Interim Results 2009 1 Interim Results For the six months ended 31 October 2009 9 December 2009

Interim Results 20091

Interim ResultsInterim ResultsFor the six months ended 31 October 2009For the six months ended 31 October 2009

9 December 20099 December 2009


Definitions Like-for-like amounts are derived, on a constant currency basis, by comparing

the relevant year-to-date amount with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods.

Operating profit for a particular business unit or division within the Group refers to profit before net finance income/charges, taxation, intangible asset expenses, exceptional items and restructuring costs.

Operating margin for a particular business unit or division within the Group means operating profit as a percentage of revenue.

Exceptional items means items which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their nature, size or incidence in order to allow a proper understanding of the underlying financial performance of the Group.

Net debt is the net of cash and borrowings as reported on the consolidated balance sheet, adjusted to exclude any accrued interest and deferred gains on derivatives.


Robert SpeirsRobert Speirs

ChairmanChairman


Highlights

Revenue growth in core UK divisions

Interim dividend of 2.0p, up 11.1%

Adjusted earnings per ordinary share down 25.6%

Reduced rail profit reflecting economic conditions

Above-inflation increases in fuel and pensions costs and significant premia payments to Government

Business is well placed to benefit from a recovery in economic conditions


Martin GriffithsMartin Griffiths

Finance DirectorFinance Director


Financial summary

* Excluding exceptional items and intangible asset expenses

Revenue - continuing operations

Operating profit* - continuing operations

Adjusted earnings per ordinary share*

Basic earnings per ordinary share

Net debt

Dividend per ordinary share

31 Oct 09 31 Oct 08

£1,081.4m

£93.5m

9.0p

8.5p

£(343.1)m

2.0p

£1,045.0m

£119.8m

12.1p

9.7p

£(370.2)m

1.8p

Change

3.5%

(22.0)%

(25.6)%

(12.4)%

(7.3)%

11.1%


Summary income statement

UK Bus operating profit

North America operating profit excl megabus

megabus North America operating loss

UK Rail operating profit

Share of joint ventures’ profit after tax

Restructuring and group overheads

Finance charges (net)

Tax

Profit excluding intangibles and exceptionals

Intangibles and exceptionals, net of tax

Reported profit from continuing operations

31 Oct 09£m

31 Oct 08£m

58.9

9.0

(0.7)

14.9

17.6

(6.2)

(18.0)

(11.1)

64.4

(7.7)

56.7

60.9

20.2

(0.4)

31.7

15.6

(8.2)

(14.6)

(18.9)

86.3

(16.9)

69.4

Change£m

(2.0)

(11.2)

(0.3)

(16.8)

2.0

2.0

(3.4)

7.8

(21.9)

9.2

(12.7)


UK Bus

Continued underlying revenue growth

£8.6m increase in fuel costs and £4.0m increase in pension costs

Expected reduction in fuel costs in 2010/11

Flexible business model

OFT market review

Revenue (£m)

Like-for-like revenue (£m)

Operating profit (£m)

Operating margin

Estimated like-for-like passenger journeys (m)

Like-for-like vehicle miles operated (m)

31 Oct 09 31 Oct 08

433.0

417.3

58.9

13.6%

329.4

163.2

410.4

399.9

60.9

14.8%

331.7

163.5

Change

5.5%

4.4%

(3.3)%

(1.2)%

(0.7)%

(0.2)%


North America

Excluding megabus, revenue down US$25.4m but costs down US$14.8m notwithstanding higher fuel cost per unit

Like-for-like revenue down 6.5% Decisive action to reduce operating mileage and costs Twin America joint venture performing to plan

US$12.5m dividends received Expansion of megabus.com

Wholly-owned, excluding megabus.com

Share of Twin America

Total excl. megabus.com

megabus.com

Total

RevenueUS$m

Operating ProfitUS$m

201.3

41.0

242.3

20.1

262.4

14.6

12.8

27.4

(1.1)

26.3

Operating Margin

%

7.3%

31.2%

11.3%

(5.5)%

10.0%

RevenueUS$m

Operating ProfitUS$m

267.7*

Nil

267.7

15.4

283.1

38.0

Nil

38.0

(0.8)

37.2

Operating Margin

%

14.2%

n/a

14.2%

(5.2)%

13.1%

6 months to 31 October 2009 6 months to 31 October 2008

* Includes US$47.5m for business transferred to Twin America from 31 March 2009


UK Rail (wholly-owned)

Continued revenue growth Increased payment to/decreased subsidy from Department for Transport Significant cost savings Additional revenue from special projects at Manchester Metrolink SWT disputes hearing in February 2010 – decision by April 2010

Revenue (£m)

Revenue excluding light rail (£m)

Operating profit (£m)

Operating margin

South Western Trains estimated passenger miles (millions)

East Midlands Trains estimated passenger miles (millions)

31 Oct 09 31 Oct 08

512.9

475.0

14.9

2.9%

1,635.6

577.0

486.4

466.1

31.7

6.5%

1,675.6

615.7

Change

5.4%

1.9%

(53.0)%

(3.6)%

(2.4)%

(6.3)%


Virgin Rail Group

Number of services increased by approximately one-third from December 2008

Improvements in reliability of railway infrastructure

Step-up in infrastructure costs

Profit supported by revenue support

Revenue - 49% share (£m)

Operating profit - 49% share (£m)

Operating margin

Dividends received (£m)

Estimated Passenger miles (millions) - West Coast

31 Oct 09 31 Oct 08

170.4

12.8

7.5%

8.6

1,669.7

159.3

19.4

12.2%

19.4

1,378.0

Change

7.0%

(34.0)%

(4.7)%

(55.7)%

21.2%


Miscellaneous income statement items

Reduction in group overheads Exceptional items include

a gain of £3.9m in relation to previous acquisitions & disposals a gain of £4.3m on sale of properties a loss of £4.1m on exit from certain operations expenses of £2.7m in relation to proposal to acquire certain businesses of, or merge with,

National Express Group plc

Citylink joint venture (£m)

Splash Tours joint venture (£m)

Intangible asset expenses (£m)

Group overheads (£m)

Restructuring costs (£m)

Post-tax exceptional items (£m)

31 Oct 09 31 Oct 08

0.9

(0.5)

(5.7)

(5.8)

(0.4)

1.0

0.7

(0.2)

(6.5)

(7.2)

(1.0)

(11.5)

Change

28.6%

150.0%

(12.3)%

(19.4)%

(60.0)%

(108.7)%


Finance charges and credit ratios

Net Group finance charges (£m)

Net finance charges, including net finance income from joint ventures (£m)

EBITDA from continuing operations and joint ventures* (£m)

- last six months

- last twelve months

Period-end net debt (£m)

Net Debt/EBITDA (12 months)*

EBITDA*/Net finance charges (including net finance income from joint ventures)

31 Oct 09 31 Oct 08

(18.0)

(17.9)

147.9

300.9

343.1

1.1x

8.3x

(14.6)

(13.0)

156.2

302.7

370.2

1.2x

12.0x

Change

23.3%

37.7%

(5.3)%

(0.6)%

(7.3)%

(0.1)x

(3.7)x

* excluding exceptional items


Liquidity & interest rate risk Excellent liquidity

c.£525.3m of undrawn committed bank facilities at 31 October 2009

US$ bond redemption financed from existing facilities in November 2009

Key refinancing required by 2012

Other undrawn available credit lines – e.g. asset finance

Operating well within bank covenants

Encouraged by liquidity that was available to finance National Express opportunity

Cash generative

Planning for re-financing

Significantly higher margins for new UK asset finance

Likely step up in bank margins for refinancing

Debt capital markets offer longer maturities and reduced reliance on banks


Taxation

Excluding intangible asset expenses and exceptional items- Before joint ventures- Joint venturesIntangible asset expenses

Exceptional items

Reclassify joint venture taxation for reporting purposesReported in income statement

Pre-taxProfit£m

Tax£m

57.921.5(5.7)73.7

1.475.1(3.9)71.2

(11.1)(3.9)0.9

(14.1)(0.4)

(14.5)3.9

(10.6)

Rate%

19.2%18.1%15.8%19.1%

19.3%

14.9%

31 Oct 2009

Cash tax received was £10.6m


EBITDA from Group companies before exceptionals Loss on disposal of plant and equipmentEquity-settled share based paymentDividends from joint venturesMovement in retirement benefit obligationsWorking capital movementsNet interest paidTax receivedNet cash from operating activitiesNet capital expenditure including new hire purchase and finance leasesAcquisitions of businesses, intangibles and investmentsDisposals of businesses and investmentsMovement in loans to joint venturesToken sales and redemptionsCash generationForeign exchange/otherEquity dividendsIncrease in net debtOpening net debtClosing net debt

31 Oct 09£m

126.50.82.2

16.3(7.9)

(53.0)(17.5)10.678.0

(71.6)(1.0)1.61.6

(1.1)7.5

19.6(30.1)

(3.0)(340.1)(343.1)

Movement in net debt


33.21.9

Nil

35.1

53.712.121.6

87.4

(3.5)(0.6)

(11.7)

(15.8)

50.211.5

9.9

71.6

20.510.221.6

52.3

Capital expenditure

UK BusNorth AmericaUK Rail

New hire purchase

and finance leases

£m

Impact ofcapex onnet debt

£m

Disposalproceeds**

£mNet£m

Cash spent on capex*

£m

* Excludes capitalised intangible assets of £0.5m (2008: £3.1m)

** Excludes proceeds from selling businesses


Defined benefit pensions At 31 October 2009, the Group’s accounting post-tax net deficit

was £177.2m

Rail schemes represent around 40% of pension assets and liabilities and is low risk

The Group’s main scheme is closed to new members

The accounting value of pension assets, liabilities and costs will continue to vary with market fluctuations and assumptions

Cash contributions expected to be more stable


Fuel Hedging

2008/9 - average effective price (per litre)

2009/10 - % of forecast consumption hedged

- average hedge price (per litre)





Market price (per litre)

UK BusNorth

America

32.0p

96.0%

46.0p

95.0%

35.9p

10.0%

37.2p

32.1p

63.1 cents

89.0%

82.4 cents

84.0%

50.5 cents

11.0%

54.2 cents

52.2 cents

UK Rail

33.4p

77.0%

31.3p

76.0%

31.3p

-

-

31.5p

Market prices are as at 20 November 2009

Prices excludes delivery margins, duty, taxes and Bus Services Operators’ Grant


(202.3)

79.2

(123.1)

(37.3)

(5.0)

(21.1)

(186.5)

(183.6)

78.3

(105.3)

(27.9)

(5.1)

(21.4)

(159.7)

(179.4)

78.3

(101.1)

(30.0)

(5.1)

(21.5)

(157.7)

Fuel costsLatest forecasts

UK Bus, excluding BSOG*

UK Bus, BSOG*

UK Bus, including BSOG*

North America

South Western Trains

East Midlands Trains

Total

2009/10Forecast

£m

2010/11Forecast

£m

2011/12Forecast

£m

Fuel costs

(176.4)

75.9

(100.5)

(32.8)

(5.4)

(20.0)

(158.7)

2008/09Actual

£m

Market prices are as at 20 November 2009, when Brent Crude was US$76 per barrel

Forecast costs for the unhedged element of fuel are based on 20 November 2009 spot prices

Above costs include delivery margins, duty and taxes (duty forecast at current levels) and exclude 3rd party fuel costs

* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services


Brian SouterBrian Souter

Chief ExecutiveChief Executive


Overview

Good performance despite downturn and step-up in costs

UK businesses - revenue growth ahead of inflation

Bus businesses - resilient and flexible business model

Management action to protect UK Rail business for the long-term

Excellent operational performance


UK Bus Resilient, flexible business model Managed £12.6m in extra fuel and pensions costs Strong industry-leading operating margin Stable passenger volumes Stable mileage Sustained investment


UK Rail

Focus on managing rail contracts Revenue growth despite downturn

Early signs of improvement Cost reduction programme

£70m recurring annual savings identified Maintained excellent operational performance

Positive engagement with Department for Transport South Western Trains contractual issues

Specific issues Clear timeframe for resolution by April 2010


North America

High unemployment levels impacting revenue

Decisive management action to reduce operating mileage and costs

Growth and further potential of megabus.com

Online bus sales – up 24% on 2008

Twin America joint venture positive development for New York sightseeing business


Current trading and outlook

Current trading in line with management expectations Balanced portfolio and resilient bus business New, lean low cost rail model Positive outlook for 2010/11

Reduced fuel costs Entitlement to revenue support at South Western

Trains Pricing

Good shape for economic recovery





Appendices


UK Bus Revenue

Like-for-like

Acquisitions:Highland excluding Inverness (acquired 16 May 2008)Preston Bus (acquired 23 January 2009)Eastbourne/Cavendish (acquired 18 December 2008)

Stagecoach in Inverness*

Start-ups:Rail replacement (started May 2008)

Total reported

Change%

4.4%

5.5%

31 Oct 2009£m

31 Oct 2008£m

417.3

3.93.33.2

4.4

0.9

433.0

399.9

4.4--

3.7

2.4

410.4

* Existing Inverness operations integrated with and now not distinguishable from Highland so Inverness excluded from like-for-like comparison


Scheduled service/line run/commuterCharterSchool bus & contractSightseeing & tourLike-for-like revenue excl megabusClosed/transferred operations and foreign exchange movementsTotal North America excl megabusmegabusTotal North America

31 Oct 09US$m

31 Oct 08US$m

95.250.739.814.4

200.11.2

201.320.1

221.4

103.556.843.916.0

220.247.5

267.715.4

283.1

% Growth

(8.0)%(10.7)%(9.3)%

(10.0)%(9.1)%

(97.5)%(24.8)%30.5%

(21.8)%

North America revenue breakdown


Divisional income statementsSix months ended 31 October 2009

UK Rail£m

512.9

(50.4)

34.6

(130.1)

(15.4)

(2.6)

(14.7)

(94.4)

(2.3)

(110.2)

(19.4)

(11.2)

(31.8)

(50.1)

14.9

UK Bus£m

North America£m

433.0

Nil

6.4

(219.1)

(62.3)

(15.7)

(26.1)

Nil

(5.2)

Nil

Nil

Nil

(17.1)

(35.0)

58.9

136.6

Nil

1.6

(58.6)

(20.2)

(9.3)

(9.8)

Nil

(3.0)

Nil

Nil

Nil

(9.6)

(19.4)

8.3

VRG (100%)£m

347.8

(36.3)

60.0

(67.1)

(9.0)

(1.4)

(0.7)

(105.4)

Nil

(77.1)

(20.2)

(22.4)

Nil

(42.0)

26.2

Revenue

Rail franchise premia

Other operating income (including revenue support)

Staff costs

Fuel costs (i.e. diesel)

Insurance and claims costs

Depreciation and impairment

Rolling stock costs – lease & maintenance

Other operating leases

Network Rail

Electricity for trains

Commissions payable

Material & consumables

Other costs

Operating profit


Rail subsidy/(premia) profiles

2009

2010

2011

2012

2013

2014

2015

2016

2017

South Western

£m

East Midlands

£m

21.1

(42.0)

(96.3)

(158.3)

(228.1)

(292.9)

(357.7)

(432.1)

(429.4)

121.7

96.9

61.0

17.8

(13.5)

(32.4)

(87.9)

-

-

West Coast£m

288.2

277.2

226.3

190.0

-

-

-

-

-

Year to 31 March:

The above amounts are subject to adjustment for: (1) various inflation measures (2) risks borne by the Department for Transport (3) called options and (4) changes in Regulated Network Rail charges. The amounts shown above are based on estimated inflation and options called to date.

The amounts shown above do not reflect changes arising from changes to Network Rail charges for Control Period 4, which began on 1 April 2009, because these charges are not yet finalised.


Exchange rates

US$C$

Closing rate Average rate

1.61581.9645

1.88111.9767

October 2008

Closing rate Average rate

1.64841.7756

1.62071.7885

October 2009




Documents

Interim Results 2009 1 Interim Results For the six months ended 31 October 2009 9 December 2009