Interim Results

NATIONAL EXPRESS GROUP PLC 9 September 1999 NATIONAL EXPRESS GROUP PLC Interim Results 6 months to 30 June 1999 Financial Highlights -Turnover increased by 4.6% to £670.1m (1998: £640.8m) -Operating profit, before exceptional costs of £5.9m (1998: £3.8m) and amortisation of goodwill of £0.6m (1998: nil), increased by 20.4% to £46.0m (1998: £38.2m) -Profit before taxation up 12.0% to £39.3m (1998: £35.1m) -Normalised earnings per share up 21.4% to 26.1p (1998: 21.5p) -Dividend up 22.3%to 5.75p (1998: 4.7p) - Net debt at 30 June 1999 was £51.9m (30 June 1998: net cash £43.4m) -Gearing at 30 June 1999 was 21.7% (30 June 1998: nil) Business Development Highlights - Significant progress with stated strategy for international expansion. This has established National Express Group as: - the third largest school bus services company in the USA, following the acquisition of Durham Transportation Inc. in August 1999 - the largest private operator of bus, train and tram services in Australia through the acquisition of two urban bus operators - National Bus Company and Transport Management Group and the award of three franchises to operate train and tram services in Melbourne and across the State of Victoria - Strengthened management team with new appointments to the Board Operational Highlights - Record passenger numbers. 277 million passenger journeys made on the Group's services in the first six months - up 9% on 1998 levels - Objectives of the Government's integrated transport policy being met : - increased passenger numbers on rail and bus services - 'Quality Partnership' bus initiatives showing double digit passenger growth - considerable investment in new vehicles and introduction of new rolling stock - further investment in infrastructure, additional services and better passenger information systems - more integrated rail/bus tickets increasing accessibility to the public transport network - promotion of many other fare offers encouraging more people to travel by public transport -150 new low-floor, easy access buses put into service by Travel West Midlands, the core UK bus company during the first six months, with 130 more planned for introduction during the remainder of the year. 30% of the fleet to comprise low-floor, easy access buses by the end of 1999 -122 new trains worth £320m now on order. 17 are in service, a further 34 are planned for delivery by the end of 1999 and 71 are scheduled for delivery in 2000 - Most of the Group's passenger rail services continue to be ranked in the upper quartile of OPRAF's punctuality and reliability statistics Commenting on current trading and prospects Michael Davies, Chairman, said: 'All divisions continue to experience good levels of passenger growth and are progressively developing the reliability, safety, value for money and overall quality of services to attract more passengers. The Group's businesses will continue to pursue all opportunities to develop their close working relationships with local and transport authority partners and other passenger transport providers. They will build on the successes achieved to date with existing partnership programmes and seek to identify new opportunities for implementing further schemes. This approach, supported by all contributors to the public transport industry, will be crucial to maintaining the momentum already begun by the Government's integrated transport policy. The strength and quality of all of the Group's operations, together with its significant presence in the key geographic markets of the USA and Australia, where good opportunities for further acquisitions continue to exist, gives the Board confidence that the outlook for further growth is promising.' Michael Davies, Chairman, 9 September 1999 NATIONAL EXPRESS GROUP PLC CHAIRMAN'S STATEMENT I am pleased to report that National Express Group has made further strong progress during the first half of 1999. Each of the Group's operating divisions - buses, trains coaches and airports - have handled record numbers of passengers and delivered good results. Financial Results The Group's operating profit for the first six months, before exceptional costs of £5.9m (1998: £3.8m) and amortisation of goodwill amounting to £0.6m (1998: nil), increased by 20.4% to £46.0m (1998: £38.2m). Turnover was up 4.6% to £670.1m (1998: £640.8m). Exceptional costs comprise £4.7m (1998: £3.3m) for the Trains division and £1.2m (1998: £0.5m) for the Buses division. Earnings per ordinary share rose by 21.4% to 26.1p (1998: 21.5p) calculated on a diluted normalised basis. The Group's net assets stood at £239.3m at 30 June 1999, compared with £211.9m at the end of 1998. At 30 June 1999 the Group had net debt of £51.9m (30 June 1998: £43.4m, cash) after excluding advance cash held for season tickets. Dividends The Board is pleased to declare an interim dividend of 5.75p per ordinary share, an increase of 22.3% on the 1998 dividend of 4.7p. The interim dividend is payable on 22 October 1999 to shareholders on the register at 24 September 1999. International Expansion The first six months of 1999 have been particularly significant for National Express Group because of the considerable progress we have made in implementing our strategy for international expansion. Our objectives - to establish significant public transport operations and achieve critical mass in the key geographic markets of Australia and the USA - have been substantially met, following the completion of several important acquisitions in both markets. We will continue to focus on these important markets, where many opportunities for further growth continue to exist. As a result of these developments 800 million passengers worldwide use our services each year. To support this international expansion we have made key appointments to the Board and extended our divisional management structure. Operational Review Our core businesses have continued to concentrate on their proven strategy for improving all aspects of the quality of their services to encourage more people to use them. We continued to invest in new vehicles, higher service frequencies and better passenger facilities. We plan to invest almost £100m this year in improvements to our wide range of passenger transport services. These actions have contributed to the good levels of passenger growth achieved during the period. They are also firmly in line with the Integrated Transport White Paper and the Government's objectives to encourage greater use of public transport systems and reduce car usage. One year on from the publication of this important document, it is clear that the benefits of this policy are beginning to bear fruit and the Group intends to pursue all opportunities to maintain this momentum. Buses The Group's buses division reported another successful six months. Turnover was up 31.5% to £121.9m (1998: £92.7m) and operating profit before exceptional costs and amortisation of goodwill increased by 27.6% to £26.8m (1998: £21.0m). These results include the first full six months contributions from Crabtree-Harmon Corporation and five months contributions from Robinson Bus Service Inc, the USA student transportation services companies acquired in September 1998 and February 1999 respectively. Both companies have made a useful contribution to the division's results and continue to trade in line with expectations. They also include eight weeks contributions from National Bus Company Pty Limited and four weeks contributions from Transport Management Group Pty Limited, the Australian urban bus companies acquired in May and June 1999 respectively. Sustained passenger growth of 1% was recorded at Travel West Midlands ('TWM'), the core UK bus operation. More off-peak services were introduced to take advantage of the increasing evening leisure market in Birmingham's city centre and late-night and Sunday shopping. There was strong growth in sales of travel cards and one-day passes in the early summer months. Other innovative fare offers, also designed to encourage more off peak travel and to attract new bus users onto the network also proved to be successful. In June, the West Midlands launched its fourth 'Quality Partnership', a bus service which links central Birmingham with the large residential Castle Vale area. Passengers on this route are now served by TWM's new fleet of eleven, two-coach, articulated 'Bendi-buses' operating on corridors with extensive bus priorities to improve the speed and reliability of services. The road infrastructure has been provided by Birmingham City Council while Centro, the West Midlands Passenger Transport Executive, has introduced advanced passenger waiting information facilities. Passenger numbers for the first two months of operation show that 5% growth is already being achieved on this corridor. The partners in these four 'Showcase' bus routes have invested a combined total of around £15m since the first Quality Partnership scheme was launched in 1997. The three Quality Partnership corridors launched since this date continue to record double-digit passenger growth. Three further projects are planned for Autumn 1999 and early 2000 and will require similar levels of investment. TWM, working closely with Centro and the highways authorities have also started evaluating a number of potential schemes at key congestion hot- spots for the innovative Regional infrastructure investment partnership. Under this programme, TWM has pledged to invest up to £10m a year over the next three years - around half of the total anticipated funding - in bus priority, traffic management and information systems which will deliver clear commercial benefits to the business and benefit bus passengers right across the West Midlands. 150 new buses entered service in the first half of the year as part of the division's ongoing fleet replacement investment programme, with a further 130 expected to be introduced by the end of 1999. The new vehicles have been used to upgrade a number of routes to 'Quality Partnership' standards. By the end of 1999, 30% of the fleet will comprise low-floor easy access vehicles - one of the largest networks of accessible buses in Europe. At the end of May, the Midlands' public transport system was expanded when the region's first light rail system, the Midland Metro, was opened for public service. This important £145m infrastructure project has been developed as a public/private partnership with Centro and is operated and maintained by TWM. The Metro service operates 23 stops between Wolverhampton and Birmingham City Centre in a total journey time of approximately 35 minutes. This is almost half the time of an equivalent car journey during the peak rush hour period. Fully integrated with the local bus and heavy rail services, the service is 'fed' with low-floor, easy access buses along the route to create a fully accessible network. Trains Trains division recorded a good first half. Turnover increased by 1% to £457.1m (1998: £452.9m) with operating profit before exceptional costs up 12% to £13.1m (1998: £11.7m). These results were achieved against an £11.5m decrease in the level of support payments from the Government. The Group's five train operating companies - Central Trains, Gatwick Express, Midland Mainline, ScotRail and Silverlink - again recorded increased passenger numbers. Passenger growth rates on 1998 levels were up by between 5% and 11% across the five companies, with total passenger numbers up by 7%. Since privatisation, passenger growth of 18% has been achieved across the Group's five train operating companies. Across the division, a wide range of new fare offers were promoted. These encouraged leisure travellers to use more off peak services and successfully attracted new passengers. The number of bus/rail ticketing schemes introduced across Britain also increased passenger accessibility to the rail network. We now have 23 bus/rail add-on ticketing schemes in operation across Britain, often in partnership with other operators. Maintaining and developing performance levels remains a priority and most of our passenger rail services continue to be ranked in the upper quartile of OPRAF's punctuality and reliability statistics. ScotRail remains the most punctual service provider in Britain. Midland Mainline's performance dipped in the last three months because of some teething problems with its new Turbostar trains. We are working closely with Adtranz, the trains builder, to ensure these problems are addressed as rapidly as possible. Central Trains maintained its performance levels, while congestion on Gatwick Express' route, one of the busiest on the network, affected its punctuality performance. 94% of delays on Gatwick Express' services were caused by Railtrack and third parties. In the last few months, Silverlink's performance has improved on all routes. Punctuality on Silverlink's County route is now running 10% higher than at the beginning of the year while reliability on the Metro route is currently at its best level since records began. This improved performance has been achieved through closer co-operation with Railtrack and the allocation of additional maintenance resources in key areas. Further improvement at Silverlink is expected when the company takes delivery of newer rolling stock from its sister company, Central Trains, in the autumn. We welcome the introduction into Parliament of the draft Railways Bill and the formation of the Strategic Rail Authority, both of which give further impetus to the Government's integrated transport policy. We hope that there will now be a far greater degree of certainty against which the industry can plan and commit to further investment and sustainable growth, particularly in the case of large, long term or more strategic railway development programmes. Our programme to introduce 122 new trains worth £320m by 2000 is well advanced. Midland Mainline took delivery of its new fleet of 17 Turbostar trains during the period. A new timetable was implemented which has doubled the frequency of service and reduced journey times on key routes. The expanded fleet has given the company additional flexibility to develop new stopping patterns and serve new destinations, some of which have not had direct services to London for many years. This flexibility has also maximised passenger choice and convenience and created new journey opportunities for Midland Mainline customers. A further 34 new trains, including Gatwick Express' fleet are scheduled for delivery during 1999. 71 new trains will also be delivered during 2000, including an additional 9 trains recently ordered for ScotRail. All of this new rolling stock, together with the levels of investment committed by Railtrack on many parts of its route network, will enable us to respond effectively to the high levels of growth which have been achieved by its train companies and increase the overall quality and reliability of its rail services. In addition to new trains, since acquisition, we have invested a further £16m in improving the quality of services and facilities for our passengers. Key investments by our train companies during the first six months of 1999 have included train refurbishment programmes, station upgrades - including improved accessibility and passenger information systems - and the installation of CCTV and revenue protection barriers at many facilities. The Government has clearly indicated that it is willing to enter into discussions concerning the re-negotiation or extension of passenger rail franchises with those train operators who have developed a reputation for concentrating on and improving their operational performance and service levels. We believe that we are well positioned to enter into such discussions and look forward to starting talks in the near future. In March 1999, Eurostar (UK) implemented a new management structure bringing together each of three partner national railways. The new framework will enable the operation to reduce costs, maximise cashflow and formulate more effective marketing strategies for achieving further revenue growth and responding to growing competition from low-cost airlines. Coaches Coaches division recorded a good performance. Turnover for continuing operations was up 1.3% to £75.1m (1998: continuing operations £74.1m) and operating profits increased to £1.6m (1998: continuing operations £0.8m). Passenger growth was achieved by the division for the sixth year running, with passenger numbers up 3.5% on the corresponding period last year. While passenger volumes on the core Express network remained under pressure as a result of increased competition in the leisure and discretionary travel market, the operation continued to take advantage of the flexibility of the coach network to mitigate this. More routes were converted to high frequency 'turn-up-and-ride' shuttle services. On the long distance network, frequencies on existing routes were increased, where appropriate, and new routes were developed. The services continued to be supported by high levels of promotional activity and more leisure break add-on products and attraction discounts were launched to stimulate discretionary travel and add value to coach travel. Sales through the division's own distribution channels continued to grow. Revenue growth from the telesales operation was up by 14% on 1998 levels and sales through the Internet also increased. Today, almost 20% of the division's sales are made through these channels. The division continued to exploit and develop its niche marketing approach. 'AirLinks, The Airport Coach Company' became operational from 1 January 1999, bringing together all of the Group's airport related coaching activities. The benefits of this new more effective structure for managing services in this key sector have proved considerable with strong growth in bulk ticket sales to airlines increasing again year on year. In June 1999, AirLinks acquired the business of Silverwing, one of the UK's leading operators of airside coach services which provides passenger and crew transportation for major airlines at Heathrow, Gatwick and Stansted. Silverwing's airside capabilities complement the Group's existing landside operations - Speedlink and Jetlink. The move will significantly strengthen AirLinks and position it as the UK's leading provider of the most complete range of airside and landside passenger and crew transportation services to airlines in this rapidly-growing market sector. Eurolines continued to perform well, particularly on the important London- Paris, London-Amsterdam routes, and passenger load factors have been improved on a number of other corridors. Airports The airports division recorded another successful six months. Turnover was up 11% to £16.0m (1998: £14.4m) with operating profits increased by 15.4% to £4.5m (1998: £3.9m). East Midlands Airport (EMA) handled a record number of passengers during the first half of 1999. Nearly one million passengers used the airport during the period, an increase of 8.4% over the same period last year, with growth shown in all passenger sectors. Cargo throughput declined by 6% on 1998 levels to just over 66,000 tonnes, reflecting the decision by UPS to transfer two daily services to the South East of England last year. Key projects which are aimed at maintaining EMA's position as one of the UK's leading air cargo gateways, are well advanced. The construction of DHL's new UK express cargo hub made strong progress during the first half of the year. The new building (consisting of a 300,000 sq ft warehouse building and 90,000 sq ft of offices) is on target to commence operations in April 2000. The new air traffic control tower became operational in April 1999 and work began on the extension of EMA's runway by 610 metres which is programmed for completion by the spring of 2000. Both Bournemouth and EMA continue to develop new retailing operations to minimise the impact of the loss of duty free revenues from intra EC flights. Whilst these new activities will not fully compensate for lost duty free sales, early indications are that passengers are continuing to make use of airport shopping opportunities. Marketing and sales initiatives will develop further as post duty free experience is gained. Discussions with the State of New York, concerning the terms of the 99 year lease which is expected to be assigned to us for the operation of Stewart Airport in New York State, are progressing well. We expect to make a further announcement about this in the near future. International expansion - USA and Australia In August 1999, we significantly expanded our student transportation operations with the acquisition of Durham Transportation Inc. ('Durham'), the fourth largest operator in this important sector of the USA's public transit market. Estimated to be worth $13bn a year and, with over 8bn annual student trips taken on about 435,000 vehicles each year, the school bus services market represents the largest system of public transportation in the USA. Durham, based in Austin, Texas, currently operates 116 contracts in five states with a fleet of 3,500 vehicles - primarily in California and Texas, but also in Idaho, Washington and Oregon. It employs approximately 4,200 staff, including almost 3,500 drivers and chaperones, and transports approximately 80 million pupils each year. Durham has developed by adding more private school bus contracts to its portfolio and actively encouraging more school districts to privatise their school transportation operations. It has achieved this by forging strong relationships with its school district partners and by developing a reputation for delivering some of the highest standards of service quality in the industry. The company enjoys one of the highest contract retention rates in the industry. Together with our existing operations - Crabtree-Harmon, Robinson and Bauman Bus - we are now the third largest student transportation bus services operation in the USA. 5,600 vehicles serve schools in 14 states and transport around 115 million pupils a year. We expect to benefit from managing this enlarged organisation more efficiently. Integration will provide cost savings from improved risk management processes, the consolidation of administrative operations and the introduction of a comprehensive fleet management programme. Purchasing and procurement strategies will also be developed to take advantage of the business' considerable purchasing power. The operation is well equipped to continue to encourage more school districts to convert their student bus services from the public to the private sector. There is significant scope for growth through conversions as only 30% of services are currently operated by the private sector. With around 5,000 companies operating half of the total number of yellow buses in service, the industry is fragmented and provides many further opportunities for consolidation. We are also now well placed to develop our presence in the USA's wider public transit market. In May 1999, we entered the Australian public transport market and started a series of acquisitions which have made us the largest private operator of passenger transport services on the continent. We acquired National Bus Company Pty Limited ('NBC'), the largest privately owned bus company in Australia. NBC and its subsidiary companies operate urban bus services in Melbourne, Brisbane and Sydney. This acquisition was followed, in June, with the purchase of Transport Management Group ('TMG') which operates services in the rapidly-growing suburbs of Perth. Together, these operations deliver services to 53 million passengers each year with a fleet of almost 1,000 vehicles and employ 1,600 staff. Our position in Australia was additionally strengthened in June, when we were awarded three franchises by the State of Victoria to operate passenger train and tram services in Melbourne and across the State. The franchises - V/Line Passenger, Bayside Trains and Swanston Trams - provide services to almost 140 million customers each year and employ approximately 3,350 staff. The new train and tram businesses were formally transferred to us at the end of August and we have already begun to action significant programmes for developing them. These include measures to increase passenger numbers by concentrating on improving service quality, reliability and frequency. We intend to invest in better security and passenger information systems, introduce new trains and refurbish existing rolling stock and launch new fare offers, backed with considerable marketing and promotion to encourage more people to travel on off-peak services. We also expect to benefit from purchasing efficiencies within the new Australian bus operations. We aim to further grow passenger numbers through the application of many of the best practice operational and marketing techniques, which are implemented in our core UK bus businesses. With a strong foundation in Australia, we are well positioned to take advantage of further opportunities for growth in the wider public transport market in this region. Strengthened management team To support this wider range of business activities we have strengthened the Board. Richard Brown, formerly Chief Executive of our trains division, has been appointed to the Board in the new position of Group Commercial Director. Ray O'Toole will also join the Board in the new position of Chief Operating Officer (UK), with responsibility for all aspects of operational performance in the UK. Ray is currently with First Group plc, where he is responsible for their operations in Yorkshire and the North West of England, and group engineering. Both appointees will report to Phil White, the Group's Chief Executive. A new Group Finance Director will also be appointed in due course following the recent resignation of Colin Child. Following our international expansion, we have extended our divisional management structure with the formation of two new divisions - USA and Australia. Larry Durham, Chief Executive of Durham Transportation has additionally been appointed head of the USA division. Outlook and current trading 'All divisions continue to experience good levels of passenger growth and are progressively developing the reliability, safety, value for money and overall quality of services to attract more passengers. The Group's businesses will continue to pursue all opportunities to develop their close working relationships with local and transport authority partners and other passenger transport providers. They will build on the successes achieved to date with existing partnership programmes and seek to identify new opportunities for implementing further schemes. This approach, supported by all contributors to the public transport industry, will be crucial to maintaining the momentum already begun by the Government's integrated transport policy. The strength and quality of all of the Group's operations, together with its significant presence in the key geographic markets of the USA and Australia, where good opportunities for further acquisitions continue to exist, gives the Board confidence that the outlook for further growth is promising.' 9 September 1999 Michael Davies, Chairman National Express Group PLC Group Profit and Loss Account Unaudited Audited 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Turnover - continuing operations 656.3 634.1 1,313.0 - acquisitions 13.8 - - - discontinued operations - 6.7 9.4 670.1 640.8 1,322.4 Other operating income 4.7 4.6 9.5 Operating costs (634.7) (611.0) (1,246.8) Goodwill amortisation (0.6) - (0.2) Operating profit - continuing operations 38.1 33.7 83.6 - acquisitions 1.4 - - - discontinued operations - 0.7 1.3 39.5 34.4 84.9 Profit on sale of investment 0.2 - - Share of operating loss of joint - - (0.2) venture Profit on sale of discontinued - - 5.4 operations Release of provision against a fixed - - 4.8 asset investment Profit on ordinary activities before 39.7 34.4 94.9 interest Interest receivable 4.1 2.6 6.8 Interest payable and similar charges (4.5) (1.9) (4.7) Profit on ordinary activities before 39.3 35.1 97.0 taxation Tax on profit on ordinary activities (10.0) (9.7) (22.8) Profit on ordinary activities after 29.3 25.4 74.2 taxation Equity minority interest (0.1) - - Profit attributable to shareholders 29.2 25.4 74.2 Dividends (6.6) (5.3) (18.1) Retained profit 22.6 20.1 56.1 Earnings per share - basic 25.7p 22.9p 66.5p Earnings per share - diluted - 22.6p 19.8p 57.8p actual - normalised 26.1p 21.5p 54.8p National Express Group PLC Group Balance Sheet Unaudited Audited 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Fixed assets Intangible assets 42.9 - 9.1 Tangible assets 366.4 258.0 293.8 Investments 5.3 0.3 5.5 Investments in associated undertakings 1.3 2.1 1.3 415.9 260.4 309.7 Current assets Stock 11.0 8.8 8.6 Debtors 132.6 96.0 137.6 Cash at bank and in hand 71.8 83.6 94.2 215.4 188.4 240.4 Creditors: amounts falling due within one year (266.7) (240.0) (274.0) Net current liabilities (51.3) (51.6) (33.6) Total assets less current liabilities 364.6 208.8 276.1 Creditors: amounts falling due after more than one year (105.0) (27.5) (50.4) Provisions for liabilities and charges (16.1) (13.7) (13.8) Equity minority interest (4.2) - - Total assets less liabilities 239.3 167.6 211.9 Capital and reserves Called up share capital 5.8 5.6 5.7 Share premium account 35.3 28.0 30.4 Capital reserve 17.0 11.3 17.0 Share capital to be issued 0.5 0.6 0.6 Revaluation reserve 18.2 18.5 18.2 Profit and loss account 162.5 103.6 140.0 Equity shareholders' funds 239.3 167.6 211.9 National Express Group PLC Group Statement of Cash Flows Unaudited Audited 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Net cash inflow from operating activities 45.0 67.5 98.2 Interest received 4.2 2.7 6.7 Interest paid (4.5) (1.9) (4.8) Returns on investments and servicing of finance (0.3) 0.8 1.9 Taxation paid (2.1) (0.6) (4.4) Payments to acquire intangible fixed assets - - (0.8) Payments to acquire tangible fixed assets (38.9) (18.6) (52.6) Receipts from sales of tangible fixed assets 1.0 0.5 4.3 Payments to acquire other investments (7.8) (5.0) (5.0) Receipts from investment in preference shares - - 0.1 Capital expenditure and financial investment (45.7) (23.1) (54.0) Payments to acquire subsidiary undertakings (34.4) - (8.9) Net (overdraft)/cash of acquired subsidiaries (0.3) - 0.9 Deferred consideration for businesses acquired (0.4) (0.4) (0.4) Receipt from sale of investment 0.2 - - Disposal of subsidiary undertakings - - 12.0 Net cash of subsidiaries sold - - (1.2) Acquisitions and disposals (34.9) (0.4) 2.4 Equity dividends paid (12.8) (10.5) (15.7) Cash withdrawn/(deposited) in short term deposits 14.4 (12.0) (11.2) Management of liquid resources 14.4 (12.0) (11.2) Issue of ordinary share capital 0.9 0.7 3.8 Movements on bank deposits relating to loan notes - - (0.6) Borrowings advanced/(repaid) 21.1 (10.0) 7.2 Financing 22.0 (9.3) 10.4 (Decrease)/increase in net cash (14.4) 12.4 27.6 National Express Group PLC Group Statement of Total Recognised Gains and Losses Unaudited Audited 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Profit attributable to members of the parent company 29.2 25.4 74.2 Exchange differences (0.1) - 0.1 Total recognised gains and losses 29.1 25.4 74.3 Reconciliation of Movement in Shareholders' Funds Unaudited Audited 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Total recognised gains and 29.1 25.4 74.3 losses Dividends (6.6) (5.3) (18.1) New share capital issued 5.0 1.3 3.9 Goodwill written back on disposals - - 6.2 Other goodwill movements - 0.1 (0.4) Shares to be issued (0.1) - (0.1) Net addition to shareholders' funds 27.4 21.5 65.8 Opening shareholders' funds 211.9 146.1 146.1 Closing shareholders' funds 239.3 167.6 211.9 National Express Group PLC Segmental Analysis 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Turnover by activity Coaches - continuing 75.1 74.1 163.8 - discontinued - 6.7 9.4 75.1 80.8 173.2 Buses - continuing 108.1 92.7 198.5 - acquisitions 13.8 - - 121.9 92.7 198.5 Airports 16.0 14.4 32.7 Trains 457.1 452.9 918.0 670.1 640.8 1,322.4 6 months to 6 months Year to 30 June to 31 Dec 1999 30 June 1998 £m 1998 £m £m Operating profit by activity after exceptional costs and amortisation of goodwill Coaches - continuing 1.6 0.8 10.3 - discontinued - 0.8 1.3 1.6 1.6 11.6 Buses - continuing 23.6 20.5 44.4 - acquisitions 1.4 - - 25.0 20.5 44.4 Airports 4.5 3.9 12.4 Trains 8.4 8.4 16.5 39.5 34.4 84.9 Operating profit is stated after charging exceptional costs of £1.2m in the Bus division (1998 interim £0.5m; full year £1.2m); £4.7m in the Trains division (1998 interim £3.3m; 1998 full year £9.4m) and £nil in the Airports division (1998 interim £nil; 1998 full year £0.1m). These are analysed as reorganisation costs of £2.6m (1998 interim £3.8m; 1998 full year £8.8m), costs incurred in connection with the deployment of new trains of £2.6m (1998 interim £nil; 1998 full year £0.9m) and revenue costs of ensuring Year 2000 compliance of £0.7m (1998 interim £nil; 1998 full year £1.0m). Amortisation of goodwill is charged in the Buses division as to acquisitions £0.4m and other continuing operations £0.2m (1998 interim £nil; 1998 full year £0.2m). National Express Group PLC Notes to the Interim Accounts 1 Basis of preparation These unaudited accounts, which do not constitute statutory accounts, have been prepared using accounting policies set out in the Group's 1998 statutory accounts. The 1998 accounts received an unqualified auditor's report and have been delivered to the Registrar of Companies. 2 Turnover The turnover of the Group comprises revenue from road passenger transport, airport operations, train passenger services and related activities. Within the Trains division, franchise agreement receipts from the Shadow Strategic Rail Authority and local Passenger Transport Executives within the West Midlands region and Scotland are treated as turnover. Franchise agreement payments are treated as an operational cost. During the first half year franchise agreement receipts amounted to £236.5m, (1998 interim £248.0m; 1998 full year £499.1m). 3 Taxation Taxation has been calculated using an estimated annual effective rate of 25.5% (1998 full year 26.3%) on profit on ordinary activities. 4 Earnings per share The calculation of basic earnings per share is based on earnings of £29.2m (1998 interim £25.4m; 1998 full year £74.2m) and on 113,566,739 ordinary shares, being the weighted average number of ordinary shares in issue during the period (1998 interim 110,791,457; 1998 full year 111,638,886). Diluted earnings per share has been calculated in accordance with Financial Reporting Standard 14. The calculation is based on earnings of £29.2m (1998 interim £25.4m; 1998 full year £74.2m). An adjustment has been made to the weighted average number of ordinary shares to reflect the number of dilutive potential ordinary shares. 6 months to 6 months Year 30 June to to 1999 30 June 31 Dec 1998 No of 1998 No of shares shares No of shares Basic weighted average number of ordinary shares 113,566,739 110,791,457 111,638,886 Adjustment for effect of dilutive potential ordinary shares 15,455,667 17,267,289 16,765,805 Diluted weighted average number of ordinary shares 129,022,406 128,058,746 128,404,691 National Express Group PLC Normalised diluted earnings per share Restated 6 months 6 months Year to to to 30 June 30 June 31 Dec 1999 1998 1998 pence pence pence Diluted earnings per share 22.6 19.8 57.8 Exceptional costs 3.1 2.1 5.7 Amortisation of goodwill 0.5 - - Profit on sale of investment (0.1) - - Release of a provision against a fixed asset investment - - (3.7) Earnings attributable to discontinued operations - (0.4) (0.7) Profit on sale of discontinued operations - - (4.3) 26.1 21.5 54.8 The normalised diluted earnings per share has 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, it reflects the financial performance of the business more appropriately. 5 Acquisitions During the six months ended 30 June 1999 the Group acquired the following companies and businesses: - - Date of acquisition Robinson Bus Service Inc. 2 February 1999 National Bus Company Pty Limited 7 May 1999 Transport Management Group 31 May 1999 Silverwing Transport Services 30 June 1999 Buses Coaches Division Division Businesses Businesses Total £m £m £m Consideration: Cash 32.3 1.2 33.5 Shares issued 4.1 - 4.1 Deferred consideration 3.3 - 3.3 Acquisition costs 0.9 - 0.9 40.6 1.2 41.8 Fair value of net assets acquired 8.3 0.6 8.9 Goodwill on acquisition 32.3 0.6 32.9 National Express Group PLC 6. Outstanding litigation On 19 June 1998 Atlantic Express Transportation Group Inc. issued a writ against the Group claiming breach of confidentiality. The claim is for an amount in excess of $75 million. Based on legal advice that the Group has a strong defence, no provision has been made in these accounts and the directors are vigorously defending the claim. 7. Year 2000 The Group's Year 2000 committee has continued its work in addressing issues arising from the millennium compliance process. By 30 June 1999 the majority of the Group's critical business systems had been made compliant, with those few remaining systems scheduled to be compliant well before the year end. The Group's programme has included contacting its key customers, suppliers and business partners to assess and seek assurance as to their own progress on Year 2000 compliance. As part of the programme, certain non-compliant systems have been replaced or enhanced as part of the routine IT investment programme. During the period £0.7m was charged to the profit and loss account. For further information contact: Phil White, Chief Executive Helen McCorry, Group Communications Manager National Express Group PLC on 9.9.99 Tel: 020 7831 3113 Thereafter Tel: 020 7529 2000 Julian Hanson-Smith Nicola Marsden Financial Dynamics Tel: 020 7831 3113

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