Final Results

National Express Group PLC 21 March 2001 21 March 2001 National Express Group PLC Preliminary Results for the year ended 31 December 2000 Financial Highlights * Turnover exceeded £2bn for the first time, up 35.6% on last year (1999: £1.5bn) * Operating profit before exceptional costs and amortisation of goodwill up 37.0% to £155.1m (1999: £113.2m) * Normalised profit before tax up 11.1% to £119.3m (1999: £107.4m) * Normalised diluted earnings per share up 15.5% to 71.7p (1999: 62.1p) * Diluted earnings per share of 39.7p (1999: 51.9p) * Final dividend up 14.1% to 14.2p per ordinary share (1999: 12.45p), making the total for the year 20.7p per share (1999: 18.2p) * Operating cash flow of £167.5m (1999: £95.1m) * EBITDA interest cover of 5.3 times on continuing activities * Significant investment continues - £370.5m on acquiring new businesses * Net assets of £377.3m (1999: £267m) * Disposal of airports division for £241m post year end. Operational Highlights * Record passenger numbers of over 1 billion were achieved * Acquisition of Prism Rail in the UK, SS&L in the USA and Blue Ribbon in Australia * TWM bus patronage up 1% for third consecutive year * Extension of Valley Lines and Wales & West franchises, together with the Great Northern part of the West Anglia Great Northern (WAGN) franchise as well as extension of Midland Mainline (MML) franchise by two years to 2008 * 45 new trains introduced during the year * Overseas operations account for 26% of Group turnover and 29% of operating profit * Appointment of new Chief Executive for Australian division. Commenting on current trading and prospects, Chairman Michael Davies said: 'The year has started well. In our trains division, there is still ongoing disruption but passenger numbers for the first 10 weeks of the year have been gradually increasing and are now down only 3% year on year. We are focused on attracting patronage back on to our services and have initiated marketing campaigns which are designed to stimulate growth within each of our companies. As a major provider of passenger rail services, we are aiming to retain our strong position in the UK public transport market by working closely with the SRA and assisting it in its refranchising process. Within the coach and bus market, we expect continued growth in 2001 supplemented, where appropriate, by bolt-on acquisitions and investment in Quality Partnerships. We will continue to extend our presence within the American and Asia Pacific marketplaces. We continue to have the financial headroom to develop in key geographic markets and to invest in public transport systems. We look to the year ahead with confidence.' For further information, please contact: Phil White, Chief Executive William Rollason, Finance Director Nicola Marsden, Director of Group Communications National Express Group PLC 020 7529 2000 Steve Jacobs/Richard Mountain Financial Dynamics 020 7269 7186 O There will be an analyst meeting at 0900 hours on 21 March 2001 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2 O A copy of the presentation will be available on our website, www.nationalexpressgroup.com, at 0900 hours on 21 March 2001. National Express Group PLC Preliminary Results For the year ended 31 December 2000 2000 was another successful year. We focused on investing in and developing our existing operations as well as integrating our newly acquired businesses. Highlights of the year included the acquisition of Prism Rail, which brought two busy London commuter businesses, WAGN and c2c plus the Welsh businesses, Wales & West and Valley Lines, into our trains division and the two year extension to 2008 of the Midland Mainline franchise. The combination of National Express and Prism Rail presents an excellent opportunity for us to enhance our position in the rail sector of the UK's public transport market. The excellent progress of our trains division during the first nine months of the year was severely set back by the tragic Hatfield derailment in October. On behalf of the National Express Group, I extend our condolences to the families of the bereaved at Hatfield and, more recently, at the Selby accident. The Hatfield incident resulted in emergency speed restrictions (ESRs) being introduced across the UK network. This severely disrupted services and caused considerable inconvenience and frustration to both passengers and staff. In the UK, we extended our presence in the airport coaching market through the acquisitions of Capital Logistics and Airbus, making Airlinks the leading provider of bus and coach services to BAA and the international airline community. Overseas, acquisitions in the USA included School Services & Leasing Inc (SS&L), the second-largest privately owned student transportation bus company and Forsythe, a transit business on the West Coast. In Australia, Blue Ribbon, which operates school bus services to the north of Sydney, was acquired in February. Such bolt-on acquisitions are consistent with the Group's strategy to grow the business by concentrating on geographic markets that complement our existing operations. Disposals In February 2001 we announced the sale of our airports division to Manchester Airport for £241m in cash. In the year ended 31 December 2000, the airports made an operating profit of £13.1m on turnover of £34m. Net assets as at that date were £99.0m. Passenger numbers for East Midlands and Bournemouth airports were 2.2 million and 273,000 respectively for the year ended 31 December 2000. Due to the expansion of the Group over the last 18 months, our airports have become less material to the Group overall. This disposal is part of our strategy to focus on our core transport operations, both in the UK and overseas. Subject to clearance by the OFT, we expect this transaction to be completed by the end of March 2001. Financial Results and Dividend Turnover increased by 35.6% to £2bn (1999: £1.5bn). Operating profit, before exceptional costs and the amortisation of goodwill, increased to £155.1m (1999: £113.2m), up 37.0%. Profit before tax, goodwill and exceptional costs was up 11.1% to £119.3m (1999: £107.4m). Normalised diluted earnings per share increased by 15.5% to 71.7p (1999: 62.1p). We generated cash of £167.5m (1999: £95.1m) from operations and invested £89.3m in new assets and £370.5m (including £80.5m settled in shares) in acquiring new businesses. We are recommending that a final dividend of 14.2p per ordinary share (1999: 12.45p) be paid on 4 May 2001 to shareholders on the register at 6 April 2001. Including the interim dividend, the proposed total dividend for the year is up 13.7% at 20.7p per share (1999: 18.2p). Review of Operations Highlights of the Year In 2000, we continued to increase the scope of our businesses with more than 26% of Group turnover and 29% of operating profit arising from our overseas operations. Throughout the year considerable progress was made on a range of issues, including acquisitions, integration of businesses and marketing initiatives, to improve the quality and efficiency of our services. A number of unique events also took place during the year, including the Olympics in Australia which presented specific challenges for our Australian operations in Sydney. In the UK, the progress of the train division was severely set back by the Hatfield incident. Whilst the impact of emergency speed restrictions was variable across our train companies, passenger revenue across our operations was impacted, with revenue being between 10-15% down over the last quarter of the year. There is still ongoing disruption but passenger numbers for the first 10 weeks of the year have been gradually increasing and are now only down 3% year on year. We are focused on attracting patronage back on to our services and have initiated marketing campaigns which are designed to stimulate growth within each of our companies. However, it is notable that passenger revenue growth across the trains division for the nine months prior to Hatfield was running at over 10%, with revenues falling by 14% immediately following this event. Buses Turnover was up 1.9% to £200.1m (1999: £196.4m) and operating profit before goodwill and exceptional items was up 6.3% to £50.6m (1999: £47.6m), reflecting increased efficiencies and resulted in an improvement in margins to 25.3% (1999: 24.2%). TWM performed well despite the disruption caused by the redevelopment of Birmingham city centre. In May 2000 Brian Jackson, formerly of Arriva, was appointed Managing Director of TWM. For the third successive year, 1% more passengers used TWM's services. Patronage growth was driven primarily by our investment in Quality Partnerships and infrastructure. In addition, we extended our marketing activity and ticketing range. Sales of group tickets and travelcards continued to grow, while those of day tickets increased by 14%. Services were extended to include new out-of-town destinations. Last year, we launched the 'Infrastructure Investment Project', a £30m three- year investment in vital congestion-busting schemes across the region. Working in partnership with the seven local metropolitan councils, we have invested in new bus lanes, new signage, bus slip roads, lower kerbing, better bus shelters and information systems as well as appropriate landscaping on bus routes. These investments will help beat congestion, attract passengers and improve services. During 2001, we will be investing £6m in a variety of such schemes. We continue to work on developing additional Quality Partnership Showcase routes. We currently operate five schemes which are delivering average passenger growth of over 20%. Through these partnerships, we work with the local Councils to increase the appeal of bus travel by relieving congestion. Investment in our fleet continues. We have recently placed a £23m order for 180 new low floor double-deck buses for TWM. These vehicles will be the first in the UK to be fitted with Euro III engines - the most advanced low emission engine currently on the market. The initial order brings our total investment on new buses for TWM to over £100m since its acquisition in 1995. Following its launch in 1999, Midland Metro has become an integral part of the West Midlands public transport network and a total of 5.4 million journeys were made on the Metro. A new range of tickets and passes has been introduced to encourage further integration between train and bus. More than 50% of fare-paying Metro passengers now use multi-modal tickets. Trains Turnover was up 14.8% to £1.1bn (1999: £921.8m). This includes £129.6m from the four Prism train operating companies acquired in September 2000, of which £33.8m was franchise subsidies from the SRA. This was offset by a £19.4m reduction in franchise subsidies to £448.8m (1999: £468.2m) for all our other train operating companies. On a like for like basis excluding Prism and the franchise subsidies, turnover increased by £26.6m or 5.9%. Operating profit before goodwill and exceptional items increased by £6.1m to £34.1m (1999: £ 28.0m). 2000 was a year of landmark events for the trains division. September saw the completion of the acquisition of Prism Rail. This acquisition brought four new train companies into the group and enabled us to rebalance our train portfolio through the acquisition of two London commuter businesses and two Welsh businesses. In August, MML was awarded a two year extension to 2008, thereby enabling an increase and acceleration in investment in the service. This will see £22m worth of improvements at stations and the construction of a new £17m multi-modal park and ride facility. This investment will also see increased train frequencies, faster journey times, new destinations and higher punctuality through the introduction of 28 new high speed trains worth £135m. Over the first nine months of the year, record passenger revenue growth was achieved through new services and attractive marketing campaigns. However, the post Hatfield disruption presented serious challenges to our UK train operations. To illustrate the scale of the disruption, during the normal course of business, only a small number of ESRs are in force across the network. Following Hatfield up to 550 ESRs were put on the network with over 30 being placed on MML alone. This severely impacted on travelling times. On MML, for example, at the peak of the disruption, average journey times from London to Sheffield were more than doubled from 2 hours 18 minutes to 4 hours 48 minutes and consequently train frequency was more than halved. Following Hatfield we have initiated marketing campaigns within each of our companies which are designed to stimulate growth. At the same time, we are vigorously pursuing recovery of losses arising as a consequence of the Hatfield incident from both Railtrack and our insurers, currently through negotiation but, if necessary, through legal action. New trains - We have made a significant investment in rolling stock for our train operations. We have ordered 200 new trains for a total investment of £ 550m, excluding those committed as part of the MML franchise extension. During the year we introduced 45 new trains across our companies with a further 108 scheduled for 2001. However, we are disappointed by the lack of progress in bringing new rolling stock into service with Gatwick Express and ScotRail fleets continuing to be affected by delays in delivery. In addition, c2c, Central and ScotRail have all experienced poor performance of new rolling stock because of design and manufacturing deficiencies. We are working hard with the manufacturers to ensure that new trains come into service as quickly as possible with as few breakdowns as possible. The slow progress is particularly frustrating when we can see what a difference new rolling stock makes. In the instances where we have been able to introduce rolling stock on schedule, we have been able to add new services - in some cases doubling the frequency - and new destinations. Refranchising - We believe that to justify the significant investment needed to develop our train portfolio, we need longer-term franchises and the potential for significant revenue growth. Only under these conditions can we continue to deliver good returns to our shareholders. We believe we can make a substantial contribution to helping the SRA achieve its objectives in its franchise replacement programme. We were pleased to be shortlisted for the Wales and Borders franchise and to be one of the parties requested to submit proposals for the new Wessex franchise. The SRA recently announced that it has extended our Valley Lines and Wales & West franchises, together with the Great Northern part of the West Anglia Great Northern franchise. This will ensure that services continue under our stewardship until the new franchises for Wales and Borders, Wessex and Thameslink are awarded. We are disappointed by the SRA's recent announcement on halting the Central Trains' refranchising process. We will work with the SRA to try to resolve this matter since we believe our proposals will significantly improve services. Airport Express - The Airport Express marketing and sales alliance with BAA/ Heathrow Express became effective earlier this year. Under this brand we continue to market the benefits of travelling to and from the airport by rail. Following the acquisition of Prism Rail, Stansted Express will form part of the Airport Express marketing alliance this year. Eurostar - Progress continues to be made at Eurostar with revenue for the year increasing by 12% to £439m. Sales volumes showed a 9% improvement and losses are now negligible. Coaches Turnover within our coach division was up 11.1% to £186.8m (1999: £168.2m) and operating profit before goodwill and exceptional items increased to £11.3m (1999: £11.0m). In 2000, we achieved a 15% growth in passenger numbers through acquisitions, increased marketing and the success of GoByCoach.com. During the year, we continued to enhance the network's profile by investing in information technology and ticketing systems. UK express coaches - Our strategy of developing our high-frequency shuttle routes, introducing marketing initiatives and the success of GoByCoach.com resulted in continued growth in passengers using these services. We increased the frequency of services into London and to regional airports and, in the summer, made major improvements to the cross-country network. In addition, we continued to improve ticket accessibility by using direct sales. Airport services - We strengthened our position as market leader in providing scheduled and contract services to London's three international airports. We acquired the Brighton Shuttle services and the Airbus brand in February, the latter adding a further dimension to our airport services. We are investing in improving our airport coach terminals, sales desks and lounge facilities at Heathrow, Gatwick and Stansted. In April 2000, we acquired Capital Logistics, making Airlinks the largest UK provider of airport coach services to BAA and many international airlines and won the airside and landside coaching contract at Gatwick airport. In May, in conjunction with our bus division, we introduced an experimental Birmingham Airbus service which links Birmingham International Airport and City Centre hotels. Eurolines - Intense competition in the UK from low-cost airlines continued, but marketing initiatives to re-establish Eurolines as the best value for European travel resulted in a good performance on the key London, Paris and Amsterdam routes. USA Turnover was £301.6m (1999: £64.6m) and operating profit was £32.7m (1999: £ 9.5m). These results reflect a full year benefit from the acquisitions in 1999 of Robinson, Bauman, Durham, MultiSystems and ATC as well as contributions from the acquisition in 2000 of Forsythe, Stewart International Airport and SS &L. With a combined fleet of 11,000 vehicles, these operations serve 200 million passengers a year and employ over 18,000 people, including more than 10,000 drivers. 2000 was a year of significant developments with the acquisition of SS&L and Forsythe. Integration of the back office functions of recently acquired businesses also took place into the division's head office in Austin, Texas. This process has already resulted in cost savings of over £2m per annum. Student Transportation - The acquisition of SS&L consolidated our position as the third-largest provider of student transportation services in the USA with operations in nineteen states. SS&L increases the division's position in the geographic areas experiencing the greatest student population growth. In addition we added new contracts in California, Illinois, Michigan, Missouri and Pennsylvania and reorganised the operations to meet the increasing size of the business. With the growth of the business there is added focus on employee training, asset utilisation and driver recruitment programmes. Standardisation of best practices across these businesses is being implemented. The management of the student division was further strengthened with the appointment of John Elliott as Chief Operating Officer of the transportation division. John has over twenty-five years' experience in the market. Public Transit - The public transit division has continued to win contracts and maintain its reputation as being an industry leader in quality service and growth despite increased fuel costs and labour shortages. The division is split into two distinct services, fixed route which are only 8% privatised and paratransit/demand response operations, primarily operated for the disabled and elderly, which are 79% privatised. New paratransit contracts were won or expanded in Cobb County, Dallas, Denver, San Francisco and San Jose. Extensions to fixed route contracts were achieved in Las Vegas, Chicago suburbs, Napa Valley and East Bay, California. In January 2000 our USA in-house training facilities were extended with the creation of the ATC University to develop the skills of the employees within the division. Airport Management - We took over control of Stewart International Airport on 1 April 2000. Since then activity has focused on improving the management and operational structure. In December Charles Seliga, formally general manager of JFK Airport, joined as Managing Director of Stewart International Airport. Australia In our first full year of ownership, turnover for our Australian operations totalled £221.5m (1999: £91.8m) with operating profit of £13.3m (1999: £4.2m). These results reflect a full year benefit from the bus operations acquired in May 1999 and the train and tram businesses operated from September 1999 as well as a contribution from the Blue Ribbon bus operation which operates school bus services to the north of Sydney and was acquired in February 2000. We have introduced new services, ticketing, rebranding and operational standards to achieve further growth. Through these initiatives we have seen passenger growth across the division of over 4% on pre-privatisation levels. In December, our operations were re-organised to aid management of the business. The operations of Swanston Trams and Bayside Trains were renamed M> Tram and M>Train respectively under the 'Moving Melbourne' marketing banner. Also, in December, Craig Wallace, who has over fifteen years experience of the Asia Pacific transport market, was appointed Chief Executive of our Australian Division, a new position which was created to drive development of our existing business whilst looking for new opportunities in the Australasian market and the Far East. Rail - Across M>Tram, M>Train and V/Line, nearly 1,000 extra services have been added to the weekly schedules. We have worked closely with the new Victoria State Government on a number of initiatives, including options for fast rail links to regional cities. With Victoria's population growing at 1% per annum, we are looking to expand existing rail services into new residential growth areas. Over A$1bn of investment was committed in new rolling stock orders which will provide 62 new trains and 59 new trams. These orders, scheduled for delivery between 2002 and 2005, will provide improved energy efficiencies, noise reduction and greatly improved comfort for passengers. Buses - Improved timetabling and service delivery resulted in National Bus Company seeing an increase of over 10% in passenger numbers for the first time in five years. We provided 315 buses and coaches for the Sydney Olympics. It was widely agreed that the efficiency of the transport services was a major contributor to the Games' success and we would like to thank all of our employees for their enormous efforts to ensure that this was a successful operation. Southern Coast Transit broadened its core business to include eighteen school bus contracts in October and a second Central Area Transit service in November. As part of a Commonwealth Government funded training programme, over 350 drivers took part in a nationally accredited Certificate 3 level training programme to raise levels of driver commitment, reduce accident numbers, increase duty of care awareness and improve the overall level of customer service. New Technology New technology continues to drive the provision of information and ticketing to our customers. The success of GoByCoach.com has shown that passengers like easy methods of booking. We continue to invest to meet further demands in this area and during the year we purchased a 20% shareholding in Prepayment Cards Limited, whose other shareholders are FirstGroup, Stagecoach, ERG and Sema, to develop smartcards in the UK. On our bus services in Coventry, smartcard technology is to be trialled on 200 buses during 2001. We are gaining operational experience of the benefits of this initiative, ensuring standards are put in place for the eventual roll-out of the technology. The increased use of new technology across our train companies will continue to drive improvements by providing passengers with more user-friendly, easier to access services, as well as assisting revenue protection. We are investing £10m over the next few years in developing and launching a new mobile ticketing system for the UK rail network. This will provide a broader range of services than the technology currently in use, printing rail tickets to and from anywhere in the UK (including those for use through London Underground-style barriers) as well as providing a portable database of up-to-date rail network timetabling and fare information. This incorporates leading edge technology which will provide greater flexibility, efficiency and improved service levels for passengers and staff. With the increasing popularity of web technology, all our train companies host websites detailing their services and providing valuable travel information. A new call centre in Sheffield was opened on 21 February to cater for this demand. We continue to develop our own website which will give passengers access to rail service and fare information. This will be launched during the second quarter of this year. A new call centre in Birmingham for our coach operation is set to open in the Spring. Integrated Transportation Being at the heart of public transport systems, we are committed to working with our industry partners to develop a more fully integrated transportation system and to ensure quality and value through continued investment. Development of the industry depends on building partnerships between operators and policy makers to make positive change. In October, Richard Brown, Commercial Director, was elected Chairman of the Association of Train Operating Companies (ATOC) which acts on behalf of the train operating companies. Since Hatfield, Richard has been guiding the rail industry through difficult times. In June 2001, David Leeder, the Group's Marketing Director, is to be appointed President of the Confederation of Passenger Transport UK (CPT) which represents the interests of the bus and coach industry. Safety In 1999 we commissioned an independent report on the effectiveness of our safety systems across the Group. The findings of the report concluded that we have a strong safety culture overall. The Board Safety Committee met regularly during the year and continues to focus on improving safety standards across our operations worldwide. Board Changes After eight years with the Group, Alun Cathcart resigned as a Non Executive Director and Deputy Chairman in September 2000 due to an increase in his other business commitments. Alun had been a Director of the Group since 1992 and Deputy Chairman since 1998. He provided a major contribution during that time. As we announced at the beginning of February, Clive Myers, who has been a Non Executive Director since our flotation in 1992, will not seek re-election to the Board at the Annual General Meeting and James Watson, a Non Executive Board member since 1994, will be standing down. I would like to thank both Clive and James for their contributions, which have been considerable. I would like to take this opportunity to welcome Tim Stevenson and David Ross who join the Board as Non Executive Directors. Tim, who becomes the Senior Independent Director, brings 25 years' of international experience at Burmah Castrol PLC, which culminated in his appointment as Chief Executive in 1998. David Ross, who is Chief Operating Officer of The Carphone Warehouse Group PLC, brings consumer experience to the Group. Current Trading and Prospects The year has started well. In our trains division, there is still ongoing disruption but passenger numbers for the first 10 weeks of the year have been gradually increasing and are now down only 3% year on year. We are focused on attracting patronage back on to our services and have initiated marketing campaigns which are designed to stimulate growth within each of our companies. As a major provider of passenger rail services, we are aiming to retain our strong position in the UK public transport market by working closely with the SRA and assisting it in its refranchising process. Within the coach and bus market, we expect continued growth in 2001 supplemented, where appropriate, by bolt-on acquisitions and investment in Quality Partnerships. We will continue to extend our presence within the American and Asia Pacific marketplaces. We continue to have the financial headroom to develop in key geographic markets and to invest in public transport systems. We look to the year ahead with confidence. Michael Davies, Chairman 21 March 2001 NATIONAL EXPRESS GROUP PLC GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December 2000 Total Goodwill Total before Good- before and goodwill and will goodwill exceptional Total exceptional and and items items except- exceptional ional items items Total 2000 2000 2000 1999 1999 1999 Note £m £m £m £m £m £m Turnover - continuing 1,797.0 - 1,797.0 1,442.8 - 1,442.8 operations - acquisitions 171.6 - 171.6 - - - - discontinued 34.0 - 34.0 33.9 - 33.9 operations Turnover 1 2,002.6 - 2,002.6 1,476.7 - 1,476.7 Other operating 13.4 - 13.4 10.5 - 10.5 income Other operating (1,860.9) (30.6) (1,891.5) (1,374.0)(14.7) (1,388.7) costs Goodwill - (22.7) (22.7) - (3.3) (3.3) Total operating (1,860.9) (53.3) (1,914.2) (1,374.0)(18.0) (1,392.0) costs Operating profit 155.1 (53.3) 101.8 113.2 (18.0) 95.2 - continuing 128.2 (41.0) 87.2 100.3 (17.8) 82.5 operations - acquisitions 13.8 (12.3) 1.5 - - - - discontinued 13.1 - 13.1 12.9 (0.2) 12.7 operations 1 155.1 (53.3) 101.8 113.2 (18.0) 95.2 Share of (1.8) - (1.8) - - - operating losses of associated undertakings Profit on sale - - - - 0.2 0.2 of investments Loss on - (1.0) (1.0) - - - termination of business Profit on 153.3 (54.3) 99.0 113.2 (17.8) 95.4 ordinary activities before interest Net interest (34.0) - (34.0) (5.8) - (5.8) payable Profit on 119.3 (54.3) 65.0 107.4 (17.8) 89.6 ordinary activities before taxation Tax on profit on (25.7) 12.8 (12.9) (27.6) 4.8 (22.8) ordinary activities Profit after tax 93.6 (41.5) 52.1 79.8 (13.0) 66.8 Minority (0.7) - (0.7) (0.2) - (0.2) interest Profit 92.9 (41.5) 51.4 79.6 (13.0) 66.6 attributable to shareholders Dividends (26.3) - (26.3) (21.0) - (21.0) Retained profit 66.6 (41.5) 25.1 58.6 (13.0) 45.6 for the financial year Normalised Actual Normalised Actual Earnings - diluted 2 71.7p 39.7p 62.1p 51.9p per share Earnings - basic 2 78.5p 43.4p 69.7p 58.3p per share NATIONAL EXPRESS GROUP PLC Group Balance Sheet At 31 December 2000 2000 1999 Note £m £m Fixed assets Intangible assets 523.7 242.6 Tangible assets 653.6 503.8 Investments and interests in associated undertakings 27.3 15.0 1,204.6 761.4 Current assets Stock 20.7 14.8 Debtors 327.1 216.6 Cash at bank and in hand 3 53.8 101.0 401.6 332.4 Creditors: amounts falling due within one year (751.1) (394.9) Net current liabilities (349.5) (62.5) Total assets less current liabilities 855.1 698.9 Creditors: amounts falling due after more than one (458.2) (408.8) year Provisions for liabilities and charges (19.6) (23.1) 377.3 267.0 Capital and reserves Called-up share capital 6.5 5.8 Share premium account 40.5 35.7 Share capital to be issued 0.4 0.5 Merger reserve 57.3 - Capital reserve 17.0 17.0 Revaluation reserve 17.5 17.9 Profit and loss account 233.6 185.9 Equity shareholders' funds 372.8 262.8 Equity minority interest 4.5 4.2 377.3 267.0 NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF CASH FLOWS For the year ended 31 December 2000 2000 1999 Note £m £m Net cash inflow from operating activities 4 167.5 95.1 Interest received 3.1 6.2 Interest paid (20.7) (10.1) Interest element of finance lease rentals (1.6) (0.8) Return on investments and servicing of finance (19.2) (4.7) UK corporation tax paid (24.8) (13.7) Overseas tax paid (1.8) (2.2) Taxation (26.6) (15.9) Payments to acquire tangible assets (89.3) (97.9) Receipts from sale of tangible assets 3.6 7.5 Purchase of shares to satisfy employee share scheme (1.6) (7.8) Payment to acquire other investments (13.1) (7.5) Receipts from the sale of investments - 0.1 Capital expenditure and financial investment (100.4) (105.6) Payments to acquire subsidiary undertakings (283.0) (264.9) Cash acquired in companies purchased 52.6 8.7 Deferred consideration for businesses acquired - (3.4) Acquisitions (230.4) (259.6) Equity dividends paid (22.0) (19.4) Cash outflow before financing activities (231.1) (310.1) Management of liquid resources Cash withdrawn from short term deposits 19.4 3.9 Financing Issue of share capital 4.9 1.3 Repayment of capital element of finance lease rentals (4.4) (4.9) Repayment of loan notes - (9.9) Movements on bank deposits relating to loan notes 3.1 (0.5) Loans advanced 187.5 373.3 Loans repaid - (45.9) Net cash inflow from financing 191.1 313.4 (Decrease)/increase in cash (20.6) 7.2 NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2000 2000 1999 £m £m Profit attributable to members of the parent company 51.4 66.6 Exchange differences on foreign currency net investments (0.5) - Total recognised gains and losses for the year 50.9 66.6 RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS For the year ended 31 December 2000 2000 1999 £m £m Total recognised gains and losses 50.9 66.6 Dividends (26.3) (21.0) New share capital issued for cash 4.9 5.3 New share capital issued for non cash consideration 80.5 - Net addition to shareholders' funds 110.0 50.9 Equity shareholders' funds at 1 January 262.8 211.9 Equity shareholders' funds at 31 December 372.8 262.8 NATIONAL EXPRESS GROUP PLC Notes 1. Turnover and segmental analysis The turnover of the Group comprises revenue from road passenger transport, airport operations, train passenger services and related activities in the UK, USA and Australia. Within the trains division, franchise agreement payments from the Strategic Rail Authority and local Passenger Transport Executives within the West Midlands region and Scotland are treated as turnover. During the year franchise agreement payments amounted to £482.6m (1999: £468.2m) in the UK and £69.6m (1999: £27.9m) from the Victoria Department of Public Transport in Australia. Turnover and operating profit are analysed as follows: Operating profit before goodwill and Turnover exceptional items Net assets 2000 1999 2000 1999 2000 1999 Analysis by class of £m £m £m £m £m £m business Buses - continuing 200.1 196.4 50.6 47.6 119.8 104.0 Trains - continuing 929.0 921.8 27.0 28.0 (45.8) (21.1) - acquisitions 129.6 - 7.1 - 2.1 - 1,058.6 921.8 34.1 28.0 (43.7) (21.1) Coaches - continuing 186.8 168.2 11.3 11.0 37.6 33.5 Airports - 34.0 33.9 13.1 12.9 173.8 165.0 discontinued UK operations 1,479.5 1,320.3 109.1 99.5 287.5 281.4 USA - continuing 259.6 64.6 26.0 9.5 371.0 288.0 - acquisitions 42.0 - 6.7 - 213.3 - 301.6 64.6 32.7 9.5 584.3 288.0 Australia - continuing 221.5 91.8 13.3 4.2 73.5 66.2 2,002.6 1,476.7 155.1 113.2 945.3 635.6 Exceptional items (see (30.6) (14.7) table below) Goodwill (22.7) (3.3) 101.8 95.2 Unallocated net (572.5) (372.8) liabilities 372.8 262.8 Equity minority interest 4.5 4.2 Total net assets 377.3 267.0 Exceptional items can be analysed as follows: Buses Trains Airports USA Australia Other Total £m £m £m £m £m £m £m 2000 New Trains - 2.4 - - - - 2.4 Reorganisation 1.6 5.6 - 1.5 2.4 - 11.1 Abortive bid costs - - - 0.6 - - 0.6 Atlantic Express - - - - - 16.5 16.5 1.6 8.0 - 2.1 2.4 16.5 30.6 1999 New Trains - 4.9 - - - - 4.9 Year 2000 - - - - - 2.1 2.1 Reorganisation 1.5 5.8 0.2 0.2 - - 7.7 1.5 10.7 0.2 0.2 - 2.1 14.7 The exceptional expenditure on new trains is the costs associated with bringing the new trains into service. The exceptional expenditure of £16.5m is the settlement, with no admission of liability, of the litigation brought against the Group by Atlantic Express Group Inc. in the USA and the associated professional fees. Of the total exceptional items of £30.6m (1999: £14.7m), £ 27.7m (1999: £14.5m) relates to continuing operations, £2.9m relates to acquisitions and nil (1999: £0.2m) relates to discontinued operations. Goodwill amortisation of £22.7m (1999: £3.3m) is analysed as UK continuing £ 0.1m (1999: nil), UK acquisitions £6.1m, USA continuing £11.9m (1999: £2.4m), USA acquisitions £3.3m and Australia continuing £1.3m (1999: £0.9m). Unallocated net liabilities comprise other investments, cash at bank and in hand, borrowings (other than finance leases), dividends payable and taxation. The net assets in respect of the Group's investment in associated undertakings have been analysed according to the activities of the associated undertakings. NATIONAL EXPRESS GROUP PLC 2. Earnings per share 2000 1999 (i) Basic earnings per share 43.4p 58.3p The calculation of basic earnings per share is based on earnings of £51.4m (1999: £66.6m) and on 118,393,605 (1999: 114,232,918) ordinary shares, being the weighted average number of ordinary shares in issue in the year. 2000 1999 (ii) Normalised basic earnings per share 78.5p 69.7p The calculation of normalised basic earnings per share is based on normalised earnings of £92.9m (1999: £79.6m) and on 118,393,605 (1999: 114,232,918) ordinary shares, being the weighted average number of shares in issue in the year. 2000 1999 (iii) Diluted earnings per share 39.7p 51.9p The calculation of diluted earnings per share is based on earnings of £51.4m (1999: £66.6m). An adjustment has been made to reflect the number of dilutive potential ordinary shares. The weighted average diluted number of shares in issue during the year was 129,584,841 (1999: 128,266,998). 2000 1999 (iv) Normalised diluted earnings per share 71.7p 62.1p The calculation of normalised diluted earnings per share is based on normalised earnings of £92.9m (1999: £79.6m) and on the weighted average number of dilutive potential ordinary shares in issue during the year, which was 129,584,841 (1999: 128,266,998). Normalised profits after tax and minority interest are: 2000 1999 £m £m Profit after tax and minority interest 51.4 66.6 Exceptional operating costs 20.8 10.7 Profit on sale of investments - (0.2) Loss on termination of business 0.7 - Goodwill 20.0 2.5 92.9 79.6 The reconciliation of weighted average number of ordinary Number Number shares is detailed as follows: of of shares shares 2000 1999 Basic weighted average shares 118,393,605 114,232,918 Adjustment for dilutive potential ordinary shares 11,191,236 14,034,080 Diluted weighted average shares 129,584,841 128,266,998 The normalised basic and diluted earnings per share have been calculated in addition to the basic and diluted earnings per share required by Financial Reporting Standard 14 since, in the opinion of the Directors, they reflect the financial performance of the core business more appropriately. NATIONAL EXPRESS GROUP PLC 3. Net borrowings 2000 1999 £m £m Borrowings Loan notes (10.3) (10.3) Bank loans (585.0) (382.9) Other loans (0.4) (0.5) Bank overdrafts (0.4) (4.5) Finance lease obligations (14.3) (18.7) (610.4) (416.9) Cash Cash at bank in hand 21.0 20.9 Overnight deposits 20.2 45.0 Other short term deposits 12.6 32.0 Bank deposits relating to loan notes - 3.1 53.8 101.0 Net borrowings (556.6) (315.9) Net gearing 148% 118% 4. Cash flow statement The reconciliation of operating profit to net cash inflow from operating activities is shown below: Discon- Continuing Discontinued Continuing tinued operations Acquisi- operations Total operations operations Total tions 2000 2000 2000 2000 1999 1999 1999 £m £m £m £m £m £m £m Operating 87.2 1.5 13.1 101.8 82.5 12.7 95.2 profit Depreciation 34.4 5.2 4.3 43.9 23.0 3.6 26.6 of tangible assets Amortisation 13.3 9.4 - 22.7 3.3 - 3.3 of goodwill (Loss)/ 0.3 - - 0.3 (1.1) (1.3) (2.4) profit on sale of tangible assets Increase in (1.1) (0.4) - (1.5) (0.8) - (0.8) stocks (Increase)/ (25.8) (31.7) 0.4 (57.1) (30.4) (1.3) (31.7) decrease in debtors Increase / 33.5 32.3 (4.1) 61.7 2.3 1.9 4.2 (decrease) in creditors (Decrease) / (4.4) 0.1 - (4.3) 2.4 (1.7) 0.7 increase in provisions Net cash 137.4 16.4 13.7 167.5 81.2 13.9 95.1 inflow from operating activities 5. Post balance sheet event As announced on 19 February 2001, the Airports division, comprising East Midlands International Airport Limited and Bournemouth International Airport Limited, has been sold for gross sale proceeds of £241.0m, resulting in a profit on disposal after expenses of approximately £96.0m (including £36.0m negative goodwill taken to reserves on the acquisition of the airports, which has no effect on net assets or shareholders' funds). This will be reflected in the accounts for the year ending 31 December 2001. Copies of the preliminary statement may be obtained from the Company Secretary at 75 Davies Street, London W1K 5HT. The preliminary announcement is an abridged version of the full accounts upon which the auditors have given an unqualified opinion. The full accounts will be filed with the Registrar of Companies in due course. . - ENDS -

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