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National Express (NEX)

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Thursday 01 March, 2007

National Express

Final Results

National Express Group PLC
01 March 2007


                           National Express Group PLC

                              Preliminary Results

                      For the year ended 31 December 2006

  National Express Group PLC, a leading international public transport group,
   today announces preliminary results for the year ended 31 December 2006.


Financial Highlights

                                                 2006          2005      Change
                                            -----------    -----------  -------
Revenue                                    £2.5 billion    £2.2 billion   +14%
                                            -----------    -----------  -------
Group operating profit                   £141.6 million  £109.5 million   +29%
                                            -----------    -----------  -------
Normalised operating profit*             £184.8 million  £155.5 million   +19%
                                            -----------    -----------  -------
Profit before tax                        £104.1 million   £89.3 million   +17%
                                            -----------    -----------  -------
Normalised profit before tax*            £156.1 million  £135.3 million   +15%
                                            -----------    -----------  -------
Operating cashflow**                     £182.0 million   £79.9 million  +128%
                                            -----------    -----------  -------
Diluted earnings per share from
continuing operations                      52.5 pence      44.5 pence     +18%
                                            -----------    -----------  -------
Normalised diluted earnings per share*     76.5 pence      76.3 pence       -
                                            -----------    -----------  -------
Final dividend per share                   24.0 pence      22.25 pence     +8%
                                            -----------    -----------  -------
Total dividend for the year per share      34.75 pence     32.25 pence     +8%
                                            -----------    -----------  -------
Net debt                                 £438.4 million  £563.4 million   -22%
                                           
* Normalised results are the statutory results excluding the profit or loss on
the sale of businesses, exceptional profit or loss on sale of non-current assets
and charges for goodwill impairment, intangible asset amortisation, exceptional
items and tax relief on qualifying exceptional items.

** Operating cash flow as defined in the Finance Review.


Operating Highlights

• Passenger growth of over 4% in coaches and 6% in trains
• Rail businesses leading the industry performance tables
• Investment in new technology including yield management and customer
  relationship marketing
• Excellent North American bidding season with $30.0 million new business
  won with contract expansion into Florida, New Jersey, Louisiana and Arkansas
• Successful integration of Alsa with growth in all areas of the business
  in first full year of operation and the award of new contracts
• Sale of Stewart airport lease for $78.5 million agreed, subject to
  regulatory approvals, with completion anticipated later this year.

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

'I am very pleased to report that we have started the year well. We have
prequalified for the Inter City East Coast franchise, have recently submitted
our bid for the East Midlands franchise and will be submitting our New Cross
Country bid shortly.

All of our businesses are performing well. We believe we can do more in 2007 and
beyond by offering new services, putting our customers and stakeholders at the
forefront of everything we do and bringing an even greater focus to sales and
marketing. Our plans are designed to stimulate repeat business and attract new
customers to our services thereby maximising the growth of our revenue.

Alongside this organic growth we will continue to seek attractive acquisitions
in those core markets in which we operate. We have a strong balance sheet and
look forward to utilising this to maximise our opportunities. We look to the
future with confidence.'

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

Neil Bennett/Suzanne Bartch/Brian Hudspith
Maitland                                           020 7379 5151


• There will be an analyst and investor meeting at 0900 hours on 1 March 2007 at
  City Presentation Centre, 4 Chiswell Street, Finsbury Square London, EC1Y 4UP.
• A webcast of the analyst presentation will be available on our website
  www.nationalexpressgroup.com at 0900 hours on 1 March 2007.
• High resolution images are available for the media to view and download, free 
  of charge, from www.vismedia.co.uk or telephone 020 7613 2555.


                           National Express Group PLC

                              Preliminary Results

                      For the year ended 31 December 2006

Chairman's Statement

I am pleased to report that 2006 was another excellent year for the Group with a
strong finish to the year delivering results ahead of our expectations. This was
achieved through sustained topline growth driven by our continued focus on
operational excellence, innovation and development of our broad range of
products and services.

We are particularly pleased with the performance of Alsa, making its first full
year contribution to the Group. We achieved excellent growth in our long
distance operations and won a number of new contracts. We experienced yet
another best ever bid season in North America.

In the UK, Midland Mainline retained its position as the best performing
intercity rail operator as well as being awarded the prestigious 'Operator of
the Year' Award for 2006 in the National Rail Awards. c2c was once again named
Britain's best performing train company. Our coach business, Britain's No 1
coach operator, goes from strength to strength with strong volume growth and
innovative fare promotions. Our award winning Levante coaches are fully
accessible to all our customers including those with wheelchairs. We have
committed to making our entire fleet similarly accessible by 2012. Despite
increased fuel costs, our bus division produced another strong contribution.

The publication of the Stern Review highlighted the pivotal role that transport
can play in tackling climate change. During 2007, National Express Group will be
launching and participating in a number of initiatives aimed at maximising the
role bus, coach and rail can play in reducing the impact of climate change.

2006 was also a year of change for the Group. We welcomed Richard Bowker as
Chief Executive in September. Richard has reviewed our businesses and with the
Board concluded that:

• We have a strong and diversified portfolio of businesses. The Group will grow 
  them through acquisitions and new developments, both in the UK and overseas. 
  We are now actively seeking opportunities to do this and have a number of 
  potential opportunities under consideration
• We are a leading provider of integrated transport solutions both in the UK and
  other geographies. Our long term commitment to rail is demonstrated in our 
  submissions for the East Midlands and New Cross Country franchise bids and, 
  later this year, the Inter City East Coast
• We will invest in the necessary products and systems to maximise the value of 
  our customer base. We believe through greater customer relationship management
  and marketing we can develop this relationship further and, by providing a 
  level of service and innovation that customers want, stimulate repeat business
• We will maintain the efficiency of our balance sheet to give us greater
  flexibility and greater capacity for acquisitions whilst ensuring our 
  investment strategy is driven by long term value creation.

Above all, National Express Group is in the process of 'Making Travel Simpler',
by listening to our customers and wider stakeholders and then delivering what
they want. To do that, we recognise our people are our most important asset. We
ask great things of them day after day and the Board would like to thank all our
employees for their efforts in 2006 and looks forward to their support in the
future.

In early January 2007 a National Express coach accident occurred on the M25/M4.
The safety and security of our customers and employees is of paramount
importance to us and we were deeply saddened by the events of that evening. Our
condolences go to those involved in this incident and particularly those who
lost loved ones.

This year will be a period of change and growth at National Express. We will
continue with the skills and values that have made this Group so successful such
as operational excellence but we will build on them. We will apply an
entrepreneurial approach to our product and business development and most of all
we will listen to our customers, our stakeholders and our people.

Outlook and current trading

I am very pleased to report that we have started the year well. We have
prequalified for the Inter City East Coast franchise, have recently submitted
our bid for the East Midlands franchise and will be submitting our New Cross
Country bid shortly.

All of our businesses are performing well. We believe we can do more in 2007 and
beyond by offering new services, putting our customers and stakeholders at the
forefront of everything we do and bringing an even greater focus to sales and
marketing. Our plans are designed to stimulate repeat business and attract new
customers to our services thereby maximising the growth of our revenue.

Alongside this organic growth we will continue to seek attractive acquisitions
in those core markets in which we operate. We have a strong balance sheet and
look forward to utilising this to maximise our opportunities. We look to the
future with confidence.

Results and Dividend

Revenue was up 14% to £2.5 billion (2005: £2.2 billion) and normalised Group
operating profit increased by 19% to £184.8 million (2005: £155.5 million).
After interest and the Group's share of losses from associated undertakings,
normalised profit before tax was up 15% to £156.1 million (2005: £135.3
million). Normalised diluted earnings per share from continuing operations were
76.5 pence (2005: 76.3 pence).

We are recommending a final dividend of 24.0 pence per ordinary share (2005:
22.25 pence), an increase of 7.9%, to be paid on 4 May 2007 to shareholders on
the register at 27 April 2007. Including the interim dividend, the proposed
total dividend for the year is 34.75 pence (2005: 32.25 pence).

Operational Review

Alsa

Alsa is Spain's leading private operator of coach and bus services operating 64
coach and 19 bus concessions within the Spanish market. The division provides
nearly 62 million passenger journeys per annum and employs over 3,500 people.

Revenue in its first full year was £249.3 million (2005: £18.2 million) and
normalised operating profit was £44.3 million (2005: £2.6 million). We are
delighted with the progress of Alsa in its first full year as part of the Group.
Our experienced local management team delivered an excellent performance and the
financial integration project has been successfully completed.

We have continued to improve our fares and product offering. Our long distance
coaching division saw passenger growth of 2%. Drawing on our experience in the
UK for the first time, we introduced promotional fares and special offers. There
has also been a greater focus on sales through the internet which now account
for around 14% of total sales. We believe we can further reduce our cost of
sales through increased promotion of the internet.

During the year, our urban bus division secured new business, retained contracts
and moved into new geographic areas in Spain. We were awarded a contract to
transfer customers to and from the new terminal at Madrid Airport and we won two
new franchises in Catalonia to operate coach services from the AVE Station of
Tarragona.

In December 2006, a 15 year contract to operate the urban network in the city of
Leon was renewed and new school bus contracts were won in Levante. Bus station
management contracts were awarded in Zaragoza and Seville. The regional
franchises in Cantabria, have been renewed until 2012 and 2013 respectively. We
also acquired a 25% shareholding in Bilbobus, the largest private operator in
Bilbao which operates a fleet of over 270 buses. Our Moroccan bus operation
continues to flourish and we are currently shortlisted on a tender for 400 buses
in the capital city of Rabat.

We were also pleased to be awarded, with partners Madrid Metro and Caja Madrid
bank, the concession to operate and maintain Madrid's newly constructed light
rail system which is expected to commence in May 2007.

Coaches

The coach division provides Britain's only scheduled national coach network and
serves more than 1,000 destinations, providing approximately 19 million
passenger journeys each year. The airport services provide premier, high
frequency scheduled coach services to all the UK's major airports. Eurolines
offers value for money European travel by coach. The division employs over 1,500
people.

Revenue for the year was £207.3 million (2005: £200.5 million) with a normalised
operating profit of £23.7 million (2005: £21.5 million). Passenger growth of 
5.5% in the second half resulted in overall passenger growth of over 4%. 
Our key corridors have performed well and on some routes such as Bristol and 
Stansted to London we have seen double digit passenger growth. Our margins have 
increased above 11%.

Within our core schedule coaching business, the success of yield managed fares
which ensure greater efficiency and utilisation of the fleet, helped drive
growth. Such products enable us to provide customers with improved value for
money fares. Funfares, from just £1, are now offered on 32 popular routes.
Direct sales accounted for 65% of total sales and internet sales continued to
improve with over a quarter of all bookings now made on-line, of which over 90%
of all tickets booked on-line are distributed either as e- or m-tickets or SMS
messages. New self service touch screen fast issue ticket and journey planning
kiosks have been installed at Heathrow, Gatwick, Birmingham and Manchester coach
stations. In September the division scooped the top prize at the National
Customer Service Awards winning 'Best Use of Technology in Customer Service'.

In November, the National Express coach brand was awarded Superbrand status in a
poll conducted amongst more than 1,000 business professionals and a select panel
of marketing, advertising and branding experts by YouGov. In this prestigious
survey National Express was placed in the top 300 brands as well as in the top
10 UK travel brands. We are using this strong position to develop our services
to a broader customer base.

We introduced easy access coaches onto a number of routes across the network
during 2006. Forty-four of these new style coaches are now operating on some of
our busiest routes including East Midlands to Stansted Airport, Brighton to
London and Yorkshire to Heathrow and Gatwick. Our new wheelchair accessible
Levante coach won two awards this year, 'Top Dual-Purpose vehicle' and the
'Clarkes Trophy' for a coach offering the best access for the disabled. We are
committed to making the whole network fully accessible by the 2012 Olympics
representing a £100 million investment.

During the year we worked closely with BAA at Heathrow to redevelop the new £2.5
million Central Bus Station terminal. This includes investment in the
infrastructure and taking on the responsibility of operating the facility on
behalf of BAA. We are working closely with BAA on the provision of coach
services for Terminal Five which opens in 2008. Discussions regarding the
redevelopment of Digbeth coach station are ongoing and we expect work to
commence later this year.

Trains

We operate c2c, Central Trains, Gatwick Express, Midland Mainline, 'one'
including the Stansted Express, and Silverlink franchises. We provide 230
million passenger journeys per year and employ 10,000 people.

Revenue for the year was £1,497.6 million (2005: £1,497.2 million) with
normalised operating profit of £49.1 million (2005: £64.2 million). The 
reduction in the operating profit primarily related to the transfer of the Great
Northern and Wessex franchises in April 2006.

The division experienced a good year with a 6.1% increase in passenger numbers
driven by investment in services, good operational performance and strong
airport growth.

In the industry's operational performance tables(1) Gatwick Express topped the
regional category and c2c retained its position as Britain's best performing
rail franchise. Midland Mainline retained its position as the UK's best
performing intercity train company as well as Passenger Operator of the Year
award winner for 2006.

We have been working to deliver greater value for money to our customers. Off
peak discounted fares promotions have been introduced using yield management
systems in Midland Mainline ('MML') and these have delivered growth of 20%. MML
became the first train operator to launch a new Print@Home facility, allowing
customers to purchase and print their train tickets at home. In December the £50
million Sheffield Station Gateway Masterplan, a key hub for MML, was completed
and in the last quarter of the year, MML moved into the new St Pancras
International station.

In December we made our latest submission on the Brighton Main Line Route
Utilisation Strategy, the outcome of which will affect Gatwick Express. Our
other London franchises performed well in the period.

At 'one' a £25 million modernisation and refurbishment of the mainline intercity
fleet was completed. In April a new customer service academy was opened in
London. In addition the Stansted Express has seen an enhanced frequency to every
15 minutes and seating capacity to cater for the increased demands of this
growing airport. To assist with the increased energy costs that the train
industry is facing, a project to introduce regenerative braking onto the 'one'
fleet of Class 360 trains is underway.

We have recently submitted our bid for the East Midlands franchise and within
the next week will be submitting our bid for the New Cross Country franchise. We
believe we have submitted winning bids which reflect the aspirations and
expectations of customers as well as the financial considerations of the
Department for Transport. We have also prequalified for the Inter City East
Coast franchise, one of the most prestigious in the UK and look forward to
submitting a similarly excellent bid later in the year. Whilst the market for
rail franchises remains intense, we are committed to bidding for franchises
where we believe long term growth and shareholder returns can be achieved.

(1) National Rail Trends, ORR, 19 December 2006

Buses

The bus division operates over 2,000 buses, provides approximately 380 million
passenger journeys and employs 7,000 people in the West Midlands, Dundee and
London. It also operates the Midland Metro, the light rail service in the West
Midlands.

Revenue for the year was £300.8 million (2005: £268.6 million) and normalised
operating profit was £40.7 million (2005: £41.5 million). We are particularly 
pleased with this result given the £9 million year-on-year increase in fuel 
costs.

In Dundee we have relaunched a number of radial routes around the city as part
of our partnership agreement with Dundee City Council. This included the
provision of new bus shelters, customer information as well as investment in new
liveries. In addition we commenced the operation of new contracted routes in
Angus. A national concessionary fares scheme was introduced in Dundee in April
2006 and we have seen increases in both concessionary and commercial patronage.
In the West Midlands we are starting to see the benefits of the launch of the
national concessionary fare scheme. In partnership with Coventry City Council,
an improved network was introduced following the findings of a joint network
study.

We continue to invest in our fleet. 80% of the West Midlands fleet is low-floor,
easy-access, the highest percentage of any major fleet outside London. Automatic
vehicle technology has been fitted to over 20% of the TWM fleet and real time
journey information is available across half of the network. In addition SMS
timetable information is available via SMS codes published at over 1,200 bus
stops. This service regularly receives over 3,000 hits a month. We believe the
provision of accurate 'real-time' information is key to making our services
attractive and accessible to customers.

Travel London continued to extend its operations with new contract awards and
extensions to existing contracts. The redevelopment of the Battersea depot is
planned which will give an additional capacity for 100 buses. In partnership
with Surrey County Council and BAA, we are providing key services to support the
construction of Terminal 5.

A Group priority for 2007 is to re-energise our relationships with our key
stakeholders in our heartland bus operation in the West Midlands to ensure that
partnership working delivers new quality partnerships in the coming year. This
will enable us to deliver marketing, customer care, investment in new buses and
innovation. Looking to the future we are working with Centro and Birmingham City
Council to put in place an overarching partnership agreement to deliver
improvements on selected key routes in the region.

North America

The North American division consists of student transportation. It operates over
14,000 buses and provides approximately 200 million passenger journeys per
annum. The division employs over 18,300 people.

Our North American division goes from strength to strength. Revenue in the
division for the year was £283.7 million (2005: £241.8 million) and normalised 
operating profit was £39.1 million (2005: £35.0 million). In local currency, 
revenue was US$524.0 million (2005: US$440.5 million) and normalised operating 
profit was US$72.3 million (2005: US$63.7 million).

In 2006 we experienced our best bidding season ever. We won $30 million of new
business and achieved a retention rate of greater than 95%. We now operate in
twenty five US states and two Canadian provinces. We expanded into Florida, New
Jersey, Louisiana and Arkansas and completed six tuck-in acquisitions.

Our focus during the latter part of the year has been to integrate our North
American companies under one management team. Further progress continues in 2007
with the amalgamation of key office functions such as finance and information
technology. The focus on one company and standardisation of processes and
systems now provide us with the foundation to execute our Transformation
Project.

Our Transformation Project, which commenced in the fourth quarter of 2006, is
well underway and supporting further growth in North America. Our focus is to
differentiate our offering in the market and deliver even higher standards of
customer service and satisfaction. The project will bring new standard,
streamlined systems and processes to our operations, will enhance significantly
the quality of our information, allow our local management to focus on the key
roles of customer and employee relationship management and also develop our
leadership team. In addition to the change in management focus, investment in
technology is a key enabler to deliver these improvements and to achieve
benefits of scale in such a geographical diverse business. Ultimately the
project will enable us to improve our product offering and therefore achieve
greater success.

As announced on 26 January the Port Authority of New York and New Jersey Board
Commissioners have approved the purchase of the operating lease at Stewart
International Airport, New York State for $78.5 million. Completion of the sale
is anticipated in the second half of the year.

Finance Review

Year at a glance

We have achieved another strong set of results, increasing profit before tax by
17% to £104.1m (2005: £89.3m), driven by a 29% increase in operating profit to 
£141.6m (2005: £109.5m). Diluted earnings per share from continuing operations 
improved 18% to 52.5p (2005: 44.5p).

Our financial key performance indicators are based on normalised results, which
we feel reflect the performance of the business more appropriately. Normalised
results are defined as the statutory result before the following, as
appropriate: profit or loss on the sale of businesses, exceptional profit or
loss on the disposal of non-current assets and charges for goodwill impairment,
intangible asset amortisation, exceptional items and tax relief thereon as
appropriate.

Normalised group operating profit was up by 19% to £184.8m (2005: £155.5m), on
revenue of £2,525.5m (2005: £2,216.0m) resulting in an increased operating
margin of 7.3% (2005: 7.0%). Normalised profit before tax increased by 15% to
£156.1m (2005: £135.3m). With an increase in the effective tax rate from 21.8%
to 25.1% and the loss of rail profits, normalised diluted earnings per share
from continuing operations marginally increased to 76.5p (2005: 76.3p). Net debt
decreased by £125.0m to £438.4m. The proposed full year dividend per share will
be increased by 8% to 34.75p (2005: 32.25p).

Divisional review

Commentary on the divisional results is included in the Operational Review
above. Other financial points to note are included below.

Alsa

In local currency, Alsa's results are revenue of €365.6m (2005: €26.7m) and a
normalised operating profit of €65.0m (2005: €3.8m).

This year has seen a great deal of work on the financial integration of Alsa,
which is now complete. The integration has involved the development of Alsa
reporting processes to deliver financial results prepared under IFRS in line
with the Group's month end timetable. In addition, the valuation work on
intangibles and key assets has been completed and the 31 December 2005 balance
sheet updated in accordance with IFRS 3, 'Business Combinations'.

Trains

Increased fuel costs have added £5.3m to the cost base this year. We expect
electricity charges to increase in 2007, although efficiency benefits such as
regenerative braking would offset this increase.

Bid costs remain a significant investment for this Division with a total cost of
£9.8m (2005: £6.1m) included in normalised operating profit.

As part of the DfT current re-mapping exercise, Central Trains, Silverlink and
Midland Mainline will run until November 2007.

Buses

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 £0.4m is
included in the divisional result.

North America

In local currency, North America increased normalised operating profit to
US$72.3m (2005: US$63.7m). Revenue has increased by US$83.5m to US$524.0m (2005:
$440.5m). Additional legal costs and a new pay award in Canada contributed to a
lower margin of 13.8% (2005: 14.5%). The historic fuel hedges that were in place
have ended in 2006, which will lead to a US$13m increase in the cost base in
2007.

Following the Group's announcement of the planned sale of the operating lease on
Stewart International Airport to the Port Authority of New York in 2007, the
assets and related liabilities of the disposal group have been separately
identified on the balance sheet, in accordance with IFRS 5, 'Non-current assets
held for sale and discontinued operations'. The business does not meet the
definition of a discontinued operation, therefore the results, which do not make
a significant contribution, are included within continuing operations.

Joint ventures and Associates

We hold a 40% investment in Inter-Capital and Regional Rail Limited ('ICRRL')
and account for a number of associates and joint ventures within Alsa.

The total charge for associates and joint ventures was £29.5m (2005: £8.8m),
which comprises our share of the post tax results from associates and joint
ventures of £3.8m (2005: £8.8m) and a £25.7m exceptional charge for the
designation of the Group's Eurostar contract with ICRRL as an onerous contract.
As noted at the half year we have provided for the Eurostar losses to the end of
the contract in 2010.

Our share of the operating profit for Altram for the period to 14 March 2006 was
£0.1m (2005: loss of £0.2m). The results of the joint ventures and associates
within Alsa were a loss of £0.2m (2005: £nil) and a profit of £0.2m (2005: £nil)
respectively.

Finance cost

Net interest payable increased to £24.9m (2005: £11.4m), principally reflecting
a higher level of net debt as a result of the Alsa acquisition in December 2005.
This was offset by the weakening of the US dollar which decreased the cost of
servicing our foreign currency denominated financing.

After excluding £nil (2005: £5.1m) for discontinued operations, continuing
normalised operating profit before depreciation and other non-cash items
('EBITDA') was £264.0m (2005: £212.5m) and continuing EBITDA finance cover was
11.6 times (2005: 20.2 times).

Goodwill and Intangible assets

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 within the balance sheet. This has resulted in £174.2m reclassified
as intangible assets representing the contracts acquired with the business. The
balance of £294.1m, after further fair value adjustments, remains within
goodwill.

Amortisation of £27.8m (2005: £4.9m) was charged on the intangible asset that
arises from the Group's right to operate its rail franchises (£1.6m) and on
contracts acquired in Alsa (£20.1m), UK Bus (£1.6m) and North America (£4.5m).

The impairment charge for the year on the goodwill arising from the acquisition
of Prism Rail PLC in December 2000 was £19.2m (2005: £33.3m); this goodwill is
now fully amortised. Although IFRS 3, 'Business Combinations' prohibits the
amortisation of goodwill, the train franchises acquired with Prism have finite
lives, and therefore the goodwill has been impaired over the remaining cash
flows.

A goodwill impairment charge of £1.0m has been charged on goodwill acquired with
the remaining share capital of Altram.

Exceptional items

Exceptional items totalled a net income of £4.8m (2005: cost of £7.8m),
comprising a credit of £6.7m in relation to defined benefit pension liabilities
and charges of £1.9m in relation to the integration of Alsa. The pension credit
reflects a negative past service cost that arises as a result of the 'A-day'
changes to pension legislation which increased the maximum limit on the lump-sum
benefits that can be withdrawn tax free on retirement. We believe that to
disclose this credit within normalised profit would present a misleading picture
of the results.

The profit on disposal of non-current assets of £16.9m comprises £7.5m of profit
on the disposal of a car park in Sheffield and £9.4m of profit on disposal of
our 14% shareholding in Trainline.  Both profits relate to the UK Trains
division.

Discontinued operations

An additional provision of £3.2m was booked in relation to the Group's Public
Transit business which was disposed of in 2005. This provision reflects the
Directors' best estimate of the Group's liability regarding an industry wide
employment issue in California, over which the Group provided an indemnity to
the purchaser at the time of the disposal.

Taxation

The total tax charge of £23.6m (2005: £27.5m) on profit before tax of £104.1m
(2005: £89.3m) represents an effective rate of 22.7% (2005: 30.8%). The tax
charge on normalised profit of £156.1m (2005: £135.3m) was £39.2m (2005:
£29.5m), which represents an effective rate of 25.1% (2005: 21.8%). The
normalised effective tax rate has increased due to the higher proportion of
overseas earnings in the Group.

The total tax charge includes a tax credit on exceptional items of £15.6m (2005:
£2.0m) which includes the deferred tax impact of the Group's non-deductible
intangible asset amortisation.

Cash flow

The Group continues to generate strong cash flow with a cash inflow from
operations of £182.0m (2005: £79.9m), which includes an outflow of £27.7m in
relation to the franchise exits in March. The increase reflects the full year
contribution from Alsa of £40.1m (2005: outflow of £1.2m) and the benefit of
various working capital timing benefits in UK Trains and Central functions. This
cash flow was used to maintain high levels of investment across the Group,
particularly in North America where most of the capital expenditure relates to
contract wins.


Operating Cash Flow
         
                                                North
                       UK       UK       UK  American           Central
                      Bus  Coaches   Trains       Bus    Alsa functions   Total
                       £m       £m       £m        £m      £m        £m      £m
                     ------  -------   ------  --------  ------  --------  -----
Normalised
operating profit     40.7     23.7     49.1      39.1    44.3     (12.1)  184.8
Depreciation         15.7      5.7     21.6      25.3    12.9       0.5    81.7
Amortisation of
leasehold
property
prepayment            0.1        -        -       0.5       -         -     0.6
Amortisation of
fixed asset
grants                  -        -     (1.9)        -    (0.1)        -    (2.0)
Profit on
disposal              0.2     (0.1)    (2.2)     (0.6)   (0.4)        -    (3.1)
Share-based
payment               0.4      0.1      0.3       0.2       -       1.0     2.0
                     ------  -------   ------  --------  ------  --------  -----
EBITDA               57.1     29.4     66.9      64.5    56.7     (10.6)  264.0
Working capital
movement            (15.7)     0.2     34.3     (12.2)    0.3      26.2    33.1
                     ------  -------   ------  --------  ------  --------  -----
Net cash inflow
from operations      41.4     29.6    101.2      52.3    57.0      15.6   297.1
Net capital
expenditure         (16.1)    (3.8)   (12.3)    (38.0)  (16.9)     (0.3)  (87.4)
                     ------  -------   ------  --------  ------  --------  -----
Operating cash
flow before
one-offs             25.3     25.8     88.9      14.3    40.1      15.3   209.7
                     ------  -------   ------  --------  ------  --------  -----
Other
- Franchise exits                                                         (27.7)
                                                                           -----
Operating cash
flow                                                                      182.0


Operating cash flow is intended to be the cash flow equivalent to normalised
operating profit. To reconcile the operating cash flow to the statutory cash
flow the following items are included: '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 10
and the cash flow statement. The non-operating items are then excluded which
comprise £13.0m exceptional property proceeds, £8.4m payment to associates and
£2.0m payments in relation to other exceptional items.

The working capital outflow in UK Bus comprises payments to the defined benefit
pension schemes in excess of the income statement charge and the losses
associated with the onerous contracts in our London business. The working
capital movement in UK Trains relates to amounts received in the year in
relation to 2005. In North America, a timing difference has contributed to the
working capital outflow The cash flow benefit in Central Functions arises
through the restructure of our insurance arrangements.

Net capital expenditure was £87.4m (2005: £110.6m) including £20.7m (2005:
£57.0m) of additions purchased under finance leases and £6.8m (2005: £8.1m) of
proceeds from disposals.


Reconciliation of net debt               2006              2005
                                           £m                £m
                                       ------            ------
Operating cash flow                     182.0              79.9
Exceptional cash flow                    (2.0)             (7.7)
Exceptional property proceeds            13.0                 -
Payments to associates                   (8.4)             (1.7)
Net interest                            (20.6)            (22.0)
Taxation                                 (9.0)            (26.7)
Share buy back                          (11.6)            (29.3)
Financial investments & shares           15.8               8.4
Acquisitions and disposals              (16.8)           (359.1)
Dividends                               (49.7)            (41.6)
                                       -------           -------
Net funds flow                           92.7            (399.8)
Foreign exchange                         32.3             (27.0)
                                       -------           -------
Funds flow post exchange                125.0            (426.8)
Opening effective net debt             (563.4)           (136.6)
                                       -------           -------
Closing effective net                  (438.4)           (563.4)
debt


Net interest paid of £20.6m (comprising the cash outflow of £19.7m adjusted for
loan fee amortisation of £0.9m) is in line with last year as the 2005 cash flow
included the termination of a US$200m interest rate swap during the year.

The receipt of tax rebates in respect of prior years resulted in reduced tax
payments this year.

Acquisitions and disposals includes the acquisitions in the year of £19.8m,
deferred consideration of £3.0m, acquisition of associates and investments of
£8.7m and proceeds from the disposal of investments and intangible assets of
£14.7m. The 2005 outflow includes the acquisition of Alsa for £367.4m.

Dividend

An interim dividend of 10.75p per share was paid in October 2006 and a final
dividend of 24.0p per share will be paid in May 2007, bringing the total
dividend for the year to 34.75p. This is a 8% increase in total dividends
declared compared to 2005. This dividend is covered 2.2 times (2005: 2.3 times)
by normalised profits after tax.

Facilities

During the first half of the year, we refinanced our two existing bank debt
facilities into one new £800 million five year revolving credit facility
maturing in June 2011. As at 31 December 2006, the headroom under the facility
was £247.8m.


NATIONAL EXPRESS GROUP PLC

GROUP INCOME STATEMENT

For the year ended 31 December 2006

                                                            Total before
                    Total before      Goodwill                  goodwill
                        goodwill   impairment,               impairment,       Goodwill
                     impairment,    intangible                intangible    impairment,
                      intangible  amortisation              amortisation     intangible
                    amortisation             &                         &   amortisation
                   & exceptional   exceptional               exceptional  & exceptional
                           items         items       Total         items          items       Total
                            2006          2006        2006          2005           2005        2005
               Note           £m            £m          £m            £m             £m          £m
               ----      -------      --------     -------      --------       --------     -------
Continuing
Operations
Revenue           3      2,525.5             -     2,525.5       2,216.0              -     2,216.0
                     
Operating
costs before
goodwill
impairment,
intangible
amortisation &
exceptional
items                   (2,340.7)            -    (2,340.7)     (2,060.5)             -    (2,060.5)
Goodwill
impairment        3            -         (20.2)      (20.2)            -          (33.3)      (33.3)
Intangible
amortisation      3            -         (27.8)      (27.8)            -           (4.9)       (4.9)
Exceptional
items             3            -           4.8         4.8             -           (7.8)       (7.8)
                         
Total
operating
costs                   (2,340.7)        (43.2)   (2,383.9)     (2,060.5)         (46.0)   (2,106.5)
                 ----     -------      --------     -------      --------       --------     -------
Group
operating
profit                     184.8         (43.2)      141.6         155.5          (46.0)      109.5
Profit on
disposal of
non-current
assets            3            -          16.9        16.9             -              -           -
                ----     -------      --------     -------      --------       --------     -------
Profit from
operations                 184.8         (26.3)      158.5         155.5          (46.0)      109.5
Share of post
tax results
from
associates and
joint ventures
accounted for
using the
equity method               (3.8)        (25.7)      (29.5)         (8.8)             -        (8.8)
Finance income    4         12.4             -        12.4          10.8              -        10.8
Finance costs     4        (37.3)            -       (37.3)        (22.2)             -       (22.2)
                 ----     -------      --------     -------      --------       --------     -------
Profit before
tax                        156.1         (52.0)      104.1         135.3          (46.0)       89.3
Tax expense       5        (39.2)         15.6       (23.6)        (29.5)           2.0       (27.5)
                 ----     -------      --------     -------      --------       --------     -------
Profit after
tax for the
year from
continuing
operations                 116.9         (36.4)       80.5         105.8          (44.0)       61.8
(Loss)/profit
for the year
from
discontinued
operations                     -          (3.2)       (3.2)          3.8          (68.3)      (64.5)
                 ----     -------      --------     -------      --------       --------     -------
Profit/(loss)
for the year               116.9         (39.6)       77.3         109.6         (112.3)       (2.7)
                         
Profit/(loss)
attributable
to equity
shareholders               116.1         (39.6)       76.5         109.5         (112.3)       (2.8)
Profit
attributable
to minority
interests                    0.8             -         0.8           0.1              -         0.1
                         
                           116.9         (39.6)       77.3         109.6         (112.3)       (2.7)
                 ----     -------      --------     -------      --------       --------     -------

Earnings/(loss)
per share:
- basic earnings/
(loss) per share  7                                   50.7p                                    (2.0p)
- diluted 
earnings/(loss) 
per share         7                                   50.4p                                    (2.0p)

Normalised 
earnings
per share:
- basic earnings/
(loss) per share  7         77.0p                                   77.4p
- diluted 
earnings/(loss) 
per share         7         76.5p                                   76.3p

Earnings per
share from
continuing
operations:
- basic
earnings per
share             7                                   52.8p                                    45.2p
- diluted
earnings per
share             7                                   52.5p                                    44.5p
                 ----     -------      --------     -------      --------       --------     -------

Dividends per
ordinary share:
- interim         6                                   10.75p                                   10.00p
- final           6                                   24.00p                                   22.25p
                 ----     -------      --------     -------      --------       --------     -------
                                                      34.75p                                   32.25p

Dividends of £50.1m were paid during the year (2005: £41.6m). Dividends of
£52.5m were proposed for approval during the year (2005: £47.0m).


NATIONAL EXPRESS GROUP PLC

GROUP BALANCE SHEET

At 31 December 2006
                                                 Note       2006          2005*
                                                              £m            £m
                                               ------  -----------  ------------
Non-current assets
Intangible assets                                          697.6         766.3
Property, plant and
equipment                                                  501.9         514.4
Financial assets -
Available for sale                                          13.5          11.4
- Derivative
financial instruments                                        0.3           0.6
Investments accounted
for using the equity
method                                                       8.7           4.8
Other receivables                                            4.1          26.2
Deferred tax asset                                          10.6          23.0
                                               ------  -----------  ------------
                                                         1,236.7       1,346.7
                                               ------  -----------  ------------
Current assets
Inventories                                                 15.5          18.7
Trade and other
receivables                                                272.3         301.8
Financial assets -
Derivative financial
instruments                                                  8.1           6.7
Current tax assets                                          26.4          11.3
Cash and cash
equivalents                                                143.6         145.5
                                               ------  -----------  ------------
                                                           465.9         484.0
                                               ------  -----------  ------------
Disposal group assets
classified as held
for sale                                                    20.1             -
                                               ------  -----------  ------------
Total assets                                             1,722.7       1,830.7
                                               ------  -----------  ------------
Non-current liabilities
Financial liabilities 
- Borrowings                                              (538.4)       (495.5)
- Derivative financial instruments                          (8.3)         (8.3)
Deferred tax
liability                                                  (84.3)        (81.9)
Other non-current
liabilities                                                 (3.0)         (6.1)
Defined benefit
pension liability                                 8        (52.8)        (88.8)
Provisions                                                 (61.3)        (41.3)
                                               ------  -----------  ------------
                                                          (748.1)       (721.9)
                                               ------  -----------  ------------
Current liabilities
Trade and other
payables                                                  (518.4)       (532.4)
Financial                                                
- Borrowings liabilities                                   (43.6)       (214.4)
- Derivative financial instruments                          (6.4)        (13.4)
Current tax
liabilities                                                (40.9)        (24.0)
Provisions                                                 (17.4)        (12.3)
                                               ------  -----------  ------------
                                                          (626.7)       (796.5)
                                               ------  -----------  ------------
Liabilities directly
associated with
disposal group assets
classified as held
for sale                                                    (2.4)            -
                                               ------  -----------  ------------
Total liabilities                                       (1,377.2)     (1,518.4)
                                               ------  -----------  ------------
Net assets                                                 345.5         312.3
                                               ------  -----------  ------------
Shareholders' equity
Called up share
capital                                           9          7.7           7.5
Share premium account                             9        189.8         174.2
Capital redemption
reserve                                           9          0.2           0.2
Own shares                                        9        (16.7)         (5.1)
Other reserves                                    9          7.9          24.5
Retained earnings                                 9        153.3         108.1
                                               ------  -----------  ------------
Total shareholders'
equity                                                     342.2         309.4
Minority interest in
equity                                            9          3.3           2.9
                                               ------  -----------  ------------
Total equity                                      9        345.5         312.3

*Adjusted for Alsa fair value movements as required by IFRS 3.


NATIONAL EXPRESS GROUP PLC

GROUP STATEMENT OF CASH FLOWS

For the year ended 31 December 2006

                                                   
                                                    Note      2006        2005
                                                                £m          £m
                                                   -----  ----------  ----------
Cash generated from operations                      11       254.5       181.1
Tax paid                                                      (9.0)      (26.7)
                                                   -----  ----------  ----------
Net cash from operating activities                           245.5       154.4
                                                   -----  ----------  ----------
Cash flows from investing activities
Payments to acquire businesses, net of cash                  
acquired                                                     (19.8)     (218.8)
Deferred consideration for businesses acquired                (3.0)       (0.3)
Purchase of property, plant and equipment                    (73.5)      (61.7)
Proceeds from disposal of property, plant and               
equipment                                                     24.3         8.1
Payments to acquire investments                               (4.6)          -
Payments to acquire associates                                (1.5)          -
Receipts from disposal of investments                         13.2           -
Receipts from disposal of businesses, net of cash
disposed                                                         -        71.3
Receipts from disposal of intangible assets                    1.5           -
Interest received                                             12.4        10.8
Receipts from sale of shares for employee schemes                -         3.5
                                                   -----  ----------  ----------
Net cash used in investing activities                        (51.0)     (187.1)
                                                   -----  ----------  ----------
Cash flows from financing activities
Proceeds from issue of ordinary shares                        15.8         4.9
Purchase of treasury shares                                  (11.6)       (3.5)
Share buy back                                                   -       (25.8)
Interest paid                                                (32.1)      (32.6)
Finance lease principal payments                             (21.5)      (20.0)
Repayment of loan notes                                          -        (6.7)
Net loans (repaid)/advanced                                  (89.9)      148.1
Loans receivable repaid                                        1.0           -
Dividends paid                                               (49.7)      (41.6)
                                                   -----  ----------  ----------
Net cash (used in)/from financing activities                (188.0)       22.8
                                                   -----  ----------  ----------
Increase/(decrease) in cash and cash equivalents               6.5        (9.9)
                                                   -----  ----------  ----------
Opening cash and cash equivalents                            140.0       147.2
Increase/(decrease) in cash and cash equivalents               6.5        (9.9)
Foreign exchange                                              (2.9)        2.7
                                                   -----  ----------  ----------
Closing cash and cash equivalents                   10       143.6       140.0



NATIONAL EXPRESS GROUP PLC

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 31 December 2006
                                                
                                                    Note      2006        2005
                                                                £m          £m
                                                  ------  ----------  ----------
Income and expense recognised directly in equity
Exchange differences on retranslation of foreign            
operations                                                   (55.3)       50.3
Exchange differences on retranslation of foreign
currency borrowings                                           46.8       (45.5)
Actuarial gains/(losses) on defined benefit                  
pension plans                                                 20.6       (32.0)
(Loss)/gain on cash flow hedges taken to equity              (12.1)       14.5
                                                  ------  ----------  ----------
                                                                 -       (12.7)
                                                  ------  ----------  ----------
Transfers to the income statement
Exchange differences on disposal of foreign                   
operations                                                       -         1.5
On cash flow hedges                                            1.6        (9.4)
                                                  ------  ----------  ----------
                                                               1.6        (7.9)
                                                  ------  ----------  ----------
Tax on exchange differences on retranslation of
foreign operations                                            (1.3)        7.1
Tax on share based payments                                    2.4         1.4
Deferred tax on actuarial (gains)/losses                      (6.2)        9.0
Deferred tax on cash flow hedges                               3.7        (1.4)
                                                  ------  ----------  ----------
Tax on items taken directly to or transferred                 (1.4)       16.1
from equity                                       ------  ----------  ----------

Net losses recognised directly in equity                       0.2        (4.5)
Profit/(loss) for the financial year                          76.5        (2.8)
Profit attributable to minority interests                      0.8         0.1
                                                  ------  ----------  ----------
Total recognised income/(expense) for the year       9        77.5        (7.2)
                                                         
Income/(expense) attributable to equity                      
shareholders                                                  76.7        (7.3)

Income attributable to minority interests                      0.8         0.1
                                                         
                                                              77.5        (7.2)
                                                  ------  ----------  ----------
Effects of changes in accounting policy:
Equity shareholders:
Net loss on hedges on first-time adoption of IAS                
39                                                               -       (18.4)
Tax recognised on hedges on first-time adoption             
of IAS 39                                                        -         5.6
                                                  ------  ----------  ----------
                                                                 -       (12.8)

NATIONAL EXPRESS GROUP PLC

NOTES TO THE ACCOUNTS

For the year ended 31 December 2006


1. Basis of preparation

The results have been prepared in accordance with International Financial
Reporting Standards ('IFRS') and the International Financial Reporting
Interpretations Committee's interpretations as adopted by the European Union,
and with those parts of the Companies Act 1985 applicable to companies reporting
under IFRS.

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

Normalised results are defined as the statutory results before the following as
appropriate: profit or loss on the sale of businesses, exceptional profit or
loss on the sale of non-current assets and charges for goodwill impairment,
intangible asset amortisation, exceptional items and tax relief on qualifying
exceptional items.


2. Exchange rates

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

                           2006            2006            2005            2005
                   Closing rate    Average rate    Closing rate    Average rate
                      -----------     -----------     ------------   -----------
US dollar                  1.96            1.85            1.72            1.82
Canadian dollar            2.28            2.09            2.00            2.20
Euro                       1.48            1.47            1.45            1.47
Australian dollar          2.48            2.44            2.35            2.39

The 2005 average rate for Euros reflects the average rate since the Alsa
acquisition.

If the results for the year to 31 December 2005 had been retranslated at the
average exchange rates for the year to 31 December 2006, North America would
have achieved normalised operating profit of £35.0m on revenue of £241.7m,
compared to normalised operating profit of £35.0m on revenue of £241.8m as
reported, and Alsa would have remained the same with normalised operating profit
of £2.6m on revenue of £18.2m.


3. Segmental analysis

Analysis by class and geography of business
                                              Operating              Operating
                                    Revenue      result     Revenue     result
                                       2006        2006        2005       2005
                                         £m          £m          £m         £m
                                      -------    --------     -------    -------
UK Bus                                300.8        40.7       268.6       41.5
UK Trains                           1,497.6        49.1     1,497.2       64.2
UK Coach                              207.3        23.7       200.5       21.5
Intercompany elimination              (13.2)          -       (10.3)         -
                                      -------    --------     -------    -------
UK operations                       1,992.5       113.5     1,956.0      127.2
North American Bus                    283.7        39.1       241.8       35.0
European Coach & Bus (Alsa)           249.3        44.3        18.2        2.6
Central functions                         -       (12.1)          -       (9.3)
                                    -------    --------     -------    -------
Result from continuing operations   2,525.5       184.8     2,216.0      155.5
Goodwill impairment                               (20.2)                 (33.3)
Intangible asset amortisation                     (27.8)                  (4.9)
Exceptional items                                   4.8                   (7.8)
                                      -------    --------     -------    -------
Group operating profit                            141.6                  109.5
Profit on disposal of non-current                  16.9                      -
assets                                -------    --------     -------    -------
Profit from operations                            158.5                  109.5
Share of post tax results from                    (29.5)                  (8.8)
associates
Net finance costs                                 (24.9)                 (11.4)
                                      -------    --------     -------    -------
Profit before tax                                 104.1                   89.3
Tax expense                                       (23.6)                 (27.5)
                                      -------    --------     -------    -------
Profit for the year from continuing
operations                                         80.5                   61.8
Loss from discontinued operations                  (3.2)                 (64.5)
                                      -------    --------     -------    -------
Profit/(loss) for the year                         77.3                   (2.7)

Intercompany sales only occur between the Group's UK Divisions.


3. Segmental analysis (continued)

Goodwill impairment, intangible asset amortisation, property and exceptional
items can be analysed by class and geography of business as follows:

                                            Intangible
                               Goodwill          asset  Exceptional
                             impairment   amortisation        items      Total
                                   2006           2006         2006       2006
                                     £m             £m           £m         £m
                                 --------      ---------     --------  ---------
UK Bus                              1.0            1.6         (4.9)      (2.3)
UK Trains                          19.2            1.6            -       20.8
UK Coach                              -              -         (1.3)      (1.3)
North American Bus                    -            4.5            -        4.5
European Coach & Bus (Alsa)           -           20.1          1.9       22.0
Central functions                     -              -         (0.5)      (0.5)
                                 --------      ---------     --------  ---------
Total                              20.2           27.8         (4.8)      43.2

In the year to 31 December 2006 exceptional income arose in UK Bus, UK Coach and
Central Functions for a past service pension credit. Integration costs of £1.9m
were incurred in Alsa.

The profit on disposal of non-current assets of £16.9m (2005: £nil) comprises
£7.5m (2005: £nil) of profit on the disposal of property and £9.4m (2005: £nil)
of profit on disposal of investments. Both profits relate to the UK Trains
division.

                                            Intangible  
                               Goodwill          asset  Exceptional
                             impairment   amortisation        items      Total
                                   2005           2005         2005       2005
                                     £m             £m           £m         £m
                                 --------      ---------     --------  ---------
UK Bus                                -            0.9          1.5        2.4
UK Trains                          33.3            2.4          3.5       39.2
North American Bus                    -            1.6          2.8        4.4
                                 --------      ---------     --------  ---------
Total continuing operations        33.3            4.9          7.8       46.0
Discontinued operations            60.0              -          0.2       60.2
                                 --------      ---------     --------  ---------
Total                              93.3            4.9          8.0      106.2

In the year to 31 December 2005 exceptional items were incurred in UK Bus for
business reorganisation costs, in UK Trains for staff redundancy programmes and
business reorganisations and in North America in respect of the divisional head
office relocation.


4. Net finance costs
                                                         
                                                            2006          2005
                                                              £m            £m
                                                          --------      --------
Bank interest payable                                      (28.2)        (16.3)
Finance lease interest payable                              (7.0)         (4.7)
Other interest payable                                         -          (0.3)
Unwind of provision discounting                             (2.1)         (0.9)
                                                          --------      --------
Finance costs                                              (37.3)        (22.2)
Finance income: Bank interest receivable                    12.4          10.8
                                                          --------      --------
Net finance costs                                          (24.9)        (11.4)


5. Taxation

Analysis of taxation charge in the year
                                                            
                                                                2006      2005
                                                                  £m        £m
                                                              --------  --------
Current taxation:
UK corporation tax - continuing operations                      10.0      19.5
Overseas taxation - continuing operations                        8.8      (1.2)
Overseas taxation - discontinued operations                        -      (0.2)
                                                              --------  --------
Current income tax charge                                       18.8      18.1
Amounts overprovided in prior years - UK                        (4.8)     (9.5)
Amounts overprovided in prior years - Overseas                  (0.2)        -
                                                              --------  --------
Total current income tax                                        13.8       8.6

Deferred taxation:
Origination and reversal of temporary differences -
continuing operations                                            9.8      18.7
                                                              --------  --------
Total tax charge                                                23.6      27.3
                                                              --------  --------

The tax charge in the income statement is disclosed as
follows:
Income tax expense on continuing operations                     23.6      27.5
Income tax credit on discontinued operations                       -      (0.2)
                                                              --------  --------
                                                                23.6      27.3
                                                              --------  --------

The tax expense on continuing operations is disclosed as
follows:
Tax charge on profit before goodwill impairment, intangible
asset amortisation and exceptional items                        39.2      29.5
Tax credit on intangible asset amortisation and exceptional
items                                                          (15.6)     (2.0)
                                                              --------  --------
                                                                23.6      27.5

6. Dividends paid and proposed

                                                           
Declared and paid during the year                              2006       2005
                                                                 £m         £m
                                                            ---------  ---------
Ordinary final dividend for 2005 paid of 22.25p per share
(2004: 20.65p per share)                                       33.9       28.1
Ordinary interim dividend for 2006 paid of 10.75p per
share (2005: 10.0p per share)                                  16.2       13.5
                                                            ---------  ---------
                                                               50.1       41.6
                                                            ---------  ---------

Proposed for approval (not recognised as a liability at 31
December)                                                   ---------  ---------
Ordinary final dividend for 2006 of 24.00p per share
(2005: 22.25p per share)                                       36.3       33.5


7. Earnings per share
                                                               2006       2005
                                                            ---------  ---------
Basic earnings per share - continuing operations               52.8p      45.2p
Basic loss per share - discontinued operations                 (2.1p)    (47.2p)
                                                            ---------  ---------
Basic earnings/(loss) per share - total                        50.7p      (2.0p)
                                                            ---------  ---------
Normalised basic earnings per share - continuing 
operations                                                     77.0p      77.4p
                                                            ---------  ---------
Diluted earnings per share - continuing operations             52.5p      44.5p
Diluted loss per share - discontinued operations               (2.1p)    (46.5p)
                                                            ---------  ---------
Diluted earnings/(loss) per share - total                      50.4p      (2.0p)
                                                            ---------  ---------
Normalised diluted earnings per share - continuing             
operations                                                     76.5p      76.3p


Basic earnings per share is calculated by dividing the earnings attributable to
equity shareholders of £76.5m (2005: loss of £2.8m) by the weighted average
number of ordinary shares in issue during the year, excluding those held by
employee share ownership trusts and those held as treasury shares which are both
treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares
in issue during the year 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.


7. Earnings per share (continued)

The reconciliation of basic and diluted weighted average number of ordinary
shares is as follows:

                                                           2006           2005
                                                      ---------      ---------
Basic weighted average shares                       150,847,303    136,591,474
Adjustment for dilutive potential ordinary shares       915,923      2,017,744
                                                      ---------      ---------
Diluted weighted average shares                     151,763,226    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 since, in the opinion of the Directors, they reflect the underlying
performance of the business's operations more appropriately.

The reconciliation of the earnings and earnings per share to their normalised
equivalent is as follows:

                                      2006     2006              2005     2005
                                     Basic  Diluted             Basic  Diluted
                             2006      EPS      EPS     2005      EPS      EPS
                               £m        p        p       £m        p        p
                            -------  -------  -------  -------  -------  -------
Profit/(loss) attributable
to equity shareholders       76.5     50.7     50.4     (2.8)    (2.0)    (2.0)
Loss from discontinued
operations                    3.2      2.1      2.1     64.5     47.2     46.5
                            -------  -------  -------  -------  -------  -------
Profit from continuing
operations attributable to
equity shareholders          79.7     52.8     52.5     61.7     45.2     44.5
Goodwill impairment on
continuing operations        20.2     13.4     13.3     33.3     24.4     24.1
Intangible asset
amortisation                 27.8     18.5     18.3      4.9      3.6      3.5
Exceptional charge for
associate onerous contract
provision                    25.7     17.0     16.9        -        -        -
Exceptional items            (4.8)    (3.2)    (3.1)     7.8      5.7      5.6
Profit on disposal of
non-current assets          (16.9)   (11.2)   (11.1)       -        -        -
Tax relief on goodwill and
exceptional items           (15.6)   (10.3)   (10.3)    (2.0)    (1.5)    (1.4)
                            -------  -------  -------  -------  -------  -------
Normalised profit
attributable to equity
shareholders                116.1     77.0     76.5    105.7     77.4     76.3


8. Pensions and other post-employment benefits

The UK Bus and UK Coach divisions operate both funded defined benefit schemes
and a defined contribution scheme. The majority of employees of the UK Train
companies are members of the appropriate shared-cost section of the Railways
Pension Scheme ('RPS'), a funded defined benefit 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 unfunded post-employment
benefits to employees in North America and Spain, which are disclosed in the
Other category below.

The total pension cost for the year was £23.9m (2005: £27.5m), of which £3.4m
(2005: £2.5m) relates to the defined contribution schemes.

The defined benefit pension liability included in the balance sheet is as
follows:

                         2006            2005
                           £m              £m
                    ----------      ----------
UK Bus                  (17.3)          (37.8)
UK Coach                (12.7)          (14.9)
UK Train                (21.1)          (34.2)
Other                    (1.7)           (1.9)
                    ----------      ----------
Total                   (52.8)          (88.8)


9. Share capital and reserves

                               Capital
            Share    Share  redemption      Own     Other  Retained            Minority    Total
          capital  premium     reserve   shares  reserves  earnings    Total  interests   equity
               £m       £m          £m       £m        £m        £m       £m         £m       £m
             ------   ------     -------  -------   -------   -------   ------    -------   ------
At 1
January      
2006          7.5    174.2         0.2     (5.1)     24.5     108.1    309.4        2.9    312.3
Shares        
issued        0.2     15.6           -        -         -         -     15.8          -     15.8
Shares
purchased       -        -           -    (11.6)        -         -    (11.6)         -    (11.6)
Total
recognised
 income/
 (expense)      -        -           -        -     (16.6)     93.3     76.7        0.8     77.5
Share
based          
payments        -        -           -        -         -       2.0      2.0          -      2.0
Dividends       -        -           -        -         -     (50.1)   (50.1)         -    (50.1)
Payments
to
minority       
interests       -        -           -        -         -         -        -       (0.4)    (0.4)
            ------   ------     -------  -------   -------   -------   ------    -------   ------
At 31
December  
2006          7.7    189.8         0.2    (16.7)      7.9     153.3    342.2        3.3    345.5


Own shares comprise treasury shares and shares held in the Employee Benefit
Trust.

Treasury shares include 1,825,000 (2005: 400,000) ordinary shares in the
Company. During the year, the Group repurchased 1,425,000 (2005: 3,300,000)
shares for consideration of £11.6m (2005: £29.3m). 1,425,000 (2005: 400,000)
shares have been retained as treasury shares within equity for future issue
under the Group's share schemes or cancellation. No shares were cancelled during
the year (2005: 2,900,000).

Own shares include 663,351 (2005: 849,456) ordinary shares in the Company that
have been purchased by the Trustees of the National Express Employee Benefit
Trust (the 'Trust'). During the year, the Trust purchased no (2005: 5,329)
shares and 186,105 (2005: 899,417) shares were used to satisfy options granted
under a number of the Company's share schemes. The value of shares within the
Trust has been recognised as an investment in treasury shares. The market value
of these shares at 31 December 2006 was £7.5m (2005: £7.3m). The dividends
payable on these shares have been waived.


10. Net debt

Net debt at 31 December 2006 comprises cash and cash equivalents of £143.6m
(2005: £145.5m), current interest bearing loans and borrowings of £43.6m (2005:
£214.4m) and non-current interest bearing loans and borrowings of £538.4m (2005:
£495.5m) and other debt receivable of £nil (2005: £1.0m).

                   At
                    1                                                     At 31
               January    Cash  Acquisitions/     Exchange      Other  December
                 2006     flow      Disposals  Differences  movements      2006
                   £m       £m             £m           £m         £m        £m
               -------  -------       --------      -------    -------  --------
Cash             53.2     (8.1)             -         (1.4)         -      43.7
Overnight
deposits         24.5     (2.9)             -            -          -      21.6
Other short
term             
deposits         67.8     12.0              -         (1.5)         -      78.3
Bank             
overdrafts       (5.5)     5.5              -            -          -         -    
               -------  -------       --------      -------    -------  --------
Cash and
cash            
equivalents     140.0      6.5              -         (2.9)         -     143.6    
               -------  -------       --------      -------    -------  --------
Other debt
receivable        1.0     (1.0)             -            -          -         -
               -------  -------       --------      -------    -------  --------
Borrowings:
  Loan notes     (0.8)       -              -            -          -      (0.8)
  Bank loans   (594.5)    89.9           (2.6)        30.0       (0.9)   (478.1)
  Finance
  lease      
  obligations  (109.1)    21.5              -          5.2      (20.7)   (103.1)
    

               -------  -------       --------      -------    -------  --------
               (704.4)   111.4           (2.6)        35.2      (21.6)   (582.0)
               -------  -------       --------      -------    -------  --------
Net debt       (563.4)   116.9           (2.6)        32.3      (21.6)   (438.4)


Short term deposits included within liquid resources relate to term deposits
repayable within three months. Changes in cash and cash equivalents arising from
acquisitions and disposals in the year are disclosed separately on the face of
the cash flow statement.

Other non cash movements in net debt represent finance lease additions of £20.7m
(2005: £57.0m) and £0.9m (2005: £0.2m) amortisation of loan arrangement fees.


11. Cash flow statement

The net cash inflows from operating activities include outflows of £2.0m (2005:
£7.7m) from continuing operations which related to exceptional costs.

The reconciliation of Group operating profit to cash generated from operations
is as follows:

Total Operations                                              2006        2005
                                                                £m          £m
                                                          ----------  ----------
Net cash inflow from operating activities
Group operating profit                                       141.6       109.5
Operating loss of discontinued operations                        -       (56.4)
Depreciation of property, plant and equipment                 81.7        56.8
Amortisation of leasehold property prepayment                  0.6         0.8
Goodwill impairment                                           20.2        93.3
Intangible asset amortisation                                 27.8         4.9
Amortisation of fixed asset grants                            (2.0)       (0.9)
Profit on disposal of fixed assets (in operating profit)      (3.1)       (2.0)
Share-based payment                                            2.0         3.6
Decrease/(increase) in inventories                             2.9        (0.7)
Decrease in receivables                                       27.3        22.4
Decrease in payables                                         (21.1)      (37.2)
Decrease in provisions                                       (23.4)      (13.0)
                                                          ----------  ----------
Cash generated from operations                               254.5       181.1


12. Financial information

The financial information set out above, which was approved by the Board on 1
March 2007, is derived from the full Group accounts for the year ended 31
December 2006 and does not constitute the full accounts within the meaning of
section 240 of the Companies Act (as amended). The Group accounts on which the
auditors have given an unqualified report, which does not contain a statement
under section 237 (2) or (3) of the Companies Act 1995, will be delivered to the
Registrar of Companies in due course.

Copies of the Preliminary Results may be obtained from the Company Secretary at
75 Davies Street, London, W1K 5HT. Copies are also available via
www.nationalexpressgroup.com.

                                    - ENDS -







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