Bus and train operator FirstGroup said on Tuesday it had a good first half with new franchises leading to a strong performance across its UK Rail division.

The country's largest bus company and one of the biggest operators of yellow school buses in the United States, FirstGroup also said in a statement it had seen good trading at its UK Bus unit and strong contract retention in North America.

The board remains confident of the prospects for the group and its continued strong cash flows, FirstGroup said, adding it remained committed to annual dividend growth of 10 percent for the foreseeable future.

Its two new rail franchises, First Great Western and First Capital Connect which both started during the period, were trading ahead of our initial projections, the company said.

FirstGroup is on recently announced shortlists for the Cross Country and East Midlands rail franchises which will be awarded in mid 2007.

Its shares, which have outperformed the travel and leisure sector <.FTASX5750> by 25 percent over the past 12 months were flat in early trading, having closed at 486 pence on Monday to value the business at 1.94 billion pounds.