Interim Results 8 December 2004 Interim Results 2004

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Interim Results 8 December 2004 Interim Results 2004

Interim Results 8 December 2004 Interim Results 2004

Robert Speirs Chairman 2 Interim Results 2004

Robert Speirs Chairman 2 Interim Results 2004

Highlights § Strong set of results for 6 months ended 31 October 2004 -

Highlights § Strong set of results for 6 months ended 31 October 2004 - Organic growth in bus and rail operations in UK and overseas - Innovative growth ideas fuelling good underlying performance at UK Bus - Strong revenue and passenger growth at South West Trains § £ 241. 4 m of capital returned to shareholders § Shortlisted bids for Inter. City East Coast and Integrated Kent rail franchises § Interim dividend up 11. 1% to 1. 0 p per share 3 Interim Results 2004

Martin Griffiths Finance Director 4 Interim Results 2004

Martin Griffiths Finance Director 4 Interim Results 2004

Financial Highlights § Turnover from continuing businesses up 6. 7% - £ 882. 0

Financial Highlights § Turnover from continuing businesses up 6. 7% - £ 882. 0 m (2003 - £ 826. 8 m) - Up 8. 3% at constant exchange rates § Operating margin enhancement in continuing divisions* Before goodwill amortisation Including goodwill amortisation Oct 2004 % 8. 9% Oct 2003 % 7. 7% 8. 0% 6. 8% * Excluding disposed Citybus, Road King and Trainline businesses but including all of North America; before exceptional items 5 Interim Results 2004

Financial Summary October 2004 £m October 2003 £m Turnover 886. 4 963. 8 -

Financial Summary October 2004 £m October 2003 £m Turnover 886. 4 963. 8 - continuing operations 882. 0 826. 8 Total operating profit 69. 9 67. 3 - pre exceptionals & goodwill*(after restructuring costs) 78. 5 76. 9 Profit before tax 57. 2 44. 8 - pre exceptionals & goodwill 69. 2 60. 3 128. 8 100. 3 Free cash flow ** Adjusted EPS 4. 0 p 3. 2 p Dividend per share 1. 0 p 0. 9 p * After restructuring costs of £ 0. 3 m (2003 - £ 4. 1 m) ** Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and associates, net cash (outflow)/inflow from returns on investments and servicing of finance, and taxation 6 Interim Results 2004

EBITDA UK Bus North America Overseas Bus - New Zealand - Discontinued Rail VRG

EBITDA UK Bus North America Overseas Bus - New Zealand - Discontinued Rail VRG thetrainline Road King Others Group overheads & restructuring costs EBITDA before exceptionals 7 October 2004 £m October 2003 £m 59. 3 21. 7 5. 9 22. 9 5. 1 (0. 2) 114. 7 (4. 5) 110. 2 54. 0 25. 3 6. 8 3. 5 22. 5 5. 0 (1. 7) 5. 0 (0. 7) 119. 7 (8. 3) 111. 4 Interim Results 2004

Movement in Net Debt October 2004 £m Opening net debt Cash flows from operations

Movement in Net Debt October 2004 £m Opening net debt Cash flows from operations (67. 6) 127. 7 Net interest paid Dividends paid Net capital expenditure and new hire purchase/finance leases Acquisition of businesses and net debt assumed Sale of businesses and net debt eliminated First redemption of “B” shares (1. 0) (26. 6) (53. 6) (2. 4) 14. 4 (220. 4) Foreign exchange, tax and other movements Closing net debt 15. 1 (214. 4) 8 Interim Results 2004

UK Bus Trading Results § Divisional turnover growth 10. 4% to £ 351. 1

UK Bus Trading Results § Divisional turnover growth 10. 4% to £ 351. 1 m (2003 £ 317. 9 m) § Passenger growth of 1. 3% outwith London - 6. 3% revenue growth § Strong contribution from London companies - 22. 1% revenue growth § Improved operating margin - Divisional margin, 10. 9% versus 10. 8% in 2003 - Outside London, 11. 8% versus 11. 4% in 2003 9 Interim Results 2004

UK Bus Profit Analysis October 2004 October 2003 £m £m Turnover Operating profit before

UK Bus Profit Analysis October 2004 October 2003 £m £m Turnover Operating profit before lease costs, megabus. com & Taxibus Margin Operating lease costs Saving in depreciation arising from operating leases Operating profit before megabus. com & Taxibus Margin Megabus. com & Taxibus 351. 1 42. 6 12. 1% (4. 3) 1. 7 40. 0 11. 4% (1. 8) 317. 9 36. 3 11. 4% (2. 6) 0. 9 34. 6 10. 9% (0. 3) Reported operating profit 38. 2 34. 3 Reported operating margin 10. 9% 10. 8% 10 Interim Results 2004

North America Trading Results § Turnover £ 123. 6 m (2003 - £ 234.

North America Trading Results § Turnover £ 123. 6 m (2003 - £ 234. 0 m) § 13. 8% increase in US$ turnover from continuing operations § - like for like increase* 12. 7% Operating margin up from 6. 8% to 11. 7% § Operating profit** £ 14. 4 m (2003 - £ 15. 9 m) - US$26. 1 m (2003 – US$26. 0 m) - excellent revenue growth - strict cost control - overhead reduction * ** Like for like turnover increase is measured as the change in turnover from the residual businesses excluding the impact of foreign exchange movements Pre restructuring costs, exceptional items and goodwill amortisation 11 Interim Results 2004

North America Turnover Breakdown By Region October 2004 October 2003 Turnover US$m Growth %

North America Turnover Breakdown By Region October 2004 October 2003 Turnover US$m Growth % 105. 8 57. 5 22. 5 185. 8 192. 1 4. 1 382. 0 12. 1% 9. 6% 35. 6% 14. 2% Discontinued Residual taxi business to be disposed of Total 118. 6 63. 0 30. 5 212. 1 8. 0 4. 0 224. 1 £ equivalent £m 123. 6 £m 234. 0 Residual businesses - North East - North Central - Canada 12 Interim Results 2004

North America Turnover Breakdown By Product Scheduled service/Line run/Commuter Charter Sightseeing & Tour School

North America Turnover Breakdown By Product Scheduled service/Line run/Commuter Charter Sightseeing & Tour School Bus & Contract Total 13 October 2004 US$m October 2003 US$m % Growth 80. 9 52. 1 47. 6 31. 5 212. 1 76. 7 42. 0 36. 9 30. 2 185. 8 5. 5% 24. 0% 29. 0% 4. 3% 14. 2% Interim Results 2004

New Zealand Trading Results § Turnover £ 26. 2 m (2003 - £ 26.

New Zealand Trading Results § Turnover £ 26. 2 m (2003 - £ 26. 4 m) § Underlying revenue similar to last year (excluding currency movements) § Operating profit £ 3. 9 m (2003 - £ 4. 9 m) - NZ$10. 9 m (2003 – NZ$13. 7 m) § Operating margin 14. 9% (2003 – 18. 6%) § Increased rail competition § More sustainable level of profitability 14 Interim Results 2004

Rail Trading Results Rail Subsidiaries § First full six months of new South West

Rail Trading Results Rail Subsidiaries § First full six months of new South West Trains franchise § Turnover £ 234. 8 m (2003 - £ 216. 7 m), up 8. 4% § Operating profit £ 21. 6 m (2003 - £ 21. 5 m) - ahead of original expectations § Passenger volumes up 4. 2% at SWT 15 Interim Results 2004

Rail Profit Analysis October 2004 £m Operating Profit per Bid 12. 4 Passenger income

Rail Profit Analysis October 2004 £m Operating Profit per Bid 12. 4 Passenger income 19. 4 Miscellaneous income 2. 5 Net Sch 7/Sch 8 performance payments (1. 8) Overhaul work on behalf of ROSCOs 0. 3 Staff costs 4. 0 Other costs 5. 5 Revenue/Profit share to the SRA (19. 8) Actual SWT operating profit 22. 5 Other, including franchise bid costs (0. 9) Total Rail operating profit 21. 6 16 Interim Results 2004

Virgin Rail Group § Share of turnover £ 150. 7 m (2003 - £

Virgin Rail Group § Share of turnover £ 150. 7 m (2003 - £ 149. 5 m) § Share of operating profit £ 5. 1 m (2003 – £ 5. 0 m) § Committed to agreeing new long-term commercial arrangements on West Coast § Awaiting decision on SRA’s plans for future of Cross. Country 17 Interim Results 2004

Taxation October 2004 Pre-tax £m 69. 2 (4. 0) (8. 0) 57. 2 Pre

Taxation October 2004 Pre-tax £m 69. 2 (4. 0) (8. 0) 57. 2 Pre goodwill and exceptionals Exceptional items Goodwill amortisation Result for the period Cash tax paid (net) Tax £m (18. 8) 1. 3 0. 6 (16. 9) % 27. 2% 32. 5% 7. 5% 29. 5% (12. 6) 18 Interim Results 2004

Balance Sheet & Financing § Net debt £ 214. 4 m (April 2004 -

Balance Sheet & Financing § Net debt £ 214. 4 m (April 2004 - £ 67. 6 m) § Outstanding “B” Shares £ 21. 0 m § More efficient capital structure following completion of £ 241. 4 m return of capital to shareholders § EBITDA*/Interest cover 11. 8 times (2003 – 6. 7 times) § Progressive dividend policy * Before exceptional items 19 Interim Results 2004

International Financial Reporting Standards (“IFRS”) § First IFRS results: six months to 31 October

International Financial Reporting Standards (“IFRS”) § First IFRS results: six months to 31 October 2005, with comparatives § Most significant adjustments will be: - Financial instruments - Pensions - Goodwill - Share-based payment - Dividends - “B” Shares § Many other less significant areas 20 Interim Results 2004

Brian Souter Chief Executive 21 Interim Results 2004

Brian Souter Chief Executive 21 Interim Results 2004

Group Strategy Delivering shareholder value through: § Focus on local transport operations with critical

Group Strategy Delivering shareholder value through: § Focus on local transport operations with critical mass § Organic growth in UK and overseas businesses § Complementary bolt-on acquisitions § Targeted opportunities in UK Rail market 22 Interim Results 2004

Growth in UK Bus § Core route development § UK-wide telemarketing campaign § Kickstart

Growth in UK Bus § Core route development § UK-wide telemarketing campaign § Kickstart projects – Stagecoach initiatives and partnerships with local authorities § Bolt-on acquisitions § Optical guidance development with Siemens § Investment in megabus. com 23 Interim Results 2004

Growth in overseas bus North America § Bolt-on acquisitions § Product development – investment

Growth in overseas bus North America § Bolt-on acquisitions § Product development – investment in New York Sightseeing § Margin development New Zealand § Deploy successful telemarketing programme trialled in UK § Wellington Trolley Bus Contract expansion 24 Interim Results 2004

Growth in UK rail § New commercial deal on Virgin West Coast on acceptable

Growth in UK rail § New commercial deal on Virgin West Coast on acceptable risk profile § Target five year extension at SWT § Bids for commuter (Integrated Kent, Greater Northern / Thameslink) and inter-city (Inter-City East Coast, Greater Western) franchises 25 Interim Results 2004

Current Trading and Outlook § § Strong trading performance across the Group Current trading

Current Trading and Outlook § § Strong trading performance across the Group Current trading in line with our expectations Progressive dividend growth Group’s portfolio offers good potential for further growth 26 Interim Results 2004

Interim Results 8 December 2004 Interim Results 2004

Interim Results 8 December 2004 Interim Results 2004

Appendices 28 Interim Results 2004

Appendices 28 Interim Results 2004

UK Bus Revenue Development London Outwith London £m 2003 Turnover Passenger volumes Tender wins/

UK Bus Revenue Development London Outwith London £m 2003 Turnover Passenger volumes Tender wins/ contract amendments % £m 82. 9 - % 235. 0 - UK Bus £m % 317. 9 3. 1 1. 3% 3. 1 1. 0% 15. 6 18. 8% 1. 7 0. 7% 17. 3 5. 4% Fare increases 2. 4 2. 9% 8. 1 3. 4% 10. 5 3. 3% Megabus. com 0. 3 0. 4% 2. 0 0. 9% 2. 3 0. 7% 2004 Turnover 101. 2 22. 1% 249. 9 6. 3% 351. 1 10. 4% 29 Interim Results 2004

UK Bus - London/Other October 2004 October 2003 Operating Profit £m Turnover £m Operating

UK Bus - London/Other October 2004 October 2003 Operating Profit £m Turnover £m Operating Margin % 8. 6% Turnover £m 7. 5 Margin % London 101. 2 8. 7 Other 249. 9 29. 5 11. 8% 235. 0 26. 8 11. 4% 351. 1 38. 2 10. 9% 317. 9 34. 3 10. 8% 30 82. 9 Operating 9. 0% Interim Results 2004

North America Revenue Development Core continuing US$m 2003 Turnover Impact of disposals and other

North America Revenue Development Core continuing US$m 2003 Turnover Impact of disposals and other movements in non-core US$/C$ currency impact Underlying growth Acquisitions 2004 Turnover 185. 8 0. 8 23. 9 1. 6 212. 1 31 Other US$m Total US$m 196. 2 382. 0 (184. 2) 12. 0 (184. 2) 0. 8 23. 9 1. 6 224. 1 Interim Results 2004

Turnover of North American business by Region and Product 2004 North East US$m 2003

Turnover of North American business by Region and Product 2004 North East US$m 2003 North East US$m 2004 North Central US$m 2003 2004 2003 North Central Canada US$m 2004 Total US$m 2003 Total US$m Scheduled service/ Line run/Commuter 58. 2 57. 6 11. 3 9. 2 11. 4 9. 9 80. 9 76. 7 Charter 13. 1 11. 9 23. 0 19. 8 16. 0 10. 3 52. 1 42. 0 Sightseeing & Tour 34. 1 25. 5 11. 6 10. 2 1. 9 1. 2 47. 6 36. 9 School Bus & Contract 13. 2 10. 8 17. 1 18. 3 1. 2 1. 1 31. 5 30. 2 118. 6 105. 8 63. 0 57. 5 30. 5 22. 5 212. 1 185. 8 Total Turnover Note: The above figures relate to turnover from the continuing elements of the three core regions of North America 32 Interim Results 2004

Overseas Bus Revenue Development 2003 Turnover Disposal of Citybus Currency movements Volumes 2004 Turnover

Overseas Bus Revenue Development 2003 Turnover Disposal of Citybus Currency movements Volumes 2004 Turnover 33 Citybus £m New Zealand £m 17. 8 (17. 8) Nil 26. 4 (0. 1) 26. 2 Total £m 44. 2 (17. 8) (0. 1) 26. 2 Interim Results 2004

Rail Revenue Development £m 2003 Turnover % 216. 7 SWT Passenger volumes 8. 9

Rail Revenue Development £m 2003 Turnover % 216. 7 SWT Passenger volumes 8. 9 4. 1% SWT Fares 7. 8 3. 6% SWT Other 0. 9 0. 4% Island Line/Supertram 0. 5 0. 2% 234. 8 8. 4% 2004 Turnover 34 Interim Results 2004

Interest/Debt Ratios October 2004 £m Finance charges (net) EBITDA pre-exceptionals/finance charges 35 October 2003

Interest/Debt Ratios October 2004 £m Finance charges (net) EBITDA pre-exceptionals/finance charges 35 October 2003 £m 9. 3 16. 6 110. 2 111. 4 11. 8 times 6. 7 times Interim Results 2004

Finance Charges Gross debt & related derivatives Cash Average balance* £m Finance charges £m

Finance Charges Gross debt & related derivatives Cash Average balance* £m Finance charges £m Annual Effective rate % 561. 0 (415. 0) 146. 0 17. 2 (9. 5) 7. 7 (1. 3) 0. 3 0. 4 0. 5 1. 4 0. 3 9. 3 6. 1% 4. 6% 10. 7% Joint ventures & associates Non-utilisation/commitment fees Amortisation of bond issue costs/bank charges Insurance letters of credit/guarantee Discount on insurance provisions Other *Average of month end interest bearing debt and cash balances 36 Interim Results 2004

Fuel Hedging Actual 2003/04 Forecast 2004/05 Forecast 2005/06 Forecast 2006/07 % of Group fuel

Fuel Hedging Actual 2003/04 Forecast 2004/05 Forecast 2005/06 Forecast 2006/07 % of Group fuel hedged/capped at present 100% 97% 50% 0% Average hedge price US$/barrel US$24 US$35 US$43 N/A 1. 71 1. 85 1. 90 Average unhedged floating price US$/barrel US$32 US$45 Variable fuel costs of continuing businesses (excludes product margin/ delivery/tax) £ 25 m £ 35 m £ 43 m £ 44 m £ 77 m £ 78 m Average US$/£ rate Total Fuel Cost £ 59 m £ 68 m Continuing Bus divisions use 1. 84 m barrels of fuel a year (292 m litres) Each US$10 per barrel movement in crude oil price impacts variable fuel costs by approximately US$18 m if no hedging in place 37 Interim Results 2004

Fuel Usage and Impact of Crude Price Annual Usage litres Annual Usage barrels US$

Fuel Usage and Impact of Crude Price Annual Usage litres Annual Usage barrels US$ variable costs based on $45 a barrel 189. 0 m 1. 2 m $54. 0 m $42. 0 m North America 81. 0 m 0. 5 m $22. 5 m $17. 5 m New Zealand 22. 4 m 0. 14 m $6. 4 m $4. 9 m 292. 4 m 1. 84 m $82. 9 m $64. 4 m UK Bus 38 US$ variable costs based on $35 a barrel Interim Results 2004

Capital Expenditure UK Bus North America New Zealand Rail Cash spent on capex £m

Capital Expenditure UK Bus North America New Zealand Rail Cash spent on capex £m Capex on new hire purchase £m Impact of capex on net debt £m 12. 1 19. 0 3. 7 1. 0 23. 8 - 35. 9 19. 0 3. 7 1. 0 (2. 3) (3. 7) - 33. 6 15. 3 3. 7 1. 0 35. 8 23. 8 59. 6 (6. 0) 53. 6 Disposal Proceeds* £m Net £m *Excludes proceeds from selling businesses Note: In addition to the above, vehicles with a capital value of £ 23. 5 m were acquired by UK Bus during the six months on operating leases (2003 - £ 7. 9 m). 39 Interim Results 2004

Exchange Rates October 2004 Closing rate US$ NZ$ C$ Average rate 1. 8323 2.

Exchange Rates October 2004 Closing rate US$ NZ$ C$ Average rate 1. 8323 2. 6784 2. 2350 1. 8131 2. 7985 2. 4114 40 October 2003 Closing rate 1. 6970 2. 7617 2. 2367 Average rate 1. 6324 2. 7875 2. 2299 Interim Results 2004

Interim Results 8 December 2004 Interim Results 2004

Interim Results 8 December 2004 Interim Results 2004