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National Express (NEX)

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Thursday 09 March, 2006

National Express

Final Results

National Express Group PLC
09 March 2006

Thursday 9 March 2006

                           National Express Group PLC

                              Preliminary Results

                      For the year ended 31 December 2005

Financial Highlights

•  Revenue of £2.2 billion (2004*:  £2.4 billion)

•  Group operating profit up 9.6% to £109.5 million (2004*: £99.9 million)

•  Normalised** operating profit up 8.5% to £155.5 million (2004*:£143.3 

•  Normalised** Group operating margin increased to 7% (2004*:6.1%)

•  Profit before tax up 14.6% to £89.3 million (2004*:  £77.9 million)

•  Normalised** profit before tax  up 10.7% to £135.3 million (2004*: £122.2 

•  Diluted earnings per share from continuing operations up 11.5% to 44.5 pence 
   (2004*: 39.9 pence)

•  Normalised** diluted earnings per share  up 10.1% to 76.3 pence (2004*: 69.3 

•  Final dividend increased by 7.7% to 22.25 pence per share (2004:  20.65 pence 
   per share), making a total dividend for the year of 32.25 pence per share up 
   7.5% (2004: 30.0 pence per share)

•  £29.3 million of shares were purchased by the company in 2005 and share 
   buy-back programme set to recommence

•  Net debt of £563.4 million (2004: £136.6 million)

*  as restated for the transition to IFRS

** excluding goodwill impairment, intangible amortisation, exceptional
   items and tax relief on qualifying exceptional items

The financial highlights refer to the results of continuing businesses in
compliance with IFRS.

Operating Highlights

•  Alsa acquired in December and integration progressing well

•  Disposal of North American public transit division enabling strategic focus 
   on school bus operations

•  Record bid season in United States and completion of key strategic 
   acquisition in Canada

•  2% passenger growth in UK Coaches despite effects of terrorist attacks

•  Strong operational performance in trains division above Government targets, 
   with focus for 2006 on incumbent franchises

•  Continued growth in London bus market

•  Substantial ongoing investment in fleet and customer facilities 

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

'The current year has started well.  We have experienced good operational
performance across all our divisions and achieved early successes in the current
US school bid season. We are making good progress with the integration of Alsa
and believe this division will play a key role in the Group's future growth
prospects. We remain confident that the foundations are in place to enhance
shareholder value through organic and acquisitive growth whilst maintaining
dividend and share buy-backs.'

Commenting on Phil White's retirement announcement today he continued:

'After ten years' service as Chief Executive of the Group, Phil White has
announced today his intention to retire from the Board, no later than December
2006. Phil has made a significant contribution to the Group's development and,
on behalf of the Board, I would like to thank him and wish him well for the

For further information, please contact:

Phil White, Chief Executive

Adam Walker, Finance Director

Nicola Marsden, Director of Group Communications

National Express Group PLC                                         020 7529 2000

Andrew Dowler/ Ben Foster

Financial Dynamics                                                 020 7831 3113

•  There will be an analyst and investor meeting at 0900 hours on 9 March
2006 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A

•  A web-cast of the analyst presentation will be available on our
website at 0900 hours on 9 March 2006. For further
details, contact Helen Lutman at Financial Dynamics on 020 7831 3113.

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

Chairman's Statement

I am pleased to report the Group's results for the year ended 31 December 2005.

2005 was a strong year for the Group.  As well as achieving organic growth
across most of our operations, we extended our presence in the public transport
market through both new contract wins and acquisitions in existing and new

This year will be remembered for the tragic events of the London bus and tube
bombings. The Group has many operations in and around London and many of our
colleagues were close to, or involved in, the aftermath of the events. Whilst
our operations were not directly affected, we are proud that many of our
employees played an active role in assisting Londoners during this difficult
period. I would like to take this opportunity to thank them for their commitment
and their tremendous efforts in reassuring the public, getting services back to
normal and working alongside the teams from the emergency services during this
difficult time.

In December Alsa, Spain's largest private coach and bus operator, owned by the
Cosmen family, joined the Group. In one transaction we achieved critical mass in
a major European country which has good growth prospects, gaining sustainable
earnings at above average margins. Alsa is a long established business with an
experienced management team who are keen to drive the business forward. The
quality of its product delivery has earned Alsa a first class reputation as both
an operator and employer in the Spanish public transport market. Operating in
the Spanish regulated coach and bus markets, Alsa has extensive contracts, with
an average life of nine years, which provides stable earnings. These features
provide stability to the Group's earnings. Recognising the opportunities that
exist in the enlarged company, the Cosmen family acquired a substantial
shareholding in the Group and we are delighted that Jorge Cosmen has joined the
Group Board as a non executive director.

This development gives the Group a significant combined coaching operation,
enabling the transfer of best practice between two major businesses. Our initial
focus has been the integration of Alsa's financial and reporting systems, which
is currently on schedule. Our management teams are already working well together
to identify cost synergies, particularly in procurement, risk management and IT.
We believe there are many opportunities to grow this business by the use of
better yield management and improved marketing. In addition, we will be drawing
on our experience in the UK coach market to reduce Alsa's cost of sales. The
respective cultures of National Express and Alsa have significant similarities
which should enable the integration plan to be fully delivered by the end of
this year. We are pleased with the progress we have made to date and are
confident that we can achieve the benefits identified when we announced this
strategic move.

This year we revised our North American strategy to focus on our highly
successful school bus operations where our strong reputation with our customers
delivers a high quality and reliable earnings stream. Consequently, we sold ATC,
our public transit business, during the year.

As part of the rail remapping, we have agreed with the Department for Transport
('DfT') to align our Central Trains, Silverlink and Midland Mainline franchises
to run until the end of 2007. We are currently in discussions with the DfT to
agree the financial arrangements around the new extensions. On the next round of
bidding during 2006 we will focus on franchises where we are incumbent and, as a
consequence, we have withdrawn from the competition for the South Western

Following the announcement relating to the GN/Thameslink and Greater Western
rail franchises, the employees of Wagn and Wessex Trains will leave the Group on
31 March this year.  I would like to thank them for their contribution whilst
part of the Group and wish them all the best for the future.

As part of our succession planning process and following a thorough selection
process, I am delighted that following the retirement of Brian Jackson, Denis
Wormwell has been appointed Chief Executive of our UK Bus division in February.
Consequently, Paul Bunting moved from Midland Mainline to replace Denis as Chief
Executive of our UK Coach division.

The Board

After what will be ten years as Chief Executive, Phil White has decided he will
be retiring from the Group by the end of this year. Phil started his career with
the Group in 1994 as Finance Director of Travel West Midlands and was appointed
Chief Executive of the Group in January 1997.  He guided the Group's entry into
North America and subsequently into continental Europe with the Alsa
transaction. The Board is unanimous in thanking Phil for his contribution over
the years and wishes him well for what the next stage in his life will bring. On
a personal level I would like to thank Phil most sincerely for his help and
support since commencing my tenure as Chairman in May 2004. The process to find
a successor is now underway.

I am also pleased to report that this year Phil White, Group Chief Executive,
has taken on the role as President of the Confederation of Passenger Transport,
the national trade association representing the UK bus, coach and light rail
operators. Furthermore, with the Group's interests in rail, Ray O'Toole joined
the British Transport Police Authority as an Authority member.

On 21 September 2005, Barry Gibson was appointed senior independent director
following Tim Stevenson's resignation from the board. I would like to thank Tim
for his valuable contribution.

Results and Dividend

Turnover was £2.2 billion (2004*: £2.4 billion) and normalised Group operating
profit increased by 8.5% to £155.5 million (2004*: £143.3 million). After
interest and the Group's share of losses from associated undertakings,
normalised profit before tax was £135.3 million (2004*: £122.2 million).
Normalised diluted earnings per share from continuing operations were 76.3 pence
(2004: 69.3 pence).

We are recommending a final dividend of 22.25p per ordinary share (2004: 20.65
pence), an increase of 7.7%, to be paid on 26 May 2006 to shareholders on the
register at 28 April 2006. Including the interim dividend, the proposed total
dividend for the year is 32.25 pence (2004: 30.0 pence). We shall also be
recommencing our £100 million share buy-back programme, subject to market

Current trading and outlook

The current year has started well. We have experienced good operational
performance across all our divisions and achieved early successes in the current
US school bid season. We are making good progress with the integration of Alsa
and believe this division will play a key role in the Group's future growth
prospects. We remain confident that the foundations are in place to enhance
shareholder value through organic and acquisitive growth whilst maintaining
dividend and share buy-backs.

Operational Review


The coach division provides Britain's only scheduled national coach network and
serves more than 1,000 destinations.  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 1,800

Revenue for the year was £200.5 million (2004*: £195.6 million) with a
normalised operating profit of      £21.5 million (2004*: £19.3 million). The
division experienced an encouraging year as we focused on our core scheduled
coaching business.

The first half saw good growth on our London bound and airport routes.  However,
the terrorist incidents in July and the subsequent reduction of inbound leisure
journeys into London saw a softening of this growth in the second half.
Nevertheless, in the full year passenger growth of 2% was achieved.

Following a detailed market segmentation analysis undertaken early in the year,
we are working on strategies to increase further the appeal of coach travel.
Our promotion of dynamic pricing continues to play a key role enabling customers
to buy value for money tickets. We repeated our successful £9 'Go Anywhere'
fares as well as the 'Million Seat Sale'.  These, along with our continued
roll-out of funfares, from as little as £1 each way, backed up by national
advertising campaigns, have heightened an awareness of coach travel amongst
existing and potential customers. We have further extended our sales channels
through the increased promotion of the internet which now accounts for 21% of
total sales.  E-ticket and m-ticket sales increased.  Up to 9 out of 10
purchases on the web are now e-tickets with up to two thirds of all tickets sold
via our customer contact centre distributed by either e or m-tickets.

Our investment in coach stations continues. Working in partnership with BAA, we
invested £2m to improve Heathrow Central Bus station.  The new customer
facilities include improved waiting and refreshment areas and a new ticket
office and information desk. Further investment is taking place at key locations
at Cardiff, Cheltenham, Manchester airport and Southampton with plans for
further improvements at Bournemouth, Leicester, Milton Keynes and Wolverhampton.
We have drawn up plans for the total redevelopment of Digbeth coach station in
Birmingham, our major hub for connecting services and we anticipate construction
starting later this year.

We are improving the quality of our product and services.  We have been rolling
out our state-of-the-art 'WOW' coaches, used currently on the London to
Birmingham route, onto other key corridors such as Bristol, Cheltenham and
Gloucester. NXTV has been fitted on over 40 vehicles and will be rolled out
further by the end of 2006.  This year we were proud to launch our first fully
accessible coach, the Caetano Levante, enabling wheelchair users and people with
mobility impairments to travel by coach.  The bespoke vehicle, which has been
developed in consultation with the Mobility and Inclusion Unit of the DfT,
complies with the new DDA legislation which was introduced at the start of this
year. We aim to have a fully wheelchair accessible fleet on the network by the
London 2012 Olympic Games.

Last year we were pleased to be awarded contracts for the provision of coaching
services for the G8 summit and the EU summit. This year we have extended our
provision of transport services to other events including music and sporting
events at venues such as the Millennium Stadium, Cardiff.

We are investing in new technology, such as Coachcom, which provides satellite
tracking and improved information for customers, drivers and operational
control.  The new system will also improve seat utilisation by 'checking in' all
tickets at the departure point, enabling all coach tickets to be checked in.
Coachcom will be rolled out across the whole fleet from summer 2006.


The bus division operates over 2,250 buses and employs 7,100 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 period was £268.6 million (2004*: £239.8 million) and normalised
operating profit was   £41.5 million (2004*: £41.6 million).

We welcomed the early introduction of Centro's concessionary fares scheme
providing free travel for men and women over 60 in July 2005.  This move helped
to reverse the decline in concessionary fare passenger numbers we have
experienced over the past two years.

We are pleased with our improved operational performance during the period. This
has been achieved by the recruitment of over 400 Polish drivers within our
Travel West Midlands ('TWM') business. Over 10% of these drivers have already
achieved their NVQ qualifications and we are starting to see the first Polish
recruits being promoted to traffic controllers. Three out of every five drivers
in the West Midlands have NVQ Level 2 qualifications and over four out of five
Travel London drivers have been awarded the BTEC accreditation.

Following its launch in January 2005, strong passenger growth of over 20%
continues to be experienced on our Premier 997 service linking Walsall and
Birmingham.  Recent research has confirmed that half of all users actively
choose this service over alternatives due to its quality offering, highlighting
the opportunities that product segmentation presents. We continue to look for
other opportunities where similar growth possibilities exist.

With central Government's renewed focus on reducing urban congestion, we believe
the introduction of road pricing in London illustrates the benefits and
increased bus patronage that can be achieved on the back of such initiatives. We
welcome the launch of the Government's Transport Innovation Fund ('TIF'),
focusing on demand management, which highlights the West Midlands as one of the
TIF feasibility areas.

Our investment in technology continues with the roll-out of automatic vehicle
location ('AVL') equipment and mobile phone based real time information for over
350 vehicles.  During 2006, we will roll-out AVL on key routes including the
main Outer Circle 11 route in Birmingham.  To improve the attractiveness of
travelling by bus we have simplified further our ticketing and extended some
concessionary ticket offers such as the Early Bird travelcard to non
concessionary passengers.

In September 2005, Travel Dundee signed the UK's first statutory quality
partnership.  This will be launched in April 2006 in partnership with Dundee
City Council and the Scottish Executive and will focus on improving bus services
within the Dundee area.  This has resulted in the introduction of a new cross
city link to a major hospital in the city providing a valuable new community
service under the Government's Kick Start initiative. In the last quarter of the
year Travel Dundee achieved Investors in People status and in November was
awarded 'Bus Operator of the Year' at the Scottish Transport Awards.

This year we achieved further growth in our Travel London operation through new
contract wins and the acquisition of Tellings Golden Miller's London bus
operations which have been integrated into our London business. This has
resulted in a much greater presence in the London market, a regulated market
where further contract opportunities exist. We operate a fleet of over 400
vehicles operating from six depots at which there remains additional capacity to
accommodate future growth.

The Midland Metro continued to perform well with passenger growth of 2%.  We are
continuing to discuss with Centro the long term development of this system
including line extensions and new services.


We operate c2c, Central Trains, Gatwick Express, Midland Mainline, 'one'
including the Stansted Express, Silverlink, Great Northern and Wessex Trains
franchises. The division currently employs 11,500 people.

Revenue for the period was £1,497.2 million (2004*: £1,712.1 million) with
normalised operating profit of £64.2 million (2004*: £61.3 million).

2005 saw the launch of a major internal initiative focused on improving
punctuality and reliability within the trains division.  This resulted in
significant improvements in performance across all our franchises including
Central Trains, a highly complex regional train operating company ('TOC'), where
considerable progress was made. Five of our TOCs are in the top seven positions
in the latest industry public performance measure ('PPM') figures released in
January 2006.

The division also made encouraging progress in its customer satisfaction
ratings.  Gatwick Express consolidated its position at the top of the league
tables for customer satisfaction recording an overall satisfaction rating of 93%
in the DfT's December 2005 National Passenger Survey, marking the fifth
consecutive period when Gatwick has been rated first in the survey. In addition
c2c improved its results from 83% to 90% and Midland Mainline showed the
greatest increase year-on-year, rising 10 points to 89% this year. Overall the
trains division improved its customer satisfaction scores by three points from
79% last year to 82%.

During the first half of the year, we experienced substantial patronage growth.
However, following the terrorist attacks in July, demand for discretionary
travel in and out of London was badly affected. We are pleased that passenger
numbers returned to pre-July levels towards the end of the year.

Midland Mainline made good progress in the year with passenger growth of 3% and
was the most punctual long distance operator for 2005 in the January 2006 PPM
figures.  This performance was assisted by the introduction of the new Meridian
9 car trains. Growth was also achieved through new marketing initiatives,
including a summer promotion offering 200,000 seats to London for £15 per person
and a new pricing structure launched in October offering travel from Sheffield
to London for £6. With Sheffield station being a key hub for our MML services,
we have worked in partnership with key stakeholders in Sheffield to improve the
ambience and quality of the station.  In June a new DDA compliant travel centre
was opened including extra ticket windows and a new electronic queuing process.

Gatwick Express performed well despite the impact of 7 July.  Strong revenue and
cost control ensured the solid performance of the business.  We will be
discussing the future of this franchise with the DfT following publication of
the Brighton Main Line Route Utilisation Strategy.

In December, 'one' introduced its new timetable on the West Anglia route.  The
changes, the biggest on this route for fifty years, seek to optimise route
utilisation to meet the growth at Stansted airport, whilst also catering for
growth on the domestic commuting traffic to the City, Stratford and on to Canary
Wharf.  Due to the complex nature of the changes, stakeholder consultation has
been extensive and the majority of users have benefited from the improved

North America

The North American division consists of student transportation and Stewart
Airport in New York State. The division employs 15,800 employees, with 3,300 in

Revenue in the division for the year was £241.8 million (2004*:  £213.2 million)
and normalised operating profit was £35.0 million (2004*:  £29.6 million).  In
local currency, revenue was US$440.5 million (2004*: US$391.0 million) and
normalised operating profit was US$63.7 million (2004*:  US$54.3 million).  We
are pleased to report that we increased our margins despite the cost pressures
that we face.

2005 was a watershed year for our North American business. As well as selling
our public transit business we experienced our best ever bidding season and won
contracts in Connecticut, Missouri and Rhode Island. We achieved a retention
rate of contracts of approximately 95%, highlighting strong levels of customer
satisfaction. All operations experienced a smooth school startup, a significant
feat given the amount of new business won during the year.

In September we completed the sale of our public transport operations for cash
consideration of US$93 million (before working capital adjustments), enabling
the division to focus on the provision of and growth in school bus
transportation. In August we strengthened our presence in the school bus market
in Canada through the acquisition of Northstar, which services school boards.
Northstar operates 800 school buses and has 850 employees. It serves 12 school
boards and provides entry into new areas such as Simcoe County, north of
Toronto. In October we completed the acquisition of Jones Bus Service, which has
650 buses in Wisconsin and Illiniois.

During the year we relocated the headquarters of our US Head Office from Texas
to Chicago, providing a better location to manage and grow the division.

Our re-engineering project focusing on improving the cost effectiveness of our
operations has been launched across the whole North American division. The key
objectives are to improve the cost effectiveness of our operations by reviewing
the efficiency of employee rotas, the use of technology and better management of
our assets such as fleet.

We believe we are well positioned to capitalise on further growth opportunities
at the bid table and through acquisition.


Alsa is Spain's leading private operator of coach and bus services operating 90
coach and 19 bus concessions within the Spanish market.

Alsa joined the Group on 1 December, providing immediate scale in an attractive
European growth market.  We have consolidated revenue of £18.2 million and
operating profit of £2.6 million into the Group's 2005 results.

Alsa is Spain's leading coach and bus operator with annualised turnover of £218
million.  It operates exclusive national and regional coach concessions and
urban and suburban bus services with 75% of its revenue generated by its coach
operations. It also operates 65 international coach routes in Europe.

Spain is Europe's fifth largest passenger transport market and the third biggest
coach market.  Approximately double the number of passengers travel by coach on
long distance concessions in Spain than by rail, with coach representing 11% of
the total public transport market. Alsa is the clear leader in coaching with
nearly 10% of the market.  Alsa's long distance concessions are granted on an
exclusive basis by the national government for each route with durations varying
between 8 - 20 years. The regional coach network concessions are awarded by
regional government.

As Spain's second largest private bus operator, Alsa operates 19 urban bus
concessions primarily in Oviedo and Leon, northern Spain. It also operates buses
in Porto, Portugal and Marrakech, Morocco.

Alsa is a quality business run by an experienced and long standing management
team, known to the Group through the Eurolines partnership. We believe that
through close working between Alsa and our National Express sales, marketing and
operations teams we can bring further value to both businesses.  This
acquisition gives the Group critical mass in the Spanish transport market where
we believe further opportunities for public transport growth exist.


On 1 March, the Secretary of State for Transport announced that he would
consider any potential offers for London and Continental Railways ('LCR') in
which the Group has a minority ordinary shareholding and a  preference
shareholding in one of LCR's subsidiaries.

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

                                    - ENDS -

Finance Director's Review

Year at a glance

We have achieved another strong set of results, increasing profit before tax by
14.6% to £89.3m (2004*: £77.9m), driven by a 9.6% increase in operating profit
to £109.5m (2004*: £99.9m). Basic earnings per share from continuing operations
improved to 45.2p (2004*: 40.5p).

For the remainder of this report we will refer to 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: charges for goodwill impairment, intangible amortisation,
exceptional items and tax relief on qualifying exceptional items.

Normalised group operating profit was up by 8.5% to £155.5m (2004*: £143.3m), on
revenue of £2,216.0m (2004*: £2,354.5m) resulting in an increased operating
margin of 7.0% (2004*: 6.1%). Normalised profit before tax increased by 10.7% to
£135.3m (2004*: £122.2m) driving up normalised diluted earnings per share from
continuing operations to 76.3p (2004*: 69.3p) an increase of 10.1%.  Net debt
increased by £426.8m to £563.4m, principally as a result of the acquisition of
Alsa.  The proposed full year dividend per share will be increased by 7.5% to
32.25p (2004: 30.0p).

* As restated for the transition to IFRS

Divisional review

                                                           Revenue              Normalised operating
                                                          2005          2004           2005         2004

                                                            £m            £m             £m           £m
UK Coach                                                 200.5         195.6           21.5         19.3
UK Bus                                                   268.6         239.8           41.5         41.6
UK Train                                               1,497.2       1,712.1           64.2         61.3
Inter-segment sales                                     (10.3)         (6.2)              -            -
North American Bus                                       241.8         213.2           35.0         29.6
Alsa                                                      18.2             -            2.6            -
Central functions                                            -             -          (9.3)        (8.5)
                                                       2,216.0       2,354.5          155.5        143.3


Our UK Coach operations delivered another year of strong performance, increasing
normalised operating profit by 11.4% to £21.5m (2004*: £19.3m). A 2% increase in
passenger numbers was driven by promotions such as our 'Million Seat' campaign
and improved customer service initiatives increasing revenue by £4.9m to £200.5m
(2004*: £195.6m). The terrorist events in July caused passenger decline on key
routes going into London during our busy summer months. Nevertheless, the
normalised operating margin improved to 10.7% (2004*: 9.9%) reflecting
continuing controls over costs, including working with our contractors to
mitigate the rising cost of fuel, and the disposal of our low margin Heathrow
Airport airside operation.

During the year we started a rail replacement division and a special events
division to broaden the reach of our coaching product.


Revenue increased by 12.0% to £268.6m (2004*: £239.8m) and we generated
normalised operating profit of £41.5m (2004*: £41.6m). Divisional operating
margins are being diluted by a greater presence in the regulated London market.
Revenue, excluding Travel London, increased by £5.0m, however this was offset by
increased driver costs and the final share based payment charge of £2.1m in 2005
for the appropriation of shares from the TWM Share Incentive Plan.

The acquisition of the London bus operations of Tellings Golden Miller
contributed normalised operating profit of £0.8m and revenue of £12.4m.  This
brings our share of the London bus market to 5%.

The early introduction of the national concessionary fares scheme in Birmingham
by Centro has helped to reverse the recent decline in patronage from this key
part of our passenger group. The Group's fuel hedging policy has mitigated the
impact of rising prices in 2005, however, 2006 will see an increase in fuel
costs as new hedges have been put in place. Fuel costs will increase by £7m this
year and are the principal reason why we introduced an above inflationary fares
increase this year.


Normalised operating profit increased to £64.2m (2004*: £61.3m) on reduced
revenue of £1,497.2m (2004*: £1,712.1m), as a result of changes in our portfolio
of TOCs.  This resulted in improved margins of 4.3% (2004*: 3.6%).

The terrorist activities in July had an impact on discretionary rail travel over
the summer months, however this loss in revenue was partly mitigated by existing
revenue and profit share arrangements with DfT Rail.  As a result, rail
passenger revenue was up 3.3% on a like-for-like basis, having been 5.4% ahead
at June.  Our franchises continue to appear at the top of the TOC league tables
for performance and customer satisfaction, which has contributed to our ability
to stimulate customer demand.

On 31 March 2006, our Wessex and Great Northern franchises will leave the Group.
As part of the DfT current re-mapping exercise, Central Trains, Silverlink and
Midland Mainline will run until November 2007. We are currently negotiating new
financial arrangements for these franchises.

North America

In local currency, North America increased normalised operating profit to
US$63.7m (2004*: US$54.3m).  Revenue has increased by US$49.5m to US$440.5m
(2004: US$391.0m), improving our margins to 14.5% (2004: 13.9%). The
strengthening dollar increased revenue by £4.9m year on year and operating
profit by £0.8m.

Revenue in our Student Transportation business increased by 12.7% through the
benefit of new routes operated and acquisitions during the year.  The 2005 US
bid environment remains competitive but we were delighted with our best ever bid
season, winning new business with annualised revenue of US$29m. We achieved high
retention of existing contracts showing our mix of value for money and customer
service is proving successful with the School Boards.  Our Canadian operations
continued to perform well boosted by the acquisitive growth in the Ontario and
Ottawa regions.  Existing fuel hedges continue to the end of 2006.

The acquisitions of Aboutown, Northstar and Jones consolidates the Group's
position as the third largest student transportation operator in North America.
Annualised turnover for these acquisitions is £26.2m.

We relocated our US head office from Austin to Chicago during the summer and are
pleased that such a move was well controlled, given the large number of
recruitment, systems and timing issues it presented.

In accordance with IFRS 5, 'Non-current assets held for sale and discontinued
operations', the trading results for Public Transit have been reclassified into
one line in the income statement.


Alsa's results were consolidated from 1 December. In local currency it
contributed €3.8m (£2.6m) to normalised operating profit.  The government have
announced a tariff increase of 3.3% on concessions from 1 December 2005 to cover
the above inflation impact of fuel costs which have been fully hedged in 2006.

Our integration programme has commenced and is proceeding in line with
expectations. Initial focus has been on financial and reporting systems and we
are pleased with the efforts being made to ensure a seamless transition.
Valuation work on intangibles and key assets is underway and we will complete
the work for inclusion in our next financial statements.

Joint ventures and Associates

The total charge for associates was £8.8m (2004: £3.4m).

At the year end we held a 33% investment in Altram LRT Limited ('Altram').
Altram has operated the Midland Metro since June 1999. Our share of the
operating loss for 2005 was £0.2m (2004: £0.2m). On 2 March, we received
clearance from the Office of Fair Trading regarding our acquisition of the
outstanding 67% shareholding. Completion is expected to occur by the end of
March. Altram's results will be disclosed within the Bus Division in 2006.

We hold a 40% investment in Inter-Capital and Regional Rail Limited ('ICRRL').
ICRRL is contracted to manage the operations of Eurostar UK to 2010. Our share
of the operating loss for the year was £8.6m (2004: £3.2m). The cash outflow of
£1.7m in 2005 comprises the Group's share of funding for the 2004 losses. On 1
March, the Secretary of State made a statement requesting expressions of
interest for London and Continental Railways ('LCR'), which owns Eurostar UK. If
a sale is concluded we would expect to recover the book value for our preference
shares in the LCR Group.

The results of the joint ventures and associates acquired with Alsa were
immaterial for the period from acquisition to 31 December 2005.

Finance cost

Net interest payable decreased to £11.4m (2004*: £17.7m), principally reflecting
a lower level of net debt in the first half of the year when compared to 2004
and the termination of a US$200m interest rate swap as reported in our Annual
Report and Accounts 2004.  This was offset by the strengthening of the US dollar
which increased the cost of servicing our US dollar denominated financing.

After excluding £5.1m (2004*: £15.9m) for discontinued operations, continuing
normalised operating profit before depreciation and other non-cash items ('
EBITDA') was £212.5m (2004*: £194.7m) and continuing EBITDA finance cover
improved to 20.2 times (2004*: 11.5 times).

Goodwill and Intangibles

The impairment charge for the year on the goodwill arising from the acquisition
of Prism Rail PLC in December 2000 was £33.3m (2004*: £33.3m). Although IFRS 3,
'Business Combinations' prohibits the amortisation of goodwill, the train
franchises acquired with Prism have finite lives, and therefore the goodwill
will be impaired in line with the remaining cash flows.

Amortisation of £4.9m (2004*: £2.4m) was charged on the intangible asset that
arises from the Group's right to operate its rail franchises (£2.4m) and on
contracts acquired in UK Bus (£0.9m) and North America (£1.6m).

The goodwill and intangible assets, of £421.4m, arising on the Alsa acquisition
are provisionally classified as goodwill at 31 December 2005 and these will be
allocated during 2006 after the valuation work is complete.

Exceptional items

Exceptional items totalled £7.8m (2004*: £7.7m), of which £3.5m was incurred in
relation to restructuring and redundancies in the UK Trains division following a
review of our rail franchise portfolio.

In North America £2.8m was incurred in respect of the relocation of the
divisional head office from Texas to Chicago in the year.  The balance comprises
£1.5m of costs incurred in a reorganisation of our Birmingham operations.

Discontinued operations

As disclosed in the Annual Report and Accounts 2004, the Group's remaining bus
operations in Australia are now in administration and are no longer controlled
by the Group.  The Group received proceeds of £25.4m from the administrator in
December and it is possible that further amounts will be received but it is not
practicable to forecast the amount or timing of any receipt.

As anticipated in our Interim report, our Public Transit business was sold on 1
September 2005, for net proceeds of £49.6m.


The total tax charge of £27.5m (2004*: £22.8m) on profit before tax of £89.3m
(2004*: £77.9m) represents an effective rate of 30.8% (2004: 29.3%).  The tax
charge on normalised profit of £135.3m (2004*: £122.2m) was £29.5m (2004*:
£26.4m), which represents an effective rate of 21.8% (2004*: 21.6%).

We expect our normalised tax rate to increase over the medium term to reflect
the higher tax rates in overseas jurisdictions.

Cash flow

The Group continues to generate strong cash flow with a cash inflow from
operations of £188.8m (2004: £247.9m). The fall reflects the working capital
timing reversals highlighted last year in connection with performance and profit
share payments. 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 new bidding work.

Operating Cash Flow                    UK        UK          UK        North      Alsa      Central     Total
                                      Bus   Coaches      Trains     American              functions        
                                       £m        £m          £m          Bus        £m           £m        £m

Normalised operating profit          41.5      21.5        64.2         35.0       2.6        (9.3)     155.5

Normalised operating profit
of discontinued operations              -         -           -          3.8         -            -       3.8

Depreciation                         12.2       5.3        15.4         22.5       0.9          0.5      56.8

Amortisation of leasehold
property prepayment                   0.1         -           -          0.7         -            -       0.8
Amortisation of fixed asset             -         -       (0.9)            -         -            -     (0.9)

Profit on disposal                  (1.2)     (0.5)           -        (0.3)         -            -     (2.0)

Share based payments                  2.2       0.1         0.3          0.2         -          0.8       3.6

EBITDA                               54.8      26.4        79.0         61.9       3.5        (8.0)     217.6

Working capital movement              2.8     (0.1)      (20.2)        (2.0)     (4.1)        (3.5)    (27.1)

Eurostar                                -         -           -            -         -        (1.7)     (1.7)

Net cash inflow from                 57.6      26.3        56.8         59.9     (0.6)       (13.2)     188.8

Net capital expenditure            (44.5)     (8.2)      (24.8)       (33.3)     (0.6)          0.8   (110.6)

Operating cash flow before
one-offs                             13.1      18.1        34.0         26.6     (1.2)       (12.4)      78.2


 - Exceptional items                                                                                    (7.7)

Operating cash flow                                                                                      70.5

Operating cash flow represents 'Cash generated from operations' plus 'Proceeds
from disposal of property, plant and equipment' less 'Finance lease additions'
and 'Purchase of property, plant and equipment' as set out in note 11 and the
cash flow statement.

Net capital expenditure was £110.6m (2004: £66.5m) including £57.0m (2004:
£16.2m) of additions purchased under finance leases offset by £8.1m of proceeds
from disposals.  The finance lease expenditure included £37.8m (2004: £0.2m) in
UK Buses that arose from the conversion of operating lease arrangements to
finance leases in the year.

   Reconciliation of net debt                                                     2005                     2004
                                                                                    £m                       £m

   Operating cash flow                                                            70.5                    187.5
   Net interest                                                                 (22.0)                   (20.3)
   Taxation                                                                     (26.7)                    (3.2)
   Share buy back                                                               (29.3)                        -
   Financial investments & shares                                                  8.4                      2.6
   Acquisitions and disposals                                                  (359.1)                     22.8
   Dividends                                                                    (41.6)                   (36.4)
   Net funds flow                                                              (399.8)                    153.0
   Foreign exchange                                                             (27.0)                     18.2
   Funds flow post exchange                                                    (426.8)                    171.2
   Opening effective net debt                                                  (136.6)                  (307.8)
   Closing effective net debt                                                  (563.4)                  (136.6)

Net interest paid of £22.0m (comprising the cash outflow of £21.8m adjusted for
loan fee amortisation of £0.2m) increased in the year following the termination
of a US$200m interest rate swap during they year.

The receipt of tax rebates in respect of prior years in 2004 resulted in reduced
tax payments last year.

Acquisitions and disposals includes the acquisition of the Alsa Group of
£367.4m, other acquisitions of £65.5m, net proceeds of £49.6m from the sale of
ATC, £25.4m from the disposal of Bosnjak Group and other items, including cash
disposed, of £1.2m. The 2004 inflow includes £26.4m from the disposal of three
Australian Bus subsidiaries in October 2004.


An interim dividend of 10.0p per share was paid in October 2005 and a final
dividend of 22.25p per share will be paid in May 2006, bringing the total
dividend for the year to 32.25p. This is a 7.5% increase in total dividends
declared compared to 2004.  This dividend is covered 2.5 times (2004*: 2.3
times) by normalised profits after tax.


The Group's principal defined benefit pension schemes are all in the UK. The
most recent triennial actuarial valuations were carried out at 31 March 2004 and
31 March 2002 for the two Bus schemes, 5 April 2004 for Coaches and 31 December
2004 for the Train schemes.  These valuations showed funding levels of 88% to
107% on the Bus schemes, 65% on the Coach scheme and 86% to 95% on the Train
schemes.  Approximately 1,400 (20%) Bus division employees are members of the
two schemes, which have been closed for some years, and some 450 members of
staff are members of the Coach division scheme which was closed in June 2002.
New employees in the Bus and Coach division are offered membership of defined
contribution pension schemes.  In the Trains division approximately 11,000
employees are members of the Train schemes.

The balance sheet includes provision for the deficits of the defined benefit
schemes in the group which includes the Railways Pension Scheme ('RPS'), where
our main obligation is to pay the contributions agreed with the scheme actuary
over the life of our franchise.

Overall, the IAS 19 deficits have increased as the increased values of the
financial assets, reflecting the improvements in global equities, have been
offset by increased liabilities arising from decreases in the discount rate and
in the case of the RPS, an increase in the longevity assumptions. In the coach
scheme the deficit increased to £14.9m (2004: £11.0m).  In the Bus schemes, the
deficit has increased slightly to £37.8m (2003: £36.2m).  The RPS deficit
increased by £16.3m to £34.2m, mainly due to the change in the longevity
assumptions and the reduction in the discount rate.


One of the Group's banking facilities expires in October 2006.  We are working
with the Group's banks to put in place a new banking arrangement over the next
two to three months.

Accounting policies


The Group's Annual Report and Accounts for the year ended 31 December 2005 has
been prepared using accounting policies that comply with International
Accounting Standards ('IAS') and International Financial Reporting Standards ('

We released our restated 2004 results under IFRS on 27 June 2005 and issued our
first set of Interim Results under IFRS on 28 July 2005. It has been a
significant additional workload for the Group Finance team and shareholders will
note a number of changes in presentation of our primary statements and
significant additional disclosure.  Due to the length of the disclosures
required under the new financial standards, the Group will prepare a summary
report and accounts for the 2006 year end.  Shareholders will have the option
whether to receive the full annual report and accounts or the summary version.

We believe that one of the principal benefits of IFRS is to provide consistency
in accounting standards across geographic areas and industries. With this in
mind, we have worked with our peers to produce a consistent approach to the
unique difficulties generated by the RPS to the requirements of IAS 19.

Adam Walker

Finance Director



For the year ended 31 December 2005

                                   Total before                         Total before
                                       goodwill     Goodwill                goodwill      Goodwill
                                     impairment  impairment,             impairment,   impairment,
                                     intangible   intangible              intangible    intangible
                                   amortisation amortisation             amortisation amortisation
                                  & exceptional  & exceptional          & exceptional & exceptional
                                          items         items     Total         items         items    Total
                                           2005          2005      2005         2004*         2004*    2004*

                            Note             £m           £m         £m           £m            £m         £m
Continuing Operations

Revenue                                 2,216.0            -    2,216.0      2,354.5             -    2,354.5

Operating costs before
intangible amortisation &
exceptional items                     (2,060.5)            -  (2,060.5)    (2,211.2)             -  (2,211.2)

UK Trains goodwill                            
impairment                                    -       (33.3)     (33.3)            -        (33.3)     (33.3)

Intangible amortisation                       -        (4.9)      (4.9)            -         (2.4)      (2.4)

Exceptional items                             -        (7.8)      (7.8)            -         (7.7)      (7.7)

Total operating costs                 (2,060.5)       (46.0)  (2,106.5)    (2,211.2)        (43.4)  (2,254.6)

Group operating profit                    155.5       (46.0)      109.5        143.3        (43.4)       99.9

Loss on disposal of                           
non-current assets                            -            -          -            -         (0.9)      (0.9)

Profit from operations                    155.5       (46.0)      109.5        143.3        (44.3)       99.0

Share of post tax results
from associates and joint
ventures accounted for 
using the equity method                   (8.8)            -      (8.8)        (3.4)             -      (3.4)

Finance income                 3           10.8            -       10.8         13.2             -       13.2

Finance costs                  3         (22.2)            -     (22.2)       (30.9)             -     (30.9)

Profit before tax                         135.3       (46.0)       89.3        122.2        (44.3)       77.9

Tax expense                    4         (29.5)          2.0     (27.5)       (26.4)           3.6     (22.8)

Profit after tax for the
period from
continuing operations                     105.8       (44.0)       61.8         95.8        (40.7)       55.1

(Loss)/profit for the
period from
discontinued operations        5            3.8       (68.3)     (64.5)          9.3         (5.8)        3.5

(Loss)/profit for the                     109.6      (112.3)      (2.7)        105.1        (46.5)       58.6

(Loss)/profit attributable
to equity shareholders                    109.5      (112.3)      (2.8)        106.1        (43.9)       62.2

Profit/(loss) attributable
to minority interests                       0.1            -        0.1        (1.0)         (2.6)      (3.6)

                                          109.6      (112.3)      (2.7)        105.1        (46.5)       58.6

(Loss)/earnings per share:

- basic (loss)/earnings        7                                 (2.0p)                                 45.7p
  per share
- diluted (loss)/earnings      7                                 (2.0p)                                 45.0p
  per share

Earnings per share from
continuing operations:

- basic earnings per share     7                                  45.2p                                 40.5p

- diluted earnings per         7                                  44.5p                                 39.9p

*Results are restated for the transition to International Financial Reporting

Dividends of £41.6m were paid during the year (2004: £36.4m). Dividends of
£47.0m were proposed for approval during the year (2004: £40.9m).



At 31 December 2005

                                                                   Note                     2005                  2004*
                                                                                              £m                     £m
Non-current assets
Intangible assets                                                                          719.4                  352.8
Property, plant and equipment                                                              507.2                  333.5
Financial assets
   - Other investments                                                                      11.4                   10.2
   - Derivative financial instruments                                                        0.6                      -
Investments accounted for using the equity method                                            4.8                      -
Other receivables                                                                           26.2                   30.5
Deferred tax asset                                                                          23.0                   18.3
                                                                                         1,292.6                  745.3
Current assets
Inventories                                                                                 18.7                   16.1
Trade and other receivables                                                                301.8                  301.8
Financial assets     - Derivative financial instruments                                      6.7                      -
Current tax assets                                                                          11.3                      -
Cash and cash equivalents                                                                  145.5                  143.1
                                                                                           484.0                  461.0
Disposal group assets classified as held for sale                                              -                   33.8
Total assets                                                                             1,776.6                1,240.1
Non-current liabilities
Financial liabilities
   - Borrowings                                                                          (495.5)                (251.8)
   - Derivative financial instruments                                                      (8.3)                      -
Deferred tax liability                                                                    (27.1)                  (4.5)
Other non-current liabilities                                                              (6.1)                  (3.0)
Defined benefit pension liability                                    10                   (88.8)                 (65.7)
Provisions                                                                                (41.3)                 (36.4)
                                                                                         (667.1)                (361.4)
Current liabilities
Trade and other payables                                                                 (533.1)                (514.5)
Financial liabilities
   - Borrowings                                                                          (214.4)                 (30.3)
   - Derivative financial instruments                                                     (13.4)                      -
Current tax liabilities                                                                   (24.0)                 (36.8)
Provisions                                                                                (12.3)                 (23.4)
                                                                                         (797.2)                (605.0)

Liabilities directly associated with disposal group assets
classified as held for sale                                                                    -                  (6.9)

Total liabilities                                                                      (1,464.3)                (973.3)
Net assets                                                                                 312.3                  266.8
Shareholders' equity
Called up share capital                                                                      7.5                    7.0
Share premium account                                                                      174.2                   47.5
Capital redemption reserve                                                                   0.2                      -
Treasury shares                                                                            (5.1)                  (5.1)
Other reserves                                                                              24.5                   13.3
Retained earnings                                                                          108.1                  203.2
Total shareholders' equity                                                                 309.4                  265.9
Minority interest in equity                                                                  2.9                    0.9
Total equity                                                          9                    312.3                  266.8

*Results are restated for the transition to International Financial Reporting



For the year ended 31 December 2005

                                                                         Note                 2005                2004*
                                                                                                £m                   £m

Cash generated from operations                                             11                181.1                254.1
Tax paid                                                                                    (26.7)                (3.2)
Net cash from operating activities                                                           154.4                250.9
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired                                       (218.8)                 12.6
Deferred consideration for businesses acquired                                               (0.3)                (4.5)
Purchase of property, plant and equipment                                                   (61.7)               (69.2)
Proceeds from disposal of property, plant and equipment                                        8.1                 18.8
Payments in respect of businesses disposed                                                       -                (1.5)
Receipts from disposal of businesses, net of cash disposed                                    71.3                 24.7
Interest received                                                                             10.8                 13.1
Receipts from sale of shares for employee schemes                                              3.5                  0.1
Net cash used in investing activities                                                      (187.1)                (5.9)
Cash flows from financing activities
Proceeds from issue of ordinary shares                                                         4.9                  2.5
Purchase of treasury shares                                                                  (3.5)                    -
Share buy back                                                                              (25.8)                    -
Interest paid                                                                               (32.6)               (31.6)
Repayment of maintenance bond at ScotRail                                                        -               (18.7)
Finance lease principal payments                                                            (20.0)               (15.8)
Repayment of loan notes                                                                      (6.7)                (0.9)
Loans advanced/(repaid)                                                                      148.1               (93.1)
Dividends paid                                                                              (41.6)               (36.4)
Net cash from/(used in) financing activities                                                  22.8              (194.0)
(Decrease)/increase in cash and cash equivalents                                             (9.9)                 51.0
Opening cash and cash equivalents                                                            147.2                 96.8
(Decrease)/increase in cash and cash equivalents                                             (9.9)                 51.0
Foreign exchange                                                                               2.7                (0.6)
Closing cash and cash equivalents                                          11                140.0                147.2

*Results are restated for the transition to International Financial Reporting


For the year ended 31 December 2005

                                                                          Note               2005              2004*
                                                                                               £m                 £m
Income and expense recognised directly in equity

Exchange differences on retranslation of foreign operations                                  50.3             (28.0)
Exchange differences on retranslation of foreign currency borrowings                       (45.5)               29.8
Actuarial losses on defined benefit pension plans                           10             (32.0)              (2.3)
Gains on cash flow hedges taken to equity                                                    14.5                  -

                                                                                           (12.7)              (0.5)

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

                                                                                            (7.9)                  -

Tax on exchange differences on retranslation of foreign operations                            7.1              (4.1)
Deferred tax on share based payments                                                          1.4                0.8
Deferred tax on actuarial gains/(losses)                                                      9.0              (0.2)
Deferred tax on cash flow hedges                                                            (1.4)                  -
Tax on items taken directly to or transferred from equity                                    16.1              (3.5)

Net losses recognised directly in equity                                                    (4.5)              (4.0)
(Loss)/profit for the financial period                                                      (2.8)               62.2
Profit/(loss) attributable to minority interests                                              0.1              (3.6)
Total recognised (expense)/income for the period                             9              (7.2)               54.6

(Expense)/ income attributable to equity shareholders                                       (7.3)               58.4
Income/ (expense) attributable to minority interests                                          0.1              (3.8)

                                                                                            (7.2)               54.6

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)                  -

*Results are restated for the transition to International Financial Reporting



For the year ended 31 December 2005

1      Basis of preparation

As a company registered and listed in an EU country, National Express Group PLC
has been required to adopt International Financial Reporting Standards ('IFRS')
with effect from 1 January 2005. The results for the year ended 31 December 2005
represent the Group's first annual report and accounts prepared in accordance
with its accounting policies under IFRS. Previously the Group reported under UK
generally accepted accounting policies ('UK GAAP'). Detailed UK GAAP to IFRS
reconciliations of equity for the date of transition, 31 December 2004 and 1
January 2005, and of profit for the year ended 31 December 2004 were issued on
27 June 2005.

The Group's accounting policies under IFRS are published on the Group's website

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

2      Exchange rates

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

                                               2005                  2005                    2004                  2004

                                       Closing rate          Average rate            Closing rate          Average rate

US dollar                                      1.72                  1.82                   1.92                   1.84
Canadian dollar                                2.00                  2.20                   2.31                   2.38
Euro                                           1.45                  1.47
Australian dollar                              2.35                  2.39                   2.45                   2.48

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

If the results for the year to 31 December 2004 were retranslated at the average
exchange rates for the year to 31 December 2005, North America would have
achieved normalised operating profit of £29.9m on revenue of £215.5m, compared
to normalised operating profit of £29.6m on revenue of £213.2m as reported.

3      Net finance costs

                                                                                              2005         2004
                                                                                                £m           £m

Bank interest payable                                                                       (16.3)       (23.0)
Finance lease interest payable                                                               (4.7)        (6.6)
Other interest payable                                                                       (0.3)        (0.5)
Unwind of insurance provision discounting                                                    (0.9)        (0.8)
Finance costs                                                                               (22.2)       (30.9)
Finance income: Bank interest receivable                                                      10.8         13.2
Net finance costs                                                                           (11.4)       (17.7)

4      Taxation

Analysis of taxation charge/ (credit) in the year
                                                                                              2005         2004

                                                                                                £m           £m
Current taxation:
UK corporation tax - continuing operations                                                    19.5         22.2
Overseas taxation - continuing operations                                                    (1.2)          2.7
Overseas taxation - discontinued operations                                                  (0.2)        (1.5)
Current income tax charge                                                                     18.1         23.4
    Amounts overprovided in prior years - UK                                                 (9.5)        (2.2)
    Amounts overprovided in prior years - Overseas                                               -        (0.1)
    Total current income tax                                                                   8.6         21.1

Deferred taxation:
Origination and reversal of timing differences - continuing operations                        18.7          0.2
Total tax charge                                                                              27.3         21.3

The tax charge in the income statement is disclosed as follows:
Income tax expense on continuing operations                                                   27.5         22.8
Income tax credit on discontinued operations                                                 (0.2)        (1.5)

                                                                                              27.3         21.3

The tax expense on continuing operations is disclosed as follows:

Tax charge on profit before goodwill impairment, intangible amortisation and                  29.5         26.4
exceptional items
Tax credit on goodwill impairment and exceptional items                                      (2.0)        (3.6)

                                                                                              27.5         22.8

5      Discontinued operations

The Group decided to exit its non-core markets in North American Public Transit
and Australia Bus in 2005 and 2004 respectively.

The Group's North American Public Transit operation (trading as ATC) was
disposed of on 1 September 2005 and has been classified in discontinued

In the year ended 31 December 2004 the Group sold National Bus Company
(Victoria) Pty Limited, National Bus Company (Queensland) Pty Limited and
Transport Management Group Pty Limited on 1 October 2004. The Group also
announced the voluntary administration of the Bosnjak Holdings Group (comprising
the Group's remaining operations in Australia) on 31 January 2005.

The results of the Group's discontinued operations are presented below.
Normalised results are defined as the statutory results before the following as
appropriate: profit or loss on the sale of business and charges for goodwill
impairment, intangible amortisation, fixed asset impairments, exceptional items
and tax relief on qualifying exceptional items. The results for the Australia
Bus and Bosnjak Group are immaterial in 2005.

5      Discontinued operations (continued)

                                                            2005             2004              2004              2004
                                                     N. American      N. American         Australia
                                                  Public Transit   Public Transit               Bus             Total
                                                              £m               £m                £m                £m

Revenue                                                    100.8            152.1              62.4             214.5
Operating expenses                                        (97.0)          (145.0)            (59.9)           (204.9)
Normalised operating profit                                  3.8              7.1               2.5               9.6
Finance income                                                 -                -               0.3               0.3
Finance costs                                              (0.2)            (0.4)             (0.3)             (0.7)
Normalised profit before tax                                 3.6              6.7               2.5               9.2
Tax on normalised profit                                     0.2                -               0.1               0.1
Normalised profit                                            3.8              6.7               2.6               9.3

Goodwill impairment                                       (60.0)                -            (10.6)            (10.6)
Property, plant & equipment impairment                         -                -             (6.1)             (6.1)
Exceptional items                                          (0.2)            (0.2)                 -             (0.2)

                                                          (60.2)            (0.2)            (16.7)            (16.9)
Profit on disposal of non-current assets                       -                -               0.8               0.8
(Loss)/gain on sale of discontinued                        (6.6)                -               8.9               8.9
Cumulative exchange differences

 Transferred from reserves                                 (1.5)                -                 -                 -

                                                          (68.3)            (0.2)             (7.0)             (7.2)
Tax - related to exceptional and other
items                                                          -              1.4                 -               1.4

                                                          (68.3)              1.2             (7.0)             (5.8)
(Loss)/ profit for the period from
 Discontinued operations                                  (64.5)              7.9             (4.4)               3.5

6      Dividends paid and proposed

Declared and paid during the year                                                            2005            2004

                                                                                               £m              £m

Ordinary final dividend for 2004 paid of 20.65p per share (2003: 17.5p per share)            28.1            23.6
Ordinary interim dividend for 2005 paid of 10.0p per share (2004: 9.35p per                  13.5            12.8

                                                                                             41.6            36.4

Proposed for approval (not recognised as liability as at 31 December)
Ordinary final dividend for 2005 of 22.25p per share (2004: 20.65p per share)                33.5            28.1

7      Earnings per share

                                                                                             2005            2004

Basic earnings per share - continuing operations                                            45.2p           40.5p
Basic (loss)/earnings per share - discontinued operations                                 (47.2p)            5.2p
Basic (loss)/earnings per share - total                                                    (2.0p)           45.7p
Normalised basic earnings per share - continuing operations                                 77.4p           70.4p

Diluted earnings per share - continuing operations                                          44.5p           39.9p
Diluted (loss)/earnings per share - discontinued operations                               (46.5p)            5.1p
Diluted (loss)/earnings per share - total                                                  (2.0p)           45.0p
Normalised diluted earnings per share - continuing operations                               76.3p           69.3p

Normalised earnings per share are defined as the statutory earnings per share
before the following: profit or loss on the sale of business and charges for
goodwill impairment, intangible amortisation, fixed asset impairments,
exceptional items and tax relief on qualifying exceptional items.

Basic loss per share is calculated by dividing the loss attributable to equity
shareholders of £2.8m (2004: profit of £62.2m) by the weighted average number of
ordinary shares in issue during the year, excluding those held by employees'
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 weighted average number of ordinary shares is detailed as

                                                                                             2005            2004

Basic weighted average shares                                                         136,591,474     136,166,921
Adjustment for dilutive potential ordinary shares                                       2,017,744       2,039,292
Diluted weighted average shares                                                       138,609,218     138,206,213

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.

Normalised profits for the financial period are:

                                                       2005      2005       2005      2004      2004       2004
                                                         £m     Basic    Diluted        £m     Basic    Diluted
                                                                  EPS        EPS                 EPS        EPS
                                                                    p          p                   p          p

(Loss)/profit attributable to equity                  (2.8)     (2.0)      (2.0)      62.2      45.7       45.0
Loss/(profit) from discontinued operations             64.5      47.2       46.5     (7.1)     (5.2)      (5.1)
Profit from continuing operations attributable to
equity shareholders                                    61.7      45.2       44.5      55.1      40.5       39.9
Goodwill impairment on continuing operations           33.3      24.4       24.1      33.3      24.4       24.1
Intangible asset amortisation                           4.9       3.6        3.5       2.4       1.8        1.7
Exceptional items                                       7.8       5.7        5.6       7.7       5.7        5.6
Loss on disposal of non-current assets                    -         -          -       0.9       0.7        0.6
Tax relief on goodwill and exceptional items          (2.0)     (1.5)      (1.4)     (3.6)     (2.7)      (2.6)
Normalised profit attributable to equity
shareholders                                          105.7      77.4       76.3      95.8      70.4       69.3

Profit/loss from discontinued operations comprises the results as disclosed in
note 5 net of minority interests of £3.6m in the year to 31 December 2004.

8      Business combinations

a)     Acquisition of Alsa

On 1 December 2005 the Group acquired the entire share capital of General
Tecnica Industrial S.L., Dabliu Consulting S.L. and Turyexpress S.A. which
together hold the companies that comprise Alsa, a bus and coach operator based
in Spain. Consideration of £268.6m was satisfied by the issue of 13,503,600
ordinary shares of 5p at £9.07 (£122.5m), being the price of National Express
Group PLC shares on 1 December 2005, and cash of £146.1m (net of a provisional
£2.6m completion adjustment that is receivable at 31 December 2005).
Additionally costs of £4.4m have been included in total consideration.

2005                                                             Alsa                 Alsa                 Alsa
                                                           book value           fair value     fair value total
                                                                   £m                   £m                   £m

Net assets at date of acquisition:                                                      

Intangible assets                                               178.2              (178.2)                    -
Property, plant and equipment                                    59.2                 14.4                 73.6
Available for sale investments                                    1.2                    -                  1.2
Investments accounted for under the equity                        6.0                (1.2)                  4.8
Inventories                                                       3.1                    -                  3.1
Trade and other receivables                                      52.8                (3.8)                 49.0
Current tax                                                       0.8                    -                  0.8
Cash and cash equivalents                                        10.0                    -                 10.0
Trade and other payables                                       (55.4)                    -               (55.4)
Retirement benefit obligations                                  (0.2)                (0.9)                (1.1)
Provisions                                                      (1.0)                    -                (1.0)
Financial liabilities - Borrowings                            (211.8)                    -              (211.8)
Deferred tax liability                                            0.4                (6.5)                (6.1)
Net assets                                                       43.3              (176.2)              (132.9)
Less minority interest                                         (11.4)                (4.1)               (15.5)
Group's share of net assets                                      31.9              (180.3)              (148.4)
Goodwill on acquisition                                                                                   421.4
Total consideration                                                                                       273.0
Net consideration                                                                                         268.6
Acquisition costs                                                                                           4.4
Total consideration                                                                                       273.0
Less: shares issued                                                                                     (122.5)
Add: provisional completion adjustment                                                                      2.6
Less: accrued acquisition costs                                                                           (0.2)
Less: net cash acquired                                                                                  (10.0)
Net cash outflow                                                                                          142.9

8      Business combinations (continued)

In accordance with Group accounting policies, provisional fair value adjustments
have been made to the assets and liabilities acquired. In particular, due to the
proximity of the combination to the year end the Group has been unable to
complete a detailed valuation of the intangible and tangible assets acquired
with the business.  Accordingly, the surplus of consideration over fair value of
the share of net assets acquired has been allocated to goodwill at 31 December
2005. The Group expects to identify intangible assets, including brands,
customer relationships and customer contracts, and will complete a property
valuation.  Independent valuers have been retained by the Group to complete this
exercise and the results will be reflected in the Group's next accounts.  The
value of goodwill will be adjusted by a corresponding amount for the value of
intangible assets identified and the difference between the market and book
values of the property assets. Management believes that goodwill remaining after
this exercise will comprise value to the Group for which the recognition of a
discrete intangible asset is not permitted and will represent future growth

On 15 December 2005 the Group paid £12.7m of cash consideration to acquire the
10.2% minority interest of Enatcar, a subsidiary of Alsa. This payment
represented fair value and consequently had no impact on the goodwill recognised
above. Due to the date of acquisition, the profit accrued in 2005 was not
material to the Group.

From the date of acquisition, Alsa has contributed £2.6m to the normalised
operating profit of the Group. As a privately owned group Alsa did not prepare
consolidated financial information. Using the December 2005 results as being
indicative of the profit for the full year, if the combination had taken place
at the beginning of the year, the normalised operating profit for the Group
would have been £184.1m and revenue from continuing operations would have been

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

b)     Other acquisitions

The Group acquired the entire share capital of TGM Buses Limited and TGM
Middlesex Limited, representing the London bus operations of Tellings Golden
Miller PLC (TGM) on 17 June 2005. In Canada the Group acquired the entire share
capital of Aboutown School Transit Inc., a school bus operator on 15 July 2005
and the entire share capital of Northstar Passenger Services LP and Walsh
Transportation LP, representing the school bus operations of Contrans Income
Fund (a Canadian freight haulage company) on 1 August 2005. The Group also
acquired the entire share capital of Jones School Bus Service Inc on 10 November
2005, a school bus operator in the United States.  The net cash outflow in
respect of these acquisitions was £63.2m.

9      Share capital and reserves

                                                                                                         Total equity

At 31 December 2004                                                                                             266.8
Financial instruments recognition                                                                              (12.8)
At 1 January 2005                                                                                               254.0
Shares issued                                                                                                   127.4
Shares purchased                                                                                               (29.3)
Acquisition of minority interest                                                                                  2.8
Total recognised expense                                                                                        (7.2)
Shares awarded to satisfy share scheme                                                                            3.5
Disposal of subsidiaries                                                                                        (0.9)
Share based payments                                                                                              3.6
Dividends                                                                                                      (41.6)
At 31 December 2005                                                                                             312.3

10    Pensions and other post-employment benefits

i)  Financial results for pension benefits

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

                                                                                          2005              2004
                                                                                            £m                £m

UK Bus                                                                                  (37.8)            (36.2)
UK Coach                                                                                (14.9)            (11.0)
UK Train                                                                                (34.2)            (17.9)
Other                                                                                    (1.9)             (0.6)
Total                                                                                   (88.8)            (65.7)

10    Pensions and other post-employment benefits (continued)

The amounts charged to the Group income statement and Group statement of
recognised income and expense for the year ended 31 December 2005 are set out in
the following tables.

Group income statement                                 UK Bus     UK Coach    UK Trains       Other       Total
                                                         2005         2005         2005        2005        2005
                                                           £m           £m           £m          £m          £m

Amounts charged to operating profit:

Current service cost                                    (5.3)        (1.6)       (31.2)       (0.2)      (38.3)
Past service cost                                           -            -            -           -           -
Expected return on pension scheme assets                 23.9          2.1         30.1           -        56.1
Interest on pension liabilities                        (20.2)        (2.2)       (24.0)           -      (46.4)
Interest on franchise adjustment                            -            -          3.6           -         3.6
Charge to operating profit                              (1.6)        (1.7)       (21.5)       (0.2)      (25.0)
Total charge to income statement                        (1.6)        (1.7)       (21.5)       (0.2)      (25.0)

Actual return on plan assets                             59.2          4.6         84.5           -       148.3

Group statement of recognised income and expense        UK Bus     UK Coach  UK Trains        Other        Total
                                                          2005         2005       2005         2005         2005
                                                            £m           £m         £m           £m           £m

Actual return less expected return on pension             35.3          2.5       54.4            -         92.2
scheme assets
Other actuarial gains and losses                        (41.6)        (7.3)     (75.3)            -      (124.2)
Actuarial loss                                           (6.3)        (4.8)     (20.9)            -       (32.0)

The amounts recognised in the balance sheet at 31 December 2005 are:

                                                       UK Bus    UK Coach    UK Trains       Other        Total
                                                         2005        2005         2005        2005         2005
                                                           £m          £m           £m          £m           £m

Equities                                                218.5        17.2        638.1           -        873.8
Bonds                                                   159.7        18.5         88.2           -        266.4
Property                                                  3.6           -         67.3           -         70.9
Other                                                     4.0           -          2.8           -          6.8
Fair value of scheme assets                             385.8        35.7        796.4           -      1,217.9
Present fair value of scheme liabilities              (423.6)      (50.6)      (901.6)       (1.9)    (1,377.7)
Franchise adjustment                                        -           -         71.0           -         71.0
Group's defined benefit obligation                    (423.6)      (50.6)      (830.6)       (1.9)    (1,306.7)
Defined benefit pension deficit                        (37.8)      (14.9)       (34.2)       (1.9)       (88.8)

ii)  Accounting for the Railways Pension Scheme

The majority of employees of the UK Train companies are members of the
appropriate section of the Railways Pension Scheme ('RPS'), a funded defined
benefit scheme. The RPS is a shared cost scheme, which means that costs are
formally shared 60% employer and 40% employee. To date, the Group has
experienced three changes of UK Train franchise ownership where the current
owner has funded the scheme during the franchise term and the pension deficit at
franchise exit has transferred to the new owner, without cash settlement.
However, although the Group's past experience has proven otherwise, our legal
advice has opined that in certain situations, some of the liability for the
deficit on the relevant sections of the RPS could theoretically crystallise for
funding by an individual TOC at the end of the franchise. By entering into the
franchise contract, the TOC becomes the designated employer for the term of the
contract and under the rules of the RPS must fund its share of the pension
liability in accordance with the schedule of contributions agreed with the
Scheme trustees and actuaries and for which there is no funding cap set out in
the franchise contract. We understand that franchise contracts entered into in
the future will clarify that RPS pension deficits and surpluses will not be the
responsibility of the outgoing franchisee following exit.

To comply with IAS 19, the Group is required to account for its legal obligation
under the formal terms of the RPS and its constructive obligation that arises
under the terms of each franchise agreement.

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

In calculating the Group's constructive obligations in respect of the RPS, the
Group has calculated the total pension deficits in each of the RPS sections in
accordance with IAS 19 and the assumptions set out above. These deficits are
reduced by a 'franchise adjustment' which is that portion of the deficit
projected to exist at the end of the franchise and for which the Group will not
be required to fund. The franchise adjustment, which has been calculated by the
Group's actuaries, is offset against the present value of the RPS liabilities so
as to fairly present the financial performance, position and cash flows of the
Group's obligations.

11    Cash flow statement

The net cash flows from operating activities include outflows of £7.7m (2004:
£5.2m) from continuing operations which related to exceptional costs.

a)     Reconciliation of Group operating profit to cash generated from

Total Operations                                                                               2005                2004
                                                                                                 £m                  £m

Net cash inflow from operating activities
Group operating profit                                                                        109.5                99.9
Operating profit of discontinued operations                                                  (56.4)               (7.3)
Depreciation of property, plant & equipment                                                    56.8                63.6
Amortisation of leasehold property prepayment                                                   0.8                 0.6
Goodwill impairment                                                                            93.3                43.9
Intangible asset amortisation                                                                   4.9                 2.4
Property, plant and equipment impairment                                                          -                 6.1
Amortisation of fixed asset grants                                                            (0.9)               (6.5)
Profit on disposal of fixed assets (in normalised operating profit)                           (2.0)               (0.6)
Share-based payments                                                                            3.6                 0.6
(Increase)/decrease in inventories                                                            (0.7)                 0.7
Decrease in receivables                                                                        22.4                18.7
(Decrease)/increase in payables                                                              (37.2)                34.7
Decrease in provisions                                                                       (13.0)               (2.7)
Cash generated from operations                                                                181.1               254.1

Discontinued Operations                                                                      2005                2004
                                                                                               £m                  £m

Net cash inflow from operating activities
Operating profit                                                                           (56.4)               (7.3)
Depreciation of property, plant & equipment                                                   1.3                 6.3
Goodwill impairment                                                                          60.0                10.6
Property, plant and equipment impairment                                                        -                 6.1
Profit on disposal of fixed assets (in normalised operating profit)                         (0.1)                   -
Share-based payments                                                                          0.1                   -
Increase in inventories                                                                     (0.1)                   -
(Increase)/decrease in receivables                                                          (1.1)                 1.2
Increase/(decrease) in payables                                                               1.2               (4.9)
Decrease in provisions                                                                      (1.3)               (2.9)
Cash generated from operations                                                                3.6                 9.1

b)     Analysis of changes in net debt

Net debt at 31 December 2005 of £563.4m (2004: £136.6m) comprises cash and cash
equivalents of £145.5m (2004: £147.2m), current interest bearing loans and
borrowings of £214.4m (2004: £30.3m) and non-current interest bearing loans and
borrowings of £495.5m (2004: £251.8m) and other debt receivable of £1.0m (2004:

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

                                                   At   Cash flow                          Other movements       At 31
                                            1 January             Acquisitions/     Exchange                  December
                                                 2005                 Disposals  Differences                      2005
                                                   £m          £m            £m           £m            £m          £m

Cash                                             26.8        25.0             -          1.4             -        53.2
Overnight deposits                               24.1         0.4             -            -             -        24.5
Other short term deposits                        96.3      (29.8)             -          1.3             -        67.8
Bank overdrafts                                     -       (5.5)             -            -             -       (5.5)
Cash and cash equivalents (including
overdrafts)                                     147.2       (9.9)             -          2.7             -       140.0
Other debt receivable                             1.0           -             -            -             -         1.0
Debt due within one year:
   Loan notes                                   (7.5)         6.7             -            -             -       (0.8)
   Bank loans                                   (8.0)     (174.8)             -        (1.5)         (0.2)     (184.5)

                                               (15.5)     (168.1)             -        (1.5)         (0.2)     (185.3)
Debt due after one year:

   Bank loans                                 (207.5)        26.7       (204.0)       (25.2)             -     (410.0)
   Finance lease obligations                   (61.8)        20.0         (7.3)        (3.0)        (57.0)     (109.1)
Net debt                                      (136.6)     (131.3)       (211.3)       (27.0)        (57.2)     (563.4)

11    Cash flow statement (continued)

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

Other non cash movements in net debt represent finance lease additions of £57.0m
(2004: £16.2m) and £0.2m (2004: £1.8m) amortisation of loan arrangement fees.

c)     Reconciliation of net cash flow to movement in net debt

                                                                                           2005                  2004
                                                                                             £m                    £m

(Decrease)/increase in cash and cash equivalents in the period                            (9.9)                  51.0
Cash (inflow)/outflow from movement in debt and lease financing                         (121.4)                 109.8
Change in net debt resulting from cash flows                                            (131.3)                 160.8
Change in net debt resulting from acquisitions and disposals                            (211.3)                 (8.5)
Change in net debt resulting from non cash flows                                         (84.2)                   0.2
Movement in net debt in the period                                                      (426.8)                 152.5
Opening net debt                                                                        (136.6)               (289.1)
Net debt                                                                                (563.4)               (136.6)

12    Financial Information.

The financial information set out above, which was approved by the Board on 9
March 2006, is derived from the full Group accounts for the year ended 31
December 2005 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.

                      This information is provided by RNS
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