FirstGroup PLC — Audit Report / Information 2011

Mar 26, 2011

Company Registration No 1990370

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First West Yorkshire Limited

Report and Financial Statements

26 March 2011

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Report and financial statements 2011 Contents

Directors' report	1
Directors' responsibilities statement	5
Independent auditor's report	6
Profit and loss account	7
Balance sheet	8
Reconciliation of movements in shareholders' funds	9
Statement of total recognised gains and losses	10
Notes to the financial statements	11

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Directors' report

The directors have pleasure in submitting their annual report and financial statements for the 52 week period ended 26 March 2011

Principal activities

The company's principal activities are the provision of bus and coach operations in the United Kingdom

Business review

As shown in the company's profit and loss account on page 7, the company's sales showed a 4 3% reduction on the prior period whilst operating profit increased by 25 6% to £27 8 million. The improvement is a result of detailed reviews of route profitability to ensure that company resources are managed as efficiently as possible whilst matching service provision with demand and driving down unit costs through operational efficiencies and higher productivity

The balance sheet on page 8 of the financial statements shows the company's financial position at the period-end Net assets have increased from £45.9 million to £56.3 million in the current period, primarily as a result of movements in actuarial assumptions in relation to the defined benefit pension scheme The net pension asset recognised on the company's balance sheet has increased from £2.2 million to £15.1 million The net assets have also increased due to the profit made during the year £29 2m (2010 £17 4m) less the dividend paid of £25 0m (2010 £10 0m)

Capital expenditure was £1.3 million in the period, being the purchase of 6 new hybrid vehicles Further details are set out in note 12

Safety remains the highest priority. The directors are continuously developing and improving processes to ensure that a 'Safety First' culture is embedded throughout the company and strive to make our services as safe as possible for our customers and staff

FirstGroup plc manages its operations on a divisional basis. For this reason, the company's directors believe that further key performance indicators for the company are not necessary or appropriate for an understanding of the development. performance or position of the business. The performance of the UK Bus Division of FirstGroup plc, which includes the company, is discussed in the Group's Annual Report which does not form part of this report

Risks and uncertainties

There are a number of potential risks and uncertainties that could have an impact on the company's long-term performance The directors have established an ongoing process for identifying, evaluating and managing the significant risks and uncertainties faced by the company and continue to assess these on a regular basis in the light of internal and external events

Specific business risks faced by the company include competitive pressures, legislation and regulation and increasing labour, fuel and insurance costs The directors are aware of the continual change in laws and other regulations and the increasing costs of compliance The directors conduct regular reviews of safety procedures, equipment specifications, employment requirements, environmental procedures, insurance coverage and other areas to ensure they are appropriate and operating effectively Labour costs represent the most significant element of the company's operating costs The directors continue to monitor employee recruitment, training, personal development and remuneration to ensure the company attracts and retains the right people Fuel costs also represent a significant proportion of the company's cost base Fuel prices are directly influenced by international, political and economic circumstances as well as natural disasters Wherever possible, the directors seek to minimise the operational and financial impact of such events through fixed price forward contracts and other operational efficiency measures Finally, the promotion of a 'Safety First' culture at all levels throughout the business minimises insurance premiums and other related claims

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Directors' report (continued)

Going concern

The directors have considered the going concern assumption given the current uncertainty of the economic climate and have formed the conclusion that there is a reasonable expectation that the company will continue to operate in the foreseeable future The directors have considered the company forecasts, uncertainties and the financial commitment from the parent company in forming this judgement

The parent company has provided the directors of the company with a letter confirming that it will make available such funds as may be required to enable the company to meet its obligations for a period of at least 12 months from signing the financial statements. The directors have made enquiries and understand that the parent company has adequate resources to be able to provide this financial support

After making enquiries and considering the above facts, the directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future Accordingly, they continue to adopt the going concern basis in preparing the financial statements

Outlook

The trading environment for the next 12 months is set to continue to be challenging In spite of this, the directors remain optimistic about the current and future opportunities to grow the business with innovative ideas, improved service quality and reliability while retaining a tight control on costs

The directors remain confident that the company's activities will generate a satisfactory result in the coming period

Environmental

FirstGroup plc recognises the importance of its environmental policies, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by the Group's activities. The company operates in accordance with Group policies, which are described in the Group's Annual Report, which do not form part of this Report Initiatives designed to minimise the company's impact on the environment include safe disposal of waste, recycling and reducing energy consumption

Through our core business activities we are committed to providing a safe, good quality, reliable and cost effective public transport to all our customers Our core business strategy is to increase customer numbers and encourage a greater move towards the use of bus transport This will support the needs of society to achieve more sustainable travel We recognise the environmental impacts arising from our business activities and are committed to reducing these through effective environmental management

Employees

Details of the number of employees and related costs can be found in note 4 to the financial statements

Financial matters

The results for the financial period are given in the profit and loss account on page 7

A final dividend of £25 0million was paid prior to the period end (2010 £10 0million) In accordance with FRS 21 this has been recognised in the financial statements when approved

Fixed assets

In the opinion of the directors, there were no material differences between the market values of the company's assets and their net book values

Directors' report (continued)

Supplier payment policy

It is the company's policy to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods and services in accordance with agreed terms and conditions A number of significant purchases, such as commitments under finance leases and hire purchase contracts and under operating leases are paid by direct debit At 26 March 2011 the company had 65 days' $(2010 - 59 \text{ days'})$ purchases outstanding

Financial instruments

The company's principal financial assets are bank balances and trade debtors. The company's credit risk is primarily attributable to its trade debtors The amounts presented in the balance sheet are net of provisions for doubtful debts The company has no significant concentration of credit risk, with exposure spread over a large number of customers The credit risk on liquid funds is limited because the counterparties are banks Although certain risks, for example fuel price, are hedged on a group basis, the company does not directly enter into any derivative financial instruments In order to maintain liquidity and ensure that sufficient funds are available for ongoing operations and future developments the company uses a mix of intercompany loans and finance leases

Directors

The directors who held office throughout the period and subsequently appointed are as follows

D A Kaye	(resigned 1 June 2010)
I Humphreys	(resigned 16 May 2011)
R Harris	(resigned 16 May 2011)
D B Alexander
C Stafford	(resigned 28 September 2010)
B T Gilligan	(appointed 28 September 2010)
R Ward	(appointed 1 December 2010)
A R Foster	(appointed 1 March 2010)
T M Broxton	(appointed $16$ May 2011)
R Hamilton	(appointed $16$ May 2011)
A J Pike	(appointed 6 June 2011)

Employee involvement

Communication with employees is effected mainly through regular briefing and negotiating meetings between the directors, the senior management and employee representatives on the central and depot negotiating committees The briefing meetings enable senior management to consult employees and to ascertain their views on matters likely to affect their interests

Disabled persons

The company recognises its obligations to give disabled people full and fair consideration for all vacancies within the statutory medical requirement which have to be met for certain grades of staff Wherever reasonable and practicable, the company will retain newly disabled employees and at the same time provide full and fair opportunities for the career development of disabled people

Directors' report (continued)

Audit information

Each of the persons who is a director at the date of approval of this report confirms that

• as far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and $\bullet$
• the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditor is aware of that information

This confirmation is given and should be interpreted in accordance with the provision of S418 of the Companies Act 2006

Auditor

Deloitte LLP have indicated their willingness to be reappointed for another term and appropriate arrangements are being made for them to be deemed reappointed as auditors in the absence of an Annual General Meeting

Approved by the Board of Directors And signed by order of the board

anno Moxecene D B Alexander Director

31 August 2011

Directors' responsibilities statement

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations

Company law requires the directors to prepare financial statements for each financial period Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period In preparing these financial statements, the directors are required to

• select suitable accounting policies and then apply them consistently, $\bullet$
• make judgments and accounting estimates that are reasonable and prudent, $\bullet$
• state whether applicable UK Accounting Standards have been followed, subject to any material departures $\bullet$ disclosed and explained in the financial statements, and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FIRST WEST YORKSHIRE LIMITED

We have audited the financial statements of First West Yorkshire Limited for the 52 week period ended 26 March 2011 which comprise the profit and loss account, the balance sheet, the reconciliation of movement in shareholders' funds, the statement of total recognised gains and losses and the related notes 1 to 24 The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice)

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express and opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or This includes an assessment of whether the accounting policies are appropriate to the company's error circumstances and have been consistently applied and adequately disclosed, the reasonableness of significant accounting estimates made by the directors, and the overall presentation of the financial statements In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report

Opinion on financial statements

In our opinion the financial statements

• give a true and fair view of the state of the company's affairs as at 26 March 2011 and of its profit for the 52 week period then ended.
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, and $\bullet$
• $\bullet$ have been prepared in accordance with the requirements of the Companies Act 2006

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us, or
• the financial statements are not in agreement with the accounting records and returns, or $\bullet$
• certain disclosures of directors' remuneration specified by law are not made, or $\bullet$
• we have not received all the information and explanations we require for our audit $\bullet$

بمحملا م Rousey

Christopher Powell FCA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Leeds, England 31 August 2011

Profit and loss account 52 weeks ended 26 March 2011	Notes	52 weeks ended 26 March 2011 £000	52 weeks ended 27 March 2010 £000
Turnover	2	134.793	140,872
Operating costs	3	(107,019)	(118, 757)
Operating profit		27,774	22,115
Net interest receivable	7	11,912	2,678
Profit on ordinary activities before taxation	8	39,686	24,793
Tax on profit on ordinary activities	9	(10, 482)	(7, 386)
Profit for the period, transferred to reserves	19	29,204	17,407

$\frac{1}{2} \left( \begin{array}{ccc} 1 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 \ 0 & 0 & 0 & 0 \ 0 & 0 & 0 & 0 \ 0 & 0 & 0 & 0 \ 0 & 0 & 0 & 0 & 0 \ 0 & 0 & 0 & 0 & 0 \ 0 & 0 & 0 & 0 & 0 \ 0 & 0$

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All activities relate to continuing operations

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Balance Sheet At 26 March 2011

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	Notes	£000	26 March 2011 £000	£000	27 March 2010 £000
Assets employed:
Fixed assets
Goodwill	11		776		843
Tangible assets	12		80,800		90,466
Current assets			81,576		91,309
Stocks	13	1,661		1,782
Debtors	14	10,914		12,468
Cash at bank and in hand		104,856		76,160
Creditors amounts falling due within one year	15	117,431 (124, 156)		90,410 (109, 972)
Net current liabilities			(6, 725)		(19, 562)
Total assets less current liabilities			74,851		71,747
Creditors amounts falling due after more than one year	15		(21,786)		(15, 893)
Provisions for liabilities	16		(11, 863)		(12, 119)
Net assets excluding pension asset			41,202		43,735
Pension asset	22		15,075		2,210
Net assets including pension asset			56,277		45,945
Financed by.
Capital and reserves
Called up share capital	18		16,717		16,717
Share premium account	19		1,251		1,251
Other reserves	19		14,702		14,702
Profit and loss account	19		23,607		13,275
Shareholders' funds			56,277		45,945

These financial statements (Company Registration Number 1990370) were approved by the Board of directors on 31 August 2011 and were signed on its behalf by

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D B Alexander Director

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Reconciliation of movements in shareholders' funds

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52 weeks ended 26 March 2011

	52 weeks ended	52 weeks ended
	26 March 2011 £000	27 March 2010 £000
Profit for the financial period	29,204	17,407
Share based payments (note 6)	180	231
Other recognised gains and losses relating to the period (net)	5,948	(1,368)
Dividends paid (note 10)	(25,000)	(10,000)
Net increase to shareholders' funds	10,332	6,270
Opening shareholders' funds	45,945	39,675
Closing shareholders' funds	56,277	45,945

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Statement of total recognised gains and losses

52 weeks ended 26 March 2011

	52 weeks ended 26 March 2011 £000	52 weeks ended 27 March 2010 £000
Profit for the financial period	29,204	17,407
Actuarial gain / (loss) relating to the pension scheme (note 22)	8,400	(1,900)
UK deferred taxation attributable to actuarial (gain) / loss	(2,268)	532
Reduced deferred tax hability arising from decrease in tax rate	(184)
Total recognised gains and losses for the period and since last report	35,152	16,039

Notes to the Financial Statements 52 weeks ended 26 March 2011

$\mathbf{1}$ . Principal accounting policies

The accounting policies have been applied consistently throughout the current and preceding period

Basis of preparation $(a)$

The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards The financial statements are made up to the Saturday nearest to the year end for each financial period

Going concern (b)

The directors have considered the going concern assumption given the current uncertainty of the economic climate and have formed the conclusion that there is a reasonable expectation that the company will continue to operate in the foreseeable future. The directors have considered the company forecasts, uncertainties and the financial commitment from the parent company in forming this judgement

The parent company has provided the directors of the company with a letter confirming that it will make available such funds as may be required to enable the company to meet its obligations for a period of at least 12 months from signing the financial statements The directors have made enquiries and understand that the parent company has adequate resources to be able to provide this financial support

After making enquiries and considering the above facts, the directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future Accordingly, they continue to adopt the going concern basis in preparing the financial statements

Cash flow statement $(c)$

The company is a wholly owned subsidiary of FirstGroup plc, a company registered in Scotland Accordingly, the company has taken advantage of the exemption offered by Financial Reporting Standard I enabling it not to produce a cash flow statement as the parent company has included a consolidated cash flow statement within its Group financial statements

$(d)$ Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment

Depreciation is provided to write off the cost less residual value of tangible fixed assets over their estimated useful economic lives as follows

Freehold buildings	$\overline{\phantom{0}}$	50 years straight line
Short leasehold properties		period of lease
Passenger carrying vehicle
Double and single decks		15 years straight line
Coaches	$\overline{\phantom{0}}$	7 or 12 years straight line
Midibuses		12 years straight line
Mimbuses	$\overline{\phantom{a}}$	9 years straight line
Other plant and equipment	$\overline{\phantom{0}}$	3 to 8 years straight line

No depreciation is provided on freehold land

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$\mathbf{I}$ Principal accounting policies (continued)

$(e)$ Goodwill

Purchased goodwill is capitalised and classified as an intangible fixed asset on the balance sheet Prior to 1 April 1998, purchased goodwill was written off to reserves in the year it was acquired This goodwill has not been reinstated On disposal of the businesses concerned this goodwill is included in determining the gain or loss on disposal in the profit and loss account

Where capitalised goodwill is regarded as having a limited useful economic life, it is amortised over that life, but where capitalised goodwill is regarded as having an indefinite useful economic life, it is not amortised Where capitalised goodwill is amortised over a life of greater than 20 years, or is not amortised, annual impairment reviews are conducted to compare the book value with the recoverable amount If the recoverable amount has fallen below the book value, the goodwill is written down to the recoverable amount immediately

All capitalised goodwill in the balance sheet at the period end is being amortised over a period of 20 years on a straight line basis

Leases and hire purchase $(1)$

Assets held under finance lease, which are those leases where substantially all the risks and rewards of ownership of the asset have passed to the company, and under hire purchase contracts are recorded in the balance sheet as tangible fixed assets Depreciation is provided on these assets over their estimated useful lives or lease term, as appropriate

Future obligations under finance leases and hire purchase contracts are included in creditors, net of finance charges Payments are apportioned between the finance element, which is charged to the profit and loss account as interest, and the capital element, which reduces the outstanding obligations The finance charges are calculated in relation to the reducing amount of obligations outstanding and are charged to the profit and loss account on the same basis

All other leases are operating leases and the rental charges are taken to the profit and loss account on a straight line basis over the life of the lease

Government grants and subsidies $(g)$

Amounts receivable for tendered services and concessionary fare schemes are included in turnover Rebates in respect of duty paid on fuel are netted off operating costs Grant income is credited to other creditors and is released to the profit and loss account over the estimated useful lives of the assets to which they relate The grant income is shown net of operating costs

Stocks $(h)$

Stocks are valued at the lower of cost and net realisable value Provision is made for obsolete and slow moving or defective items where appropriate

$\left( 1\right)$ Taxation

UK corporation tax is provided at amounts expected to be paid (or recovered) using tax rates and laws that have been enacted or substantively enacted by the balance sheet date

The taxation liability is reduced wholly or in part by the surrender of losses by Group undertakings The tax benefits arising from Group relief are recognised in the financial statements of the surrendering undertaking

The charge for taxation is based on the profit for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered Deferred tax assets and habilities are not discounted

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that have been enacted by the balance sheet date

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$1.$ Principal accounting policies (continued)

$\mathbf{u}$ Pension costs

Company specific schemes

The company operates a defined benefit scheme (West Yorkshire Superannuation Fund), which is held in separately administrated funds

The amounts charged to operating profit regarding the defined benefit scheme are the current service costs and gains and losses on settlements and curtailments They are included as part of staff costs Past service costs are recognised immediately in the profit and loss account if the benefits have vested If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs The interest costs and the expected return on the assets are shown as a net amount of other financial costs or credits included within interest payable Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses

Pension scheme assets are measured at fair values and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond or equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least trienmally and are updated at each balance sheet date The resulting defined benefit asset or liability, net of related deferred tax, is presented separately after other assets on the face of the balance sheet

Group schemes

The company is unable to separately identify its share of the schemes assets and liabilities for the First UK Bus Pension Scheme and the FirstGroup Pension Scheme It therefore accounts for the schemes as if they were defined contribution schemes and includes certain disclosures in the financial statements in respect of the Group schemes Contributions are charged to the profit and loss account as they become payable

$(k)$ Turnover

UK Bus turnover principally comprises amounts receivable from ticket sales and concessionary fare schemes Concessionary amounts are recognised in the period in which the service is provided based on a predetermined formula as agreed with the relevant local authority Other bus and services revenue from contracts with government bodies and similar organisations are recognised as the services are provided

$(1)$ Share based payment

The company's parent issues equity-settled share-based payments to certain employees Equity-settled share-based payments are measured at fair value at the date of grant The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and is adjusted for the effects of non-market based vesting conditions

Fair value is measured by use of a Black-Scholes model The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations

$(m)$ Insurance

FirstGroup plc's policy is to self-insure high frequency, low value claims within the businesses $T_0$ provide protection above these types of losses, cover is obtained through third party insurance policies Provision is made under FRS12 for the estimated cost of settling uninsured claims for incidents occurring prior to the balance sheet date

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$2.$ Turnover and profit on ordinary activities before taxation

Turnover represents the amounts receivable for services supplied to customers during the period and amounts receivable for tendered services and concessionary fare schemes

$\overline{\phantom{a}}$

The whole of the turnover and profit on ordinary activities before taxation derives from the company's principal activities within the United Kingdom The company has one principal class of business, namely the provision of passenger transport services

$3.$ Operating costs

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	52 weeks ended 26 March 2011 £000	52 weeks ended 27 March 2010 £000
Raw materials and consumables	19,139	27,373
Staff costs (note 4)	64,129	68,253
Other external charges	14,576	13,727
Depreciation and other amounts written off tangible fixed assets	9,108	9,337
Amortisation of goodwill	67	67
	107,019	118,757

Employee numbers and costs $\boldsymbol{4}$ .

The average number of persons employed by the company (including directors) during the period was as follows

	52 weeks ended 26 March 2011 No.	52 weeks ended 27 March 2010 N 0
Drivers Maintenance and traffic Administration	1,864 514 55	2,109 561 91
	2,433	2,761

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$\overline{4}$ . Employee numbers and costs (continued)

The aggregate payroll costs of these persons were as follows

	52 weeks	52 weeks
	ended	ended
	26 March 2011	27 March 2010
	£000	£000
Wages and salaries	54,458	58,593
Social security costs	4,326	4,684
Other pension costs	5,165	4,745
Share based payments	180	231
	64,129	68,253

$5.$ Directors' remuneration

One director received remuneration from FirstGroup plc of £83,000 (2010 £312,000), the ultimate parent company, in the current and prior periods It is not considered practicable to allocate this between services provided to that company, and services provided in his capacity as director of First West Yorkshire Limited

The remuneration of the directors during the period was as follows

	52 weeks	52 weeks
	ended	ended
	26 March	27 March
	2011	2010
	£000	£000
Aggregate emoluments (excluding pension contributions)	491	557

Retirement benefits accrued to 1 director under the company defined benefit schemes (2010 3) and to 3 directors under other FirstGroup plc defined benefit schemes, treated as money purchase schemes (2010 3)

Directors' emoluments include salary, fees, bonuses, company contributions to money purchase pension schemes, sums paid by way of expense allowances subject to UK income tax and the money value of other non-cash benefits and exclude share options, other company pension contributions and payments made under long-term incentive schemes

No directors exercised share options during the current or preceding period

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

5. Directors' remuneration (continued)

The emoluments of the highest paid director amounted to

	52 weeks ended	52 weeks ended
	26 March 2011 £000	27 March 2010 £000
Aggregate emoluments	212	169
Defined benefit scheme
Accrued pension at end of period	5	3
Accrued lump sum at end of period	26	13

The highest paid director exercised no share options during the period but did become entitled to receive shares under the FirstGroup long term incentive plan

6. Share based payments

Save as you earn (SAYE)

The Group operates an Inland Revenue approved savings related share option scheme Grants were made as set out below. The scheme is based on eligible employees being granted options and their agreement to opening a sharesave account with a nominated savings carrier and to save weekly or monthly over a specified period Sharesave accounts are held with Yorkshire Building Society The right to exercise the option is at the employee's discretion at the end of the period previously chosen for a period of six months

Details of the share options of the Group outstanding during the period are as follows

	SAYE April 2006 Options No.	SAYE December 2006 Options No.	SAYE December 2007 Options No.	SAYE December 2008 Options No	SAYE December 2009 Options No.	SAYE December 2010 Options No.
Outstanding at the
beginning of the period	1,265	1,789,363	1,514,616	2,224,615	2,900,694
Awarded during the period						2.999,495
Exercised during the period			(1, 595)	(2, 878)	(3,093)
Lapsed during the period	(1,265)	(1,789,363)	(1, 389, 721)	(272,935)	(271,508)	(33, 882)
Outstanding at the end of
the period			123,300	1,948,802	2,626,093	2965,613
Exercisable at the end of the period			123,300
Weighted average exercise price (pence)	3250	4440	5830	3710	3100	3190
Weighted average share price at date of exercise (pence)	N/A	N/A	3768	3821	3693	N/A

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

6. Share based payments (continued)

The fair values of the options granted during the last two periods were measured using a Black-Scholes model The inputs into the Black-Scholes model were as follows

	2011	2010
Weighted average share price (pence)
– SAYE December 2009		3950
$-$ SAYE December 2010	3870
Weighted average exercise price (pence)
$-$ SAYE December 2009		3100
– SAYE December 2010	3190
Expected volatility
- SAYE December 2009		35%
– SAYE December 2010	35%
Expected life
- SAYE schemes	3 years	3 years
Rate of interest
- SAYE December 2009		20%
$-$ SAYE December 2010	14%
Expected dividend yield
- SAYE December 2009		48%
– SAYE December 2010	48%

Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous five years The expected life used in the model has been adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations

Allowances have been made for the SAYE schemes for the fact that, amongst a group of recipients some are expected to leave before an entitlement vests The accounting charge is then adjusted over the vesting period to take account of actual forfeitures, so although the total charge is unaffected by the pre-vesting forfeiture assumption, the timing of the recognition of the expense will be sensitive to it Fair values for the SAYE include a 10% p a pre-vesting leaver assumption

The Group used the inputs noted above to measure the fair value of the new share options

The Group has allocated the expense amongst its trading subsidiary undertakings based on the number of employees participating in the scheme The company has recognised a total expense of £180,000 (2010 £231,000) relating to equity-settled share-based payment transactions

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$7.$ Net interest receivable and similar income

52 weeks ended	52 weeks ended
26 March	27 March
2011	2010
	£000
(395)	(395)
(12,900)	(16, 149)
(393)	(159)
(13,688)	(16, 703)
	19,381
11,912	2,678
	£000 25,600

$\overline{\phantom{a}}$ $-$ $-$

8. Profit on ordinary activities before taxation

Profit on ordinary activities before taxation is stated after charging / (crediting)	52 weeks ended 26 March 2011 £000	52 weeks ended 27 March 2010 £000
Auditor's remuneration
Fees payable to the Company's auditor for the audit of the Company's annual
accounts	94	40
Depreciation and other amounts written off tangible fixed assets
- owned assets	7,366	8,112
- held under finance leases and hire purchase contracts	1,742	1,225
Amortisation of goodwill	67	67
Government grants	(600)	(636)
Rentals payable under operating leases
- plant and machinery	124	128
- land and buildings	346	34 I

There were no fees payable to Deloitte LLP and their associates for non-audit services to the company during the period (2010 £nil)

$---$

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

9. Tax charge on profit on ordinary activities

	52 weeks ended 26 March 2011 £000	52 weeks ended 27 March 2010 £000
Current taxation
- Group relief payable	8,559	7,669
- Adjustments in respect of prior periods	(193)	(821)
Total current taxation	8,366	6,848
Deferred taxation
- Origination and reversal of timing differences	78	(645)
- Adjustment in respect of prior periods	137	1,155
- Effect of decrease in tax rate on opening deferred tax balance	(355)
	(140)	510
- Deferred taxation on pension scheme movements	2,471	28
- Effect of decrease in tax rate on opening deferred tax balance	(215)
	2,256	28
Total deferred taxation	2,116	538
Total tax charge on profit on ordinary activities	10,482	7,386

The standard rate of taxation for the period, based on the UK standard rate of corporation tax, is 28% (2010 28%) The actual current tax charge for the current and previous period differed from the standard rate for the reasons set out in the following reconciliation

	52 weeks ended 26 March 2011 %	52 weeks ended 27 March 2010 %
Standard rate of taxation	280	280
Factors affecting charge
- Expenses not deductible for tax purposes	0 1	02
- Capital allowances (in excess of) / less than depreciation	(01)	22
- Other timing differences	(64)	05
- Prior periods' tax charge	(0 5)	(33)
Current taxation rate for the period	211	27.6

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

9. Tax charge on profit on ordinary activities (continued)

During the year the UK government enacted legislation to reduce the UK corporation tax rate The UK corporation tax rate reduced from 28% to 27% with effect from 1 April 2011 The effect of this reduction in the UK corporation tax rate was to reduce the deferred tax hability on UK timing differences

The UK government later announced that it would introduce legislation that would reduce the corporation tax rate to 26% with effect from 1 April 2011 This legislation was substantially enacted on 29 March 2011, after the end of the financial year. The effective tax rate for the period to 31 March 2012 is expected to reduce accordingly

The UK government has also announced the intention to subsequently reduce the UK corporation tax rate by 1% per annum to 23% with effect from 1 April 2014 This is likely to have the effect of reducing the effective tax rate in future years

10 Dividends

11.

	52 weeks ended 26 March 2011	52 weeks ended 27 March 2010
	£000	£000
Amounts recognised as distributions to equity holders in the period Final dividend for the period	25,000	10,000
Goodwill
		£000
Cost
At 27 March 2010 and 26 March 2011		1,507
Amortisation
At 28 March 2010		664
Charge for period		67
At 26 March 2011		731
Net book value
At 26 March 2011		776
At 27 March 2010		843

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$12.$ Tangible fixed assets

and vehicle fleet buildings equipment £000 £000 £000 £000 Cost or valuation At 28 March 2010 4,680 131,264 16,664 152,608 Additions 1,338 1,338 Intra Group transfers out (1,306) (21) (1, 327) Disposals (3, 418) (1,085) (4, 503) At 26 March 2011 4,680 127,878 15,558 Depreciation At 28 March 2010 1,027 48,605 12,510				Passenger Other plant
		Land and	carrying
					Total
					148,116
					62,142
	Charge for period	96	8,298	714	9,108
Intra Group transfers out (5) (625)					(630)
Disposals (2,220) (1,084)					(3, 304)
At 26 March 2011 1,123 54,058 12,135					67,316
Net book value
At 26 March 2011 3,557 73,820 3,423					80,800
At 27 March 2010 3,653 82,659 4,154					90,466
The net book value of land and buildings comprises
26 March					27 March
2011					2010
£000					£000
Freehold 3,482					3,571
Short leasehold 75					82
3,557					3,653

Depreciation is not provided on the land element of freehold property which amounts to £967,000 (2010 -£967,000)

£23.2 million (2010 - £10.7 million) of the net book value of the passenger carrying vehicle fleet was acquired under finance leases and hire purchase contracts The depreciation charges on these assets during the period was £1 7 million $(2010 - E1 2$ million)

During October 2010, the company arranged a new HP finance deal repayable by fixed instalments over a seven year period The assets covered by the arrangement were 101 existing passenger carrying vehicles with a total net book value of £16 1 million

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$-$

$\sim$

13. Stocks

	26 March 27 March
	2011	2010
	£000	£000
Spare parts and consumables	1,661	1,782

There is no material difference between the balance sheet value of the stocks and their replacement cost

$14$ Debtors

	26 March 2011 £000	27 March 2010 £000
Amounts due within one year
Trade debtors	656	355
Amounts owed by group undertakings	7.094	8,896
Other debtors	1,855	1.084
Other prepayments and accrued income	1.309	2,133
	10,914	12,468

15. Creditors

	26 March	27 March
	2011	2010
	£000	£000
Amounts falling due within one year
Obligations under finance leases and hire purchase contracts	5,741	2,236
Trade creditors	6,908	22,975
Amounts owed to group undertakings	103,134	77,816
Corporation tax
Other tax and social security	2,163	1,651
Other creditors	2,200	393
Accruals and deferred income	4,009	4,900
	124,156	109,972
Amounts falling due after more than one year
Obligations under finance leases and hire purchase contracts	16,560	8,419
Other creditors	5,226	7,474
	21,786	15,893
Analysis of borrowings
Obligations under finance leases and hire purchase contracts
Due in more than one year but not more than two years	2,912	2,121
Due in more than two years but not more than five years	10,226	5,487
Due in more than five years	3,422	811
	16,560	8,419

$\omega_{\rm{c}}$ , $\omega_{\rm{c}}$

$\hspace{1.0cm} \overline{\hspace{1.0cm} } \hspace{1.1cm} \overline{\hspace{1.1cm} } \hspace{1.1cm} \overline{\hspace{1.1cm} } \hspace{1.1cm} \overline{\hspace{1.1cm} } \hspace{1.1cm} \overline{\hspace{1.1cm} } \hspace{1.1cm} \overline{\hspace{1.1cm} } \hspace{1.1cm} }$

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

16. Provisions for liabilities

	Insurance claims £000	Deferred tax £000	Total 000t
At 28 March 2010	2,306	9.813	12,119
Utilised in the period	(2,449)		(2, 449)
Charge to the profit and loss account	2,333	(140)	2,193
At 26 March 2011	2,190	9.673	11,863

Details of the deferred tax provision (excluding deferred tax in the pension asset) are given in note 17

Insurance claims accruals due within one year at 26 March 2011 amounted to £1,179,000 (2010 £1,241,000) and are included in 'accruals and deferred income' within note 15 The amount included within provisions above represents the estimate of amounts due after more than one year

The insurance claims provision arises from estimated exposures for incidents occurring prior to the balance sheet date It is anticipated that the majority of such claims will be settled within the next six years

17. Deferred taxation

Provision for deferred taxation consists of the following amounts

		26 March 2011 £000	27 March 2010 £000
	Capital allowances in excess of depreciation Other timing differences	9,678 (5)	10,247 (434)
	Deferred tax provision	9,673	9,813
18.	Called up share capital
		26 March 2011 £000	27 March 2010 £000
	Allotted, called up and fully paid 16,717,000 ordinary shares of £1 each	16,717	16,717

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

19. Reserves

	Share premium account £000	Other reserves £000	Profit and loss account £000
At 28 March 2010	1.251	14,702	13,275
Other recognised gains and losses		$\overline{\phantom{a}}$	5,948
Dividends paid		٠	(25,000)
Share based payments (note 6)			180
Profit for the period		۰	29,204
At 26 March 2011	1,251	14,702	23,607
Profit and loss reserve excluding pension asset			8,532
Pension asset			15,075
At 26 March 2011			23,607

The cumulative amount of goodwill arising from the acquisition of businesses written off in prior years is £0.5 million (2010 - £0.5 million) This goodwill had been eliminated against reserves as a matter of accounting policy and will be charged to the profit and loss account on the disposal of the business to which it relates

Commitments 20.

Capital commitments, contracted for at the end of the period for which no provision has been made are £4.7 million (2010 £nil)

Commitments for payments in the next financial period under operating leases are as follows

	26 March 2011		27 March 2010
	Land and Buildings	Other	Land and Buildings	Other
	£000	£000	£000	£000
Operating leases which expire
Within one year	36	6	29	9
Between two and five years	70	88	68	75
After five years	227	-	215
	333	94	312	84

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$21.$ Other commitments

The company has guaranteed the bank overdrafts of certain fellow subsidiary undertakings The amount outstanding at the end of the period under the guarantees was nil (2010 - £nil)

The company is a member of a Value Added Tax ("VAT") group covering a number of subsidiary undertakings All members of the VAT group are jointly and severally hable in respect of any VAT owed to HMRC

Together with certain other Group companies, the company has guaranteed the bank loans of its holding company under various term facilities The amount of guaranteed bank loans at the end of the period was £654 5 million (2010 - £896 0 million)

22. Pension scheme

West Yorkshire Superannuation Pension Fund (WYSF)

The company is a member of a defined benefit pension scheme, which is funded The scheme's assets are held and managed independently of the company's finances by independent investment managers appointed by the trustees of the scheme

The scheme is subject to triennial valuation by independent actuaries, the last valuation being carried out in 2010 using the projected unit method

The main financial assumptions used in this update were as follows

	2011	2010	2009
Rate of increase in salaries	4 20%	4 40%	4 10%
Rate of increase of pensions in payment	2 40%	340%	260%
Rate of increase of pensions in deferment	240%	340%	260%
Discount rate	5 50%	560%	6 7 5 %
Inflation assumption – RPI	3 20%	340%	260%
Inflation assumption $-$ CPI	2 40%	۰	$\overline{\phantom{0}}$

During the period the government announced its intention to change the measure that it uses for cost of living increases to the public sector pensions and to change the basis for the statutory revaluation and indexation of occupational pension schemes in the private sector Increases to pensions in payment and deferred pensions in the local government pension schemes are expected to be linked to the rise in CPI in future rather than the rise in RPI As a result of this, pension liabilities are £15 9 million lower

The assets in the scheme and the expected rate of return were

	2011 Expected Rate of Return	2010 Expected Rate of Return	2009 Expected Rate of Return	2011	2010	2009
				Value £m	Value $\mathbf{f}_{\mathbf{m}}$	Value £m
Equities	885%	905%	865%	227.5	2213	1609
Bonds	5 20%	5 30%	5 50%	500	518	40 0
Property	685%	760%	680%	115	152	117
Other	687%	636%	4 00%	398	353	372
				3288	3236	249 8

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$22.$ Pension scheme (continued)

The balance sheet position for the company

	2011 £m	2010 $\pmb{\pmb{\pmb{\varepsilon}}}$ m	2009 £m
Total fair value of assets	3288	323 6	2498
Present value of scheme liabilities	(2385)	(320.5)	(2450)
Irrecoverable surplus	(696)
Surplus in the scheme	207	31	48
Related deferred tax hability	(56)	(09)	(13)
Net pension asset	15 1	22	35
Analysis of amount charged to operating profit
		2011	2010
		£m	£m
Current service costs		35	36
Total operating charge		35	36
Amounts charged to the profit and loss account
		2011	2010
		£m	£m
Expected return on pension scheme assets		256	194
Interest on pension scheme liabilities		(129)	(161)
Net return (chargeable as finance cost)		127	33
Current service cost (chargeable as operating cost)		(3 5)	(36)
Net pension income / (cost)		92	(03)
Amounts recognised in the statement of total recognised gains and losses
		2011	2010
		£m	£m
Actual return less expected return on pension scheme assets		(65)	650
Experience gains and losses arising on scheme liabilities		717	02
Changes in assumptions underlying the present value of scheme liabilities Irrecoverable surplus		128 (696)	(671)
		84	(19)

The cumulative amount of actuarial gains and losses recognised in the statement of total recognised gains and losses since the adoption of FRS17 is a charge of £28 8 million (2010 charge of £37 2 million)

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$22.$ Pension scheme (continued)

Movements in the present value of defined benefit obligations were as follows

				2011 £m	2010 £m
At 28 March 2010	320 5	2450
Current service cost	35	36
Interest cost	129	16 1
Employee share of change to defined benefit obligations	09	04
Actuarial (gain) / loss	(845)	669
Benefits paid				(148)	(115)
At 26 March 2011	238.5	320 5
Movements in the fair value of scheme assets were as follows
				2011	2010
				£m	£m
At 28 March 2010				323.6	2498
Expected return on scheme assets				256	194
Employer contributions					04
Employee contributions				09	0 5
Actuarial (loss) / gain				(65)	650
Benefits paid				(148)	(115)
At 26 March 2011				3288	3236
History of experience gains and losses
	2011	2010	2009	2008	2007
Present value of defined benefit obligations (f m )	(2385)	(320.5)	(2450)	(2468)	(2783)
Fair value of scheme assets (£m)	3288	3236	249 8	3136	3289
Irrecoverable surplus (£m)	(696)			(307)	(68)
Surplus in the scheme $(\text{\textsterling} m)$	20.7	31	48	36 1	438
Experience adjustments on scheme habilities
Amount (£m)	717	0 2	(72)	(11)	(0.8)
Percentage of scheme habilities	(301)	(01)	29	04	03
Experience adjustments on scheme assets
Amount (£m)	(65)	650	(789)	(31.5)	60
Percentage of scheme assets	(2 0)	201	(316)	(100)	18

The estimated amounts of contributions expected to be paid to the scheme during the current financial period is £0.9 million (2010 £0.5 million)

Notes to the Financial Statements (continued) 52 weeks ended 26 March 2011

$22$ Pension scheme (continued)

First UK Bus Pension Scheme

The company is unable to separately identify its share of the scheme assets and liabilities as contributions are set for the scheme as a whole rather than reflecting the underlying actuarial characteristics of the employees of the individual employer It therefore accounts for the scheme as if it were a defined contribution scheme Contributions are charged to the profit and loss account as they become payable

The deficit on the Group scheme of $\mathcal{L}(524)$ million (2010 $\mathcal{L}(619)$ million) will affect the company through periodic adjustments to the company's contribution rate as determined by the actuary Additional disclosures required under Financial Reporting Standard 17 have been made on a group basis in the accounts of FirstGroup plc

The total pension cost in the period was £1 8 million (2010 £1 8 million)

At the 26 March 2011 £0 1 million, $(2010 \text{ £0} 1 \text{ million})$ was outstanding as at that date

The estimated amounts of contributions expected to be paid to the scheme during the current financial period is £1 8 million $(2010 \tImes 8 \tanhon)$

FirstGroup Pension Scheme

The company is unable to separately identify its share of the scheme assets and liabilities as contributions are set for the scheme as a whole rather than reflecting the underlying actuarial characteristics of the employees of the individual employer It therefore accounts for the scheme as if it were a defined contribution scheme Contributions are charged to the profit and loss account as they become payable

The deficit on the Group scheme of $f(1 5)$ million (2010 $f(4 3)$ million) will affect the company through periodic adjustments to the company's contribution rate as determined by the actuary Additional disclosures required under Financial Reporting Standard 17 have been made on a group basis in the accounts of FirstGroup plc

The total pension cost in the period was £0 1 million (2010 $\angle$ £0 1 million)

At the 26 March 2011 £nil, (2010 £nil) was outstanding as at that date

The estimated amounts of contributions expected to be paid to the scheme during the current financial period is £0 1 million $(2010 \tE0 1$ million)

23. Related party transactions

The company is taking advantage of the exemption under FRS8 not to disclose transactions with Group companies that are related parties

24. Ultimate parent company

The directors regard FirstGroup plc, a company incorporated in Great Britain and registered in Scotland, as the ultimate parent and controlling company, which is the smallest and largest group that includes the company's results and for which Group financial statements are prepared

The company's immediate controlling party is First Bus North Limited

Copies of the accounts of FirstGroup plc can be obtained on request from Ground Floor, 50 Eastbourne Terrace, London, W2 6LX