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Thursday 28 July, 2005

National Express

Interim Results

National Express Group PLC
28 July 2005



28 July 2005

                           NATIONAL EXPRESS GROUP PLC
                                Interim Results
                     For the six months ended 30 June 2005


Financial Highlights


•         Revenue of £1,077.7m (2004:  £1,157.9m*)

•         Normalised operating profit** up 26.5% to £67.3m (2004:  £53.2m*)

•         Normalised profit before tax** up 47.5% to £58.1m (2004:  £39.4m*)

•         Normalised diluted earnings per share** up 44.9% to 31.3 pence (2004:
          21.6 pence*)

•         Interim dividend up 7% to 10 pence per share (2004:  9.35 pence*)

•         Operating cash flow*** before one-off items of £106.2m (2004: £127.8m)

•         Net debt of £143.3m (31 December 2004:  £136.6m)

•         Normalised Group margin** increased to 6.2% (2004: 4.6%*)

•         £29.3 million returned to shareholders through share buy-back



Operational Highlights


•         Continued growth in coach patronage

•         Successful roll-out of coach best value fare promotions

•         Improved operational bus performance through recruitment initiatives

•         Doubling of bus market share in London through acquisition of Tellings
          Golden Miller bus division

•         Operator of 7 of the UK's top 9 performing train companies

•         Shortlisted for Greater Western and Thameslink / GN rail bids

•         Successful student bus bid season in North America

•         Conditional disposal of US public transit operations to Connex.


*             as restated for the transition to IFRS

**            excluding goodwill impairment, intangible amortisation,
              exceptional items and tax relief thereon as appropriate

***           operating cash flow as defined in the Finance Director's Review


Commenting on the results, David Ross, Chairman said:

'Today's results reflect the excellent progress the Group has made over the six
month period.  We are focused on improving the quality and performance of our
businesses.  We will continue to invest in the facilities, fleet and customer
service initiatives that underpin our strategy of attracting more people to our
services through our improved service offering.

It is too early to assess any impact recent terrorist activity may have on the
discretionary travel market.  Given our financial resilience and excellent cash
generation, we remain confident in our prospects for the year. Our track record
of consistent growth and our low debt level place us in a strong position to
continue to invest in our businesses. Shareholder value will continue to be
enhanced through a combination of our dividend policy, the buyback programme and
careful investment in acquisitions.'




                                   - 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 1100 hours on 28 July
          2005 at Financial Dynamics, Holborn Gate, London.

•         A webcast of the analyst presentation will be available on website
          www.nationalexpressgroup.com at 1100 hours on 28 July 2005. For 
          further details, contact Sara Freeman at Financial Dynamics on 
          020 7269 7134.

•         Photographs are available through Vismedia at www.vismedia.co.uk or
          telephone 020 7436 9595.





                           NATIONAL EXPRESS GROUP PLC

                                Interim Results

                     For the six months ended 30 June 2005



Chairman's Statement

I am pleased to report on the Group's interim results for the six month period
ended 30 June 2005.

First of all, I would like to express my sympathy to all those who lost loved
ones and were affected by the tragic events in London on 7 July. Many of our
passengers and people were involved in these events. I would like to thank all
of our employees for their outstanding efforts in very difficult circumstances
and our passengers for their continued patronage and vigilance during this time.
I would like to reassure both customers and our employees that their safety
and security are a priority and will remain so.

The year has started well. Our coach division is fully focused on innovation and
quality. We currently run 7 of the UK's top 9 performing train companies and we
are launching new initiatives generating passenger growth in our bus division.
In North America, we have experienced our best ever bidding season.

Following a strategic review of our North American operations, we are announcing
the conditional sale of our public transit services. We have concluded that our
public transit operations are no longer core to the Group's North American
strategy.

We aim to make public transport the preferred choice for travel and believe
there is a strong correlation between the quality of service we provide to our
customers and the morale of our employees.  We regularly seek the views of our
customers and employees to help us improve the quality of the services offered
to our customers.

We will be working closely with the Department for Transport ('DfT') and
Transport for London on their bus and rail strategy.  Following the announcement
that London is to host the Olympics in 2012, we look forward to working with the
newly formed Olympic Transport Authority to develop a comprehensive transport
strategy for this event.


Board Changes

After four years on the Board, Tim Stevenson will be retiring in September.  I
would like to thank Tim for his contribution over this period.  He has brought
great counsel and strategic input to the Board and on behalf of all my
colleagues I wish him well for the future.  Barry Gibson will be taking over the
role of senior independent director.


Results

Revenue for the six months to 30 June 2005 was £1,077.7 million (2004: £1,157.9
million*).  Normalised operating profit was £67.3 million (2004: £53.2 million
*).  Normalised profit before tax increased to £58.1 million (2004: £39.4 
million*).

Normalised diluted earnings per share were up 44.9% to 31.3 pence (2004: 21.6
pence*). Operating cash flow before one-off items during the first six months
was £106.2 million (2004:  £127.8 million).  Net debt at 30 June was £143.3
million (31 December 2004:  £136.6 million).

An interim dividend of 10 pence per share, an increase of 7% over last year's
interim dividend of 9.35 pence per share, will be paid on 7 October 2005 to
shareholders on the register on 9 September 2005.


Current trading

Today's results reflect the excellent progress the Group has made over the six
month period.  We are focused on improving the quality and performance of our
businesses.  We will continue to invest in the facilities, fleet and customer
service initiatives that underpin our strategy of attracting more people to our
services through our improved service offering.

It is too early to assess any impact recent terrorist activity may have on the
discretionary travel market.  Given our financial resilience and excellent cash
generation, we remain confident in our prospects for the year. Our track record
of consistent growth and our low debt level place us in a strong position to
continue to invest in our businesses. Shareholder value will continue to be
enhanced through a combination of our dividend policy, the buyback programme and
careful investment in acquisitions.



Chief Executive's Review of Operations

Coaches

The coach division provides Britain's only scheduled national coach network and
services to more than 1,200 destinations.  Eurolines offers value for money
European travel by coach.

Revenue was £91.7 million (2004:  £87.8 million*) and normalised operating
profit was £4.1 million (2004: £2.1 million*.)

Our coach division goes from strength to strength. Passenger numbers rose by
over 5% as we have enhanced the overall coach network. We have improved the
quality of our fleet through the introduction of state-of-the-art vehicles which
currently operate on the Birmingham, Bristol, Cheltenham and Gloucester routes.
We will continue to roll out our 'Wow' coaches to other areas of the network.

We have extended the use of dynamic pricing. We have repeated successful
initiatives such as our £9 'Go Anywhere' promotion and also introduced new
pricing offers such as the 'Million Seat Sale'.  These initiatives have been
promoted by national advertising campaigns.

One in four tickets is now sold via the internet. Our m-Ticket solution enables
passengers to receive ticket reservations directly on their mobile phones.

Good progress has been made in the development of a new landmark coach station
in Birmingham and construction is expected to commence in 2006. Working in
partnership with BAA, construction has already started on improving the Heathrow
Central Bus Station which will include improved waiting and refreshment
facilities. We will be taking over the management of this new facility.

We have been working closely with vehicle manufacturers and the Mobility and
Inclusion Unit of the DfT to develop a coach which complies with the new
Disability Discrimination Act ('DDA') legislation.  In September we will launch
our new bespoke DDA compliant vehicle with a front end lift for wheelchairs.
These vehicles will be the first of their kind in Europe and will be trialled
during Autumn on a number of routes before going into full service in 2006. This
will mark the introduction of the first wheelchair accessible coaches in the UK.


Buses

The bus division operates over 1,800 buses in the West Midlands, Dundee and
London.  We also operate the Midland Metro, the light rail service in the West
Midlands.

Revenue was £127.0 million (2004: £115.5 million*) with operating profit of
£18.2 million (2004: £19.6 million*).  This division incurred a one-off £2.1
million charge as a result of the introduction of IFRS.

We have experienced a reduction in the number of concessionary travellers
through changes in the scheme. However, we welcome the announcement by the
Chancellor in March this year of the new national concessionary fare scheme
which was introduced early in the West Midlands on 24 July. The closure of the
Rover plant at Longbridge has also impacted on our performance in the first
half.

New initiatives such as Premier Bus and Saver Bus have been successful in
growing patronage. Premier Bus, a high quality limited stop commuter bus
service, has experienced double digit growth after six months.  On the back of
significant growth, our Saver Bus service will be extended to North Solihull.
Working in partnership with Birmingham City Council, we are developing further
new initiatives to improve the quality of services in the West Midlands to
attract more people to public transport.

To improve our quality of service, we have centralised our customer after-sales
team and implemented a series of passenger research initiatives. We continue to
invest in new technology; automatic vehicle location technology has been
installed on over 300 Birmingham buses, enabling the provision of real-time
information for our passengers. In addition we continue to invest in the safety
and security of our employees and passengers through the installation of '
crystaleyes', which monitors on-board behaviour and further development of the
Operation Safer Travel initiative.

Our recruitment drive in Poland has resulted in 300 drivers joining our
workforce which has significantly improved the reliability of our services. A
further 50 will be joining our team shortly. Nearly 70% of all our bus drivers
are NVQ2 qualified or currently in training to achieve the qualification.

In London, the Travel London Walworth bus garage was opened by the Mayor of
London in February.  In June, we extended our London bus operations through the
acquisition of the bus division of Tellings Golden Miller.  This added a further
181 buses to the Travel London fleet and increases our London market share to
nearly 5%. We look forward to growing this business further.

In Dundee, a new cross city link was funded by the Scottish Executive through
£1.3 million of 'Kickstart' funding.  Travel Dundee continues to perform well.


Trains

We operate c2c, Central Trains, Gatwick Express, Midland Mainline, 'one'
including the Stansted Express, Silverlink, Great Northern and Wessex Trains
franchises.

The Trains division achieved revenue of £739.3 million (2004: £842.0 million*)
and operating profit of £27.1 million (2004: £15.0 million*).  These results
have been achieved on the back of continued passenger growth resulting from the
improved punctuality and reliability of our services. We are pleased to report
passenger growth of 4% for the period.

Our concerted focus on improving operational performance has resulted in the
Group currently running 7 of the UK's top 9 performing train operating
companies.  In the SRA's latest Quarterly Performance Figures, Midland Mainline
('MML') and 'one' intercity were placed first and second amongst long distance
operators.  In addition, we ran 4 of the top 5 peak-time operators in London and
the South East.

We continue to work closely with Network Rail on improving the operating
environment through joint performance improvement plans and integrated control
centres.  This has already led to significantly better performance at MML and
Wagn.

At MML, our new Meridian four-car trains have continued to perform well and are
currently the most reliable diesel fleet on the UK network.  At the beginning of
July the first of the nine-car Meridian trains were introduced into service.
Recent National Passenger Survey results have confirmed that MML has increased
customer satisfaction levels from 74% to 85% year-on-year.  With Sheffield being
a major terminal for MML, we are working with major stakeholders in the region
on the redevelopment of Sheffield station, including a new Travel Centre.

We continue to integrate the operations of 'one' and have achieved improved
punctuality and reliability scores on the franchise. We have started to deliver
a major train refurbishment programme,  provided new timetables and introduced
new ticketing technology.  During the coming months, a new Customer Service
Academy will be opened in Stratford, east London.

Our c2c, Silverlink and Wagn franchises have all seen good revenue growth,
despite Silverlink County losing its services north of Northampton to allow West
Coast Modernisation work to be completed.

Gatwick Express had a good six months with increased traffic at the airport.
For the fourth time running, Gatwick was awarded top place in the SRA's National
Passenger Survey Spring 2005 customer satisfaction scores.

Despite being an operationally complex franchise to run, Central Trains has
achieved its best performance since July 2000, through closer working with
Network Rail and greater collaboration on the new Midlands integrated control
centre.  Our Wessex Trains franchise continues to perform well and build on its
excellent local stakeholder relationships.

Following receipt in early June of the Invitations to Tenders for both the
Greater Western and Thameslink/GN franchises, we are preparing our bids for
submission in September. We are focused on delivering bids which meet the DfT's
objective of value for money and quality performance.

We continue to work closely with the DfT on the franchise remapping,
particularly the future of the Central Trains, MML and Silverlink franchises.


North America

Following a strategic review of our North American operations, we have concluded
that our public transit operations ('ATC') are no longer core to the Group's
North American strategy. Today, we are announcing the conditional sale of ATC to
Connex for cash consideration of US$93 million, before working capital and other
completion adjustments. ATC provides public transit passenger services operating
in 50 cities and 18 American states.  In the year ended 31 December 2004, ATC
made a normalised operating profit of £7.1 million (US$13.1 million) on turnover
of £152.1 million (US$279.9 million). Net assets as at that date were £115.5
million (US$221.8 million).  The impairment charge at 30 June 2005 is £60.0
million (US$112.6 million). Connex are looking to expand further in the public
transit market and we believe that these operations will continue to be
developed under their ownership.  We would like to take this opportunity to
thank ATC's employees for their commitment to the Group during our ownership.
The sale proceeds will be used to fund the future development of the Group's
North American school bus operations.  The transaction is expected to be
completed in September.

Revenue was £123.8 million (2004:  £115.9 million*) and operating profit was
£22.6 million (2004:  £20.6 million*).

During the period we experienced good growth in our student transport division
whilst maintaining operating margins. This was achieved following a successful
bid season in 2004 and further organic growth from the development of existing
contracts. During this year's bidding season we won 9 new contracts and
significantly extended a number of other contracts. In addition we were awarded
a conversion in Iowa.  We entered new markets in Rhode Island, Massachusetts and
Connecticut.

At the beginning of July, we extended our presence in Ontario through the
acquisition of Aboutown Transportation which added an additional 140 routes to
our business. We believe that proposed changes to the funding for transport by
the Canadian Government will prove beneficial in the future. We are actively
seeking further school bus acquisitions in both Canada and the United States as
we focus on the growth of our student bus division.

We continue to improve efficiency in the business through our re-engineering
initiative to increase both productivity and service quality. During the second
half of the year we will be relocating our school bus headquarters from Austin,
Texas to Chicago, Illinois as we continue to grow our operations in the north
east region of the country.


Phil White, Chief Executive
28 July 2005

                                    - ENDS -


Finance Director's Review

Half year at a glance

I am pleased to report that the Group has produced another strong set of
results. The Group achieved 26.5% growth in normalised** operating profit, up to
£67.3m (2004: £53.2m*). Normalised** diluted earnings per share were 31.3p
(2004: 21.6p*), an increase of 44.9%. The Group continued to generate strong
operating cash flow across all its divisions and in the six months to 30 June
2005, net debt increased by only £6.7m to £143.3m despite buying back shares for
consideration of £29.3m.

*    As restated for the transition to IFRS

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


UK Coach

Our coach operations continue to deliver strong growth, with normalised**
operating profit increasing to £4.1m (2004: £2.1m*). Innovative promotions and
competitive pricing, illustrated by the 'Million Seat' promotion and best value
fares respectively, drove patronage up by over 5%. Reducing costs through the
increased use of direct sales and the disposal of our low margin Heathrow
Airport airside operation helped increase the margin to 4.5% (2004: 2.4%*). The
seasonality of this operation means that the majority of the profit is earned in
the second half of the year.


UK Bus

Patronage growth in our UK Bus division remains challenging, with concessionary
fare passengers falling year-on-year. Revenue excluding Travel London increased
by £2.3m but was offset by increased driver costs, pension contributions and
accident claims costs. Normalised** operating profit reduced by £1.4m to £18.2m
(2004: £19.6m*) primarily because of a £2.1m share based payment charge in 2005
for the final appropriation of shares from the WMT Share Incentive Plan. Driver
costs rose as we invested in our workforce to maintain our high frequency
network though the recruitment of 300 drivers from Poland. The Travel London
operations acquired from Connex in February 2004 are trading ahead of our
expectations. The acquisition on 17 June 2005 of the London bus operations of
Tellings Golden Miller doubles our market share and will make a solid
contribution in the second half of the year. We are in negotiations with our two
joint venture partners to acquire all the shares in Altram, the company which
owns our light rail operation Midland Metro.


UK Trains

Normalised** operating profit in UK Trains increased significantly to £27.1m
(2004: £15.0m*) as we benefited from the changes to our portfolio that have
occurred over the past 15 months. We commenced operation of the 'one' franchise
on 1 April 2004 and both Central Trains and ScotRail were loss making in the
three months to 31 March 2004, whereas Central is now generating a profit under
its franchise extension. Normalised operating margin improved to 3.7% (2004:
1.8%*). Our franchises have consistently been at the top of the TOC league
tables in terms of performance, which helps drive passenger growth. Due to the
blockade that was in place at St Pancras until May 2005, growth remained
challenging at Midland Mainline. Nevertheless, patronage growth of 4% across the
division has enabled us to offset increases in the cost of diesel, franchise bid
costs and the costs of introducing new fleets at Midland Mainline, Central
Trains and Silverlink.


North America

In local currency terms, Student Transportation increased normalised** operating
profit to US$42.5m (2004: US$37.5m*). We have successfully grown our revenue by
US$21.8m year on year to US$232.7m. This was achieved whilst maintaining pricing
levels and, as a result, our normalised operating margin improved to 18.3%
(2004: 17.8%*). We continue to focus on driving down costs, particularly in
making more effective use of the fleet. The school summer holiday means that
this operation earns the majority of its profit in the first half of the year.

Our Public Transit business produced normalised** operating profits of US$5.1m
(2004: US$5.6m*). We have reviewed the future strategy of the Group and have
concluded that our US Public Transit operations are non core and will be
disposed of to Connex for cash consideration of $93.0m (before working capital
adjustments). In accordance with IFRS5, 'Non-current assets held for sale and
discontinued operations', the trading results for Public Transit have been
reclassified into one line in the income statement, and the assets and
liabilities disclosed as held for sale.


Central functions

The cost of the Group's Central Functions increased to £4.7m (2004: £4.1m*) as a
result of increased charges for share based payments and professional fees.


Share of operating losses of associates

The Group's share of operating losses from associates was £4.4m (2004: £4.3m).

Eurostar UK has maintained its strong year-on-year revenue growth following the
opening of the first section of the high speed Channel Tunnel Rail Link. However
the outturn continues to lag behind the benchmark set in our operating contract,
and our share of the operating loss was £4.3m (2004: £4.2m).

Our share of the operating loss at Midland Metro remained £0.1m (2004: £0.1m).


Finance cost

Interest payable benefited from the lower levels of net debt and the termination
of a US$200m interest rate swap as reported in our Annual Report and Accounts
2004. Together this reduced the finance cost to £4.8m (2004: £9.5m*). EBITDA
finance cover before discounting improves to 22.4 times (2004: 9.4 times),
compared to the full year 2004 figure of 12.4 times.


Goodwill, Intangibles and Exceptional items

The impairment charge for the six months on the goodwill arising from the
acquisition of Prism Rail PLC in December 2000 was £16.6m (2004: £16.5m).
Although IFRS3, 'Business Combinations' prohibits the amortisation of goodwill,
the train franchises acquired with Prism have finite lives, and therefore the
goodwill will be impaired over the remaining cash flows.

Amortisation of £1.7m (2004: £0.7m) was charged on the intangible asset that
arises from the Group's right to operate its rail franchises and on contracts
acquired in UK Bus and North America.

Exceptional costs of £0.3m arose in the North America Bus division, where we
have started the relocation of our head office functions from Austin, Texas to
Chicago, Illinois in a program that will be completed in the second half of the
year. The exceptional costs of £5.3m in 2004 arose in the UK Trains division.


Discontinued operations

As disclosed in the Annual Report and Accounts 2004, the Group's remaining bus
operations in Australia are now in administration and are no longer controlled
by the Group. The division was cash neutral for the Group on an operating cash
flow basis in the six months to 30 June 2005.

Our Public Transit business has been reclassified as discontinued in the first
half of 2005. The charge to the income statement of £57.5m comprises the profit
before tax for the six months ended 30 June 2005 of £2.5m, offset by the
impairment charge on the goodwill arising on the acquisition of £60.0m. The net
assets of £47.4m have been disclosed as non current assets and liabilities
classified as held for sale.


Tax

The tax charge on normalised profit before tax of £58.1m (2004: £39.4m) was
£14.8m (2004: £9.5m). Before the reclassification of the results for the
discontinued Public Transit and Australia Bus businesses, this represents an
effective tax rate of 24.5% (2004: 22.2%). This tax rate principally reflects
the benefit of low effective tax rates on overseas earnings and the utilisation
of brought forward losses.


Cash flow

The Group generated £106.2m of operating cash flow before one-offs (2004:
£127.8m) from normalised operating profit of £67.3m (2004: £53.2m).


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

Normalised operating profit                            4.1      18.2      27.1        22.6        (4.7)     67.3
Normalised operating profit from discontinued            -         -         -         2.7           -       2.7
operations
Share based payments                                     -       2.1       0.1           -         0.8       3.0
Depreciation and profit/ (loss) on disposal            2.4       5.5       6.7        10.9         0.2      25.7
Amortisation of fixed asset grants                       -         -      (0.3)          -           -      (0.3)
EBITDA                                                 6.5      25.8      33.6        36.2        (3.7)     98.4
Working capital movement                               1.1      (0.1)     20.1         2.9        12.9      36.9
Eurostar                                                 -         -         -           -        (1.7)     (1.7)
Net cash inflow from operations                        7.6      25.7      53.7        39.1         7.5     133.6
Net capital expenditure                               (0.6)     (2.1)    (13.1)      (12.6)        1.0     (27.4)
Operating cash flow before one-offs                    7.0      23.6      40.6        26.5         8.5     106.2
Other items                                                                                                 (1.1)
Operating cash flow                                                                                        105.1

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 generated on-going operating cash flow in excess of their
normalised operating profit. 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. The cash
inflow for Central Functions is caused by the cash settlement of foreign
exchange swaps and fuel swaps.

Net capital expenditure was £27.4m (2004: £18.1m), including £7.3m (2004: £6.3m)
of additions purchased under finance leases. In UK Trains, £5.0m of the capital
expenditure was invested in our 'one' franchise which commenced in 2004. In
North America, £12.2m of the capital expenditure arose on the acquisition of 670
vehicles for student transportation.

Other items give rise to a net outflow of £1.1m comprising the North American
reorganisation costs charged in the period and certain UK Trains exceptional
costs that were charged to the income statement in 2004.

After other investing activities, financing and tax, the net funds inflow was
£5.7m, before a foreign exchange translation effect of £12.4m. Even after
foreign exchange, net debt increased by only £6.7m to £143.3m.

We anticipate the second half of the year will see an increase in the Group's
net debt. Firstly, around two-thirds of the Group's capital expenditure program
is projected to occur in the second half of the year. There will be an intake of
approximately 490 vehicles (£16.0m) in North America for the new school year and
we will continue to invest in fleet and other facilities in both our UK Bus and
UK Trains divisions. Additionally, the UK Trains division is expected to settle
outstanding performance payments and profit share monies with the SRA.


Rail franchises

The Group is on the shortlist for the Thameslink/GN franchise and the Greater
Western franchise, and we will be submitting bids in the second half of the
year. Contractually two more of the Group's existing rail franchises could be
re-franchised in 2006. Whilst it is therefore difficult to predict the level of
profit beyond 2006, our financial position will remain robust whatever the
outcome.


Accounting policies

The Group's Interim Report for the six months to 30 June 2005 has been prepared
using accounting policies that comply with International Accounting Standards ('
IAS') and International Financial Reporting Standards ('IFRS'). These accounting
policies were used for the preparation of the restated IFRS financial
information for the year ended 31 December 2004, issued in a press release on 27
June 2004. The accounting policies and the IFRS restatement of the 2004 results
are both available on the group's website, www.nationalexpressgroup.com.

We expect to use consistent accounting policies for the preparation of the
results for the year ending 31 December 2005. However, there is a possibility
that the accounting policies may need to be updated because interpretations may
be issued by the International Financial Reporting Interpretations Committee ('
IFRIC') that will be mandatory, new standards may yet be issued by the
International Accounting Standards Board ('IASB') that will be mandatory, or the
interpretation of existing IFRS may evolve.


Adam Walker

Finance Director

28 July 2005



NATIONAL EXPRESS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2005

                                                Unaudited six months to 30 June                       Unaudited

                           Total before                          Total before              
                              goodwill,    Goodwill,                goodwill,    Goodwill,
                           intangible & intangible &               intangible intangible &               Year to 
                            exceptional  exceptional            & exceptional  exceptional                31 Dec
                                  items        items      Total         items        items     Total       Total
                                   2005         2005       2005         2004*        2004*      2004*      2004*        

                         Note        £m           £m         £m            £m           £m         £m         £m
Revenue                    4    1,077.7            -    1,077.7       1,157.9            -    1,157.9    2,354.5
Operating costs before         (1,010.4)           -   (1,010.4)     (1,104.7)           -   (1,104.7)  (2,211.2)
goodwill, intangible
amortisation & exceptional
items
Goodwill impairment        5          -        (16.6)     (16.6)            -        (16.5)     (16.5)     (33.3)
Intangible amortisation    5          -         (1.7)      (1.7)            -         (0.7)      (0.7)      (2.4)
Exceptional items          6          -         (0.3)      (0.3)            -         (5.3)      (5.3)      (7.7)
Total operating costs          (1,010.4)       (18.6)  (1,029.0)     (1,104.7)       (22.5)  (1,127.2)  (2,254.6)
Group operating profit             67.3        (18.6)      48.7          53.2        (22.5)      30.7       99.9
Loss on disposal of                   -            -          -             -            -          -       (0.9)
non-current assets
Profit from operations             67.3       (18.6)       48.7          53.2       (22.5)       30.7       99.0
Share of post tax results          (4.4)           -       (4.4)         (4.3)           -       (4.3)      (3.4)
from associates
Finance income             7        6.0            -        6.0           5.1            -        5.1       13.2
Finance costs              7      (10.8)           -      (10.8)        (14.6)           -      (14.6)     (30.9)
Profit before tax                  58.1        (18.6)      39.5          39.4        (22.5)      16.9       77.9
Tax expense                8      (14.8)         0.1      (14.7)         (9.5)         2.3       (7.2)     (22.8)

Profit for the period from         43.3        (18.5)      24.8          29.9        (20.2)       9.7       55.1
continuing operations
(Loss)/profit for the      9        2.5        (60.0)     (57.5)          4.1          0.5        4.6        3.5
period from discontinued
operations

(Loss)/profit for the              45.8        (78.5)     (32.7)         34.0        (19.7)      14.3       58.6
period
(Loss)/profit attributable         45.8        (78.5)     (32.7)         34.9        (19.7)      15.2       62.2
to equity shareholders
Loss attributable to                  -            -          -          (0.9)           -       (0.9)      (3.6)
minority interests
                                   45.8        (78.5)     (32.7)         34.0        (19.7)      14.3       58.6

(Loss)/earnings per share:
- basic (loss)/earnings                                   (24.0p)                               11.3p      45.7p
  per share
- diluted (loss)/earnings per                             (23.7p)                               11.0p      45.0p
  share

Earnings per share from continuing
operations:
- basic earnings per share                                 18.2p                                 7.2p      40.5p
- diluted earnings per                                     17.9p                                 7.0p      39.9p
  share
 

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1. In addition, results for the six months
ended 30 June 2004 are restated for change in revenue recognition. See note 2.

Dividends of £28.1m were paid during the period (six months to 30 June 2004:
£23.6m; year to 31 December 2004: £36.4m).  Dividends of £13.5m were proposed
for approval during the period (six months to 30 June 2004: £12.8m; year to 31
December 2004: £40.9m).



NATIONAL EXPRESS GROUP PLC

GROUP BALANCE SHEET
At 30 June 2005
                                                         Note         Unaudited      Unaudited      Unaudited
                                                                        30 June        30 June         31 Dec
                                                                           2005          2004*          2004*

                                                                             £m             £m             £m
Assets
Non-current assets
Goodwill                                                                  253.0          379.9          338.7
Intangible assets                                                          17.1           11.7           14.1
Property, plant and equipment                                             369.9          383.4          354.9
Financial assets/Other investments                       13                15.3           10.2           10.5
Other receivables                                                           9.6            2.7            9.1
Deferred tax asset                                                         11.6           18.8           18.3
                                                                          676.5          806.7          745.6
Current assets
Inventories                                                                14.8           18.5           16.1
Trade and other receivables                                               233.0          260.4          309.7
Financial assets - Other                                 13                 6.8              -              -
Cash and cash equivalents                                                 135.3          182.5          143.1
                                                                          389.9          461.4          468.9
Disposal group assets classified as held for sale        9                 72.8              -           33.8
Total assets                                                            1,139.2        1,268.1        1,248.3
Non-current liabilities
Financial         - Borrowings                                           (257.5)        (296.0)        (251.8)
liabilities
                  - Other                                13               (10.9)             -              -
Deferred tax liability                                                     (6.5)          (2.6)          (4.5)
Other non-current liabilities                                              (2.7)          (4.3)          (3.0)
Retirement benefit obligations                           14               (40.9)         (68.5)         (65.1)
Provisions                                                                (54.3)         (56.5)         (47.2)
                                                                         (372.8)        (427.9)        (371.6)
Current liabilities
Trade and other payables                                                 (468.0)        (543.0)        (510.9)
Financial         - Borrowings                                            (22.1)         (29.4)         (30.3)
liabilities
                  - Other                                13               (11.0)             -              -
Current tax liabilities                                                   (31.5)         (18.6)         (36.8)
Provisions                                                                (12.1)         (15.6)         (25.0)
                                                                         (544.7)        (606.6)        (603.0)
Liabilities directly associated with disposal group      9                (25.4)             -           (6.9)
assets classified as held for sale
Total liabilities                                                        (942.9)      (1,034.5)        (981.5)
Net assets                                                                196.3          233.6          266.8
Shareholders' equity
Ordinary shares                                                             6.8            6.9            7.0
Share premium account                                    15                49.6           45.8           47.5
Own shares                                               15                (5.1)          (5.3)          (5.1)
Treasury shares                                          15                (3.5)             -              -
Other reserves                                           15                15.8           16.2           15.4
Cumulative translation adjustments                       15                 1.9           (0.1)          (2.1)
Retained earnings                                        15               130.8          166.6          203.2
Total shareholders' equity                                                196.3          230.1          265.9
Minority interest in equity                                                   -            3.5            0.9
Total equity                                                              196.3          233.6          266.8

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1. In addition, results for the six months
ended 30 June 2004 are restated for change in revenue recognition. See note 2.





NATIONAL EXPRESS GROUP PLC

GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2005
                                                            Note       Unaudited       Unaudited      Unaudited
                                                                   six months to   six months to        year to
                                                                         30 June         30 June         31 Dec
                                                                            2005           2004*          2004*

                                                                              £m              £m             £m
Net cash inflow from operating activities
Net (loss)/profit                                                          (32.7)           15.2           62.2
Minority interest                                                              -            (0.9)          (3.6)
Loss/(profit) from discontinued operations (excluding op                    60.2            (0.1)           5.9
profit)
Tax expense                                                                 14.7             7.2           22.8
Net finance cost                                                             4.8             9.5           17.7
Loss on disposal of non-current assets                                         -               -            0.9
Depreciation of property, plant & equipment                                 26.1            33.6           64.2
Goodwill amortisation and impairment                                        16.6            16.5           33.3
Intangible asset amortisation                                                1.7             0.7            2.4
Amortisation of fixed asset grants                                          (0.3)           (5.6)          (6.5)
Profit on disposal of fixed assets                                          (0.4)           (0.3)          (0.6)
Share of operating losses of associates                                      4.4             4.3            3.4
Share-based payments                                                         3.0             0.4            0.6
Movement in pension liabilities                                             (2.0)            0.3           (1.1)
(Increase)/decrease in inventories                                             -            (1.0)           0.7
Decrease in receivables                                                     72.0            87.5           18.7
(Decrease)/increase in payables                                            (35.7)            6.5           34.7
Increase/(decrease) in provisions                                            0.1            (3.2)          (1.6)
Cash generated from operations                                             132.5           170.6          254.1
Tax paid                                                                   (10.3)           (3.1)          (3.2)
Net cash from operating activities                                         122.2           167.5          250.9
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired                       (18.6)           18.9           12.6
Deferred consideration for businesses (acquired)/disposed                   (0.3)           (4.5)          (4.5)
Purchase of property, plant and equipment                                  (23.1)          (16.0)         (69.2)
Proceeds from disposal of property, plant and equipment                      3.0             1.7           18.8
Payments in respect of businesses disposed/closed                              -            (0.8)          (1.5)
Receipts from disposal of businesses, net of cash disposed                  (1.5)              -           24.7
Interest received                                                            6.0             5.3           13.1
(Payments for) /receipts from (purchase) /sale of shares                       -            (0.1)           0.1
for employee schemes
Net cash (used in)/from investing activities                               (34.5)            4.5           (5.9)
Cash flows from financing activities
Proceeds from issue of ordinary shares                                       2.1             0.7            2.5
Purchase of treasury shares                                                 (3.5)              -              -
Share buy back                                                             (25.8)              -              -
Interest paid                                                              (19.8)          (15.1)         (31.6)
Receipt/(repayment) of maintenance bond at ScotRail                            -            24.0          (18.7)
Finance lease principal (payments)/receipts                                 (7.9)           29.7          (15.8)
Repayment of loan notes                                                     (6.5)           (0.9)          (0.9)
Loans repaid                                                               (11.5)         (100.6)         (93.1)
Dividends paid                                                             (28.1)          (23.6)         (36.4)
Net cash used in financing activities                                     (101.0)          (85.8)        (194.0)
(Decrease)/increase in cash and cash equivalents                           (13.3)           86.2           51.0
Opening cash and cash equivalents                                          147.2            96.8           96.8
(Decrease)/increase in cash and cash equivalents                           (13.3)           86.2           51.0
Exchange                                                                     1.4            (1.4)          (0.6)
Closing cash and cash equivalents                             16           135.3           181.6          147.2

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1. In addition, results for the six months
ended 30 June 2004 are restated for change in revenue recognition. See note 2.





GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the six months ended 30 June 2005
                                                                       Unaudited       Unaudited       Unaudited
                                                                   six months to   six months to         year to
                                                                         30 June         30 June          31 Dec
                                                                            2005           2004*           2004*

                                                                              £m              £m              £m
Net exchange adjustments offset in reserves net of tax                       4.0            (0.1)           (2.1)
Balances recognised on adoption of IAS 39 net of tax                       (12.8)              -               -
Cash flow hedges net of tax
- net fair value gains                                                       8.6               -               -
- reclassified and reported in profit                                       (2.2)              -               -
- reclassified and reported in translation reserve                          (0.3)              -               -
Deferred tax on share based payments                                         2.0             0.3             0.8
Actuarial gains/(losses)                                                    22.2            (4.9)           (2.3)
Tax on actuarial gains/(losses)                                             (6.1)            1.5            (0.2)
Net gains/(losses) not recognised in income statement                       15.4            (3.2)           (3.8)
(Loss)/profit for the financial period                                     (32.7)           15.2            62.2
Total recognised (expense)/income for the period                           (17.3)           12.0            58.4

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1. In addition, results for the six months
ended 30 June 2004 are restated for change revenue recognition. See note 2.





SEGMENTAL ANALYSIS

For the six months ended 30 June 2005
                                                       Unaudited six months to                Unaudited year to
                                                               30 June                           31 December
Analysis by class and geography of            Revenue   Operating    Revenue   Operating      Revenue  Operating
business                                                   result                 result                  result
                                                 2005        2005      2004*       2004*        2004*      2004*
                                                                                                
                                                   £m          £m         £m          £m           £m         £m
UK Bus                                          127.0        18.2      115.5        19.6        239.8       41.6
UK Trains                                       739.3        27.1      842.0        15.0      1,712.1       61.3
UK Coach                                         91.7         4.1       87.8         2.1        195.6       19.3
Intercompany sales elimination                   (4.1)          -       (3.3)          -         (6.2)         -
UK operations                                   953.9        49.4    1,042.0        36.7      2,141.3      122.2
North America Bus                               123.8        22.6      115.9        20.6        213.2       29.6
Central functions                                   -        (4.7)         -        (4.1)           -       (8.5)
Normalised profit from continuing             1,077.7        67.3    1,157.9        53.2      2,354.5      143.3
operations
Goodwill impairment                                         (16.6)                 (16.5)                  (33.3)
Intangible amortisation                                      (1.7)                  (0.7)                   (2.4)
Exceptional items                                            (0.3)                  (5.3)                   (7.7)
Group operating profit                                       48.7                   30.7                    99.9
Loss on disposal of non-current assets                          -                      -                    (0.9)
Profit from operations                                       48.7                   30.7                    99.0
Share of post tax results from associates                    (4.4)                  (4.3)                   (3.4)
Net finance costs                                            (4.8)                  (9.5)                  (17.7)
Profit before tax                                            39.5                   16.9                    77.9
Tax expense                                                 (14.7)                  (7.2)                  (22.8)
Profit for the year from continuing                          24.8                    9.7                    55.1
operations
(Loss)/profit from discontinued operations                  (57.5)                   4.6                     3.5
(Loss)/profit for the period                                (32.7)                  14.3                    58.6

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1. In addition, results for the six months
ended 30 June 2004 are restated for change in revenue recognition. See note 2.

Revenues include £3.4m property rentals receivable (2004 interim: £4.5m; 2004
full year: £8.5m).  Intercompany sales only occur between the Group's UK
Divisions.



NATIONAL EXPRESS GROUP PLC

NOTES TO THE INTERIM ACCOUNTS

For the six months ended 30 June 2005



1.        Basis of preparation

As an EU-listed company National Express Group PLC has been required to adopt
International Financial Reporting Standards ('IFRS') with effect from 1 January
2005. The results for the six months ended 30 June 2005 represent the Group's
first interim financial statements prepared in accordance with its accounting
policies under IFRS. The Group's first IFRS Annual Report and Accounts will be
for the year ended 31 December 2005. Previously the Group reported under UK
generally accepted accounting policies ('UK GAAP'). Detailed UK GAAP to IFRS
reconciliations of equity for the date of transition, 31 December 2004, 30 June
2004 and 1 January 2005, and of profit for the six months ended 30 June 2004 and
for the year ended 31 December 2004 were issued on 27 June 2005 and are
available on the Group's website. A revised summary of the Group's accounting
policies under IFRS is also published on the Group's website.

These interim financial statements have been prepared by the Group using those
standards it expects to be endorsed and applicable when the IFRS accounts are
prepared for the year ending 31 December 2005, specifically the amendment to IAS
19, 'Employee Benefits', allowing actuarial gains and losses to be recognised in
full through reserves. These standards are subject to ongoing review and
endorsement by the European Union or possible amendment by interpretive guidance
from the International Accounting Standard Board ('IASB') and the International
Financial Reporting Interpretations Committee ('IFRIC') and are therefore still
subject to change.

The interim results are unaudited but have been reviewed by the auditors. The
financial information 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 2004 or 1 January 2005 have been extracted from the
IFRS restatements issued on 27 June 2005 which were themselves based on the
Annual Report and Accounts 2004 which has been filed with the Registrar of
Companies. The audit report on the Annual Report 2004 was unqualified and did
not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.



2.        Change in UK GAAP accounting policy for revenue recognition (as
disclosed in 2004 Annual Report and Accounts)

The 30 June 2004 UK GAAP balance sheet prior to IFRS transition has been
restated for a change in revenue recognition accounting policy resulting in an
additional £8.2m recognised as deferred income, and a £2.4m reduction in the
corporation tax liability. After a reduction in revenue and operating profit of
£2.3m, and a reduction in the tax charge of £0.7m, the net effect is to reduce
the Group's profit after tax by £1.6m from £7.8m to £6.2m in the six months
ended 30 June 2004. Net assets and reserves have been reduced by £5.8m at 30
June 2004 and £4.2m at 1 January 2004. This restatement is included in the IFRS
reconciliations issued on 27 June 2005 and is available on the Group's website.



3.        Exchange rates

The most significant exchange rates to the pound for the Group are as follows:
                     Six months to 30 June 2005    Six months to 30 June 2004        Year to 31 Dec 2004
                      Closing rate   Average rate   Closing rate   Average rate    Closing rate   Average rate
US dollar                     1.79           1.88           1.82           1.82           1.92            1.84
Canadian dollar               2.20           2.31           2.43           2.43           2.31            2.38
Australian dollar             2.35           2.42           2.60           2.46           2.45            2.48

If the results for the six months to 30 June 2004 were retranslated at the
average exchange rates for the six months to 30 June 2005, North America would
have achieved normalised operating profit of £20.4m on revenue of £114.0m.



4.        Revenue

The revenue of the Group comprises revenue from road passenger transport, train
passenger services, airport operations and related activities in the UK and
North America.  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 revenue.  During the half year
to 30 June 2005, franchise agreement receipts amounted to £157.2m (2004 interim:
£275.7m; 2004 full year: £497.0m).



5.        Goodwill impairment and intangible amortisation

Goodwill in UK Trains is subject to an annual impairment charge reflecting the
finite life of the rail franchises. The charge for the six months to 30 June
2005 is £16.6m (2004 interim restated: £16.5m; 2004 full year restated: £33.3m).

Other intangible assets in UK Trains are subject to amortisation, which is
charged on a straight-line basis to the end of the franchise, of £1.2m (2004
interim restated: £0.7m; 2004 full year restated: £1.9m). Intangible assets in
North America (representing customer contracts on a school bus acquisition in
2004) have been subject to an amortisation charge of £0.5m (2004 interim
restated: £nil; 2004 full year restated: £0.5m).



6.        Exceptional items

Exceptional items are those items of financial performance that the Group
believes should be separately disclosed to assist in the understanding of the
financial performance achieved by the Group and in making projections of future
results.



6.   Exceptional items (continued)

The exceptional items can be analysed as follows:
                                                            Six months to      Six months to            Year to
                                                             30 June 2005       30 June 2004       31 Dec 2004*

                                                                       £m                 £m                 £m
UK Trains                                                               -                5.3                7.2
UK Bus                                                                  -                  -                0.4
North America                                                         0.3                  -                0.1
Total exceptional charge                                              0.3                5.3                7.7

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

In the six months to 30 June 2005, exceptional costs of £0.3m have been incurred
in the reorganisation of our North American operations.

In the six months to 30 June 2004 and the year to 31 December 2004 UK Trains
exceptional costs were incurred at 'one' (integration of the three legacy Train
Operating Companies ('TOCs') resulted in redundancy charges and start up costs,
together with the cost of the Competition Commission review), Qjump (redundancy,
property and pension charges following the merger) 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). The
balance of exceptional items comprised the cost of reorganisations at UK Bus
(£0.4m) and North America (£0.1m).



7.        Net finance costs

                                                            Six months to      Six months to            Year to
                                                             30 June 2005      30 June 2004*       31 Dec 2004*

                                                                      £m                 £m                 £m
Finance lease interest payable                                       (1.9)              (2.7)              (6.6)
Bank interest payable                                                (8.4)             (11.3)             (23.0)
Other interest payable                                               (0.1)              (0.2)              (0.5)
Unwind of insurance provision discounting                            (0.4)              (0.4)              (0.8)
Finance costs                                                       (10.8)             (14.6)             (30.9)
Bank interest receivable                                              6.0                5.1               13.2
Net finance costs                                                    (4.8)              (9.5)             (17.7)

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.



8.        Taxation

Tax on profit on ordinary activities for the six months to 30 June 2005 has been
calculated on the basis of the estimated annual effective rate for the year
ending 31 December 2005. The tax charge of £14.8m (2004 interim: £9.5m restated;
2004 full year restated: £26.4m) represents an effective tax rate on normalised
profit before tax, for continuing and discontinued operations, of 24.5% (2004
interim restated: 22.2%; 2004 full year restated: 20.0%). It includes overseas
taxation of £4.6m (2004 interim: £3.4m; 2004 full year: £5.4m), and deferred
taxation of £2.9m (2004 interim restated: £1.7m; 2004 full year restated: credit
of £1.1m).



9.        Discontinued operations

The Group's North American Public Transit operations (ATC) will be disposed of
in the second-half of 2005 and have been classified in discontinued operations
at 30 June 2005.  The Group sold National Bus Company (Victoria) Pty Limited,
National Bus Company (Queensland) Pty Limited and Transport Management Group Pty
Limited on 1 October 2004. The Group also announced the voluntary administration
of the Bosnjak Holdings Group (comprising the Group's remaining operations in
Australia) on 31 January 2005. The results of the Group's discontinued
operations are presented below. The results for the Australia Bus & Bosnjak
Group are immaterial in 2005.


                                                                              Six months to 30 June

                                                                 ATC           ATC   Australia Bus &
                                                                                       Bosnjak Group
                                                                2005         2004*             2004*           Total
                                                                                               
                                                                  £m            £m               £m               £m
Revenue                                                         73.7          76.2              35.0           111.2
Operating expenses                                             (71.0)        (73.1)            (33.6)         (106.7)
Operating profit before impairment charges                       2.7           3.1               1.4             4.5
Goodwill impairment                                            (60.0)            -                 -               -
Operating (loss)/profit                                        (57.3)          3.1               1.4             4.5
Finance income                                                     -             -               0.2             0.2
Finance costs                                                   (0.2)         (0.2)             (0.2)           (0.4)
(Loss)/profit before tax from discontinued                     (57.5)          2.9               1.4             4.3
operations
Tax                                                                -           0.5              (0.2)            0.3
Total                                                          (57.5)          3.4               1.2             4.6

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1





9.   Discontinued operations (continued)
                                                                               Year to 31 Dec 2004*
                                                                                   
                                                                                   Australia Bus &  
                                                                            ATC      Bosnjak Group             Total

                                                                             £m                 £m                £m
Revenue                                                                   152.1               62.4             214.5
Operating expenses                                                       (145.0)             (59.9)           (204.9)
Operating profit before impairment charges                                  7.1                2.5               9.6
Goodwill impairment                                                           -              (10.6)            (10.6)
Tangible fixed asset impairment                                               -               (6.1)             (6.1)
Exceptional items                                                          (0.2)                 -              (0.2)
Operating profit/(loss)                                                     6.9              (14.2)             (7.3)
Finance income                                                                -                0.3               0.3
Finance costs                                                              (0.4)              (0.3)             (0.7)
Profit on sale of properties                                                  -                0.8               0.8
Gain on sale of discontinued operations                                       -                8.9               8.9
Profit before tax from discontinued operations                              6.5               (4.5)              2.0
Tax                                                                         1.4                0.1               1.5
Total                                                                       7.9               (4.4)              3.5

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

The major classes of assets and liabilities of discontinued operations measured
at the lower of carrying amount and fair value less costs to sell as at 30 June
2005 and 31 December 2004 are as follows:
                                                                                      At 30 June              31 Dec
                                                                                            2005               2004*

                                                                                              £m                  £m
Assets:
Goodwill                                                                                    36.6                   -
Property, plant and equipment                                                                5.2                25.4
Inventories                                                                                  1.8                 0.2
Receivables                                                                                 29.2                 4.1
Cash                                                                                           -                 4.1
Disposal group assets classified as held for sale                                           72.8                33.8
Liabilities:
Payables                                                                                   (13.0)               (4.2)
Provisions                                                                                 (10.5)                  -
Deferred tax liability                                                                      (1.9)                  -
Interest bearing liabilities                                                                   -                (2.7)
Liabilities directly associated with disposal group assets classified as                   (25.4)               (6.9)
held for sale
Net assets attributable to discontinued operations                                          47.4                26.9

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

Cash flows and (loss)/earnings per share from discontinued operations are as
follows:
                                                            Six months to         Six months to              Year to
                                                                  30 June               30 June               31 Dec
                                                                     2005                 2004*                2004*

                                                                       £m                    £m                   £m
Net cash flows from operating activities                              3.4                   7.8                  9.1
Net cash flows from investing activities                             (1.3)                 (0.1)                24.7
Net cash flows from financing activities                                -                  (1.4)                (2.5)
(Loss)/earnings per share
Basic from discontinued operations                                 (42.2p)                 4.1p                 5.2p
Diluted from discontinued operations                               (41.6p)                 4.0p                 5.1p

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.



10.     Business combinations

On 17 June 2005 the Group acquired 100% of the share capital of TGM Buses
Limited and TGM Middlesex Limited, representing the London bus operations of
Tellings Golden Miller PLC. The Group paid £20.4m cash in consideration for the
investment, and expects to pay a further £0.9m completion adjustment. Total
consideration of £21.5m has been incurred including accrued acquisition costs.

The fair value of identifiable assets and liabilities of the business acquired
are £10.0m, including intangible assets of £4.6m representing the value of
customer contracts acquired with the business, cash of £1.8m and finance leases
of £2.1m giving rise to goodwill of £11.5m. Included in the £11.5m of goodwill
are certain intangible assets that cannot be individually separated from the
acquired business and reliably measured due to their nature. These assets
included in this balance comprise control over the acquired business and
increased scale in our London Bus operations.



10.   Business combinations (continued)

The acquisition became unconditional on 17 June 2005 and under the terms of the
sale and purchase agreement a first draft of the balance sheet acquired was
provided by the vendor on 11 July 2005. Therefore, the fair value adjustments
above are subject to revision in the second half of 2005.

The contribution of the acquired business to the Group's revenue and profit for
the six months to 30 June 2005 has been immaterial.



11.     Dividends paid and proposed

Dividends charged in the period:
                                                                  Six months to   Six months to         Year to
                                                                        30 June         30 June          31 Dec
                                                                           2005           2004*           2004*

                                                                             £m              £m              £m
Ordinary final dividend for 2003 paid of 17.5p per share                      -            23.6            23.6
Ordinary interim dividend for 2004  paid of 9.35p per share                   -               -            12.8
Ordinary final dividend for 2004 paid of 20.65p per share                  28.1               -               -
                                                                           28.1            23.6            36.4

Proposed for approval (not recognised as liability as at period
end)
Ordinary interim dividend for 2004 of 9.35p per share                         -            12.8               -
Ordinary final dividend for 2004 of 20.65p per share                          -               -            28.1
Ordinary interim dividend for 2005 of 10.0p per share                      13.5               -               -

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.



12.     Earnings per share

                                                                  Six months to   Six months to         Year to
                                                                        30 June         30 June          31 Dec
                                                                           2005           2004*           2004*

Basic earnings per share - continuing operations                          18.2p            7.2p           40.5p
Basic (loss)/earnings per share - discontinued operations                (42.2p)           4.1p            5.2p
Basic (loss)/earnings per share - total                                  (24.0p)          11.3p           45.7p
Normalised basic earnings per share                                       31.8p           22.1p           70.4p

Diluted earnings per share - continuing operations                        17.9p            7.0p           39.9p
Diluted (loss)/earnings per share - discontinued operations              (41.6p)           4.0p            5.1p
Diluted (loss)/earnings per share - total                                (23.7p)          11.0p           45.0p
Normalised diluted earnings per share                                     31.3p           21.6p           69.3p

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

Basic earnings per share is calculated by dividing the loss attributable to
equity shareholders of £32.7m  (2004 interim: profit of £15.2m; 2004 full year:
profit of £62.2m) by the weighted average number of ordinary shares in issue
during the period, excluding those held by employees' share ownership trusts and
held as treasury shares 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 Dec
                                                                           2005           2004*           2004*
Basic weighted average shares                                       136,140,675     135,226,325     136,166,921
Adjustment for dilutive potential ordinary shares                     2,054,305       2,956,871       2,039,292
Diluted weighted average shares                                     138,194,980     138,183,196     138,206,213

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

The normalised basic and normalised diluted earnings per share have been
calculated in addition to the basic and diluted earnings per shares required by
IAS 33 since, in the opinion of the Directors, they reflect the financial
performance of the core business more appropriately.





12. Earnings per share (continued)

Normalised profits for the financial period are:
                                                                   Six months to        Six months         Year to
                                                                    30 June 2005  to 30 June 2004*    31 Dec 2004*      
                                                                            
                                                                              £m                              £m
                                                                                              £m
(Loss)/profit attributable to equity shareholders                          (32.7)           15.2            62.2
(Profit)/loss from discontinued operations                                  57.5            (5.5)           (7.1)
Profit from continuing operations                                           24.8             9.7            55.1
Goodwill impairment on continuing operations                                16.6            16.5            33.3
Intangible asset amortisation                                                1.7             0.7             2.4
Exceptional items                                                            0.3             5.3             7.7
Loss on disposal of non-current assets                                         -               -             0.9
Tax relief on goodwill and exceptional items                                (0.1)           (2.3)           (3.6)
Normalised profit attributable to equity shareholders                       43.3            29.9            95.8

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

Profit/loss from discontinued operations comprises the results from note 9 and
minority interests of £0.9m in the six months to 30 June 2004 and £3.6m in the
year to 31 December 2004.


                                                             Six months ended     Six months ended           Year ended

                                                                 30 June 2005        30 June 2004*         31 Dec 2004*
                                                            Basic     Diluted     Basic    Diluted      Basic   Diluted

                                                              eps         eps       eps        eps        eps       eps

                                                                p           p         p          p          p         p
(Loss)/profit attributable to equity shareholders           (24.0)      (23.7)     11.3       11.0       45.7      45.0
Loss/(profit) from discontinued operations                   42.2        41.6      (4.1)      (4.0)      (5.2)     (5.1)
Profit from continuing operations                            18.2        17.9       7.2        7.0       40.5      39.9
Goodwill impairment on continuing operations                 12.2        12.0      12.2       11.9       24.4      24.1
Intangible asset amortisation                                 1.2         1.2       0.5        0.5        1.8       1.7
Exceptional items                                             0.2         0.2       3.9        3.8        5.7       5.6
Loss on disposal of non-current assets                          -           -         -          -        0.7       0.6
Tax relief on goodwill and exceptional items                    -           -      (1.7)      (1.6)      (2.7)     (2.6)
Normalised profit attributable to equity shareholders        31.8        31.3      22.1       21.6       70.4      69.3

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.



13.     Financial assets and liabilities

Under the exemption available in IFRS 1, 'First-time Adoption of IFRS' the Group
has not restated its results for the six months ended 30 June 2004 or the year
ended 31 December 2004 for the effect of IAS 32, 'Financial instruments:
Disclosure and Presentation', or IAS 39, 'Financial Instruments: Recognition and
Measurement'. Additional financial instruments have been recognised on the
balance sheet from 1 January 2005 as reported in the Group's IFRS
reconciliations as published on 27 June 2005 and available on the Group's
website. A summary is included below:
                                                           At 30 June      At 30 June       At 31 Dec        At 1 Jan

                                                                 2005            2004            2004           2005*

                                                                   £m              £m              £m              £m
Fuel swaps                                                        4.8               -               -             1.4
Available for sale investments/Other investments                 10.5            10.2            10.5            10.5
Financial instruments held as non-current assets                 15.3            10.2            10.5            11.9
Fuel swaps                                                        6.8               -               -             4.9
Foreign exchange forward contracts                                  -               -               -            14.9
Financial instruments held as current assets                      6.8               -               -            19.8
Interest rate swaps                                             (10.9)              -               -            (7.6)
Financial instruments held as non-current liabilities           (10.9)              -               -            (7.6)
Interest rate swaps                                              (3.3)              -               -           (19.9)
Foreign exchange forward contracts                               (7.7)              -               -               -
Financial instruments held as current liabilities               (11.0)              -               -           (19.9)

*£14.6m included in foreign exchange forward contracts at 1 January 2005 had
previously been included in other receivables as at 31 December 2004, and £2.5m
included in interest rate swaps (in current liabilities) had been included in
accruals and deferred income at 31 December 2004.



14.     Retirement benefit obligations

As per note 1 the Group's IFRS policies for retirement benefits are published on
the Group's website.

The defined benefit schemes for the UK Bus and UK Coach divisions are accounted
for in accordance with the requirements of IAS 19, 'Employee benefits'.

The majority of employees of the UK Train companies are members of the
appropriate shared-cost section of the Rail Pension Scheme ('RPS'), a funded
defined benefit scheme. To date, the Group has experienced three changes of UK
Train franchise ownership where the Group has funded the scheme during the
franchise term and the pension deficit at franchise exit has transferred to the
new owner, without cash settlement.  However, although the Group's past
experience has proven otherwise, our legal advice has opined that in certain
situations, the full liability for the deficit on the relevant sections of the
RPS could theoretically crystallise for funding by an individual TOC during the
franchise terms.  To comply with IAS 19, the Group is required to account for
its legal obligation under the formal terms of the RPS and its constructive
obligation that arises under the terms of each franchise agreement.

In determining the appropriate accounting policy for the RPS to ensure that the
Group's financial statements presents fairly its financial position, financial
performance and cash flows, management has consulted with TOC industry peers and
has concluded that the Group's constructive but not its legal RPS defined
benefit obligations should be accounted for in accordance with IAS 19. This
accounting policy, which in all other respects is consistent with that set out
in this note for the Group's other defined benefit schemes, means that the
Group's financial statements reflect that element of the deficits to be settled
by the Group during the franchise term and will prevent gains arising on
transfer of the existing RPS deficits to a new owner at franchise exit.

In calculating the Group's constructive obligations in respect of the RPS, the
Group has calculated the total pension deficits in each of the RPS sections in
accordance with IAS 19 and the assumptions set out in the Annual Report and
Accounts 2004. These deficits are reduced by a 'franchise adjustment' which is
that portion of the deficit projected to exist at the end of the franchise and
for which the Group will not be required to fund. The franchise adjustment,
which has been calculated by the Group's actuaries, is the deficit forecast to
exist at the end of the current franchises, and invokes the true and fair
override provision of the Companies Act 1985.

The franchise adjustment decreased from £67.6m at 31 December 2004 to £61.8m at
30 June 2005. The decrease is caused by net actuarial movements in scheme
liabilities of £7.7m offset by unwinding the discount (£1.9m).

The franchise adjustment increased by £5.2m from £62.4m at 1 January 2004 to
£67.6m at 31 December 2004. The increase is caused by unwinding the discounting
(£3.3m) and net actuarial movements in scheme liabilities (£28.1m), offset by
franchise exits net of franchise wins / extensions (£26.2m).

If the Group had accounted for its legal obligation in respect of the RPS
instead of the constructive obligation, the following adjustments would have
been made to the financial information in these interim accounts:


                                                                 At 30 June        At 30 June         At 31 Dec

                                                                       2005              2004              2004

                                                                         £m                £m                £m
Balance Sheet
Retirement benefit obligations                                        (61.8)            (63.7)            (67.6)
Deferred tax asset                                                      9.9              14.1              11.3
Intangible asset                                                       16.4              25.6              24.0
                                                                      (35.5)            (24.0)            (32.3)
Statement of recognised income and expense
Actuarial gains/ (losses)                                               7.7              (0.3)            (28.1)
Tax on actuarial gains and losses                                      (0.3)              0.1               1.4
                                                                        7.4              (0.2)            (26.7)
Income Statement
Financing cost - unwind of discount                                    (1.9)             (1.8)             (3.3)
Curtailment gain on franchise exit                                        -                 -              14.0
Intangible asset amortisation                                          (7.6)             (4.6)            (11.5)
Deferred tax credit/ (charge)                                          (0.1)              0.1               1.0
                                                                       (9.6)             (6.3)              0.2





15.     Share capital and reserves

During the six months ended 30 June 2005 the Group has repurchased 3,300,000
shares for consideration of £29.3m. 2,900,000 shares have been cancelled, and
the remaining 400,000 shares retained as treasury shares within equity for
future issue under the Group's various share schemes. Details of these schemes
are included the 2004 Annual Report and Accounts.

                                       Capital
                            Share   Redemption       Own  Treasury    Merger    Hedging  Translation    Retained    
                          premium      reserve    shares    shares   reserve    reserve      reserve    earnings   Total
  
                                                                                                      
                               £m           £m       £m        £m       £m        £m          £m          £m        £m
At 31 Dec 2004*              47.5            -     (5.1)        -     15.4         -        (2.1)       203.2     258.9
Financial instrument            -            -        -         -        -      (5.9)          -         (6.9)    (12.8)
recognition
At 1 January 2005*           47.5            -     (5.1)        -     15.4      (5.9)       (2.1)       196.3     246.1
Shares issued                 2.1            -        -         -        -          -          -           -        2.1
Shares purchased                -          0.2        -     (3.5)        -          -          -        (25.8)    (29.1)
Actuarial gains                 -            -        -         -        -          -          -         16.1      16.1
Share based payments            -            -        -         -        -          -          -          3.0       3.0
Deferred tax on share           -            -        -         -        -          -          -          2.0       2.0
based payments
Hedge movements                 -            -        -         -        -        6.1          -            -       6.1
Loss for the period             -            -        -         -        -          -          -        (32.7)    (32.7)
Dividends                       -            -        -         -        -          -          -        (28.1)    (28.1)
Exchange differences            -            -        -         -        -          -        4.0            -       4.0
At 30 June 2005              49.6          0.2    (5.1)     (3.5)     15.4        0.2        1.9        130.8     189.5

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.



16.     Net debt

                                                                 At 30 June        At 30 June         At 31 Dec
                                                                       2005              2004              2004

                                                                         £m                £m                £m
Due within one year
Loan notes                                                              1.0               7.6               7.5
Bank loans                                                                -                 -               8.0
Bank overdrafts                                                           -               0.9                 -
Finance lease obligations                                              21.1              20.9              16.3
                                                                       22.1              29.4              31.8
Due within one to two years
Finance lease obligations                                              16.9              20.3              16.7
                                                                       16.9              20.3              16.7
Due within two to five years
Bank loans                                                            216.3             218.4             207.5
Finance lease obligations                                              19.4              45.2              25.1
                                                                      235.7             263.6             232.6
Due by instalment after five years
Finance lease obligations                                               4.9              12.1               3.7
Total borrowings                                                      279.6             325.4             284.8
Cash and cash equivalents                                            (135.3)           (182.5)           (147.2)
Other debt receivable                                                  (1.0)             (1.0)             (1.0)
Net borrowings                                                        143.3             141.9             136.6

Net debt at 31 December 2004 includes £4.1m cash and £1.5m finance leases due
within one year and £1.2m finance leases due within one to two years
attributable to discontinued operations and classified separately on the balance
sheet within the 'Disposal group assets classified as held for sale' and '
Liabilities directly associated with disposal group assets classified as held
for sale' headings.

'Cash and cash equivalents' in the Group Statement of Cash Flows includes £0.9m
bank overdrafts at 30 June 2004.

Secured borrowings within the Group (representing finance leases) total £62.3m
(30 June 2004: £98.5m; 31 December 2004: £61.8m).

Included in cash and cash equivalents are restricted balances of £105.2m (30
June 2004: £119.0m; 31 December 2004: £73.9m) held by the train companies which
cannot be distributed by means of a dividend or loaned to other Group companies.
Within the restricted balances at 30 June 2004 was £42.7m of cash deposits
secured against a bond issued in respect of future rolling stock maintenance at
ScotRail Railways Limited. The Group did not earn interest on these monies as an
amount equal to the interest earned on the deposit is added to the bond. This
cash deposit transferred with the ScotRail franchise in 2004.





17.     Cash flow statement

Reconciliation of net cash flow to movement in net debt:
                                                              Six months to     Six months to           Year to
                                                                    30 June           30 June            31 Dec
                                                                       2005             2004*             2004*

                                                                         £m                £m                £m
(Decrease)/increase in cash and cash equivalents  in the              (13.3)             86.2              51.0
period
Cash outflow from movement in debt and lease financing                 25.9              71.8             109.8
Change in net debt resulting from cash flows                           12.6             158.0             160.8
Change in net debt resulting from acquisitions and                      0.5              (9.2)             (8.5)
disposals
Change in net debt resulting from non cash flows                      (19.8)             (1.6)              0.2
Movement in net debt in the period                                     (6.7)            147.2             152.5
Opening net debt                                                     (136.6)           (289.1)           (289.1)
Net debt                                                             (143.3)           (141.9)           (136.6)

*Results are restated for the impact of transition to International Financial
Reporting Standards (IFRS). See note 1.

Net debt at 31 December 2004 includes £4.1m cash and £1.5m finance leases due
within one year and £1.2m finance leases due within one to two years
attributable to discontinued operations and classified separately on the balance
sheet within the 'Disposal group assets classified as held for sale' and '
Liabilities directly associated with disposal group assets classified as held
for sale' headings.

Changes in net debt resulting from non cash flows represent £12.4m exchange loss
movements (30 June 2004: £5.2m gain; 31 December 2004: £18.2m gain), £0.1m loan
arrangement fees (30 June 2004: £0.5m; 31 December 2004: £1.8m), £7.3m finance
lease additions (30 June 2004: £6.3m; 31 December 2004: £16.2m).

The Interim Report 2005 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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