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Tuesday 17 September, 2002

National Express

Interim Results

National Express Group PLC
17 September 2002


17 September 2002

                           NATIONAL EXPRESS GROUP PLC

                                Interim Results

                      For the six months ended 30 June 2002



Financial Highlights



  • Turnover of £1,238.7 million (2001: £1,177.1 million)
  • Normalised profit before tax of £37.2 million (2001: £60.5 million)
  • Normalised diluted earnings per share of 20.8 pence (2001: 33.7 pence
    restated)
  • Interim dividend increased 11% to 8.1 pence (2001: 7.3 pence)
  • Operating cash flow of £105.7 million (2001: £82.4 million) before net
    payment to the Strategic Rail Authority ('SRA') of £35.1 million
  • EBITDA interest cover of 8.8 times (2001: 6.4 times)
  • Reduction of net debt at 30 June to £321.5 million (2001: £370.4 million)
  • Net gearing 80.2% (2001: 83.3% restated)



Operational Highlights



  • UK bus margins remain strong;
  • New terms with the SRA for our Central Trains and ScotRail franchises;
  • Patronage growth in UK Rail remains soft with London and the South East
    rail performance severely impacted;
  • £160 million rolling stock order placed for Midland Mainline ('MML') for
    delivery from May 2004 and opening of first rail Customer Service Academy in
    Derby in April;
  • ScotRail industrial action costing £7 million in the period now resolved;
  • Direct coach sales now account for 45% of sales;
  • Profits up 8% year-on-year from the North American student bus
    transportation division;
  • Entry into the Canadian student bus market with the acquisition of Stock
    Transportation;
  • Negotiations with the Victorian Government relating to our Australian tram
    and train businesses are progressing; and
  • Investment levels maintained to fund further growth of the business
    through new facilities and technology for the future.



Commenting on current trading and prospects, Chairman, Michael Davies said:



'We have experienced a challenging six months.  We are addressing the
profitability of our trains division and the on-going issues relating to the
rail infrastructure whilst continuing to focus on attracting patronage back onto
the network.  In addition we have continued our negotiations with the Victorian
Government to put our Australian rail franchises on a firmer longer term
financial footing.



Trading is good in our UK bus, coach and North American student bus operations.
We continue to address the issues with our trains division and I am encouraged
by our continuing strong cash flow.'



For further information, please contact:

William Rollason, Finance Director
Nicola Marsden, Director of Group Communications
National Express Group PLC                                         020 7529 2000


Steve Jacobs/ Ben Foster
Financial Dynamics                                                 020 7831 3113





  • There will be an analyst meeting at 0900 hours on 17 September at
    Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London, WC2.



  • A copy of the analyst presentation will be available on our website
    www.nationalexpressgroup.com at 0900 hours on 17 September 2002. For further
    information contact 020 7529 2035.



                           NATIONAL EXPRESS GROUP PLC

                                Interim Results

                  For the six months ended 30 June 2002



Chairman's Statement



I would like to convey my sincere condolences to the families and friends whose
loved ones were lost or injured as a result of the accident at Potters Bar on 10
May, which involved Wagn, one of our train operations.  In addition, I would
like to thank all our employees, the emergency services and our industry
partners who worked well together to return operations to normal.  This was the
most serious train accident that the Group has ever experienced and it was a
difficult time for all those involved.



During the first half of the year our UK bus, coach and North American student
bus operations performed well.  However, as anticipated earlier in the year the
performance of our UK trains and Australian divisions was disappointing.



As a result of 11 September we have seen an impact on our train operations as
well as a significant increase in insurance costs.  We continue to protect our
exposure to fuel price fluctuations through an active hedging programme.



In the UK bus industry we are pleased that, together with our industry partners
and other stakeholders, we are making progress in delivering further Quality
Partnerships.



Earlier this year we agreed new terms for our Central Trains and ScotRail
franchises with the SRA. This has enabled us to maintain existing levels of
service.  However, industrial action,  infrastructure upgrades and maintenance
work across the network continue to affect the financial and operational
performance of our franchises. We are currently discussing these issues with the
SRA. Overall results were lower than last year due to disappointing rail
patronage failing to offset the reduction in franchise grants and compensation
received last year from Railtrack which has particularly affected our operations
in London and the South East.



Our coach division progressed well in the first half and on-line sales continued
to grow.



We have made good progress in our North American student bus division and have
entered the Canadian school bus market through the acquisition of Stock
Transportation ('Stock').  Stock exemplifies the qualities that we seek in any
acquisition; critical mass, a well respected brand, stability of earnings as
well as quality management.  I welcome the Stock team to the Group.  Public
transit remains a challenge in light of increased insurance costs and industrial
action, however, we continue to maximise the operating synergies to offset these
rising costs.



In Australia we have been focusing on the negotiation of new arrangements for
our train and tram businesses and in February we announced an interim payment of
£16.5 million (A$45.9 million) from the Victorian Government for these
businesses.  In mid-August we commenced negotiations for a new contract for V/
Line Passenger, our country rail franchise in Victoria, and negotiations
continue with Victorian Government on our remaining two franchises.



We continue to benefit from the cash generative nature of the Group and look for
opportunities which will afford us growth in the medium to long term.  I believe
that a number of the developments highlighted will position us well for the
future.



Financial Report



Turnover for the six months to 30 June 2002 was £1,238.7 million (2001: £1,177.1
million).  Operating profit from continuing operations before exceptional costs
and the amortisation of goodwill was £49 million (2001: £76.8 million).  Profit
before tax, exceptional costs and goodwill was £37.2 million (2001:  £60.5
million).



Normalised diluted earnings per ordinary share were 20.8 pence (2001: 33.7 pence
restated).



At 30 June, EBITDA interest cover was 8.8 times (2001: 6.4 times).  Cash
generation from operations during the first six months remained strong at £105.7
million (2001:  £82.4 million) before a net payment of £35.1 million to the SRA
for the Central and ScotRail settlement agreed earlier this year.  Net debt at
30 June reduced to £321.5 million (2001: £370.4 million) and net assets were
£401 million (2001: £444.7 million restated).  Gearing at 30 June was 80.2%
compared with 83.3% at the same time last year.



Dividend


An interim dividend of 8.1 pence per ordinary share, an increase of 11% over the
2001 interim dividend of 7.3 pence, will be paid on 18 October 2002 to
shareholders on the register on    27 September 2002. This increase reflects our
confidence in the future long term prospects of the Group.



Current Trading and Outlook



We have experienced a challenging six months.  We are addressing the
profitability of our trains division and the on-going issues relating to the
rail infrastructure whilst continuing to focus on attracting patronage back onto
the network.  In addition we have continued our negotiations with the Victorian
Government to put our Australian rail franchises on a firmer longer term
financial footing.



Trading is good in our UK bus, coach and North American student bus operations.
We continue to address the issues with our trains division and I am encouraged
by our continuing strong cash flow.



Chief Executive's Review of Operations



Buses



Travel West Midlands is the UK's largest regional bus company; its fleet of
1,800 buses covers more than 450 routes.  It employs 5,400 people and
incorporates Travel Dundee and Midland Metro.



Turnover was £102 million (2001: £103.1 million) with operating profit of £23.8
million (2001: £26.5 million) following the sale of Bronckaers, our Belgian bus
business, in October last year and a £0.5 million increase in operating costs
due to the change from buying buses to acquiring them on operating leases.  This
is a trend that we are likely to continue in the foreseeable future.  In the
period concessionary travel, primarily by senior citizens was lower but fare
paying patronage increased. We continued to make steady progress with strong
margins despite the major construction work in Birmingham city centre.



We are focusing on the provision of a comprehensive network and quality
services.  We offer the lowest fares outside London supported by a wide range of
travelcards, state-of-the-art easy access vehicles and high frequency which
makes our services appealing to a broad range of customers.



We are pleased that all our existing Quality Partnerships are performing well
and, together with our industry partners and other local and Central Government
stakeholders, we are starting to deliver more schemes.  As we have demonstrated
in the West Midlands, Quality Partnerships provide a package of new low-floor
vehicles, bus priority measures and improved customer information systems which
improve our overall product and deliver double digit patronage growth. Also we
launched our second scheme in Dundee.



We have invested in the redevelopment of depots in Dundee and Walsall.  We
continue to work with local partners such as retailers to promote new shopping
destinations and the West Midlands Police to tackle crime, vandalism and
graffiti on buses.



Over half of our drivers have registered for an NVQ with nearly 40% having full
accreditation. This compares to the national figure of 31%.



Within the bus division insurance claims and therefore costs have increased over
the period, and we are taking action to ensure that this trend is reversed.  Our
five-year pay deal and fuel hedging have helped stabilise our other major costs.



The second half of this year has started well and we believe that increased
stability to services will be achieved during 2003 when construction work in the
city centre of Birmingham is completed and new retail stores open. In addition
we look forward to the roll-out of further Quality Partnerships.



Trains



We are the largest operator of train franchises in the UK.  We operate c2c,
Central Trains, Gatwick Express, Midland Mainline, ScotRail, Silverlink, Wagn,
Wales and Borders and Wessex.  The division employs 15,000 people.


                                                    Turnover                    Operating profit/(loss)
                                                                                  
                                                  2002          2001             2002            2001
                                                    £m            £m               £m              £m
London and the South East                        246.2         249.0              5.6            34.4
Long Distance/Intercity                           67.7          58.8              5.1             4.9
Regional Services                                395.4         345.2            (5.7)          (20.2)
Other                                             18.5          19.6            (0.9)             1.2
Total                                            727.8         672.6              4.1            20.3





Total turnover, including franchise receipts, rose 8.2% to £727.8 million (2001:
£672.6 million) and operating profit before goodwill and exceptional costs was
£4.1 million (2001: £20.3 million).  The profitability of our trains division
was affected by the lack of growth in rail patronage, a reduction in franchise
grants, industrial relations activity and lower compensation payments from
Railtrack.



Overall, within the period there was little improvement in leisure traffic and
there has been no real growth across the network for 18 months.  We actively
continue to stimulate the leisure market to restore growth.  We welcome the
SRA's Fare Regime review as profitability on certain routes can only be achieved
by a change to the industry pricing structure.



In early March we announced that we had agreed new terms with the SRA for our
Central and ScotRail franchises which increased the subsidy and consequently
these franchises were forecast to break-even until the end of their franchise
periods in early 2004.  However, we retained revenue and cost risk.
Subsequently, industrial action at ScotRail has cost £7 million to date in lost
revenue and increased costs.  In addition, current industrial action across the
rail network, which is impacting on Central's services, the continuing decline
in leisure traffic and on-going infrastructure maintenance issues, where
performance is still not consistently back to pre-Hatfield levels, have combined
to put these two franchises back into losses.  As a result we have recommenced
negotiations with the SRA about the future of these franchises.  Last month's
announcement by the SRA that the West Coast Main Line ('WCML') will be closed
for significant 17 week periods in both 2003 and early 2004 will impact further
on the financial performance of Central and the ScotRail sleepers, which we are
also discussing with the SRA.



We believe opportunities will be created through the SRA's refranchising
programme and we anticipate that our current portfolio of businesses will
change.  We will, however, only be bidding on the basis that any new
arrangements will provide sufficient returns to reward the risks involved.  In
the meantime we continue to discuss a two-year franchise extension for Central
with both the SRA and Centro.



At the beginning of July we submitted our initial bid for the Wales and Borders
franchise and are waiting for the start of the Best and Final Offer period,
which we expect in the Autumn.  We also responded to the SRA consultation on the
future of our Wessex franchise, the findings of which are due shortly.



We await the start of the formal bidding timetable for Greater Anglia and the
SRA's proposals for Silverlink in view of the WCML upgrade.



Through joint industry boards we continue to liaise with Railtrack and other
industry partners to limit the impact of maintenance work on the network.  We
look forward to working with the new team at Network Rail. We continue to work
with Railtrack on reducing the number of infrastructure related issues on the
network.



The first few months of the second half of the year has been impacted by
increased work by Railtrack and the industrial relations unrest on parts of the
network. These will affect the profitability of our trains division during the
second half.



London and the South East



Turnover for the six months was £246.2 million (2001: £249 million) with an
operating profit of £5.6 million (2001: £34.4 million).  Across the sector,
patronage was up but revenue was down due to the industry pricing structure.
Operating profit has dropped sharply year-on-year due to a combination of
increased train leasing charges at c2c, the significant reduction in WCML,
Hatfield compensation payments at Silverlink and the reduction in patronage at
Gatwick Express.



On c2c, performance has been encouraging as issues with the new rolling stock
have been resolved.  We have been focussing on growing off-peak patronage
although the year-on-year effect has been to increase rolling stock leasing
charges by £6.7 million.



Following 11 September Gatwick Express' profitability was severely impacted and
patronage was 12% down on last year. This was the result of a reduction in
scheduled traffic at Gatwick Airport primarily due to British Airways'
implementation of its 'Future Size and Shape programme'.  Consequently, we are
extending our association with the low-cost airline operators who have moved
into Gatwick Airport and completed an exclusive internet sales deal with
EasyJet.  Discussions with other low-cost operators are on-going.



Whilst patronage, particularly off-peak, has increased on Silverlink, the
reduction in compensation from Railtrack compared to last year has resulted in a
drop in profitability. On-going WCML work will continue to impact on Silverlink
services moving forward.



Wagn's performance was impacted severely following Hatfield and, most recently
the accident at Potters Bar. We are focused on improving the quality of Wagn's
services.  However, considerable infrastructure under-investment by Railtrack,
which we are seeking to address, and an historic backlog of driver recruitment
and training, which we will have rectified by October, continues to impact on
services.  The Stansted Express is being impacted by the West Anglia Route
Modernisation engineering work.



We note the SRA's recent announcement in relation to the extension of the
Thameslink franchise to 2009 and will be discussing the ramifications of this in
relation to our Great Northern franchise with the SRA.



Long Distance/Intercity



Turnover for the six months was £67.7 million (2001: £58.8 million) with an
operating profit of £5.1 million (2001: £4.9 million).  Within this sector, some
growth was achieved.



In February we announced the signing of a £160 million order for the manufacture
and supply of 23 new trains for our MML franchise and the new fleet will come
into service gradually from May 2004.



At the beginning of April we extended our investment in our trains division when
Richard Bowker, Chairman of the SRA, opened our new £2 million Customer Service
Academy in Derby, the first such training facility in the UK.  This facility
will become a centre of excellence to train staff across our rail division.



Following the SRA and Railtrack's decision not to proceed with the proposed £60
million infrastructure upgrade that was part of the MML franchise extension to
2008, we agreed in July that the £60 million would be invested in other customer
service improvements.  These include the refurbishment of thirteen high speed
trains within the existing fleet as well as improved customer information
systems and first class lounges at Derby and Leicester stations. We have also
recently launched a real-time train information service via the mobile phone
network which enables customers to request specific information on train arrival
and departure times.



Regional Services



Turnover for the six months was £395.4 million (2001:  £345.2 million) with an
operating loss of £5.7 million (2001:  £20.2 million).



Regional services provide a vital role in the lives of many communities but
their lack of profitability requires increasing on-going subsidy support in the
long term if the existing levels of services are to be maintained.  Patronage
continues to be affected as a result of reduced leisure traffic and on-going
industrial action across parts of the network.



Earlier this year, to address the financial issues at Central and ScotRail
following Hatfield, we were successful in reaching an agreement with the SRA.
However, an industrial relations dispute at ScotRail with ASLEF resulted in the
introduction of an emergency timetable and subsequent strikes which cost £7
million in the period.  We resolved this dispute at the end of March with a
package funded by productivity improvements.



At Central on-going maintenance of the rail infrastructure continues to disrupt
services with more demands from Railtrack for engineering work which is taking
longer to complete. In addition the WCML and Virgin Cross Country upgrades are
impacting on punctuality of services.  The recently announced two 17 week
closures in the summer of 2003 and early 2004 will inevitably have an adverse
effect on patronage across the franchise.  This is further compounded by a
reduction in patronage due to industrial action across parts of the network
which connect into Central's services.  These events have prompted us to review
the future viability of the franchise and we are currently in discussions with
the SRA to resolve this.



We have continued to attract patronage on our Wales and Borders franchise with a
16% increase in patronage on Valley Line services in Cardiff.  We managed the
transfer of six South Wales mainline stations from First Great Western into the
franchise and introduced a range of measures, including a new timetable, to
improve punctuality and reliability on the Cambrian Line.  We have secured Rail
Passenger Partnership Funding for schemes such as CCTV and station improvements,
being awarded around 20% of the total available allocation, more than any other
train operating company.  Moving forward, we have been asked by the SRA to
transfer the First North Western services from North Wales into the franchise
involving the transfer of 350 staff and 46 stations.



We have also managed the creation of the Wessex franchise out of the former
Wales and West franchise.  Patronage improvements have been achieved in the
Bristol and Exeter areas and good relationships have been formed with a wide
range of stakeholders.



We continue to focus on improving safety across the division.  Good progress is
being made with the implementation of Professor Uff's and Lord Cullen's
recommendations, following their inquiries into the accidents at Southall and
Ladbroke Grove.



The Train Protection and Warning System ('TPWS') fitment programme continues on
target and all the rolling stock used by c2c, Gatwick Express and MML is now
equipped.  Over 70% of our fleet has been completed to date and we anticipate
that the whole of our fleet will be fitted by the end of 2003.



Other



Turnover for the six months was £18.5 million (2001:  £19.6 million) with an
operating loss of £0.9 million (2001:  £1.2 million profit).



Qjump.co.uk, our rail on-line ticketing service, continues to make good progress
following partnerships with Multimap, BT Openworld and Expedia.



We were pleased to receive ISO14001 accreditation at two of Maintrain's depots,
which will help make it more competitive in bidding for new maintenance work.



Coaches



The coach division provides Britain's only scheduled express coach network and
serves more than 1,200 destinations. AirLinks, the airport coach service,
operates premier, high-frequency scheduled coach services between all the UK's
major airports, as well as airside coaching services. Eurolines offers
value-for-money European travel by coach.  The division has 2,000 employees.



Turnover was £84.2 million (2001:  £85.4 million) and operating profit £2
million (2001:  £1.9 million).  The division produced a good performance in the
first six months, despite a reduction in volumes following last year's boost due
to rail disruption.



Direct sales now account for 45% of sales reducing the need for third party
ticket agents.  Sales via the web doubled year-on-year as new features such as
e-ticketing were added to the service.  A quarter of all our internet sales use
e-ticketing and we are actively growing this distribution channel, which has
already been successfully exploited by the budget airlines.  As planned, a
gradual streamlining of our three call centres into the new facility in
Birmingham was completed with the move of Eurolines UK reservations from Luton.



During the year, the quality and service provision on key corridor routes was
reviewed and new services to Cambridge and Stansted airport are being
introduced.



In March the new 28,000 sq ft Manchester coach station was opened by the Rt Hon
John Spellar MP, Minister for Transport.  Since then there has been an 11%
increase in patronage through the facility assisted by the Commonwealth Games
traffic.



We continue to focus on the needs of our customers, particularly the less able.
In March we introduced four specialist wheelchair accessible coaches on the Bath
to London route, in partnership with the DTLR, with a further three scheduled
for delivery this year.  In addition, we have launched our own Code of Practice
for travellers with special needs.



At AirLinks, scheduled airport services and landside and airside services have
improved following the downturn post 11 September and we have reduced the cost
base of this business to maintain profitability.



The 'Well Driven' scheme continues to provide valuable feedback on driving
standards and accident rates within the coach division have been reduced over
the past six months.



Eurolines continues to perform well despite the ever competitive low-cost
airlines and increased costs relating to the policing of illegal immigrants. To
bring more focus to our UK operations, we sold Eurolines Holland to our partners
Eurolines France at the end of July.



The peak summer season has gone well and the increased use of our direct sales
channels is both encouraging new users and increasing margins.





North America



The North American division consists of student transportation, transit
operations and Stewart Airport in New York State.  Following the acquisition of
Stock Transportation, the student transportation division employs 14,000 people,
provides services in more than 300 school districts and local transit
authorities in thirty states and two Canadian provinces. It operates a fleet of
13,800 vehicles.


                                                            Turnover               Operating profit
                                                         2002         2001          2002         2001

                                                           £m           £m            £m           £m
Student                                                 114.9        109.6          19.2         17.8
Public Transit (including Stewart                        96.5         92.9           0.3          4.2

Airport)
Total                                                   211.4        202.5          19.5         22.0



Turnover for the first six months was £211.4 million (2001:  £202.5 million) and
operating profit was £19.5 million (2001:  £22 million).  These results do not
include a contribution from the Stock acquisition which was completed in early
July for £74.3 million (C$170 million).



We were pleased with the performance of the student transportation division and
particularly the acquisition of Stock Transportation, Canada's largest privately
owned school bus business. Stock operates more than 2,200 buses with over 80% of
its operations in Nova Scotia and Ontario, Canada.  It employs more than 2,600
people and operates 33 contracts.  With over a third of its contracts being '
evergreen' rolling contracts, stability of earnings will be maintained.  Working
alongside the Stock management, we believe there is further scope for growth in
the Canadian marketplace.



Whilst price competition continued to be a feature of the bid season, we
concentrated on  improving the margins on our existing contracts and winning new
contracts at higher margins.  Using these parameters we retained contracts which
expanded the Durham School Services fleet by 250 vehicles during the year to
accommodate contract wins.  Significant new contracts were won in Seattle, WA,
Baltimore, MD and Los Angeles, CA.



As anticipated we experienced increased insurance costs arising from the
aftermath of 11 September.  All insurance costs including fleet, workers'
compensation and employee health have increased over the year.  We continue to
seek ways to address these increased costs, however, we anticipate that these
levels will continue to be the norm longer term. We have already employed
aggressive safety education and training processes throughout the operating
divisions to mitigate total insurance costs by reducing accidents and
controlling claims settlement costs.



The profitability of our public transit division was severely impacted by these
increased insurance costs as well as industrial action in Las Vegas.  We
continue to review the costs within this division and have launched a
fundamental review of the overheads including a full review of the synergies
between the two divisions.



We have appointed a Senior Vice-President with specific responsibility for
safety within the North American division. He is supported by a Director of
Safety Education and a number of Regional Safety Directors who provide a local
focus for safety matters in their area of operations.  We are pleased to report
that the frequency of accidents is down within public transit whilst the
severity of accident claims is significantly down within the student bus
operation.



After a particularly difficult six months following September 11, Stewart
Airport was pleased to announce a new contract with Southeast Airlines for
services to Florida.  These services commenced on 12 September this year.



Our public transit division is trading well at the operating level but increased
insurance costs and industrial action are affecting the bottom line.  Our
student bus division continues to perform well and we look forward to building
on the opportunities in Canada following the acquisition of Stock. Overall our
North American division is in line with expectations.





Australia



In Australia, we are the largest private operator of train, tram and bus
services with operations in Brisbane, Melbourne, Sydney and Perth, under the
rail brands M>Train, M>Tram, V/Line and the bus brands Blue Ribbon, National Bus
Company, Southern Coast Transit and Westbus. 4,500 people are employed by the
division.


                                                  Turnover               Operating profit/(loss)
                                                  2002          2001             2002            2001
                                                    £m            £m               £m              £m
Trains and Trams                                  84.9          78.5            (2.3)             3.2
Buses                                             28.4          28.2              1.9             2.9
Total                                            113.3         106.7            (0.4)             6.1



Turnover for our Australian operations totalled £113.3 million (2001: £106.7
million) with an operating loss of £0.4 million (2001: £6.1 million profit).
The decline in profitability resulted from a decreasing grant relating to our
train and tram operations and falling bus patronage in Sydney.



In February, we announced an interim agreement with the Victorian Government in
Australia to settle outstanding contractual claims and disputes and to secure
the short term viability of our franchises. We received a total payment of £16.5
million (A$45.9 million) to settle outstanding contractual claims and disputes.



We continue to discuss with the Victorian Government the long term issues
relating to our train and tram franchises in Victoria.  Working with all the
operators, the Government has recognised that the franchise model needs to be
changed to reflect the difficulties that all franchise operators have faced. In
mid-August the Government announced its intention to work with us to establish a
new set of contractual arrangements to 2006 for V/Line Passenger, our country
rail franchise. Negotiations in relation to our Metropolitan franchises continue
with the Victorian Government with a view to concluding a satisfactory outcome
by the end of the year.



We were pleased that the most recent punctuality and reliability figures for the
last quarter issued by the Victorian Government confirmed that significant
progress has been made across all services, with M>Train recording its highest
ever on-time performance at 97.4%.  M>Tram has also improved reliability
compared to the March 2001 quarter with M>Train and V/Line passenger trains
improving their on-time services compared with the same period last year.
Despite all the challenges in the three years since privatisation, significant
improvements in punctuality and reliability have been achieved and customer
satisfaction has risen.  We will continue to work closely with the Government
and our fellow franchisees to ensure real improvements are delivered to
passengers.



We are focusing on the reduction of fare evasion on our Metropolitan franchises
through the recruitment of an additional 130 authorised revenue protection
officers which takes the total number to 240.  We have also undertaken a series
of high profile blitz campaigns to raise the profile of fare evasion.



We have started to take delivery of 62 new trains and 59 new trams.  Our train
and tram  refurbishment programme involving internal refit and external branding
is underway with the completion of 85 units to date. To complement the
introduction of the new trams, in May we also launched M>Tram's first superstop,
providing a safer embarkation point, timetables, real time information displays
and public telephones.



We have conducted several reviews of the safety management systems and the
division is implementing a series of action plans designed to improve further
the systems and safety performances.



Progress within the bus division was variable.  We are pleased with the
financial and operational performance of our bus businesses in Melbourne and
Perth as well as the performance of Glenorie since its acquisition last
December.  However, in Sydney there has been a decline in bus patronage across
the network.  As a result, we are discussing this with the New South Wales
Government with the aim of improving profitability. It is likely that the
decline in patronage in Sydney will continue into the second half of the year.



We are expecting to conclude our negotiations with the Victorian Government on
the future of our train and tram business by the end of the year.  Trading in
our Australian bus division remains difficult and we are taking steps to improve
profitability.





Phil White
Chief Executive
17 September 2002











                           NATIONAL EXPRESS GROUP PLC

                                Interim Results

                      For the six months ended 30 June 2002



Finance Director's Review of Operations



Half year at a glance



Normalised operating profit from continuing operations was £49 million (2001:
£76.8 million) on turnover of £1,238.7 million (2001: £1,170.3 million).
Normalised diluted earnings per share were 20.8 pence (2001: 33.7 pence after
being restated for FRS19).  Group operating cash flow remained strong at £105.7
million (2001: £82.4 million) after a net payment of
£35.1 million to the SRA. We have declared an increased interim dividend of 8.1
pence per share (2001: 7.3 pence).



In UK Trains the operating profit of £4.1 million (2001: £20.3 million) was
significantly lower than last year owing to disappointing rail patronage failing
to offset the reduction in franchise grants.  In the prior period, compensation
received from Railtrack mitigated the revenue shortfall incurred.  In UK Bus,
increasing insurance costs and the change from buying buses to acquiring them on
operating leases has reduced operating profit to £23.8 million (2001: £26.5
million).  The North American division also suffered from rising insurance
costs, particularly in the Public Transit business and as a result operating
profit was £19.5 million (2001: £22 million).  The main impact on the Australian
business has been the decreasing grant in our Melbourne tram and train
franchises resulting in an operating loss of £0.4 million against 2001 operating
profits of £6.1 million.



Share of operating losses of associated undertakings



The Group share of operating losses from associated undertakings increased to
£2.6 million (2001: £1.1 million) as revenue growth at Eurostar UK and Midland
Metro fell below expectations.



Interest



Net interest payable was £9.2 million (2001: £16.3 million) due to the reduction
in net debt following the sale of the airport business for gross proceeds of
£241 million in March 2001.  EBITDA cover before exceptional items improved to
8.8 times (2001: 6.4 times).



Goodwill and exceptional items



Goodwill amortisation increased to £22 million (2001: £20.1 million restated).
Exceptional costs of £0.7 million comprise franchise bid costs; exceptional
charges in 2001 of £2.6 million comprised franchise bid costs (£0.2 million) and
reorganisation charges (£2.4 million).



Tax



The current tax charge on normalised profit before tax, goodwill and exceptional
items of £37.2 million (2001: £60.5 million) was £7.8 million (2001: £13
million), which represents an effective tax rate of 20.9% (2001: 21.5%).  The
adoption of FRS19 'Deferred Tax', increases the overall tax charge by £0.8
million and the effective tax rate to 23.0% (2001: 21.5% restated).



The adoption of FRS19 'Deferred Tax' results in an additional 2002 half year tax
charge of £0.8 million. In addition, goodwill arising in previous years has been
recalculated taking account of deferred tax on acquisition, resulting in an
increase in the net book value of goodwill on 1 January 2002 of £4.7 million,
and amortisation of £0.1 million in 2002.  The net effect reduces profit after
tax by £0.9 million to £8.1 million, basic earnings per share by 0.1 pence to
6.2 pence and decreases net assets by £12.7 million (2001: £11.5 million
restated).



Cash flow and balance sheet



The Group generated £105.7 million of operating cash flow (2001: £82.4 million),
before making a net payment of £35.1 million to the SRA. Overall net debt was
reduced to £321.5 million (2001: £370.4 million).  Net assets were £401 million
(2001: £444.7 million restated).  Gearing at 30 June 2002 was 80.2% (2001: 83.3%
restated).



Gross capital expenditure of £59.2 million (2001: £63.1 million) comprises
investment of £14.7 million (2001: £11.4 million) on UK Buses, £8.7 million
(2001: £10.4 million) within the UK Trains division on station enhancements,
£1.7 million (2001: £6.7 million) on UK coaches, £14.2 million (£18.2 million)
on North American buses and £19.9 million (£15.6 million) in Australia.


Post balance sheet events



On 4 July 2002, the Group acquired the Canadian school bus operator, Stock
Transportation, for a total consideration of £74.3 million, payable in cash on
completion funded from existing bank facilities.  Unaudited normalised pro-forma
results for Stock for the twelve months to 31 May 2002 show EBITDA of £11
million on turnover of £38 million.  Goodwill on acquisition is expected to be
approximately £50 million and will be amortised over 20 years.



Accounting policies



FRS19 'Deferred Tax' has been adopted as at 1 January 2002 and prior year
figures restated to reflect the new policy.  Details of the restatement are
given in Note 1.



We will continue to apply the transitional arrangements of FRS17 'Retirement
Benefits' and plan to adopt the standard in the year ending 31 December 2004.



William Rollason
Finance Director
17 September 2002




NATIONAL EXPRESS GROUP PLC

GROUP PROFIT AND LOSS ACCOUNT

For the six months ended 30 June 2002


                           Unaudited     Unaudited   Unaudited     Unaudited    Unaudited   Unaudited     Audited
                        Total before    Goodwill &       Total  Total before   Goodwill &       Total   Year to 31
                          goodwill &   exceptional                goodwill &                              December
                         exceptional         items               exceptional  exceptional
                               items                                   items        items                    Total
                                2002          2002        2002         2001*        2001*       2001*        2001*      
                                  £m            £m          £m            £m           £m          £m           £m
Turnover

- continuing                 1,238.7             -     1,238.7       1,170.3            -     1,170.3      2,457.4
operations
- discontinued                     -             -           -           6.8            -         6.8          6.8
operations
Turnover                     1,238.7             -     1,238.7       1,177.1            -     1,177.1      2,464.2
Other operating income           5.7             -         5.7           6.8            -         6.8         12.4

Other operating costs
before goodwill and
exceptional items          (1,195.4)             -   (1,195.4)     (1,106.0)            -   (1,106.0)    (2,318.8)
Franchise amendment
 costs                             -             -           -             -            -           -       (67.0)
Other exceptional                  -         (0.7)       (0.7)             -        (2.6)       (2.6)       (16.5)
items

Goodwill amortisation              -        (22.0)      (22.0)             -       (20.1)      (20.1)       (42.2)

Total operating costs      (1,195.4)        (22.7)   (1,218.1)     (1,106.0)       (22.7)   (1,128.7)    (2,444.5)



Operating profit                49.0        (22.7)        26.3          77.9       (22.7)        55.2         32.1

- continuing                    49.0        (22.7)        26.3          76.8       (22.7)        54.1         31.0
operations
- discontinued                     -             -           -           1.1            -         1.1          1.1
operations


Operating profit                49.0        (22.7)        26.3          77.9       (22.7)        55.2         32.1

Share of operating
losses of associated
undertakings                   (2.6)             -       (2.6)         (1.1)            -       (1.1)        (1.9)
Profit on sale of
businesses                         -             -           -             -        115.5       115.5        112.0
Profit on ordinary
activities before
interest                        46.4        (22.7)        23.7          76.8         92.8       169.6        142.2
Net interest payable           (9.2)             -       (9.2)        (16.3)            -      (16.3)       (26.7)
Profit on ordinary              37.2        (22.7)        14.5          60.5         92.8       153.3        115.5
activities before
taxation
Tax on profit on               (7.8)           2.2       (5.6)        (13.0)          2.6      (10.4)        (1.2)
ordinary activities
Deferred tax charge            (0.8)             -       (0.8)             -            -           -            -
Profit after tax                28.6        (20.5)         8.1          47.5         95.4       142.9        114.3

Minority interest                  -             -           -             -            -           -          0.1
Profit for the                  28.6        (20.5)         8.1          47.5         95.4       142.9        114.4
financial period

Dividends                     (10.7)             -      (10.7)         (9.4)            -       (9.4)       (28.6)
Retained (loss)/profit          17.9        (20.5)       (2.6)          38.1         95.4       133.5         85.8



Basic earnings per                                        
share                                                     6.2p                                 111.1p        88.4p
Diluted earnings per                                      
share                                                     5.9p                                 103.2p        82.7p
Normalised diluted
earnings per share             20.8p                                   33.7p                                 72.8p

*Restated for change in accounting policy for deferred tax (see note 1)









NATIONAL EXPRESS GROUP PLC

Group Balance Sheet

At 30 June 2002


                                                                Unaudited        Unaudited          Audited
                                                                  30 June          30 June      31 December
                                                                     2002            2001*            2001*
                                                                       £m               £m               £m

Fixed assets

Intangible assets                                                   472.6            530.9            508.3
Tangible assets                                                     529.5            513.0            512.8
Investments and interests in associated undertakings                 23.0             27.3             26.4
                                                                  1,025.1          1,071.2          1,047.5


Current assets

Stock                                                                22.4             21.1             21.4
Debtors                                                             291.7            290.8            376.1
Cash at bank and in hand                                             97.3             68.0             92.3

                                                                    411.4            379.9            489.8


Creditors: amounts falling due within one year                    (587.8)          (569.4)          (610.6)
Net current liabilities                                           (176.4)          (189.5)          (120.8)

Total assets less current liabilities                               848.7            881.7            926.7


Creditors: amounts falling due after more than one year           (384.7)          (397.8)          (405.1)
Provisions for liabilities and charges                             (63.0)           (39.2)          (119.5)
                                                                    401.0            444.7            402.1


Capital and reserves

Called up share capital                                               6.7              6.6              6.6

Share premium account                                                44.6             43.1             43.7
Share capital to be issued                                            0.2              0.4              0.3

Merger reserve                                                       15.4             37.3             15.4

Revaluation reserve                                                   0.8             17.5              0.8
Profit and loss account                                             327.7            335.5            330.0


Equity shareholders' funds                                          395.4            440.4            396.8

Equity minority interest                                              5.6              4.3              5.3
                                                                    401.0            444.7            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 six months ended 30 June 2002


                                                                  Unaudited        Unaudited          Audited
                                                              six months to    six months to          year to
                                                                    30 June          30 June 31 December 2001
                                                                       2002             2001
                                                                         £m               £m               £m



Net cash inflow from operating activities                              70.6             82.4            185.5

Net interest payable                                                  (9.6)           (21.5)           (28.2)
Interest element of finance lease rentals                             (1.7)            (0.5)            (1.0)

Return on investments and servicing of finance                       (11.3)           (22.0)           (29.2)
UK corporation tax paid                                               (0.1)            (3.7)            (5.4)
Overseas tax paid                                                     (0.1)            (0.5)            (0.6)

Taxation                                                              (0.2)            (4.2)            (6.0)
Payments to acquire tangible assets                                  (59.2)           (63.1)          (102.6)
Receipts from sale of tangible assets                                   1.2              3.7             10.6
Receipts from sale of /(payments to acquire) shares to
satisfy
employee share scheme                                                   0.7                -            (0.7)
Payments to acquire other investments                                 (0.4)                -            (0.1)
Capital expenditure and financial investment                         (57.7)           (59.4)           (92.8)
Receipts from the sale of businesses                                      -            232.4            237.6
Payments to acquire businesses                                            -            (0.5)            (8.6)
Cash disposed in businesses sold                                          -            (1.8)            (1.7)
Cash acquired in businesses purchased                                     -                -              0.4
Deferred consideration for businesses acquired                        (0.4)            (1.0)            (1.5)

Acquisitions and disposals                                            (0.4)            229.1            226.2
Equity dividends paid                                                (19.2)           (18.2)           (28.1)

Cash (outflow)/inflow before financing activities                    (18.2)            207.7            255.6

Management of liquid resources

Cash withdrawn from short term deposits                                 3.6              6.6              4.5

Financing

Issue of share capital                                                  1.0              2.7              3.2
Cash inflow/(outflow) from lease financing                             22.7            (1.9)             21.2

Loans repaid                                                          (0.6)          (194.5)          (241.2)

Net cash inflow/(outflow) from financing                               23.1          (193.7)          (216.8)

Increase in cash                                                        8.5             20.6             43.3








NATIONAL EXPRESS GROUP PLC

GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the six months ended 30 June 2002


                                                                  Unaudited         Unaudited           Audited
                                                              six months to     six months to        year to 31
                                                               30 June 2002     30 June 2001*    December 2001*
                                                                         £m                £m                £m


Profit for the financial period                                         8.1             142.9             114.4
Exchange differences on foreign currency net investments                0.2             (1.0)             (0.6)
Total recognised gains and losses relating to the period                8.3             141.9             113.8
Prior year adjustment for deferred tax (see note 1)                  (11.7)
Total recognised gains and losses                                     (3.4)

*Restated for change in accounting policy for deferred tax (see note 1)



RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS

For the six months ended 30 June 2002


                                                                 Unaudited         Unaudited            Audited
                                                             six months to     six months to         year to 31
                                                              30 June 2002     30 June 2001*     December 2001*
                                                                        £m                £m                 £m


Profit for the financial period                                        8.1             142.9              114.4
Dividends                                                           (10.7)             (9.4)             (28.6)
Exchange differences on foreign currency net investments               0.2             (1.0)              (0.6)
New share capital issued for cash                                      1.0               2.7                3.2
Goodwill realised                                                        -            (35.8)             (32.6)
Net addition to shareholders' funds                                  (1.4)              99.4               55.8

Equity shareholders' funds at 1 January#                             396.8             341.0              341.0
Equity shareholders' funds                                           395.4             440.4              396.8


*Restated for change in accounting policy for deferred tax (see note 1)

#Shareholders' funds at 1 January 2002 were originally £408.6m before deducting
prior year adjustment of £11.7m



SEGMENTAL ANALYSIS

For the six months ended 30 June 2002

                                      Unaudited six months to 30 June                  Audited year to 31
                                                                                       December
                                         Turnover   Operating   Turnover     Operating    Turnover   Operating
                                                       profit                   profit                  profit
                                             2002        2002       2001         2001*        2001       2001*
Analysis by class of business                  £m          £m         £m            £m          £m          £m


Buses                                       102.0        23.8      103.1          26.5       208.3        52.8

Trains                                      727.8         4.1      672.6          20.3     1,458.2        40.6

Coaches                                      84.2         2.0       85.4           1.9       181.3        10.6


UK operations                               914.0        29.9      861.1          48.7     1,847.8       104.0

North America                               211.4        19.5      202.5          22.0       401.7        39.3

Australia                                   113.3       (0.4)      106.7           6.1       207.9        13.4


Continuing operations                     1,238.7        49.0    1,170.3          76.8     2,457.4       156.7

Discontinued operations - Airports              -           -        6.8           1.1         6.8         1.1
                                          1,238.7        49.0    1,177.1          77.9     2,464.2       157.8

Exceptional items                                       (0.7)                    (2.6)                  (83.5)

Goodwill amortisation                                  (22.0)                   (20.1)                  (42.2)

Share of operating losses of                            (2.6)                    (1.1)                   (1.9)
associated
undertakings
Profit on sale of businesses                                -                    115.5                   112.0

Profit on ordinary activities before                     23.7                    169.6                   142.2
interest


 *Restated for change in accounting policy for deferred tax (see note 1)









NATIONAL EXPRESS GROUP PLC

NOTES

For the six months ended 30 June 2002



1.             Basis of preparation



These accounts 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 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 the 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 FRS19, leading to
additional amortisation of £0.1 million (2001 full year: £0.3 million).  Due to
the additional deferred tax provision on the Airport balance sheet at disposal,
the profit on disposal in the six months to June 2001 is increased by £20.3
million to £115.5 million (2001 full year: £112.0 million).  The net effect is
to increase profit after tax by £20.2 million (2001 full year: £20.0 million)
from £122.7 million to £142.9 million.  Basic earnings per share has been
increased by 15.7 pence (2001 full year: 15.5 pence) to 111.1 pence (2001 full
year: 88.4 pence).



The Group disposed of its airports division in March 2001 and the results for
this division have been disclosed as discontinued operations in the profit and
loss account.



The interim results are unaudited but have been reviewed by the auditors.  The
financial information presented herein does not amount to full statutory
accounts within the meaning of Section 240 of the Companies Act 1985 (as
amended).  The figures for the year to 31 December 2001 have been extracted from
the Annual Report 2001 which has been filed with the Registrar of Companies.
The audit report on the Annual Report 2001 was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.



2.             Exchange rates



The most significant exchange rates to the pound for the Group are as follows:


                                              Six months to       Six months to          Year to
                                              30 June 2002        30 June 2001      31 December 2001
                                             Closing    Average  Closing  Average    Closing    Average
                                                rate       rate     rate     rate       rate       rate
US dollar                                       1.52       1.45     1.41     1.46       1.46       1.44

Australian dollar                               2.72       2.72     2.77     2.74       2.84       2.80



3.             Turnover



The turnover of the Group comprises revenue from road passenger transport,
airport operations, train passenger services and related activities in the UK,
North America and Australia.  Within the trains division, franchise agreement
payments from the SRA and local Passenger Transport Executives within the West
Midlands region and Scotland are treated as turnover.  During the first half
year, franchise agreement payments amounted to £311.1 million (2001 interim:
£259.6 million; 2001 full year: £554.8 million) in the UK and

£28.4 million (2001 interim: £29.4 million; 2001 full year:  £56.0 million) from
the Victoria Department of Public Transport in Australia.



4.             Exceptional items



Exceptional items can be analysed as follows:


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June  31 December 2001
                                                                  2002              2001                £m
                                                                    £m                £m
Buses                                                              0.1                 -               0.2

Trains                                                             0.6               2.2              75.8

Coaches                                                              -                 -               3.1

North America                                                        -                 -               3.6
Australia                                                            -               0.4               0.8
                                                                     
                                                                   0.7               2.6              83.5



All exceptional operating costs related to continuing businesses.



The exceptional items for UK Trains in the year to 31 December 2001 of £75.8
million include £67.0 million of franchise amendment costs which represent the
cost to the Group of its renegotiations with the SRA of the Central and ScotRail
rail franchises.



5.             Profit on sale of businesses



The profit on sale of businesses during the first half of 2001 of £115.5 million
(2001 full year: £112.0 million), net of expenses, arose on the sale of the
airports division for gross proceeds of £241.0 million.  It includes the benefit
of £35.8 million negative goodwill taken to reserves on the acquisition of the
airports (the release of which has no effect on net assets or shareholders'
funds).



6.             Goodwill amortisation


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June 31 December 2001*
                                                                  2002             2001*                £m
                                                                    £m                £m
Trains                                                            11.5              10.7              21.6

Coaches                                                            0.3               0.2               0.4

North America                                                      9.3               8.5              18.8

Australia                                                          0.9               0.7               1.4
                                                                  22.0              20.1              42.2

* Restated for change in accounting policy for deferred tax (see note 1)



All goodwill amortisation relates to continuing businesses.



7.             Taxation



Tax on profit on ordinary activities for the first half year has been calculated
on the basis of the estimated annual effective rate for the year ending 31
December 2002.  The tax charge of £5.6 million (2001 interim: £10.4 million;
2001 full year £1.2 million) represents an effective tax rate on profit on
ordinary activities, excluding goodwill and exceptional items, of 23.0% (2001
interim: 21.5%; 2001 full year 21.5%).  It includes overseas taxation of £0.1
million (2001 interim: £1.4 million; 2001 full year £5.1 million).



8.             Earnings per share


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June 31 December 2001*
                                                                  2002             2001*
Basic earnings per share                                          6.2p            111.1p             88.4p

Diluted earnings per share                                        5.9p            103.2p             82.7p

Normalised diluted earnings per share                            20.8p             33.7p             72.8p

* Restated for change in accounting policy for deferred tax (see note 1)



Basic earnings per share is calculated by dividing the profit for the financial
period of £8.1 million (2001 interim: £142.9 million restated; 2001 full year
£114.4 million 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 period.



The reconciliation of weighted average number of ordinary shares is detailed as
follows:


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June  31 December 2001
                                                                  2002              2001            Number
                                                                Number            Number
Basic weighted average shares                              130,979,091       128,604,613       129,457,561

Adjustment for dilutive potential ordinary shares            6,657,664         9,840,940         8,852,402
Diluted weighted average shares                            137,636,755       138,445,553       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 six months ended 30 June 2001
and the year ended 31 December 2001 exclude the earnings from discontinued
operations.  They have not been adjusted to reflect the interest earned on the
cash proceeds from the disposal of the discontinued operations.





Normalised profits after tax and minority interests are:


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June 31 December 2001*
                                                                  2002             2001*                £m
                                                                    £m                £m
Profit for the financial period                                    8.1             142.9             114.4

Earnings from discontinued operations                                -             (0.8)             (0.8)

Exceptional operating costs                                        0.7               2.6              83.5

Goodwill amortisation                                             22.0              20.1              42.2

Profit on sale of businesses                                         -           (115.5)           (112.0)

Tax relief on goodwill and exceptional items                     (2.2)             (2.6)            (26.6)
Normalised profits for the financial period                       28.6              46.7             100.7

* Restated for change in accounting policy for deferred tax (see note 1)



9.             Cash flow statement



(a)           Reconciliation of operating profit to net cash inflow from
operating activities


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June 31 December 2001*
                                                                  2002             2001*                £m
                                                                    £m                £m
Operating profit                                                  26.3              55.2              32.1

Depreciation of tangible assets                                   34.9              29.9              60.6

Goodwill amortisation                                             22.0              20.1              42.2

Increase in stocks                                               (1.3)             (0.5)             (1.4)

Decrease/(increase) in debtors                                    72.9              36.4            (54.9)

(Decrease)/increase in creditors                                (23.5)            (62.8)              31.4

(Decrease)/increase in provisions                               (60.7)               4.1              80.4

Other movements                                                      -                 -             (4.9)
Net cash inflow from operating activities                         70.6              82.4             185.5

* Restated for change in accounting policy for deferred tax (see note 1)



(b)           Reconciliation of net cash flow to movement in net debt


                                                         Six months to     Six months to           Year to
                                                               30 June           30 June  31 December 2001
                                                                  2002              2001                £m
                                                                    £m                £m
Increase in cash in the period                                     8.5              20.6              43.3

Cash (inflow)/outflow from movement in debt and
   lease financing                                              (22.1)             196.4             220.0

Cash inflow from movement in liquid resources                    (3.6)             (6.6)             (4.5)
Change in net debt resulting from cash flows                    (17.2)             210.4             258.8
Loans and finance leases of subsidiaries acquired                    -                 -             (1.4)

Other non cash movements in net debt                              10.7            (24.2)            (15.8)
Change in net debt resulting from non cash flows                  10.7            (24.2)            (17.2)
Movement in net debt in the period                               (6.5)             186.2             241.6

Opening net debt                                               (315.0)           (556.6)           (556.6)
Net debt                                                       (321.5)           (370.4)           (315.0)



Other non cash movements in net debt primarily represent exchange movements.



The Interim Report 2002 will be sent to all shareholders.  Copies can also be
obtained from the Company Secretary at 75 Davies Street, London W1K 5HT.



                                    - ENDS -


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