TIDMFGP
Embargoed until 7:00am on Wednesday 30 September 2009
FIRSTGROUP PLC
PRE CLOSE TRADING UPDATE
FirstGroup plc (`The Group') provides the following update on trading for the
six months ended 30 September 2009, ahead of its half-year results to be
announced on 4 November 2009.
Overall trading
The Group provided an update on trading as part of its AGM and Interim
Management Statement on 16 July 2009. Since then the Group's overall trading
performance remains in line with management expectations.
A diverse portfolio of operations in which 50% of revenues are contract-backed,
providing stability against a fast changing economic backdrop, underpins the
continued performance of the Group. In those areas of our business where we are
dependent on passenger demand we have utilised the flexible operating models
that exist and reacted quickly to changing market conditions.
As previously announced, during this financial year the Group will absorb a
significant increase in its hedged fuel costs which are set to recover by over
GBP100m in 2010/11. Significant progress has been made in implementing the cost
reduction programme that will achieve more than GBP200m of annual savings during
the year. We identified scope to further reduce indirect headcount, in
particular in North America, and have now reduced headcount by over 4,000
across the Group.
Strong cash generation is a key priority and the actions we have taken have
ensured that we remain on course to achieve our cash generation targets of GBP
100m per annum in 2009/10 and 2010/11, which will be applied to net debt
reduction.
UK Bus
Like-for-like passenger revenue is expected to increase by 2.3% during the
period. We have taken action to protect revenue per mile while ensuring a
continued focus on improving service quality, operational performance and cost
efficiencies. We have utilised the flexible operating model outside of London
to match our services to any changing demand and this, together with our cost
reduction programme, has ensured that profitability has remained on course.
Value for money is a key driver in this current economic environment and we
continue to introduce ticketing and travel initiatives designed to promote the
cost and environmental benefits of bus travel.
UK Rail
Like-for-like passenger revenue growth is expected to be 1.7% during the
period. The performance of our rail business is as we anticipated with trends
being relatively stable over the period, particularly in the second quarter.
Despite the clear impact of the weaker economy on the UK's railways, we
continue to deliver revenue growth and are substantially insulated from the
effects of the recession by the contractual revenue support mechanisms in
place. We are currently receiving revenue support at the highest level of 80%
for both of our London based franchises. With passengers continuing to seek
value there has been a strong demand for advance purchase and discounted
tickets during the period.
North America Contract Businesses
Our North America contract business, providing a stream of revenues with
medium-term visibility and no exposure to passenger demand, has performed well
during the period with high contract retention rates over 90%. We are seeing
the positive results of our margin enhancement programme in the Student and
Transit businesses. We continue to successfully pursue the increased
`outsourcing' opportunity arising from the current weaker economic environment.
We delivered a successful school start up period and were pleased to have won
contracts for more than 400 buses that were previously operated in the public
sector.
Greyhound
Greyhound, which represents less than 10% of Group EBIT, has seen revenues fall
as a result of the weak US economy and increased unemployment. Revenues during
the period are expected to reduce by 20.3%. Revenue trends stabilised over the
period and began to improve towards the end of the second quarter. We have
taken action to protect revenue per mile by reducing services to match demand
and removing surplus overheads. Management actions will further reduce the cost
base, increase efficiencies while continuing to improve customer service and
on-time performance. Greyhound now has a stronger foundation on which to build
and is well placed to benefit from economic recovery in the future.
Balance sheet & Financing
During the period we have made further progress with our strategy to extend our
debt maturity profile and reduce reliance on bank debt. On 9 September we
launched GBP200m of 15-year bonds with a coupon of 6.875%. The proceeds were used
to repay existing bank debt and extended our average debt duration to 6.2
years. This, our fifth bond issue, was substantially oversubscribed from a high
quality order book. We are very pleased by the continued support from fixed
income investors demonstrating the confidence in the strength and resilience of
the Group. The Group has no material refinancing requirement until February
2012.
Outlook
We are encouraged by the Group's continued resilience in the first half of the
year in delivering a good performance with overall trading in line with
management expectations despite challenging economic conditions. We have
demonstrated our ability to respond swiftly to changing patterns of passenger
demand. This, together with the cost reduction programme we have implemented
and a relentless focus on budgetary control, has ensured that we remain on
course to achieve our cash generation and earnings targets.
Undoubtedly the transport industry faces a challenging year ahead however, the
Board remains confident in the underlying strength and resilience of the Group
and its ability to continue to deliver long-term value for its shareholders.
A conference call for analysts and investors will be held at 9:00am today.
Please call +44 207 291 0507 / 0512 to register your details to join the call.
Contacts FirstGroup plc:
Sir Moir Lockhead, Chief Executive
Nick Chevis, Acting Finance Director
Tel: +44 207 291 0512
Rachael Borthwick, Corporate Communications Director
Tel: +44 207 291 0508 / +44 7771 945432
END
(END) Dow Jones Newswires
September 30, 2009 02:00 ET (06:00 GMT)