REG-FirstGroup PLC: Trading Statement <Origin Href="QuoteRef">FGP.L</Origin>

FirstgroupAnnouncement

28/01/2016 07:10

FIRSTGROUP PLC                                 

                     THIRD QUARTER 2015/16 TRADING UPDATE                      

FirstGroup plc (the 'Group'), the leading transport operator in the UK and
North America, today reports the following update on trading since the 2015
half-yearly results.

Summary

  * Group revenues in the third quarter decreased by 9.5% on a constant
    currency basis, principally reflecting:
      + changes to the rail franchise portfolio, and
      + the number of First Student operating days this year due to the timing
        of school calendar.
  * Excluding these previously announced effects, Group revenues increased by
    0.9% in constant currency in the period
  * Continued progress of the transformation plans in the third quarter was
    mitigated by a challenging trading environment:
      + First Bus revenues affected by lower than forecast high street retail
        footfall with exceptionally wet weather and flooding in some markets,
        and
      + First Student experienced higher costs related to acute driver
        shortages in certain locations as a result of the tightening US
        employment market.
  * Management's outlook for operating profit in the current financial year is
    slightly lowered by trading in the period
  * Confident that the transformation plans continue to improve underlying
    performance and will drive sustainable cash generation over the medium term
    as planned
  * Awarded TransPennine Express rail franchise in December, increasing
    duration of First Rail portfolio to at least 2023

Divisional performance in the third quarter

For First Student, operating performance in the period has benefited from the
second year of improved pricing achieved in the bid season completed earlier in
the financial year. We continue to make progress with our cost efficiency
programme, but this has been partially offset by higher than budgeted costs
incurred in response to acute driver shortages in certain of our markets. As
previously indicated, First Student's results this financial year will be
impacted by fewer school days operated due to the timing of the school
calendar. Schools will make these days up at the end of the academic year,
which will fall into our 2016/17 financial year. Overall our turnaround of
First Student continues to make progress toward our double digit margin target.

As expected, First Transit continues to be affected by the substantial
reduction in the oil price in the third quarter of the prior financial year,
which has resulted in lower demand for our shuttle services in the Canadian oil
sands region. These revenue declines have however been offset by organic growth
and new contracts in other segments, as First Transit continues to win business
from our pipeline of predominantly capital-light opportunities in both our core
and adjacent geographic and service markets. For example, we were awarded
shuttle contracts at Sacramento Airport and Northwestern University, and work
commenced under our Houston paratransit and Panama transit management contracts
in the period.

Greyhound's like-for-like revenues in the third quarter decreased by 5.2%,
continuing to reflect the reduced passenger demand experienced across the coach
industry since fuel prices fell sharply in the prior year. Our point-to-point
revenues remain more resilient than the wider division, with like-for-like
Greyhound Express revenues in the third quarter decreasing by 1.2%. We continue
to mitigate the impact of this demand contraction on our margins by flexing our
cost base. Our roll out of yield management, real-time pricing and customer
relationship systems across the Greyhound network continued to plan in the
period.

First Bus revenues in the period were adversely affected by lower than expected
high street retail footfall in the run up to Christmas, with exceptionally wet
weather and flooding impairing services in some of our markets. Like-for-like
revenues in the period were flat, with commercial passenger revenue growth of
0.9% and ongoing weakness in concessionary revenues as seen across the
industry. Our cost efficiency programme continues to move forward as planned,
and we remain on course to improve trading margins for the financial year by
one percentage point before the impact of the previously indicated depot
closures. In November we welcomed confirmation following the Comprehensive
Spending Review that Government funding of the Bus Services Operators' Grant
(BSOG) will be maintained through to 2020/21.

Our First Rail business experienced some slowing in passenger demand growth in
the weeks following the Paris terror attacks in November and in areas affected
by recent flooding, with like-for-like passenger revenue growth in the third
quarter of 5.6%, though these are not expected to affect full year results for
the division. In the period we were pleased to be awarded the TransPennine
Express franchise for at least another seven years from 1 April 2016, and
submitted our bid for the East Anglia franchise competition, for which the
winner will be announced in June ahead of the franchise start in October 2016.

Financial position

There is no material change in the Group's financial position since that
reported at the half-yearly results in November 2015. We continue to expect
underlying net cash flow for the current year to be broadly flat.

Commenting on today's announcement, FirstGroup Chief Executive Tim O'Toole
said:

"Our transformation plans continue to make headway despite a challenging third
quarter trading period in our markets, with disappointing retail footfall and
the terrible weather affecting First Bus, and our largest division First
Student experiencing acute driver recruitment and retention challenges in
certain locations. While these issues have slightly moderated our trading
performance in the period they are not of a magnitude to materially affect our
multi-year transformation plans, which we expect to deliver significantly
improved cash generation in our next financial year as planned. Our ability to
create sustainable value in the medium term continues to strengthen through our
improvements to First Student's contract pricing and cost efficiency, the
transformation of Greyhound's business model through improved systems and the
restoration of profitable commercial passenger revenue growth to First Bus,
while our disciplined but ambitious approach to rail franchising has resulted
in the award of the TransPennine Express franchise to at least 2023."

Investor information

A conference call for investors and analysts will be held at 9:00am today.
Please call +44 (0) 20 7725 3354 in advance of the call to register and receive
joining details. A playback facility will be available together with a pdf copy
of this announcement at www.firstgroupplc.com/investors.

The Group is scheduled to announce its results for the year to 31 March 2016 on
Tuesday 14 June 2016.

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Media
Tel: +44 (0) 20 7725 3354

Contacts at Brunswick PR:
Michael Harrison / Andrew Porter, Tel: +44 (0) 20 7404 5959

Notes

Financial figures for the 'period' or the 'third quarter' include the results
of the rail business for the twelve weeks to 12 December 2015 and the results
of all the other businesses for three months to 26 December 2015. No account is
taken of foreign exchange translation effects in the descriptions of divisional
performance.

Figures presented in this announcement are not audited. Certain statements
included or incorporated by reference within this announcement may constitute
'forward-looking statements' with respect to the business, strategy and plans
of the Group and our current goals, assumptions and expectations relating to
our future financial condition, performance and results. By their nature,
forward- looking statements involve known and unknown risks, assumptions,
uncertainties and other factors which may cause actual results, performance or
achievements of the Group to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Shareholders are cautioned not to place undue reliance on the
forward-looking statements. Except as required by the UK Listing Rules and
applicable law, the Group does not undertake any obligation to update or change
any forward-looking statements to reflect events occurring after the date of
this announcement. Nothing in this announcement should be construed as a profit
forecast. Past performance cannot be relied upon as a guide to future
performance and persons needing advice should consult an independent financial
adviser.

FirstGroup plc (LSE: FGP.L; the 'Group') is the leading transport operator in
the UK and North America. With approximately £6 billion in revenues and around
110,000 employees, we transported around 2.4 billion passengers last year. Each
of our five divisions is a leader in its field: In North America, First Student
is the largest provider of student transportation with a fleet of around 49,000
yellow school buses, First Transit is one of the largest providers of
outsourced transit management and contracting services, while Greyhound is the
only nationwide operator of scheduled intercity coach services. In the UK,
FirstGroup is one of Britain's largest bus operators running a fleet of some
6,300 buses, and we are one of the country's most experienced passenger rail
operators, carrying around 280 million passengers last year.

Our vision is to provide solutions for an increasingly congested world...
keeping people moving and communities prospering.

Visit our website at www.firstgroupplc.com



END



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