Final Results

National Express Group PLC 13 March 2003 13 March 2003 National Express Group PLC Preliminary Results for the year ended 31 December 2002 Key Highlights • Turnover up to £2.6bn (2001: £2.5bn); • Group operating profit before goodwill and exceptional items of £130.9m (2001: £157.8m); • Strong cash flow from operations of £175.5m (2001: £185.5m); • Profit before tax, goodwill and exceptionals of £106.8m (2001: £129.2m); • Normalised fully diluted EPS of 60.3p (2001: 66.0p restated); • Increase in total dividend per share of 11% to 24.5p (2001: 22.0p); • Net debt of £334.6m (2001: £315.0m); • Continuing EBITDA interest cover before exceptional items of 9.5 times (2001: 7.5 times); • Heads of terms agreed with the Strategic Rail Authority ('SRA') for two-year extension for Central Trains ('Central'); • Two-year extension for Silverlink under discussion with the SRA; • Purchase of Stock Transportation ('Stock') in Canada; • Withdrawal from Australian train and tram operations; and • Limited share buy-back programme to be undertaken. Commenting on current trading and prospects, Michael Davies, Chairman said: 'In 2002 we produced a solid operating profit which led to strong operating cash flow, a major characteristic of our business. We took the decision to withdraw from our Australian train and tram operations. Our trading in 2003 is in line with our expectations. 'With six of our nine rail franchises coming up for renewal during 2004, we will be in a strong position to improve the cash returns in our trains division whilst at the same time rationalising our rail portfolio. 'We look forward to developing our position in the UK bus and coach markets and to further growth in North America. 'Given our strong cash flow and the current level of our share price, we intend to implement a limited share buy-back programme during 2003, without affecting the Group's dividend policy.' - ENDS - For further information, please contact: Phil White, Chief Executive Adam Walker, Finance Director Nicola Marsden/Fiona Noblet, Group Communications National Express Group PLC 020 7529 2000 Steve Jacobs/Ben Foster/Dido Laurimore Financial Dynamics 020 7831 3113 • An analyst presentation will take place at 0900 hours on 13 March 2003 at The Regus Business Conference Centre, City Point, 9th Floor, 1 Ropemaker Street, London, EC2 • A copy of the analyst presentation will be available on our website www.nationalexpressgroup.com at 0900 hours on 13 March 2003. For further information, contact 020 7529 2035 • For details of the live webcast, please contact Elaine Holder at Financial Dynamics on 020 7269 7121 • Photos are available through Newscast on Tel: 020 7608 1000. NATIONAL EXPRESS GROUP PLC PRELIMINARY RESULTS 2002 2002 was a year of significant developments. Despite the challenges we faced in our UK trains division and Australia, we generated a strong cash flow from operations of £175.5m (2001: £185.5m). In the UK, our bus division continued to perform well with farepaying passenger levels increasing despite the disruption in Birmingham city centre. We have broadened the base of our London bus operations through an opportunity to develop a bus depot in South London, in partnership with Transport for London, with a view to bidding for bus routes during the spring and summer of 2003. Following the acquisition of Prism in September 2000, we hold a greater number of train operating companies ('TOCs') than we planned due to the changes in the Strategic Rail Authority's franchising programme. In the coming year, we aim to rationalise our portfolio to ensure we have a viable portfolio of quality TOCs. To help the SRA achieve its strategic plans we will explore franchise extensions where we can achieve a reasonable return with strong cash flow. We are pleased to announce that Heads of Terms have been agreed with the SRA for a two- year franchise extension for Central Trains from 1 April 2004. Subject to the agreement of Centro and approval by the Secretary of State, it is our intention to enter into a legally binding agreement as soon as possible. The SRA intends to enter into discussions with us with regard to a two-year extension for the Silverlink franchise from 2004. We have recently reached agreement with the SRA on the level of payments relating to the effects on our ScotRail operations of the industrial action early last year. Our coach business performed well during the period with passenger numbers increasing by 2%. Sales via the internet increased by over 75% during the year. Direct sales and internet bookings now account for nearly half of total sales. In North America, we acquired one of Canada's most respected private student bus companies, Stock Transportation. The integration of this business has gone well. The continuing student transportation business excluding Stock produced good year-on-year organic growth and we increased operating margins during the year. Our public transit division performance was disappointing and we are putting in place initiatives to address this. In December, we exited from our Australian tram and train operations. The one-off cost to the Group of writing off these operations was £125.9m, a reduction on the expected cost at the time of announcing our withdrawal. We have taken the opportunity to assess the carrying value of our Australian bus division in light of our withdrawal from the trains and tram operation which has resulted in a goodwill impairment charge of £13.5m. Results and dividends Turnover in 2002 was £2.6bn (2001: £2.5bn) and Group operating profit before goodwill and exceptional items of £130.9m (2001: £157.8m). After interest and the Group's share of losses from associated undertakings, profit before tax, goodwill and exceptionals was £106.8m (2001: £129.2m). Normalised diluted earnings per share were 60.3p (2001: 66.0p restated). We are recommending an increased final dividend of 16.4p per ordinary share (2001: 14.7p) to be paid on 16 May 2003 to shareholders on the register at 22 April 2003. Including the interim dividend, the proposed total dividend for the year is 24.5p (2001: 22.0p). Strong cash generation from the Group's core operations continues with £91.3m operating cash flow (2001: £93.5m), after net capital expenditure of £84.2m (2001: £92.0m) and the exceptional payment to the SRA of £62.5m. The withdrawal from the Australian train and tram franchises announced in December will cost £49.8m cash in the coming year. We have provided for these costs during this year. Board appointments In March 2003 we were pleased to announce the appointment of two new Board Members. Adam Walker, formerly the Group's Corporate Development Director, has joined the Board as Group Finance Director. Larry Durham, the current Chief Executive Officer of our North American division, has also joined the Board. We look forward to the contribution which Adam and Larry will make to the Board. Current Trading In 2002 we produced a solid operating profit which led to strong operating cash flow, a major characteristic of our business. We took the decision to withdraw from our Australian train and tram operations. Our trading in 2003 is in line with our expectations. With six of our nine rail franchises coming up for renewal during 2004, we will be in a strong position to improve the cash returns in our trains division whilst at the same time rationalising our rail portfolio. We look forward to developing our position in the UK bus and coach markets and to further growth in North America. Given our strong cash flow and the current level of our share price, we intend to implement a limited share buy-back programme during 2003, without affecting the Group's dividend policy. Trading overview Bus Travel West Midlands is the leading bus operator in the West Midlands incorporating Travel Coventry, Travel Dundee and Travel Midland Metro. It employs over 5,300 people and has a fleet of 1,900 buses operating over 600 routes. In 2002, turnover increased to £208.7m (2001: £208.3m) following the sale in October 2001 of Bronckaers, our Belgian bus business which contributed £3.4m to turnover last year. Operating profit before goodwill reduced to £49.8m (2001: £52.8m) due to further vehicle operating leases and increasing insurance costs. On-going redevelopment work in the centres of Birmingham and Coventry continued to make operations challenging. However, this construction work is due for completion by the end of 2003. Farepaying passengers increased on last year with strong growth in day tickets and travelcards. However, the number of concessionary passengers decreased as a result of the service disruptions in Birmingham city centre. Our long-term five year pay deal agreed in April 2000 and our fuel hedging strategy ensures key costs are kept under control. To complement the changing face and revitalisation of the city of Coventry, we undertook a rebranding of our operations under the Travel Coventry brand, giving Coventry customers their own local identity. This initiative also included improved information, a new website, new bus-stop plates and roadside information, further investment in more easy-access buses, new 'smartcard' ticketing technology and a dedicated Customer Care facility. We continue to experience double-digit growth in patronage through quality partnerships since their inception. Looking to the future we are focusing on new quality partnership routes including the Birmingham Outer Circle and the Walsall Showzone. At Travel Dundee, two quality partnerships were signed covering routes serving Ninewells, a major regional hospital. Revenue growth of 8% has been achieved on these routes in the year. We were pleased to announce in January 2003 that the Group is further broadening its presence in the London bus market by working with Transport for London on the development of an existing bus depot in south London. This facility has the capacity for 120 buses. We will commence bidding for contracts in spring and summer of this year. Together with our existing Feltham depot we are aiming for an initial London fleet of approximately 200 buses. Midland Metro's operational performance continues to improve and we are currently in discussions with Centro to improve its financial performance and stimulate further passenger growth. The new year has commenced well. Birmingham city centre is now in the final stage of redevelopment and we anticipate that the opening of new department stores such as Selfridges and Debenhams in autumn 2003 will attract patronage back to the city centre. Trains We operate c2c, Central, Gatwick Express, Midland Mainline, ScotRail, Silverlink, Wagn including the Stansted Express, Wales & Borders and Wessex franchises. The division employs 13,200 people. Turnover was £1,553.2m (2001: £1,458.2m) up 6.5%. Operating profit before goodwill and exceptional items was £33.9m (2001: £40.6m) due to increased insurance premia and new rolling stock charges at c2c. We are pleased to announce that Heads of Terms have been agreed with the SRA for a two-year extension for Central to April 2006 with a much improved financial return. Furthermore, we are about to commence negotiations with the SRA on a two-year extension for our Silverlink franchise. We expect this to be concluded later this year. Safety remains a priority for our business. We were saddened by the tragic Potters Bar accident which occurred on our Wagn service. We have made good progress implementing all the recommendations of the reports of Lord Cullen. The Train Protection Warning System ('TPWS') fitment programme continues on target with completion scheduled for the first half of 2003. Over 90% of our fleet is now fitted. Performance across the trains division was mixed. Punctuality and reliability of services are key areas for focus and we continue to work closely through Joint Boards with Network Rail to address these issues and reduce the number of delays on the network. Network Rail does not expect a return to pre-Hatfield levels in the short term. We have been improving our own operational performance through self-help initiatives such as recruitment of additional drivers and staff at stations. To give greater operational and customer focus we announced a new management structure for our rail division in March 2003. We have split our operations into two distinct geographic areas covering the north and south of the country. Dominic Booth will oversee c2c, Wagn, Silverlink, Gatwick Express, Wales and Borders and Wessex in his role as Divisional Director (South). David Franks, who recently joined the Group from Go-Ahead Group, has responsibility for Central, Maintrain, Midland Mainline, Qjump and ScotRail in the role of Divisional Director (North). They report to Ian Buchan, Chief Executive of the division, whose team also addresses strategic issues. The new year has shown a small improvement on the same period last year. With six out of our nine franchises coming up for renewal during 2004, we will be in a strong position to improve the cash returns of our trains division whilst at the same time rebalancing our rail portfolio. London and the South East Turnover for the year was £535.2m (2001: £516.4m) with an operating profit of £21.8m (2001: £46.7m). The reduction in operating profit resulted from increased rolling stock leasing charges and reduced subsidies. Our commuter train operating companies (c2c, Silverlink and Wagn), continued to make significant operational progress over the period. Performance remains a key issue and across all routes our operations have developed detailed plans to drive forward improvements. At c2c the introduction of the new fleet was completed early in the year. On the Wagn franchise, punctuality and reliability were improved after the replacement of signalling between Bethnal Green and Cheshunt and Chingford and Enfield Town. During 2002, all West Anglia stations were refurbished and rebranded. The West Anglia Route Modernisation Programme, including improvements to track circuit equipment, signalling, point motors and detection gear, continued throughout the year. This has impacted on the Stansted Express service, particularly at weekends when engineering work has regularly taken place. New early morning and late night services have also been introduced to cater for changing airline schedules. Marketing continues to focus on low-cost airline tie ups and a new Air Berlin contract was signed up providing a strong foothold in the market for air passengers to Germany. Increased travelcard sales and improved revenue protection has seen passenger revenue growth of 11.6% at Silverlink. However, operational performance has been impacted by the West Coast Mainline project. A two-year self-financing pay deal was negotiated for Silverlink drivers. Gatwick Express continued to be affected by a significant change in the mix of airlines operating out of Gatwick Airport. In addition, the contraction of the North American market and increased competition on the route affected growth. A new marketing and sales strategy has been implemented to tackle the changing market conditions and a new internet retailing contract agreed with Easyjet. As the market has recovered, additional services have been re-introduced into the timetable. Long distance/intercity Turnover for the year was £135.9m (2001: £121.7m) up 11.7% with an operating profit of £10.4m (2001: £10.5m). With an 8.1% growth in passenger volumes, Midland Mainline's performance has been above the industry average. In February, we ordered twenty-three new trains for the franchise. In April, the new £2.0m Customer Service Academy was opened with all staff attending courses at the centre since its opening. During the year a number of amendments to the two-year franchise extension were agreed with the SRA including a fleetwide overhaul of the thirteen high-speed trains involving interior refurbishment and exterior repaint with new engines for fourteen of the high speed train powercars and improved information at selected stations. The first of the refurbished trains is currently being launched onto the network and will provide significant improvements to performance. As a result of the West Coast Route Mainline project, Midland Mainline will assist the SRA by running hourly services between London and Manchester from summer 2003 until autumn 2004. However, on-going construction work for the Channel Tunnel Rail Link project at St Pancras continues to cause disruption. Regional Turnover for the year was £847.3m (2001: £779.9m) with an operating profit of £6.0m (2001: loss of £19.0m). In February 2002 we agreed new terms for our Central and ScotRail franchises with the SRA which provided £114.7m additional subsidy. In return we made a cash payment to the SRA of £59.0m and continued to operate additional services above the minimum level required in the franchise agreements. At Central, performance has been affected by strike action at neighbouring train operating companies. However, forthcoming service changes will see Central acquire some new key routes including Birmingham to Cardiff and Liverpool. At ScotRail the performance of the sleeper services continues to be affected by infrastructure issues. The strike action earlier in the year was resolved with a self-financing three year pay deal with productivity improvements. In December, we agreed to procure 28 additional turbostar-type trains, funded by the Scottish Executive, and to invest in the recruitment and training of extra drivers. These new trains, of which eight are anticipated to be delivered before the end of the current franchise in March 2004, will improve capacity requirements particularly following the opening of the new Edinburgh Park station which is scheduled for 2003. At Wales and Borders we completed the integration of the six Great Western stations into the franchise and will complete the remapping process in September this year when the First North Western train stations and services in North Wales are integrated into the new franchise. We have submitted our initial bid for the Wales and Borders franchise and await the timetable for the best and final offer stage. Earlier this year a unique self-financing five year pay deal for this franchise was agreed, the first of its type in the railway industry. Following the creation of the Wessex Trains franchise out of the former Wales and West franchise, the SRA launched a consultation exercise on changes to rail franchises serving the South West. In November, the SRA concluded that there would be an amalgamation of the Wessex Trains, Thames Trains and Great Western Trains franchises into a single operation from 2006. This reorganisation will take time to implement and we are therefore discussing a two-year extension for this franchise. Other This division includes Qjump.co.uk, our on-line ticketing service and our train maintenance company, Maintrain. Turnover for the year was £34.8m (2001: £40.2m) with an operating loss of £4.3m (2001: profit £2.4m) due primarily to losses at Qjump as it develops its businesses in its second year of operation. The results at Maintrain were impacted by higher insurance costs and lower turnover. Coaches The coach division provides Britain's only scheduled national coach network and serves more than 1,700 destinations. The airport services provide premier, high-frequency scheduled coach services to all the UK's major airports, as well as airside coaching services. Eurolines offer value-for-money European travel by coach. The division has 1,700 employees. In the year turnover grew by 1.8% to £184.5m (2001: £181.3m) and operating profit increased by 15.1% to £12.2m (2001: £10.6m). This was generated by a 2% increase in passenger numbers and good cost control. We disposed of Eurolines Nederland BV in August 2002. During the period we remained focused on improving passenger growth by way of product development and capacity and yield management. Promotion of low price fares continues to attract a wide customer base and increased investment in internet sales ensures that prices remain highly competitive. Sales via the internet increased by over 75% year-on-year as new initiatives such as e-ticketing were added to the service. Direct sales and internet bookings now account for nearly 50% of revenue. Well over one million passenger journeys a year are now booked via our web-site. We are focused on broadening the appeal of coach travel to a greater range of customers including the less-able. In March we introduced the first scheduled coach service accessible for wheelchair users on the Bath/London route with the support of the Department for Transport. Following an initial trial these facilities have been extended to the whole fleet on this service. In addition, a new disability helpline and code of practice for less-able travellers was launched in May. We have increased sales through direct channels and introduced new technology and initiatives to speed up the customers' experience when planning and booking their journeys. The introduction of e-ticketing has been well received by our customers and dedicated web promotions are also marketed regularly. To support our agent network we developed a new web-based portal ensuring our agents are kept abreast of latest promotions. Interactive voice recognition technology has been introduced to simplify sales and enquiries and to increase the capacity of our customer contact centre. Through this and our website we now offer a 24 hours a day, 7 days a week booking facility. In March 2003 coinciding with the 30th birthday of the division, we launched the new National Express coach brand and at the same time rationalised the number of brands within the division. The new brand will start to be rolled out across the fleet and coach stations during 2003 and we have developed a marketing programme around the new brand proposition. We are focused on promoting coach travel to a broader customer base. We continue to develop the network with focus on short to medium journeys such as Cambridge/London where we increased frequency. Long distance routes to the North West also performed well. During the last two years Manchester coach station was redeveloped at a cost of £2.7m in advance of the Commonwealth Games. The new design marks a radical change in the perception of coach travel and provides a blueprint for future coach stations. The facility is more attractive for the customer, being modern, innovative and more accessible with improved passenger information. Since Manchester reopened, passenger numbers have increased by 11%. The £1.5m Newcastle coach station will open later this month. We continue to discuss our plans for a new coach facility in Birmingham with the City Council as the current facility is in urgent need of modernisation. We believe customer perceptions of coach travel will change as a result of this investment. The 'Well Driven' scheme provides valuable feedback on driving standards and in combination with a proactive accident reduction programme has reduced accident rates by 20% during the year. Airport Services Scheduled services to airports have seen passenger journeys return to pre-September 2001 levels. We are looking to introduce new services to many of the expanding regional airports, particularly in the South East. The growth of low-cost airlines during the year has also allowed a substantial upgrading of services to Stansted airport and the development of a new operational base close to the airport has ensured we are well placed to serve the airport. With increased service frequency and new vehicles, we aim to capitalise on the growth already seen on the Airbus services between London and Stansted airport. A new five year contract with the hoteliers at Heathrow has resulted in a new Hotel Hoppa contract, linking 17 airport hotels with Heathrow's terminals 1, 2 and 3. The 26 strong vehicle fleet will be refurbished and a new livery introduced. European coaches Eurolines performed well despite competition from low-cost airlines and increased costs incurred to prevent the illegal entry of immigrants via our services. New day trips and scheduled services to Disneyland Paris are being introduced. To bring more focus to our UK operations, we sold Eurolines Nederland BV to our partner, Eurolines France, at the end of July. North America The North American division consists of student transportation, public transit operations and Stewart Airport in New York State. Following the acquisition of Stock Transportation, the North American division employs 14,000 people, provides services in more than 300 school districts and 70 public transit authorities whilst operating in thirty-one states and two Canadian provinces. It operates a fleet of 14,100 vehicles. Turnover for the year was £408.0m (2001: £401.7m) and operating profit was £32.6m (2001: £39.3m). Operating profit declined primarily because of £7.5m insurance cost pressures within our public transit division and £1.6m adverse exchange rate movements. Student Transportation Turnover for the year was £219.6m (2001: £206.2m) and operating profit was £30.9m (2001: £29.1m). Margins from continuing operations excluding Stock improved from 14.1% to 14.6%. Turnover and operating profit were adversely impacted by exchange movements. Reported margins were impacted by the timing of the acquisition of Stock. These results include a £1.2m operating profit contribution from Stock which was acquired in July 2002 just as Stock entered its summer vacation period when fleet utilisation is at its lowest level of the year. The new school year started very smoothly. We experienced organic growth within our existing contracts, despite a general economic slowdown. During 2002 the student transportation division participated in an increased number of new bid opportunities and had significant new contract wins in Baltimore, Long Beach, Los Angeles and Seattle. In addition, a new contract win of 50 buses was awarded in Natchez, Mississippi as part of our privatisation initiative. Such developments, together with the increased focus by school boards on reducing costs against a background of decreased tax revenues, confirms our belief that there are plenty of opportunities for the Group in this market. Our unique safety culture has become both a key selling attribute and a powerful tool for cost containment. We were pleased to acquire Stock, a well respected operator in the industry in July 2002. Stock provides an excellent platform for growth as it is the second largest private provider of student transportation in Canada. It transports 80,000 students per day and operates more than 1,800 vehicles in two Canadian provinces. Stock has been integrated well and we are already experiencing gains in procurement, particularly in the areas of vehicle maintenance and vehicle acquisition. We believe that substantial new consolidation opportunities exist within Canada, particularly in the province of Ontario. Public Transit Turnover for the year was £188.4m (2001: £195.5m) including an £8.1m adverse foreign exchange impact and operating profit was £1.7m (2001: £10.2m). Increased insurance premia and accident claims costs adversely affected the performance of this division. To address the division's financial performance we have substantially completed an orderly exit of selected contracts, which do not meet our required financial criteria. Additionally, we have raised our financial targets and, as contracts are retendered, we are bidding at rates that reflect a more appropriate return for the business, including the increased insurance costs. New contract wins in Chula Vista, California and Columbus, Ohio were won and extensive contract expansions were granted in San Jose and San Diego, California. ATC was successful in renegotiating an extension of its fixed-route contract in Las Vegas, one of the nation's largest systems. This new, four year contract will deliver one of the most cost-effective, large transit systems in the US. Moving forward we will focus on achieving higher profits by reducing our total accident claims costs and labour costs. We have fully implemented a cost reduction initiative designed to provide significant margin improvement in 2003. Australia Following the Group's decision to exit the train and tram operations in Melbourne, the Group now operates the Blue Ribbon, Glenorie, National Bus Company, Southern Coast Transit and Westbus bus brands. Operations are in Brisbane, Melbourne, Perth and Sydney and employ 1,700 people. On 16 December we were disappointed to announce our withdrawal from our Melbourne train and tram operations. The one-off cost to the Group of writing off these operations is £125.9m, a lower figure than announced in December, including a cash payment of £49.8m to indemnify the providers of the performance bonds for these operations and to cover other exit costs. Since we ceased funding our operations on 23 December we have worked alongside the State of Victoria to achieve an orderly handover of the train and tram operations and this was achieved without any disruption to service levels. We have taken the opportunity to assess the carrying value of our Australian bus division in light of our withdrawal from train and tram operations which has resulted in a goodwill impairment charge of £13.5m. Turnover for our Australian operations totalled £217.9m (2001: £207.9m) and generated an operating profit of £2.4m (2001: £13.4m). Turnover for the train and tram operations, which we ceased operating on 23 December, in the year to 31 December 2002 totalled £159.9m (2001: £153.0m) with operating profit of £0.1m (2001: £9.4m). Turnover of our bus operations in the year to 31 December 2002 totalled £58.0m (2001: £54.9m) with an operating profit of £2.3m (2001: £4.0m). At National Bus Company (NBC) in Victoria, a review of routes is underway to improve the inner Melbourne network and freeway services. New services to Melbourne's newest inner city development and increased bus priority measures such as express lanes are being implemented. Such initiatives, including the creation of Melbourne's first park and ride scheme, give us a unique marketing opportunity. Focus on preventative maintenance programmes has resulted in performance improvements. During the year, thirteen new buses were added into the fleet. In Queensland, NBC has been working in association with the Trainlink rail-bus integration service which was introduced in January. This service is promoting integrated ticketing between Birkdale and Capalaba. Additional off-peak services have also been introduced on selected routes and a new busway continues to assist with city congestion. Integrated ticketing is still planned for introduction over the next two years. In Western Australia, Southern Coast Transit has seen strong patronage growth as the partnership with Government continues to promote local bus services as the preferred mode of transport. A government trial on a bio-diesel project has commenced. In New South Wales, Westbus has introduced a fleet of new articulated vehicles increasing capacity on the popular M2 services into the Central Business District. Hillsbus services continue to be popular with their distinct branding. Special services such as the Beachbus, connecting the Hills district to the beach were very popular, and New Year's Eve services proved popular. Glenorie Bus company acquired late 2001 has achieved improved profitability and expanded services in its growth markets. Phil White Chief Executive 12 March 2003 Finance Review Associates We hold a 33% investment in Altram LRT Limited ('Altram') and a 40% investment in Inter-Capital and Regional Rail Limited ('ICRRL'). Altram started operating the Midland Metro in June 1999. Our share of the operating loss for 2002 was £0.5m (2001: £1.3m). The £2.6m (2001: £nil) exceptional cost for associates comprises the Group's share of an impairment charge in the accounts of Altram following a review of the carrying value of its fixed assets. ICRRL is contracted to manage the operations of Eurostar UK to 2010. Our share of the operating loss for the year was £3.5m (2001: £0.6m). Interest Net interest payable was reduced to £20.1m (2001: £26.7m) by a combination of lower levels of net debt in 2002 compared to 2001 and the impact of lower interest rates. Group operating profit before depreciation, amortisation and exceptional items ('EBITDA') from continuing operations was £191.5m (2001: £200.0m) and EBITDA interest cover from continuing operations improved to 9.5 times (2001: 7.5 times). Goodwill amortisation The goodwill amortisation charge increased to £58.7m (2001: £42.2m restated) reflecting the £13.5m impairment of the goodwill arising on the acquisition of the Australia bus businesses noted previously. The balance of the increase results from the acquisition of Stock Transportation in July 2002 and the full year effect of goodwill arising last year. Exceptional items Exceptional items comprise £5.0m of pre-contract bid costs incurred in the UK Trains franchise retendering process. The increase in pre-contract bid costs over 2001 reflects the increased pace of refranchising activity in 2002. Taxation The tax charge on profit before tax, goodwill amortisation and exceptional items of £106.8m (2001: £129.2m) was £24.6m (2001: £27.8m restated), which represents an effective tax rate of 23.0% (2001: 21.5%). This tax rate principally reflects the benefit of continuing low effective tax rates on overseas earnings. A reconciliation to the standard UK corporation tax rate of 30% will be included in the published financial accounts. The total tax charge is £20.3m (2001: £1.2m), due to the tax relief available on certain North American goodwill amortisation and on the other exceptional items. Cash flow and balance sheet Strong cash flow remains a feature of the Group and for the full year we generated £175.5m (2001: £185.5m) of cash flow from operations and operating cash flow after capital expenditure, of £91.3m (2001: £93.5m). The £44.1m improvement in working capital was before the £71.0m cash out flow relating to exceptional items, including £62.5m for the franchise amendment payment to the SRA. Net divisional cash flow after capital expenditure is stated in the table below. UK UK UK North America Australia Australia Total Buses Coaches Trains Bus Trains £m £m £m £m £m £m £m Operating profit 49.8 12.2 33.9 32.6 2.3 0.1 130.9 before exceptionals Depreciation 10.6 4.5 18.6 23.4 3.6 10.8 71.5 EBITDA 60.4 16.7 52.5 56.0 5.9 10.9 202.4 Working capital (9.2) 1.6 40.2 5.6 (0.8) 6.7 44.1 movement Exceptional items - - (69.3) (1.6) (0.1) - (71.0) Net cash inflow from 51.2 18.3 23.4 60.0 5.0 17.6 175.5 operations Net capital (0.2) (2.1) (17.1) (23.8) (8.4) (32.6) (84.2) expenditure Operating cash flow 51.0 16.2 6.3 36.2 (3.4) (15.0) 91.3 In the UK, the Bus and Coach divisions generated £67.2m of cash and Trains remained cash positive in spite of the payment to the SRA. North America contributed £36.2m after capital expenditure of £23.8m, assisted by improvements in receivable collections. In Australia, the Bus division was cash negative with a high capex requirement in the year and the discontinued train division absorbed cash of £15.0m. After the acquisition of Stock Transportation for £74.9m, net debt only increased by £19.6m to £334.6m (2001: £315.0m) as a result of the strong cash flow performance and a £29.0m benefit from foreign exchange movements, principally on our US$ denominated debt. Dividends paid in the year utilised £29.9m (2001: £28.1m) of cash. The £139.5m reduction in net assets to £262.6m at 31 December 2002 (2001: £402.1m restated) was principally a reflection of the £125.9m cost of withdrawing from the Australia Trains business and Australia bus goodwill impairment of £13.5m. Pensions The Group's principal defined benefit pension schemes are all in the UK. Our most recent triennial actuarial valuations were carried out at 31 March 2001 and 31 March 2002 for the two Bus schemes, 5 April 2001 for Coaches and 31 December 2001 for the Train schemes. The actuarial valuations showed that the Bus schemes were in surplus by £58.7m but under FRS17 rules, at 31 December 2002, were in deficit by £18.7m (2001: £39.4m surplus). Approximately 40% of the Bus Division employees are members of these schemes, which have been closed to new members for some years. The actuarial valuation of the Coach Division scheme showed a deficit of £6.8m, which under FRS17 rules at 31 December 2002 increased to a deficit of £9.5m (2001: £6.7m deficit). In order to improve the funding level the Group injected £5m into this scheme on 11 March 2003. This scheme, which comprises one third of the relevant employees, was closed to new members during 2002. In the Bus and Coach Divisions new members of staff are offered membership of defined contribution pension schemes. The actuarial valuations of the Train pension schemes at 31 December 2001 showed a range of funding between 89% and 109%. As our main obligation on rail pensions is to pay contributions as agreed with the scheme actuary we have split out the short term TOCs from the longer term businesses. Our objective is to provide increased transparency, as, owing to a variety of contractual arrangements with the SRA, there is no direct linkage between additional pension costs and profits for many of these short term TOCs. Under the FRS 17 rules the reported deficit for the short term TOCs at 31 December 2002 was £44.2m (2001: £39.1m surplus). The long term train businesses showed an FRS 17 deficit, at 31 December 2002, of £9.6m (2001: £13.9m surplus). Accounting Policies FRS 19 'Deferred Tax' has been adopted as at 1 January 2002 and prior year figures restated to reflect the change in policy from partial provision to full provision. Details of the restatement are given in Note 1 to the Preliminary Results. We continued to apply the transitional arrangements of FRS 17 ' Retirement Benefits' and plan to move directly to the International Accounting Standard equivalent (IAS 19) in 2005 following the ASB's decision to defer full adoption of FRS 17. NATIONAL EXPRESS GROUP PLC GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December 2002 Total before Goodwill & Total Total before Goodwill & Total goodwill & exceptional goodwill & exceptional items 2002 exceptional exceptional items items items 2002 2002 2001* 2001* 2001* Note £m £m £m £m £m £m Turnover - continuing operations 2,396.8 - 2,396.8 2,304.4 - 2,304.4 - acquisitions 15.6 - 15.6 - - - - discontinued 159.9 - 159.9 159.8 - 159.8 operations Turnover 2 2,572.3 - 2,572.3 2,464.2 - 2,464.2 Other operating income 10.8 - 10.8 12.4 - 12.4 Other operating costs before goodwill and exceptional items (2,452.2) - (2,452.2) (2,318.8) - (2,318.8) Goodwill amortisation and impairment 2 - (58.7) (58.7) - (42.2) (42.2) Franchise amendment costs 2 - - - - (67.0) (67.0) Other exceptional items 2 - (5.0) (5.0) - (16.5) (16.5) Total operating costs (2,452.2) (63.7) (2,515.9) (2,318.8) (125.7) (2,444.5) Group operating profit/ 130.9 (63.7) 67.2 157.8 (125.7) 32.1 (loss) - continuing operations 129.6 (62.7) 66.9 147.3 (125.3) 22.0 - acquisitions 1.2 (1.0) 0.2 - - - - discontinued 0.1 - 0.1 10.5 (0.4) 10.1 operations Group operating profit/ 2 130.9 (63.7) 67.2 157.8 (125.7) 32.1 (loss) Share of operating losses of associates 2 (4.0) (2.6) (6.6) (1.9) - (1.9) Total operating profit/ 126.9 (66.3) 60.6 155.9 (125.7) 30.2 (loss) (Loss)/profit on closure /sale of businesses - (126.1) (126.1) - 112.0 112.0 Profit/(loss) on ordinary activities before interest 126.9 (192.4) (65.5) 155.9 (13.7) 142.2 Net interest payable (20.1) - (20.1) (26.7) - (26.7) Profit/(loss) on ordinary activities before taxation 106.8 (192.4) (85.6) 129.2 (13.7) 115.5 Tax on profit/(loss) on ordinary activities 3 (24.6) 4.3 (20.3) (27.8) 26.6 (1.2) Profit/(loss) after tax 82.2 (188.1) (105.9) 101.4 12.9 114.3 Minority interest 0.6 - 0.6 0.1 - 0.1 Profit/(loss) for the 82.8 (188.1) (105.3) 101.5 12.9 114.4 financial year Dividends (32.4) - (32.4) (28.6) - (28.6) Retained profit /(loss) 50.4 (188.1) (137.7) 72.9 12.9 85.8 Basic (loss)/earnings per share 4 (80.0p) 88.4p Normalised basic earnings per share 4 62.9p 70.5p Diluted (loss)/earnings per share 4 (80.0p) 82.7p Normalised diluted earnings per share 4 60.3p 66.0p * Restated for change in accounting policy for deferred tax (see note 1) NATIONAL EXPRESS GROUP PLC GROUP BALANCE SHEET At 31 December 2002 2002 2001* Note £m £m Fixed assets Intangible assets 467.7 508.3 Tangible assets 420.5 512.8 Investments and interests in associates 25.3 26.4 913.5 1,047.5 Current assets Stock 19.7 21.4 Debtors 8 359.8 376.1 Cash at bank and in hand 93.7 92.3 473.2 489.8 Creditors: amounts falling due within one year 9 (659.7) (610.6) Net current liabilities (186.5) (120.8) Total assets less current liabilities 727.0 926.7 Creditors: amounts falling due after more than one 10 (360.0) (405.1) year Provisions for liabilities and charges (104.4) (119.5) 262.6 402.1 Capital and reserves Called up share capital 6.7 6.6 Share premium account 44.7 43.7 Share capital to be issued 0.2 0.3 Merger reserve 15.4 15.4 Capital reserve 0.4 - Revaluation reserve 0.8 0.8 Profit and loss account 189.6 330.0 Equity shareholders' funds 257.8 396.8 Equity minority interest 4.8 5.3 262.6 402.1 * Restated for change in accounting policy for deferred tax (see note 1) NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF CASH FLOWS For the year ended 31 December 2002 2002 2001 Note £m £m Net cash inflow from operating activities 6 (a) 175.5 185.5 Interest received 7.0 9.5 Interest paid (24.1) (37.7) Interest element of finance lease rentals (1.9) (1.0) Return on investments and servicing of finance (19.0) (29.2) UK corporation tax paid (9.4) (5.4) Overseas tax paid (2.4) (0.6) Taxation (11.8) (6.0) Payments to acquire tangible assets (91.6) (102.6) Receipts from sale of tangible assets 7.4 10.6 Payments to acquire shares to satisfy employee share scheme (2.7) (0.7) Payments to acquire other investments (1.2) (0.1) Capital expenditure and financial investment (88.1) (92.8) Receipts from the sale of businesses 2.9 237.6 Cash disposed in businesses closed/sold (3.3) (1.7) Payments to acquire businesses (74.9) (8.6) Cash acquired in businesses purchased 2.2 0.4 Deferred consideration for businesses acquired (2.4) (1.5) Acquisitions and disposals (75.5) 226.2 Equity dividends paid (29.9) (28.1) Cash (outflow)/inflow before financing activities (48.8) 255.6 Management of liquid resources Cash (paid in to)/withdrawn from short term deposits (50.4) 4.5 Financing Issue of share capital 1.0 3.2 Cash inflow from lease financing 20.3 21.2 Repayment of loan notes (0.9) - Loans advanced 32.0 - Loans repaid - (241.2) Net cash inflow/(outflow) from financing 52.4 (216.8) (Decrease)/increase in cash 6 (b) (46.8) 43.3 NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2002 2002 2001* £m £m (Loss)/profit for the financial year (105.3) 114.4 Exchange differences on foreign currency net investments (2.7) (0.6) Total recognised gains and losses relating to the period (108.0) 113.8 Prior year adjustment for deferred tax (see note 1) (11.8) Total recognised gains and losses (119.8) * Restated for change in accounting policy for deferred tax (see note 1) RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS For the year ended 31 December 2002 2002 2001* £m £m (Loss)/profit for the financial year (105.3) 114.4 Dividends (32.4) (28.6) Exchange differences on foreign currency net investments (2.7) (0.6) New share capital issued for cash 1.0 3.2 Goodwill realised 0.4 (32.6) Net (reduction)/addition to shareholders' funds (139.0) 55.8 Equity shareholders' funds at 1 January + 396.8 341.0 Equity shareholders' funds at 31 December 257.8 396.8 * Restated for accounting policy for deferred tax (see note 1) + Shareholders' funds at 1 January 2002 were originally £408.6m before deducting the prior year adjustment of £11.8m. NATIONAL EXPRESS GROUP PLC Notes 1. Basis of preparation The Preliminary Results presented have been prepared using the accounting policies set out in the Group's 2001 statutory accounts with the exception of the policy on deferred tax. Financial Reporting Standard ('FRS') 19, 'Deferred Tax' has been adopted with effect from 1 January 2002. The adjusted accounting policy is that deferred tax be recognised on a full provision basis in respect of all material timing differences that have originated, but not reversed, by the balance sheet date. Deferred tax is measured on a non-discounted basis at tax rates that are expected to apply in the periods in which the timing differences reverse. Deferred tax assets are recognised where their recovery is considered more likely than not in that there will be suitable taxable profits from which the future reversal of underlying timing differences can be deducted. Prior to 1 January 2002, the Group's accounting policy was to provide for deferred tax on all material timing differences to the extent that it was probable that the liability would crystallise. The prior year comparatives have been restated to comply with FRS 19, resulting in a deferred tax provision of £16.5m at 31 December 2001. The net effect on reserves of £11.8m includes an increase in the net book value of goodwill as at 31 December 2001 of £4.7m. Due to the additional deferred tax provision on the Airport balance sheet at disposal, the profit on disposal for the year to 31 December 2001 is increased by £20.3m to £112.0m. After an additional amortisation charge for the Group in 2001 of £0.3m the net effect is to increase the Group's profit after tax by £20.0m from £94.3m to £114.3m. Basic earnings per share has been increased by 15.5p to 88.4p. The Group's loss for the current year has been reduced by £6.0m as a result of the change in accounting policy. 2. Turnover and segmental analysis The turnover of the Group comprises revenue from road passenger transport, train passenger services, airport operations and related activities in the UK, North America and Australia. Where appropriate, amounts are shown net of rebates and sales tax. Due to the nature of the Group's businesses, the origin and destination of turnover is the same. Within the Trains division, franchise agreement receipts from the Strategic Rail Authority ('SRA') and local Passenger Transport Executives within the West Midlands region and Scotland are treated as turnover. During the year, annual franchise agreement receipts amounted to £634.9m (2001: £554.8m) in the UK and £62.5m (2001: £56.0m) from the Victoria Department of Public Transport in Australia. Turnover Operating profit Net assets before goodwill and exceptional items 2002 2001 2002 2001* 2002 2001* Analysis by class of business £m £m £m £m £m £m Buses 208.7 208.3 49.8 52.8 34.7 63.8 Trains 1,553.2 1,458.2 33.9 40.6 3.3 9.8 Coaches 184.5 181.3 12.2 10.6 28.1 35.8 UK operations 1,946.4 1,847.8 95.9 104.0 66.1 109.4 North America bus - continuing 392.4 401.7 31.4 39.3 451.2 505.6 - acquisitions 15.6 - 1.2 - 70.3 - 408.0 401.7 32.6 39.3 521.5 505.6 Australia bus 58.0 54.9 2.3 4.0 48.9 49.4 Continuing operations 2,412.4 2,304.4 130.8 147.3 636.5 664.4 Discontinued operations - Australia trains 159.9 153.0 0.1 9.4 (49.8) 52.2 - Airports - 6.8 - 1.1 - - 159.9 159.8 0.1 10.5 (49.8) 52.2 2,572.3 2,464.2 130.9 157.8 586.7 716.6 Annual goodwill amortisation (45.2) (42.2) Goodwill impairment (13.5) - Exceptional items (see table below) (5.0) (83.5) Group operating profit 67.2 32.1 Share of operating losses of associates (6.6) (1.9) Total operating profit 60.6 30.2 (Loss)/profit on closure/sale of businesses (126.1) 112.0 (Loss)/profit on ordinary activities before (65.5) 142.2 interest Unallocated net liabilities (328.9) (319.8) 257.8 396.8 Equity minority interest 4.8 5.3 Total net assets 262.6 402.1 * Restated for change in accounting policy for deferred tax (see note 1) Annual goodwill amortisation of £45.2m (2001:£42.2m) is analysed as Trains £23.2m (2001:£21.6m), Coaches £0.8m (2001:£0.4m), North America bus £19.4m (2001: £18.8m) and Australia bus £1.8m (2001:£1.4m). The goodwill impairment charge for 2002 relates to Australia bus. Exceptional items are analysed as follows: Buses Trains Coaches North America Australia Total bus £m £m £m £m £m £m 2002 Pre-contract bid costs - 5.0 - - - 5.0 2001 Franchise amendment costs - 67.0 - - - 67.0 New trains - 3.0 - - - 3.0 Reorganisation - 4.8 3.1 3.6 0.6 12.1 Pre-contract bid costs 0.2 1.0 - - 0.2 1.4 0.2 75.8 3.1 3.6 0.8 83.5 The exceptional franchise amendment costs in 2001 includes the cost to the Group of its renegotiations with the SRA of the Central Trains and ScotRail rail franchises. The exceptional expenditure on new trains in 2001 is the costs associated with bringing the new trains into service. Reorganisation costs in 2001 include £1.7m relating to the impairment of goodwill previously written off to reserves in respect of a coach business. Included in the share of operating losses of associates of £6.6m (2001:£1.9m) is a £2.6m exceptional loss (2001:£nil) which comprises the Group's share of an impairment charge in the accounts for Altram LRT Limited following a review of the carrying value of its fixed assets. There is no tax effect in the profit and loss account relating to the exceptional items recognised below Group operating profit (2001:£nil). The Group withdrew from the Australia trains division resulting in a loss on disposal of £125.9m. The companies within the division were put into administration and receivership on 23 December 2002. The combined loss on the sale of Eurolines Nederland BV and Multisystems IT Division on 2 August 2002 and 15 August 2002 respectively was £0.2m. Unallocated net liabilities comprise other investments, cash at bank and in hand, borrowings (other than finance leases), deferred consideration payable, dividends payable and taxation. The net assets in respect of the Group's investment in associates have been analysed according to the activities of the associate. 3. Taxation Analysis of taxation charge in the year Total Total 2002 2001* £m £m Current taxation: UK Corporation tax 27.5 27.4 Prior years - UK - (1.8) 27.5 25.6 Double tax relief - (2.9) 27.5 22.7 Overseas taxation 3.4 5.1 30.9 27.8 Tax relief on goodwill and exceptional items: UK corporation tax (1.4) (21.5) Overseas (2.9) (5.1) Total current taxation 26.6 1.2 Deferred taxation Origination and reversal of timing differences (6.3) - Tax on profit on ordinary activities 20.3 1.2 * Restated for change in accounting policy for deferred tax (see note 1) 4. Earnings per share 2002 2001* Basic (loss)/earnings per share (80.0p) 88.4p Normalised basic earnings per share 62.9p 70.5p Diluted (loss)/earnings per share (80.0p) 82.7p Normalised diluted earnings per share 60.3p 66.0p * Restated for change in accounting policy for deferred tax (see note 1) Basic (loss)/earnings per share is calculated by dividing the loss for the financial period of £105.3m (2001: £114.4m profit restated) by the weighted average number of ordinary shares in issue in the period, excluding those held by employees' share ownership trusts which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. For 2002, the weighted average number of ordinary shares for the purpose of calculating the diluted loss per share is identical to that used for basic loss per share. This is because the adjustment for dilutive potential ordinary shares would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of FRS14, 'Earnings per share'. The reconciliation of weighted average number of ordinary shares is detailed as follows: Number Number of shares of shares 2002 2001 Basic weighted average shares 131,602,152 129,457,561 Adjustment for dilutive potential ordinary shares 5,622,274 8,852,402 Diluted weighted average shares 137,224,426 138,309,963 The normalised diluted earnings per share has been calculated in addition to the basic and diluted earnings per shares required by FRS 14 since, in the opinion of the Directors, it reflects the financial performance of the core business more appropriately. The normalised diluted earnings per share for the year ended 31 December 2002 and 31 December 2001 exclude the earnings from discontinued operations, with 2001 earnings restated to exclude earnings from operations discontinued in 2002. They have not been adjusted to reflect the interest earned on the cash proceeds from the disposal of the discontinued operations in 2001. Normalised profits for the financial year are: 2002 2001* £m £m (Loss)/profit for the financial year (105.3) 114.4 Earnings from discontinued operations (0.1) (10.2) Goodwill amortisation (including impairment of £13.5m) 58.7 42.2 Exceptional operating costs 5.0 83.5 Exceptional loss of associate 2.6 - Loss/(profit) on closure/sale of businesses 126.1 (112.0) Tax relief on goodwill and exceptional items (4.3) (26.6) Normalised profits for the financial period 82.7 91.3 * Restated for change in accounting policy for deferred tax (see note 1) 5. Net borrowings 2002 2001 £m £m Due within one year Loan notes 9.1 10.0 Bank loans 53.2 3.6 Other loans - 0.1 Bank overdrafts - 0.5 Finance lease obligations 10.0 6.3 72.3 20.5 Due within one to two years Bank loans 308.0 70.8 Finance lease obligations 11.5 6.8 319.5 77.6 Due within two to five years Bank loans - 285.2 Finance lease obligations 31.3 18.9 31.3 304.1 Due by instalment after five years Finance lease obligations 5.2 5.1 Total borrowings 428.3 407.3 Cash at bank and in hand (93.7) (92.3) Net borrowings 334.6 315.0 Secured borrowings within the Group (representing finance leases) total £58.0m (2001:£37.1m) 6. Cash flow statement (a) Reconciliation of operating profit to net cash inflow from operating activities Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations 2002 2002 2002 2001* 2001* 2001* £m £m £m £m £m £m Group operating profit 67.1 0.1 67.2 22.0 10.1 32.1 Depreciation of tangible assets 60.7 10.8 71.5 52.7 7.9 60.6 Annual goodwill amortisation 45.2 - 45.2 42.2 - 42.2 Goodwill impairment 13.5 - 13.5 - - - Increase in stocks (0.5) (0.3) (0.8) (1.1) (0.3) (1.4) (Increase)/decrease in debtors (10.5) 5.7 (4.8) (53.9) (1.0) (54.9) Increase/(decrease) in creditors 44.8 (2.9) 41.9 38.4 (7.0) 31.4 (Decrease)/increase in (62.8) 5.2 (57.6) 80.4 - 80.4 provisions Other movements 0.4 (1.0) (0.6) (4.9) - (4.9) Net cash inflow from operating activities 157.9 17.6 175.5 175.8 9.7 185.5 * Restated for change in accounting policy for deferred tax (see note 1) The net cash flow from operating activities includes outflows of £71.0m (2001: £15.6m) from continuing operations which related to exceptional costs, and £nil (2001: £0.4m) from discontinued operations. (b) Reconciliation of net cash flow to movement in net debt 2002 2001 £m £m (Decrease)/increase in cash in the year (46.8) 43.3 Cash (inflow)/outflow from movement in debt and lease financing (51.4) 220.0 Cash outflow/(inflow) from movement in liquid resources 50.4 (4.5) Change in net debt resulting from cash flows (47.8) 258.8 Loans and finance leases of subsidiaries acquired in year - (1.4) Other non cash movements in net debt 28.2 (15.8) Change in net debt resulting from non cash flows 28.2 (17.2) Movement in net debt in the year (19.6) 241.6 Net debt at 1 January (315.0) (556.6) Net debt at 31 December (334.6) (315.0) Other non cash movements in net debt primarily represent exchange movements. (c) Analysis of changes in net debt At Cash flow Other At 1 January movements 31 December 2002 2002 £m £m £m £m Cash 29.7 (12.3) (0.6) 16.8 Overnight deposits 54.5 (35.0) - 19.5 Liquid resources - other short term deposits 8.1 50.4 (1.1) 57.4 Cash at bank and in hand 92.3 3.1 (1.7) 93.7 Bank overdrafts (0.5) 0.5 - - Debt due within one year Loan notes (10.0) 0.9 - (9.1) Bank and other loans (3.7) 3.7 (53.2) (53.2) (13.7) 4.6 (53.2) (62.3) Debt due after one year Bank and other loans (356.0) (35.7) 83.7 (308.0) (356.0) (35.7) 83.7 (308.0) Finance lease obligations (37.1) (20.3) (0.6) (58.0) Net debt (315.0) (47.8) 28.2 (334.6) Short term deposits included within liquid resources relate to term deposits repayable within three months. Changes in net debt arising from acquisitions and disposals in the year are disclosed separately on the face of the cash flow statement. 7. The most significant exchange rates to the pound for the Group are as follows: 2002 2002 2001 2001 Closing rate Average rate Closing rate Average rate US dollar 1.61 1.51 1.46 1.44 Australian dollar 2.86 2.78 2.84 2.80 Canadian dollar 2.54 2.47 - - 8. Debtors 2002 2001 £m £m Trade debtors 192.8 158.6 Amounts due from associates 4.7 3.0 Other debtors 78.1 120.7 Prepayments and accrued income 84.2 93.8 359.8 376.1 Included within other debtors is £4.7m (2001: £6.8m) and within prepayments is £1.7m (2001: £1.7m) which is recoverable after more than one year. 9. Creditors: amounts falling due within one year 2002 2001 £m £m Loan notes 9.1 10.0 Bank loans 53.2 3.6 Other loans - 0.1 Bank overdrafts - 0.5 Trade creditors 201.6 169.2 Amounts owed to associates 0.1 0.2 Finance lease obligations 10.0 6.3 Corporation tax 25.3 15.1 Social security and other taxation 21.7 22.2 Accruals and deferred income 317.0 364.2 Proposed dividend 21.7 19.2 659.7 610.6 10. Creditors: amounts falling due after more than one year 2002 2001 £m £m Bank loans 308.0 356.0 Finance lease obligations 48.0 30.8 Accruals and deferred income 4.0 18.3 360.0 405.1 11. The financial information set out above, which was approved by the Board on 13 March 2003, is derived from the full Group accounts for the year ended 31 December 2002 and does not constitute the full accounts within the meaning of section 240 of the Companies Act (as amended). The Group accounts on which the auditors have given an unqualified report which does not contain a statement under section 237 (2) or (3) of the Companies Act 1985 will be delivered to the Registrar of Companies in due course. Copies of the Preliminary Results may be obtained from the Company Secretary at 75 Davies Street, London W1K 5HT. Copies are also available via www.nationalexpressgroup.com. - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

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