.5 15.1 578.6 96.1 16.6 1,182.0 205.4 17.4 UK Rail 949.1 74.5 7.8 960.6 66.3 6.9 2,121.5 137.2 6.5 North 1,047.1 135.4 12.9 895.9 100.7 11.2 2,224.1 374.2 16.8America Greyhound 309.4 28.3 9.1 326.0 53.9 16.5 642.4 76.6 11.9 Group 11.4 (7.3) - 7.4 (11.0) - 17.3 (21.2) - Total Group 2,902.6 319.4 11.0 2,768.5 306.0 11.1 6,187.3 772.2 12.5

1Operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties plus depreciation.

Operating Cash flow

Cash generated by operations was 164.4m (2008: 175.7m) with the improved operating cash flow offset by adverse working capital, principally the CP4 charging mechanism changes in UK Rail.

Net debt

The Group's net debt at 30 September 2009 was 2,373.8m (2008: 2,195.1m; full year 2009: 2,503.5m) and was comprised as follows:

Analysis of net debt Fixed Variable Total GBPm GBPm GBPm Cash - (126.7) (126.7) UK Rail ring-fenced cash and deposits - (175.8)

(175.8)

Other ring-fenced cash and deposits - (23.4) (23.4) Sterling bond (2013)1 297.4 - 297.4 Sterling bond (2018)2 327.4 - 327.4 Sterling bond (2019)2 - 274.8 274.8 Sterling bond (2021)3 331.7 - 331.7 Sterling bond (2024)1 198.9 - 198.9 Sterling bank loans and overdrafts - 33.0

33.0

US Dollar bank loans and overdrafts4 - 806.5

806.5

Canadian Dollar bank loans and overdrafts 1.6 132.2

133.8

Euro and other bank loans and overdrafts - 47.0

47.0

HP contracts and finance leases 120.9 117.8 238.7 Loan notes 8.7 1.8 10.5 Interest rate swaps 1,097.1 (1,097.1) - Total 2,383.7 (9.9) 2,373.81 excludes accrued interest

2 stated excluding accrued interest, swapped to US Dollars and adjusted for movements on associated derivatives

3 stated excluding accrued interest, partially swapped to US Dollars and adjusted for movements on associated derivatives

4 includes 46.2m of Euro bank loans swapped into US Dollars

Average debt maturity at the end of the period was 6.4 years (full year 2009:4.6 years). Headroom under committed revolver facilities at 30 September 2009was 826m (2008: 474m).

We remain focused on continuing to reduce our leverage. At 30 September 2009 net debt to EBITDA, calculated on a rolling 12 monthly basis, stood at 3.0 times (March 2009: 3.2 times).

Shares in issue

As at the period end there were 479.9m (2008: 480.8m) shares in issue,excluding treasury shares and shares held in trust for employees. The number oftreasury shares and shares held in trust for employees at 30 September 2009 was2.2m (2008: 1.3m). The weighted average number of shares in issue for thepurpose of EPS calculations (excluding treasury shares and shares held in trustfor employees) was 480.9m (2008: 468.9m).

Total equity

Total equity has decreased by 125.4m since the start of the period. Theprincipal reasons for this are actuarial losses on defined benefit pensionschemes, net of deferred tax, of 142.4m, adverse foreign exchange movements of 148.8m and dividends paid of 65.7m partly offset by favourable movements onderivative hedging instruments, net of deferred tax, of 205.4m and profit

forthe period of 26.9m.Foreign exchangeThe most significant exchange rates to Sterling for the Group are as follows: 6 months to 6 months to Year to 30 September 2009 30 September 2008 31 March 2009 Closing Effective Closing Effective Closing Effective rate rate rate rate rate rate US Dollar 1.60 1.53 1.84 1.91 1.43 1.63 Canadian Dollar 1.77 1.88 1.90 1.97 1.78 1.95Fuel hedgingIn the UK, 100% of the Group's current year exposure to crude oil prices (2.6mbarrels p.a.) is hedged at $111 per barrel. In North America 100% of currentyear "at risk" volumes (1.9m barrels p.a.) are hedged at $116 per barrel andrelate only to those requirements not covered by pass through or escalationclauses in contracts.

For 2010/11 in the UK, 82% of the Group's exposure is hedged at $76 per barrel and 82% of North American "at risk" volumes are hedged at $89 per barrel.

Pensions

The Group has updated the pension assumptions as at 30 September 2009 for the defined benefit schemes in the UK and North America. As a result, the net pension deficit of 169m at the beginning of the period has moved to a net pension deficit of 345m at the end of the period principally due to the reduction in the discount rate used from 6.75% to 5.45%, partly offset by improvements in asset returns over the period.

The main factors that influence the balance sheet position for pensions and the sensitivities to their movement are set out below:

Movement Impact Discount rate + 0.1% Reduce deficit by 30m Inflation + 0.1% Increase deficit by 19mSeasonalityThe 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 strongest in thesummer months.

Principal risks and uncertainties for the remaining six months of the financial year

There are a number of risks and uncertainties facing the Group in the remainingsix months of the financial year. These are considered to be the same asdisclosed in the 2009 Annual Report. The principal risks and uncertainties,which are set out in detail on pages 38 to 40 of the Annual Report and Accounts2009, are: * Economy in the UK and North America * Pensions * Competitive pressures * Legislation and regulation * Labour costs and employee relations * Fuel costs * Treasury risks and insurance costs * Terrorism * Rail franchise agreements * Retention of key management * Customer service and contract retention * Environmental Responsibility statement

We confirm that to the best of our knowledge:

* the condensed set of financial statements has been prepared in accordance

with IAS 34 "Interim Financial Reporting";

* the interim management report includes a fair review of the information

required by DTR 4.2.7R (indication of important events during the first six

months and description of principal risks and uncertainties for the remaining six months of the year); and * the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). Jeff CarrFinance Director3 November 2009

Condensed consolidated income statement

Notes Adjusted Adjustments2 Unaudited Adjusted

Adjustments2 Unaudited Audited

results1 6 months to Total results1 6 months to Total Total 6 months 30 September 6 months 6 months 30 September 6 months year to to to to to 2009 2008 31 March 30 30 30 30 September GBPm September September GBPm September 2009 2009 2009 2008 2008 GBPm GBPm GBPm GBPm GBPm Revenue 2 2,902.6 - 2,902.6 2,768.5 - 2,768.5 6,187.3 Operating costs before (2,736.1) (42.2) (2,778.3) (2,587.3)

(49.9) (2,637.2) (5,841.9)(loss)/profit on disposal of properties Operating profit 166.5 (42.2) 124.3 181.2 (49.9) 131.3 345.4before (loss)/profit on disposal of properties Amortisation charges - (17.1) (17.1) - (13.5) (13.5) (33.1) Non-recurring bid - - - - (1.5) (1.5) (3.5)costs Other non-recurring - (25.1) (25.1) - (34.9) (34.9) (115.5)items - (42.2) (42.2) - (49.9) (49.9) (152.1) (Loss)/profit on - (1.2) (1.2) - (2.8) (2.8) 25.7disposal of properties Operating profit 2 166.5 (43.4) 123.1 181.2 (52.7) 128.5 371.1 Investment income 3 1.0 - 1.0 3.8 - 3.8 7.9 Finance costs 3 (97.8) 4.0 (93.8) (77.9) - (77.9) (179.0) Profit before tax 69.7 (39.4) 30.3 107.1 (52.7) 54.4 200.0 Tax 4 (17.0) 13.6 (3.4) (26.0) 2.9 (23.1) (43.0) Profit for the period 52.7 (25.8) 26.9 81.1 (49.8) 31.3 157.0 Attributable to: Equity holders of the 44.5 (25.7) 18.8 73.1 (49.7) 23.4 143.3parent Minority interest 8.2 (0.1) 8.1 8.0 (0.1) 7.9 13.7 52.7 (25.8) 26.9 81.1 (49.8) 31.3 157.0 Basic earnings per 6 3.9p 5.0p 30.2pshare Diluted earnings per 6 3.9p 4.9p 30.0pshare

All results relate to continuing operations.

Dividends of 61.1m were paid during the period (2008: 55.5m; full year 2009: 84.6m). Dividends of 32.0m were proposed for approval during the period (2008: 29.1m; full year 2009: 61.1m) per note 5.

1Adjusted trading results before items noted in 2 below.

2Amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties and tax thereon.

Condensed consolidated balance sheet

Notes Unaudited Unaudited Audited 30 30 31 March September September 2009 2009 2008 GBPm GBPm GBPm Non-current assets Goodwill 7 1,662.6 1,416.9 1,820.0 Other intangible assets 8 403.6 381.4 456.7 Property, plant and equipment 9 2,280.0 2,062.2 2,398.1 Deferred tax assets 43.1 - 50.2 Retirement benefit assets 19 3.8 114.3 111.5

Derivative financial instruments 13 51.0 46.1

24.8 Investments 4.6 4.3 5.1 4,448.7 4,025.2 4,866.4 Current assets Inventories 98.1 87.1 110.0 Trade and other receivables 10 592.5 654.0 610.3 Financial assets - cash and cash 325.9 227.6 322.5equivalents

Assets classified as held for sale 11 4.3 5.6

4.2

Derivative financial instruments 13 16.6 69.1

3.1 1,037.4 1,043.4 1,050.1 Total assets 5,486.1 5,068.6 5,916.5 Current liabilities Trade and other payables 12 1,084.1 1,011.5 1,124.7 Tax liabilities 45.3 57.9 47.2 Financial liabilities - bank overdrafts 1.6 30.4 210.7and loans - bonds 36.3 20.7 36.0

- obligations under HP contracts

and finance leases 38.6 26.7 34.3 Derivative financial instruments 13 183.9 39.4 304.5 1,389.8 1,186.6 1,757.4 Net current liabilities 352.4 143.2 707.3 Non-current liabilities Financial liabilities - bank loans 1,018.7 1,471.8 1,408.1 - bonds 1,411.4 840.8 870.2

- obligations under HP contracts

and finance leases 200.1 71.0 194.6 - loan notes 10.5 10.5 10.5 Derivative financial instruments 13 124.8 37.5

243.6

Retirement benefit liabilities 19 348.8 139.7 280.2 Deferred tax liabilities 6.7 130.3 20.6 Provisions 14 296.4 302.8 327.0 3,417.4 3,004.4 3,354.8 Total liabilities 4,807.2 4,191.0 5,112.2 Net assets 678.9 877.6 804.3 Equity Share capital 16 24.1 24.1 24.1 Share premium account 676.4 676.4 676.4 Hedging reserve (147.4) 55.9 (352.8) Other reserves 4.6 4.6 4.6 Own shares (8.0) (5.7) (3.4) Translation reserve 189.0 (13.5) 337.4 Retained earnings (82.4) 116.3 98.5 Equity attributable to equity holders of 656.3 858.1 784.8the parent Minority interests 22.6 19.5 19.5 Total equity 678.9 877.6 804.3

Condensed consolidated statement of comprehensive recognised income

Unaudited Unaudited Audited 6 months 6 months Year to to to 31 March 30 30 September September 2009 2009 2008 GBPm GBPm GBPm Derivative hedging instrument movements 263.1 (1.2)

(539.6)

Deferred tax on derivative hedging instrument (57.7) 7.4 137.1movements Exchange differences on translation of foreign (148.8) 57.8 409.6operations Unrealised losses on executive deferred (0.4) (1.4) (3.1)compensation plans Actuarial losses on defined benefit pension (193.6) (141.1) (308.3)schemes Deferred tax on actuarial losses on defined 51.2 43.7 102.2benefit pension schemes Net expense recognised directly in equity (86.2) (34.8) (202.1) Profit for the period 26.9 31.3 157.0 Total recognised income and expense for the (59.3) (3.5) (45.1)period Attributable to: Equity holders of the parent (67.0) (12.4) (60.7) Minority interests 7.7 8.9 15.6 (59.3) (3.5) (45.1)

Condensed consolidated statement of changes in equity

Share Share Hedging Other Own Trans-lation Retained

Total Minority Total

capital premium reserve reserves shares reserve earnings GBPm interests equity GBPm account GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm Balance at 1 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5

784.8 19.5 804.3April 2009 Profit for - - - - - - 18.8 18.8 8.1 26.9the period Exchange - - - - - (148.4) - (148.4) (0.4) (148.8)differences on translation of foreign operations Actuarial - - - - - - (193.6) (193.6) - (193.6)loss on defined pension schemes Deferred tax - - - - - - 51.2 51.2 - 51.2on actuarial losses on defined benefit schemes Unrealised - - - - - - (0.4) (0.4) - (0.4)losses on executive deferred compensation plans Derivative - - 263.1 - - - - 263.1 - 263.1hedging instrument movements Deferred tax - - (57.7) - - - - (57.7) - (57.7)on derivative hedging instrument movements Total - - 205.4 - - (148.4) (124.0) (67.0) 7.7 (59.3)comprehensive income for the period Dividends - - - - - - (61.1) (61.1) (4.6) (65.7)paid Movement in - - - - (4.6) - - (4.6) - (4.6)EBT and treasury shares Share-based - - - - - - 2.7 2.7 - 2.7payments Deferred tax - - - - - - 1.5 1.5 - 1.5on share-based payments

Balance at 30 24.1 676.4 (147.4) 4.6 (8.0) 189.0 (82.4) 656.3 22.6 678.9September 2009 Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5

691.6 13.2 704.8April 2008 Profit for - - - - - - 23.4 23.4 7.9 31.3the period Exchange - - - - - 56.8 - 56.8 1.0 57.8differences on translation of foreign operations Actuarial - - - - - - (141.1) (141.1) - (141.1)loss on defined pension schemes Deferred tax - - - - - - 43.7 43.7 - 43.7on actuarial losses on defined benefit schemes Unrealised - - - - - - (1.4) (1.4) - (1.4)losses on executive deferred compensation plans Derivative - - (1.2) - - - - (1.2) - (1.2)hedging instrument movements Deferred tax - - 7.4 - - - - 7.4 - 7.4on derivative hedging instrument movements Total - - 6.2 - - 56.8 (75.4) (12.4) 8.9 (3.5)comprehensive income for the period Issue of 2.2 228.6 - - - - - 230.8 - 230.8share capital Dividends - - - - - - (55.5) (55.5) (2.6) (58.1)paid Movement in - - - - 1.9 - (1.5) 0.4 - 0.4EBT and treasury shares Share-based - - - - - - 3.1 3.1 - 3.1payments Current tax - - - - - - 0.1 0.1 - 0.1on share-based payments

Balance at 30 24.1 676.4 55.9 4.6 (5.7) (13.5) 116.3

858.1 19.5 877.6September 200 8

Condensed consolidated statement of changes in equity (continued)

Share Share Hedging Other Own Trans-lation Retained

Total Minority Total

capital premium reserve reserves shares reserve earnings GBPm interests equity GBPm account GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5

691.6 13.2 704.8April 2008 Profit for - - - - - - 143.3 143.3 13.7 157.0the period Exchange - - - - - 407.7 - 407.7 1.9 409.6differences on translation of foreign operations Actuarial - - - - - - (308.3) (308.3) - (308.3)loss on defined pension schemes Deferred tax - - - - - - 102.2 102.2 - 102.2on actuarial losses on defined benefit schemes Unrealised - - - - - - (3.1) (3.1) - (3.1)losses on executive deferred compensation plans Derivative - - (539.6) - - - - (539.6) - (539.6)hedging instrument movements Deferred tax - - 137.1 - - - - 137.1 - 137.1on derivative hedging instrument movements Total - - (402.5) - - 407.7 (65.9) (60.7) 15.6 (45.1)comprehensive income for the period Issue of 2.2 228.6 - - - - - 230.8 - 230.8share capital Dividends - - - - - - (84.6) (84.6) (9.3) (93.9)paid Movement in - - - - 4.2 - (3.9) 0.3 - 0.3EBT and treasury shares Share-based - - - - - - 6.3 6.3 - 6.3payments Deferred tax - - - - - - (1.7) (1.7) - (1.7)on share-based payments Current tax - - - - - - 0.1 0.1 - 0.1on share-based payments Current tax - - - - - - 2.7 2.7 - 2.7on foreign exchange movements

Balance at 31 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5

784.8 19.5 804.3March 2009

Condensed consolidated cash flow statement

Note Unaudited Unaudited Audited 6 months to 6 months Year to to 30 31 March September 30 2009 September 2009 GBPm 2008 GBPm GBPm Net cash from operating activities 17 74.9 93.2 494.4 Investing activities Interest received 1.0 4.6 9.0

Proceeds from disposal of property, 21.5 2.8

54.7plant and equipment Purchases of property, plant and (93.1) (176.2) (320.2)equipment Acquisition of businesses - (2.4) (6.5) Net cash used in investing activities (70.6) (171.2) (263.0) Financing activities

Shares purchased by Employee Benefit (1.4) -

-Trust

Monies received on exercise of options 1.4 0.5

0.5 Dividends paid (61.1) (55.5) (84.6) Dividends paid to minority shareholders (4.6) (2.6) (9.3) Proceeds from bond issues 550.0 300.0 300.0 Proceeds from new bank facilities - 225.5

436.1

Proceeds from existing bank facilities 46.0 126.0

6.4 Repayment of bank debt (509.4) (724.9) (1,062.4) Repayments under HP contracts and (11.3) (17.9) (43.3)finance leases Repayment of loan notes - (4.6) (4.6) Fees for bank facility amendments and (4.5) (5.7) (10.4)bond issue costs

Proceeds from sale and finance - -

70.3lease-back of buses Net proceeds on issue of shares - 230.8

230.8

Net cash from financing activities 5.1 71.6

(170.5)

Net increase/(decrease) in cash and cash 9.4 (6.4)

60.9

equivalents before foreign exchange

movements Cash and cash equivalents at beginning 322.5 239.7 239.7of period Foreign exchange movements (6.0) (5.7) 21.9 Cash and cash equivalents at end of 325.9 227.6

322.5

period per condensed consolidated balance sheet Cash and cash equivalents for the purposes of the condensed consolidated cashflow statement comprise cash at bank and in hand and other short-term highlyliquid investments with a maturity of three months or less.

Notes to the half-yearly financial report

1 Basis of preparation

This half-yearly financial report does not constitute statutory accounts withinthe meaning of section 435 of the Companies Act 2006. The statutory accountsfor the year ended 31 March 2009 have been delivered to the Registrar ofCompanies. The auditors reported on those accounts; their report wasunqualified, did not draw attention to any matters by way of emphasis and didnot contain a statement under section 237(2) or (3) of the Companies Act 1985.The figures for the six months to 30 September 2009 include the results of therail businesses for the period ended 19 September 2009 and the results for theother businesses for the 26 weeks ended 26 September 2009.The accounting policies used in the half-yearly financial report are consistentwith International Financial Reporting Standards. The same accounting policies,presentation and methods of computation are followed in the condensed set offinancial statements as applied in the Group's latest annual audited financialstatements, except for as described below.In the current financial year, the Group has adopted International FinancialReporting Standard (IFRS) 8 "Operating Segments" and International AccountingStandard (IAS) 1 "Presentation of Financial Statements" (revised 2007). As aresult of the adoption of IFRS 8 total assets are disclosed by segment. As aresult of the adoption of IAS 1, a condensed consolidated statement of changesin equity has been included in the primary statements, showing changes in eachcomponent of equity for each period presented.The Directors have revised the balance sheet presentation of assets classifiedas held for sale as current assets and retirement benefit assets and deferredtax assets are included as non-current assets. The Directors have revised thecondensed consolidated cash flow statement for the year to 31 March 2009 toshow proceeds from bond issues on a gross basis with an equal increase in feesfor bond issue costs. The Directors have also revised the presentation ofminority interests in the condensed consolidated statement of comprehensiverecognised income to include foreign exchange gains and losses on translationof foreign minority interests. This has not impacted the Group's net assets orthe minority interests in the Group.

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

These results are unaudited but have been reviewed by the auditors. Thecomparative figures for the six months to 30 September 2008 are unaudited andare derived from the half-yearly financial report for the six months ended 30September 2008, which was also reviewed by the auditors.The Group has continued to extend the maturity profile of debt as discussed inthe Finance Director's review. There continues to be no significant repayments,other than finance leases, until 2012. After taking this into account andmaking enquiries and reviewing the outlook for 2010/11 and medium term plans,the Directors have a reasonable expectation that the Group has adequateresources to continue in operational existence for the foreseeable future.Accordingly they continue to adopt the going concern basis in preparing thehalf-yearly financial report.

This half-yearly financial report will be available to all shareholders in November 2009 and will also be available to the public at the Registered Office of the Company, 395 King Street Aberdeen AB24 5RP.

This half-yearly financial report was approved by the Board on 3 November 2009.

2 Segment information

For management purposes, the Group is currently organised into four operatingdivisions - UK Bus, UK Rail, North America and Greyhound. These divisions arethe basis on which the Group reports its primary segment information. Theprincipal activities of these divisions are set out in the Chief Executive'soperating review.The First Student business generates lower revenues and profits in the firsthalf of the financial year than in the second half as the school summerholidays fall into the first half. Greyhound profits are typically higher inthe first half of the financial year due to demand being stronger in the summermonths.The segment results for the six months to 30 September 2009 are as follows:

UK Bus UK Rail North Grey- Group Total America items GBPm GBPm hound GBPm GBPm GBPm GBPm Revenue 585.6 949.1 1,047.1 309.4 11.4 2,902.6 Segment results1 50.8 50.8 60.2 13.9 (9.2) 166.5 Amortisation charges - (3.3) (12.3) (1.5) - (17.1) Non-recurring items (3.6) (0.1) (14.0) (7.0) (0.4) (25.1) (Loss)/profit on disposal (1.3) - - 0.1 - (1.2)of properties Operating profit 45.9 47.4 33.9 5.5 (9.6) 123.1 Investment income 1.0 Finance costs (97.8) Hedge ineffectiveness on 4.0financial derivatives Profit before tax 30.3 Tax (3.4) Profit for the period 26.9

The segment results for the six months to 30 September 2008 are as follows:

UK Bus UK Rail North Grey- Group Total America items GBPm GBPm hound GBPm GBPm GBPm GBPm Revenue 578.6 960.6 895.9 326.0 7.4 2,768.5 Segment results1 60.0 48.3 44.4 41.6 (13.1) 181.2 Amortisation charges - (3.2) (9.1) (1.2) - (13.5) Non-recurring bid costs - - - - (1.5) (1.5) Other non-recurring items - - (33.3) (1.2) (0.4) (34.9) Loss on disposal of (1.8) - (1.0) - - (2.8)properties Operating profit 58.2 45.1 1.0 39.2 (15.0) 128.5 Investment income 3.8 Finance costs (77.9) Profit before tax 54.4 Tax (23.1) Profit for the period 31.3

1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties.

2 Segment information (continued)

The segment results for the year to 31 March 2009 are as follows:

UK Bus UK Rail North Grey- Group Total America items GBPm GBPm hound GBPm GBPm GBPm GBPm Revenue 1,182.0 2,121.5 2,224.1 642.4 17.3 6,187.3 Segment results1 134.0 94.2 246.1 48.5 (25.3) 497.5 Amortisation charges - (7.1) (23.1) (2.9) - (33.1) Non-recurring bid costs - - - - (3.5) (3.5) Other non-recurring items (9.5) (12.7) (70.1) (23.2) - (115.5) Profit on disposal of 9.2 - 3.0 13.5 - 25.7properties Operating profit 133.7 74.4 155.9 35.9 (28.8) 371.1 Investment income 7.9 Finance costs (179.0) Profit before tax 200.0 Tax (43.0) Profit for the period 157.01Before amortisation charges, hedge ineffectiveness on financial derivatives,non-recurring bid costs, other non-recurring items and profit on disposal ofproperties.Total assets 30 September 30 September 31 March 2009 2008 2009 GBPm GBPm GBPm United Kingdom 5,010.7 4,754.9 4,680.2 North America 3,923.6 4,557.0 5,121.9 Eliminations (3,491.3) (4,243.3) (3,935.8) Unallocated corporate items 43.1 - 50.2 5,486.1 5,068.6 5,916.5

3 Investment income and finance costs

6 months to 6 months to Year to 30 September 30 31 March 2009 September 2008 2009 GBPm GBPm GBPm Investment income (1.0) (3.8) (7.9) Bonds 39.6 14.9 44.9 Bank Borrowings 44.7 50.3 106.6 Loan notes 0.5 0.6 1.2

Finance charges payable in respect of HP 4.2 3.2

7.5contracts and finance leases

Notional interest on provisions 8.8 8.9

18.8

Hedge ineffectiveness on financial (4.0) -

-derivatives Finance costs 93.8 77.9 179.0 Net finance costs 92.8 74.1 171.14 Tax 6 months to 6 months to Year to 30 30 31 March September September 2009 2009 2008 GBPm GBPm GBPm Corporation tax 2.2 6.1 7.3 Deferred tax 1.2 1.8 20.5

Non-recurring deferred tax charge - 15.2

15.2

Tax on profit on ordinary activities 3.4 23.1

43.0

The tax effect of amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/ profit on disposal of properties was a credit of 13.6m (2008: credit of 18.1m; full year 2009: credit of 53.8m).

5 Dividends 6 months 6 months Year to to to 31 30 30 March September September 2009 2009 2008 GBPm GBPm GBPm

Final dividend paid for the year ended 31 March 61.1 55.5 55.5 2009 of 12.7p (2008: 11.55p) per share

Interim dividend paid for the year ended 31 March - - 29.1 2009 of 6.05p (2008: 5.5p) per share

Amounts recognised as distributions to equity 61.1 55.5

84.6holders in the period

Proposed interim dividend for the year ended 31 32.0 29.1

-

March 2010 of 6.65p (2009: 6.05p) per share

The proposed interim dividend will be paid on 3 February 2010 to shareholders on the register of members at the close of business on 8 January 2010. The proposed interim dividend has not been included as a liability as at 30 September 2009.

6 Earnings per share (EPS)

Basic EPS is based on post-tax earnings of 18.8m (2008: 23.4m; full year2009: 143.3m) and on a weighted average number of ordinary shares in issue(excluding own shares held in trust for employees and treasury shares) of480.9m (2008: 468.9m; full year 2009: 474.8m).

6 Earnings per share (EPS) (continued)

The adjusted basic EPS and adjusted cash EPS as set out below are intended todemonstrate recurring elements of the results of the Group and as such arecalculated before amortisation charges, hedge ineffectiveness on financialderivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties. A reconciliation of the earnings used in thealternative bases is set out below: 6 months to 6 months to Year to 30 September 30 September 31 March 2009 2009 2008 GBPm EPS (p) GBPm EPS (p) GBPm EPS (p) Profit for EPS calculation 18.8 3.9 23.4 5.0 143.3 30.2 Amortisation charges1 17.0 3.5 13.4 2.9 32.9 6.9 Hedge ineffectiveness on (4.0) (0.8) - - - -financial derivatives Non-recurring bid costs - - 1.5 0.3 3.5 0.7 Other non-recurring items 25.1 5.2 34.9 7.5 115.5 24.3 Loss/(profit) on disposal of 1.2 0.3 2.8 0.6 (25.7) (5.4)properties Tax effect of above adjustments (13.6) (2.8) (18.1) (3.9) (53.8) (11.3) Non-recurring deferred tax - - 15.2 3.2 15.2 3.2charge on abolition of

Industrial Buildings Allowances

Profit for adjusted EPS 44.5 9.3 73.1 15.6 230.9 48.6calculation Depreciation2 152.5 31.7 124.4 26.5 273.6 57.7 Profit for adjusted cash EPS 197.0 41.0 197.5 42.1 504.5 106.3calculation

1Amortisation charges of 17.1m (2008: 13.5m; full year 2009: 33.1m) per note 2 less 0.1m (2008: 0.1m; full year 2009: 0.2m) attributable to equity minority interests.

2Depreciation charge of 152.9m (2008: 124.8m; full year 2009: 274.7m) per note 9 less 0.4m (2008: 0.4m; full year 2009: 1.1m) of depreciation attributable to equity minority interests.

Diluted EPS is based on the same earnings and on a weighted average number of ordinary shares of 482.3m (2008: 473.0m; full year 2009: 478.0m). The difference in the number of shares between the basic calculation and the diluted calculation represents the weighted average number of potentially dilutive ordinary shares from share options.

Diluted EPS 6 months to 6 months to Year to 30 September 30 September 31 March 2009 2008 2009 Pence Pence Pence Diluted EPS 3.9 4.9 30.0 Adjusted diluted EPS 9.2 15.5 48.37 Goodwill GBPm Cost At 1 April 2009 1,820.0 Additions - Foreign exchange movements (157.4) At 30 September 2009 1,662.6

Accumulated impairment losses At 1 April 2009 and 30 September 2009

- Carrying amount At 30 September 2009 1,662.6 At 31 March 2009 1,820.0 At 30 September 2008 1,416.98 Other intangible assets Customer Greyhound UK Rail Total contracts brand and franchise GBPm GBPm trade name agreements GBPm GBPm Cost At 1 April 2009 412.1 65.9 56.3 534.3 Foreign exchange movements (35.1) (5.1) - (40.2) At 30 September 2009 377.0 60.8 56.3 494.1 Amortisation At 1 April 2009 44.6 5.0 28.0 77.6 Charge for period 12.3 1.5 3.3 17.1 Foreign exchange movements (3.9) (0.3) - (4.2) At 30 September 2009 53.0 6.2 31.3 90.5 Carrying amount At 30 September 2009 324.0 54.6 25.0 403.6 At 31 March 2009 367.5 60.9 28.3 456.7 At 30 September 2008 298.3 50.9 32.2 381.4

Contracts acquired through the purchases of businesses and subsidiary undertakings, are amortised on a straight-line basis over their useful lives which are between nine and twenty years.

The rail franchise agreements intangible asset represents the part of theeconomic benefit derived from the rail franchise agreements that is realised asa result of recognising our share of the rail pension deficit and is amortisedon a straight-line basis over the term of the franchise.9 Property, plant and Land and Passenger Other Totalequipment buildings carrying plant and GBPm GBPm vehicle equipment fleet GBPm GBPm Cost At 1 April 2009 531.5 2,598.1 514.4 3,644.0 Additions 12.8 134.2 28.2 175.2 Disposals (0.4) (49.4) (5.2) (55.0) Reclassified as held for - (9.0) - (9.0)sale Foreign exchange movements (25.0) (133.8) (14.3) (173.1) At 30 September 2009 518.9 2,540.1 523.1 3,582.1 Depreciation At 1 April 2009 51.6 974.7 219.6 1,245.9 Charge for period 6.7 114.3 31.9 152.9 Disposals (0.2) (32.2) (3.6) (36.0) Reclassified as held for - (6.6) - (6.6)sale Foreign exchange movements (1.8) (44.8) (7.5) (54.1) At 30 September 2009 56.3 1,005.4 240.4 1,302.1 Carrying amount At 30 September 2009 462.6 1,534.7 282.7 2,280.0 At 31 March 2009 479.9 1,623.4 294.8 2,398.1 At 30 September 2008 421.0 1,362.4 278.8 2,062.210 Trade and other receivables 30 September 30 31 March 2009 September 2008 2009 GBPm GBPm GBPm Amounts due within one year Trade receivables 442.5 459.6 453.0 Other receivables 67.2 98.2 67.2

Prepayments and accrued income 82.8 96.2

90.1 592.5 654.0 610.311 Assets classified as held for sale 30 September 30 31 March 2009 September 2008 2009 GBPm GBPm GBPm

Assets classified as held for sale 4.3 5.6

4.2

Assets classified as held for sale comprise principally First Student buses which are surplus to requirement and are being actively marketed on the Internet. Gains or losses arising on the disposal of such assets are included in arriving at operating profit in the income statement.

12 Trade and other payables 30 September 30 September 31 March 2009 2008 2009 GBPm GBPm GBPm

Amounts falling due within one year

Trade payables 265.3 261.3 314.5 Other payables 173.1 118.7 129.2 Accruals and deferred income 591.8 577.2

623.0

Season ticket deferred income 53.9 54.3 58.0 1,084.1 1,011.5 1,124.713 Derivative financial instruments 30 September 30 September 31 March 2009 2008 2009 GBPm GBPm GBPm Non-current assets

Interest rate and foreign exchange 46.4 21.9

21.7derivatives Fuel derivatives 4.6 24.2 3.1 51.0 46.1 24.8 Current assets

Interest rate and foreign exchange 13.8 14.4

3.1derivatives Fuel derivatives 2.8 54.7 - 16.6 69.1 3.1 Total assets 67.6 115.2 27.9 Current liabilities

Interest rate and foreign exchange 48.7 16.3

52.4derivatives Fuel derivatives 135.2 23.1 252.1 183.9 39.4 304.5 Non-current liabilities Interest rate and foreign exchange 84.3 19.7 161.7derivatives Fuel derivatives 40.5 17.8 81.9 124.8 37.5 243.6 Total liabilities 308.7 76.9 548.114 Provisions Insurance Legal Pensions Total Claims1 and other GBPm GBPm GBPm GBPm As 1 April 2009 262.0 59.5 5.5 327.0 Provided in the period 63.8 3.1 - 66.9 Utilised in the period (80.0) (5.6) (0.2) (85.8) Transfers from current - 8.2 - 8.2liabilities2 Notional interest 8.8 - - 8.8 Foreign exchange movements (23.6) (5.1) - (28.7) At 30 September 2009 231.0 60.1 5.3 296.4 At 30 September 2008 241.1 55.9 5.8 302.81Insurance claims accruals due within one year at 30 September 2009 amounted to 124.4m (2008: 110.5m; full year 2009: 141.1m) and are included in "accrualsand deferred income" in note 12.

2During the period the timing of the settlement of certain legal and other claims was reassessed and amounts previously included within "accruals and deferred income" (note 12) have been transferred to provisions.

15 Business combinations 30 September 30 31 March 2009 September 2008 2009 GBPm GBPm GBPm

Provisional fair values of net assets

acquired:

Property, plant and equipment - 2.4

2.3 Other current assets - 0.8 0.7 Finance leases - (1.3) (1.3) Other creditors - (1.4) (1.7) - 0.5 - Goodwill (note 7) - 1.9 6.5

Satisfied by cash paid and payable - 2.4

6.516 Share capital 30 September 30 31 March 2009 September 2008 2009 GBPm GBPm GBPm Authorised: Ordinary shares of 5p each 32.5 32.5 32.5

Allotted, called up and fully paid

Ordinary shares of 5p each 24.1 24.1 24.1The number of ordinary shares of 5p each in issue, excluding treasury sharesand shares held in trust for employees, at the end of the period was 479.9m(2008: 480.8m; full year 2009: 480.8m). At the end of the period 1.2m shares(2008: 0.3m shares; full year 2009: 0.3m shares) were being held as treasuryshares and 1.0m shares (2008: 1.0m shares; full year 2009: 1.0m shares) werebeing held in trust to satisfy the exercise of employee share options.17 Notes to the condensed consolidated cash 6 months to 6 months to Year toflow statement 30 September 30 31 March 2009 September 2009 GBPm 2008 GBPm GBPm Operating profit before (loss)/profit on 124.3 131.3 345.4disposal of properties Adjustments for: Depreciation charges 152.9 124.8 274.7 Amortisation charges 17.1 13.5 33.1 Share-based payments 2.7 3.1 6.3

Loss on disposal of property, plant and 0.4 5.3

3.2equipment

Operating cash flows before working capital 297.4 278.0 662.7

Decrease/(increase) in inventories 5.0 (5.7)

(17.2)

(Increase)/decrease in receivables (29.9) (38.3) 114.7 Decrease in payables (90.8) (31.2) (69.8) Defined benefit pension payments in excess (17.3) (27.1) (50.7)of income statement charge Cash generated by operations 164.4 175.7 639.7 Tax paid (1.3) (6.6) (8.9) Interest paid (83.1) (72.2) (129.0) Interest element of HP contracts and finance (5.1) (3.7) (7.4)leases Net cash from operating activities 74.9 93.2

494.4

18 Reconciliation of net cash flows 6 months to 6 months Year toto movement in net debt to 30 September 31 March 2009 30 September 2009 GBPm 2008 GBPm GBP8

Increase/(decrease) in cash and 9.4 (6.4)

60.9cash equivalents in period (Increase)/decrease in debt and (75.3) 95.9 369.8finance lease financing Inception of new HP contracts and (32.0) (12.7) (155.9)finance leases Debt acquired on acquisition of - (1.3) (1.3)businesses

Fees on issue of bank facilities 4.5 5.7

8.4

amendments and bond issue costs

Foreign exchange movements 225.1 (110.4) (614.9) Other non-cash movements in (2.0) (4.9) (9.5)

relation to financial instruments Movement in net debt in period 129.7 (34.1)

(342.5)

Net debt at beginning of period (2,503.5) (2,161.0) (2,161.0) Net debt at end of period (2,373.8) (2,195.1) (2,503.5)19 Retirement benefit schemes

The Group operates or participates in a number of defined benefit pension schemes which cover the majority of UK employees and certain North American employees. The scheme details are described in page 94 of the Annual Report and Accounts for the year ended 31 March 2009.

The market value of the assets at 30 September 2009 for all defined benefit schemes totalled 2,864m (2008: 2,744m and full year 2009: 2,465m).

Contributions are paid to all defined benefit schemes in accordance with rates recommended by the schemes' actuaries. The valuations are made using the Projected Unit Credit Method.

The key assumptions were as follows:

UK North UK North UK North UK North UK UK UK America America America America 30 30 31 31 31 31 31 30 30 31 31 Sept Sept March March March March March Sept Sept March March 2009 2008 2009 2008 2007 2006 2005 2009 2008 2009 2008 % % % % % % % % % % % Discount 5.45 5.1 7.2 6.4 6.75 6.15 6.85 6.0 5.45 5.0 5.5rate Expected 7.6 7.0 7.85 7.5 7.75 7.5 7.85 7.5 7.5 7.3 7.6return on scheme assets Expected 4.4 3.5 4.8 3.75 4.1 3.0 4.8 3.5 4.3 4.1 4.1rate of salary increases Inflation 2.9 2.3 3.3 2.5 2.6 2.0 3.3 2.5 2.8 2.6 2.6 Future 2.9 - 3.3 - 2.5 - 3.3 - 2.8 2.6 2.6pension increases

Amounts recognised in the condensed consolidated income statement in respect of these defined benefit schemes are as follows:

30 30 31 31 31 31 31 Sept Sept March March March March March 2009 2008 2009 2008 2007 2006 2005 GBPm GBPm GBPm GBPm GBPm GBPm GBPm Current service cost 29.3 34.2 70.1 74.9 75.2 53.4 46.1 Interest cost 77.9 77.8 158.6 125.4 102.0 89.0 80.0 Expected return on scheme (81.8) (96.5) (196.2) (174.4) (140.5) (107.6) (87.9)assets Interest on franchise (2.6) 0.4 0.8 (0.1) (1.0) (2.3) (1.5)adjustment Past service cost - - (3.0) (1.7) (13.2) (16.6) - 22.8 15.9 30.3 24.1 22.5 15.9 36.7

Actuarial gains and losses have been reported in the condensed consolidated statement of comprehensive income.

The amount included in the condensed consolidated balance sheet arising fromthe Group's obligations in respect of its defined benefit pension schemes is asfollows: 30 30 31 31 31 31 31 Sept Sept March March March March March 2007 2009 2008 2009 2008 2006 2005 GBPm GBPm GBPm GBPm GBPm GBPm GBPm

Fair value of schemes' 2,863.9 2,743.6 2,464.9 2,911.4 2,506.7

1,992.6 1,578.4assets Present value of defined (3,600.4) (2,760.4) (2,789.6) (2,788.3) (2,488.5) (2,193.8) (1,881.8)benefit obligations Rail franchise 219.2 14.1 75.9 (13.8) 2.2 38.3 41.7adjustment (60%) Irrecoverable surplus - (51.1) - (30.7) (6.8) - - Adjustment for employee 172.3 28.4 80.1 10.4 10.2 30.9 40.6share of Rail Pension Schemes' deficits (40%) (Deficits)/surplus in (345.0) (25.4) (168.7) 89.0 23.8 (132.0) (221.1)schemes This amount is presented in the condensed consolidated balance sheet as follows: Non-current assets 3.8 114.3 111.5 186.2 57.1 - - Non-current liabilities (348.8) (139.7) (280.2) (97.2) (33.3) (132.0) (221.1) (Liabilities)/assets (345.0) (25.4) (168.7) 89.0 23.8 (132.0) (221.1)recognised in the condensed consolidated balance sheet