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Thursday 11 September, 2003

National Express

Interim Results

National Express Group PLC
11 September 2003



11 September 2003



                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                     For the six months ended 30 June 2003


Financial Highlights

  • Turnover from continuing operations up 9% to £1,258.8 million
  • Operating profit from continuing operations before goodwill and
    exceptional items up 13% to £57.8 million
  • Normalised profit before tax up 11% to £41.4 million
  • Normalised diluted earnings per share up 5% to 23.7 pence
  • Interim dividend increased by 5% to 8.5 pence
  • On-going operating cash flow remained strong at £70.7 million
  • Continuing EBITDA interest cover before exceptional items of 7.5 times


Operational Highlights

  • Rail patronage up 5%
  • Bid for the Greater Anglia franchise submitted to Strategic Rail Authority
    ('SRA')
  • Negotiations commencing on two-year extensions for Great Northern part of
    the Wagn franchise, Silverlink and Wessex franchises
  • Coach patronage up 1%
  • Investment of £24 million in 170 new buses for Travel West Midlands
  • Continued commitment to partnerships with local authorities in the West
    Midlands
  • Increased underlying profits and margin improvement in US Student
    transportation


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


'We are pleased with our performance for the period and have made an encouraging
start to the second half.'


'The opening of the Bullring shopping development in Birmingham is welcomed and
we have in place marketing strategies to promote our bus network to maximise
passenger growth.  In our coach division the summer season has started well.  We
are excited by the opportunities that exist within the rail refranchising
process. We have submitted our bid for the Greater Anglia franchise and look
forward to submitting our ScotRail bid at the end of October.  Overseas, we
believe that there are further growth opportunities in North America.'


                                  - E N D S -



For further information, please contact:


Phil White, Chief Executive
Adam Walker, 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 and investor meeting at 1030 hours on 11
    September 2003 at the City Presentation Centre, 4 Chiswell Street, London,
    EC1Y 4UP.


  • A webcast of the analyst presentation will be available on our website
    www.nationalexpressgroup.com at 1030 hours on 11 September 2003. For further
    details, contact Abigail Forbes at Financial Dynamics on 020 7269 7211.






                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                      For the six months ended 30 June 2003


Chairman's Statement


I am pleased to report the Group's results for the six months ended 30 June
2003.  Our operations made good progress during this period with continued
strong cash flow generated by all our businesses.


In Birmingham, the new Bullring shopping development has opened this month. Over
the past two years Travel West Midlands has faced challenging trading conditions
as a result of this redevelopment.  We look forward to stability returning to
our bus services.


We remain focused on improving the quality of our rail division. The SRA's rail
refranchising process provides some exciting opportunities.  On 1 September we
submitted our bid for the Greater Anglia franchise and at the end of October we
will be submitting our ScotRail bid. We await the final sign-off of our two-year
extension for our Central Trains franchise which is expected at the end of this
month.  We welcome the SRA's announcement relating to the two-year extension
discussions for the Great Northern part of the Wagn franchise, Silverlink and
Wessex franchises.


Following the announcement at the beginning of August regarding the Wales and
Borders franchise, we will work to ensure a smooth handover at the end of this
year. I would like to take this opportunity to thank all the Wales and Borders
staff for their efforts during our tenure.


Within the coach division, a number of important new initiatives have taken
place including the introduction of yield managed fares and the roll-out of our
new £1 low fares.  We have also continued to focus on growing direct sales
channels, particularly the internet.


Our overseas operations have performed in line with our expectations.   The
Student transportation market remains competitive but we are pleased with our
progress during the first half of the year.


Negotiations continue around the restructuring of the Eurostar operations.
During the first half of the year, Eurostar's trading performance was
significantly below its management's expectations.  We are working towards an
end to our involvement in Eurostar by the end of the year.


Safety remains a key feature of our business and is a paramount consideration
for all management across our worldwide operations.


Financial Report


Turnover from continuing operations for the six months to 30 June 2003 was up 9%
to £1,258.8 million (2002: £1,153.8 million).  Operating profit from continuing
operations before exceptional costs and the amortisation of goodwill was up 13%
to £57.8 million (2002: £51.3 million).  Normalised profit before tax increased
by 11% to £41.4 million (2002: £37.2 million).


Normalised diluted earnings per ordinary share were up 5% to 23.7 pence (2002:
22.5 pence restated following the disposal of our Australian train and trams
business).


At 30 June, continuing EBITDA interest cover before exceptional items was 7.5
times (2002: 8.8 times).  On-going operating cash flow from continuing
operations during the first six months remained strong at £70.7 million (2002:
£67.4 million).  Net debt at 30 June increased to £379.4 million after paying
£48 million to indemnify the performance bonds in respect of our withdrawal from
Australian train and trams.


Dividend

An interim dividend of 8.5 pence per ordinary share, an increase of 5% over the
2002 interim dividend of 8.1 pence, will be paid on 17 October 2003 to
shareholders on the register on 26 September 2003.


Current Trading and Outlook


We are pleased with our performance for the period and have made an encouraging
start to the second half.


The opening of the Bullring shopping development in Birmingham is welcomed and
we have in place marketing strategies to promote our bus network to maximise
passenger growth.  In our coach division the summer season has started well.  We
are excited by the opportunities that exist within the rail refranchising
process. We have submitted our bid for the Greater Anglia franchise and look
forward to submitting our ScotRail bid at the end of October.  Overseas, we
believe that there are further growth opportunities in North America.



Chief Executive's Review of Operations


Buses


Turnover was £103.8 million (2002: £102.0 million) with operating profit of
£22.0 million (2002: £23.8 million). The reduction is primarily due to the
continued financing of new buses through operating leases.


Birmingham city centre reopened last week following two years of redevelopment
work. Working in partnership with the Bullring marketing team and Birmingham
City Council, we are launching new 'Return to Birmingham' and 'Making Travel
Easier' campaigns to promote the network, ticket prices, timetables and journey
planning assistance to customers.


A total of 170 new buses, representing a total investment of £24 million, will
be delivered by the end of the year.  Thirty new buses were introduced into
Travel Coventry during the period.  In addition smartcard technology has been
fitted to the Travel Coventry fleet and trials of the new technology are
underway.  A total of 35,000 smartcards have been issued to date making travel
easier and quicker for customers.


We are working closely with Centro to invest further funds in transport
infrastructure to improve journey times. We are strongly committed to the
extension of quality partnerships in line with local transport plans.


Trains

                                                        Turnover            Operating profit/(loss)
                                                  2003          2002             2003            2002
                                                    £m            £m               £m              £m
London and the South East                        274.0         246.2              7.8             5.6
Long Distance/Intercity                           81.1          67.7              5.7             5.1
Regional Services                                447.5         395.4            (5.6)           (5.7)
Other                                             21.0          18.5            (0.6)           (0.9)
Total                                            823.6         727.8              7.3             4.1


The UK Trains division had an encouraging six months with operating profit of
£7.3 million (2002: £4.1 million).  We are pleased to report that overall
patronage across our Trains division for the period was up 5% on last year.


Performance was mixed during the period. Whilst Silverlink's performance
benefited from an upgrade of its fleet, the West Coast Main Line infrastructure
upgrade has impacted service levels with buses replacing services on the London
to Birmingham route on a regular basis.


Midland Mainline's punctuality and reliability continued to be impacted by
Network Rail infrastructure issues.  We are undertaking a series of reviews with
Network Rail to address this. Delays to services are also taking place on a
daily basis as a result of the Channel Tunnel Rail Link work at St Pancras,
which is impacting on the quality of service that we can provide to our
passengers out of this terminal.


At Central Trains improvements in operational performance were achieved despite
significant congestion on the network particularly around Birmingham New Street
station.  At ScotRail significant improvements in performance were achieved over
the period.


London and the South East


Turnover for the six months was £274.0 million (2002: £246.2 million) with an
operating profit of £7.8 million (2002: £5.6 million).  We were particularly
pleased with the consistent performance on our London commuter businesses which
saw patronage growth of 6.4% compared with other London operators where growth
averaged 3.5%.


Specifically in the London market, leisure patronage was boosted through joint
marketing schemes linked into major London tourist venues.


Despite the challenges of the West Anglia Route Modernisation which has required
bus replacement services, patronage on the Stansted Express grew by 14.2%.  New
marketing programmes have been implemented at Gatwick Express in conjunction
with low-cost airline operators.


Long Distance/Intercity


Turnover for the six months was £81.1 million (2002: £67.7 million) with an
operating profit of £5.7 million (2002: £5.1 million).  We are pleased with this
performance  but there is still work to be done to improve punctuality and
reliability.


In mid May we introduced a new Manchester to London service at the request of
the SRA, offering alternative travel options during the West Coast Main Line
upgrade.  This service was further extended at the end of June. Passenger
numbers on this service continue to increase.


Regional Services


Turnover for the six months was £447.5 million (2002: £395.4 million) with an
operating loss of £5.6 million (2002:  loss of £5.7 million).


From the end of September, Central Trains will take over the operation of
services from the Midlands to Cardiff and Liverpool, adding new intercity
services to the business.  We are preparing our bid for the ScotRail franchise
and are currently undertaking consultation with key stakeholders.


Coaches


Turnover was £85.3 million (2002:  £84.2 million) and operating profit was £2.3
million (2002: £2.0 million).  Patronage levels increased by 1%. This was a very
creditable  performance given an overall reduction in in-bound travel into the
UK during the period.


Improved cost control, focus on direct sales channels and the continued
extension of our best value fares from £1 on seven popular routes has
contributed to an increase in patronage.  During this period we have continued
to roll-out the new branding.


In association with the Department for Transport, a concessionary travel scheme
for the over 60s and the disabled was launched at the beginning of May.  Since
the launch over 650,000 passengers have benefited from the scheme.


In mid-June we announced, in partnership with Birmingham City Council, the
construction of a new twenty-one bay coach station on the Ludgate site in
Central Birmingham.  We will invest £8 million in the new facility which will be
open in summer 2005. A planning application for the project will be submitted in
late September.


North America

                                                         Turnover               Operating profit
                                                  2003          2002         2003               2002

                                                    $m            $m           $m                 $m
Student                                          208.4         166.7         37.6               27.9
Public Transit                                   140.7         139.9          1.9                0.5
Total                                            349.1         306.6         39.5               28.4



Turnover in the Student transportation division for the first six months was
$208.4 million (2002:  $166.7 million) and operating profit was up 35% to $37.6
million (2002:  $27.9 million).  Our US operations have grown revenue by 8% and
increased margins.


Against the background of a competitive bid season, a number of quality and cost
initiatives were completed. The focus in 2003 is to ensure retention of key
contracts while selectively targeting growth opportunities.


In Canada, Stock Transportation continued its strong performance since
acquisition in July 2002.  New government funding will bring greater benefits
for this business.  In addition, the increased flexibility of the fleet across
the US and Canadian markets is improving efficiency.


Turnover in the Public transit division was $140.7 million (2002: $139.9
million) and operating profit was $1.9 million (2002: $0.5 million).  We are
reviewing underperforming contracts and seeking price adjustments for those
contracts that are to be retendered.  We are focused on driving cost out of the
business and benefiting from economies of scale.  Insurance costs remain an
issue but we are striving to improve profitability further through addressing
all other cost areas.


Australia


Turnover for our Australian bus division totalled £29.8 million (2002: £28.4
million), with an operating profit of £1.7 million (2002: £1.9 million).  In
July the Deed of Company Arrangement for our Australian train and tram
franchises was approved, completing the orderly handover of these businesses.
We expect to incur no further charges as a result of the withdrawal from our
Australian rail division.  Our bus operations continue to perform in line with
expectations.


Phil White, Chief Executive
11 September 2003




                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                    For the six months ended 30 June 2003


Finance Director's Review of Operations


Half year at a glance


Normalised operating profit from continuing operations increased to £57.8m
(2002: £51.3m) on turnover of £1,258.8m (2002: £1,153.8m). Normalised diluted
earnings per share rose to 23.7p (2002: 22.5p).  Group on-going operating cash
flow remained strong at £70.7m with all divisions generating an operating cash
inflow. We have declared a 5% increase in the interim dividend to 8.5 pence per
share (2002: 8.1 pence).


The UK Bus division operating profit fell to £22.0m (2002: £23.8m). An increase
in the number of buses financed by operating leases increased net financing
costs. Although the funding cost is charged against operating profit, the
financing attainable through operating leases remains attractive.


Our UK Trains division experienced an encouraging six months with patronage
growth of 5% improving operating profit to £7.3m (2002: £4.1m). London and South
East TOCs have performed well against a backdrop of falling employment in the
South East, to increase passenger revenue through a combination of revenue
protection measures and volume growth, particularly on the Stansted Express.


Patronage in our UK Coaches division for the first six months was impacted by a
reduction in in-bound UK travel but yield management on ticketing and reductions
in our cost base have produced an increase in operating profit to £2.3m (2002:
£2.0m).


The North American Bus division improved operating profit by £7.0m at constant
exchange rates, through the acquisition of Stock Transportation in July 2002,
new routes operated by Student transportation and our focus on the cost
pressures within the Public transit division. After foreign exchange the
division achieved an increase in operating profit of £5.0m to £24.5m (2002:
£19.5m).


Our Australian Bus division has continued in line with our expectations, with
the lower margins on rail replacement work and increasing staff costs reducing
operating profit to £1.7m (2002: £1.9m)


The Deed of Company Arrangement for our Australian train and tram franchises has
recently been approved, completing our orderly handover of these businesses. We
expect to incur no further charges as a result of the withdrawal from Australian
Trains.


Share of operating losses of associates


The Group share of operating losses from associates increased to £3.7m (2002:
£2.6m). Revenue growth at Eurostar UK fell below expectations and our share of
the operating loss increased to £3.5m (2002: £1.9m). Eurostar has been
particularly affected by competition from low cost airlines, and has experienced
a 15.6% reduction in turnover compared to the same period in 2002. Our share of
the operating loss at Midland Metro improved to £0.2m (2002: £0.7m).


Interest


Net interest payable was £12.7m (2002: £9.2m) reflecting the increase in net
debt following the purchase of Stock Transportation in July 2002 for cash
consideration of £74.9m and payments totalling £48.0m in the first half of 2003
to indemnify the providers of the performance bonds in respect of our withdrawal
from Australian Trains. EBITDA cash interest cover before exceptional items from
continuing operations was 7.5 times (2002: 8.8 times), compared to the full year
2002 figure of 9.5 times.


Goodwill and exceptional items


Goodwill amortisation increased to £22.4m (2002: £22.0m) with the amortisation
of £53.7m of goodwill arising on the acquisition of Stock Transportation in July
2002 partially offset by the weakening US dollar. Exceptional costs of £1.2m
(2002: £0.7m) solely comprise franchise bid costs in both 2003 and 2002.


Tax


The tax charge on normalised profit before tax of £41.4m (2002: £37.2m) was
£9.5m (2002: £8.6m), which represents an effective tax rate of 23.0% (2002:
23.0%). This tax rate principally reflects the benefit of continuing low
effective tax rates on overseas earnings.


Cash flow


The Group generated £70.7m of on-going operating cash flow from continuing
operations (2002: £67.4m).


Divisional cash flow                               UK         UK        UK      North   Australian     Total
                                                                             American          Bus
                                                  Bus    Coaches    Trains        Bus
                                                   £m         £m        £m         £m           £m        £m

Operating profit before exceptionals             22.0        2.3       7.3       24.5          1.7      57.8
Depreciation                                      5.1        2.2      10.5       12.3          1.8      31.9
EBITDA                                           27.1        4.5      17.8       36.8          3.5      89.7
Working capital movement                        (1.8)        3.8    (12.3)       13.4          1.3       4.4
On-going net cash inflow from operations         25.3        8.3       5.5       50.2          4.8      94.1
Net capital expenditure                         (8.9)      (0.8)     (3.4)      (8.4)        (1.9)    (23.4)
On-going operating cash flow                     16.4        7.5       2.1       41.8          2.9      70.7
Exceptional items                                   -          -     (1.2)          -            -     (1.2)
Other item                                          -      (5.0)         -          -            -     (5.0)
Operating cash flow                              16.4        2.5       0.9       41.8          2.9      64.5



Operating cash flow represents 'Net cash inflow from operating activities', plus
'Receipts from the sale of tangible assets', less 'Finance lease additions' and
'Payments to acquire tangible assets'.


The strong cash conversion in our North American bus division is the result of
an improvement in trade receivable collections and working capital movements in
insurance reserves. It also includes a phasing effect on school buses that will
be acquired in July for the new school year.


Net capital expenditure of £23.4m (2002: £58.0m) includes £8.9m (2002: £13.5m)
of investment in the UK Bus fleet, £8.4m (2002: £14.2m) on North American school
buses and £nil (2002: £15.5m) on infrastructure and rolling stock in Australian
Trains division. It also includes £3.4m (2002: £nil) of additions purchased
under finance leases, comprising £0.1m (2002: £nil) in UK Coaches, £0.3m (2002:
£nil) in UK Trains and £3.0m (2002: £nil) in North American Bus. The other item
for UK Coaches comprises the £5.0m injection into the Coach division pension
scheme on 11 March 2003 to improve the funding level.


Balance sheet


Net assets increased to £266.2m (31 December 2002: £262.6m). Net debt rose from
£334.6m at the start of the year to £379.4m at 30 June 2003, principally because
of payments totalling £48.0m to indemnify the providers of the performance bonds
in respect of our withdrawal from Australian Trains.


Accounting policies


We continued to apply the transitional arrangements of Financial Reporting
Standard ('FRS') 17 'Retirement Benefits' and plan to move directly to the
International Accounting Standard equivalent (IAS19) in 2005 following the
Accounting Standards Board's decision to defer full adoption of FRS17.



Adam Walker
Finance Director
11 September 2003



NATIONAL EXPRESS GROUP PLC
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2003


                                               Unaudited six months to 30 June                             Audited
                           Total before  Goodwill &     Total    Total before  Goodwill &     Total     Year to 31
                             goodwill & exceptional                goodwill & exceptional                 December
                            exceptional       items               exceptional       items
                                  items                                 items                                Total
                                   2003        2003      2003            2002        2002      2002           2002
                                     £m          £m        £m              £m          £m        £m             £m
Turnover
- continuing operations         1,258.8           -   1,258.8         1,153.8           -   1,153.8        2,412.4
- discontinued operations             -           -         -            84.9           -      84.9          159.9
Turnover                        1,258.8           -   1,258.8         1,238.7           -   1,238.7        2,572.3
Other operating income              5.4           -       5.4             5.7           -       5.7           10.8
Other operating costs         (1,206.4)           - (1,206.4)       (1,195.4)           - (1,195.4)      (2,452.2)
before goodwill and
exceptional items
Goodwill amortisation and             -      (22.4)    (22.4)               -      (22.0)    (22.0)         (58.7)
impairment
Other exceptional items               -       (1.2)     (1.2)               -       (0.7)     (0.7)          (5.0)
Total operating costs         (1,206.4)      (23.6) (1,230.0)       (1,195.4)      (22.7) (1,218.1)      (2,515.9)
Group operating profit             57.8      (23.6)      34.2            49.0      (22.7)      26.3           67.2
- continuing operations            57.8      (23.6)      34.2            51.3      (22.7)      28.6           67.1
- discontinued operations             -           -         -           (2.3)           -     (2.3)            0.1
Group operating profit             57.8      (23.6)      34.2            49.0      (22.7)      26.3           67.2
Share of operating losses         (3.7)           -     (3.7)           (2.6)           -     (2.6)          (6.6)
of associates
Total operating profit             54.1      (23.6)      30.5            46.4      (22.7)      23.7           60.6
Loss on closure of                    -           -         -               -           -         -        (126.1)
businesses
Profit/ (loss) on ordinary         54.1      (23.6)      30.5            46.4      (22.7)      23.7         (65.5)
activities before interest
Net interest payable             (12.7)           -    (12.7)           (9.2)           -     (9.2)         (20.1)
Profit/ (loss) on ordinary         41.4      (23.6)      17.8            37.2      (22.7)      14.5         (85.6)
activities before taxation
Tax on profit/ (loss) on          (9.5)         2.1     (7.4)           (8.6)         2.2     (6.4)         (20.3)
ordinary activities
Profit/ (loss) after               31.9      (21.5)      10.4            28.6      (20.5)       8.1        (105.9)
taxation
Minority interest                   0.6           -       0.6               -           -         -            0.6
Profit/ (loss) for the             32.5      (21.5)      11.0            28.6      (20.5)       8.1        (105.3)
financial period
Dividends                        (11.5)           -    (11.5)          (10.7)           -    (10.7)         (32.4)
Retained profit/ (loss)            21.0      (21.5)     (0.5)            17.9      (20.5)     (2.6)        (137.7)

Basic earnings/ (loss) per                               8.3p                                  6.2p        (80.0p)
share
Normalised basic earnings         24.5p                                 23.6p                                62.9p
per share
Diluted earnings/ (loss)                                 8.0p                                  5.9p        (80.0p)
per share
Normalised diluted                23.7p                                 22.5p                                60.3p
earnings per share




NATIONAL EXPRESS GROUP PLC
Group Balance Sheet
At 30 June 2003

                                                                  Unaudited       Unaudited         Audited
                                                                    30 June         30 June     31 December
                                                                       2003            2002            2002
                                                                         £m              £m              £m
Fixed assets
Intangible assets                                                     449.5           472.6           467.7
Tangible assets                                                       422.4           529.5           420.5
Investment and interests in associates                                 25.7            23.0            25.3
                                                                      897.6         1,025.1           913.5
Current assets
Stock                                                                  20.3            22.4            19.7
Debtors                                                               278.0           291.7           359.8
Cash at bank and in hand                                               79.1            97.3            93.7
                                                                      377.4           411.4           473.2
Creditors: amounts falling due within one year                      (517.5)         (587.8)         (659.7)
Net current liabilities                                             (140.1)         (176.4)         (186.5)
Total assets less current liabilities                                 757.5           848.7           727.0
Creditors: amounts falling due after more than one year             (424.6)         (384.7)         (360.0)
Provisions for liabilities and charges                               (66.7)          (63.0)         (104.4)
Net assets                                                            266.2           401.0           262.6
Capital and reserves
Called up share capital                                                 6.8             6.7             6.7
Share premium account                                                  44.7            44.6            44.7
Share capital to be issued                                              0.1             0.2             0.2
Merger reserve                                                         15.4            15.4            15.4
Capital reserve                                                           -               -             0.4
Revaluation reserve                                                     0.8             0.8             0.8
Profit and loss account                                               193.5           327.7           189.6
Equity shareholders' funds                                            261.3           395.4           257.8
Equity minority interest                                                4.9             5.6             4.8
                                                                      266.2           401.0           262.6



NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2003


                                                                     Unaudited       Unaudited         Audited
                                                                 six months to   six months to         year to
                                                                       30 June         30 June     31 December
                                                                          2003            2002            2002
                                                                            £m              £m              £m
Net cash inflow from operating activities                                 87.9            70.6           175.5
Net interest paid                                                        (9.9)           (9.6)          (17.1)
Interest element of finance lease rentals                                (2.1)           (1.7)           (1.9)
Return on investments and servicing of finance                          (12.0)          (11.3)          (19.0)
UK corporation tax paid                                                 (13.8)           (0.1)           (9.4)
Overseas tax paid                                                        (0.4)           (0.1)           (2.4)
Taxation                                                                (14.2)           (0.2)          (11.8)
Payments to acquire tangible assets                                     (25.7)          (59.2)          (91.6)
Receipts from sale of tangible assets                                      5.7             1.2             7.4
Receipts from sale of/(payments to acquire) shares to satisfy
employee share scheme                                                      1.3             0.7           (2.7)
Payments to acquire other investments                                        -           (0.4)           (1.2)
Capital expenditure and financial investment                            (18.7)          (57.7)          (88.1)
Receipts from the sale of businesses                                         -               -             2.9
Payments in respect of/cash disposed in businesses closed/sold          (49.6)               -           (3.3)
Payments to acquire businesses                                           (4.7)               -          (74.9)
Cash acquired in businesses purchased                                        -               -             2.2
Deferred consideration for businesses acquired                           (0.4)           (0.4)           (2.4)
Acquisitions and disposals                                              (54.7)           (0.4)          (75.5)
Equity dividends paid                                                   (21.7)          (19.2)          (29.9)
Cash outflow before financing activities                                (33.4)          (18.2)          (48.8)
Management of liquid resources
Cash withdrawn from/(paid in to) short term deposits                      14.4             3.6          (50.4)
Financing
Issue of share capital                                                       -             1.0             1.0
Cash (outflow)/ inflow from lease financing                              (6.1)            22.7            20.3
Repayment of loan notes                                                      -               -           (0.9)
Loans advanced                                                             9.1               -            32.0
Loans repaid                                                                 -           (0.6)               -
Net cash inflow from financing                                             3.0            23.1            52.4
(Decrease)/ increase in cash                                            (16.0)             8.5          (46.8)





NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 30 June 2003


                                                                  Unaudited       Unaudited         Audited
                                                              six months to   six months to         year to
                                                                    30 June         30 June     31 December
                                                                       2003            2002            2002

                                                                         £m              £m              £m
Profit/(loss) for the financial period                                 11.0             8.1         (105.3)
Exchange differences on foreign currency net investments                4.0             0.2           (2.7)
Total recognised gains and losses relating to the period               15.0             8.3         (108.0)





RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS
For the six months ended 30 June 2003

                                                                  Unaudited       Unaudited         Audited
                                                              six months to   six months to         year to
                                                                    30 June         30 June     31 December
                                                                       2003            2002            2002
                                                                         £m              £m              £m

Profit/(loss) for the financial period                                 11.0             8.1         (105.3)
Dividends                                                            (11.5)          (10.7)          (32.4)
Exchange differences on foreign currency net investments                4.0             0.2           (2.7)
New share capital issued for cash                                         -             1.0             1.0
Goodwill realised                                                         -               -             0.4
Net addition/(reduction) to shareholders' funds                         3.5           (1.4)         (139.0)
Equity shareholders' funds at 1 January                               257.8           396.8           396.8
Equity shareholders' funds                                            261.3           395.4           257.8






SEGMENTAL ANALYSIS
For the six months ended 30 June 2003

                                         Unaudited six months to 30 June             Audited year to 31
                                                                                          December
                                           Turnover  Operating   Turnover  Operating   Turnover  Operating
                                                        profit                profit                profit
                                               2003       2003       2002       2002       2002       2002
Analysis by class of business                    £m         £m         £m         £m         £m         £m

UK Bus                                        103.8       22.0      102.0       23.8      208.7       49.8

UK Trains                                     823.6        7.3      727.8        4.1    1,553.2       33.9

UK Coaches                                     85.3        2.3       84.2        2.0      184.5       12.2

UK operations                               1,012.7       31.6      914.0       29.9    1,946.4       95.9

North American Bus                            216.3       24.5      211.4       19.5      408.0       32.6

Australian Bus                                 29.8        1.7       28.4        1.9       58.0        2.3

Continuing operations                       1,258.8       57.8    1,153.8       51.3    2,412.4      130.8

Discontinued operations - Australian
Trains                                            -          -       84.9      (2.3)      159.9        0.1

                                            1,258.8       57.8    1,238.7       49.0    2,572.3      130.9

Goodwill amortisation                                   (22.4)                (22.0)                (45.2)

Goodwill impairment                                          -                     -                (13.5)

Exceptional items                                        (1.2)                 (0.7)                 (5.0)

Group operating profit                                    34.2                  26.3                  67.2

Share of operating losses of associates                  (3.7)                 (2.6)                 (6.6)

Total operating profit                                    30.5                  23.7                  60.6

Loss on closure of a business                                -                     -               (126.1)

Profit/ (loss) on ordinary activities                     30.5                  23.7                (65.5)
before interest




NATIONAL EXPRESS GROUP PLC
NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 June 2003



1.             Basis of preparation


These accounts have been prepared using the accounting policies set out in the
Group's 2002 statutory accounts.


The Group withdrew from its Australian Trains division in December 2002 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 2002 have been extracted from
the Annual Report 2002 which has been filed with the Registrar of Companies. The
audit report on the Annual Report 2002 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 30 June 2003  Six months to 30 June 2002   Year to 31 December 2002
                      Closing rate  Average rate  Closing rate  Average rate  Closing rate  Average rate
US dollar                     1.65          1.61          1.52          1.45          1.61          1.51
Canadian dollar               2.24          2.36             -             -          2.54          2.47
Australian dollar             2.46          2.63          2.72          2.72          2.86          2.78



If the results for the six months to 30 June 2002 were retranslated at the
average exchange rates for the six months to 30 June 2003, North America would
have achieved profit of £17.5m on turnover of £190.0m and Australia Bus profit
of £2.0m on turnover of £29.4m.


3.             Turnover


The turnover of the Group comprises revenue from road passenger transport, train
passenger services, airport operations and related activities in the UK, North
America and Australia.  Within the UK Trains division, franchise agreement
receipts from the Strategic Rail Authority and local Passenger Transport
Executives within the West Midlands region and Scotland are treated as turnover.
During the first half year, franchise agreement receipts amounted to £334.1m
(2002 interim: £311.1m; 2002 full year: £634.9m).  Before the Group's withdrawal
from the Australian Trains business in December 2002, franchise agreement
receipts from the Victorian Department of Public Transport in Australia totalled
£28.4m at 2002 interim and £62.5m at 2002 full year.


4.             Goodwill amortisation and impairment


Goodwill amortisation can be analysed as follows:

                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m

UK Trains                                                            11.5             11.5             23.2

UK Coaches                                                            0.5              0.3              0.8

North American Bus                                                    9.8              9.3             19.4

Australian Bus                                                        0.6              0.9              1.8
Goodwill amortisation                                                22.4             22.0             45.2
Goodwill impairment: Australian Bus                                     -                -             13.5
                                                                     22.4             22.0             58.7


All goodwill amortisation relates to continuing businesses.


5.             Exceptional items


Exceptional items can be analysed as follows:

                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m
UK Trains                                                             1.2              0.7              5.0


All exceptional operating costs relate to continuing businesses, and solely
comprise franchise bid costs.


6.             Loss on closure of businesses


The loss on closure of businesses during the second half of 2002 of £126.1m, net
of expenses, comprises £125.9m on the withdrawal from the Australian Trains
business and £0.2m on the disposal of Eurolines Nederland BV and the
Multisystems IT Division.


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 2003. The tax charge of £9.5m (2002 interim: £8.6m; 2002 full year:
£24.6m) represents an effective tax rate on profit on ordinary activities,
excluding goodwill and exceptional items, of 23.0% (2002 interim: 23.0%; 2002
full year: 23.0%). It includes overseas taxation of £1.8m (2002 interim: £0.1m;
2002 full year: £3.4m), and deferred taxation of £0.3m (2002 interim: £0.8m;
2002 full year: £6.3m).


8.             Earnings per share

                                                             Six months to    Six months to           Year to
                                                                   30 June          30 June       31 December
                                                                      2003             2002              2002

Basic earnings/(loss) per share                                       8.3p             6.2p           (80.0)p
Normalised basic earnings per share                                  24.5p            23.6p             62.9p
Diluted earnings/(loss) per share                                     8.0p             5.9p           (80.0)p
Normalised diluted earnings per share                                23.7p            22.5p             60.3p



Basic earnings/(loss) per share is calculated by dividing the profit for the
financial period of £11.0m (2002 interim: £8.1m; 2002 full year loss £105.3m) by
the weighted average number of ordinary shares in issue during 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. For the year to 31 December 2002, the weighted average number
of ordinary shares for the purpose of calculating the diluted loss per share is
identical to that used for the basic loss per share. This is because the
adjustment for dilutive potential ordinary shares would have the effect of
reducing the loss per ordinary share and is therefore not dilutive under the
terms of FRS14, 'Earnings per share'.


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

                                                         Six months to         Six months to          Year to
                                                               30 June               30 June      31 December
                                                                  2003                  2002             2002
                                                                               
Basic weighted average shares                                  132,595,076       130,979,091      131,602,152
Adjustment for dilutive potential ordinary shares                4,282,761         6,657,664        5,622,274
Diluted weighted average shares                                136,877,837       137,636,755      137,224,426


The normalised basic and normalised diluted earnings per share has been
calculated in addition to the basic and diluted earnings per share required by
FRS 14 since, in the opinion of the Directors, it reflects the financial
performance of the core business more appropriately.



The normalised basic and normalised diluted earnings per share for the six
months ended 30 June 2002 and the year ended 31 December 2002 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.


                                                           Six months to    Six months to          Year to
                                                                 30 June          30 June      31 December 
                                                                    2003             2002             2002  
                                                                      £m               £m               £m

Profit/(loss) for the financial period                              11.0              8.1          (105.3)
Loss/(earnings) from discontinued operations                           -              2.3            (0.1)
Goodwill amortisation                                               22.4             22.0             58.7
Exceptional operating costs                                          1.2              0.7              5.0
Exceptional loss of associate                                          -                -              2.6
Loss on closure of businesses                                          -                -            126.1
Tax relief on goodwill and exceptional items                       (2.1)            (2.2)            (4.3)
Normalised profits for the financial period                         32.5             30.9             82.7



Goodwill amortisation in the year to 31 December 2002 includes a £13.5m
impairment during the second half of 2002 relating to Australian Bus.
9.             Debtors


                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m

Trade debtors                                                       147.2            139.1            192.8
Amounts due from associates                                           8.8              4.5              4.7
Other debtors                                                        45.3             88.8             78.1
Prepayments and accrued income                                       76.7             59.3             84.2
                                                                    278.0            291.7            359.8



Included within other debtors is £4.6m (30 June 2002: £8.0m; 31 December 2002:
£4.7m) and included within prepayments is £5.9m (30 June 2002: £1.6m; 31
December 2002: £1.7m) which is recoverable after more than one year.



10.           Creditors: amounts falling due within one year

                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2003             2002             2002 
                                                                       £m               £m               £m

Loan notes                                                            8.8              9.9              9.1
Bank loans                                                              -             39.4             53.2
Bank overdrafts                                                      15.4                -                -
Trade creditors                                                     147.0            167.4            201.6
Amounts owed to associates                                            0.2              0.9              0.1
Finance lease obligations                                            14.5              8.2             10.0
Corporation tax                                                      17.6             17.1             25.3
Social security and other taxation                                   16.5             15.2             21.7
Accruals and deferred income                                        286.0            319.0            317.0
Proposed dividend                                                    11.5             10.7             21.7
                                                                    517.5            587.8            659.7



11.           Creditors: amounts falling after more than one year


                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m

Bank loans                                                          378.3            309.3            308.0
Finance lease obligations                                            41.9             51.6             48.0
Accruals and deferred income                                          4.4             23.8              4.0
                                                                    424.6            384.7            360.0



12.           Cash flow reconciliation


(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 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m

Group operating profit                                               34.2             26.3             67.2
Depreciation of tangible assets                                      31.9             34.9             71.5
Goodwill amortisation                                                22.4             22.0             45.2
Goodwill impairment                                                     -                -             13.5
Increase in stocks                                                  (0.6)            (1.3)            (0.8)
Decrease/(increase) in debtors                                       81.6             72.9            (4.8)
(Decrease)/increase in creditors                                   (87.3)           (23.5)             41.9
Increase/(decrease) in provisions                                     6.0           (60.7)           (57.6)
Other movements                                                     (0.3)                -            (0.6)
Net cash inflow from operating activities                            87.9             70.6            175.5




(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 
                                                                     2003             2002             2002  
                                                                       £m               £m               £m

(Decrease)/increase in cash in the period                          (16.0)              8.5           (46.8)
Cash inflow from movement in debt and lease financing               (3.0)           (22.1)           (51.4)
Cash (inflow)/outflow from movement in liquid resources            (14.4)            (3.6)             50.4
Change in net debt resulting from cash flows                       (33.4)           (17.2)           (47.8)
Change in net debt resulting from non cash flows                   (11.4)             10.7             28.2
Movement in net debt in period                                     (44.8)            (6.5)           (19.6)
Opening net debt                                                  (334.6)          (315.0)          (315.0)
Net debt                                                          (379.4)          (321.5)          (334.6)



Changes in net debt resulting from non cash flows represent £8.0m exchange loss
movements (30 June 2002: £10.7m gain; 31 December 2002: £29.0m gain) and £3.4m
finance lease additions (30 June 2002: £nil; 31 December 2002: £0.8m).



The Interim report 2003 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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