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 Â£37.1m fuel cost increase + Revenue up by 22.4% and adjusted operating profit up 12.8% + Adjusted EBITDA - Â£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 Â£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 Â£3,708.8m (2006: Â£3,030.9m) * Adjusted operating profit1 Â£259.2m (2006: Â£229.7m) * Operating profit Â£203.6m (2006: Â£210.7m) * Adjusted EBITDA2 Â£398.9m (2006: Â£351.7m) * Adjusted profit before tax1 Â£195.8m (2006: Â£176.4m) * Profit before tax Â£140.2m (2006: Â£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 Â£516.2m (2006: Â£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 Â£37.1m as a result of increased fuel costs. Our business is highly cash generative and we have achieved record adjusted EBITDA of Â£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 Â£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 Â£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 (Â£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 Â£3,708.8m (2006: Â£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 Â£195.8m (2006: Â£176.4m). Profit before tax was Â£140.2m (2006: Â£ 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 Â£ 37.1m. EBITDA (Group operating profit* plus depreciation) increased to a record Â£398.9m (2006: Â£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 Â£3,708.8m (2006: Â£ 3,030.9m). Adjusted operating profit was Â£259.2m (2006: Â£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 Â£37.1m by additional fuel costs. Foreign exchange translation on North American results reduced sterling earnings year on year by Â£3.8m - the average rate for 2006/07 was $1.89 compared to $1.79 for 2005/06. Profit before tax was Â£140.2m (2006: Â£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 Â£398.9m (2006: Â£ 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 Â£1,824.1m (2006: Â£ 1,164.9m) and operating profit increased by 36.7% to Â£108.8m (2006: Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£802.9m or $1,522.4m (2006: Â£826.3m or $1,476.0m). Revenue in these results is Â£45.8m lower than the prior year due to foreign exchange movements. Operating profit increased to Â£68.2m or $130.5m (2006: Â£67.1m or $120.2m) despite absorbing additional fuel costs of $11.2m or Â£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 Â£1,073.7m (2006: Â£1,031.2m) as a result of revenue and passenger growth initiatives and increased journeys including concessions and pricing. Operating profit was Â£103.0m (2006: Â£98.4m). This is a particularly notable achievement as operating profit was adversely impacted by Â£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 Â£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 Â£10m in new vehicles, extra CCTV cameras on buses and training programmes for staff. The Transport Executive and the City Council have invested Â£4.4m during the year and have agreed to invest Â£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 Â£49m in new infrastructure, including bus lanes, road widening, improved bus stops, enhanced traffic controls and Real Time Passenger Information as well as some Â£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 Â£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 Ã˜resund 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 Â£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 Â£3.7 billion and adjusted operating profit exceeding Â£ 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 Â£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 Â£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 Â£3,708.8m (2006: Â£3,030.9m), an increase of 22.4%. Adjusted operating profit was Â£259.2m (2006: Â£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 Â£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 Â£m operating margin * Â£m operating margin * profit * % profit * % Â£m Â£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 Â£1,073.7m (2006: Â£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 Â£103.0m (2006: Â£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 Â£ 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 Â£1,824.1m (2006: Â£1,164.9m), an increase of 56.6%. Operating profit was Â£108.8m (2006: Â£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 Â£802.9m (2006: Â£826.3m). Although lower in Sterling, at constant exchange rates, this result represents an increase of 3.1%. Operating profit was Â£68.2m (2006: Â£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 Â£3.7m (2006: profits of Â£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 Â£10.3m (2006: Â£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 Â£19.3m (2006: Â£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 Â£14.5m. Non-rail bid costs of Â£4.8m (2006: Â£ 2.4m) were incurred principally on European bid activities. UK Rail transition costs of Â£21.3m (2006: Â£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 Â£63.4m (2006: Â£53.3m) with the increase of Â£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 Â£51.1m (2006: Â£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 Â£38.1m (2006: Â£40.0m) representing a rate of 27.2% (2006: 25.4%). The actual cash effect of taxation to the group was a charge of Â£5.5m (2006: a credit of Â£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 Â£398.9m (2006: Â£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 Â£m Â£m % Â£m Â£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 Â£367.9m from Â£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 Â£5.5m (2006: outflow of Â£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 Â£321.6m (2006: Â£209.1m). Capital expenditure was predominantly in North American operations of Â£48.1m (2006: Â£ 65.6m), UK Bus operations of Â£141.9m (2006: Â£102.4m) including Â£84.0m of lease restructuring, UK Rail Â£110.0m (2006: Â£16.9m) and UK Bus properties of Â£19.8m (2006: Â£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 Â£17.9m and provisional goodwill arising on all acquisitions amounted to Â£9.1m. Funding and risk management At the year end, total bank borrowing facilities amounted to Â£596m of which Â£ 520m is committed. Of these committed facilities, Â£318.7m were utilised at 31 March 2007 leaving committed headroom of Â£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 Â£28.2m in UK Bus and Â£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 Â£188.2m. This reduction is mainly explained by the share placement in February 2007, associated with the planned acquisition of Laidlaw, which raised Â£216.9m net of expenses. The Group's net debt at 31 March 2007 was Â£516.2m and was comprised as follows: Analysis of net debt Fixed Variable Total Â£m Â£m Â£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 Â£216.9m less Â£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 Â£275.4m over the year reflecting the net outcome of the share placing of Â£211.0m (net proceeds of Â£216.9m less Â£5.9m of additional anticipated costs relating to equity placing), retained earnings (after the payment of Â£57.1m of dividends) for the year of Â£34.6m, actuarial gains on defined benefit pension arrangements (net of tax) of Â£81.9m, an increase in the hedging reserve of Â£24.8m and a net movement in own shares held of Â£9.2m. These positive movements were partly offset by a reduction in the translation reserve of Â£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 Â£1:$1.89 (2006: Â£1:$1.79). The period end rate was Â£1:$1.96 (2006: Â£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 Â£132m at the start of the year is now an aggregate surplus of Â£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 Â£m charges and Â£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 Â£m items 2007 Â£m 2007 Â£m Â£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 Â£57.1m (2006: Â£52.0m) were paid during the year. Dividends of Â£ 45.6m (2006: Â£37.4m) were proposed for approval in respect of the year. Consolidated balance sheet As at 31 March Notes 2007 2006 Â£m Â£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 Â£m Â£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: Â£m Â£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 Â£m Â£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 Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£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 Â£91.7m (2006: Â£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 Â£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 Â£m Earnings Â£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 Â£10.3m per note 5 less Â£0.2m (2006: Â£4.5m less Â£0.2m) attributable to equity minority interests. ** Loss on disposal of fixed assets of Â£3.7m less Â£nil (2006: profit of Â£14.0m less Â£0.5m) attributable to equity minority interests. *** Depreciation charge of Â£139.7m (2006: Â£122.0m) per note 6 less Â£0.9m (2006: Â£0.4m) attributable to equity minority interests. **** Excludes working capital movements. 4. Goodwill 2007 2006 Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m vehicle equipment fleet Â£m Â£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 Â£m Â£m vehicle equipment fleet Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m Â£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 Â£m depreciation Â£m Â£m Â£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 * Â£m Â£m Â£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 Â£ 44.0m (2006: Â£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 Â£m Â£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. Â£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 Â£230.0m. In February 2007 the Group issued 39.5m shares for gross proceeds of Â£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 Â£m Â£m Â£m account Â£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 Â£m Â£m Â£m At 31 March 2007 and 31 March 2006 1.9 2.7 4.6 18. Translation reserves Â£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 Â£m Â£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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Flutter shares tank as primary listing moves to New York and the CFO steps aside, JD Sports struggles to impress despite sales growth in challenging market and Nat West buys £1.24bn of its own stock back from the government.

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