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Thursday 29 July, 2004

National Express

Interim Results

National Express Group PLC
29 July 2004


29 July 2004

                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                     For the six months ended 30 June 2004

Financial Highlights

•         Turnover of £1,266.7m (2003:  £1,258.8m)
•         Normalised operating profit* up 9.4% to £61.9m (2003:  £56.6m***)
•         Normalised profit before tax* up 19.2% to £47.9m (2003:  £40.2m***)
•         Normalised diluted earnings per share* up 16.9% to 27.0 pence (2003:
          23.1 pence***)
•         Interim dividend up 10% to 9.35 pence per share (2003:  8.5 pence)
•         On-going operating cash flow** of £127.8m (2003: £70.7m)
•         Effective net debt** reduced by £123.2m since year end to £184.6m
•         Normalised Group margins increased to 4.9% (2003: 4.5%***)

Operational Highlights

•         Good performance from Travel West Midlands on the back of continued
          investment;
•         Travel London integration progressing well with further growth
          opportunities;
•         Passenger growth of 6% in coaches;
•         Rail punctuality and reliability above Government targets;
•         Rail passenger growth of 5%;
•         Successful launch of the 'one' rail franchise;
•         Constructive negotiations with the Strategic Rail Authority ('SRA')
          nearing completion for a two year extension for our Silverlink 
          franchise;
•         Successful bidding season and contract renewals in the United States;
•         Public Transit recovery continues.

*   excluding goodwill, exceptional items and tax relief thereon as appropriate
**  operating cash flow and effective net debt as defined in the Finance 
    Director's Review
*** as restated for change in classification

Commenting on current trading and prospects, Chairman, David Ross said:

'I am pleased to present a very good set of results for the first half of 2004
with earnings up 17%.  This performance was characterised by very strong cash
management, with the business generating £127.8 million of cash.

Our coach business has started the year well and we are optimistic for the full
year as the division enters its peak trading period.  The increase in patronage
and improved financial performance of this division was encouraging.  This was
generated by our focus on the customer and adoption of customer-driven pricing
strategies.

We were pleased with the solid performance of our UK Bus division.  We are also
planning to implement a number of initiatives to attract further growth.

Following the appointment of the new management team in North America, our
student bus business completed a successful bid season and achieved good
results.  Trading in Canada remains encouraging. A constant focus on costs has
improved the results of our public transit division.

The Group welcomes the recommendations of the Government's recent White Paper -
'The Future of Rail' and we will be working closely with the Department for
Transport and Network Rail in implementing the recommendations.  We are pleased
with the passenger growth on our rail services and are focused on the
performance of our rail division.

Trading in the second half is in line with expectations. We are operationally
and financially strong. We have excellent cash flow and we will continue to
invest in organic growth as well as seeking additional opportunities for each of
our core divisions.'

                                  - 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

Andrew Dowler/ Ben Foster
Financial Dynamics                                           020 7831 3113

•         There will be an analyst and investor meeting at 0900 hours on 29 July
          2004 at Financial Dynamics, Holborn Gate, London.

•         A webcast of the analyst presentation will be available on our website
          www.nationalexpressgroup.com at 0900 hours on 29 July 2004. For 
          further details, contact Elaine Holder at Financial Dynamics on 
          020 7269 7121.

•         Photographs are available through Newscast on telephone 020 7608 1000.


                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                     For the six months ended 30 June 2004


Chairman's Statement

I am pleased to report the Group's results for the six months ended 30 June
2004. National Express Group is a people business which is committed to
encouraging greater use of public transport. We are focused on investing in and
developing further all our employees to improve the quality of the service we
offer our customers.

Trading in the period has been strong with all our divisions performing in line
with expectations. We have increased normalised operating profit by over 9.4%
and normalised diluted earnings per share by 16.9%. I am pleased to announce
that the interim dividend has been increased by 10% to 9.35 pence per share.  
This is backed by excellent cash flow and a substantial reduction in the Group's 
level of debt in the first half.

In January, we were delighted to be awarded the Greater Anglia rail franchise
which began operation on 1 April under the new brand name of 'one'.  This
showcase franchise brings together three separate train companies into a single
rail business. We are excited by the potential for this business and the market
in which it operates.

We are nearing completion of constructive negotiations with the SRA of a two
year extension for our Silverlink franchise.

We have not retained the ScotRail train franchise where we had a good track
record for performance, investment and customer service.  With the transfer of
this business in mid October, we would like to thank all our ScotRail employees
for all their hard work under our ownership and wish them the best for the
future.

On 15 July, the Secretary of State for Transport published the White Paper, 'The
Future of Rail' focusing on the future strategy for the rail industry.  The
proposals are based on the provision of a railway run by public and private
sector partnerships. We welcome plans to simplify the structure of the rail
industry and initiatives that provide a closer working relationship between all
stakeholders.

On 20 July, a further White Paper, 'The Future of Transport - a network for 2030
' was published.  This document outlines the valuable role played by buses in
improving public transport and in reducing congestion.  The paper recognises
that in most areas, bus services can be better provided through a partnership
approach between local authorities and operators.

During the first half our rail performance continued to improve and, as a
result, there was a 5% increase in the number of customers travelling. Travel
West Midlands produced another set of solid results and our coach division
generated a 6% growth in passengers.  Across all our UK businesses we continue
to work on ways to stimulate passenger growth and improve customer service
including 'Getaway Giveaway', our summer free rail ticket promotion,
introduction of NX TV on coaches and the launch of Saverbus, our low fare
initiative, in the West Midlands.

Overseas, progress has been encouraging. In the United States our student bus
business had a successful bidding season and in Public Transit operating costs
continue to be driven down.

Financial Report

Turnover for the six months to 30 June 2004 was £1,266.7 million (2003: £1,258.8
million).  Normalised operating profit increased by 9.4% to £61.9 million (2003:
£56.6 million ***).  Normalised profit before tax increased by 19.2% to £47.9
million (2003: £40.2 million ***).

Normalised diluted earnings per share were up 16.9% to 27.0 pence (2003: 23.1
pence***).

For the six months to 30 June, EBITDA interest cover before exceptional items
was 9.2 times (2003: 6.8 times***, where EBITDA is as disclosed in the Finance
Director's Review). On-going operating cash flow during the first six months was
excellent at £127.8 million (2003:  £70.7 million).  Effective net debt** at 30
June decreased to £184.6 million (2003:  £379.4 million).

Dividend

An interim dividend of 9.35 pence per share, an increase of 10% over the 2003
interim dividend of 8.5 pence per share, will be paid on 1 October 2004 to
shareholders on the register on 3 September 2004.

Current Trading and Outlook

Trading in the second half is in line with expectations. We are operationally
and financially strong. We have excellent cash flow and we will continue to
invest in organic growth as well as seeking additional opportunities for each of
our core divisions.

Chief Executive's Review of Operations

Buses

Turnover was £115.1 million (2003: £103.8 million) with operating profit of
£21.1 million (2003: £22.1 million***), a reduction partly driven by the
continued financing of buses through operating leases.

In the West Midlands, we continue to focus on making bus travel easier for all
our customers.  We have undertaken a full review of the West Midlands bus
network and are testing a number of new products to stimulate the market. This
has already resulted in the introduction of a new value for money proposition,
Saverbus, which provides a low value flat fare service from Bromford to the
centre of Birmingham. We are also conducting feasibility studies on bus rapid
transit services and limited stop premium express services.

We continue to work with Centro and Birmingham City Council on the roll-out of a
statutory quality partnership before the end of the year on Route 67.  This
service runs between the centre of Birmingham and Castle Vale and will see the
introduction of eleven new articulated buses all equipped with real time
information systems.

Following the partial closure of the Bullring bus mall, we are discussing our
preferred solution with Birmingham City Council which will result in the full
opening of the two-way system. We believe that this will encourage further
travel into the city centre.

Following the successful launch of the Coventry Concordat in December 2003, we
recently signed a Dundee Concordat formalising and consolidating the working
relationship between Travel Dundee and Dundee City Council with the aim of
encouraging further bus travel.

We are pleased with our entry into London and are making good progress.  We are
focused on improving the profitability of this operation by restructuring the
business and by renewing contracts on improved terms.  Since acquisition, we
have been awarded three new contracts, bringing the total number to 15.  To
accommodate extra business, we will be operating from the newly refurbished
Walworth bus garage in Camberwell this Autumn.

Investment in Travel West Midlands continues with a further 130 new low-floor
easy-access buses being delivered by the end of this year. In 2004 the entire
Travel Dundee fleet will be low-floor easy-access with CCTV coverage - 11 years
ahead of the Government's deadline.

Trains

                                                  Turnover             Normalised operating profit/
                                                                                  (loss)
                                                  2004          2003             2004         2003***
                                                    £m            £m               £m              £m
London and the South East                        348.6         274.6              5.9             8.8
Long Distance/Intercity                          106.3          93.1              6.0             5.9
Regional Services                                383.7         455.9              5.1           (4.5)
Franchise bid costs                                  -             -            (1.3)           (1.2)
Total                                            838.6         823.6             15.7             9.0

The UK Trains division performed well in the first six months with turnover of
£838.6 million (2003: £823.6 million) and an increased normalised operating
profit of £15.7 million (2003: £9.0 million***), as our loss making regional
franchises, Central and ScotRail, were operated under new subsidy terms. We
continue to focus on improving the quality of our rail portfolio and improving
its profitability.

In addition to patronage being up 5%, we were particularly pleased we delivered
operational performance above the Government's Public Performance Measure 
('PPM') target of 85%. This is a significant development and one that was 
achieved through our local management teams working closely with Network Rail.

London and the South East

Turnover for the six months was £348.6 million (2003:  £274.6 million) with a
normalised operating profit of £5.9 million (2003:  £8.8 million***). The
reduction in operating profit arose primarily from the seasonality of the 'one'
franchise and the reduction of subsidy receipts.

The 'one' franchise was launched by the Secretary of State for Transport on 1
April 2004.  Five trains and 20 stations were rebranded as 'one' in record time
for the launch.  During the first three months of operation, we have focused on
integrating the three businesses into one business, and preparing to deliver the
committed franchise improvements. Operational performance over the period has
been excellent. Due to the seasonality of this business and its high travelcard
usage, a contribution from this franchise will come through in the second half.
We are working with the Competition Commission on their enquiry and hope to
achieve a speedy resolution to this matter.

Silverlink continues to suffer from the impact of the West Coast Route
Modernisation upgrade but we are working with Network Rail to minimise the
impact on our customers. We anticipate signing a two year franchise extension
shortly.

At c2c, we have introduced the first driver only operation on the rail network
since privatisation. This brings further performance improvement and cost
efficiencies to the business together with additional customer service staff at
stations.

Great Northern's excellent performance saw a 11.3% increase in passenger
revenue.

Patronage levels at Gatwick Express improved on the back of innovative marketing
with the low cost airlines. However, franchise payments to the Strategic Rail
Authority ('SRA') continued to impact on the financial performance of the
operation.

Long Distance/Intercity

Turnover for the six months was £106.3 million (2003: £93.1 million) with a
normalised operating profit of £6.0 million (2003: £5.9 million***).

Midland Mainline ('MML') experienced a solid six months. During this period it
delivered its best operational performance for four years. This was a
considerable achievement against the backdrop of the Channel Tunnel Rail Link
construction work at St Pancras which resulted in a number of MML services
moving during Easter 2004 to a new purpose-built interim station. From mid
September this year, our operations will be impacted by the start of the
Thameslink blockade when MML and Thameslink Trains will be sharing the St
Pancras facility for almost eight months.

In May, we introduced the first of our new four-car Meridian trains into the
fleet. These have been well received by our customers.  Fifteen more four-car
units are due to come into service during 2004. Refurbishment of our high speed
train fleet is due for completion in the second half of the year.  In
consultation with the SRA, MML's London to Manchester service has been extended
to September on this route. We are currently evaluating the impact of the SRA's
Route Utilisation Strategy for the Midland Mainline and the East Midlands on
MML's services.

Regional Services

Turnover for the six months was £383.7 million (2003: £455.9 million) with a
normalised operating profit of £5.1 million (2003:  loss of £4.5 million***).
Improved profitability arose following the award of a two year franchise
extension at Central Trains and the seven period extension agreed for ScotRail.

At Central Trains, financial performance was good, particularly as we now run
more trains as a result of services transferred from Virgin and Wales and
Borders at the end of last year. At the end of July 2004, we opened our new
Customer Service Academy in Birmingham which will provide a dedicated training
facility for all our staff at Central Trains.

Following the completion of the transfer of the Wales and Borders franchise in
December 2003, Wessex Trains has been reorganised to give greater focus on its
local constituency and stakeholders.  We have further refined the operations to
introduce new timetables and improved service levels.

The performance of ScotRail over the period was exceptional and led to the award
of 'Operator of the Year' at the recent National Transport Awards.  Eight new
Turbostars were introduced onto the Edinburgh to Glasgow route, increasing peak
seating capacity by nearly 40%. In addition, new automatic ticket gates
commenced operation at selected major stations aimed at reducing fare evasion.
Consequently, as the incumbent with a good track record, we were disappointed to
hear the outcome of the ScotRail franchise competition in early June. We are
working on a smooth handover of the business on 17 October 2004.

We are pleased with the performance of our trains division and look forward to
improving its quality of earnings from increased patronage growth.  To stimulate
further growth we will be launching the industry's first 'Getaway Giveaway'
promotion across most of our TOCs. This promotion, which will be launched in
early August, will offer seven million free rail tickets to customers and we
believe that such an initiative will encourage further use of our rail services.

Coaches

Turnover was £87.8 million (2003:  £85.3 million) and normalised operating
profit was £4.2 million (2003: £2.9 million***).  This excellent result, the
best ever achieved by this division, resulted from a 6% increase in passenger
numbers which arose from extending the appeal of coach travel by rolling out
best values fares and the launch of a major TV campaign. We continued to invest
in the quality of the fleet and, in September, we will bring into service our
latest state-of-the-art vehicles incorporating climate control, all leather
seating and on-board television entertainment. We are also introducing new '
Coachcom' technology which will improve the overall customer experience by
providing real-time arrival and departure information as well as improving
capacity management, by allowing real-time reservations to maximise seat
utilisation.

We are now planning a major redevelopment of our coach station in Birmingham.
Work is expected to start in early 2005 with a new landmark facility opening in
summer 2006.

Eurolines has introduced new services from Birmingham to Paris via Oxford. The
Eurolines Plus service will see the introduction of new longer 13.7 metre
coaches increasing capacity by 25% whilst at the same time offering customers
extra legroom and on-board entertainment.

The peak season has started well with events such as the Glastonbury festival
resulting in good passenger growth.  We believe that by improving the quality of
the product offering and promoting these developments to new customer market
sectors, we can continue to grow this further.

North America

                                                  Turnover             Normalised operating profit
                                                  2004          2003         2004            2003***
                                                    $m            $m           $m                 $m
Student                                          207.4         208.4         37.9               37.6
Public Transit                                   142.2         140.7          5.5                1.9
Total                                            349.6         349.1         43.4               39.5

The results of the North American division were particularly encouraging
although the reported profits were impacted by the weakening dollar.

Turnover in the Student Transportation division for the first six months was
$207.4 million (2003:  $208.4 million) and normalised operating profit was $37.9
million (2003:  $37.6 million***).  During the last six months, Durham School
Services achieved new business wins in California, Connecticut and Texas.
Performance in Canada continued to be encouraging and we will be exploring
further growth opportunities within this market.

At Durham School Services, although competitive pressures remain, we improved
our retention rates as well as winning additional business.  Whilst financial
pressures on school districts continue we have responded well by implementing
further steps to reduce costs.

Turnover in Public Transit was $142.2 million (2003: $140.7 million) and
normalised operating profit was $5.5 million (2003: $1.9 million***). Ongoing
focus on operating efficiencies and improved productivity has driven this strong
improvement in results. We continue to benefit from engineering and procurement
efficiencies. We are driving improvements in risk management through the
installation of an on-board TV monitoring system, 'Drivecam'. This records
driving standards and performance.

We are working closely with the Las Vegas RTC, a major public transit client,
and in early July ten bus rapid transit vehicles were introduced into our
operation.  These state-of-the-art vehicles incorporate optical guidance, hybrid
diesel/electric propulsion, external video cameras and use of on- street payment
machines, reducing the need for on-board fare collection.

We believe that concentration on cost efficiencies and opportunities for
acquisition across North America will underpin the future growth of this
division.

Australia

Turnover for our Australian Bus division totalled £33.4 million (2003: £29.8
million), with a normalised operating profit of £1.2 million (2003: £1.7 million
***), primarily due to reduced passenger levels in New South Wales. We are
participating in an Industry Reform process, initiated by the New South Wales
Government, to address this issue.

In Perth, Southern Coast Transit continued to perform well. In Queensland and
Victoria, new contracts were agreed with the respective Governments, putting
these operations on a more stable and viable footing.

Associates

We continue to seek an exit from our investment in Eurostar but do not
anticipate achieving this by the end of the year.

Phil White, Chief Executive
29 July 2004

                                    - ENDS -

Finance Director's Review

Half year at a glance

I am particularly pleased that the progress the Group made last year has
continued into 2004. The Group achieved a strong growth in normalised* operating
profit of 9.4%, up to £61.9m (2003: £56.6m***).  Normalised diluted earnings per
share were 27.0p (2003: 23.1p***), an increase of 16.9%.  The Group continued to
generate strong operating cash flow across all our divisions. In the six months
to 30 June 2004 effective net debt** reduced by £123.2m to £184.6m.

* Where we refer to a normalised result, this is defined as the statutory result
before the following as appropriate: charges for goodwill amortisation,
exceptional items and tax relief on certain North American goodwill amortisation
and exceptional items.

** Effective net debt is defined as net debt excluding the £42.7m (June 2003:
£nil; Dec 2003: £18.7m) of cash deposits secured as a bond, which retains the
interest earned, in respect of future rolling stock maintenance at ScotRail.

*** As restated for change in classification (see note 2 to the interim
accounts)

UK Bus

The normalised operating margin was 19.7% (2003: 21.3%***) excluding Travel
London which achieved a break even result on turnover of £8.1m.  With the
continuing congestion in Birmingham dampening patronage, the turnover increase
of 3.1% was just about adequate to cover the increases in driver numbers
required to maintain workable manning levels and higher accident costs.  The
reduction in normalised operating profit is largely due to the increase in
operating lease charges as compared with the equivalent depreciation charges and
the change in the methodology applied to the concessionary fare scheme.  Good
progress has been made in Travel London in implementing the management controls
we require.

UK Coach

Increased volumes and additional services resulted in a significant improvement
in normalised operating profit with the margin increasing to 4.8% (2003: 3.4%**
*). However, the seasonality of this operation means that the majority of the
profit is earned in the second half of the year.  We continued to benefit from
the enhanced management information which enables us to match services more
effectively with demand.

UK Trains

Normalised operating profit was significantly higher in UK Trains, with our
Regional operations moving into profit as we benefited from the commencement of
the two year extension at Central Trains and the seven month extension at
ScotRail. The normalised operating margin improved to 1.3% (2003: loss of 1.0%**
*). In London and the South East normalised operating margins of 1.7% (2003:
3.2%***) were lower as a result of reduced subsidies in the existing businesses
and the fact that in 'one' (which commenced operation in April) revenue levels
are seasonally low.  With turnover boosted by the Manchester service, which runs
until September, the normalised operating margin at Long Distance/Intercity was
5.6% (2003: 6.3%***).  The normalised operating profit is stated net of a £1.3m
(2003: £1.2m) charge for franchise bid costs. These costs have previously been
disclosed as operating exceptional items.

North America

In local currency terms, Student Transportation maintained profit but improved
the normalised operating margin to 18.3% (2003: 18.0%***) as turnover was
slightly lower reflecting the previous year's bid results.  The softening of the
US dollar reduced the normalised operating profit by £2.5m.  We continue to
focus on driving down costs, particularly in making more effective use of the
fleet.  Public Transit performed much better with higher normalised operating
profits of US$5.5m (2003: US$1.9m***).  However, the margin of 3.8% (2003: 1.3%*
**) remains unsatisfactory and we continue to focus on making efficiencies and
mitigating the exposure to 'shock loss' accident claims.

Australia Bus

The normalised operating margin reduced to 3.6% (2003: 5.7%***) as a result of
patronage decline in New South Wales which is being addressed by the Industry
Review.  The division continued to return cash to the Group.

Central functions

This year we have separated out our central charges from the business segments
both to provide greater transparency and to align the external reporting with
how we run the business.

Share of operating losses of associates

The Group's share of operating losses from associates increased to £4.3m (2003:
£3.7m).

Eurostar UK has produced strong year on year revenue growth following the
opening of the first section of the Channel Tunnel Rail Link. However, losses
did not improve by as much as the benchmark set in our operating contract and
therefore our share of the operating loss increased to £4.2m (2003: £3.5m). We
continue to seek an exit from Eurostar which we believe is in the best interests
of shareholders.

Our share of the operating loss at Midland Metro improved to £0.1m (2003:
£0.2m).

Interest

Our interest charge benefited from the strong cash conversion achieved in the
first half of 2004, with the lower levels of net debt reducing net interest
payable to £9.7m (2003: £12.7m). EBITDA interest cover before exceptional items
improves to 9.2 times (2003: 6.8 times***), compared to the full year 2003
figure of 7.6 times***.

Goodwill and Exceptional items

The amortisation charge for the six months on the goodwill arising from the
acquisition of Prism plc in December 2000 has been increased by £5.0m to £16.5m
to ensure that the capitalised value of goodwill in the future will be
supportable by the remaining franchises. The overall goodwill amortisation
increased to £26.4m (2003: £22.4m) owing to the increase of the Prism
amortisation, off-set by the weakening US dollar.

Exceptional costs of £5.3m (2003: £nil***) arose in the UK Trains division. The
integration of the three legacy TOCs into 'one' resulted in start up costs and
redundancy charges. The Group incurred redundancy, property and pension charges
following the merger of Qjump with the Trainline.com. Redundancy costs were
incurred at Maintrain as a result of the decision to cease tendering for
external work and focus on improving service to Central Trains and Midland
Mainline.

Tax

The tax charge on normalised profit before tax of £47.9m (2003: £40.2m) was
£11.2m (2003: £9.2m), which represents an effective tax rate of 23.4% (2003:
23.0%). This tax rate principally reflects the benefit of continuing low
effective tax rates on overseas earnings and the utilisation of brought forward
losses.

Cash flow

The Group generated £127.8m of on-going operating cash flow (2003: £70.7m).

Divisional cash flow                                                North   
                                    UK         UK          UK    American   Australian     Central                
                                   Bus      Coach      Trains         Bus          Bus   functions       Total
                                    £m         £m          £m          £m           £m          £m          £m

Normalised operating profit       21.1        4.2        15.7        23.8          1.2       (4.1)        61.9
Depreciation and profit/
    (loss) on disposal             5.0        3.1        12.6        10.4          1.9         0.3        33.3
Amortisation of fixed asset
    grants                           -          -       (5.6)           -            -           -       (5.6)
EBITDA                            26.1        7.3        22.7        34.2          3.1       (3.8)        89.6
Working capital movement         (2.0)        1.7        45.7         4.4          1.4         8.2        59.4
Eurostar                             -          -           -           -            -       (3.1)       (3.1)
On-going net cash inflow
   from operations                24.1        9.0        68.4        38.6          4.5         1.3       145.9
Net capital expenditure          (6.5)      (0.1)       (6.2)       (5.3)            -           -      (18.1)
On-going operating cash
   flow                           17.6        8.9        62.2        33.3          4.5         1.3       127.8
Other items                                                                                               22.2
Operating cash flow                                                                                      150.0

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'.

All divisions continued to convert profit into cash to a significant degree. The
working capital in UK Trains benefited from the fact that in the first half year
we receive seven of the year's thirteen subsidy receipts and from delays in
settling performance payments with the SRA.

Other items include a net inflow of £27.7m upon the commencement of the 'one'
rail franchise, net of the unwind of certain working capital balances at the
Wales and Borders franchise which we exited in December 2003.  Off-setting this
are payments of £1.8m relating to rail franchise bid costs and  £3.7m relating
to UK Trains exceptional items.

Net capital expenditure of £18.1m (2003: £23.4m) included £6.5m (2003: £8.9m) of
investment in UK Bus (35 vehicles), £6.2m (2003: £3.4m) in UK Trains and £5.3m
(2003: £8.4m) in North America (207 school buses). This includes £6.3m (2003:
£3.4m) of additions purchased under finance leases.

After interest, dividends, tax and corporate activity the net funds inflow was
£118.0m, before a foreign exchange gain of £5.2m. The effective net debt has
reduced by £123.2m since 1 January 2004 to £184.6m. The published net debt of
£141.9m is stated after taking into account £42.7m of cash deposits secured in
respect of future rolling stock maintenance at ScotRail. The Group has no
effective right to the interest as an amount is added to the bonded cash which
is equivalent to the interest earned. The cash will transfer with the ScotRail
franchise when it leaves the Group in October this year.

We anticipate a partial reversal of the favourable half year cash flows in the
second half of 2004 for a number of reasons. Firstly, the Group's capital
expenditure program will be heavily weighted towards the second half of the
year; in particular there will be an intake of approximately 700 vehicles (£30m)
in North America and the UK.  Secondly, we anticipate there will be a cash
outflow from unwinding the working capital position of the ScotRail franchise.
Finally, the UK Trains division is expected to settle outstanding performance
payments with the SRA and wind down the additional Manchester services operated
by Midland Mainline.

Accounting policies

We have adopted the accounting policy for treasury shares stipulated by Urgent
Issues Task Force ('UITF') statement 38. The new accounting policy requires
those shares held for employee benefit trusts be deducted from shareholders'
funds as 'Treasury shares', where as previously these shares were held as
investment assets. The prior year comparatives have been restated resulting in a
reduction in the net book value of investments and reserves of £6.1m at 30 June
2003, and £5.2m at 31 December 2003.

We continue to make progress on our conversion to International Financial
Reporting Standards which we will adopt for the year to 31 December 2005.

Adam Walker
Finance Director
29 July 2004


NATIONAL EXPRESS GROUP PLC
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2004

                                            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       2004     exceptional        items     2003 *
                             items                                   items
                Note                       2004                                  2003 *
                              2004                                  2003 *                                  Total

                                                                                                           2003 *
                                £m           £m         £m                           £m         £m             £m
                                                                        £m
Turnover
- continuing               1,258.6            -    1,258.6         1,258.8            -    1,258.8        2,566.1
operations
- acquisitions                 8.1            -        8.1               -            -          -              -
Turnover         4         1,266.7            -    1,266.7         1,258.8            -    1,258.8        2,566.1
Other                          4.7            -        4.7             5.4            -        5.4           10.9
operating
income
Other                    (1,209.5)            -  (1,209.5)       (1,207.6)            -  (1,207.6)      (2,447.7)
operating
costs before
goodwill and
exceptional
items
Goodwill         5               -       (26.4)     (26.4)               -       (22.4)     (22.4)         (45.7)
amortisation
Exceptional      6               -        (5.3)      (5.3)               -            -          -              -
items

Total                    (1,209.5)       (31.7)  (1,241.2)       (1,207.6)       (22.4)  (1,230.0)      (2,493.4)
operating
costs

- continuing                  61.9       (31.7)       30.2            56.6       (22.4)       34.2           83.6
operations
- acquisitions                   -            -          -               -            -          -              -

Group            2            61.9       (31.7)       30.2            56.6       (22.4)       34.2           83.6
operating
profit
Share of                     (4.3)            -      (4.3)           (3.7)            -      (3.7)          (4.1)
operating
losses of
associates
Profit on                     57.6       (31.7)       25.9            52.9       (22.4)       30.5           79.5
ordinary
activities
before
interest
Net interest                 (9.7)            -      (9.7)          (12.7)            -     (12.7)         (25.0)
payable
Profit on                     47.9       (31.7)       16.2            40.2       (22.4)       17.8           54.5
ordinary
activities
before
taxation
Tax on profit/   7          (11.2)          2.8      (8.4)           (9.2)          1.8      (7.4)         (12.5)
(loss) on
ordinary
activities
Profit after                  36.7       (28.9)        7.8            31.0       (20.6)       10.4           42.0
taxation
Minority                       0.9            -        0.9             0.6            -        0.6            1.0
interest
Profit for the
financial
period                        37.6       (28.9)        8.7            31.6       (20.6)       11.0           43.0
Dividends                   (12.8)            -     (12.8)          (11.5)            -     (11.5)         (35.1)
Retained                      24.8       (28.9)      (4.1)            20.1       (20.6)      (0.5)            7.9
(loss) /profit

Basic earnings   8                                    6.4p                                    8.3p          32.1p
per share
Normalised
basic earnings   8
per share                    27.8p                                   23.8p                                  58.4p
Diluted
earnings per     8
share                                                 6.2p                                    8.0p          31.2p
Normalised
diluted          8
earnings per                 27.0p                                   23.1p                                  56.7p
share


* Restated for change in classification (see note 2)


NATIONAL EXPRESS GROUP PLC
GROUP BALANCE SHEET
At 30 June 2004

                                                             Unaudited       Unaudited         Audited
                                                               30 June         30 June     31 December
                                                                  2004           2003*           2003*
                                                Note                £m              £m              £m
Fixed assets
Intangible assets                                                370.1           449.5           404.6
Tangible assets                                                  383.4           422.4           405.6
Investments and interests in associates                           10.2            19.6             7.3
                                                                 763.7           891.5           817.5
Current assets
Stock                                                             18.5            20.3            17.3
Debtors                                              9           269.0           278.0           343.7
Cash at bank and in hand                                         182.5            79.1            97.0
                                                                 470.0           377.4           458.0
Creditors: amounts falling due within one year      10         (595.1)         (517.5)         (601.0)
Net current liabilities                                        (125.1)         (140.1)         (143.0)
Total assets less current liabilities                            638.6           751.4           674.5
Creditors: amounts falling due after more than
     one year                                       11         (300.3)         (424.6)         (347.3)
Provisions for liabilities and charges                          (74.6)          (66.7)          (58.8)
Net assets                                                       263.7           260.1           268.4
Capital and reserves
Called up share capital                                            6.9             6.8             6.8
Share premium account                                             45.8            44.7            45.1
Share capital to be issued                                           -             0.1             0.1
Treasury shares                                                  (5.3)           (6.1)           (5.2)
Merger reserve                                                    15.4            15.4            15.4
Revaluation reserve                                                0.8             0.8             0.8
Profit and loss account                                          196.6           193.5           200.7
Equity shareholders' funds                                       260.2           255.2           263.7
Equity minority interest                                           3.5             4.9             4.7
                                                                 263.7           260.1           268.4

* Restated for change in accounting policy for treasury shares (see note 2)




NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2004


                                                                    Unaudited       Unaudited         Audited
                                                                six months to   six months to         year to
                                                     Note             30 June         30 June     31 December
                                                                         2004            2003            2003
                                                                           £m              £m              £m
Net cash inflow from operating activities              13 (a)           170.6            87.9           182.8
Net interest paid                                                       (7.4)           (9.9)          (19.1)
Interest element of finance lease rentals                               (2.4)           (2.1)           (3.9)
Return on investments and servicing of finance                          (9.8)          (12.0)          (23.0)
UK corporation tax paid                                                 (2.1)          (13.8)          (22.2)
Overseas tax paid                                                       (1.0)           (0.4)           (0.1)
Taxation                                                                (3.1)          (14.2)          (22.3)
Payments to acquire tangible fixed assets                              (16.0)          (25.7)          (48.0)
Receipts from sale of tangible fixed assets                               1.7             5.7            12.9
(Payments to acquire)/receipts from sale of                             (0.1)             1.3             2.1
shares to satisfy employee share scheme
Receipts in respect of other investments                                    -               -             8.1
Capital expenditure and financial investment                           (14.4)          (18.7)          (24.9)
Receipts from the sale of businesses                                        -               -             0.8
Payments in respect of businesses sold /closed                          (0.8)          (49.6)          (49.8)
Payments to acquire businesses                                          (0.2)           (4.7)           (4.7)
Cash acquired in businesses purchased                                    19.1               -               -
Deferred consideration for businesses disposed                            0.4               -               -
Deferred consideration for businesses acquired                          (4.9)           (0.4)           (0.4)
Acquisitions and disposals                                               13.6          (54.7)          (54.1)
Equity dividends paid                                                  (23.6)          (21.7)          (33.2)
Cash inflow/(outflow) before financing                                  133.3          (33.4)            25.3
activities
Management of liquid resources
Cash (paid in to)/withdrawn from short term                            (42.3)            14.4            14.2
deposits
Financing
Issue of share capital                                                    0.7               -             0.4
Cash inflow/(outflow) from lease financing                               29.7           (6.1)          (13.8)
Repayment of loan notes                                                 (0.9)               -           (0.7)
Loans advanced                                                              -             9.1               -
Loans repaid                                                          (100.6)               -          (26.1)
Net cash (outflow)/inflow from financing                               (71.1)             3.0          (40.2)
Increase/(decrease) in cash                             13(b)            19.9          (16.0)           (0.7)




NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 30 June 2004


                                                                  Unaudited       Unaudited         Audited
                                                              six months to   six months to         year to
                                                                    30 June         30 June     31 December
                                                                       2004            2003            2003
                                                                         £m              £m              £m
Profit for the financial period                                         8.7            11.0            43.0
Exchange differences on foreign currency net investments                  -             4.0             2.8
Total recognised gains and losses                                       8.7            15.0            45.8





RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS
For the six months ended 30 June 2004


                                                                  Unaudited       Unaudited          Audited
                                                              six months to   six months to          year to
                                                                    30 June         30 June      31 December 
                                                                       2004            2003             2003  
                                                                         £m              £m               £m
Profit for the financial period                                         8.7            11.0             43.0
Dividends                                                            (12.8)          (11.5)           (35.1)
Exchange differences on foreign currency net investments                  -             4.0              2.8
New share capital issued for cash                                       0.7               -              0.4
Net (addition)/reduction in treasury shares*                          (0.1)           (0.4)              0.5
Net (reduction)/addition to shareholders' funds                       (3.5)             3.1             11.6
Equity shareholders' funds at 1 January*                              263.7           252.1            252.1
Equity shareholders' funds                                            260.2           255.2            263.7

* Restated for change in accounting policy for treasury shares (see note 2)





SEGMENTAL ANALYSIS

For the six months ended 30 June 2004


                                              Unaudited six months to 30 June             Audited year to 31
                                                                                               December
Analysis by class of business            Turnover   Operating  Turnover    Operating      Turnover   Operating
                                             2004      profit      2003       profit          2003      profit
                                               £m        2004        £m       2003 *            £m      2003 *
                                                           £m                     £m                        £m
UK Bus - continuing operations              107.0        21.1     103.8         22.1         211.9        47.5
             - acquisitions                   8.1           -         -            -             -           -
UK Trains                                   838.6        15.7     823.6          9.0       1,702.4        33.4
UK Coach                                     87.8         4.2      85.3          2.9         186.6        16.1
UK operations                             1,041.5        41.0   1,012.7         34.0       2,100.9        97.0
North American Bus                          191.8        23.8     216.3         24.5         400.1        37.0
Australian Bus                               33.4         1.2      29.8          1.7          65.1         3.4
Central functions                               -       (4.1)         -        (3.6)             -       (8.1)
                                          1,266.7        61.9   1,258.8         56.6       2,566.1       129.3
Goodwill amortisation                                  (26.4)                 (22.4)                    (45.7)
Exceptional items                                       (5.3)                      -                         -
Group operating profit                                   30.2                   34.2                      83.6
Share of operating losses of associates                 (4.3)                  (3.7)                     (4.1)
Profit on ordinary activities before                     25.9                   30.5                      79.5
interest

* Restated for change in classification (see note 2)


NATIONAL EXPRESS GROUP PLC
NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 June 2004

1.       Basis of preparation

These accounts have been prepared using the accounting policies set out in the
Group's 2003 statutory accounts with the exception of UITF 38 'Accounting for
ESOP Trusts' (see note 2). Changes have also been made to the classification of
the segmental analysis of the Group's operating profit (see note 2).

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 2003 have been extracted from
the Annual Report 2003 which has been filed with the Registrar of Companies. The
audit report on the Annual Report 2003 was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.

2.       Change in segmental analysis classification and accounting policy

Two changes have been made to the Group's segmental analysis classification:

(a)     The costs incurred bidding for franchises in our UK Trains division are
now classified as operating costs. These costs were previously classified as
operating exceptional items.

(b)     Costs incurred in operating the Group management function are now
disclosed separately as Central functions. These were previously allocated
across the divisions. The change in classification is intended to align our
external reporting with our internal management reporting.

The segmental analysis as restated, and as reported, is as follows:

                                                 Unaudited six months to 30 June          Audited year to 31
                                                                                               December
                                               Operating profit   Operating profit         Operating profit

                                                           2004         2003                     2003
                                             Details                    As         As             As       As 
                                              above               restated   reported       restated  reported
                                                                                                           £m
                                                                        £m         £m             £m
                                                             £m
UK Bus - continuing operations                 (b)         21.1       22.1     22.0           47.5       47.2
             - acquisitions                                   -          -        -              -          -
UK Trains                                    (a), (b)      15.7        9.0      7.3           33.4       32.0
UK Coach                                       (b)          4.2        2.9      2.3           16.1       15.0
UK operations                                              41.0       34.0     31.6           97.0       94.2
North American Bus                             (b)         23.8       24.5     24.5           37.0       37.0
Australian Bus                                 (b)          1.2        1.7      1.7            3.4        3.4
Central functions                              (b)        (4.1)      (3.6)        -          (8.1)          -
                                                           61.9       56.6     57.8          129.3      134.6
Goodwill amortisation                                    (26.4)     (22.4)   (22.4)         (45.7)     (45.7)
Exceptional items - UK Train bid costs         (a)            -          -    (1.2)              -      (5.3)
Other exceptional items                                   (5.3)          -        -              -          -
Group operating profit                                     30.2       34.2     34.2           83.6       83.6



UITF 38, 'Accounting for ESOP Trusts', has been adopted with effect from 1
January 2004. The adjusted accounting policy is that shares held in respect of
employee benefit trusts should be deducted from shareholders' funds as 'Treasury
shares'. Prior to 1 January 2004 these shares were held as investment assets.

The prior year comparatives have been restated to comply with UITF 38, resulting
in a reduction in the net book value of investments and reserves of £6.1m at 30
June 2003, and £5.2m at 31 December 2003.

3.       Exchange rates

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

                     Six months to 30 June 2004  Six months to 30 June 2003   Year to 31 December 2003
                      Closing rate  Average rate  Closing rate  Average rate  Closing rate  Average rate
US dollar                     1.82          1.82          1.65          1.61          1.79          1.64
Canadian dollar               2.43          2.43          2.24          2.36          2.32          2.31
Australian dollar             2.60          2.46          2.46          2.63          2.37          2.53

If the results for the six months to 30 June 2003 were retranslated at the
average exchange rates for the six months to 30 June 2004, North America would
have achieved normalised operating profit of £22.1m on turnover of £193.1m and
Australia Bus normalised operating profit of £1.8m on turnover of £31.8m.

4.       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 half year to 30 June 2004, franchise agreement receipts amounted to
£275.7m (2003 interim: £334.1m; 2003 full year: £684.0m).

5.       Goodwill amortisation

Goodwill amortisation is analysed as follows:

                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June 31 December 2003
                                                                     2004             2003               £m
                                                                       £m               £m
UK Trains                                                            16.5             11.5             24.3
UK Coach                                                              0.5              0.5              0.9
North American Bus                                                    8.8              9.8             19.4
Australian Bus                                                        0.6              0.6              1.1
Goodwill amortisation                                                26.4             22.4             45.7

All goodwill amortisation relates to continuing businesses.

6.       Exceptional items

Exceptional items are analysed as follows:

                                                            Six months to    Six months to          Year to
                                                                  30 June          30 June      31 December 
                                                                     2004            2003*            2003* 
                                                                       £m               £m               £m
UK Trains                                                             5.3                -                -

*Restated for change in classification (see note 2)

The exceptional costs were incurred at 'one' (the integration of the three
legacy TOCs resulted in start up costs and redundancy charges), Qjump
(redundancy, property and pension charges following the merger with the
Trainline.com) and Maintrain (redundancy costs incurred as a result of the
decision to cease tendering for external work and focus on improving service to
Central Trains and Midland Mainline).

7.       Taxation

Tax on profit on ordinary activities for the half year to 30 June 2004 has been
calculated on the basis of the estimated annual effective rate for the year
ending 31 December 2004. The tax charge of £11.2m (2003 interim*: £9.2m; 2003
full year*: £23.1m) represents an effective tax rate on profit on ordinary
activities, excluding goodwill and exceptional items, of 23.4% (2003 interim:
23.0%; 2003 full year: 23.0%). It includes overseas taxation of £3.6m (2003
interim: £1.8m; 2003 full year: £5.1m), and deferred taxation of £3.2m (2003
interim: £0.3m; 2003 full year: £4.1m credit).

* Restated for change in classification (see note 2)



8.       Earnings per share


                                                            Six months to    Six months to            Year to
                                                                  30 June          30 June        31 December
                                                                     2004            2003*              2003*
Basic earnings per share                                             6.4p             8.3p              32.1p

Normalised basic earnings per share                                 27.8p            23.8p              58.4p

Diluted earnings per share                                           6.2p             8.0p              31.2p

Normalised diluted earnings per share                               27.0p            23.1p              56.7p

* Restated for change in classification (see note 2)

Basic earnings per share is calculated by dividing the profit for the financial
period of £8.7m (2003 interim: £11.0m; 2003 full year: £43.0m) 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.

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 
                                                                      2004             2003              2003
Basic weighted average shares                                  135,226,325      132,595,076       133,765,928
Adjustment for dilutive potential ordinary shares                3,750,931        4,282,761         3,951,354
Diluted weighted average shares                                138,977,256      136,877,837       137,717,282

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

Normalised profits for the financial period are:


                                                              Six months       Six months       Year to 31
                                                              to 30 June       to 30 June         December
                                                                    2004            2003*            2003*
                                                                      £m               £m              £m

Profit for the financial period                                      8.7             11.0             43.0
Goodwill amortisation                                               26.4             22.4             45.7
Exceptional operating costs                                          5.3                -                -
Tax relief on goodwill and exceptional items                       (2.8)            (1.8)           (10.6)
Normalised profits for the financial period                         37.6             31.6             78.1

* Restated for change in classification (see note 2)



9.       Debtors


                                                               At 30 June       At 30 June   At 31 December
                                                                     2004             2003             2003
                                                                       £m               £m               £m

Trade debtors                                                       129.6            147.2            175.3
Amounts due from associates                                          12.2              8.8              9.2
Other debtors                                                        59.1             45.3             75.4
Prepayments and accrued income                                       68.1             76.7             83.8
                                                                    269.0            278.0            343.7

Included within other debtors is £2.2m (30 June 2003: £4.6m; 31 December 2003:
£2.8m) and included within prepayments is £5.7m (30 June 2003: £5.9m; 31
December 2003: £5.9m) which is recoverable after more than one year.

10.   Creditors: amounts falling due within one year

                                                              At 30 June       At 30 June    At 31 December
                                                                    2004             2003              2003
                                                                                                         £m
                                                                      £m               £m
Loan notes                                                           7.6              8.8               8.4
Bank loans                                                             -                -              19.9
Bank overdrafts                                                      0.9             15.4               0.2
Trade creditors                                                    147.8            147.0             160.1
Amounts owed to associates                                           0.3              0.2               0.2
Finance lease obligations                                           20.9             14.5              11.6
Corporation tax payable                                             21.0             17.6              18.4
Social security and other taxation                                  15.0             16.5              16.4
Accruals and deferred income                                       188.6            169.7             169.4
Other creditors                                                    180.2            116.3             172.8
Proposed dividend                                                   12.8             11.5              23.6
                                                                   595.1            517.5             601.0





11.   Creditors: amounts falling due after more than one year


                                                              At 30 June       At 30 June    At 31 December
                                                                    2004             2003              2003
                                                                      £m               £m                £m
Bank loans                                                         218.4            378.3             304.5
Finance lease obligations                                           77.6             41.9              41.5
Other creditors                                                      4.3              4.4               1.3
                                                                   300.3            424.6             347.3



12.   Net borrowings


                                                              At 30 June       At 30 June    At 31 December
                                                                    2004             2003              2003
                                                                      £m               £m                £m
Due within one year
Loan notes                                                           7.6              8.8               8.4
Bank loans                                                             -                -              19.9
Bank overdrafts                                                      0.9             15.4               0.2
Finance lease obligations                                           20.9             14.5              11.6
                                                                    29.4             38.7              40.1
Due within one to two years
Finance lease obligations                                           20.3             10.2              12.2
                                                                    20.3             10.2              12.2
Due within two to five years
Bank loans                                                         218.4            378.3             304.5
Finance lease obligations                                           45.2             31.1              27.7
                                                                   263.6            409.4             332.2
Due by instalment after five years
Finance lease obligations                                           12.1              0.6               1.6
Total borrowings                                                   325.4            458.9             386.1
Cash at bank and in hand                                         (182.5)           (79.1)            (97.0)
Other debt receivable                                              (1.0)            (0.4)                 -
Net borrowings                                                     141.9            379.4             289.1



Secured borrowings within the Group (representing finance leases) total £98.5m
(30 June 2003: £56.4m; 31 Dec 2003: £53.1m).

Included in cash at bank and in hand are restricted balances of £119.0m (30 June
2003: £28.8m; 31 Dec 2003: £62.7m) held by the train operating companies which
can only be used to settle their own liabilities. Within the restricted balances
is £42.7m (30 June 2003: £nil, 31 Dec 2003: £18.7m) of cash deposits secured
against a bond issued in respect of future rolling stock maintenance at ScotRail
Railways Limited. The Group does not earn interest on these monies as an amount
equal to the interest earned on the deposit is added to the bond.

13.   Notes to the 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 2003
                                                                     2004             2003               £m

                                                                       £m               £m
Group operating profit                                               30.2             34.2             83.6

Depreciation of tangible fixed assets                                33.6             31.9             64.7

Amortisation of fixed asset grants                                  (5.6)            (1.3)            (3.0)

Profit on disposal of fixed assets                                  (0.3)            (0.3)            (1.5)

Goodwill amortisation                                                26.4             22.4             45.7

(Increase)/decrease in stocks                                       (1.0)            (0.6)              2.0

Decrease in debtors                                                  87.7             81.6             17.6

Increase/(decrease) in creditors                                      2.8           (86.0)           (34.2)

(Decrease)/increase in provisions                                   (3.2)              6.0              7.9
Net cash inflow from operating activities                           170.6             87.9            182.8



The net cash flows from operating activities include outflows of £1.5m from
acquisitions.


13. Notes to the cash flow statement (continued)

(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
                                                                     2004             2003               £m
                                                                       £m               £m
Increase/(decrease) in cash in the period                            19.9           (16.0)            (0.7)
Cash outflow/(inflow) from movement in debt and lease                71.8            (3.0)             40.6
financing
Cash outflow/(inflow) from movement in liquid resources              42.3           (14.4)           (14.2)
Change in net debt resulting from cash flows                        134.0           (33.4)             25.7
Change in net debt resulting from acquisitions and                  (9.2)                -                -
disposals
Change in net debt resulting from non cash flows                     22.4           (11.4)             19.8


Movement in net debt in the period                                  147.2           (44.8)             45.5

Opening net debt                                                  (289.1)          (334.6)          (334.6)
Net debt                                                          (141.9)          (379.4)          (289.1)



Changes in net debt resulting from non cash flows represent £5.2m exchange gain
movements (30 June 2003: £8.0m loss; 31 December 2003: £10.0m gain), £0.5m loan
arrangement fees (30 June 2003: £nil; 31 December 2003: £0.9m), £6.3m finance
lease additions (30 June 2003: £3.4m; 31 December 2003: £8.0m) and £24.0m of
cash deposits secured as a bond in respect of future rolling stock maintenance
at ScotRail Railways Limited (30 June 2003: £nil; 31 December 2003: £18.7m).



The Interim report 2004 will be sent to all shareholders in August. Copies can
also be obtained from the Company Secretary at 75 Davies Street, London, W1K
5HT.



                                    - ENDS -




                      This information is provided by RNS
            The company news service from the London Stock Exchange               VRBUUR