FirstGroup, the bus and rail group has put out a statement that it is trading in line with expectations on the backdrop of a challenging trading environment.

Preliminary results published today, show that revenue, profit and earnings per share were roughly in line with previous years, whilst dividend increased.

Finance director Jeff Carr points to over £200 million of annual savings, along with the significant hedging against the rise in fuel prices as a sign of the Group's resilience during the recession, and figures show that rigorous management of networks ensured that revenue per mile was not down.

"Looking ahead we anticipate the new financial year will remain challenging. While we are encouraged by improving revenue trends in parts of our business, consistent with economic recovery, the global economic outlook remains uncertain and we expect pressure on public spending in North America to continue."

UK Rail delivered a strong performance of 2.3 pct increase in like-for like passenger revenue, whilst UK Bus services increased 1.9 pct.

The North American contract business was apparently affected by severe weather in Q4 as operating profit was down overall from £246.1 million to £233.9 million.

Highlights included First ScotRail and First TransPennine Express increasing 3.2 pct and 5.6 pct like-for-like revenue per passenger, respectively.

Operating margins for UK Bus was 10.6 pct (2009:11.3 pct) and new DriveGreen technology, was rolled out across the entire bus fleet to improve fuel efficiency.

In North America, First Student however, reduced in revenue by 3.2 pct.

"Looking ahead the Board is confident of the inherent strength and resilience of the Group, an expected return to earnings growth and strong cash generation supports the Board's commitment to dividend growth of at least 7 pct per annum over the next three years." added Chief Executive, Sir Moir Lockhead, "We have increased the Group's net cash generation target to £150m for 2010/11".

First Interim results for 2010/2011 will be released mid-July.

Share price rallied on the prelims to 378.70p change of +6.70 at 11:15am BST.