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FirstGroup PLC (FGP)

  Print      Mail a friend       Annual reports

Wednesday 16 May, 2007

FirstGroup PLC

Final Results


Embargoed until 07:00hrs on Wednesday 16 May 2007

                                                                 FIRSTGROUP PLC

                                                            PRELIMINARY RESULTS

                                                  FOR THE YEAR TO 31 MARCH 2007

SUMMARY 2006/07

  * EXCELLENT PERFORMANCE - CLEAR STRATEGY DELIVERING RESULTS
   
  * 
      + Excellent results despite £37.1m fuel cost increase
       
      + Revenue up by 22.4% and adjusted operating profit up 12.8%
       
      + Adjusted EBITDA - £398.9m up 13.4%
       
      + Adjusted basic EPS - 33.7p up 9.1%
       
      + Dividend growth - 10% for the 3rd consecutive year
       
  * UK RAIL - STRONG PERFORMANCE REVENUE INCREASED BY 56.6%
   
  * 
      + Investment delivering passenger growth and improved performance
       
      + Integrated enlarged First Great Western and First Capital Connect -
        already delivering improvements in fleet, capacity and services
       
      + First TransPennine Express, First ScotRail and Hull Trains - strong
        passenger growth and excellent operational performance
       
      + Pre-qualified for 3 new franchises - East Midlands, New Cross Country
        and InterCity East Coast
       
  * UK BUS - STRONG TRADING DESPITE INCREASED FUEL COSTS
   
  * 
      + Profit growth and improved margin despite £28.2m fuel costs
       
      + Continued revenue growth and increased passenger journeys
       
      + Further year of improvement in operational performance
       
      + Successful voluntary partnerships signed in major cities
       
  * NORTH AMERICA - EXCITING GROWTH OPPORTUNITIES IN LARGE, FRAGMENTED MARKET
   
  * 
      + First Student - margin improved and >95% contract retention
       
      + First Transit - margin growth and successful cost efficiency programme
       
      + First Services - new business and retention of 10-yr federal contract
       
  * ACQUISITION OF LAIDLAW INTERNATIONAL, INC.
   
  * 
      + Transformational deal - significant value opportunity
       
      + Both sets of shareholders approved transaction in April
       
      + Working with Dept. of Justice on regulatory approval process
       
      + Integration planning well underway - focus on synergies
       
FINANCIAL SUMMARY 2006/07

  * Revenue £3,708.8m (2006: £3,030.9m)
   
  * Adjusted operating profit1 £259.2m (2006: £229.7m)
   
  * Operating profit £203.6m (2006: £210.7m)
   
  * Adjusted EBITDA2 £398.9m (2006: £351.7m)
   
  * Adjusted profit before tax1 £195.8m (2006: £176.4m)
   
  * Profit before tax £140.2m (2006: £157.4m)
   
  * Adjusted basic earnings per share1 33.7p (2006: 30.9p)
   
  * Basic earnings per share 23.1p (2006: 27.4p)
   
  * Interest cover3 6.3x (2006: 6.6x)
   
  * Dividend per share 15.5p (2006: 14.1p)
   
  * Net debt at 31 March 2007 £516.2m (2006: £704.4m)
   
1Before intangible asset amortisation, non-recurring bid costs, other
non-recurring items and (loss)/profit on disposal of fixed assets, as shown in
the consolidated income statement on page 22.

2Adjusted operating profit as defined plus depreciation.

3Calculated as adjusted EBITDA divided by the net of finance costs and
investment income.

Commenting, FirstGroup's Chief Executive, Moir Lockhead said:

"I am pleased to report a highly successful year for the Group. The strength of
our businesses is demonstrated by these robust results despite absorbing £37.1m
as a result of increased fuel costs. Our business is highly cash generative and
we have achieved record adjusted EBITDA of £398.9m enabling us to invest for
growth in the business and return cash to shareholders by increasing the
dividend by 10% for the third consecutive year. Adjusted basic earnings per
share increased by 9.1% to 33.7p.

"We announced in February our proposed acquisition of Laidlaw International,
Inc. This transformational deal is an exciting opportunity to generate
increased value and returns for shareholders and create a strong and robust
business in a highly fragmented market. We will be able to leverage value
through scale and secure future growth and returns for shareholders through
improved operating efficiencies and the delivery of substantial synergies. On
completion of the acquisition, in excess of 50% of the Group's revenues and
earnings will be generated in North America.

"All of our businesses have delivered a very strong performance. Our UK Rail
division continues to go from strength to strength. This year we commenced
operation of two new enlarged franchises. We have made significant investment
across all of our rail businesses to deliver improvements in rolling stock,
capacity and services for passengers. Demand for our services continues to
accelerate with passenger and income growth across all of our rail operations.
We are delighted to pre-qualify for a further three franchises: East Midlands,
New Cross Country and InterCity East Coast and await the outcome later this
year. I am pleased with the strong trading result from our UK Bus division
despite absorbing additional fuel costs of £28.2m. We have delivered improved
operating performance and volume growth. Increased passenger journeys, together
with our initiatives to grow revenue and bear down on costs, have resulted in a
strong performance. We continue to promote a partnership approach to delivering
a comprehensive and sustainable bus network in the towns and cities where we
operate and have seen encouraging growth as a result. Our North American
business has enjoyed high contract retention and margin improvement. We are
seeing the positive impact of our strategy to mitigate fuel cost pressures
through the contract renewal process. The Board is pleased with the consistent
returns generated from this business since we entered the market in 1999 and
remains confident that North America offers further exciting growth prospects
for the Group.

"Our strategy is focused on delivering value for shareholders from further
growth within our core businesses and exploring opportunities to develop in new
markets. For the third year running we have increased the dividend by 10%
reflecting the Board's confidence in the Group's future prospects and ability
to continue to generate strong cash flows. We are committed to this level of
annual dividend growth for the foreseeable future, at least for the next three
years. I am pleased to report that trading in the new financial year has
started well and is in line with our expectations."

Enquiries FirstGroup plc :

Moir Lockhead, Chief Executive Tel: 020 7291 0512

Dean Finch, Finance Director Tel: 020 7291 0512

Rachael Borthwick, Corporate Communications Director Tel: 020 7291 0508

PHOTOGRAPHS FOR THE MEDIA ARE AVAILABLE AT WWW.NEWSCAST.CO.UK

NOTES TO EDITORS:

FirstGroup plc is a UK based international transport company with revenues of
over £3.7 billion a year. We employ over 74,000 staff throughout the UK and
North America and move more than 2 billion passengers a year.

  * The Group is Britain's largest bus operator running more than one in five
    of all local bus services. A fleet of nearly 9,000 buses carries some 2.9
    million passengers a day in more than 40 major towns and cities.
   
  * The Group is the UK's largest rail operator with four passenger franchises
    - First Great Western, First Capital Connect, First TransPennine Express
    and First ScotRail - and one open access operator, Hull Trains.
   
  * The Group operates one quarter of the UK passenger rail network, with a
    balanced portfolio of intercity, commuter and regional services, carrying
    almost 260m passengers per annum.
   
  * The Group is shortlisted for the East Midlands, New Cross Country and
    InterCity East Coast franchises.
   
  * The Group operates freight services through GB Railfreight.
   
  * The Group operates Croydon Tramlink network which carries over 24 million
    passengers a year.
   
  * In North America the Group has three operating divisions: Yellow School
    Buses (First Student), Transit Contracting and Management Services (First
    Transit) and Vehicle Fleet Maintenance and Support Services (First
    Services). Headquartered in Cincinnati the businesses operate across the US
    and Canada.
   
  * First Student is the second largest provider of student transportation in
    North America with a fleet of approximately 22,000 yellow school buses,
    carrying nearly 2 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
    transit authorities in cities such as Los Angeles, Houston and Denver. It
    is one of the largest providers of airport shuttle bus services in the US,
    serving airports in cities such as Baltimore, Philadelphia and Miami. It
    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. It provides fleet
    maintenance for public sector customers such as the Federal Government,
    cities and fire and police departments. It also provides a range of support
    services including vehicle maintenance, logistics support and facilities
    management to public and private sector clients including the US Navy and
    US Air Force.
   
  * On 9 February the Group announced the proposed acquisition of Laidlaw
    International, Inc. the leading operator of school and intercity bus
    transportation and a supplier of public transit services in North America
    for a consideration of US$3.6 billion (£1.9 billion). The acquisition
    remains conditional on the receipt of necessary antitrust approvals in the
    US and Canada. At this time the Board has no further update on the likely
    completion date.
   
  * Laidlaw International, Inc. has some 62,500 employees and operates three
    main business segments:
   
  * Laidlaw Education Services which operates approximately 40,000 yellow
    school buses in 37 states in the US and six provinces in Canada.
   
  * Greyhound is the only national provider of scheduled intercity bus
    transportation services in the US and Canada. Greyhound provided scheduled
    passenger services to approximately 2,400 destinations throughout the US
    and Canada carrying approximately 24 million passengers annually.
   
  * Laidlaw Transit Services provides municipal public transportation services
    in North America specialising in paratransit and fixed route contract
    services in approximately 23 states in the US.
   
Chairman's statement

I am delighted to report a very successful year for the Group delivering on our
clear strategy to profitably grow in our core markets and create further value
for shareholders. Our focus is on delivering safe, high quality and reliable
services throughout our business. The safety of our passengers and employees is
our highest priority and we strive to lead the industry in this area and
achieve the highest possible standards across the Group.

This has been a year of excellent progress across our business. We achieved a
record set of results with revenue increased to £3,708.8m (2006: £3,030.9m) and
adjusted profit before tax (before intangible asset amortisation, non-recurring
bid costs, other non-recurring items and loss on disposal of fixed assets)
increased to £195.8m (2006: £176.4m). Profit before tax was £140.2m (2006: £
157.4m) reflecting higher one-off costs primarily as a result of non-recurring
rail franchise mobilisation costs and lower property results. I am very pleased
that the Group has delivered this strong performance despite the additional
fuel cost increase during the year which impacted Group operating profit by £
37.1m. EBITDA (Group operating profit* plus depreciation) increased to a record
£398.9m (2006: £351.7m) and cash generation has been excellent. Adjusted basic
earnings per share increased by 9.1% to 33.7p (2006: 30.9p). The Board has
proposed a final dividend, subject to approval by shareholders, of 10.5p making
a full year payment of 15.5p, an increase of 10%. The dividend is covered 2.2
times, before intangible asset amortisation, non-recurring bid costs, other
non-recurring items and loss on disposal of fixed assets. It will be paid on 24
August 2007 to shareholders on the register on 20 July 2007. The Board's
commitment to increase dividends by 10% for the foreseeable future, at least
for a further three years, reflects our confidence in the Group's strong cash
generation and prospects for further growth.

On 9 February we were delighted to announce the proposed acquisition of Laidlaw
International, Inc. the leading provider of school and intercity bus
transportation and a supplier of public transit services in North America.
Following the approval for this transaction from both our shareholders and
Laidlaw stockholders on 20 April we now only await the necessary antitrust
regulatory approvals in the US and Canada for completion. We believe this
transformational acquisition will significantly enhance shareholder value and
underpins future growth. The integration of Laidlaw with FirstGroup gives us a
unique opportunity to become the leading operator in the large, fragmented
North American transport market and leverage value through scale. We have an
excellent track record of successfully acquiring and integrating businesses and
we are excited by the opportunities this acquisition will bring to increase the
service offering to customers.

We recognise that our staff are our greatest asset. On behalf of the Board I
would like to take this opportunity to thank all of our staff for their
continued hard work and commitment in delivering another excellent year for the
Group. I would also like to welcome new employees who have joined our
businesses in the UK and US during the period.

I am very pleased with the progress achieved by the Group this year building on
our position as a leading transport provider. We are delivering on our clear
strategy to create shareholder value by sustainable growth in our core
businesses and exploring opportunities to develop in new markets. We have made
significant investment in our business to ensure that we offer the highest
level of service to our customers and we remain committed to increasing the
dividend by 10% per annum for the foreseeable future. This is an exciting time
for the Group as we consolidate our position in the highly attractive North
American market and continue to deliver improved operating performance and
revenue growth in our UK businesses. The Board is optimistic about the
opportunities for the business and looks forward to the future with confidence.

Martin Gilbert

Chairman

*Operating profit referred to throughout this document refers to operating
profit before intangible asset amortisation, non-recurring bid costs, other
non-recurring items and (loss)/profit on disposal of fixed assets.

Chief Executive's operating review

OVERVIEW

Safety

The safety and security of our passengers and staff is fundamental to
everything that we do. We continually seek to improve the safety culture
throughout our business and apply a `zero tolerance' approach to unsafe acts
and practices. Over the past few years we have made great strides in improving
our working practices and procedures and in monitoring our performance in this
area. We are never complacent and continually strive to meet the highest
possible standards of safety for our passengers and staff. For example, our
Injury Prevention Programme (IPP) is not only innovative but unprecedented in
our industry. I am pleased to report that IPP has been rolled out across all of
our operations and is designed to engage all our staff and encourage good
safety practices to embed the safety culture in all of our operations.

Results

I am delighted with the excellent performance of the Group which has delivered
a record year of growth. Group revenue increased by 22.4% to £3,708.8m (2006: £
3,030.9m). Adjusted operating profit was £259.2m (2006: £229.7m). This strong
performance is all the more notable as we have faced strong headwinds during
the year, primarily the significant rise in fuel costs. In these results
operating profit was impacted by £37.1m by additional fuel costs. Foreign
exchange translation on North American results reduced sterling earnings year
on year by £3.8m - the average rate for 2006/07 was $1.89 compared to $1.79 for
2005/06. Profit before tax was £140.2m (2006: £157.4m) reflecting higher
one-off costs primarily as a result of non-recurring rail franchise
mobilisation costs and lower property results. Strong cash generation is a
feature of this business and I am pleased to report that the Group generated
record EBITDA (adjusted operating profit plus depreciation) of £398.9m (2006: £
351.7m) an increase of 13.4%, enabling us to continue to invest in the business
as well as increasing the dividend by 10% for the third consecutive year.

UK RAIL

The UK Rail division operates passenger and freight services in the UK. We have
a strong, balanced portfolio of intercity, regional and commuter franchises.
Passenger rail franchises consist of First Great Western, First Capital
Connect, First TransPennine Express and First ScotRail. We also operate Hull
Trains, a non-franchised open access intercity passenger train operator, and we
provide rail freight services through GB Railfreight. We are the UK's largest
rail operator carrying almost 260 million passengers per annum.

Results

Our successful rail division has delivered its best ever year of growth. We are
committed to the long-term development of railways in the UK and are investing
to deliver improved services for passengers. We are the only operator to run
every type of overground rail service in the UK, from high speed intercity
trains and overnight sleepers to local branch lines, regional and commuter
services and open access, light rail and freight operations. We will continue
to build on our reputation of investment, innovation and customer service.

Revenue in the Group's rail division increased by 56.6% to £1,824.1m (2006: £
1,164.9m) and operating profit increased by 36.7% to £108.8m (2006: £79.6m)
reflecting a full year contribution from the new and enlarged rail franchises
together with strong volume growth across our network. Across all of our rail
operations we have experienced good growth in passenger volumes.

First Great Western

At First Great Western we are working hard to ensure that we deliver our
franchise plans and we are investing £200m to improve the services we offer our
customers. Since we commenced operation of the new enlarged franchise
(combining First Great Western, First Great Western Link and Wessex Trains) we
have integrated three diverse railway businesses into one operation. First
Great Western operates more high speed trains into London than any other
operator and provides train services for 1.5 million passengers each week.

During the past 12 months we have consolidated depots, introduced a new
management structure and common systems, brought together 4,400 staff,
introduced new amalgamated timetables, commenced a substantial fleet
refurbishment programme and started the many major improvements which we
committed to as part of our franchise. Despite our best efforts to ensure a
seamless transition we faced some operational challenges principally as a
result of changing the rolling stock maintenance depot and the introduction of
a new consolidated timetable. We made great efforts to swiftly rectify those
issues, the majority of which we have now overcome. The new timetables which
will be introduced in May and December this year will further improve services.

As part of our £145m investment to completely overhaul the High Speed Train
(HST) fleet, we have commenced the installation of new more reliable,
environmentally friendly engines. We have already fitted 42 new engines which
have improved operating performance, doubled reliability, cut CO2 emissions by
64% and smoke emissions by 42%. The remainder of these new engines will be in
place by the end of this year. We are also making good progress on our fleet
refurbishment programme. A new stylish and contemporary interior for the HSTs
will offer a step change in quality for rail passengers and provide an
additional 3 million seats for passengers per annum. The first of these new
designed carriages are now in service and we are on track to complete the
refurbishment of more than 405 carriages by the end of the financial year. We
are also spending £4m on an interior refresh of our fleet of regional trains.
The new platform at Bristol Parkway opened this month and will ease congestion
of trains into and departing from the station and reduce delays for passengers
travelling to London, Wales, Birmingham and the South West. We are working with
Network Rail to upgrade the majority of the Reading to London relief line to
90mph by mid-2008 creating greater capacity, reliability and improved journey
times for commuters in the Thames Valley. We have progressed our plans to
deliver a range of improvements across the franchise area including the
installation of automatic ticket gates at Exeter St Davids, Plymouth and
Swindon, reducing both ticket fraud and crime on the railways. We have also
invested in station improvements such as the installation of more than 120
additional ticket vending machines, increased car parking at stations,
refurbished facilities and waiting areas at a number of stations across our
network. We have simplified our fares structure and now offer some 100,000
significantly discounted tickets each week for advance purchases and off peak
travel. `Firstminutefares' enables our customers to save up to 80% on regular
fares when booking early. This has been very popular and already more than 2.2
million tickets have been sold saving customers a total of £28m compared to the
equivalent walk-up fare. First Great Western faces major challenges from ageing
infrastructure and the effect this has on performance. We are working closely
with Network Rail, the infrastructure provider, to tackle the deep-rooted
performance issues on the network and overcome the recurring infrastructure
problems on our main line. A number of initiatives have been designed to
improve performance and we are committed to working in partnership to deliver
improved infrastructure and services across our network.

First Capital Connect

First Capital Connect, which operates across London and the South East, had an
equally busy first twelve months of operation and made an overall improvement
in operational performance. PPM, the industry measurement of punctuality and
reliability, improved to over 88% and we were particularly pleased to achieve
the highest ever recorded PPM of over 95% on the Great Northern part of the
network. We are investing £55.0m, the majority in the first three years of the
franchise term, to improve the service we offer our customers. During the year
we commenced the refurbishment of waiting rooms and facilities at a number of
our stations across the network. In addition we embarked on a programme to
refresh the interiors of our class 319 fleet. Eight units have already been
completed and we will continue to roll this out to the remaining units in due
course. In December 2006 we announced a further investment of £2m, over and
above our franchise commitment, to improve the interiors of the trains that
operate on the Great Northern route. This additional work, which will improve
on-board comfort for passengers, commenced in March and will be completed by
the end of this year. During this period we also brought the engineering of our
fleet in house which delivered greater service quality and cost efficiency. In
April we welcomed the announcement by the Department for Transport that the
remaining twelve class 319 trains will be transferred to First Capital Connect
from Southern Railway. These trains will provide up to 8,000 extra seats per
day during the peak periods and help to ease crowding on our very busy
Thameslink route. In addition improvements to be introduced in the May
timetable will also increase capacity at peak times, providing more seats for
customers in the morning and evening peak with additional services and an
increased number of carriages on some of our busy routes. One of our key
priorities is to improve security on the network and reduce ticket fraud
through improved revenue protection. We have provided customers with improved
ticketing facilities and have already reduced revenue leakage through the
introduction of additional staff to carry out further ticket checks and the
installation of automatic ticket gates at a number of stations across the
network including Blackfriars, City Thameslink and Stevenage. Further automatic
ticket gates will be installed at key stations across the network in the coming
months. We have also invested over £1m to provide additional Police Community
Support Officers and British Transport Police to serve our network. These
initiatives are proven to improve security, reduce ticketless travel and lessen
vandalism.

First ScotRail

We are proud to operate Scotland's train services through our First ScotRail
operation. Since we took over the franchise in October 2004 we have established
a successful record of delivering improved services for passengers together
with a strong focus on operating performance and service quality. We have
reduced operator delays, for which we are responsible, by some 39%, over and
above our franchise commitment of 2% per annum. Performance has continued to
improve over the year and we are now regularly running services at more than
90% punctuality. We were pleased to record the highest PPM performance in 7
years for the last period. In addition customer satisfaction has been recorded
at its highest level and outperformed the average for regional train operators.
During the year we continued to invest in fleet reliability and passenger
comfort and also provided additional services to meet demand such as increased
late night services on 18 routes out of Glasgow Central on Fridays. Increased
security and revenue protection is a key priority and we have installed
automatic ticket gates at stations including Aberdeen, Ayr, Dundee and
Stirling. Security is further enhanced by the installation of CCTV on almost
the entire First ScotRail fleet and we are continuing our investment programme
to roll out CCTV, customer information systems, induction loops and help points
at stations across the country. Over the last year a number of investments have
been made to improve the level and availability of facilities at stations in
Scotland. In February 2007, an extension to Haymarket Depot in Edinburgh was
opened. This extension of two maintenance facilities will assist in further
improving the reliability of the Class 170 and Class 158 fleets, by providing
the opportunity for more trains to be maintained more quickly.

First TransPennine Express

First TransPennine Express had another successful year with excellent
operational performance coupled with strong revenue and volume growth
reflecting the high demand for its services in the region. Passenger journeys
increased by 7.3% to 18.5 million during the year. Our focus on performance has
ensured that PPM is consistently over 90% and overall customer satisfaction has
exceeded the national average for all train operators. Since we commenced
operation of the franchise two years ago we have introduced an entire fleet of
brand new 100mph Siemens trains which have a range of new, high quality
features such as improved seating, air conditioning, on-board security cameras
and easier access for all passengers. We continued our station investment
programme during the year and spent £2.0m refurbishing waiting areas and
customer and staff facilities. We secured additional funding from the
Department for Transport to provide accessibility improvements such as
automatic doors, disabled facilities and ticket counters at stations across our
network. During the year we successfully managed the integration of the
Manchester Airport to Blackpool routes which we took over in June last year. We
have demonstrated our competence in delivering the process both smoothly and
cost efficiently. From December 2007 we will further extend our TransPennine
network to operate the Manchester Airport to Glasgow and Edinburgh services. We
are very proud of our achievements at First TransPennine Express and were
delighted that our efforts were recognised by the industry when we were awarded
an unprecedented four national awards, including `Rail Business of the Year' at
the HSBC Rail Business Awards 2006.

Hull Trains

Hull Trains, our non-franchised, open access intercity train company operating
between London Kings Cross and Hull, performed well during the year with strong
passenger volume growth which increased by 30%. In December we were pleased to
be awarded an additional train path by the Office of Rail Regulation bringing
our number of weekday services to seven in each direction. This clear response
to passenger demand ensures that we can offer our customers a greater choice
and level of service. Our focus on operational performance has ensured that we
are once again ranked as the most reliable long distance operator on the East
Coast Mainline with performance figures that exceed the industry average for
long distance operators.

GB Railfreight

We are pleased with the progress of GB Railfreight (GBRf), our innovative and
demand responsive freight company. GBRf enjoyed another successful year winning
further contracts worth some £45.0m to provide rail freight services around the
UK for customers such as Drax Power, EDF Energy, Mendip Rail and Serco. In
addition we were pleased that Royal Mail extended a contract for GBRf to move
mail by rail demonstrating the success of the operation and the service
provided. In August we successfully commenced a significant contract to
transport infrastructure materials for Metronet as part of the renewal
programme on the London Underground. In March 2007 we were pleased to run the
first freight train transporting coal between the Port of Tyne directly into
Drax Power Station in North Yorkshire. We have invested in a number of freight
locomotives and wagons in order to support the new contracts and the ongoing
development of the business. GBRf has delivered further growth and contract
wins through the development of its innovative and customer focused business
model and we are optimistic about the future prospects for this business.

New franchises

This has been a busy year for the Group as we commenced operation of our two
franchises First Great Western and First Capital Connect and integrated the new
areas with existing operations. We are committed to a long term future in the
UK's railways and are delighted to be shortlisted for three further franchises:
East Midlands, New Cross Country and InterCity East Coast. We have an
impressive and unrivalled track record of integrating services and delivering
on large investment programmes. Our bid team is highly experienced and
committed to delivering plans that meet the needs of passengers by bringing new
investment and improved services that are cost efficient.

NORTH AMERICA

In North America the Group is currently the second largest provider of student
transportation with approximately 22,000 yellow school buses operating every
day across the US and Canada. We operate a transit contracting and management
business in North America and we have a services division providing fleet
maintenance and ancillary services to public and private sector clients.

Our North American business has delivered solid and consistent returns for
shareholders since we entered the market in 1999. During that time we have
generated $1,335.8m of EBITDA. This division is cash generative after
self-financing maintenance capital expenditure, organic growth within existing
contracts and the acquisition of small in-fill businesses.

Our successful growth in North America confirms our view that this is a highly
attractive market which offers significant growth opportunities for our
business. We have built up significant experience and expertise in this
marketplace and believe that it offers opportunities to deliver further
attractive earnings growth and value for shareholders.

Results

I am pleased with the performance of our North American division which
delivered margin improvement during the year. Revenue from our three businesses
was £802.9m or $1,522.4m (2006: £826.3m or $1,476.0m). Revenue in these results
is £45.8m lower than the prior year due to foreign exchange movements.
Operating profit increased to £68.2m or $130.5m (2006: £67.1m or $120.2m)
despite absorbing additional fuel costs of $11.2m or £5.9m.

First Student

We have had a successful year within our school bus business despite continued
fuel cost pressure. US dollar revenue increased by 5.4% and operating profit
rose by 14.7%. During the year we have worked hard to mitigate the impact of
cost pressures through the contract renewal cycle and have won or renewed
business on terms which reflect the increased costs that we face. Margin
enhancement has been a priority for us this year and through contract bidding,
tight management of controllable costs and a strong focus on productivity we
have improved margins to 10.9% (2006: 10.0%). We enjoyed a good bidding season
with contract retention, which is a key feature of this business, at over 95%.
We continued to grow our share of this large, fragmented market through a
mixture of new contract wins, organic growth and in-fill acquisitions. During
the year we expanded into Sedona, Arizona and we won a significant contract in
Savannah, Georgia. In addition we completed five tuck-in acquisitions in New
Jersey, Connecticut, New York and Illinois that either complement our existing
operations or enable us to enter new markets. We were pleased to retain almost
100% of our business in Canada which remains an attractive market for First
Student in which we aim to grow further.

Looking forward we had a successful bidding season and continue to focus on
profitable growth and margin enhancement. Our strategy is to continue to
improve our product offering and closely manage our cost base in order to offer
a compelling service to our customers, parents and students. This year sees the
further rollout of new technology such as GPS and Zonar equipment which
provides us with detailed and accurate information which will enable us to
schedule services and labour more efficiently as well as provide our customers
with real time information about services.

First Transit

First Transit had a successful year with US Dollar revenue increased by 1.7%
and operating profit by 15.6%. Our strategy to improve the margin and implement
a significant cost control and efficiencies programme throughout the division
has delivered good results with margin increased to 4.9% (2006: 4.3%).

During the year we continued to grow the business with the award of new
business including paratransit contracts in California and Ohio. We also
continued to grow our share of the outsourced call centre market with a new
contract in Oregon. This is in line with our strategy to further penetrate the
faster growing light transit markets in North America. We now operate 10 call
centres in cities such as Chicago, Denver, Hartford, New York and Portland.

We were also awarded new transit management business through contracts won in
Iowa, Ohio, Texas and Virginia. We were pleased to win the contract to operate
more than 170 buses in El Paso, Texas and renew a contract in Minnesota for an
additional five years. The private shuttle bus market is an area of growth for
First Transit and during the year we acquired Cognisa. This in-fill acquisition
further strengthened our presence in the US private shuttle bus market with 19
customer contracts located across 7 states. First Transit is one of the leading
providers of shuttle bus services with contracts to serve airports in cities
such as Cincinnati, Houston, Miami, Philadelphia, Portland and Las Vegas. I am
pleased with the progress made at First Transit this year. This business, which
requires little or no capital expenditure, has improved its margin and
continues to deliver returns. We continue to grow our expertise in this market
and develop potential for future profitable growth.

First Services

This year First Services, which provides a range of outsourced vehicle
maintenance, operations and support services in the private and public sectors,
renewed a significant contract within the large, federal market. US Dollar
revenue was, as anticipated, down by 1.9% reflecting the renewal, at a lower
margin, of a substantial contract to provide land-based support services to the
US Navy. This important contract with revenues of over $450m over the term was
re-awarded to First Services for 10 years in July. Our strategy is to achieve
organic growth within the existing contract through the provision of additional
add-on services. We also won new business in the large federal market through
the award of a contract to provide support services to the Defense Logistics
Agency in San Joaquin, California. We expanded our fleet maintenance business
with new business wins for the City of Newport, Rhode Island and Ocean
Township, New Jersey and with customers such as Eastman Chemical, Allegheny
Power and Motiva Shell. Looking ahead our focus is to achieve organic growth
within the large federal contracts and continue to use our expertise and strong
track record of customer service to grow in these areas.

Proposed acquisition of Laidlaw International, Inc

On 9 February the Group announced the proposed acquisition of Laidlaw
International, Inc. the leading operator of school and intercity bus
transportation and a supplier of public transit services in North America for a
consideration of US$3.6 billion. We have received approval from both FirstGroup
and Laidlaw shareholders, and the acquisition now remains conditional on the
receipt of necessary antitrust approvals in the US and Canada. We are working
with the relevant antitrust authorities to provide the necessary information,
including the Department of Justice to comply with their second request
process.

This is a transformational deal with considerable prospects for value creation.
This is a unique opportunity to establish the leading position in the North
American transportation market, generate significant value and returns for
shareholders. In bringing together FirstGroup America and Laidlaw we believe we
can create a stronger, more robust business in a highly fragmented market. We
aim to leverage value through scale and grow earnings through improved
operating efficiencies and extraction of substantial synergies. This
acquisition will provide a strong platform for us to improve our offering to
customers bringing further operational and cost efficiencies, economies of
scale and a greater product range of services. Since the announcement we have
made good progress on a number of plans for the integration of the businesses.

Laidlaw International, Inc. has some 62,500 employees and operates three main
business segments in the US and Canada:

Laidlaw Education Services which operates approximately 40,000 yellow school
buses in 37 states in the US and six provinces in Canada.

Greyhound is the only national provider of scheduled intercity bus
transportation services in the US and Canada. Greyhound provided scheduled
passenger services to approximately 2,400 destinations throughout the US and
Canada carrying approximately 24 million passengers annually. We consider
Greyhound to be an attractive business with exciting growth prospects and have
committed to carry out a strategic review of the business.

Laidlaw Transit Services provides municipal public transportation services in
North America specialising in paratransit and fixed route contract services in
approximately 23 states in the US.

UK BUS

The Group is the largest bus operator in the UK with a fleet of nearly 9,000
buses, and a market share of approximately 23%. We carry over 2.9 million
passengers every day.

Results

I am pleased to report another year of strong trading performance from our UK
Bus division. Revenue increased to £1,073.7m (2006: £1,031.2m) as a result of
revenue and passenger growth initiatives and increased journeys including
concessions and pricing. Operating profit was £103.0m (2006: £98.4m). This is a
particularly notable achievement as operating profit was adversely impacted by
£28.2m as a result of increased fuel costs.

We continue to deliver improvements in operational performance and efficiency
within the business. Targeting improvements in quality, allied to initiatives
to tightly control our costs, continues to underpin our strategy of margin
enhancement. Depot and route optimisation, a focus on headway management
together with revenue and passenger growth initiatives, contributed to a
turnaround in profitability and service quality of operations. We are also
implementing a programme to target a consistent level of fleet cleanliness and
appearance. I am pleased to report that the significant investment in our
maintenance and engineering functions in recent years, and the implementation
of initiatives to improve engineering efficiency and planning and to
standardise our processes, has continued to reduce our lost mileage this year.

In London we have focused on operational performance and cost efficiencies and
are pleased to report that our overall punctuality and reliability has improved
again this year. Our operations in the West of London are currently top of the
Transport for London (TfL) league tables. In preparation for the western
extension of the Congestion Charge, TfL increased the frequency of a number of
our services to provide additional passenger capacity.

We welcome the Government's commitment to buses and its recognition that buses
are a crucial part of our transport system, set out in "Putting Passengers
First". We believe that the industry has demonstrated that the most effective
way to deliver better services to passengers is through voluntary partnership
agreements. Working in partnership with local authorities to deliver improved
bus services for passengers continues to deliver encouraging results in our
business. Passenger numbers are increasing throughout our operations, supported
by growing numbers of concessionary fares passengers benefiting from the
Government's introduction of a new scheme in April 2006. We are seeing
particularly strong growth in passenger numbers where, working in partnership
with local authorities, we are delivering measures to improve the punctuality
and reliability of our services.

We are pleased to report the commitment of local authorities across the UK to
delivering improved bus services for passengers through partnerships. In
November we signed a `Stability and Growth Pact' with Glasgow City Council and
Strathclyde Partnership for Transport. The pact will bring major improvements
to Glasgow's bus services including an annual Route Development Plan, a Joint
Performance Improvement Plan to make significant improvements in punctuality
and reliability and sustained growth in bus passenger numbers with a commitment
for reasonable fares. The pact builds on the city's award-winning £30m
Streamline Partnership between First and Glasgow City Council, Strathclyde
Passenger Transport and the Scottish Executive last year.

At the start of May we signed `The Sheffield Bus Agreement', a Voluntary
Quality Partnership (VQP) Agreement with Sheffield City Council and South
Yorkshire Passenger Transport Authority. We believe that this agreement is the
most comprehensive VQP ever agreed. The agreement will give customers a more
stable network and improve the reliability of bus services by delivering
significant financial investment and improvements to the city's bus
infrastructure. Over the next two years we will invest £10m in new vehicles,
extra CCTV cameras on buses and training programmes for staff. The Transport
Executive and the City Council have invested £4.4m during the year and have
agreed to invest £2.5m in the coming year which will be used to fund
infrastructure improvements.

We are working in partnership with the four Unitary Authorities in the Greater
Bristol area to deliver improved bus services in the region. The authorities
have submitted final plans to the Department for Transport for ten `Showcase'
routes as part of the Greater Bristol Bus Network. The network will see a major
investment of some £49m in new infrastructure, including bus lanes, road
widening, improved bus stops, enhanced traffic controls and Real Time Passenger
Information as well as some £20m in new buses. This demonstrates the strong
working relationship which delivered the first Showcase route in Bristol, now
operating very successfully, and a second Showcase route due for completion
later this year.

All of our operating companies are working on plans to improve the punctuality
of our bus services on a route-by-route basis. We are the first of the major
operators to publish punctuality and reliability data by operating company and
are working with local authorities in all of our operating areas to develop
Punctuality Improvement Partnerships (PIPs). We developed our first PIP with
Greater Manchester Passenger Transport Executive and now have a number of PIPs
in progress to deliver improved bus services for passengers. We continue to
address issues within our direct control, for example, by introducing new
timetables to improve the punctuality of our services. The PIP process has
highlighted that, in order to achieve improvements in service performance in
some cases, highway alterations and other infrastructure works are required.
Some of these are already being addressed by our partners.

In January this year we started our second ftr service in Leeds. ftr was first
launched in York in May last year and uses state-of-the-art articulated
tram-like vehicles . We have seen passenger growth of 28% on the York ftr
service and continue to be encouraged by positive feedback from our customers,
local authorities from across the UK and from wider stakeholders. Independent
customer research showed an 87% satisfaction rating amongst passengers using
the ftr service. We continue to develop plans for further ftr services and our
scheme in Swansea will start next year.

We are pleased with the continued development of Aircoach, which operates
express coaches between Dublin city centre and the airport and contracted
services for airport car parks. The company continued to perform well during
the year and significant passenger growth at Dublin Airport has benefited both
our scheduled and our contracted car park services. We are using the Aircoach
model to introduce new services in the UK and recently launched York AirCoach a
frequent, express, direct coach service between York rail station and Leeds
Bradford International Airport.

We welcome the Government's announcement encouraging local initiatives in
support of improved school transport services. We pioneered the introduction of
American style yellow school buses into the UK and one of our first pilot
schemes in West Yorkshire was the precursor to Metro's MyBus initiative, which
has successfully reduced congestion at the school gates by giving parents a
high quality alternative to using their cars for the school run.

Capital expenditure was focused in areas with potential for high passenger
growth. Towns and cities including Aberdeen, Bradford, Bristol, Glasgow, Leeds
and Manchester were among those who benefited from our £57.0m spend on new low
floor, easy access buses this year.

We were delighted that our commitment to investing in our people at all levels
was recognised at the Business in the Community Awards 2006. The `Rentokil
Initial Skills for Life' award, supported by the Department for Education and
Skills and in association with Investors in People, recognised our joint
strategy, with the Transport & General Workers' Union, to improve recruitment,
retention and motivation. Our learning and development initiatives, together
with improvements to our recruitment and training programmes and our European
recruitment programme, has reduced driver turnover to an all time low.

Europe

We continue to invest in European bidding activity. We have submitted bids for
Connexxion in the Netherlands and also, with our partner DSB, for the Øresund
rail franchise which links Denmark and Sweden. While North America remains our
primary market for growth and international expansion we continue to explore
opportunities in new markets. We recently made a modest investment in Germany
of 130 buses in the Rhein-Neckar region. This small entry into Germany enables
us to build a greater understanding of the market as it continues to
liberalise.

Group outlook

All of our businesses have delivered a very strong performance. Our UK Rail
division continues to go from strength to strength. This year we commenced
operation of two new enlarged franchises. We have made significant investment
across all of our rail businesses to deliver improvements in rolling stock,
capacity and services for passengers. Demand for our services continues to
accelerate with passenger and income growth across all of our rail operations.
We are delighted to pre-qualify for a further three franchises: East Midlands,
New Cross Country and InterCity East Coast and await the outcome later this
year. I am pleased with the strong trading result from our UK Bus division
despite absorbing additional fuel costs of £28.2m. We have delivered improved
operating performance and volume growth. Increased passenger journeys, together
with our initiatives to grow revenue and bear down on costs, have resulted in a
strong performance. We continue to promote a partnership approach to delivering
a comprehensive and sustainable bus network in the towns and cities where we
operate and have seen encouraging growth as a result. Our North American
business has enjoyed high contract retention and margin improvement. We are
seeing the positive impact of our strategy to mitigate fuel cost pressures
through the contract renewal process. The Board is pleased with the consistent
returns generated from this business since we entered the market in 1999 and
remains confident that North America offers further exciting growth prospects
for the Group.

Our strategy is focused on delivering value for shareholders from further
growth within our core businesses and exploring opportunities to develop in new
markets. For the third year running we have increased the dividend by 10%
reflecting the Board's confidence in the Group's future prospects and ability
to continue to generate strong cash flows. We are committed to this level of
annual dividend growth for the foreseeable future, at least for the next three
years. I am pleased to report that trading in the new financial year has
started well and is in line with our expectations

Corporate Social Responsibility (CSR)

CSR is at the core of our business. We believe that in order to deliver
sustainable growth CSR must be embedded in the vision and values of a business.
Our aim is to transform the way people travel and how they feel about public
transport. Our management of key issues such as safety, environment, our
relationships with customers and our employees is at the heart of our strategy
and key to achieving our vision.

This year we reviewed the content of our Code of Business Ethics and Group
Equal Opportunities Policy as part of our ongoing efforts to implement best
practice in these areas. After consultation with independent CSR auditors,
corporate governance professionals and our shareholders we decided to
incorporate all of our existing policies into one Group CSR Policy.

Safety is our highest priority. We are continuously developing and improving
our processes to ensure that a `Safety First' culture is embedded throughout
the Group. We strive to ensure that our services are as safe as possible for
our passengers and our staff. Over the last year we have worked very hard to
improve our safety culture and performance. We have accomplished significant
improvements including significant reductions in employee injuries, collisions
and passenger injuries. We have pioneered and rolled out safety standards over
and above the requirements of the safety regulators. Our Injury Prevention
Programme (IPP), which has been rolled out throughout the Group, is innovative
and designed to engage all our staff in safety. The aim of IPP is to ensure
that action is taken to report any matters of safety and to resolve them
promptly in order to prevent any harm from occurring to anyone. Lost time
injuries across the Group have reduced by 24% this year. However, we are never
complacent and strive to ensure that we continuously improve our performance in
this critical area.

Our people are often the first point of contact between our customers and our
business and are central to our success. Their commitment, dedication and
effort are crucial if we are to meet our customers' expectations and ensure
that we are the leader in safe, innovative, reliable, sustainable transport
services. We want to be the employer of choice in our industry, offering our
staff opportunities to develop and grow to reach their full potential. We
continue to invest in the training and development of our employees across the
Group. We have ongoing programmes for employees working towards recognised
training in the form of vocational qualifications. In UK Bus our successful
partnership with the Transport and General Workers' Union to expand our
workplace learning provision continues and we are sponsoring the Business in
the Community Skills for Life award this year to encourage other employers to
follow our lead. In North America all of our technicians can now participate in
the Automotive Service Excellence Programme designed to train and test
technicians and First Student continues to promote the `Smith System of
Defensive Driving' to further improve our safety performance and to further
reduce the likelihood of incidents likely to lead to passenger or employee
injuries or collisions.

We continue to receive recognition for improving our environmental performance.
At the Green Apple Awards we were presented with a gold award in the Transport,
Freight and Highways category. We also received the Continuing Environmental
Excellence Award at the Network Rail Environment Awards and were runners up in
the National Business Awards for Scotland 2006 in the Scottish Power
Environmental Awareness Awards. We are pleased that our commitment to
integrating corporate social responsibility into our business and to managing,
measuring and reporting our key social and environmental impacts resulted in an
improved score in the Business in the Community Corporate Responsibility Index
2006. We also participate in the FTSE4Good Index and the Dow Jones
Sustainability Index.

Our CSR policy, together with our Corporate Social Responsibility Report, which
gives further details of our activities and progress during the year, can be
found at www.firstgroup.com

Moir Lockhead

Chief Executive

Finance Director's review

Overview

2006/07 was a year of significant achievements in terms of the results with
Group revenue exceeding £3.7 billion and adjusted operating profit exceeding £
250 million for the first time. Our UK Rail and North American businesses have
reported record earnings and adjusted basic EPS and EBITDA are the highest we
have ever achieved, up 9.1% and 13.4% respectively on last year.

The Group is now the UK's largest passenger rail operator. At the start of the
year we added First Capital Connect and the enlarged First Great Western to our
portfolio of rail franchises. Passenger revenue growth across all Train
Operating Companies (TOCs) has been very strong and profits have grown by more
than a third. UK Rail generated over 40% of Group profits.

In February 2007 we announced the acquisition of Laidlaw subject to shareholder
approval and antitrust clearances. When completed, in excess of 50% of the
Group's revenue and adjusted operating profit will come from North America. The
prospects for value creation are considerable. In addition to the significant
synergies to be achieved by combining our current North American operations
with Laidlaw, we will have the scale and expertise to become our customers'
first choice for safety and service quality.

The net pension deficit has been eliminated and we now have a net surplus when
measured on an IAS 19 basis. This has mainly been achieved through additional
cash payments into the schemes during the year, further recovery in equity
markets and by limiting future increases in pension costs.

One-off costs of £21.3m for rolling stock refurbishment, redundancy and other
mobilisation costs were incurred on the start up of the two new rail
franchises. These costs relate entirely to the mobilisation and will not be
repeated in 2007/08.

We have continued to invest heavily in new buses during the year in both the UK
and North America. In addition we have invested £110.0m in our UK Rail
franchises to improve capacity, performance and customer service. This
significant investment is likely to be repeated in 2007/08 but thereafter will
fall to maintenance requirements only.

Results

Revenue was £3,708.8m (2006: £3,030.9m), an increase of 22.4%. Adjusted
operating profit was £259.2m (2006: £229.7m), an increase of 12.8%. Adjusted
operating profits were higher at each division and margin improvements were
made both in North America and UK Bus, despite an additional £37.1m of fuel
costs year on year.

                           Year to                       Year to           
                                                                           
                        31 March 2007                 31 March 2006        
                                                                           
Divisional        Revenue  Adjusted Operating   Revenue  Adjusted Operating
results                                                                    
                       £m operating  margin *        £m operating  margin *
                                                                           
                           profit *         %            profit *         %
                                                                           
                                 £m                            £m          
                                                                           
UK Bus            1,073.7     103.0       9.6   1,031.2      98.4       9.5
                                                                           
UK Rail           1,824.1     108.8       6.0   1,164.9      79.6       6.8
                                                                           
North America       802.9      68.2       8.5     826.3      67.1       8.1
                                                                           
Other **              8.1    (20.8)         -       8.5    (15.4)         -
                                                                           
Total Group       3,708.8     259.2       7.0   3,030.9     229.7       7.6
                                                                           

* Before intangible asset amortisation, non-recurring bid costs, other
non-recurring items and (loss)/profit on disposal of fixed assets

** Tram operations, central management, Group information technology and other
items

Throughout the financial review, operating profit, operating margin and EBITDA
are defined as being before intangible asset amortisation, non-recurring bid
costs, other non-recurring items and (loss)/profit on disposal of fixed assets

UK Bus revenue was £1,073.7m (2006: £1,031.2m), an increase of 4.1% or an
increase of 6.0% when adjusted for last year's additional days. Operating
profit was £103.0m (2006: £98.4m), an increase of 4.7%. Results were driven by
strong volume growth, with passenger volumes outside of London increasing by
over 2%. A focus on improving operational performance and initiatives to
tightly manage controllable costs led to a margin improvement of 0.1% despite £
28.2m of additional fuel costs year on year. The new English concessionary
schemes for OAPs that commenced at the beginning of the year stimulated most of
the growth in passenger numbers. However, better operational performance also
contributed to passenger growth. During the year a number of bus operating
leases were restructured as finance leases. This has resulted in a decrease in
the charge for the financing element of leases and an increase in the
depreciation charge, both of which go through the "operating cost" line and an
increase in the charge for finance lease interest which goes through the
"finance cost" line.

UK Rail had an exceptional year with strong revenue growth across all TOCs
combined with the two new franchises. Revenue was £1,824.1m (2006: £1,164.9m),
an increase of 56.6%. Operating profit was £108.8m (2006: £79.6m), an increase
of 36.7%. Whilst favourable economic growth contributed to these results, so
too did the considerable investment that we are making to improve services.
Both First TransPennine Express and First ScotRail are delivering significantly
better punctuality and record customer satisfaction ratings. Both First Capital
Connect and First Great Western are investing in significant fleet upgrades
that will enhance performance, capacity and customer satisfaction. We have been
shortlisted for three further franchises (InterCity East Coast, New Cross
Country and East Midlands) and await the outcome of all three.

North American revenue was £802.9m (2006: £826.3m). Although lower in Sterling,
at constant exchange rates, this result represents an increase of 3.1%.
Operating profit was £68.2m (2006: £67.1m). In US Dollar terms this represents
an increase of 8.6%. Overall the North American US Dollar margin improved by
0.5% to 8.6% despite higher fuel costs. All three operating divisions enjoyed
strong contract retention over the course of 2006/07. Earnings growth was
particularly strong in Student and Transit. Services profits and margins fell
due to the re-tendering of a significant contract.

Central costs were higher than last year reflecting the growth in the business
as well as an unusually high level of corporate activity.

Property

Property losses of £3.7m (2006: profits of £14.0m) were incurred during the
year. There were no significant properties disposed of during the year and the
loss incurred was largely due to abortive costs in relation to the Aberdeen
depot relocation.

Intangible asset amortisation

The intangible asset amortisation charge was £10.3m (2006: £4.5m). This
increase is mostly explained by higher pension intangible charges on the new
First Capital Connect and First Great Western franchises.

Non-recurring bid costs and other non-recurring items

Bid costs of £19.3m (2006: £28.5m) were incurred during the year. Of this
amount UK Rail bids for South Western, New Cross County and InterCity East
Coast franchises accounted for £14.5m. Non-rail bid costs of £4.8m (2006: £
2.4m) were incurred principally on European bid activities.

UK Rail transition costs of £21.3m (2006: £nil) were incurred in mobilising the
First Capital Connect and First Great Western franchises including subsequent
obligations to refurbish trains on both franchises. These costs will not recur
in 2007/08.

Interest payable and similar charges

The net interest charge was £63.4m (2006: £53.3m) with the increase of £10.1m
explained by higher lease finance debt, higher bank debt and higher US interest
rates. The net interest charge is covered 6.3 times (2006: 6.6 times) by
earnings before interest, taxation, depreciation and amortisation (EBITDA).

Taxation

The taxation charge on profit before intangible amortisation, non-recurring bid
costs and other non-recurring items was £51.1m (2006: £45.3m) representing an
effective rate of 26.1% (2006: 25.7%). Tax relief on US intangible
amortisation, non-recurring bid costs and other non-recurring items, partly
offset by deferred tax on property gains, reduced the tax charge to £38.1m
(2006: £40.0m) representing a rate of 27.2% (2006: 25.4%).

The actual cash effect of taxation to the group was a charge of £5.5m (2006: a
credit of £3.3m). The UK cash cost of taxation was low due to increased pension
payments and by favourable UK tax settlements achieved during the year. It is
anticipated that the tax to be paid for 2007/08 will remain low. The group pays
a minimal amount of tax on its profits in the US due to tax losses carried
forward and we believe that the level of the cash tax in the US will remain low
for the medium term.

Dividends

The final dividend of 10.5 pence (2006: 9.55 pence) per ordinary share together
with the interim dividend of 5.0 pence (2006: 4.55 pence) per ordinary share,
gives a full year dividend of 15.5 pence (2006: 14.1 pence), an increase of
10.0%. In accordance with IFRS the final dividend has not been provided for in
the 2007 balance sheet. The final dividend will be paid on 24 August 2007 to
shareholders on the register of members at the close of business on 20 July
2007.

EPS

Adjusted basic EPS, before intangible asset amortisation, non-recurring bid
costs, other non-recurring items and (loss)/profit on disposal of fixed assets,
was 33.7 pence (2006: 30.9 pence), an increase of 9.1%. Basic EPS was 23.1
pence (2006: 27.4 pence).

EBITDA

The Group's businesses continue to generate strong operating profits which are
converted into cash. EBITDA for the year was £398.9m (2006: £351.7m) up 13.4%.
EBITDA from North American operations was up 4.0% in US Dollar terms. EBITDA by
division is set out below:

                            Year to                       Year to           
                                                                            
                         31 March 2007                 31 March 2006        
                                                                            
                   Revenue    EBITDA    EBITDA   Revenue    EBITDA    EBITDA
                                                                            
                        £m        £m         %        £m        £m         %
                                                                            
UK Bus             1,073.7     173.6      16.2   1,031.2     157.3      15.3
                                                                            
UK Rail            1,824.1     122.4       6.7   1,164.9      84.9       7.3
                                                                            
North America        802.9     119.2      14.8     826.3     122.0      14.8
                                                                            
Other                  8.1    (16.3)         -       8.5    (12.5)         -
                                                                            
Total Group        3,708.8     398.9      10.8   3,030.9     351.7      11.6
                                                                            

Cash flow

Cash generated by operations increased to £367.9m from £300.7m last year as a
result of improved profitability, better management of working capital and cash
inflows in connection with the commencement of the First Capital Connect
franchise. The working capital inflow of £5.5m (2006: outflow of £27.1m) was
mainly due to positive working capital movements on the new rail franchises
partly offset by additional cash pension contributions.

Capital expenditure and acquisitions

Capital expenditure, as set out in note 6, was £321.6m (2006: £209.1m). Capital
expenditure was predominantly in North American operations of £48.1m (2006: £
65.6m), UK Bus operations of £141.9m (2006: £102.4m) including £84.0m of lease
restructuring, UK Rail £110.0m (2006: £16.9m) and UK Bus properties of £19.8m
(2006: £15.4m).

The acquisitions made in 2006/07 were five small yellow school bus operations
in North America and one Transit shuttle bus operation. The total consideration
for all acquisitions made during the year was £17.9m and provisional goodwill
arising on all acquisitions amounted to £9.1m.

Funding and risk management

At the year end, total bank borrowing facilities amounted to £596m of which £
520m is committed. Of these committed facilities, £318.7m were utilised at 31
March 2007 leaving committed headroom of £201.3m.

The maturity profile of committed banking facilities is regularly reviewed and
well in advance of their expiry such facilities are extended or replaced.

At 31 March 2007 the Group's average debt maturity was 6.4 years (2006: 7.8
years).

As the Group is a net borrower, it minimises cash and bank deposits, which
arise principally in the Rail companies. The Group can only withdraw cash and
bank deposits from the Rail companies on a permanent basis to the lower of
retained profits or the amount determined by prescribed liquidity ratios.

The Group does not enter into speculative financial transactions and uses
financial instruments for certain risk management purposes only.

Interest rate risk

With regard to net interest rate risk, the Group reduces exposure by using a
combination of fixed rate debt and interest rate derivatives to achieve an
overall hedged position over the medium term of between 75% to 100%.

Commodity price risk

In the UK the cost of fuel increased from $38 per barrel in 2005/06 to $67 per
barrel in 2006/07, an overall cost increase of £28.2m in UK Bus and £3.0m in UK
Rail. Looking ahead, we now have 100% coverage of our UK requirements for 2007/
08 (total annual usage 2.7 million barrels) at an average rate of $67 per
barrel. In North America (total annual usage 0.7 million barrels) for 2007/08
we have 27% coverage on crude oil price risk at an average price of $55 per
barrel (2006/07: average of $53 per barrel).

Foreign currency risk

Group policies on currency risk affecting cash flow and profits are maintained
to minimise exposures to the Group by using a combination of hedge positions
and derivative instruments where appropriate.

With regard to balance sheet translation risk, the Group hedges part of its
exposure to the impact of exchange rate movements on translation of foreign
currency net assets by holding currency swaps and net borrowings in foreign
currencies. At 31 March 2007 33% (2006: 34%) of foreign currency net assets
were hedged.

Net debt

Net debt decreased over the year by £188.2m. This reduction is mainly explained
by the share placement in February 2007, associated with the planned
acquisition of Laidlaw, which raised £216.9m net of expenses.

The Group's net debt at 31 March 2007 was £516.2m and was comprised as follows:

Analysis of net debt                                 Fixed  Variable    Total
                                                                             
                                                        £m        £m       £m
                                                                             
Cash                                                     -      59.1     59.1
                                                                             
Share placement proceeds deposited *                     -     212.5    212.5
                                                                             
Rail ring-fenced cash and deposits                       -     139.6    139.6
                                                                             
Sterling bond (2013 6.875%) **                     (296.3)         -  (296.3)
                                                                             
Bond (2019 6.125%) ***                             (221.1)         -  (221.1)
                                                                             
Sterling bank loans and overdrafts                       -   (264.4)  (264.4)
                                                                             
US dollar bank and other loans and overdrafts        (0.3)     (0.9)    (1.2)
                                                                             
Canadian dollar bank and other loans and             (2.2)    (35.1)   (37.3)
overdrafts                                                                   
                                                                             
Euro bank loans and overdrafts                           -     (9.4)    (9.4)
                                                                             
HP and finance leases                                (3.7)    (78.2)   (81.9)
                                                                             
Loan notes                                           (8.7)     (7.1)   (15.8)
                                                                             
Interest rate swaps,net                             (57.0)      57.0        -
                                                                             
Total                                              (589.3)      73.1  (516.2)

* Net proceeds of £216.9m less £4.4m of acquisition costs not related to the
equity placement

** Excludes accrued interest

*** Stated excluding accrued interest and adjusted for currency and coupon
swaps

Balance sheet and net assets

Net assets increased by £275.4m over the year reflecting the net outcome of the
share placing of £211.0m (net proceeds of £216.9m less £5.9m of additional
anticipated costs relating to equity placing), retained earnings (after the
payment of £57.1m of dividends) for the year of £34.6m, actuarial gains on
defined benefit pension arrangements (net of tax) of £81.9m, an increase in the
hedging reserve of £24.8m and a net movement in own shares held of £9.2m. These
positive movements were partly offset by a reduction in the translation reserve
of £85.5m.

Shares in issue

In 2006/07 3.3m treasury shares were used to either satisfy the exercise of
Save As You Earn (SAYE) options on the maturity of the 2003 SAYE scheme or were
transferred to the Employee Benefit Trust to satisfy the exercise of Executive
Share Options and Deferred Bonus Shares. On 14 February 2007 39.5m shares were
placed at 559 pence per share, a discount of 1 pence on the market rate at the
time. As at 31 March 2007 there were 434.0m (2006: 392.0m) shares in issue,
excluding treasury shares and 3.3m shares (2006: 6.6m shares) were held as
treasury shares at year end. The weighted average number of shares in issue for
the purpose of EPS calculations (excluding own shares held in trust for
employees and treasury shares) was 397.9m (2006: 392.6m).

Foreign exchange

The results of the North American businesses have been translated at an average
rate of £1:$1.89 (2006: £1:$1.79). The period end rate was £1:$1.96 (2006: £1:
$1.74).

Pensions

The combined rail schemes and UK Bus occupational scheme are still in deficit
but these were more than offset by the surplus across the Local Government Bus
Schemes. The cash payments in 2007/08 into all the schemes are unaffected by
these changes.

The aggregate pensions deficit of £132m at the start of the year is now an
aggregate surplus of £24m as at 31 March 2007 as measured on an IAS 19 basis.

The movement in the pension position had three main elements being the
additional cash contributions being paid into the UK Bus and UK Rail schemes,
the continued recovery of equities and certain measures that limit pension cost
increases going forward.

Dean Finch

Finance Director

Consolidated income statement

Year ended 31 March 2007

                           Notes        Before  Amortisation     Total        Before  Amortisation     Total
                                                                                                            
                                  amortisation      charges,      2007  amortisation       charges      2006
                                                                                                            
                                      charges, non-recurring        £m       charges           and        £m
                                                   bid costs                         non-recurring          
                                 non-recurring                                   and                        
                                     bid costs     and other           non-recurring     bid costs          
                                                                                                            
                                     and other non-recurring               bid costs          2006          
                                 non-recurring         items                                                
                                                                                2006            £m          
                                         items          2007                                                
                                                                                  £m                        
                                          2007            £m                                                
                                                                                                            
                                            £m                                                              
                                                                                                            
Revenue                                                                                                     
                                                                                                            
Continuing operations                  3,708.8             -   3,708.8       3,030.9             -   3,030.9
                                                                                                            
Operating costs before                                                                                      
(loss)/profit on disposal                                                                                   
of fixed assets                                                                                             
                                                                                                            
Continuing operations                (3,449.6)        (51.9) (3,501.5)     (2,801.2)        (33.0) (2,834.2)
                                                                                                            
Operating profit before                                                                                     
(loss)/profit on disposal                                                                                   
of fixed assets                                                                                             
                                                                                                            
Continuing operations                    259.2        (51.9)     207.3         229.7        (33.0)     196.7
                                                                                                            
Operating profit before                  259.2             -     259.2         229.7             -     229.7
amortisation charges,                                                                                       
non-recurring bid costs                                                                                     
and other non-recurring                                                                                     
items                                                                                                       
                                                                                                            
Amortisation charges                         -        (10.3)    (10.3)             -         (4.5)     (4.5)
                                                                                                            
Non-recurring bid costs                      -        (19.3)    (19.3)             -        (28.5)    (28.5)
                                                                                                            
Other non-recurring items                    -        (22.3)    (22.3)             -             -         -
                                                                                                            
Operating profit before                  259.2        (51.9)     207.3         229.7        (33.0)     196.7
(loss)/profit on disposal                                                                                   
of fixed assets                                                                                             
                                                                                                            
(Loss)/profit on disposal                    -         (3.7)     (3.7)             -          14.0      14.0
of fixed assets                                                                                             
                                                                                                            
Operating profit                         259.2        (55.6)     203.6         229.7        (19.0)     210.7
                                                                                                            
Investment income                          9.4             -       9.4           8.5             -       8.5
                                                                                                            
Finance costs                           (72.8)             -    (72.8)        (61.8)             -    (61.8)
                                                                                                            
Profit before tax                        195.8        (55.6)     140.2         176.4        (19.0)     157.4
                                                                                                            
Tax                                     (51.1)          13.0    (38.1)        (45.3)           5.3    (40.0)
                                                                                                            
Profit for the year from                 144.7        (42.6)     102.1         131.1        (13.7)     117.4
continuing operations                                                                                       
                                                                                                            
Attributable to:                                                                                            
                                                                                                            
Equity holders of the                    134.1        (42.4)      91.7         121.5        (14.0)     107.5
parent                                                                                                      
                                                                                                            
Minority interest                         10.6         (0.2)      10.4           9.6           0.3       9.9
                                                                                                            
                                         144.7        (42.6)     102.1         131.1        (13.7)     117.4
                                                                                                            
Basic earnings per share     3                                   23.1p                                 27.4p
                                                                                                            
Diluted earnings per share   3                                   22.8p                                 27.1p

Dividends of £57.1m (2006: £52.0m) were paid during the year. Dividends of £
45.6m (2006: £37.4m) were proposed for approval in respect of the year.

Consolidated balance sheet

As at 31 March

                                                 Notes          2007      2006
                                                                              
                                                                  £m        £m
                                                                              
Non-current assets                                                            
                                                                              
Goodwill                                           4           468.8     503.1
                                                                              
Other intangible assets                            5            60.8      30.0
                                                                              
Property, plant and equipment                      6         1,059.7     926.5
                                                                              
Financial assets - derivative financial           13            27.7       8.5
instruments                                                                   
                                                                              
                                                             1,617.0   1,468.1
                                                                              
Current assets                                                                
                                                                              
Inventories                                        7            64.6      54.2
                                                                              
Trade and other receivables                        8           377.3     373.1
                                                                              
Financial assets - cash and cash equivalents                   411.2     174.4
                                                                              
- derivative financial instruments                13             8.3      14.1
                                                                              
                                                               861.4     615.8
                                                                              
Non-current assets classified as held for sale                   7.5       6.6
                                                                              
Retirement benefit surplus                                      57.1         -
                                                                              
Total assets                                                 2,543.0   2,090.5
                                                                              
Current liabilities                                                           
                                                                              
Trade and other payables                           9           695.1     545.1
                                                                              
Tax liabilities                                                 49.7      47.8
                                                                              
Financial liabilities - bank overdrafts and       10             1.8      30.9
loans                                                                         
                                                                              
- bonds                                           10            23.1      23.1
                                                                              
- loan notes                                      12             5.2       2.8
                                                                              
- obligations under finance leases                11            11.5       2.3
                                                                              
- derivative financial instruments                13             5.0       1.8
                                                                              
                                                               791.4     653.8
                                                                              
Net current assets/(liabilities)                                70.0    (38.0)
                                                                              
Non-current liabilities                                                       
                                                                              
Financial liabilities - bank loans                10           310.5     268.8
                                                                              
- bonds                                           10           539.3     553.2
                                                                              
- loan notes                                      12            10.6      17.7
                                                                              
- obligations under finance leases                11            70.4      10.1
                                                                              
- derivative financial instruments                13             4.3       0.8
                                                                              
Retirement benefit obligation                                   33.3     132.0
                                                                              
Deferred tax liabilities                          14           142.7      84.6
                                                                              
Long-term provisions                              15            33.2      37.6
                                                                              
                                                             1,144.3   1,104.8
                                                                              
Total liabilities                                            1,935.7   1,758.6
                                                                              
Net assets                                                     607.3     331.9
                                                                              
Equity                                                                        
                                                                              
Share capital                                     16            21.9      19.9
                                                                              
Share premium account                             17           447.8     238.8
                                                                              
Hedging reserves                                  17            26.7       1.9
                                                                              
Other reserves                                    17             4.6       4.6
                                                                              
Own shares                                        17          (17.4)    (26.6)
                                                                              
Translation reserves                              18          (57.8)      27.7
                                                                              
Retained earnings                                 17           170.4      52.9
                                                                              
Equity attributable to equity holders of the                   596.2     319.2
parent                                                                        
                                                                              
Minority interests                                              11.1      12.7
                                                                              
Total equity                                                   607.3     331.9

Consolidated cash flow statement

Year ended 31 March 2007

                                                Notes          2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Net cash from operating activities               19           295.5       235.0
                                                                               
Investing activities                                                           
                                                                               
Interest received                                               9.4         5.9
                                                                               
Proceeds of disposal of property, plant and                    18.3        27.3
equipment                                                                      
                                                                               
Purchases of property, plant and equipment                  (251.2)     (196.2)
                                                                               
Grants received                                                29.1           -
                                                                               
Acquisition of businesses                                    (17.9)      (12.4)
                                                                               
Net cash used in investing activities                       (212.3)     (175.4)
                                                                               
Financing activities                                                           
                                                                               
Repurchase of ordinary share capital                              -      (23.0)
                                                                               
Share purchased by Employee Benefit Trust                         -       (1.4)
                                                                               
Monies received on exercise of options                          2.8         8.4
                                                                               
Dividends paid                                               (57.1)      (52.0)
                                                                               
Dividends paid to minority shareholders                      (11.3)       (7.2)
                                                                               
Repayment of obligations under finance leases                (14.4)      (11.8)
                                                                               
Repayment of loan notes                                       (4.8)       (0.5)
                                                                               
Payment of new bank facility issue costs                          -       (1.0)
                                                                               
Proceeds on issue of shares                                   216.9           -
                                                                               
New bank loans raised                                          22.4        55.7
                                                                               
Net cash from financing activities                            154.5      (32.8)
                                                                               
Net increase in cash and cash equivalents                     237.7        26.8
before foreign exchange movements                                              
                                                                               
Cash and cash equivalents at beginning of                     169.9       145.9
year                                                                           
                                                                               
Effect of foreign exchange rate changes                         2.7       (2.8)
                                                                               
Cash and cash equivalents at end of year                      410.3       169.9

Cash and cash equivalents for cash flow                        2007        2006
statement purposes comprises:                                                  
                                                                 £m          £m
                                                                               
Cash and cash equivalents per balance sheet                   411.2       174.4
                                                                               
Overdrafts                                                    (0.9)       (4.5)
                                                                               
                                                              410.3       169.9

Note to the consolidated cash flow statement - reconciliation of net cash flows
to movement in net debt

Year ended 31 March 2007

                                                               2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Increase in cash and cash equivalents in year before          237.7        26.8
foreign exchange movements                                                     
                                                                               
Increase in debt and finance lease financing                  (3.2)      (43.4)
                                                                               
Inception of new finance leases                              (84.0)           -
                                                                               
Lease and hire purchase contracts acquired with                   -       (0.7)
business/franchise                                                             
                                                                               
Fees on issue of new loan facility                                -         1.0
                                                                               
Other non-cash movements in relation to financial             (0.8)       (1.9)
instruments                                                                    
                                                                               
Foreign exchange differences                                   38.5      (23.1)
                                                                               
Movement in net debt in year                                  188.2      (41.3)
                                                                               
Net debt at beginning of year                               (704.4)     (663.1)
                                                                               
Net debt at end of year                                     (516.2)     (704.4)

General information

The financial information set out above does not constitute the company's
Statutory Accounts for the years ended 31 March 2007 or 2006, but is derived
from those accounts. Statutory Accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
company's Annual General Meeting. The auditors have reported on both sets of
accounts; their reports were unqualified and did not contain statements under
s. 237(2) or (3) of the Companies Act 1985.

Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The company expects to publish full financial statements
that comply with IFRSs. The financial information has been prepared on the
basis of the accounting policies as set out in the Statutory Accounts for 2006.

Copies of the Statutory Accounts for the year ended 31 March 2007 will be sent
to all shareholders by early June and will be available thereafter at the
Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.

2. Business segments

The segment results for the year to 31 March 2007 are as follows:

                               UK Bus   UK Rail     North     Group       Total
                                                  America     items            
                                   £m        £m                              £m
                                                       £m        £m            
                                                                               
Revenue                       1,073.7   1,824.1     802.9       8.1     3,708.8
                                                                               
Segment results *               103.0     108.8      68.2    (20.8)       259.2
                                                                               
Amortisation of intangible          -     (8.1)     (2.2)         -      (10.3)
assets                                                                         
                                                                               
Non-recurring bid costs             -    (14.5)         -     (4.8)      (19.3)
                                                                               
Other non-recurring items           -    (21.3)     (1.0)         -      (22.3)
                                                                               
Loss on disposal of fixed       (3.7)         -         -         -       (3.7)
assets                                                                         
                                                                               
Operating profit                 99.3      64.9      65.0    (25.6)       203.6
                                                                               
Investment income                                                           9.4
                                                                               
Finance costs                                                            (72.8)
                                                                               
Profit before tax                                                         140.2
                                                                               
Tax                                                                      (38.1)
                                                                               
Profit for the year                                                       102.1

2. Business segments (continued)

The segment results for the year to 31 March 2006 are as follows:

                               UK Bus   UK Rail     North     Group       Total
                                                  America     items            
                                   £m        £m                              £m
                                                       £m        £m            
                                                                               
Revenue                       1,031.2   1,164.9     826.3       8.5     3,030.9
                                                                               
Segment results *                98.4      79.6      67.1    (15.4)       229.7
                                                                               
Amortisation of intangible          -     (2.9)     (1.6)         -       (4.5)
assets                                                                         
                                                                               
Non-recurring bid costs             -    (26.1)         -     (2.4)      (28.5)
                                                                               
Profit on disposal of fixed      14.0         -         -         -        14.0
assets                                                                         
                                                                               
Operating profit                112.4      50.6      65.5    (17.8)       210.7
                                                                               
Investment income                                                           8.5
                                                                               
Finance costs                                                            (61.8)
                                                                               
Profit before tax                                                         157.4
                                                                               
Tax                                                                      (40.0)
                                                                               
Profit for the year                                                       117.4

* Before amortisation of intangible assets, non-recurring bid costs, other
non-recurring items and (loss)/profit on disposal of fixed assets.

3. Earnings per share (EPS)

Basic EPS is calculated by dividing the profit attributable to equity
shareholders of £91.7m (2006: £107.5m) by the weighted average number of
ordinary shares of 397.9m

(2006: 392.6m).

Diluted EPS is calculated by dividing the profit attributable to equity
shareholders of £91.7m (2006: 107.5m) by the weighted average number of
ordinary shares of 402.0m (2006: 396.5m). 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. A
reconciliation of the number of shares used in the basic and diluted measures
is set out below:

                                                              2007         2006
                                                                               
                                                               No.          No.
                                                                               
                                                                 m            m
                                                                               
Weighted average number of shares used in basic              397.9        392.6
calculation                                                                    
                                                                               
SAYE share options                                             2.5          3.0
                                                                               
Executive share options                                        1.6          0.9
                                                                               
                                                             402.0        396.5

3. Earnings per share (EPS) (continued)

The adjusted basic EPS and adjusted cash EPS are intended to demonstrate
recurring elements of the results of the Group before amortisation of
intangible assets, non-recurring bid costs, other non-recurring items and loss/
profit on disposal of fixed assets. A reconciliation of the earnings used in
the bases is set out below:

                                              2007                 2006        
                                                                               
                                             £m    Earnings      £m    Earnings
                                                  per share           per share
                                                        (p)                 (p)
                                                                               
Profit for basic EPS calculation           91.7        23.1   107.5        27.4
                                                                               
Amortisation of intangible assets *        10.1         2.5     4.3         1.1
                                                                               
Non-recurring bid costs                    19.3         4.9    28.5         7.2
                                                                               
Other non-recurring items                  22.3         5.6       -           -
                                                                               
Loss/(profit) on disposal of fixed          3.7         0.9  (13.5)       (3.4)
assets **                                                                      
                                                                               
Taxation effect of adjustments           (13.0)       (3.3)   (5.3)       (1.4)
                                                                               
Profit for adjusted basic EPS             134.1        33.7   121.5        30.9
calculation                                                                    
                                                                               
Depreciation ***                          138.8        34.9   121.6        31.0
                                                                               
Profit for adjusted cash EPS              272.9        68.6   243.1        61.9
calculation ****                                                               

* Amortisation charge of £10.3m per note 5 less £0.2m (2006: £4.5m less £0.2m)
attributable to equity minority interests.

** Loss on disposal of fixed assets of £3.7m less £nil (2006: profit of £14.0m
less £0.5m) attributable to equity minority interests.

*** Depreciation charge of £139.7m (2006: £122.0m) per note 6 less £0.9m (2006:
£0.4m) attributable to equity minority interests.

**** Excludes working capital movements.

4. Goodwill                                                    2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Cost                                                                           
                                                                               
At 1 April                                                    503.1       465.8
                                                                               
Additions                                                       9.1        10.3
                                                                               
Exchange rate differences                                    (43.4)        27.0
                                                                               
At 31 March                                                   468.8       503.1
                                                                               
Accumulated impairment losses                                                  
                                                                               
At 31 March                                                       -           -
                                                                               
Carrying amount                                                                
                                                                               
At 31 March                                                   468.8       503.1

5. Other intangible assets                   Contracts    Franchise       Total
                                              acquired                         
                                                         agreements          £m
                                                    £m                         
                                                                 £m            
                                                                               
Cost                                                                           
                                                                               
At 1 April 2006                                   15.7         21.0        36.7
                                                                               
Additions                                          7.1         35.3        42.4
                                                                               
Exchange rate differences                        (1.6)            -       (1.6)
                                                                               
At 31 March 2007                                  21.2         56.3        77.5
                                                                               
Amortisation                                                                   
                                                                               
At 1 April 2006                                    2.2          4.5         6.7
                                                                               
Charge for year                                    2.1          8.2        10.3
                                                                               
Exchange rate differences                        (0.3)            -       (0.3)
                                                                               
At 31 March 2007                                   4.0         12.7        16.7
                                                                               
Carrying amount                                                                
                                                                               
At 31 March 2007                                  17.2         43.6        60.8

                                             Contracts    Franchise       Total
                                              acquired                         
                                                         agreements          £m
                                                    £m                         
                                                                 £m            
                                                                               
Cost                                                                           
                                                                               
At 1 April 2005                                   10.6         21.0        31.6
                                                                               
Additions                                          4.3            -         4.3
                                                                               
Exchange rate differences                          0.8            -         0.8
                                                                               
At 31 March 2006                                  15.7         21.0        36.7
                                                                               
Amortisation                                                                   
                                                                               
At 1 April 2005                                    0.6          1.6         2.2
                                                                               
Charge for year                                    1.6          2.9         4.5
                                                                               
Exchange rate differences                            -            -           -
                                                                               
At 31 March 2006                                   2.2          4.5         6.7
                                                                               
Carrying amount                                                                
                                                                               
At 31 March 2006                                  13.5         16.5        30.0

6. Property, plant and equipment

                                 Land and    Passenger        Other       Total
                                                                               
                                buildings     carrying    plant and          £m
                                                                               
                                       £m      vehicle    equipment            
                                                 fleet                         
                                                                 £m            
                                                    £m                         
                                                                               
Cost                                                                           
                                                                               
At 1 April 2006                     157.0      1,331.9        203.7     1,692.6
                                                                               
Subsidiary undertakings and             -          5.0            -         5.0
businesses acquired                                                            
                                                                               
Additions                            28.6        178.8        114.2       321.6
                                                                               
Disposals                           (5.1)       (43.1)       (22.8)      (71.0)
                                                                               
Reclassifications                     4.1            -        (4.1)           -
                                                                               
Reclassified as held for                -       (24.5)            -      (24.5)
sale                                                                           
                                                                               
Exchange rate differences           (2.9)       (58.2)        (5.0)      (66.1)
                                                                               
At 31 March 2007                    181.7      1,389.9        286.0     1,857.6
                                                                               
Accumulated depreciation and                                                   
impairment                                                                     
                                                                               
At 1 April 2006                      22.1        621.1        122.9       766.1
                                                                               
Charge for year                       5.2        107.7         26.8       139.7
                                                                               
Disposals                           (0.9)       (38.7)       (19.8)      (59.4)
                                                                               
Reclassified as held for                -       (18.1)            -      (18.1)
sale                                                                           
                                                                               
Exchange rate differences           (0.8)       (26.5)        (3.1)      (30.4)
                                                                               
At 31 March 2007                     25.6        645.5        126.8       797.9
                                                                               
Carrying amount                                                                
                                                                               
At 31 March 2007                    156.1        744.4        159.2     1,059.7

                                 Land and    Passenger        Other       Total
                                                                               
                                buildings     carrying    plant and          £m
                                                                               
                                       £m      vehicle    equipment            
                                                 fleet                         
                                                                 £m            
                                                    £m                         
                                                                               
Cost                                                                           
                                                                               
At 1 April 2005                     149.1      1,228.7        161.4     1,539.2
                                                                               
Subsidiary undertakings and             -          4.0            -         4.0
businesses acquired                                                            
                                                                               
Additions                            16.2        155.5         37.4       209.1
                                                                               
Disposals                           (5.1)       (64.2)        (2.9)      (72.2)
                                                                               
Reclassifications                   (5.1)            -          5.1           -
                                                                               
Reclassified as held for                -       (27.3)            -      (27.3)
sale                                                                           
                                                                               
Exchange rate differences             1.9         35.2          2.7        39.8
                                                                               
At 31 March 2006                    157.0      1,331.9        203.7     1,692.6
                                                                               
Accumulated depreciation and                                                   
impairment                                                                     
                                                                               
At 1 April 2005                      23.7        581.2         99.3       704.2
                                                                               
Charge for year                       3.6         99.0         19.4       122.0
                                                                               
Disposals                           (0.6)       (52.1)        (2.3)      (55.0)
                                                                               
Reclassifications                   (5.1)            -          5.1           -
                                                                               
Reclassified as held for                -       (21.5)            -      (21.5)
sale                                                                           
                                                                               
Exchange rate differences             0.5         14.5          1.4        16.4
                                                                               
At 31 March 2006                     22.1        621.1        122.9       766.1
                                                                               
Carrying amount                                                                
                                                                               
At 31 March 2006                    134.9        710.8         80.8       926.5

7. Inventories                                                 2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Spare parts and consumables                                    48.1        41.7
                                                                               
Property development work in progress                          16.5        12.5
                                                                               
                                                               64.6        54.2

8. Trade and other receivables                                 2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Amounts due within one year                                                    
                                                                               
Trade debtors                                                 262.7       279.3
                                                                               
Other debtors                                                  61.8        38.8
                                                                               
Other prepayments and accrued income                           52.8        55.0
                                                                               
                                                              377.3       373.1

9. Trade and other payables                                    2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Amounts falling due within one year                                            
                                                                               
Trade creditors                                               194.5       129.7
                                                                               
Other creditors                                               104.7       106.5
                                                                               
Accruals and deferred income                                  346.4       294.9
                                                                               
Season ticket deferred income                                  49.5        14.0
                                                                               
                                                              695.1       545.1

10. Financial liabilities - borrowings

                                                               2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Current financial liabilities                                                  
                                                                               
Short-term bank loans                                           0.9        26.4
                                                                               
Bank overdrafts                                                 0.9         4.5
                                                                               
                                                                1.8        30.9
                                                                               
Finance leases (note 11)                                       11.5         2.3
                                                                               
Loan notes (note 12)                                            5.2         2.8
                                                                               
Bond 6.875% (repayable 2013) - accrued interest                20.1        20.1
                                                                               
Bond 6.125% (repayable 2019) - accrued interest                 3.0         3.0
                                                                               
                                                               23.1        23.1
                                                                               
Total current financial liabilities                            41.6        59.1
                                                                               
Non-current financial liabilities                                              
                                                                               
Syndicated unsecured bank loans                               308.2       264.9
                                                                               
Other loans                                                     2.3         3.9
                                                                               
                                                              310.5       268.8
                                                                               
Finance leases (note 11)                                       70.4        10.1
                                                                               
Loan notes (note 12)                                           10.6        17.7
                                                                               
Bond 6.875% (repayable 2013)                                  296.3       295.9
                                                                               
Bond 6.125% (repayable 2019)                                  243.0       257.3
                                                                               
                                                              539.3       553.2
                                                                               
Total non-current financial liabilities                       930.8       849.8
                                                                               
Total financial liabilities                                   972.4       908.9
                                                                               
Gross borrowings repayment profile                                             
                                                                               
Within one year or on demand                                   41.6        59.1
                                                                               
Between one and two years                                      24.5        21.1
                                                                               
Between two and five years                                    351.1       271.7
                                                                               
Over five years                                               555.2       557.0
                                                                               
                                                              972.4       908.9

11. Finance leases

The Group had the following obligations under finance leases as at the balance
sheet dates:

                                                              2007         2006
                                                                               
                                                                £m           £m
                                                                               
Due in less than one year                                     11.5          2.3
                                                                               
Due in more than one year but not more than two years         12.9          2.2
                                                                               
Due in more than two years but not more than five             41.7          4.6
years                                                                          
                                                                               
Due in more than five years                                   15.8          3.3
                                                                               
Total                                                         81.9         12.4

12. Loan notes

The Group had the following loan notes issued as at the balance sheet dates:

                                                              2007      2006
                                                                            
                                                                £m        £m
                                                                            
Due in less than one year                                      5.2       2.8
                                                                            
Due in more than one year but not more than two               10.6      17.7
years                                                                       
                                                                            
Total                                                         15.8      20.5

13. Derivative financial instruments

                                                            2007        2006
                                                                            
                                                              £m          £m
                                                                            
Non-current assets                                                          
                                                                            
Cross currency swaps (net investment hedge)                 24.9           -
                                                                            
Coupon swaps (fair value hedge)                                -         8.1
                                                                            
Interest rate collars (cash flow hedge)                        -         0.4
                                                                            
Fuel derivatives (cash flow hedge)                           2.8           -
                                                                            
                                                            27.7         8.5
                                                                            
Current assets                                                              
                                                                            
Cross currency swaps (net investment hedge)                  2.9           -
                                                                            
Coupon swaps (fair value hedge)                              1.2         3.3
                                                                            
Fuel derivatives (cash flow hedge)                           4.2        10.8
                                                                            
                                                             8.3        14.1
                                                                            
Total assets                                                36.0        22.6
                                                                            
Current liabilities                                                         
                                                                            
Interest rate swaps (cash flow hedge)                        0.3         0.9
                                                                            
Cross currency swaps (net investment hedge)                    -         0.9
                                                                            
Fuel derivatives (cash flow hedge)                           1.4           -
                                                                            
Currency forwards (cash flow hedge)                          3.3           -
                                                                            
                                                             5.0         1.8
                                                                            
Non-current liabilities                                                     
                                                                            
Interest rate swaps (cash flow hedge)                          -         0.4
                                                                            
Cross currency swaps (net investment hedge)                    -         0.4
                                                                            
Coupon swaps (fair value hedge)                              4.1           -
                                                                            
Interest rate collars (cash flow hedge)                      0.2           -
                                                                            
                                                             4.3         0.8
                                                                            
Total liabilities                                            9.3         2.6

14. Deferred tax

The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting periods.

(Assets)/liabilities          Accelerated       Other       Tax       Total
                                            temporary                      
                                      tax differences    losses          £m
                                                                           
                             depreciation          £m        £m            
                                                                           
                                       £m                                  
                                                                           
At 1 April 2005                     134.3      (53.1)    (40.5)        40.7
                                                                           
Charge/(credit) to income            32.9        32.0    (21.6)        43.3
                                                                           
Charge to equity                        -         2.6         -         2.6
                                                                           
Acquisition of subsidiary               -       (3.6)         -       (3.6)
                                                                           
Exchange differences                  4.9       (0.3)   (3.0)           1.6
                                                                           
At 31 March 2006                    172.1      (22.4)    (65.1)        84.6
                                                                           
Charge to income                      4.0        20.7       7.9        32.6
                                                                           
Charge to equity                        -        30.4         -        30.4
                                                                           
Exchange differences               (11.0)       (1.1)       7.2       (4.9)
                                                                           
As 31 March 2007                    165.1        27.6    (50.0)       142.7
                                                                           

15. Provisions                               Insurance  Pensions       Total
                                                                            
                                              claims *        £m          £m
                                                                            
                                                    £m                      
                                                                            
At 1 April 2006                                   30.7       6.9        37.6
                                                                            
Provided in the year                              32.4         -        32.4
                                                                            
Utilised in the year                            (39.2)     (0.6)      (39.8)
                                                                            
Notional interest                                  6.9         -         6.9
                                                                            
Exchange rate differences                        (3.9)         -       (3.9)
                                                                            
At 31 March 2007                                  26.9       6.3        33.2

* Insurance claims accruals due within one year at 31 March 2007 amounted to £
44.0m (2006: £50.0m) and are included in "accruals and deferred income" within
note 9. The amount included within provisions above represents the estimate of
amounts due after more than one year.

16. Called up share capital                                 2007        2006
                                                                            
                                                              £m          £m
                                                                            
Authorised:                                                                 
                                                                            
600.0m ordinary shares of 5p each *                         30.0        30.0
                                                                            
Allotted, called up and fully paid:                                         
                                                                            
438.3m (2006: 398.8m) ordinary shares of 5p each            21.9        19.9
                                                                            
                                                             No.          £m
                                                                            
                                                               m            
                                                                            
At 1 April 2006                                            398.8        19.9
                                                                            
Equity share placing                                        39.5         2.0
                                                                            
At 31 March 2007                                           438.3        21.9

* Subsequent to year-end the authorised share capital was increased to 4,600m
shares of 5p each or £230.0m.

In February 2007 the Group issued 39.5m shares for gross proceeds of £221.4m.
3,334,407 (2006: 6,630,500) shares were being held as treasury shares at 31
March 2007.

The Company has one class of ordinary shares which carry no right to fixed
income.

17. Statement of changes in equity         Hedging     Share      Own  Retained
                                                               shares  earnings
                                           reserve   premium                   
                                                                   £m        £m
                                                £m   account                   
                                                                               
                                                          £m                   
                                                                               
At 1 April 2005                               37.0     238.8   (18.9)    (25.3)
                                                                               
Retained profit for the financial year           -         -        -     107.5
                                                                               
Dividends paid                                   -         -        -    (52.0)
                                                                               
Movement in EBT, QUEST and treasury              -         -    (7.7)     (8.3)
shares during the year                                                         
                                                                               
Current tax on share-based payments              -         -        -       1.8
                                                                               
Actuarial gains on defined benefit               -         -        -      36.7
pension schemes                                                                
                                                                               
Deferred tax on actuarial gains                  -         -        -    (11.0)
                                                                               
Derivative hedging instrument movements     (43.2)         -        -         -
                                                                               
Deferred tax on derivative hedging             8.1         -        -         -
instrument movements                                                           
                                                                               
Share-based payments provision                   -         -        -       3.2
                                                                               
Deferred tax on share-based payments             -         -        -       0.3
                                                                               
At 31 March 2006                               1.9     238.8   (26.6)      52.9
                                                                               
Retained profit for the financial year           -         -        -      91.7
                                                                               
Dividends paid                                   -         -        -    (57.1)
                                                                               
Premium arising on issue of equity shares        -     219.4        -         -
                                                                               
Expenses on issue of equity shares               -    (10.4)        -         -
                                                                               
Movement in EBT, QUEST and treasury              -         -      9.2     (6.3)
shares during the year                                                         
                                                                               
Current tax on share-based payments              -         -        -       1.5
                                                                               
Actuarial gain on defined benefit pension        -         -        -     116.9
schemes                                                                        
                                                                               
Deferred tax on actuarial gains on               -         -        -    (35.0)
defined benefit pension schemes                                                
                                                                               
Derivative hedging instrument movements       22.8         -        -         -
                                                                               
Deferred tax on derivative hedging             2.0         -        -         -
instrument movements                                                           
                                                                               
Share-based payments provision                   -         -        -       3.2
                                                                               
Deferred tax on share-based payments             -         -        -       2.6
                                                                               
At 31 March 2007                              26.7     447.8   (17.4)     170.4

                                               Capital      Capital Total other
                                                                               
                                            redemption      reserve    reserves
                                                                               
                                               reserve           £m          £m
                                                                               
                                                    £m                         
                                                                               
At 31 March 2007 and 31 March 2006                 1.9          2.7         4.6

18. Translation reserves

                                                                             £m
                                                                               
At 1 April 2005                                                          (14.2)
                                                                               
Reclassify to hedging reserve on financial instrument recognition         (7.7)
                                                                               
Movement for the financial year                                            49.6
                                                                               
At 31 March 2006                                                           27.7
                                                                               
Movement for the financial year                                          (85.5)
                                                                               
At 31 March 2007                                                         (57.8)

19. Notes to the consolidated cash flow statement              2007        2006
                                                                               
                                                                 £m          £m
                                                                               
Operating profit                                              207.3       196.7
                                                                               
Adjustments for:                                                               
                                                                               
Depreciation charges                                          139.7       122.0
                                                                               
Amortisation of intangible assets                              10.3         4.5
                                                                               
Share-based payments                                            3.2         3.2
                                                                               
Loss on disposal of plant and equipment                         1.9         1.4
                                                                               
Operating cash flows before working capital                   362.4       327.8
                                                                               
Increase in inventories                                       (8.8)       (9.6)
                                                                               
(Increase)/decrease in receivables                           (25.8)         3.9
                                                                               
Increase/(decrease) in payables                                40.1      (21.4)
                                                                               
Cash generated by operations                                  367.9       300.7
                                                                               
Corporation tax paid                                          (5.5)       (3.5)
                                                                               
Interest paid                                                (62.3)      (61.3)
                                                                               
Interest element of finance lease payments                    (4.6)       (0.9)
                                                                               
Net cash from operating activities                            295.5       235.0
                                                                               




                                                                                                                                                                                                                                     

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