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National Express (NEX)

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Thursday 26 July, 2007

National Express

Interim Results

National Express Group PLC
26 July 2007



                           National Express Group PLC
                                Interim Results
                     For the six months ended 30 June 2007

  National Express Group PLC, a leading international public transport group,
                        today announces interim results

Financial Highlights

• Revenue up 5% to £1,309.3 million (2006: £1,252.7 million)
• Group operating profit up 60% to £77.0 million (2006: £48.0 million)
• Operating cash flow* of £77.7 million (2006: £67.3 million)
• Normalised operating profit** up 8% to £90.6 million (2006: £84.0 million)
• Normalised profit before tax** up 18% to £79.0 million (2006: £67.2 million)
• Normalised diluted earnings per share** from continuing operations up 17% to 
  38.1 pence (2006: 32.5 pence)
• Interim dividend increased by 7.5% to 11.56 pence (2006: 10.75 pence)
• Net debt of £412.7 million (31 December 2006: £438.4 million)

*  operating cash flow as defined in the Finance Review
** excluding profit or loss on the sale of non-current assets and businesses and
   charges for goodwill impairment, intangible amortisation, exceptional items 
   and tax relief on qualifying exceptional items.

Half Year Highlights

• Acquisition of Continental Auto, one of Spain's leading coach and bus 
  operators, for €659.3 million, subject to approval by the Spanish competition 
  authorities
• Strong trading across all divisions
• Integration of UK operations releasing £11 million of annualised savings
• Another record North American bid season with over $38 million of new
  business won and over 95% of existing business retained
• Official travel supplier to Wembley Stadium and launch of partnership with the 
  Football Association and Team England
• Industry leading operational performance in Trains
• Placement of £69 million coach and bus order for UK operations.

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

'The first half of the year has delivered a strong trading performance across
all our operations driven primarily by sustained passenger growth and the
introduction of new initiatives. The high quality of earnings in our overseas
operations will be enhanced through the acquisition of Continental Auto. This
complements Alsa, our Spanish coach and bus business, where trading has been
encouraging over the past six months. In North America, continued success at the
bid table demonstrates the strength of relationships we have with our key
customers and provides a great platform for our future growth plans. Our UK
operations continue to perform well. We are particularly pleased with the
progress made by UK coaches to attract new customers and also generate repeat
business.

We are very proud of our track record in trains. Whilst we have been
disappointed by the recent franchise announcements, we are confident that our
bids are ambitious, deliverable and structured to generate shareholder value
over the long term. We await the outcome of the Inter-City East Coast bid in
early Autumn.

We have today announced the integration of our UK operations into one business
group which will enable us to respond more effectively to changes whilst
ensuring we deliver our vision of a customer focused, innovative and profitable
provider of transport and travel services. As we enter the second half we are
encouraged by the Group's prospects, underpinned by a clear and straightforward
strategy to make travel simpler for all our customers.'


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 26 July
  2007 at City Presentation Centre, 4 Chiswell Street, Finsbury Square, London
  EC1Y 4UP.
• A webcast of the analyst and investor presentation will be available on
  our website www.nationalexpressgroup.com at 0900 hours on 26 July 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.


Chairman's Statement

I am pleased to report the Group's interim results for the six month period
ended 30 June 2007. Over the last six months the Group has traded well with all
divisions providing strong contributions. This improved trading position is
particularly encouraging as it is underpinned by strong passenger growth.

We are particularly delighted with the performance of our high margin overseas
divisions which contributed almost half of the Group's operating profit. In
Spain, Alsa's operations went from strength to strength with its financial
performance supported by the opening of new coach stations as well as trialling
new products and services to its customer base. In North America our approach to
bidding and retention of contracts has resulted in the division reporting
another record bid season. We are also pleased that we are starting to see more
contract conversions from the public to private sector. We see conversions
becoming an important feature of the market over the coming years.

At the end of April, we announced the acquisition of Continental Auto, a highly
respected, well established Spanish coach and bus operator, providing an
extensive north-south long distance coach network complementing Alsa's existing
operations. Continental Auto has a strong financial track record, underpinned by
long-term, predictable concessions. It is a quality business and we are
delighted that it will join the Group as the transaction fits perfectly with our
stated strategy of utilising our balance sheet to acquire businesses in our core
markets. The acquisition is subject to the approval of the Spanish competition
authorities. We expect to complete the transaction in the final quarter of the
year.

Trading in the UK has also been encouraging. Our coach division performed
strongly whilst consolidating its Superbrand status for the second year running.
The equity in this brand positions the business well for partnerships which
enhance and build on our core offering. As announced in April, our coach
division is now the official travel supplier to Wembley Stadium. We believe
similar opportunities exist with other venues across the UK and have recently
entered into a partnership with the Rugby Football Union to support Twickenham.

Our West Midlands bus business has seen its first passenger growth in a number
of years. Both Centro and ourselves are fully committed to our new Partnership
Agreement which we look forward to signing in early Autumn.

We have seen sustained growth in our trains division with our 'one' franchise
delivering a much improved performance. Our operational performance leads the
industry. We are very proud of this record and believe it reflects our focus on
getting things right and delivering for the passenger. We have been disappointed
by the recent franchise announcements but are confident that our bids are
ambitious, deliverable and structured to generate shareholder value over the
long term. We await the outcome of the Inter-City East Coast bid in early
Autumn.

In February, after a review of the Group's activities the Board decided to
re-orientate the Group to deliver customer focused revenue growth initiatives
leveraging off the Group's unique brand. Today we have announced a major step in
reshaping the Group with the integration of our three UK businesses under a
single UK business group. The new UK operation will be headquartered in
Birmingham under the leadership of Ray O'Toole who will continue as a main board
director with the priority of leading and completing the integration. The
completion of the integration, planned for the first quarter of 2008, is
expected to produce annualised cost savings of £11 million. The one-off costs
associated with this move are expected to be £8.5 million.

As highlighted at the preliminary results, the Group continues to develop its
operations with a greater focus on its customers and wider marketing of its
services. With the issue of climate change becoming increasingly important,
public transport is a very practical way in which consumers can reduce their
carbon footprint. We are developing a number of products to satisfy this
appetite including a Carbon Club incentive scheme that will encourage repeat
travel on public transport whilst rewarding customers for making choices that
are more environmentally sustainable. In addition, our operations are evaluating
the benefits of the numerous alternative vehicle technologies available within
the market, with a number of trials already underway.

National Express is a company focused on growth through investment. We are
investing in the quality of our operations and in May announced a new £69
million order for up to 480 buses and coaches for our UK operations,
incorporating the latest in European low exhaust emissions standards and
providing fuel economy. This order is phased over the next three years and will
result in a sustained improvement in the quality of our bus and coach fleets
where the average fleet age is already below the industry average.

Results

Revenue for the six months to 30 June 2007 was up 5% to £1,309.3 million (2006:
£1,252.7 million). Group operating profit was up 60% to £77.0 million (2006:
£48.0 million) and profit before tax increased to £65.4 million (2006: £5.5
million). After taxation, the diluted earnings per share was 31.4 pence (2006:
loss per share 5.9 pence).

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 non-current assets and businesses and charges for goodwill
impairment, intangible amortisation, exceptional items and tax relief on
qualifying exceptional items.

Normalised operating profit was up 8% to £90.6 million (2006: £84.0 million).
Normalised profit before tax increased to £79.0 million (2006: £67.2 million).

Normalised diluted earnings per share were up 17% to 38.1 pence (2006: 32.5
pence). Operating cash flow during the first six months was £77.7 million (2006:
£67.3 million). Net debt at 30 June 2007 was £412.7 million (31 December 2006: 
£438.4 million).

An interim dividend of 11.56 pence per share, an increase of 7.5% over last
year's interim dividend of 10.75 pence per share, will be paid on 28 September 
2007 to shareholders on the register by 14 September 2007.

Current trading and prospects

The first half of the year has delivered a strong trading performance across all
our operations driven primarily by sustained passenger growth and the
introduction of new initiatives. The high quality of earnings in our overseas
operations will be enhanced through the acquisition of Continental Auto. This
complements Alsa, our Spanish coach and bus business, where trading has been
encouraging over the past six months. In North America, continued success at the
bid table demonstrates the strength of relationships we have with our key
customers and provides a great platform for our future growth plans. Our UK
operations continue to perform well. We are particularly pleased with the
progress made by UK coaches to attract new customers and also generate repeat
business.

We are very proud of our track record in trains. Whilst we have been
disappointed by the recent franchise announcements, we are confident that our
bids are ambitious, deliverable and structured to generate shareholder value
over the long term. We await the outcome of the Inter-City East Coast bid in
early Autumn.

We have today announced the integration of our UK operations into one business
group which will enable us to respond more effectively to changes whilst
ensuring we deliver our vision of a customer focused, innovative and profitable
provider of transport and travel services. As we enter the second half we are
encouraged by the Group's prospects, underpinned by a clear and straightforward
strategy to make travel simpler for all our customers.

Operating Review

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 £121.7 million (2006: £117.1 million) and normalised operating
profit was £18.9 million (2006: £18.1 million). The results were achieved
despite a weakening of the euro with normalised operating profit in local
currency improving 6% to €28.0 million (2006: €26.3 million).

In the first half Alsa's operations experienced passenger growth of 3% despite
competitive pressure from rail and low cost airlines. The introduction of
promotional fares, the use of differentiated product offerings and improvements
to network services have all contributed to the growth achieved to date. We are
developing our network on key routes with improvements to travel facilities
around key hubs such as Barcelona and Seville. These encouraging results were
achieved despite experiencing a reduction in passenger journeys in May due to
unseasonal weather.

Alsa has focused on improving its relationship and information provision to
customers on the back of sharing best practice with the UK coach division. In
January 'InfoSMS' was launched providing real-time information to customers
through mobile phone text messages. In May, the new Alsa customer loyalty card
called 'BUS Plus' was launched incorporating cutting edge technology which gives
customers a pre pay cash system combined with a smartcard. This has been well
received with 30,000 members signed up in three months. In addition, payment of
tickets via mobile phone and additional web capability are also under
development.

The bus business saw good growth and we recently signed a new 15 year bus
contract in Leon. With environmental credentials being a key criteria for
procuring organisations, we have been improving them in our bus fleet and are
undertaking trials of alternative technologies. We have increased our bus fleet
in Marrakech, Morocco and look forward to news with respect to our recently
submitted bid for a new 400 bus contract in Rabat. In May the new light rail
route in Madrid commenced operation and has achieved anticipated passenger
targets.

With the summer being a key trading period for the division, we are encouraged
by the prospects across our operations and look forward to working with
Continental Auto management later in the year.

Coaches

The Coach division provides Britain's only scheduled national coach network and
services to almost 1,000 destinations. Eurolines offers value for money European
travel by coach.

Revenue was £103.5 million (2006: £94.8 million) and normalised operating profit
was £6.1 million (2006: £5.3 million). Overall revenue has grown by 9% and we
have maintained our first half margins. Our coach division experienced a strong
start to the year particularly on our airport and short distance routes with
passenger growth of 3%. In addition we saw an improvement in yields as fewer
promotional fares were offered than in 2006. We experienced strong internet
growth driven by the success of our funfares which will be rolled out to other
key routes later in the year.

Although the first six months of the year is traditionally quieter than the
second, some important trends are becoming clear. Coach travel is becoming
relevant to a far greater proportion of the population. We target those
customers for whom value for money travel is a priority and who have an
increased awareness of the role the coach can play in reducing an individual's
carbon footprint. We are developing new products for coaches to address an
increasingly diverse and segmented market. We continue to lobby the Highways
Agency to allow coaches to use the proposed High Occupancy Vehicle Lanes on
Britain's motorways. We are also talking to Transport for London to promote the
coach as a key part of Greater London's transport infrastructure. In addition,
we are reviewing our network to ensure our assets are deployed to maximum
effect, without compromising the strength of our network overall.

As increasing demand is placed on transport infrastructure around our major
cities, we are looking for new ways to meet this demand and grow our business by
offering the motorist and other commuters real choice. At the end of this month,
we are launching a pilot commuter coach service between Milton Keynes and Canary
Wharf with dedicated vehicles fitted with wi-fi and power points amongst other
facilities. We have plans to introduce further routes during 2007 and 2008.

Through our Wembley sponsorship we have supported eleven events at the venue to
date with over 12,500 people travelling on our services. Our Wembley network
from 43 UK towns is encouraging new customers to use our services.

Outline planning permission has been agreed to build a new landmark purpose
built coach station in the centre of Birmingham incorporating a wide range of
customer amenities as well as being an important interchange for the West
Midlands. Detailed discussions with Birmingham City Council are now well
underway and work is expected to start by the end of the year with completion
anticipated in 2010. The transition of operations to a neighbouring temporary
site is already underway. We anticipate this new coach station will provide
enhanced customer facilities and make coach travel more appealing to a wider
customer base. To support our network, we have invested in new services such as
a sales desk at Luton Airport and improved customer amenities at our North
London hub at Golders Green and Leicester Bus Station. We are also working with
the local councils to offer improved customer facilities in Brighton and Milton
Keynes.

Eurolines has benefited from the increased movement of passengers to the UK from
across Eastern Europe with a total of 88 destinations now available as 'through
tickets' for our Polish customers. Passenger growth has also been strong on the
London to Paris route following the introduction of new coaches and revised
fares. When the Eurolines routes are combined with the international routes in
Alsa, we are one of the leading coach providers across Europe. We see this as a
future opportunity for growth given the flows of migrant travel, the benefits of
coach as an environmentally friendly form of travel and our sustained value for
money pricing structure.

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 £157.0 million (2006: £147.5 million) with normalised
operating profit of £19.8 million (2006: £19.0 million). We have experienced a
2% increase in passenger growth in the West Midlands across both farepaying and
concessionary fare passengers, reflecting the first concerted growth for several
years. This was achieved despite the challenging weather conditions in the early
part of the year and without a significant change in the terms of the local
concessionary fare scheme. This trend was assisted by the introduction of a
number of initiatives to increase the attractiveness of season tickets and
making our tickets easier to purchase.

We have focused on improving the quality of our services with new cleaning
regimes for the fleet. A greater focus on training employees has resulted in our
Coventry business receiving the Investors in People accreditation in June.

Travel London performed well. Significant contracts were won including the East
London rail replacement service as well as retention of key contracts with
Surrey County Council. Working in partnership with Transport for London to
reduce further the environmental impact of the fleet, we are introducing five
hybrid single deck vehicles into the fleet on trial.

Our Dundee operation had a good first half with passenger growth of over 4%,
despite Dundee having seen an 11% increase in car ownership over the past few
years.

We expect further progress in the West Midlands in the second half of 2007. A
new bus order will see 125 double and single deck vehicles enter the fleet for
deployment on key Birmingham routes. We have been active in supporting the
partnership themes within the Local Transport Bill and believe that our
forthcoming Partnership Agreement with Centro illustrates that working together
is by far the most effective route to deliver passenger growth and benefits.

North America

We operate a bus fleet entirely focused on school bus services both in the
United States (27 states) and Canada (2 provinces), with a fleet of 14,000
buses.

Revenue was £162.8 million (2006: £155.0 million) and normalised operating
profit was £24.1 million (2006: £26.6 million). In local currency, North America
maintained normalised operating profit at US$47.6 million (2006: US$ 47.6
million) which is a strong result despite absorbing the anticipated increase in
annual fuel costs of $13 million.

Our North American operations performed strongly with a revenue increase of 16%
in local currency. This success has been achieved on the back of good
operational delivery, increased focus on the needs of our customers and
investment in our people. To reinforce this, we are investing in new streamlined
systems and processes for our operations which will significantly enhance the
quality of our business information.

Our business transformation project remains on schedule and detailed work
commences during the second half of this year. Pilot studies in four of our
customer service centres will take place during 2008 and we expect to see
significant bottom line contribution from 2009 onwards.

In the current bid season we won over $38 million of net new business at
improved margins, making this our best ever bid season. This success was
complemented by the retention of over 98% of our existing business and
conversions were secured in Illinois, Iowa, Texas and Mississippi. We have
recently won new contracts in Tennessee and South Carolina and now operate in 27
states.

Operating in a market of 475,000 buses, our approach combines the power of a
major international organisation with the detailed knowledge of local
management. This allows us to invest time and resource with the school boards to
listen to their requirements and ensure that, despite our overall scale, we are
able to get close to our customers at a local level.

The sale of the Stewart airport lease for $78.5 million to the New York Port
Authority was signed on 17 July 2007. The disposal remains subject to approval
by the Federal Aviation Administration and the New York State Authorities.

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 £771.1 million (2006: £744.0 million)
and normalised operating profit of £28.7 million (2006: £20.0 million). Despite
an increase in energy costs of £10 million, margins have been improved. Bid
costs of £7.5 million (2006: £2.0 million) have been included within the
normalised operating profit result.

Our Trains division continues to deliver the best operational performance within
the industry. This has contributed to passenger growth of 6%. On the back of a
joint improvement plan with Network Rail and customer focused adjustments to the
timetable, the operational performance of 'one' has been substantially improved.
This has experienced double digit growth arising from increased leisure travel,
the roll-out of revenue protection initiatives at key stations including
London's Liverpool Street and a number of station upgrades. On-board services
continue to be a focus and we were awarded a National Customer Service award for
our on-board catering on the London to Norwich route at the 2007 Rail Innovation
Awards. c2c continues to be at the top of the national performance league
holding the title of Britain's best performing railway, a position it has held
for more than two years.

We continue to use technology to drive our business. Our yield management system
is working well and currently 40,000 bookings a week are being taken through the
Midland Mainline website, boosting off peak travel. We are pleased with our
progress in improving the quality of our customer relationship marketing
database and are looking at ways that this can be further developed. Technology
is increasingly being used to simplify the customer experience with increased
use of e-ticketing, mobile ticketing and car parking payments made using a
mobile phone.

We have been investigating practical ways to address increased energy costs
within the division. In June, c2c introduced regenerative braking and we
subsequently introduced it at 'one', Silverlink and Central Trains where we have
new trains. Throughout our rail business, we are working hard to reduce our
carbon footprint and bring down our energy costs. During 2006 we achieved a 17%
reduction in our site energy costs.

Earlier this month we launched our new shared service centre for our train
operations, providing a one-stop shop for back office processes for our
London-based train companies, 'one' and c2c. This will provide improved
efficiency and cost savings for the division.

In June, the Department for Transport confirmed that the current Gatwick Express
franchise will end in June 2008 and be incorporated into the Southern franchise.
We have recently submitted our bid for the Inter-City East Coast franchise and
await a decision from the DfT in the Autumn.

Finance Review

Seasonality

As a result of seasonality, the Group does not generate operating profit evenly
between the first half and the second half of the year. In UK Coach and, to a
lesser extent, Alsa, the higher volumes over the summer holiday months weight
operating profit towards the second half of the year. Underlying operating
profit in UK Trains is weighted towards the second half of the year because of
the phasing of passenger revenue in a relatively fixed cost business. The actual
weighting of profits is also affected by the commencement and termination of
franchises. Offsetting this, the North America school bus business primarily
earns revenue by operating contracts on behalf of school boards, and therefore
generates less operating profit in the second half of the year because of school
summer holidays. Operating profit in UK Bus is broadly weighted evenly between
the first half and the second half of the year.

Foreign exchange

The weakening of the US and Canadian dollar has reduced the normalised operating
profit by £2.4 million compared to 2006. If the results for the six months to 30
June 2007 were retranslated at the average exchange rates for the six months to
30 June 2006, North America would have achieved normalised operating profit of
£26.5 million on revenue of £179.6 million.

The adverse impact of currency on Alsa's results is £0.4 million and if the
results for the six months to 30 June 2007 were retranslated at the average
exchange rates for the six months to 30 June 2006 the division would have
achieved normalised operating profit of £19.3 million on revenue of £124.0
million.

Joint ventures and associates

The share of profit from the joint ventures and associates within Alsa was £0.5
million (2006: £nil).

In 2006, the total charge for associates and joint ventures was £29.5 million,
which comprised our share of the post tax results from the Group's Eurostar
associate, Inter-Capital and Regional Rail Limited ('ICRRL'), of £3.8 million
and a £25.7 million exceptional charge for the designation of the contract with
ICRRL as an onerous contract.

Finance cost

Net interest payable decreased to £12.1 million (2006: £13.0 million),
reflecting the lower levels of net debt in the first half of the year when
compared to 2006 offset by the £1.0 million charge for the unwind of the
discounting on the ICRRL onerous contract provision.

Continuing normalised operating profit before depreciation and other non-cash
items ('EBITDA') was £128.7 million (2006: £122.9 million) and continuing EBITDA
finance cover before discounting increased to 12.1 times (2006: 9.9 times).

Intangibles, goodwill and exceptional items

Intangible asset amortisation of £13.6 million (2006: £14.3 million) comprises
£10.0 million (2006: £10.1 million) on contracts acquired in Alsa, £2.4 million
(2006: £2.4 million) on contracts acquired in North America, £0.6 million (2006:
£0.8 million) on contracts acquired in UK Bus and £0.6 million (2006: £1.0
million) on the intangible asset that arises from the Group's right to operate
its rail franchises.

The goodwill impairment charge in 2006 comprised £19.3 million on the goodwill
arising from the acquisition of Prism Rail PLC in September 2000 and £0.9
million on the acquisition of the remaining share capital of Altram.

No exceptional costs were incurred in the period. Exceptional costs of £1.5
million in 2006 were incurred in relation to the Alsa integration project.

Tax

Our normalised tax rate has increased from the 2006 full year rate of 25.1% to
26.4%. The total tax charge includes a tax credit on exceptional items of £3.4
million (2006: £3.5 million) 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 an operating cash flow of
£77.7 million (2006: £67.3 million).

Operating Cash Flow      

                                             North             Central   
                  Buses  Coaches   Trains  America    Alsa   functions   Total
                     £m       £m       £m       £m      £m          £m      £m
                                                
                  ------  -------  -------  -------  ------    -------   ------
Normalised
operating
profit             19.8      6.1     28.7     24.1    18.9       (7.0)    90.6
Depreciation        8.3      2.3      8.1     12.6     6.6        0.3     38.2
Amortisation
of property,
plant and
equipment
grants                -        -     (0.3)       -    (0.1)         -     (0.4)
Profit on
disposal              -     (0.1)     0.1     (0.4)   (0.3)         -     (0.7)
Share based
payments            0.1      0.1      0.2      0.1     0.1        0.4      1.0
                  ------  -------  -------  -------  ------    -------   ------
EBITDA             28.2      8.4     36.8     36.4    25.2       (6.3)   128.7
Working
capital
movement          (10.2)     5.1    (10.6)     7.0    (1.9)       0.3    (10.3)
                  ------  -------  -------  -------  ------    -------   ------
Net cash
inflow from
operations         18.0     13.5     26.2     43.4    23.3       (6.0)   118.4
Net capital
expenditure        (6.8)     1.0     (2.6)   (15.6)  (13.5)         -    (37.5)
                  ------  -------  -------  -------  ------    -------   ------
Operating cash
flow before
one-offs           11.2     14.5     23.6     27.8     9.8       (6.0)    80.9
                  ------  -------  -------  -------  ------    -------   ------
Other cash flows
- Franchise exits                                                         (3.2)
                                                                         ------
Operating cashflow                                                        77.7
                                                                      
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 the disposal of property, plant and equipment' less 'Purchase of
property, plant and equipment' as set out in the cash flow statement.
Non-operating items are then excluded which comprises the £8.4m payment in
respect of the ICRRL liability.

The working capital outflow in UK Bus reflects payments to the defined benefit
pension schemes in excess of the income statement charge and the losses
associated with the onerous contracts in our acquired London business. In UK
Trains a timing difference has contributed to the working capital outflow.

Net capital expenditure was £37.5 million (2006: £32.5 million) including £9.7
million (2006: £3.8 million) proceeds from disposals. The net inflow in UK Coach
comprises the proceeds from the sale of vehicles. More than two thirds of the
Group's capital expenditure program is projected to occur in the second half of
the year.

Reconciliation of net debt                               2007            2006
                                                           £m              £m
                                                        ------          ------
Operating cash flow                                      77.7            67.3
Exceptional cash flow                                       -            (0.9)
Payments to associates                                   (8.4)           (8.4)
Net interest                                            (12.2)          (13.6)
Non-equity dividends paid                                (0.2)              -
Taxation                                                  0.1             5.9
Share buy back                                              -           (11.6)
Share proceeds                                            4.8            13.3
Acquisitions and disposals                               (3.6)          (10.5)
Dividends                                               (36.3)          (33.4)
                                                        ------          ------
Net funds flow                                           21.9             8.1
Foreign exchange                                          3.8             8.8
                                                        ------          ------
Funds flow post exchange                                 25.7            16.9
Opening net debt                                       (438.4)         (563.4)
                                                        ------          ------
Closing net debt                                       (412.7)         (546.5)

Payments to associates of £8.4 million represent the annual outflow in respect
of the ICRRL onerous contract.

Net interest paid of £12.2 million (comprising cash outflow of £11.8 million
plus loan fee amortisation of £0.4 million) is in excess of the net finance cost
before discounting of £10.6 million due to the payment of interest in respect of
2006.

The timing of tax receipts in Spain has resulted in a net rebate in the six
months to June.

The cash flow in relation to acquisitions comprises £2.5 million for the
purchase of subsidiaries and £1.1 million of deferred consideration paid in
respect of 2006 acquisitions.


NATIONAL EXPRESS GROUP PLC
GROUP INCOME STATEMENT

For the six months ended 30 June 2007
                                           Unaudited six months to 30 June                                 Audited

                   Total before                              Total before
                       goodwill       Goodwill                   goodwill         Goodwill 
                    impairment,    impairment,                impairment,      impairment,         
                     intangible     intangible                 intangible       intangible             
                 amortisation & amortisation &             amortisation &   amortisation &                 Year to
                    exceptional    exceptional                exceptional      exceptional                  31 Dec
                          items         items        Total          items            items       Total       Total
                           2007          2007         2007           2006             2006        2006        2006
                 Note        £m            £m           £m             £m               £m          £m          £m
                          -------       --------     -------       --------       --------      ------      ------
Continuing
operations
Revenue           3     1,309.3              -     1,309.3        1,252.7                -     1,252.7     2,525.5
                          -------       --------     -------       --------       --------      ------      ------
Operating
costs before
goodwill
impairment,
intangible
amortisation &
exceptional
items                  (1,218.7)             -    (1,218.7)      (1,168.7)               -    (1,168.7)   (2,340.7)
Goodwill
impairment        4           -              -           -              -            (20.2)      (20.2)      (20.2)
Intangible
amortisation      4           -          (13.6)      (13.6)             -            (14.3)      (14.3)      (27.8)
Exceptional
items             5           -              -           -              -             (1.5)       (1.5)        4.8
                          -------       --------     -------       --------        --------      ------      ------
Total
operating
costs                  (1,218.7)         (13.6)   (1,232.3)      (1,168.7)           (36.0)   (1,204.7)   (2,383.9)
                 ----     -------       --------     -------       --------        --------      ------      ------
Group
operating
profit                     90.6          (13.6)       77.0           84.0            (36.0)       48.0       141.6
Profit on
disposal of
non-current
assets                        -              -           -              -                -           -        16.9
                 ----     -------       --------     -------       --------        --------      ------      ------
Profit from
operations                 90.6          (13.6)       77.0           84.0            (36.0)       48.0       158.5
Share of post
tax results
from
associates and
joint ventures
accounted for
using the
equity method               0.5              -         0.5           (3.8)           (25.7)      (29.5)      (29.5)
Finance income    6         6.7              -         6.7            5.6                -         5.6        12.4
Finance costs     6       (18.8)             -       (18.8)         (18.6)               -       (18.6)      (37.3)
                 ----     -------       --------     -------       --------         --------      ------      ------
Profit before
tax                        79.0          (13.6)       65.4           67.2            (61.7)        5.5       104.1
Tax expense       7       (20.8)           3.4       (17.4)         (17.5)             3.5       (14.0)      (23.6)
                 ----     -------       --------     -------       --------         --------      ------      ------

Profit/(loss)
after tax for
the period
from
continuing
operations                 58.2          (10.2)       48.0           49.7            (58.2)       (8.5)       80.5
Loss for the
period from
discontinued
operations                    -              -           -              -                -           -        (3.2)
                 ----     -------       --------     -------       --------         --------      ------      ------

Profit/(loss)
for the period             58.2          (10.2)       48.0           49.7            (58.2)       (8.5)       77.3
                          -------       --------     -------       --------         --------      ------      ------
Profit/(loss)
attributable
to equity
shareholders               58.0          (10.2)       47.8           49.4            (58.2)       (8.8)       76.5
Profit
attributable
to minority
interests                   0.2              -         0.2            0.3                -         0.3         0.8
                          -------       --------     -------       --------         --------      ------      ------
                           58.2          (10.2)       48.0           49.7            (58.2)       (8.5)       77.3
                 ----     -------       --------     -------       --------         --------      ------      ------

Earnings/(loss)
per share:
- basic
earnings/(loss)
per share         9                                   31.5p                                       (5.9p)      50.7p
- diluted
earnings/(loss)
per share         9                                   31.4p                                       (5.9p)      50.4p

Normalised earnings 
per share:
- basic
earnings per
share             9                                   38.3p                                       32.8p       77.0p
- diluted 
earnings per
share             9                                   38.1p                                       32.5p       76.5p

Earnings/(loss) 
per share from
continuing 
operations:
- basic earnings/
(loss) per share  9                                   31.5p                                       (5.9p)      52.8p
- diluted
earnings/(loss)
per share         9                                   31.4p                                       (5.9p)      52.5p
                 ----     -------       --------     -------       --------       --------        ------      ------

Dividends per
ordinary share:
- interim
2007/2006         8                                  11.56p                                       10.75p      10.75p
- final 2006      8                                      -                                            -       24.00p
                                                     -------                                      ------     -------
                                                     11.56p                                       10.75p      34.75p

Dividends of £36.4m were due during the period (2006 interim: £33.9m; 2006 full
year: £50.1m). Dividends of £17.6m were proposed for approval during the period
(2006 interim: £16.2m; 2006 full year: £52.5m).


NATIONAL EXPRESS GROUP PLC
GROUP BALANCE SHEET

At 30 June 2007

                                       Note  Unaudited  Unaudited      Audited
                                               30 June    30 June  31 December
                                                  2007       2006         2006
                                                    £m         £m           £m
                                        -----  ---------  ---------    ---------
Non-current assets
Intangible assets                                687.4      730.9        697.6
Property, plant and equipment                    499.3      499.9        501.9
Financial assets - Available for sale    11       13.5       22.2         13.5
Financial assets - Derivative
financial instruments                    11        6.1        2.1          0.3
Investments accounted for using the
equity method                                      9.2        8.7          8.7
Other receivables                                  4.4       32.4          4.1
Deferred tax asset                                   -       15.2         10.6
                                        -----  ---------  ---------    ---------
                                               1,219.9    1,311.4      1,236.7
                                        -----  ---------  ---------    ---------
Current assets
Inventories                                       16.9       16.4         15.5
Trade and other receivables                      231.0      236.4        272.3
Financial assets - Derivative
financial                                11        5.4        6.8          8.1
instruments
Current tax assets                                 5.3       13.5         26.4
Cash and cash equivalents                14      155.1      105.3        143.6
                                        -----  ---------  ---------    ---------
                                                 413.7      378.4        465.9
Disposal group assets classified as
held for sale                                     20.0          -         20.1
                                        -----  ---------  ---------    ---------
Total assets                                   1,653.6    1,689.8      1,722.7
                                        -----  ---------  ---------    ---------
Non-current liabilities
Financial liabilities - Borrowings       14     (544.0)    (595.6)      (538.4)
Financial liabilities - Derivative
financial instruments                    11       (4.0)      (4.1)        (8.3)
Deferred tax liability                           (84.7)     (82.0)       (84.3)
Other non-current liabilities                     (3.0)      (1.7)        (3.0)
Defined benefit pension liability        12      (43.9)     (94.1)       (52.8)
Provisions                                       (57.5)     (54.9)       (61.3)
                                        -----  ---------  ---------    ---------
                                                (737.1)    (832.4)      (748.1)
                                        -----  ---------  ---------    ---------
Current liabilities
Trade and other payables                        (463.0)    (459.6)      (518.4)
Financial liabilities - Borrowings       14      (23.8)     (57.2)       (43.6)
Financial liabilities - Derivative
financial instruments                    11       (2.5)      (4.0)        (6.4)
Current tax liabilities                          (33.5)     (36.6)       (40.9)
Provisions                                       (14.7)     (26.4)       (17.4)
                                        -----  ---------  ---------    ---------
                                                (537.5)    (583.8)      (626.7)
                                        -----  ---------  ---------    ---------
Liabilities directly associated with
disposal group assets classified as
held for sale                                     (2.1)         -         (2.4)
                                        -----  ---------  ---------    ---------
Total liabilities                             (1,276.7)  (1,416.2)    (1,377.2)
                                        -----  ---------  ---------    ---------
Net assets                                       376.9      273.6        345.5
                                        -----  ---------  ---------    ---------
Shareholders' equity
Called up share capital                  13        7.7        7.7          7.7
Share premium account                    13      194.6      187.3        189.8
Capital redemption reserve               13        0.2        0.2          0.2
Own shares                               13      (16.4)     (16.7)       (16.7)
Other reserves                           13       20.7       22.1          7.9
Retained earnings                        13      166.8       70.0        153.3
                                        -----  ---------  ---------    ---------
Total shareholders' equity                       373.6      270.6        342.2
Minority interest in equity              13        3.3        3.0          3.3
                                        -----  ---------  ---------    ---------
Total equity                                     376.9      273.6        345.5
                                     

NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF CASH FLOWS

For the six months ended 30
June 2007                       

                               Note      Unaudited      Unaudited      Audited
                                     six months to  six months to      year to
                                           30 June        30 June  31 December
                                              2007           2006         2006
                                                £m             £m           £m
                                -----      ---------      ---------    ---------
Cash generated from operations   15          106.8           86.0        254.5
Tax received/(paid)                            0.1            5.9         (9.0)
                                -----      ---------      ---------    ---------
Net cash from operating
activities                                   106.9           91.9        245.5
                                -----      ---------      ---------    ---------
Cash flows from investing
activities
Payments to acquire
businesses,                      
net of cash acquired             10           (2.5)          (8.2)       (19.8)
Deferred consideration for
businesses acquired                           (1.1)           0.3         (3.0)
Purchase of property, plant
and equipment                                (47.2)         (35.8)       (73.5)
Proceeds from disposal of
property, plant and equipment                  9.7            8.3         24.3
Payments to acquire                             
investments                                      -              -         (4.6)
Payments to acquire associates                   -              -         (1.5)
Receipts from disposal of
investments                                      -              -         13.2
Receipts from disposal of
intangible assets                                -              -          1.5
Interest received                              6.7            5.6         12.4
Non-equity dividends paid                     (0.2)             -            -
                                -----      ---------      ---------    ---------
Net cash used in investing
activities                                   (34.6)         (29.8)       (51.0)
                                -----      ---------      ---------    ---------
Cash flows from financing
activities
Proceeds from issue of
ordinary shares                                4.8           13.3         15.8
Purchase of treasury shares                      -          (11.6)       (11.6)
Interest paid                                (18.5)         (18.4)       (32.1)
Finance lease principal                      
payments                                     (12.4)         (10.5)       (21.5)
Net loans repaid                                 -          (33.7)       (89.9)
Loans receivable repaid                          -              -          1.0
Dividends paid                               (36.3)         (33.4)       (49.7)
                                -----      ---------      ---------    ---------
Net cash used in financing
activities                                   (62.4)         (94.3)      (188.0)
                                -----      ---------      ---------    ---------
Increase/(decrease) in cash
and                                            
cash equivalents                               9.9          (32.2)         6.5
                                -----      ---------      ---------    ---------
Opening cash and cash            14          143.6          140.0        140.0
equivalents
Increase/(decrease) in cash
and                                            
cash equivalents                               9.9          (32.2)         6.5
Foreign exchange                               1.6           (2.5)        (2.9)
                                -----      ---------      ---------    ---------
Closing cash and cash            
equivalents                      14          155.1          105.3        143.6     


NATIONAL EXPRESS GROUP PLC
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the six months ended 30 June 2007

                                         Unaudited      Unaudited      Audited
                                     six months to  six months to      year to
                                           30 June        30 June  31 December
                                              2007           2006         2006
                                                £m             £m           £m
                                           ---------      ---------    ---------
Income and expense recognised
directly in equity
Exchange differences on
retranslation of foreign operations            2.7          (19.8)       (55.3)
Exchange differences on
retranslation of foreign currency
borrowings                                    (1.0)          11.0         46.8
Actuarial gains/(losses) on defined
benefit pension plans                          3.2           (8.9)        20.6
Gains on valuation of available for
sale assets                                      -           10.8            -
Gain/(loss) on cash flow hedges
taken to equity                               13.0            8.9        (12.1)
                                           ---------      ---------    ---------
                                              17.9            2.0            -
                                           ---------      ---------    ---------

Transfers to the income statement
On cash flow hedges                            3.1           (2.9)         1.6
                                           ---------      ---------    ---------
                                               3.1           (2.9)         1.6
                                           ---------      ---------    ---------

Tax on exchange differences on
retranslation of foreign currency
borrowings                                    (0.1)           2.2         (1.3)
Tax on share based payments                   (1.0)          (1.0)         2.4
Deferred tax on actuarial
(gains)/losses                                (0.8)           2.8         (6.2)
Deferred tax on cash flow hedges              (4.9)          (1.8)         3.7
                                           ---------      ---------    ---------
Tax on items taken directly to or
transferred from equity                       (6.8)           2.2         (1.4)
                                           ---------      ---------    ---------

Net gains recognised directly in
equity                                        14.2            1.3          0.2
Profit/(loss) for the financial
period                                        47.8           (8.8)        76.5
Profit attributable to minority
interests                                      0.2            0.3          0.8
                                           ---------      ---------    ---------
Total recognised income/(expense)
for the period                                62.2           (7.2)        77.5
                                           ---------      ---------    ---------
Income/(expense) attributable to
equity shareholders                           62.0           (7.5)        76.7
Income attributable to minority
interests                                      0.2            0.3          0.8
                                           ---------      ---------    ---------
                                              62.2           (7.2)        77.5
                                          

NATIONAL EXPRESS GROUP PLC
NOTES TO THE INTERIM ACCOUNTS

For the six months ended 30 June 2007

1. Basis of preparation

These accounts have been prepared using the accounting policies set out in the
Group's 2006 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. The
figures for the year to 31 December 2006 have been extracted from the Annual
Report and Accounts 2006 which has been filed with the Registrar of Companies.
The audit report on the Annual Report and Accounts 2006 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     Six months to 30 June          
                        2007                      2006                        Year to 31 Dec 2006      
            Closing rate  Average rate   Closing rate   Average rate     Closing rate    Average rate
               ---------     ---------      ---------      ---------        ---------       ---------
US dollar           2.01          1.98           1.85           1.79             1.96            1.85
Canadian            2.14          2.23           2.06           2.03             2.28            2.09
dollar
Euro                1.48          1.48           1.44           1.45             1.48            1.47

If the results for the six months to 30 June 2007 had been retranslated at the
average exchange rates for the six months to 30 June 2006, North America would
have achieved normalised operating profit of £26.5m on revenue of £179.6m, and
Alsa would have achieved normalised operating profit of £19.3m on revenue of
£124.0m.


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 are treated as revenue. During the half year to 30 June 2007,
franchise agreement receipts amounted to £191.4m (2006 interim: £179.0m; 2006
full year: £377.1m).

                                   
                                    Unaudited six months to             Audited year to
                                            30 June                       31 December
 
Analysis by class and                 Operating           Operating            Operating
geography of business        Revenue     result   Revenue    result    Revenue    result
                                2007      2007       2006      2006       2006      2006
                                  £m        £m         £m        £m         £m        £m
                              -------   -------    -------   -------    -------   -------
UK Bus                         157.0      19.8      147.5      19.0      300.8      40.7
UK Trains                      771.1      28.7      744.0      20.0    1,497.6      49.1
UK Coach                       103.5       6.1       94.8       5.3      207.3      23.7
Intercompany
elimination                     (6.8)        -       (5.7)        -      (13.2)        -
                              -------   -------    -------   -------    -------   -------
UK operations                1,024.8      54.6      980.6      44.3    1,992.5     113.5
North American
Bus                            162.8      24.1      155.0      26.6      283.7      39.1
European Coach
& Bus (Alsa)                   121.7      18.9      117.1      18.1      249.3      44.3
Central
functions                          -      (7.0)         -      (5.0)         -     (12.1)
                              -------   -------    -------   -------    -------   -------
Result from
continuing
operations                   1,309.3      90.6    1,252.7      84.0    2,525.5     184.8
Goodwill
impairment                                   -                (20.2)               (20.2)
Intangible
asset
amortisation                             (13.6)               (14.3)               (27.8)
Exceptional
items                                        -                 (1.5)                 4.8
                              -------   -------    -------   -------    -------   -------
Group
operating
profit                                    77.0                 48.0                141.6
Profit on
disposal of
non-current
assets                                       -                    -                 16.9
                              -------   -------    -------   -------    -------   -------
Profit from
operations                                77.0                 48.0                158.5
Share of post
tax results
from
associates and
joint ventures                             0.5                (29.5)               (29.5)
Net finance
costs                                    (12.1)               (13.0)               (24.9)
                              -------   -------    -------   -------    -------   -------
Profit before
tax                                       65.4                  5.5                104.1
Tax expense                              (17.4)               (14.0)               (23.6)
                              -------   -------    -------   -------    -------   -------
Profit/(loss)
for the period
from
continuing
operations                                48.0                 (8.5)                80.5
Loss on sale
of
discontinued
operations                                   -                    -                 (3.2)
                                        -------              -------              -------
Profit/(loss)
for the period                            48.0                 (8.5)                77.3

Intercompany sales only occur between the Group's UK Divisions. Inter-segment
trading is undertaken on standard arm's length commercial terms.

4. Goodwill impairment and intangible asset amortisation

Intangible assets in UK Trains are subject to amortisation, which is charged on
a straight-line basis to the end of the franchise, of £0.6m (2006 interim:
£1.0m; 2006 full year: £1.6m). Intangible assets representing customer contracts
have been subject to an amortisation charge in Alsa of £10.0m (2006 interim:
£10.1m, 2006 full year: £20.1m), North America of £2.4m (2006 interim: £2.4m;
2006 full year: £4.5m) and in UK Bus of £0.6m (2006 interim: £0.8m; 2006 full
year: £1.6m).

The goodwill impairment charge in 2006 related to the UK Trains' goodwill and
goodwill arising on the acquisition of Altram, both of which are now fully
written off.

5. Exceptional items and exceptional charge for associates

Exceptional items are material items of income or expenditure which due to their
nature and infrequency require separate identification on the face of the income
statement to allow a better understanding of the financial performance in the
period, in comparison to prior periods.

The exceptional items can be analysed as follows:

                                  
                                    Six months to   Six months to      Year to
                                     30 June 2007    30 June 2006  31 Dec 2006
                                               £m              £m           £m
                                        ----------      ----------   ----------
UK Bus                                          -               -         (4.9)
UK Coach                                        -               -         (1.3)
European Coach & Bus (Alsa)                     -             1.5          1.9
Central functions                               -               -         (0.5)
                                        ----------      ----------   ----------
Total exceptional charge/(credit)               -             1.5         (4.8)
                                       
No exceptional costs were incurred in the six months to June 2007.

In the six months to 30 June 2006 and the year to 31 December 2006 exceptional
costs were incurred in Spain in respect of integrating Alsa. Exceptional income
in the year to 31 December 2006 comprised income arising from the release of
balance sheet pension liabilities in UK Bus, UK Coach and Central functions. No
cash was received in respect of this exceptional income.

In the six months to 30 June 2006 and the year to 31 December 2006 an
exceptional charge of £25.7m was incurred for the designation of the Group's
Eurostar contract with Inter-Capital and Regional Rail Limited ('ICRRL') as an
onerous contract. This was included within share of results from associates and
joint ventures.

6. Net finance costs

                                Six months to     Six months to        Year to
                                 30 June 2007      30 June 2006    31 Dec 2006
                                           £m                £m             £m
                                    ----------        ----------     ----------
Bank interest payable                   (14.6)            (14.9)         (28.2)
Finance lease interest payable           (2.7)             (3.1)          (7.0)
Unwind of provision discounting          (1.5)             (0.6)          (2.1)
                                    ----------        ----------     ----------
Finance costs                           (18.8)            (18.6)         (37.3)
Finance income: Bank interest
receivable                                6.7               5.6           12.4
                                    ----------        ----------     ----------
Net finance costs                       (12.1)            (13.0)         (24.9)
               

7. Taxation

Tax on profit on ordinary activities for the six months to 30 June 2007 has been
calculated on the basis of the estimated annual effective rate for the year
ending 31 December 2007. The tax charge of £20.8m (2006 interim: £17.5m; 2006
full year: £39.2m) represents an effective tax rate on normalised profit before
tax, for continuing and discontinued operations, of 26.4% (2006 interim: 26.0%;
2006 full year: 25.1%). The total tax charge of £17.4m (2006 interim: £14.0m;
2006 full year: £23.6m) includes overseas current taxation of £5.8m (2006
interim: £3.4m; 2006 full year: £8.6m), and total deferred taxation of £4.2m
(2006 interim: £8.9m; 2006 full year: £9.8m).

8. Dividends paid and proposed

                                     Six months to  Six months to      Year to
                                      30 June 2007   30 June 2006  31 Dec 2006
                                                £m             £m           £m
                                          ---------      ---------    ---------
Declared and paid during the period:
Ordinary final dividend for 2005
paid of 22.25p per share                         -           33.9         33.9
Ordinary interim dividend for 2006
paid of 10.75p per share                         -              -         16.2
Ordinary final dividend for 2006
paid of 24.00p per share                      36.4              -            -
                                          ---------      ---------    ---------
                                              36.4           33.9         50.1
                                          ---------      ---------    ---------
Proposed for approval and not
recognised as a liability as at
period end:
Ordinary interim dividend for 2006
of 10.75p per share                              -           16.2            -
Ordinary final dividend for 2006
of 24.00p per share                              -              -         36.3
Ordinary interim dividend for 2007
of 11.56p per share                           17.6              -            -


9. Earnings per share
 
                                  Six months to     Six months to       Year to
                                   30 June 2007      30 June 2006   31 Dec 2006
                                       ---------         ---------     ---------
Basic earnings/(loss) per share -
continuing operations                     31.5p             (5.9p)        52.8p
Basic loss per share -
discontinued operations                      -                 -          (2.1p)
                                       ---------         ---------     ---------
Basic earnings/(loss) per share -
total                                     31.5p             (5.9p)        50.7p
                                       ---------         ---------     ---------
Normalised basic earnings per
share - continuing operations             38.3p             32.8p         77.0p
                                       ---------         ---------     ---------
Diluted earnings/(loss) per share
- continuing operations                   31.4p             (5.9p)        52.5p
Diluted loss per share -
discontinued operations                      -                 -          (2.1p)
                                       ---------         ---------     ---------
Diluted earnings/(loss) per share
- total                                   31.4p             (5.9p)        50.4p
                                       ---------         ---------     ---------
Normalised diluted earnings per
share - continuing operations             38.1p             32.5p         76.5p
                                    

Basic earnings per share is calculated by dividing the profit attributable to
equity shareholders of £47.8m (2006 interim: loss of £8.8m; 2006 full year:
profit of £76.5m) 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 share is identical to
that used for the basic loss per share. This is because the adjustment for
dilutive potential ordinary shares would have the effect of reducing the loss
per ordinary share and is therefore not dilutive under the terms of 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 2007   30 June 2006    31 Dec 2006
                                       ---------      ---------      ---------
Basic weighted average shares       151,529,606    150,706,759    150,847,303
Adjustment for dilutive potential
ordinary shares                         820,212      1,252,945        915,923
                                       ---------      ---------      ---------
Diluted weighted average shares     152,349,818    151,959,704    151,763,226
                                    

The normalised basic and normalised diluted earnings per share have been
calculated in addition to the basic and diluted earnings per share 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 2007    30 June 2006  31 Dec 2006
                                               £m              £m           £m
                                         ---------       ---------    ---------
Profit/(loss) attributable to
equity shareholders                          47.8            (8.8)        76.5
Loss from discontinued operations               -               -          3.2
                                         ---------       ---------    ---------
Profit/(loss) from continuing
operations attributable to equity
shareholders                                 47.8            (8.8)        79.7
Goodwill impairment on continuing
operations                                      -            20.2         20.2
Intangible asset amortisation                13.6            14.3         27.8
Exceptional items                               -             1.5         (4.8)
Exceptional associates charge                   -            25.7         25.7
Profit on disposal of non-current
assets                                          -               -        (16.9)
Tax relief on goodwill and
exceptional items                            (3.4)           (3.5)       (15.6)
                                         ---------       ---------    ---------
Normalised profit attributable to
equity shareholders                          58.0            49.4        116.1
                                        

                                Six months to    Six months to      Year to
                                 30 June 2007     30 June 2006    31 Dec 2006
                             ------   -------  ------   ------   ------   ------
                            Basic   Diluted   Basic  Diluted    Basic  Diluted
                              eps       eps     eps      eps      eps      eps
                                p         p       p        p        p        p
                             ------   -------  ------   ------   ------   ------
Profit/(loss)
attributable to equity
shareholders                 31.5      31.4    (5.9)    (5.9)    50.7     50.4
Loss from discontinued
operations                      -         -       -        -      2.1      2.1
                             ------   -------  ------   ------   ------   ------
Profit/(loss) from
continuing operations
attributable to equity
shareholders                 31.5      31.4    (5.9)    (5.9)    52.8     52.5
Dilutive effect                 -         -       -      0.1        -        -
Goodwill impairment on
continuing operations           -         -    13.4     13.3     13.4     13.3
Intangible asset
amortisation                  9.0       8.9     9.5      9.4     18.5     18.3
Exceptional items               -         -     1.0      1.0     (3.2)    (3.1)
Exceptional associates
charge                          -         -    17.1     16.9     17.0     16.9
Profit on disposal of
non-current assets              -         -       -        -    (11.2)   (11.1)
Tax relief on goodwill
and exceptional items        (2.2)     (2.2)   (2.3)    (2.3)   (10.3)   (10.3)
                             ------   -------  ------   ------   ------   ------
Normalised profit
attributable to equity
shareholders                 38.3      38.1    32.8     32.5     77.0     76.5
                             

10. Business combinations

In the period ended 30 June 2007 the Group acquired the entire share capital of
two school bus operators in Canada. Dundas Bus Service Limited was acquired on
30 March 2007 and Hogan Bus Service Limited was acquired on 31 May 2007. On 31
March 2007 the Group also acquired the entire share capital of Hotelink Limited,
a UK based business which transports customers between hotels in central London
and Heathrow and Gatwick airports.

Total consideration for these acquisitions was £2.7m and £0.2m of cash was
acquired with the business, resulting in net payments to acquire businesses of
£2.5m.

On 26 April 2007 the Group agreed to acquire the entire share capital of
Continental Auto S.L., a coach and bus operator in Spain, for €659.3m. The
acquisition is subject to approval by the Spanish competition authorities and is
expected to complete in the final quarter of the year.

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 programme 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 interest rate swaps are in place to hedge the cash flow risk in relation to
changes in interest rates. The fuel price swaps are in place to hedge the
changes in price of the different types of fuel used in each division. The
foreign exchange forward contracts are in place to hedge the foreign exchange
risk on translation of net assets and on earnings denominated in foreign
currency.

                                      At 30 June      At 30 June     At 31 Dec
                                            2007            2006          2006
                                              £m              £m            £m
                                        ---------       ---------      --------
Non-current
Interest rate swaps                          5.5               -           0.3
Fuel price swaps                             0.6             2.1             -
                                        ---------       ---------      --------
Derivative financial assets                  6.1             2.1           0.3
                                        ---------       ---------      --------

Current
Interest rate swaps                          2.2               -           1.5
Fuel price swaps                             1.7             6.8             -
Foreign exchange forward contracts           1.5               -           6.6
                                        ---------       ---------      --------
Derivative financial assets                  5.4             6.8           8.1
                                        ---------       ---------      --------

Non-current
Fuel price swaps                               -              -            2.6
Interest rate swaps                          4.0            4.1            5.7
                                        ---------      ---------      ---------
Derivative financial liabilities             4.0            4.1            8.3
                                        ---------      ---------      ---------

Current
Foreign exchange forward contracts           0.4            0.8              -
Fuel price swaps                               -              -            4.3
Interest rate swaps                          2.1            3.2            2.1
                                        ---------      ---------      ---------
Derivative financial liabilities             2.5            4.0            6.4
                                        

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 -
Available for sale' of £13.5m (30 June 2006: £22.2m; 31 December 2006: £13.5m)
which represent the Group's available for sale investments in unlisted
companies.

12. Pensions and other post-employment benefits

The UK Bus and UK Coach divisions operate funded defined benefit pension schemes
and there is 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 and Alsa contribute to a number of defined
contribution plans. The Group also provides certain additional post-employment
benefits to employees in North America, which are categorised as 'Other' below.

The total pension cost for the period was £14.7m (2006 interim: £15.7m; 2006
full year: £23.9m), of which £13.6m (2006 interim: £14.0m; 2006 full year:
£20.5m) relates to the defined benefit schemes and £1.1m (2006 interim: £1.7m;
2006 full year: £3.4m) 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
                            2007                    2006                  2006
                              £m                      £m                    £m
                        ---------                --------             ---------
UK Bus                     (18.1)                  (46.0)                (17.3)
UK Coach                   (12.8)                  (15.5)                (12.7)
UK Train                   (12.1)                  (30.7)                (21.1)
Other                       (0.9)                   (1.9)                 (1.7)
                        ---------                --------             ---------
Total                      (43.9)                  (94.1)                (52.8)
                        ---------                --------             ---------

The UK Train defined pension liability is net of the franchise adjustment of
£35.8m (30 June 2006: £47.5m; 31 December 2006: £44.4m). Details of the
franchise adjustment are included in note 35 to the Annual Report and Accounts
2006.

13. Reconciliation of movements in equity

                 Share    Share     Capital      Own     Other  Retained    Total   Minority    Total
               capital  premium  Redemption   shares  reserves  earnings       £m  interests       £m
                    £m       £m     reserve       £m        £m        £m                  £m
                                         £m
                 ------   ------     -------   ------    ------    ------   ------     ------    -----
At 1 Jan 2007      7.7    189.8         0.2    (16.7)      7.9     153.3    342.2        3.3    345.5
Shares issued        -      4.8           -        -         -         -      4.8          -      4.8
Own shares
released to
satisfy
employee
share schemes        -        -           -      0.3         -      (0.3)       -          -        -
Total
recognised
income               -        -           -        -      12.8      49.2     62.0        0.2     62.2
Share-based
payments             -        -           -        -         -       1.0      1.0          -      1.0
Dividends            -        -           -        -         -     (36.4)   (36.4)      (0.2)   (36.6)
                 ------   ------     -------   ------    ------    ------   ------     ------    -----
At 30 June         7.7    194.6         0.2    (16.4)     20.7     166.8    373.6        3.3    376.9
2007             


14. Net debt

                                                                                            At          At 
                At 1 Jan               Acquisitions/     Exchange            Other     30 June     30 June
                    2007     Cash flow     Disposals  differences        movements        2007        2006
                      £m            £m            £m           £m               £m          £m          £m
                   -------       -------       -------      -------          -------     -------     -------
Cash and
cash equivalents   143.6           9.9             -          1.6                -       155.1       105.3
Other debt
receivable             -             -             -            -                -           -         1.0
Loan notes          (0.8)            -             -            -                -        (0.8)       (0.8)
Bank loans        (478.1)            -             -          1.1             (0.4)     (477.4)     (555.1)
Finance
lease obligations (103.1)         12.4             -          1.1                -       (89.6)      (96.9)
                   -------       -------       -------      -------          -------     -------     -------
Net debt          (438.4)         22.3             -          3.8             (0.4)     (412.7)     (546.5)



Current 'Financial liabilities - Borrowings' of £23.8m (30 June 2006: £57.2m; 31
December 2006: £43.6m) comprises £0.8m of loan notes (30 June 2006: £0.8m; 31
December 2006: £0.8m), £20.2m of finance lease obligations (30 June 2006:
£32.6m; 31 December 2006: £22.7m) and £2.8m of bank loans (30 June 2006: £23.8m;
31 December 2006: £20.1m).

Non-current 'Financial liabilities - Borrowings' of £544.0m (30 June 2006:
£595.6m; 31 December 2006: £538.4m) comprises £69.4m of finance leases (30 June
2006: £64.3m; 31 December 2006: £80.4m) and £474.6m of bank loans (30 June 2006:
£531.3m; 31 December 2006: £458.0m).

Included in cash and cash equivalents are restricted balances of £52.3m (30 June
2006: £36.2m; 31 December 2006: £33.5m) held by the Train Operating Companies
and £nil (30 June 2006: £25.1m; 31 December 2006: £nil) held by NBC Pty Ltd in
Australia.

Other non cash movements in net debt represent finance lease additions of £nil
(2006 interim: £0.5m; 2006 full year: £20.7m) and amortisation of loan
arrangement fees of £0.4m (2006 interim: £0.8m; 2006 full year: £0.9m).

15. Cash flow statement

Reconciliation of Group operating profit to cash generated from operations
                                       
                                     Six months to  Six months to      Year to
                                      30 June 2007   30 June 2006  31 Dec 2006
                                                £m             £m           £m
                                          ---------      ---------    ---------
Net cash inflow from operating
activities
Group operating profit                        77.0           48.0        141.6
Depreciation of property, plant
and equipment                                 38.2           41.5         81.7
Amortisation of leasehold property
prepayment                                       -            0.4          0.6
Goodwill impairment                              -           20.2         20.2
Intangible asset amortisation                 13.6           14.3         27.8
Amortisation of property, plant
and equipment grants                          (0.4)          (1.5)        (2.0)
Profit on disposal of property,
plant and equipment                           (0.7)          (2.4)        (3.1)
Share-based payments                           1.0            0.9          2.0
(Increase)/decrease in inventories            (1.4)           2.1          2.9
Decrease in receivables                       41.1           57.2         27.3
Decrease in payables                         (48.6)         (88.8)       (21.1)
Decrease in provisions and defined
benefit pension liability                    (13.0)          (5.9)       (23.4)
                                          ---------      ---------    ---------
Cash generated from operations               106.8           86.0        254.5

The Interim Report 2007 will be sent to all shareholders. Copies can also be
obtained from the Company Secretary at 75 Davies Street, London, W1K 5HT.


                                    - ENDS -








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