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Thursday 28 September, 2006

National Express

Interim Results

National Express Group PLC
28 September 2006



28 September 2006



                           National Express Group PLC

                                Interim Results

                     For the six months ended 30 June 2006





Financial Highlights

•   Revenue up 16.2% to £1,252.7 million (2005: £1,077.7 million)

•   Group operating profit of £48.0 million (2005: £48.7 million)

•   Operating cash flow** before one-off items of £79.8 million (2005:
    £106.2 million)

•   Normalised operating profit* up 24.8% to £84.0 million (2005: £67.3
    million)

•   Normalised profit before tax* up 15.7% to £67.2 million (2005: £58.1
    million)

•   Normalised diluted earnings per share* from continuing operations up
    3.8% to 32.5 pence (2005: 31.3 pence)

•   Interim dividend increased by 7.5% to 10.75 pence (2005: 10.0 pence)

•   Net debt of  £546.5 million (31 December 2005: £563.4 million)

•   Year-on-year fuel impact in UK divisions of £7.6 million



*    excluding profit or loss on the sale of businesses and charges for goodwill
     impairment, intangible amortisation, exceptional items and tax relief on
     qualifying exceptional items.

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



Operational Highlights

•    New franchise extensions awarded for Central Trains and Silverlink

•    Pre-qualified for East Midlands and the New Cross Country rail
     franchises to be awarded in 2007

•    Continued strong operational performance in Trains division

•    Introduction of yield management systems on intercity rail services

•    Continued innovation and organic growth in UK Coaches

•    New contract wins at Travel London

•    $30 million of new business won in North American bid season

•    Alsa awarded Madrid Metro Light Rail concession in Spain as part of
     bidding consortium



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

'The Group has continued to trade well over the summer and we approach the final
quarter of the year with confidence. We are delighted to have pre-qualified for
the East Midlands and New Cross Country rail franchises and look forward to
receipt of the Invitations to Tender.  We are well advanced in our preparation
for the London Rail Concession and will be submitting our bid in October.

In particular, overseas our performance has been strong. We have experienced
significant organic growth in North America and I am delighted with the
performance of Alsa during its first six months in the Group.   We look forward
to pursuing a number of new growth opportunities across the Group.'





For further information, please contact:

Richard Bowker, Chief Executive
Adam Walker, Finance Director
Nicola Marsden, Director of Group Communications
National Express Group PLC                               020 7529 2000

Andrew Dowler/ Ben Foster
Financial Dynamics                                       020 7831 3113



•    There will be an analyst and investor meeting at 0900 hours on 28
     September 2006 at Financial Dynamics, Holborn Gate, 26 Southampton 
     Buildings, London WC2A 1PB.

•    A web-cast of the analyst presentation will be available on our website
     www.nationalexpressgroup.com at 0900 hours on 28 September 2006. For 
     further details, contact Helen MacAlister at Financial Dynamics on 
     020 7831 3113.

•    High resolution images are available for the media to view and download,
     free of charge, from www.vismedia.co.uk or telephone 020 7436 9595.



Chairman's Statement

I am pleased to report the Group's interim results for the six month period
ended 30 June 2006.

In the UK our Trains division saw excellent passenger growth and high levels of
sustained performance, whilst our UK Coach division continues to lead the way in
product innovation and quality. Our UK Bus division has performed well, with
additional contract wins and extensions in London and improved passenger
satisfaction in the West Midlands. Overseas, we experienced a very promising
first six months trading in Spain. We are delighted with the integration of Alsa
and are working on sharing best practice in the areas of operations, marketing,
procurement and information technology.  In North America, we continue to grow
our school bus operations and had another strong bid season resulting in new
contract wins generating $30 million annualised revenue.


Like all major transport companies, we face the challenge posed by rising fuel
prices. We continue to implement initiatives that mitigate these increases
although it is difficult to predict where oil prices will sit in the medium
term. The Group is fully hedged for the remainder of this year and 2007. In
addition, the rail industry is currently facing prospective significant
increases in the cost of traction electricity.  We are working on initiatives to
reduce the severity where possible and are also leading an industry group which
is discussing energy costs with the Department for Transport.


In order to attract more passengers to our services we continue to invest in new
facilities, use technology to provide innovative solutions and take the hassle
out of travel. We are focused on delivering our passengers the best quality
travel solutions and are looking at ways to develop our proposition further.
Safety continues to be a key priority across our operations, particularly given
the on-going threats of terrorism.



Board Changes

Richard Bowker joined the Group as Chief Executive on 12 September following the
retirement of Phil White from the Board as announced on 24 May. Richard brings a
wealth of public and private sector experience combined with transport and
commercial expertise. The Board looks forward to working with him.



Results

Revenue for the six months to 30 June 2006 was up 16.2% to £1,252.7 million
(2005: £1,077.7 million). Normalised operating profit was up 24.8% to £84.0
million (2005: £67.3 million).  Normalised profit before tax increased to £67.2
million (2005: £58.1 million).

The Group's profit before taxation reduced to £5.5 million (2005: £39.5 million)
as a result of increased intangible amortisation charges and the onerous
contract provision relating to the Eurostar operations. After taxation, the
basic loss per share was 5.9 pence (2005: loss per share 24.0 pence).

Normalised diluted earnings per share were up by 3.8% to 32.5 pence (2005: 31.3
pence). Operating cash flow before one-off items during the first six months was
£79.8 million (2005: £106.2 million). Net debt at 30 June was £546.5 million (31
December 2005: £563.4 million).

An interim dividend of 10.75 pence per share, an increase of 7.5% over last
year's interim dividend of 10 pence per share, will be paid on 20 October 2006
to shareholders on the register by 6 October 2006.



Current trading and prospects

The Group has continued to trade well over the summer and we approach the final
quarter of the year with confidence. We are delighted to have pre-qualified for
the East Midlands and New Cross Country rail franchises and look forward to
receipt of the Invitations to Tender.  We are well advanced in our preparation
for the London Rail Concession and will be submitting our bid in October.

In particular, overseas our performance has been strong. We have experienced
significant organic growth in North America and I am delighted with the
performance of Alsa during its first six months in the Group.   We look forward
to pursuing a number of new growth opportunities across the Group.





Chief Executive's Review of Operations

Following the announcement of my appointment back in May, I am delighted to have
joined the Group. National Express is a company I have long admired and for good
reason - it has a proven tradition of innovation and delivery. We offer a unique
combination - a strong brand combined with a focus on local delivery to our
customers. Moving forward, my key priorities will be to develop a clear strategy
for sustained growth and maintain a strong focus on the cost base of the
business.  We must ensure we have excellent relationships with all our key
stakeholders whether public or private sector whilst ensuring our people
strategy is focused on embedding a culture of delighting our customers as I
believe this will drive top line growth. I look forward to working with the team
to build a company that delivers for our customers, our shareholders and our
wider stakeholders.



Trains

We operate six train franchises in the UK: c2c, Central Trains, Gatwick Express,
Midland Mainline, 'one' and Silverlink.

The Trains division achieved revenue of £744.0 million (2005: £739.3 million)
and normalised operating profit of £20.0 million (2005: £27.1 million),
following changes to our franchise portfolio with the loss of Wessex and Great
Northern in March.

During the period, franchise extensions for Central Trains and Silverlink to
November 2007 were agreed with the Department for Transport.

We are well advanced in our planning for the East Midlands and New Cross Country
rail franchises for which we pre-qualified last week. We have a renewed focus to
our bidding and believe that we can combine our operational excellence with some
innovative and creative new ideas to produce highly competitive bids.

Across our Trains division, we continue to lead the industry in terms of
reliability and punctuality resulting in passenger growth of 4%.  During the
period, Midland Mainline topped the punctuality tables for long distance
operators and c2c was the best performing train operating company in the UK.

Our considerable efforts to put our customers at the heart of everything we do
is reflected in the opening in February of our third Customer Service Academy in
Stratford, London. Gatwick Express continues to lead the way in the National
Passenger Survey tables, achieving 94% overall passenger satisfaction. Excellent
progress has been made on punctuality and reliability at Central Trains,
particularly given the franchise geography and complexity of its operations.

Our 'one' franchise has experienced some revenue weakness on certain routes
including the Stansted Express which has taken longer than expected to recover
from last year's terrorist attacks.  To improve customer service levels, we have
completed a £25 million refurbishment of our rolling stock on the Norwich to
London mainline which has improved reliability across the network.

We have introduced yield management systems on our intercity routes to provide a
better customer offering and attract more capacity to our off-peak services. For
example, we now offer headline fares as low as £6 tickets from the Midlands to
London on Midland Mainline. As a result of this initiative, passenger numbers
have increased by 7%.

On 7 September we were delighted that Midland Mainline won 'Passenger Operator
of the Year' at the National Rail Awards.

We will be submitting our bid for the London Rail Concession to Transport for
London ('TfL') on 9 October which will lead the way for a new railway for
London.



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 £94.8 million (2005: £91.7 million) and normalised operating profit
was £5.3 million (2005: £4.1 million), up 29.3% on the same period last year.



The division experienced a very strong first half with patronage growth of 2% on
the back of utilising more yield management and a greater focus on providing
services to support major UK leisure events.

We continue to see good growth on city to city routes including services between
London and Bristol, Cardiff and Brighton. Yield managed funfares are now
available on over 30 of the division's key routes. Airport services,
particularly out of Stansted airport, also saw good growth and we continue to
seek ways to develop our airport services outside of the London market.

Paperless ticketing now represents 50% of all ticket sales, reflecting our
flexibility to cater for the changing preferences of our customers.  Over 90% of
all tickets booked on-line are distributed either as e- or m-tickets. We also
launched new self service fast issue ticket machines at Heathrow, Birmingham and
Manchester coach stations.

We are fully committed to making our coach network accessible to all and have
introduced our first fleet of fully accessible 'Levante' coaches.  We aim to be
the first coach operator to have a fully accessible fleet in preparation for the
2012 Olympics.

We have been working closely with the Alsa team to share best practice on
systems, vehicle procurement and customer information. It is anticipated that
there are more benefits to come next year.

At Eurolines, we experienced double digit growth on the Paris and Amsterdam
routes which underpinned a successful first half.



Buses

The Bus division operates over 2,000 buses in the West Midlands, Dundee and
London. We also operate the Midland Metro, the light rail service in the West
Midlands.

Revenue for the period was £147.5 million (2005: £127.0 million) with an
normalised operating profit of

£19.0 million (2005: £18.2 million). Travel London continued to extend its
operations through the award of new contracts and enhancements to existing
contracts. The Travel London fleet now totals over 400 buses. We are working
with TfL on the planned redevelopment of our Battersea depot to give us further
capacity.

Passenger numbers have benefited from the launch of the national concessionary
fare scheme, equalising the age of entry back to 60. We await the outcome of the
discussions between Centro and the DfT regarding the reimbursement methodology
under this scheme.

During the period we concluded a new two year pay deal for our Travel West
Midlands ('TWM') business which has assisted in the recruitment and retention of
drivers. At the beginning of the year we introduced driver quality monitoring
and are developing plans to further improve driver retention.

In the first half of the year, we invested in on-board real-time information
technology across a number of key routes and, in conjunction with Centro, have
launched a full SMS text messaging service to 2,000 stops in the region,
providing real-time and scheduled information. Over 350 TWM buses are now fitted
with automatic vehicle location equipment which provides increased service
quality and operational control.  We aim to roll-out further across the West
Midlands.  In Coventry, joint working with the Passenger Transport Executive has
led to the ongoing success of the extensive PrimeLines network of quality bus
routes. Travel Coventry has now spent over £10 million during the last five
years upgrading its fleet.

In Dundee, our successful partnership working with the city council has led to
continued strong performance. We are working towards the commencement of a
Statutory Quality Partnership. In March we acquired the remaining shares in
Altram, the operator of Midland Metro.



North America

We operate a large network of school bus services both in the United States and
Canada, with a fleet of 13,000 buses.

Revenue was £155.0 million (2005: £123.8 million) and normalised operating
profit was £26.6 million (2005: £22.6 million). In local currency, North America
increased normalised operating profit to US$47.6 million (2005: US$42.5
million).

Our North American division has made another strong start to the year. In the
United States we have just completed a record bid season for the second year
running. Duval, in Florida, is the largest of our new wins but we also secured
new business in Connecticut and Illinois as well as conversions in Alabama and
Louisiana. As importantly, we maintained our contract retention rate of over
95%. In June we completed a small but strategically important acquisition in
Pennsylvania.

We continue to work closely with the school boards with the aim of providing the
ultimate 'hassle-free' service which, in part, helps to maintain our high
retention levels. In Canada, local operators have secured some extra funds from
the government to compensate for high fuel costs. The acquisitions completed
last year in Canada have integrated well.

Work is progressing well on our re-engineering initiative as we aim to use
improved technology to provide an even better service to our customers. This
work will play a part in our strategy for next year's bid season, our approach
to conversion and will be rolled out across existing contracts in 2007.

We are looking at a number of potential acquisition opportunities across North
America as we continue to grow our student bus division.

Over the past two months we have received a number of expressions of interest in
Stewart airport, our leased facility, based in New York State. With our strategy
focused on growing our student bus operations, we have commenced negotiations
regarding a potential disposal.



Alsa

Alsa is Spain's largest private coach and bus operator, with a high quality
network of long distance and regional coach routes. It also operates urban bus
networks in Spain, Portugal and Morocco.

Revenue was £117.1 million and normalised operating profit was £18.1 million. We
are delighted with the progress that Alsa has made in its first full six months
as part of the Group. We have experienced an increase in passenger numbers of 5%
across the business.  In long distance, a new contract was won at Madrid's new
airport terminal and we introduced promotional fares on the network for the
first time, targeting off-peak capacity. In addition, investment has taken place
to increase the proportion of direct sales and provide our customers with a
better travelling experience.

Our urban operations have been strengthened by securing additional work in
Oviedo, Cartagena, Palencia and Marrakech and we have extended our geographical
presence with a 25% strategic stake in Bilbobus, the largest private operator in
Bilbao which operates a fleet of over 270 buses. This gives us an important
foothold in the Basque region.

In conjunction with Madrid Metro and Caja Madrid bank, Alsa has been awarded the
30 year concession to operate and maintain Madrid's newly constructed light rail
route. This may open up the possibility of further opportunities in light rail
across Spain. The operations are expected to commence in May 2007.

We remain excited by the numerous growth opportunities we are pursuing in the
Spanish and North African markets.



Finance Director's Review


Half Year at a glance

We have achieved another strong set of results increasing revenue by 16.2% to
£1,252.7 million (2005: £1,077.7 million). The Group has achieved a 24.8%
increase in normalised operating profit to £84.0 million (2005: £67.3 million),
resulting in an increased margin of 6.7% (2005: 6.2%).  Operating profit has
decreased by £0.7 million to £48.0 million (2005: £48.7 million). Normalised
profit before tax increased by 15.7% to £67.2 million (2005: £58.1 million)
resulting in improved normalised diluted earnings per share from continuing
operations of 32.5 pence (2005: 31.3 pence), up 3.8%. After intangible
amortisation, goodwill impairment, exceptional items and tax thereon, the loss
for the period was £8.5 million (2005: loss £32.7 million). Net debt decreased
by £16.9 million to £546.5 million.  The interim dividend has been increased by
7.5% to 10.75 pence (2005 - 10.0 pence).


Divisional Review

In this review, we will refer to normalised results, which we feel reflect the
performance of the business more appropriately.  Normalised results are defined
as the statutory results before the following as appropriate: profit or loss on
the sale of businesses and charges for goodwill impairment, intangible
amortisation, exceptional items and tax relief on qualifying exceptional items.


Trains

Normalised operating profit decreased to £20.0 million (2005: £27.1 million) as
a result of changes in our portfolio, with the Wessex and Great Northern
franchises leaving the Group on 31 March 2006.  This resulted in a decrease in
margin to 2.7% (2005: 3.7%).

Our franchises continue to appear at the top of the league tables for
performance and customer satisfaction, which has contributed to our ability to
stimulate customer demand.  Revenue improvements enabled us to offset increases
in fuel costs of £3.6 million in the first half, although the revenue at 'one',
which is our largest train franchise, is not growing as fast as the other London
and South East franchises.

Bid costs remain a significant investment for this Division with the majority of
this year's expenditure likely to fall in the second half of the year.

New financial arrangements have been agreed for our profitable Central Trains
and Silverlink franchises which will run until November 2007.


Coaches

Our UK Coach operations produced a strong result with normalised operating
profit increasing from £4.1 million to £5.3 million, boosted by patronage growth
of 2%.  The operating margin increased to 5.6% (2005: 4.5%) because of our
continued focus on reducing the cost base.  Direct sales have increased,
including a 15% increase in web-based ticket sales.  We continue to grow the
range of services provided, focusing recently on dedicated services to major
sporting and music events.  The seasonality of these operations means that the
majority of the profit is earned in the second half of the year.


Buses

Revenue is up 16.1% to £147.5 million (2005: £127.0 million) and the operations
generated £19.0 million (2005: £18.2 million) of normalised operating profit.
The divisional operating margin has been diluted to 12.9% (2005: 14.3%) by the
increased size of the London business as a result of the acquisition of Tellings
Golden Miller's London bus operations in 2005. We have seen a welcome return to
growth amongst our concessionary fare passengers resulting from the introduction
of the national concessionary fares scheme.

Higher fuel costs have added £3.4 million to the cost base of the business.
This increase has been partially mitigated through our fares policy and close
management of our cost base.

On 2 March 2006, we received clearance from the Office of Fair Trading regarding
our acquisition of the outstanding 67% share holding in Altram LRT Limited ('
Altram').  Completion occurred on 14 March 2006 and the results of Altram have
been fully consolidated from this date.  A normalised operating loss of £0.3m is
included in the divisional result.


North America

In local currency, North America increased normalised operating profit to
US$47.6 million (2005: US$42.5 million).  Revenue has increased by US$44.9
million (19.3%) to $277.6 million (2005: US$232.7 million).  One significant
accident claim in the US and additional legal costs in Canada contributed to a
1.1% decline in the North America margin to 17.2% (2005: 18.3%).

We have had a strong bid season, winning new business with net annualised
revenue of US$30 million. Historic fuel hedges continue to the end of 2006 which
at current prices will lead to a US$13 million increase in the cost base next
year.  Recent increases in fuel costs have been factored into our bids. The
acquisition of Reliance in Pennsylvania in June consolidates the Group's
position in the student transportation market and will contribute US$4 million
to revenue for the full year.


Alsa

We have experienced patronage growth of 5% with a particularly good performance
in our long distance division on the routes from Madrid and the north of Spain
and growth in our urban business in Leon and Marrakech. During the period we
were awarded a one year contract to operate coach services at Barajas Airport,
Madrid.

During the past six months, we have spent a lot of time focussing on the
financial integration of Alsa. This has progressed according to plan, with the
valuation work on intangibles and key assets now completed and monthly reporting
timetables in line with Group requirements. There has been no requirement to
change any of Alsa's accounting systems.  Normalised operating profit of £18.1
million was achieved on revenue of £117.1 million, an operating margin of 15.5%.


Joint Ventures and Associates

The total charge for associates was £29.5 million (2005: £4.4 million), which
comprises our share of the post tax results from associates of £3.8 million
(2005: £4.4 million) and a £25.7 million exceptional charge for the designation
of the Group's Eurostar contract with Inter-Capital and Regional Rail Limited as
an onerous contract.

Over the past two to three years the partners at Eurostar have looked at ways of
consolidating the operations.  This may or may not have led to our exit from the
contract, at a cost which was never determined or agreed.  Earlier this year
there was considerable speculation and subsequent activity around a potential
sale of London and Continental Railways which underwrites the debts of Eurostar
UK. Now that these discussions have ceased we believe it is possible to make a
reliable estimate of the amount of our obligation to contribute to the losses of
Eurostar.  Consequently, we have provided for these losses to the end of the
contract in 2010.  The net present value of the expected losses is £25.7
million.

Our share of the operating profit for Altram for the period to 14 March 2006 was
£0.1 million (2005: loss of £0.1 million).  The results of the joint ventures
and associates acquired with Alsa were immaterial for the period.


Finance Cost

Net interest payable increased to £13.0 million (2005: £4.8 million), reflecting
the higher levels of net debt in the first half of the year when compared to
2005, due to the Alsa acquisition at the end of 2005.

Normalised operating profit before depreciation and other non-cash items ('
EBITDA') was £122.9m (2005: £98.4 million) and EBITDA finance cover decreased to
9.9 times (2005: 22.4 times).


Intangibles, Goodwill & Exceptional Items

The goodwill and intangible assets arising on the Alsa acquisition in 2005 were
provisionally classified as goodwill at 31 December 2005.  They have now been
reallocated as the intangible asset valuation work is complete.  This has
resulted in £174.2 million reclassified as intangible assets representing the
contracts acquired with the business.  The balance of £294.1 million, after
further fair value adjustments, remains within goodwill.

Intangible asset amortisation of £14.3 million (2005: £1.7 million) comprises
£10.1m (2005: £nil) on contracts acquired in Alsa, £2.4m (2005: £0.5m) on
contracts acquired in North America, £0.8m (2005: £nil) on contracts acquired in
UK Bus and £1.0m (2005: £1.2m) on the intangible asset that arises from the
Group's right to operate its rail franchises.

The impairment charge for the period on the goodwill arising from the
acquisition of Prism Rail PLC in September 2000 was £19.3m (2005: £16.6m).
Although IFRS 3, 'Business Combinations', prohibits the amortisation of
goodwill, the train franchises acquired with Prism have finite lives, and
therefore the goodwill is impaired in line with the remaining cash flows.

A goodwill impairment charge of £0.9m has been charged on goodwill acquired with
the remaining share capital of Altram.

Exceptional costs of £1.5m were incurred in relation to the ongoing Alsa
integration project. Exceptional costs of £0.3m in 2005 arose in the North
America Bus division, as a result of the relocation from Austin, Texas to
Chicago, Illinois.

On 4 July 2006, the Group disposed of its 14% shareholding in Trainline Holdings
Limited ('Trainline').  The profit on disposal will be included in the income
statement in the full year financial statements, but as the disposal had not
completed at 30 June 2006 the excess of the disposal proceeds, before costs,
over the net book value is included in reserves as a revaluation of our
available for sale assets.


Tax

Our normalised tax rate increased to 26.0% (2005: 24.5%) to reflect the higher
rates of tax in overseas jurisdictions. The normalised operating profit of Alsa
(2006: £18.1m; 2005: £nil) predominantly arises in Spain where the
jurisdictional rate is 35% compared to 30% in the UK.


Cash Flow

The Group continues to generate strong cash flow with a cash inflow from
operations before exceptional items and franchise revisions of £79.8m (2005:
£106.2m).

Operating cash flow represents 'Cash generated from operations' plus 'Proceeds
from disposal of property, plant and equipment' less 'Finance lease additions'
and 'Purchase of property, plant and equipment' as set out in note 14 and the
cash flow statement.


Operating Cash Flow                               UK          UK         UK      North     Alsa      Central   Total
                                                 Bus       Coach      Train    America       £m    functions      £m
                                                  £m          £m         £m        Bus                    £m
                                                                                    £m

Normalised operating profit                     19.0         5.3       20.0       26.6     18.1        (5.0)    84.0
Depreciation                                     7.6         2.6       12.1       12.8      6.2          0.2    41.5
Amortisation of leasehold property
 prepayment                                        -           -          -        0.4        -            -     0.4
Amortisation of property, plant and
 equipment grants                                  -           -      (1.4)          -    (0.1)            -   (1.5)
Profit on disposal of property, plant and
 equipment                                       0.1           -      (2.2)      (0.4)      0.1            -   (2.4)
Share based payments                             0.2         0.1        0.1          -        -          0.5     0.9
EBITDA                                          26.9         8.0       28.6       39.4     24.3        (4.3)   122.9
Working capital movement                      (13.3)         0.8        0.4        2.5    (1.7)          9.1   (2.2)
Eurostar                                           -           -          -          -        -        (8.4)   (8.4)
Net cash inflow from operations                 13.6         8.8       29.0       41.9     22.6        (3.6)   112.3
Net capital expenditure                        (6.5)       (1.0)      (9.7)      (6.5)    (8.7)        (0.1)  (32.5)
Operating cash flow before one-offs              7.1         7.8       19.3       35.4     13.9        (3.7)    79.8
Other cash flows
 - Exceptional items                                                                                           (0.9)
 - Franchise revisions                                                                                        (20.9)
Operating cash flow                                                                                             58.0





Net capital expenditure was £32.5m (2005: £27.4m) including £0.5m (2005: £7.3m)
of additions purchased under finance leases offset by £3.8m (2005: £3.0m)
proceeds from disposals.

The net outflow of £20.9m following the transfer of the Great Northern and
Wessex franchises comprises an inflow of £4.5m in proceeds for the sale of
property, plant and equipment and £25.4m of cash outflows to fund the working
capital position in the franchises.

Around two thirds of the Group's capital expenditure program is projected to
occur in the second half of the year.  These outflows will be partially offset
by the receipt of £13.7m for the disposal of the Trainline investment.

During the first half of the year, we refinanced our two existing bank debt
facilities into one new £800m five year revolving credit facility maturing in
June 2011. As at 30 June 2006, the headroom under the facility was £194.6m.



NATIONAL EXPRESS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2006
                                                 Unaudited six months to 30 June                           Audited
                                                                  Total before
                           Total before      Goodwill                 goodwill      Goodwill
                               goodwill   impairment,              impairment,   impairment,
                            impairment,    intangible               intangible    intangible
                             intangible  amortization             amortization  amortization
                           amortization             &                        &             &               Year to
                                      &   exceptional              exceptional   exceptional                31 Dec
                            exceptional         items      Total         items         items      Total      Total
                             items 2006          2006       2006          2005          2005       2005       2005
                         Note        £m            £m         £m            £m            £m         £m         £m

Revenue                    3    1,252.7             -    1,252.7       1,077.7             -    1,077.7    2,216.0
Operating costs before
goodwill impairment,
intangible amortisation &
exceptional items             (1,168.7)             -  (1,168.7)     (1,010.4)             -  (1,010.4)  (2,060.5)
Intangible amortisation    4          -        (14.3)     (14.3)             -         (1.7)      (1.7)      (4.9)
Goodwill impairment        4          -        (20.2)     (20.2)             -        (16.6)     (16.6)     (33.3)
Exceptional items          5          -         (1.5)      (1.5)             -         (0.3)      (0.3)      (7.8)
Total operating costs         (1,168.7)        (36.0)  (1,204.7)     (1,010.4)        (18.6)  (1,029.0)  (2,106.5)
Group operating profit             84.0        (36.0)       48.0          67.3        (18.6)       48.7      109.5
Share of post tax results
from associates and joint
ventures 
accounted for using the           
equity method                     (3.8)        (25.7)     (29.5)         (4.4)             -      (4.4)      (8.8)
Finance income             6        5.6             -        5.6           6.0             -        6.0       10.8
Finance costs              6     (18.6)             -     (18.6)        (10.8)             -     (10.8)     (22.2)
Profit before tax                  67.2        (61.7)        5.5          58.1        (18.6)       39.5       89.3
Tax expense                7     (17.5)           3.5     (14.0)        (14.8)           0.1     (14.7)     (27.5)

Profit after tax for the
period
from continuing
operations                         49.7        (58.2)      (8.5)          43.3        (18.5)       24.8       61.8
Loss for the period from
discontinued operations               -             -          -           2.5        (60.0)     (57.5)     (64.5)

Loss for the period                49.7        (58.2)      (8.5)          45.8        (78.5)     (32.7)      (2.7)
Loss attributable to
equity
shareholders                       49.4        (58.2)      (8.8)          45.8        (78.5)     (32.7)      (2.8)
Profit attributable to
minority interests                  0.3             -        0.3             -             -          -        0.1
                                   49.7        (58.2)      (8.5)          45.8        (78.5)     (32.7)      (2.7)

Loss per share:
- basic loss per share    10                               (5.9)                                (24.0p)     (2.0p)
- diluted loss per share  10                               (5.9)                                (23.7p)     (2.0p)

(Loss)/earnings per share from
continuing operations:
- basic (loss)/earnings   
per share                 10                               (5.9)                                  18.2p      45.2p
- diluted (loss)/earnings 
per share                 10                               (5.9)                                  17.9p      44.5p



Dividends of £33.9m were due during the period (2005 interim: £28.1m; 2005 full
year: £41.6m). Dividends of £16.2 m were proposed for approval during the period
(2005 interim: £13.5m; 2005 full year: £47.0m)



NATIONAL EXPRESS GROUP PLC
GROUP BALANCE SHEET
At 30 June 2006
                                                           Note        Unaudited      Unaudited         Audited
                                                                         30 June        30 June          31 Dec
                                                                            2006           2005            2005
                                                                              £m             £m              £m
Assets
Non-current assets
Intangible assets                                                          730.9          270.1           719.4
Property, plant and equipment                                              499.9          347.9           507.2
Financial assets - Other investments                        11              22.2           10.2            11.4
Financial assets - Derivative financial instruments         11               2.1            4.8             0.6
Investments accounted for using the equity method                            8.7              -             4.8
Other receivables                                                           32.4           31.6            26.2
Deferred tax asset                                                             -           11.6            23.0
                                                                         1,296.2          676.2         1,292.6
Current assets
Inventories                                                                 16.4           14.8            18.7
Trade and other receivables                                                236.4          223.4           301.8
Financial assets - Derivative financial instruments         11               6.8            6.8             6.7
Current tax assets                                                          13.5              -            11.3
Cash and cash equivalents                                   14             105.3          135.3           145.5
                                                                           378.4          380.3           484.0
Disposal group assets classified as held for sale                              -           72.8               -
Total assets                                                             1,674.6        1,129.3         1,776.6
Non-current liabilities
Financial liabilities - Borrowings                          14           (595.6)        (257.5)         (495.5)
Financial liabilities - Derivative financial instruments    11             (4.1)         (10.9)           (8.3)
Deferred tax liability                                                    (66.8)          (6.5)          (27.1)
Other non-current liabilities                                              (1.7)          (2.7)           (6.1)
Defined benefit pension liability                           12            (94.1)         (41.6)          (88.8)
Provisions                                                                (54.9)         (41.2)          (41.3)
                                                                         (817.2)        (360.4)         (667.1)
Current liabilities
Trade and other payables                                                 (459.6)        (472.3)         (533.1)
Financial liabilities - Borrowings                          14            (57.2)         (22.1)         (214.4)
Financial liabilities - Derivative financial instruments    11             (4.0)         (11.0)          (13.4)
Current tax liabilities                                                   (36.6)         (31.5)          (24.0)
Provisions                                                                (26.4)         (10.3)          (12.3)
                                                                         (583.8)        (547.2)         (797.2)
Liabilities directly associated with disposal group assets                     -         (25.4)               -
classified as held for sale
Total liabilities                                                      (1,401.0)        (933.0)       (1,464.3)
Net assets                                                                 273.6          196.3           312.3
Shareholders' equity
Called up share capital                                     13               7.7            6.8             7.5
Share premium account                                       13             187.3           49.6           174.2
Capital redemption reserve                                  13               0.2            0.2             0.2
Own shares                                                  13            (16.7)          (8.6)           (5.1)
Other reserves                                              13              22.1           17.5            24.5
Retained earnings                                           13              70.0          130.8           108.1
Total shareholders' equity                                                 270.6          196.3           309.4
Minority interest in equity                                                  3.0              -             2.9
Total equity                                                               273.6          196.3           312.3





NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2006
                                                           Note        Unaudited       Unaudited        Audited
                                                                   six months to   six months to        year to
                                                                         30 June         30 June         31 Dec
                                                                            2006            2005           2005
                                                                              £m              £m             £m

Cash generated from operations                             15               86.0           132.5          181.1
Tax received/(paid)                                                          5.9          (10.3)         (26.7)
Net cash from operating activities                                          91.9           122.2          154.4
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired                       (8.2)          (18.6)        (218.8)
Deferred consideration for businesses acquired                               0.3           (0.3)          (0.3)
Purchase of property, plant and equipment                                 (35.8)          (23.1)         (61.7)
Proceeds from disposal of property, plant and equipment                      8.3             3.0            8.1
Receipts from disposal of businesses, net of cash disposed                     -           (1.5)           71.3
Interest received                                                            5.6             6.0           10.8
Receipts from sale of shares for employee share schemes                     13.3               -            3.5
Net cash used in investing activities                                     (16.5)          (34.5)        (187.1)
Cash flows from financing activities
Proceeds from issue of ordinary shares                                         -             2.1            4.9
Purchase of own shares                                                    (11.6)          (29.3)         (29.3)
Interest paid                                                             (18.4)          (19.8)         (32.6)
Finance lease principal payments                                          (10.5)           (7.9)         (20.0)
Repayment of loan notes                                                        -           (6.5)          (6.7)
Loans (repaid)/advanced                                                   (33.7)          (11.5)          148.1
Dividends paid                                                            (33.4)          (28.1)         (41.6)
Net cash (used in)/from financing activities                             (107.6)         (101.0)           22.8
Decrease in cash and cash equivalents                                     (32.2)          (13.3)          (9.9)
Opening cash and cash equivalents                                          140.0           147.2          147.2
Decrease in cash and cash equivalents                                     (32.2)          (13.3)          (9.9)
Foreign exchange                                                           (2.5)             1.4            2.7
Closing cash and cash equivalents                          14              105.3           135.3          140.0




GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 30 June 2006

                                                                       Unaudited       Unaudited         Audited
                                                                   six months to   six months to         year to
                                                                         30 June         30 June          31 Dec
                                                                            2006            2005            2005
                                                                              £m              £m              £m
Income and expense recognised directly in equity
Exchange differences on retranslation of foreign                          
operations                                                                (19.8)            25.9            50.3
Exchange differences on retranslation of foreign currency
borrowings                                                                  11.0          (25.3)          (45.5)
Actuarial (losses)/gains on defined benefit pension plans                  (8.9)            22.2          (32.0)
Gains on valuation of available for sale assets                             10.8               -               -
Gains on cash flow hedges taken to equity                                    8.9            12.3            14.5
                                                                             2.0            35.1          (12.7)

Transfers to the income statement
Exchange differences on disposal of foreign operations                         -               -             1.5
On cash flow hedges                                                        (2.9)           (3.3)           (9.4)
                                                                           (2.9)           (3.3)           (7.9)

Tax on exchange differences on retranslation of foreign
operations                                                                   2.2             3.4             7.1
Deferred tax on share based payments                                       (1.0)             2.0             1.4
Deferred tax on actuarial (losses)/gains                                     2.8           (6.1)             9.0
Deferred tax on cash flow hedges                                           (1.8)           (2.9)           (1.4)
Tax on items taken directly to or transferred from equity                    2.2           (3.6)            16.1

Net gains/(losses) recognised directly in equity                             1.3            28.2           (4.5)
Loss for the financial period                                              (8.8)          (32.7)           (2.8)
Profit attributable to minority interests                                    0.3               -             0.1
Total recognised expense for the period                                    (7.2)           (4.5)           (7.2)

Expense attributable to equity shareholders                                (7.5)           (4.5)           (7.3)
Income attributable to minority interests                                    0.3               -             0.1
                                                                           (7.2)           (4.5)           (7.2)



NATIONAL EXPRESS GROUP PLC
NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 June 2006


1.     Basis of preparation

These accounts have been prepared using the accounting policies set out in the
Group's 2005 statutory accounts.

The interim results are unaudited but have been reviewed by the auditors. The
financial information presented herein does not amount to full statutory
accounts within the meaning of Section 240 of the Companies Act 1985 (as
amended). The figures for the year to 31 December 2005 have been extracted from
the Annual Report and Accounts 2005 which has been filed with the Registrar of
Companies. The audit report on the Annual Report 2005 was unqualified and did
not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.



2.     Exchange rates

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

                     Six months to 30 June 2006    Six months to 30 June 2005        Year to 31 Dec 2005
                      Closing rate   Average rate   Closing rate   Average rate    Closing rate   Average rate

US dollar                     1.85           1.79           1.79           1.88           1.72            1.82
Canadian dollar               2.06           2.03           2.20           2.31           2.00            2.20
Euro                          1.44           1.45            n/a            n/a           1.45            1.47

If the results for the six months to 30 June 2005 were retranslated at the
average exchange rates for the six months to 30 June 2006, North America would
have achieved normalised operating profit of £24.2m on revenue of £131.7m.



3.     Segmental analysis

The revenue of the Group comprises income from road passenger transport, train
passenger services, airport operations and related activities in the UK, North
America and Europe.  Within the UK Trains division, franchise agreement receipts
from the Department for Transport Rail Division and local Passenger Transport
Executives (and the Strategic Rail Authority in 2005) are treated as revenue.
During the half year to 30 June 2006, franchise agreement receipts amounted to
£179.0m (2005 interim: £157.2m; 2005 full year: £337.0m).


                                                   Unaudited six months to               Audited year to
                                                            30 June                         31 December
Analysis by class and geography of business             Operating              Operating             Operating
                                              Revenue      result    Revenue      result    Revenue     result
                                                 2006        2006       2005        2005       2005       2005
                                                   £m          £m         £m          £m         £m         £m

UK Bus                                          147.5        19.0      127.0        18.2      268.6       41.5
UK Trains                                       744.0        20.0      739.3        27.1    1,497.2       64.2
UK Coach                                         94.8         5.3       91.7         4.1      200.5       21.5
Inter-company elimination                       (5.7)           -      (4.1)           -     (10.3)          -
UK operations                                   980.6        44.3      953.9        49.4    1,956.0      127.2
North American Bus                              155.0        26.6      123.8        22.6      241.8       35.0
European Coach & Bus (Alsa)                     117.1        18.1          -           -       18.2        2.6
Central functions                                   -       (5.0)          -       (4.7)          -      (9.3)
Result from continuing operations             1,252.7        84.0    1,077.7        67.3    2,216.0      155.5
Goodwill impairment                                        (20.2)                 (16.6)                (33.3)
Intangible asset amortisation                              (14.3)                  (1.7)                 (4.9)
Exceptional items                                           (1.5)                  (0.3)                 (7.8)
Group operating profit                                       48.0                   48.7                 109.5
Share of post tax results from associates
and joint ventures accounted for using the
equity method                                              (29.5)                  (4.4)                 (8.8)
Net finance costs                                          (13.0)                  (4.8)                (11.4)
Profit before tax                                             5.5                   39.5                  89.3
Tax expense                                                (14.0)                 (14.7)                (27.5)
Profit for the period from continuing                       (8.5)                   24.8                  61.8
operations
Loss from discontinued operations                               -                 (57.5)                (64.5)
Loss for the period                                         (8.5)                 (32.7)                 (2.7)


Revenues include £3.9m property rentals receivable (2005 interim: £3.4m; 2005
full year: £7.2m).  Inter-company sales only occur between the Group's UK
Divisions.



4.        Goodwill impairment and intangible asset 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
2006 is £19.3m (2005 interim: £16.6m; 2005 full year: £33.3m). In addition an
impairment charge of £0.9m has been charged on goodwill acquired with Altram.


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 £1.0m (2005
interim: £1.2m; 2005 full year: £2.4m). Intangible assets representing customer
contracts have been subject to an amortisation charge in Alsa of £10.1m (2005
interim: £nil, 2005 full year: £nil), North America of £2.4m (2005 interim:
£0.5m; 2005 full year: £1.6m) and in UK Bus of £0.8m (2005 interim: £nil; 2005
full year: £0.9m).



5.        Exceptional items and exceptional charge for associates

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.

The exceptional items can be analysed as follows:


                                                            Six months to      Six months to            Year to
                                                             30 June 2006       30 June 2005        31 Dec 2005
                                                                       £m                 £m                 £m

UK Trains                                                               -                  -                3.5
UK Bus                                                                  -                  -                1.5
North American Bus                                                      -                0.3                2.8
European Coach & Bus (Alsa)                                           1.5                  -                  -
Total exceptional charge                                              1.5                0.3                7.8



In the six months to 30 June 2006, exceptional costs of £1.5m have been incurred
in relation to the Alsa integration.

In the six months to 30 June 2005 and the year to 31 December 2005 exceptional
costs were incurred in North America for business reorganisation costs in
respect of the divisional head office relocation. The balance of exceptional
items comprised the cost of reorganisations at UK Bus (£1.5m) and staff
redundancy programmes and business reorganisations at UK Trains (£3.5m).

The total charge for associates of £29.5m (2005 interim: £4.4m; 2005 full year:
£8.8m) comprises our share of the post tax results from associates of £3.8m
(2005 interim: £4.4m; 2005 full year: £8.8m) and a £25.7m exceptional charge for
the designation of the Group's Eurostar contract with Inter-Capital and Regional
Rail Limited ('ICRRL') as an onerous contract in the first half of 2006.



6.        Net finance costs

                                                            Six months to      Six months to            Year to
                                                             30 June 2006       30 June 2005        31 Dec 2005
                                                                       £m                 £m                 £m

Bank interest payable                                              (14.9)              (8.4)             (16.3)
Finance lease interest payable                                      (3.1)              (1.9)              (4.7)
Other interest payable                                                  -              (0.1)              (0.3)
Unwind of insurance provision discounting                           (0.6)              (0.4)              (0.9)
Finance costs                                                      (18.6)             (10.8)             (22.2)
Finance income: Bank interest receivable                              5.6                6.0               10.8
Net finance costs                                                  (13.0)              (4.8)             (11.4)



7.        Taxation

Tax on profit on ordinary activities for the six months to 30 June 2006 has been
calculated on the basis of the estimated annual effective rate for the year
ending 31 December 2006. The tax charge of £17.5m (2005 interim: £14.8m; 2005
full year: £29.5m) represents an effective tax rate on normalised profit before
tax, for continuing and discontinued operations, of 26.0% (2005 interim: 24.5%;
2005 full year: 21.8%). It includes overseas current taxation of £3.4m (2005
interim: £4.6m; 2005 full year: credit of £1.4m), and deferred taxation of £8.9m
(2005 interim: £2.9m; 2004 full year: £18.7m).



8.        Business combinations


Alsa fair value adjustments

The project to allocate the consideration paid to acquire Alsa to the fair value
of assets acquired was completed in the first half of the year.  The fair values
of the assets acquired have now been updated.


Alsa                                                             Alsa                 Alsa                 Alsa
                                                        Fair value at           Fair value           Final fair
                                                     31 December 2005          adjustments          value total
                                                                   £m                   £m                   £m

Intangible assets                                                   -                174.2                174.2
Property, plant and equipment                                    73.6                  7.2                 80.8
Available for sale investments                                    1.2                    -                  1.2
Investments accounted for under the equity                        
method                                                            4.8                    -                  4.8
Inventories                                                       3.1                    -                  3.1
Trade and other receivables                                      49.0                    -                 49.0
Current tax                                                       0.8                    -                  0.8
Cash and cash equivalents                                        10.0                    -                 10.0
Trade and other payables                                       (55.4)                  0.3               (55.1)
Retirement benefit obligations                                  (1.1)                    -                (1.1)
Provisions                                                      (1.0)                    -                (1.0)
Financial liabilities - Borrowings                            (211.8)                    -              (211.8)
Deferred tax liability                                          (6.1)               (54.8)               (60.9)
Net assets                                                    (132.9)                126.9                (6.0)
Less minority interest                                         (15.5)                    -               (15.5)
Group's share of net assets                                   (148.4)                126.9               (21.5)
Goodwill on acquisition                                         421.4              (127.3)                294.1
Total consideration                                             273.0                (0.4)                272.6



Other acquisitions

The Group acquired the remaining 67% of the share capital of Altram LRT Limited
(Altram) on 14 March 2006.  In Canada the Group acquired the entire share
capital of M & O Bus Lines (Handicab) Limited (M&O) a school bus operator, on 11
April 2006.  The Group also acquired the entire share capital of Reliance Motor
Coach Company Inc. (Reliance) on 1 June 2006, a school bus operator in the
United States.


Total consideration for these acquisitions was £12.3m and £5.4m of cash was
acquired with the businesses.  Investments in associates of £1.3m, comprises the
balance of the £8.2m outflow for payments to acquired businesses, in the cash
flow statement.



9.        Dividends paid and proposed

                                                                  Six months to   Six months to         Year to
                                                                   30 June 2006    30 June 2005     31 Dec 2005
                                                                             £m              £m              £m
Declared and paid during the period:
Ordinary final dividend for 2004 paid of 20.65p per share                     -            28.1            28.1
Ordinary interim dividend for 2005  paid of 10.0p per share                   -               -            13.5
Ordinary final dividend for 2005 paid of 22.25p per share                  33.9               -               -
                                                                           33.9            28.1            41.6
Proposed for approval (not recognised as liability as at period
end):
Ordinary interim dividend for 2005 of 10.0p per share                         -            13.5               -
Ordinary final dividend for 2005 of 22.25p per share                          -               -            33.5
Ordinary interim dividend for 2006 of 10.75p per share                     16.2               -               -



10.     Earnings per share


                                                                  Six months to   Six months to         Year to
                                                                   30 June 2006    30 June 2005     31 Dec 2005

Basic (loss)/earnings per share - continuing operations                  (5.9p)           18.2p           45.2p
Basic loss per share - discontinued operations                                -         (42.2p)         (47.2p)
Basic loss per share - total                                             (5.9p)         (24.0p)          (2.0p)
Normalised basic earnings per share - continuing operations               32.8p           31.8p           77.4p
Diluted (loss)/earnings per share - continuing operations                (5.9p)           17.9p           44.5p
Diluted loss per share - discontinued operations                              -         (41.6p)         (46.5p)
Diluted loss per share - total                                           (5.9p)         (23.7p)          (2.0p)
Normalised diluted earnings per share - continuing operations             32.5p           31.3p           76.3p

Basic loss per share is calculated by dividing the loss attributable to equity
shareholders of £8.8m (2005 interim: £32.7m; 2005 full year: £2.8m) by the
weighted average number of ordinary shares in issue during the period, excluding
those held by employees' share ownership trusts and held as own shares which are
both treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to include the weighted average number of ordinary shares
that would be issued on the conversion of all the dilutive potential ordinary
shares into ordinary shares.

In the six months to 30 June 2006, the weighted average number of ordinary
shares for the purpose of calculating the diluted loss per shares is identical
to that used for the basic loss per share.  This is because the adjustment for
dilutive potential ordinary shares would have the effect of reducing the loss
per ordinary share and is therefore not dilutive under the terms of IAS 33, '
Earnings per share'.

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

                                                                  Six months to   Six months to         Year to
                                                                   30 June 2006    30 June 2005     31 Dec 2005

Basic weighted average shares                                       150,706,759     136,140,675     136,591,474
Adjustment for dilutive potential ordinary shares                     1,252,945       2,054,305       2,017,744
Diluted weighted average shares                                     151,959,704     138,194,980     138,609,218

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, 'Earnings per Share' since, in the opinion of the Directors, they
reflect the underlying performance of the business's operations more
appropriately.

Normalised profits for the financial period are:
                                                                   Six months to   Six months to         Year to
                                                                    30 June 2006    30 June 2005     31 Dec 2005
                                                                              £m              £m              £m

Loss attributable to equity shareholders                                   (8.8)          (32.7)           (2.8)
Loss from discontinued operations                                              -            57.5            64.5
(Loss)/profit from continuing operations attributable to equity
shareholders                                                               (8.8)            24.8            61.7
Goodwill impairment on continuing operations                                20.2            16.6            33.3
Intangible asset amortisation                                               14.3             1.7             4.9
Exceptional items                                                            1.5             0.3             7.8
Exceptional associates charge                                               25.7               -               -
Tax relief on goodwill and exceptional items                               (3.5)           (0.1)           (2.0)
Normalised profit attributable to equity shareholders                       49.4            43.3           105.7

Loss from discontinued operations includes profit attributable to minority
interests of £nil in the six months to 30 June 2005 and £0.1m in the year to 31
December 2005.


                                                                Six months to        Six months to              Year to
                                                                 30 June 2006         30 June 2005          31 Dec 2005
                                                            Basic     Diluted     Basic    Diluted      Basic   Diluted
                                                              eps         eps       eps        eps        eps       eps
                                                                p           p         p          p          p         p

Loss attributable to equity shareholders                    (5.9)       (5.9)    (24.0)     (23.7)      (2.0)     (2.0)
Loss from discontinued operations                               -           -      42.2       41.6       47.2      46.5
Dilutive effect                                                 -         0.1         -          -          -         -
(Loss)/profit from continuing operations attributable
to equity shareholders                                      (5.9)       (5.8)      18.2       17.9       45.2      44.5
Goodwill impairment on continuing operations                 13.4        13.3      12.2       12.0       24.4      24.1
Intangible asset amortisation                                 9.5         9.4       1.2        1.2        3.6       3.5
Exceptional items                                             1.0         1.0       0.2        0.2        5.7       5.6
Exceptional associates charge                                17.1        16.9         -          -          -         -
Tax relief on goodwill and exceptional items                (2.3)       (2.3)         -          -      (1.5)     (1.4)
Normalised profit attributable to equity shareholders        32.8        32.5      31.8       31.3       77.4      76.3



11.     Financial assets and liabilities

The group's multi-national transport operations and debt financing expose it to
a variety of financial risks, including the effects of changes in foreign
currency exchange rates, interest rates and fuel prices. The group has in place
a risk management program that seeks to limit the adverse effects of these
financial risks on the financial performance of the group by using financial
instruments, including foreign currency debt and fuel price and interest rate
swaps. These financial instruments are held in the balance sheet at fair value,
as determined by the third party financial institution with whom the Group holds
the instrument.

The 'Financial assets - Derivative financial instruments' represent the fair
value of the fuel price swaps, which are in place to hedge the changes in price
of the different types of fuel used in each division. They are analysed as
non-current financial assets of £2.1m (30 June 2005: £4.8m; 31 December 2005:
£0.6m) and current financial assets of £6.8m (30 June 2005: £6.8m; 31 December
2005: £6.7m) based on the date of the fuel purchases being hedged.

The 'Financial liabilities - Derivative financial instruments' represent the
fair value of the interest rate swaps and the foreign exchange forward
contracts. The interest rate swaps are in place to hedge the cash flow risk in
relation to changes in interest rates. The non-current financial liabilities
solely comprise interest rate swaps of £4.1m (30 June 2005: £10.9m; 31 December
2005: £8.3m). The current financial liabilities represent interest rate swaps of
£3.2m (30 June 2005: £3.3m; 31 December 2005: £4.1m) and foreign exchange
forward contracts of £0.8m (30 June 2005: £7.7m; 31 December 2005: £9.3m).

The foreign currency borrowings are included in 'Financial liabilities -
Borrowings' which are analysed in note 14. Included in bank loans are foreign
currency denominated borrowings which hedge the foreign currency denominated net
assets of the Group.

The remaining financial assets in the balance sheet are the 'Financial assets -
Other investments' of £22.2m (30 June 2005: £10.2m; 31 December 2005: £11.4m)
which represent the Group's available for sale investments in unlisted
companies.

The Group does not hold any financial instruments that would be classified as
held for trading under IAS 39.



12.     Retirement benefit obligations

The UK Bus and UK Coach divisions operate two and one funded defined benefit
schemes respectively and a single defined contribution scheme for the two
Divisions. The majority of employees of the UK Train companies are members of
the appropriate shared-cost section of the Railways Pension Scheme, a funded
defined benefit scheme. Central Functions staff are included in the Group's UK
Coach pension scheme. The assets of all schemes are held separately from those
of the Group. Contributions to the schemes are determined by independent
professionally qualified actuaries.

Subsidiaries in North America contribute to a number of defined contribution
plans. The Group also provides certain additional post-employment benefits to
employees in North America and Spain, which are disclosed in the Other category
below.

The total pension cost for the period was £15.7m (2005 interim: £14.3m; 2005
full year: £27.5m), of which £14.0m (2005 interim: £14.3m; 2005 full year:
£25.0m) relates to the defined benefit schemes and £1.7m (2005 interim: £1.2m;
2005 full year: £2.5m) relates to the defined contribution benefit schemes.

The defined benefit pension liability included in the balance sheet is as
follows:
                                                                       At 30 June    At 30 June        At 31 Dec
                                                                             2006          2005             2005
                                                                               £m            £m               £m

UK Bus                                                                     (46.0)        (20.2)           (37.8)
UK Coach                                                                   (15.5)        (10.0)           (14.9)
UK Train                                                                   (30.7)        (10.7)           (34.2)
Other                                                                       (1.9)         (0.7)            (1.9)
Total                                                                      (94.1)        (41.6)           (88.8)

The UK Train defined pension liability is net of the franchise adjustment of
£47.5m (30 June 2005: £61.8m; 31 December 2005: £71.0m).  Details of the
franchise adjustment are included in note 36 to the 2005 Annual Report and
Accounts.



13.     Reconciliation of movements in equity

During the six months ended 30 June 2006 the Group has repurchased 1,425,000
shares for consideration of £11.6m. All the shares repurchased have been
retained as treasury shares within the own share classification of equity, for
future issue under the Group's various share schemes. Details of these schemes
are included the 2005 Annual Report and Accounts.


                                                    Capital
                                 Share     Share Redemption      Own     Other     Retained            Minority
                               capital   premium    reserve   shares  reserves     earnings     Total interests    Total
                                    £m        £m         £m       £m        £m           £m        £m        £m       £m

At 1 Jan 2006                      7.5     174.2        0.2    (5.1)      24.5        108.1     309.4       2.9    312.3
Shares issued                      0.2      13.1          -        -         -            -      13.3         -     13.3
Shares purchased                     -         -          -   (11.6)         -            -    (11.6)         -   (11.6)
Total recognised income/             -         -          -        -     (2.4)        (5.1)     (7.5)       0.3    (7.2)
(expense)
Share based payments                 -         -          -        -         -          0.9       0.9         -      0.9
Dividends                            -         -          -        -         -       (33.9)    (33.9)     (0.2)   (34.1)
At 30 June 2006                    7.7     187.3        0.2   (16.7)      22.1         70.0     270.6       3.0    273.6




14.     Net debt

                                  At 1 Jan              Acquisitions     Exchange      Other At 30 June At 30 June
                                      2006  Cash flow     /Disposals  differences  movements       2006       2005
                                        £m         £m             £m           £m         £m         £m         £m

Cash and cash equivalents            145.5     (37.7)              -        (2.5)          -      105.3      135.3
Bank overdraft                       (5.5)        5.5              -            -          -          -          -
                                     140.0     (32.2)              -        (2.5)          -      105.3      135.3
Other debt receivable                  1.0          -              -            -          -        1.0        1.0
Loan notes                           (0.8)          -              -            -          -      (0.8)      (1.0)
Bank loans                         (594.5)       33.7          (2.6)          9.1      (0.8)    (555.1)    (216.3)
Finance lease obligations          (109.1)       10.5              -          2.2      (0.5)     (96.9)     (62.3)
Net debt                           (563.4)       12.0          (2.6)          8.8      (1.3)    (546.5)    (143.3)



Current 'Financial liabilities - Borrowings' of £57.2m (30 June 2005: £22.1m; 31
December 2005: £214.4m) comprises £0.8m of loan notes (30 June 2005: £1.0m; 31
December 2005: £0.8m), £32.6m of finance lease obligations (30 June 2005:
£21.1m; 31 December 2005: £23.6m), £23.8m of bank loans (30 June 2005: £nil; 31
December 2005: £184.5m) and £nil bank overdrafts (30 June 2005: £nil; 31
December 2005: £5.5m).

Non-current 'Financial liabilities - Borrowings' of £595.6m (30 June 2005:
£257.5m; 31 December 2005: £495.5m) comprises £64.3m of finance leases (30 June
2005: £41.2m; 31 December 2005: £85.5m) and £531.3m of bank loans (30 June 2005:
£216.3m; 31 December 2005: £410.0m).

Included in cash and cash equivalents are restricted balances of £36.2m (30 June
2005: £105.2m; 31 December 2005: £79.5m) held by the Train Operating Companies
and £25.1m (30 June 2005: £nil; 31 December 2005: £25.6m) held by NBC Pty Ltd in
Australia which cannot be distributed by means of a dividend or loaned to other
Group companies.

Other non cash movements in net debt represent finance lease additions of £0.5m
(2005 interim: £7.3m; 2005 full year: £57.0m) and amortisation of loan
arrangement fees of £0.8m (2005 interim: £0.1m; 2005 full year: £0.2m).




15.     Cash flow statement

Reconciliation of Group operating profit to cash generated from operations

                                                                   Six months to   Six months to         Year to
                                                                         30 June         30 June          31 Dec
                                                                            2006            2005            2005
                                                                              £m              £m              £m
Net cash inflow from operating activities
Group operating profit                                                      48.0            48.7           109.5
Operating loss of discontinued operations                                      -          (57.3)          (56.4)
Depreciation of property, plant & equipment                                 41.5            25.7            56.8
Amortisation of leasehold property prepayment                                0.4             0.4             0.8
Goodwill impairment                                                         20.2            76.6            93.3
Intangible asset amortisation                                               14.3             1.7             4.9
Amortisation of property, plant and equipment grants                       (1.5)           (0.3)           (0.9)
Profit on disposal of property, plant and equipment                        (2.4)           (0.4)           (2.0)
Share-based payments                                                         0.9             3.0             3.6
Decrease/(increase) in inventories                                           2.1               -           (0.7)
Decrease in receivables                                                     57.2            72.0            22.4
Decrease in payables                                                      (88.8)          (35.7)          (37.2)
Decrease in provisions                                                     (5.9)           (1.9)          (13.0)
Cash generated from operations                                              86.0           132.5           181.1


The Interim report 2006 will be sent to all shareholders in October. Copies can
also be obtained from the Company Secretary at 75 Davies Street, London, W1K
5HT.


                                    - ENDS -


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            The company news service from the London Stock Exchange