1st Mar 2007 07:07
National Express Group PLC01 March 2007 National Express Group PLC Preliminary Results For the year ended 31 December 2006 National Express Group PLC, a leading international public transport group, today announces preliminary results for the year ended 31 December 2006. Financial Highlights 2006 2005 Change ----------- ----------- -------Revenue £2.5 billion £2.2 billion +14% ----------- ----------- -------Group operating profit £141.6 million £109.5 million +29% ----------- ----------- -------Normalised operating profit* £184.8 million £155.5 million +19% ----------- ----------- -------Profit before tax £104.1 million £89.3 million +17% ----------- ----------- -------Normalised profit before tax* £156.1 million £135.3 million +15% ----------- ----------- -------Operating cashflow** £182.0 million £79.9 million +128% ----------- ----------- -------Diluted earnings per share fromcontinuing operations 52.5 pence 44.5 pence +18% ----------- ----------- -------Normalised diluted earnings per share* 76.5 pence 76.3 pence - ----------- ----------- -------Final dividend per share 24.0 pence 22.25 pence +8% ----------- ----------- -------Total dividend for the year per share 34.75 pence 32.25 pence +8% ----------- ----------- -------Net debt £438.4 million £563.4 million -22% * Normalised results are the statutory results excluding the profit or loss onthe sale of businesses, exceptional profit or loss on sale of non-current assetsand charges for goodwill impairment, intangible asset amortisation, exceptionalitems and tax relief on qualifying exceptional items. ** Operating cash flow as defined in the Finance Review. Operating Highlights • Passenger growth of over 4% in coaches and 6% in trains• Rail businesses leading the industry performance tables• Investment in new technology including yield management and customer relationship marketing• Excellent North American bidding season with $30.0 million new business won with contract expansion into Florida, New Jersey, Louisiana and Arkansas• Successful integration of Alsa with growth in all areas of the business in first full year of operation and the award of new contracts• Sale of Stewart airport lease for $78.5 million agreed, subject to regulatory approvals, with completion anticipated later this year. Commenting on current trading and prospects, Chairman, David Ross said: "I am very pleased to report that we have started the year well. We haveprequalified for the Inter City East Coast franchise, have recently submittedour bid for the East Midlands franchise and will be submitting our New CrossCountry bid shortly. All of our businesses are performing well. We believe we can do more in 2007 andbeyond by offering new services, putting our customers and stakeholders at theforefront of everything we do and bringing an even greater focus to sales andmarketing. Our plans are designed to stimulate repeat business and attract newcustomers to our services thereby maximising the growth of our revenue. Alongside this organic growth we will continue to seek attractive acquisitionsin those core markets in which we operate. We have a strong balance sheet andlook forward to utilising this to maximise our opportunities. We look to thefuture with confidence." For further information, please contact: Richard Bowker, Chief ExecutiveAdam Walker, Finance DirectorNicola Marsden, Director of Group CommunicationsNational Express Group PLC 020 7529 2000 Neil Bennett/Suzanne Bartch/Brian HudspithMaitland 020 7379 5151 • There will be an analyst and investor meeting at 0900 hours on 1 March 2007 at City Presentation Centre, 4 Chiswell Street, Finsbury Square London, EC1Y 4UP.• A webcast of the analyst presentation will be available on our website www.nationalexpressgroup.com at 0900 hours on 1 March 2007.• High resolution images are available for the media to view and download, free of charge, from www.vismedia.co.uk or telephone 020 7613 2555. National Express Group PLC Preliminary Results For the year ended 31 December 2006 Chairman's Statement I am pleased to report that 2006 was another excellent year for the Group with astrong finish to the year delivering results ahead of our expectations. This wasachieved through sustained topline growth driven by our continued focus onoperational excellence, innovation and development of our broad range ofproducts and services. We are particularly pleased with the performance of Alsa, making its first fullyear contribution to the Group. We achieved excellent growth in our longdistance operations and won a number of new contracts. We experienced yetanother best ever bid season in North America. In the UK, Midland Mainline retained its position as the best performingintercity rail operator as well as being awarded the prestigious "Operator ofthe Year" Award for 2006 in the National Rail Awards. c2c was once again namedBritain's best performing train company. Our coach business, Britain's No 1coach operator, goes from strength to strength with strong volume growth andinnovative fare promotions. Our award winning Levante coaches are fullyaccessible to all our customers including those with wheelchairs. We havecommitted to making our entire fleet similarly accessible by 2012. Despiteincreased fuel costs, our bus division produced another strong contribution. The publication of the Stern Review highlighted the pivotal role that transportcan play in tackling climate change. During 2007, National Express Group will belaunching and participating in a number of initiatives aimed at maximising therole bus, coach and rail can play in reducing the impact of climate change. 2006 was also a year of change for the Group. We welcomed Richard Bowker asChief Executive in September. Richard has reviewed our businesses and with theBoard concluded that: • We have a strong and diversified portfolio of businesses. The Group will grow them through acquisitions and new developments, both in the UK and overseas. We are now actively seeking opportunities to do this and have a number of potential opportunities under consideration• We are a leading provider of integrated transport solutions both in the UK and other geographies. Our long term commitment to rail is demonstrated in our submissions for the East Midlands and New Cross Country franchise bids and, later this year, the Inter City East Coast• We will invest in the necessary products and systems to maximise the value of our customer base. We believe through greater customer relationship management and marketing we can develop this relationship further and, by providing a level of service and innovation that customers want, stimulate repeat business• We will maintain the efficiency of our balance sheet to give us greater flexibility and greater capacity for acquisitions whilst ensuring our investment strategy is driven by long term value creation. Above all, National Express Group is in the process of "Making Travel Simpler",by listening to our customers and wider stakeholders and then delivering whatthey want. To do that, we recognise our people are our most important asset. Weask great things of them day after day and the Board would like to thank all ouremployees for their efforts in 2006 and looks forward to their support in thefuture. In early January 2007 a National Express coach accident occurred on the M25/M4.The safety and security of our customers and employees is of paramountimportance to us and we were deeply saddened by the events of that evening. Ourcondolences go to those involved in this incident and particularly those wholost loved ones. This year will be a period of change and growth at National Express. We willcontinue with the skills and values that have made this Group so successful suchas operational excellence but we will build on them. We will apply anentrepreneurial approach to our product and business development and most of allwe will listen to our customers, our stakeholders and our people. Outlook and current trading I am very pleased to report that we have started the year well. We haveprequalified for the Inter City East Coast franchise, have recently submittedour bid for the East Midlands franchise and will be submitting our New CrossCountry bid shortly. All of our businesses are performing well. We believe we can do more in 2007 andbeyond by offering new services, putting our customers and stakeholders at theforefront of everything we do and bringing an even greater focus to sales andmarketing. Our plans are designed to stimulate repeat business and attract newcustomers to our services thereby maximising the growth of our revenue. Alongside this organic growth we will continue to seek attractive acquisitionsin those core markets in which we operate. We have a strong balance sheet andlook forward to utilising this to maximise our opportunities. We look to thefuture with confidence. Results and Dividend Revenue was up 14% to £2.5 billion (2005: £2.2 billion) and normalised Groupoperating profit increased by 19% to £184.8 million (2005: £155.5 million).After interest and the Group's share of losses from associated undertakings,normalised profit before tax was up 15% to £156.1 million (2005: £135.3million). Normalised diluted earnings per share from continuing operations were76.5 pence (2005: 76.3 pence). We are recommending a final dividend of 24.0 pence per ordinary share (2005:22.25 pence), an increase of 7.9%, to be paid on 4 May 2007 to shareholders onthe register at 27 April 2007. Including the interim dividend, the proposedtotal dividend for the year is 34.75 pence (2005: 32.25 pence). Operational Review Alsa Alsa is Spain's leading private operator of coach and bus services operating 64coach and 19 bus concessions within the Spanish market. The division providesnearly 62 million passenger journeys per annum and employs over 3,500 people. Revenue in its first full year was £249.3 million (2005: £18.2 million) andnormalised operating profit was £44.3 million (2005: £2.6 million). We aredelighted with the progress of Alsa in its first full year as part of the Group.Our experienced local management team delivered an excellent performance and thefinancial integration project has been successfully completed. We have continued to improve our fares and product offering. Our long distancecoaching division saw passenger growth of 2%. Drawing on our experience in theUK for the first time, we introduced promotional fares and special offers. Therehas also been a greater focus on sales through the internet which now accountfor around 14% of total sales. We believe we can further reduce our cost ofsales through increased promotion of the internet. During the year, our urban bus division secured new business, retained contractsand moved into new geographic areas in Spain. We were awarded a contract totransfer customers to and from the new terminal at Madrid Airport and we won twonew franchises in Catalonia to operate coach services from the AVE Station ofTarragona. In December 2006, a 15 year contract to operate the urban network in the city ofLeon was renewed and new school bus contracts were won in Levante. Bus stationmanagement contracts were awarded in Zaragoza and Seville. The regionalfranchises in Cantabria, have been renewed until 2012 and 2013 respectively. Wealso acquired a 25% shareholding in Bilbobus, the largest private operator inBilbao which operates a fleet of over 270 buses. Our Moroccan bus operationcontinues to flourish and we are currently shortlisted on a tender for 400 busesin the capital city of Rabat. We were also pleased to be awarded, with partners Madrid Metro and Caja Madridbank, the concession to operate and maintain Madrid's newly constructed lightrail system which is expected to commence in May 2007. Coaches The coach division provides Britain's only scheduled national coach network andserves more than 1,000 destinations, providing approximately 19 millionpassenger journeys each year. The airport services provide premier, highfrequency scheduled coach services to all the UK's major airports. Eurolinesoffers value for money European travel by coach. The division employs over 1,500people. Revenue for the year was £207.3 million (2005: £200.5 million) with a normalisedoperating profit of £23.7 million (2005: £21.5 million). Passenger growth of 5.5% in the second half resulted in overall passenger growth of over 4%. Our key corridors have performed well and on some routes such as Bristol and Stansted to London we have seen double digit passenger growth. Our margins have increased above 11%. Within our core schedule coaching business, the success of yield managed fareswhich ensure greater efficiency and utilisation of the fleet, helped drivegrowth. Such products enable us to provide customers with improved value formoney fares. Funfares, from just £1, are now offered on 32 popular routes.Direct sales accounted for 65% of total sales and internet sales continued toimprove with over a quarter of all bookings now made on-line, of which over 90%of all tickets booked on-line are distributed either as e- or m-tickets or SMSmessages. New self service touch screen fast issue ticket and journey planningkiosks have been installed at Heathrow, Gatwick, Birmingham and Manchester coachstations. In September the division scooped the top prize at the NationalCustomer Service Awards winning "Best Use of Technology in Customer Service". In November, the National Express coach brand was awarded Superbrand status in apoll conducted amongst more than 1,000 business professionals and a select panelof marketing, advertising and branding experts by YouGov. In this prestigioussurvey National Express was placed in the top 300 brands as well as in the top10 UK travel brands. We are using this strong position to develop our servicesto a broader customer base. We introduced easy access coaches onto a number of routes across the networkduring 2006. Forty-four of these new style coaches are now operating on some ofour busiest routes including East Midlands to Stansted Airport, Brighton toLondon and Yorkshire to Heathrow and Gatwick. Our new wheelchair accessibleLevante coach won two awards this year, "Top Dual-Purpose vehicle" and the"Clarkes Trophy" for a coach offering the best access for the disabled. We arecommitted to making the whole network fully accessible by the 2012 Olympicsrepresenting a £100 million investment. During the year we worked closely with BAA at Heathrow to redevelop the new £2.5million Central Bus Station terminal. This includes investment in theinfrastructure and taking on the responsibility of operating the facility onbehalf of BAA. We are working closely with BAA on the provision of coachservices for Terminal Five which opens in 2008. Discussions regarding theredevelopment of Digbeth coach station are ongoing and we expect work tocommence later this year. Trains We operate c2c, Central Trains, Gatwick Express, Midland Mainline, 'one'including the Stansted Express, and Silverlink franchises. We provide 230million passenger journeys per year and employ 10,000 people. Revenue for the year was £1,497.6 million (2005: £1,497.2 million) withnormalised operating profit of £49.1 million (2005: £64.2 million). The reduction in the operating profit primarily related to the transfer of the GreatNorthern and Wessex franchises in April 2006. The division experienced a good year with a 6.1% increase in passenger numbersdriven by investment in services, good operational performance and strongairport growth. In the industry's operational performance tables(1) Gatwick Express topped theregional category and c2c retained its position as Britain's best performingrail franchise. Midland Mainline retained its position as the UK's bestperforming intercity train company as well as Passenger Operator of the Yearaward winner for 2006. We have been working to deliver greater value for money to our customers. Offpeak discounted fares promotions have been introduced using yield managementsystems in Midland Mainline ("MML") and these have delivered growth of 20%. MMLbecame the first train operator to launch a new Print@Home facility, allowingcustomers to purchase and print their train tickets at home. In December the £50million Sheffield Station Gateway Masterplan, a key hub for MML, was completedand in the last quarter of the year, MML moved into the new St PancrasInternational station. In December we made our latest submission on the Brighton Main Line RouteUtilisation Strategy, the outcome of which will affect Gatwick Express. Ourother London franchises performed well in the period. At 'one' a £25 million modernisation and refurbishment of the mainline intercityfleet was completed. In April a new customer service academy was opened inLondon. In addition the Stansted Express has seen an enhanced frequency to every15 minutes and seating capacity to cater for the increased demands of thisgrowing airport. To assist with the increased energy costs that the trainindustry is facing, a project to introduce regenerative braking onto the 'one'fleet of Class 360 trains is underway. We have recently submitted our bid for the East Midlands franchise and withinthe next week will be submitting our bid for the New Cross Country franchise. Webelieve we have submitted winning bids which reflect the aspirations andexpectations of customers as well as the financial considerations of theDepartment for Transport. We have also prequalified for the Inter City EastCoast franchise, one of the most prestigious in the UK and look forward tosubmitting a similarly excellent bid later in the year. Whilst the market forrail franchises remains intense, we are committed to bidding for franchiseswhere we believe long term growth and shareholder returns can be achieved. (1) National Rail Trends, ORR, 19 December 2006 Buses The bus division operates over 2,000 buses, provides approximately 380 millionpassenger journeys and employs 7,000 people in the West Midlands, Dundee andLondon. It also operates the Midland Metro, the light rail service in the WestMidlands. Revenue for the year was £300.8 million (2005: £268.6 million) and normalisedoperating profit was £40.7 million (2005: £41.5 million). We are particularly pleased with this result given the £9 million year-on-year increase in fuel costs. In Dundee we have relaunched a number of radial routes around the city as partof our partnership agreement with Dundee City Council. This included theprovision of new bus shelters, customer information as well as investment in newliveries. In addition we commenced the operation of new contracted routes inAngus. A national concessionary fares scheme was introduced in Dundee in April2006 and we have seen increases in both concessionary and commercial patronage.In the West Midlands we are starting to see the benefits of the launch of thenational concessionary fare scheme. In partnership with Coventry City Council,an improved network was introduced following the findings of a joint networkstudy. We continue to invest in our fleet. 80% of the West Midlands fleet is low-floor,easy-access, the highest percentage of any major fleet outside London. Automaticvehicle technology has been fitted to over 20% of the TWM fleet and real timejourney information is available across half of the network. In addition SMStimetable information is available via SMS codes published at over 1,200 busstops. This service regularly receives over 3,000 hits a month. We believe theprovision of accurate 'real-time' information is key to making our servicesattractive and accessible to customers. Travel London continued to extend its operations with new contract awards andextensions to existing contracts. The redevelopment of the Battersea depot isplanned which will give an additional capacity for 100 buses. In partnershipwith Surrey County Council and BAA, we are providing key services to support theconstruction of Terminal 5. A Group priority for 2007 is to re-energise our relationships with our keystakeholders in our heartland bus operation in the West Midlands to ensure thatpartnership working delivers new quality partnerships in the coming year. Thiswill enable us to deliver marketing, customer care, investment in new buses andinnovation. Looking to the future we are working with Centro and Birmingham CityCouncil to put in place an overarching partnership agreement to deliverimprovements on selected key routes in the region. North America The North American division consists of student transportation. It operates over14,000 buses and provides approximately 200 million passenger journeys perannum. The division employs over 18,300 people. Our North American division goes from strength to strength. Revenue in thedivision for the year was £283.7 million (2005: £241.8 million) and normalised operating profit was £39.1 million (2005: £35.0 million). In local currency, revenue was US$524.0 million (2005: US$440.5 million) and normalised operating profit was US$72.3 million (2005: US$63.7 million). In 2006 we experienced our best bidding season ever. We won $30 million of newbusiness and achieved a retention rate of greater than 95%. We now operate intwenty five US states and two Canadian provinces. We expanded into Florida, NewJersey, Louisiana and Arkansas and completed six tuck-in acquisitions. Our focus during the latter part of the year has been to integrate our NorthAmerican companies under one management team. Further progress continues in 2007with the amalgamation of key office functions such as finance and informationtechnology. The focus on one company and standardisation of processes andsystems now provide us with the foundation to execute our TransformationProject. Our Transformation Project, which commenced in the fourth quarter of 2006, iswell underway and supporting further growth in North America. Our focus is todifferentiate our offering in the market and deliver even higher standards ofcustomer service and satisfaction. The project will bring new standard,streamlined systems and processes to our operations, will enhance significantlythe quality of our information, allow our local management to focus on the keyroles of customer and employee relationship management and also develop ourleadership team. In addition to the change in management focus, investment intechnology is a key enabler to deliver these improvements and to achievebenefits of scale in such a geographical diverse business. Ultimately theproject will enable us to improve our product offering and therefore achievegreater success. As announced on 26 January the Port Authority of New York and New Jersey BoardCommissioners have approved the purchase of the operating lease at StewartInternational Airport, New York State for $78.5 million. Completion of the saleis anticipated in the second half of the year. Finance Review Year at a glance We have achieved another strong set of results, increasing profit before tax by17% to £104.1m (2005: £89.3m), driven by a 29% increase in operating profit to £141.6m (2005: £109.5m). Diluted earnings per share from continuing operations improved 18% to 52.5p (2005: 44.5p). Our financial key performance indicators are based on normalised results, whichwe feel reflect the performance of the business more appropriately. Normalisedresults are defined as the statutory result before the following, asappropriate: profit or loss on the sale of businesses, exceptional profit orloss on the disposal of non-current assets and charges for goodwill impairment,intangible asset amortisation, exceptional items and tax relief thereon asappropriate. Normalised group operating profit was up by 19% to £184.8m (2005: £155.5m), onrevenue of £2,525.5m (2005: £2,216.0m) resulting in an increased operatingmargin of 7.3% (2005: 7.0%). Normalised profit before tax increased by 15% to£156.1m (2005: £135.3m). With an increase in the effective tax rate from 21.8%to 25.1% and the loss of rail profits, normalised diluted earnings per sharefrom continuing operations marginally increased to 76.5p (2005: 76.3p). Net debtdecreased by £125.0m to £438.4m. The proposed full year dividend per share willbe increased by 8% to 34.75p (2005: 32.25p). Divisional review Commentary on the divisional results is included in the Operational Reviewabove. Other financial points to note are included below. Alsa In local currency, Alsa's results are revenue of €365.6m (2005: €26.7m) and anormalised operating profit of €65.0m (2005: €3.8m). This year has seen a great deal of work on the financial integration of Alsa,which is now complete. The integration has involved the development of Alsareporting processes to deliver financial results prepared under IFRS in linewith the Group's month end timetable. In addition, the valuation work onintangibles and key assets has been completed and the 31 December 2005 balancesheet updated in accordance with IFRS 3, 'Business Combinations'. Trains Increased fuel costs have added £5.3m to the cost base this year. We expectelectricity charges to increase in 2007, although efficiency benefits such asregenerative braking would offset this increase. Bid costs remain a significant investment for this Division with a total cost of£9.8m (2005: £6.1m) included in normalised operating profit. As part of the DfT current re-mapping exercise, Central Trains, Silverlink andMidland Mainline will run until November 2007. Buses On 2 March 2006, we received clearance from the Office of Fair Trading regardingour acquisition of the outstanding 67% share holding in Altram LRT Limited("Altram"). Completion occurred on 14 March 2006 and the results of Altram havebeen fully consolidated from this date. A normalised operating loss of £0.4m isincluded in the divisional result. North America In local currency, North America increased normalised operating profit toUS$72.3m (2005: US$63.7m). Revenue has increased by US$83.5m to US$524.0m (2005:$440.5m). Additional legal costs and a new pay award in Canada contributed to alower margin of 13.8% (2005: 14.5%). The historic fuel hedges that were in placehave ended in 2006, which will lead to a US$13m increase in the cost base in2007. Following the Group's announcement of the planned sale of the operating lease onStewart International Airport to the Port Authority of New York in 2007, theassets and related liabilities of the disposal group have been separatelyidentified on the balance sheet, in accordance with IFRS 5, 'Non-current assetsheld for sale and discontinued operations'. The business does not meet thedefinition of a discontinued operation, therefore the results, which do not makea significant contribution, are included within continuing operations. Joint ventures and Associates We hold a 40% investment in Inter-Capital and Regional Rail Limited ("ICRRL")and account for a number of associates and joint ventures within Alsa. The total charge for associates and joint ventures was £29.5m (2005: £8.8m),which comprises our share of the post tax results from associates and jointventures of £3.8m (2005: £8.8m) and a £25.7m exceptional charge for thedesignation of the Group's Eurostar contract with ICRRL as an onerous contract.As noted at the half year we have provided for the Eurostar losses to the end ofthe contract in 2010. Our share of the operating profit for Altram for the period to 14 March 2006 was£0.1m (2005: loss of £0.2m). The results of the joint ventures and associateswithin Alsa were a loss of £0.2m (2005: £nil) and a profit of £0.2m (2005: £nil)respectively. Finance cost Net interest payable increased to £24.9m (2005: £11.4m), principally reflectinga higher level of net debt as a result of the Alsa acquisition in December 2005.This was offset by the weakening of the US dollar which decreased the cost ofservicing our foreign currency denominated financing. After excluding £nil (2005: £5.1m) for discontinued operations, continuingnormalised operating profit before depreciation and other non-cash items("EBITDA") was £264.0m (2005: £212.5m) and continuing EBITDA finance cover was11.6 times (2005: 20.2 times). Goodwill and Intangible assets The goodwill and intangible assets arising on the Alsa acquisition in 2005 wereprovisionally classified as goodwill at 31 December 2005. They have now beenreallocated within the balance sheet. This has resulted in £174.2m reclassifiedas intangible assets representing the contracts acquired with the business. Thebalance of £294.1m, after further fair value adjustments, remains withingoodwill. Amortisation of £27.8m (2005: £4.9m) was charged on the intangible asset thatarises from the Group's right to operate its rail franchises (£1.6m) and oncontracts acquired in Alsa (£20.1m), UK Bus (£1.6m) and North America (£4.5m). The impairment charge for the year on the goodwill arising from the acquisitionof Prism Rail PLC in December 2000 was £19.2m (2005: £33.3m); this goodwill isnow fully amortised. Although IFRS 3, 'Business Combinations' prohibits theamortisation of goodwill, the train franchises acquired with Prism have finitelives, and therefore the goodwill has been impaired over the remaining cashflows. A goodwill impairment charge of £1.0m has been charged on goodwill acquired withthe remaining share capital of Altram. Exceptional items Exceptional items totalled a net income of £4.8m (2005: cost of £7.8m),comprising a credit of £6.7m in relation to defined benefit pension liabilitiesand charges of £1.9m in relation to the integration of Alsa. The pension creditreflects a negative past service cost that arises as a result of the 'A-day'changes to pension legislation which increased the maximum limit on the lump-sumbenefits that can be withdrawn tax free on retirement. We believe that todisclose this credit within normalised profit would present a misleading pictureof the results. The profit on disposal of non-current assets of £16.9m comprises £7.5m of profiton the disposal of a car park in Sheffield and £9.4m of profit on disposal ofour 14% shareholding in Trainline. Both profits relate to the UK Trainsdivision. Discontinued operations An additional provision of £3.2m was booked in relation to the Group's PublicTransit business which was disposed of in 2005. This provision reflects theDirectors' best estimate of the Group's liability regarding an industry wideemployment issue in California, over which the Group provided an indemnity tothe purchaser at the time of the disposal. Taxation The total tax charge of £23.6m (2005: £27.5m) on profit before tax of £104.1m(2005: £89.3m) represents an effective rate of 22.7% (2005: 30.8%). The taxcharge on normalised profit of £156.1m (2005: £135.3m) was £39.2m (2005:£29.5m), which represents an effective rate of 25.1% (2005: 21.8%). Thenormalised effective tax rate has increased due to the higher proportion ofoverseas earnings in the Group. The total tax charge includes a tax credit on exceptional items of £15.6m (2005:£2.0m) which includes the deferred tax impact of the Group's non-deductibleintangible asset amortisation. Cash flow The Group continues to generate strong cash flow with a cash inflow fromoperations of £182.0m (2005: £79.9m), which includes an outflow of £27.7m inrelation to the franchise exits in March. The increase reflects the full yearcontribution from Alsa of £40.1m (2005: outflow of £1.2m) and the benefit ofvarious working capital timing benefits in UK Trains and Central functions. Thiscash flow was used to maintain high levels of investment across the Group,particularly in North America where most of the capital expenditure relates tocontract wins. Operating Cash Flow North UK UK UK American Central Bus Coaches Trains Bus Alsa functions Total £m £m £m £m £m £m £m ------ ------- ------ -------- ------ -------- -----Normalisedoperating profit 40.7 23.7 49.1 39.1 44.3 (12.1) 184.8Depreciation 15.7 5.7 21.6 25.3 12.9 0.5 81.7Amortisation ofleaseholdpropertyprepayment 0.1 - - 0.5 - - 0.6Amortisation offixed assetgrants - - (1.9) - (0.1) - (2.0)Profit ondisposal 0.2 (0.1) (2.2) (0.6) (0.4) - (3.1)Share-basedpayment 0.4 0.1 0.3 0.2 - 1.0 2.0 ------ ------- ------ -------- ------ -------- -----EBITDA 57.1 29.4 66.9 64.5 56.7 (10.6) 264.0Working capitalmovement (15.7) 0.2 34.3 (12.2) 0.3 26.2 33.1 ------ ------- ------ -------- ------ -------- -----Net cash inflowfrom operations 41.4 29.6 101.2 52.3 57.0 15.6 297.1Net capitalexpenditure (16.1) (3.8) (12.3) (38.0) (16.9) (0.3) (87.4) ------ ------- ------ -------- ------ -------- -----Operating cashflow beforeone-offs 25.3 25.8 88.9 14.3 40.1 15.3 209.7 ------ ------- ------ -------- ------ -------- -----Other- Franchise exits (27.7) -----Operating cashflow 182.0 Operating cash flow is intended to be the cash flow equivalent to normalisedoperating profit. To reconcile the operating cash flow to the statutory cashflow the following items are included: "Cash generated from operations" plus"Proceeds from disposal of property, plant and equipment" less "Finance leaseadditions" and "Purchase of property, plant and equipment" as set out in note 10and the cash flow statement. The non-operating items are then excluded whichcomprise £13.0m exceptional property proceeds, £8.4m payment to associates and£2.0m payments in relation to other exceptional items. The working capital outflow in UK Bus comprises payments to the defined benefitpension schemes in excess of the income statement charge and the lossesassociated with the onerous contracts in our London business. The workingcapital movement in UK Trains relates to amounts received in the year inrelation to 2005. In North America, a timing difference has contributed to theworking capital outflow The cash flow benefit in Central Functions arisesthrough the restructure of our insurance arrangements. Net capital expenditure was £87.4m (2005: £110.6m) including £20.7m (2005:£57.0m) of additions purchased under finance leases and £6.8m (2005: £8.1m) ofproceeds from disposals. Reconciliation of net debt 2006 2005 £m £m ------ ------Operating cash flow 182.0 79.9Exceptional cash flow (2.0) (7.7)Exceptional property proceeds 13.0 -Payments to associates (8.4) (1.7)Net interest (20.6) (22.0)Taxation (9.0) (26.7)Share buy back (11.6) (29.3)Financial investments & shares 15.8 8.4Acquisitions and disposals (16.8) (359.1)Dividends (49.7) (41.6) ------- -------Net funds flow 92.7 (399.8)Foreign exchange 32.3 (27.0) ------- -------Funds flow post exchange 125.0 (426.8)Opening effective net debt (563.4) (136.6) ------- -------Closing effective net (438.4) (563.4)debt Net interest paid of £20.6m (comprising the cash outflow of £19.7m adjusted forloan fee amortisation of £0.9m) is in line with last year as the 2005 cash flowincluded the termination of a US$200m interest rate swap during the year. The receipt of tax rebates in respect of prior years resulted in reduced taxpayments this year. Acquisitions and disposals includes the acquisitions in the year of £19.8m,deferred consideration of £3.0m, acquisition of associates and investments of£8.7m and proceeds from the disposal of investments and intangible assets of£14.7m. The 2005 outflow includes the acquisition of Alsa for £367.4m. Dividend An interim dividend of 10.75p per share was paid in October 2006 and a finaldividend of 24.0p per share will be paid in May 2007, bringing the totaldividend for the year to 34.75p. This is a 8% increase in total dividendsdeclared compared to 2005. This dividend is covered 2.2 times (2005: 2.3 times)by normalised profits after tax. Facilities During the first half of the year, we refinanced our two existing bank debtfacilities into one new £800 million five year revolving credit facilitymaturing in June 2011. As at 31 December 2006, the headroom under the facilitywas £247.8m. NATIONAL EXPRESS GROUP PLC GROUP INCOME STATEMENT For the year ended 31 December 2006 Total before Total before Goodwill goodwill goodwill impairment, impairment, Goodwill impairment, intangible intangible impairment, intangible amortisation amortisation intangible amortisation & & amortisation & exceptional exceptional exceptional & exceptional items items Total items items Total 2006 2006 2006 2005 2005 2005 Note £m £m £m £m £m £m ---- ------- -------- ------- -------- -------- -------ContinuingOperationsRevenue 3 2,525.5 - 2,525.5 2,216.0 - 2,216.0 Operatingcosts beforegoodwillimpairment,intangibleamortisation &exceptionalitems (2,340.7) - (2,340.7) (2,060.5) - (2,060.5)Goodwillimpairment 3 - (20.2) (20.2) - (33.3) (33.3)Intangibleamortisation 3 - (27.8) (27.8) - (4.9) (4.9)Exceptionalitems 3 - 4.8 4.8 - (7.8) (7.8) Totaloperatingcosts (2,340.7) (43.2) (2,383.9) (2,060.5) (46.0) (2,106.5) ---- ------- -------- ------- -------- -------- -------Groupoperatingprofit 184.8 (43.2) 141.6 155.5 (46.0) 109.5Profit ondisposal ofnon-currentassets 3 - 16.9 16.9 - - - ---- ------- -------- ------- -------- -------- -------Profit fromoperations 184.8 (26.3) 158.5 155.5 (46.0) 109.5Share of posttax resultsfromassociates andjoint venturesaccounted forusing theequity method (3.8) (25.7) (29.5) (8.8) - (8.8)Finance income 4 12.4 - 12.4 10.8 - 10.8Finance costs 4 (37.3) - (37.3) (22.2) - (22.2) ---- ------- -------- ------- -------- -------- -------Profit beforetax 156.1 (52.0) 104.1 135.3 (46.0) 89.3Tax expense 5 (39.2) 15.6 (23.6) (29.5) 2.0 (27.5) ---- ------- -------- ------- -------- -------- -------Profit aftertax for theyear fromcontinuingoperations 116.9 (36.4) 80.5 105.8 (44.0) 61.8(Loss)/profitfor the yearfromdiscontinuedoperations - (3.2) (3.2) 3.8 (68.3) (64.5) ---- ------- -------- ------- -------- -------- -------Profit/(loss)for the year 116.9 (39.6) 77.3 109.6 (112.3) (2.7) Profit/(loss)attributableto equityshareholders 116.1 (39.6) 76.5 109.5 (112.3) (2.8)Profitattributableto minorityinterests 0.8 - 0.8 0.1 - 0.1 116.9 (39.6) 77.3 109.6 (112.3) (2.7) ---- ------- -------- ------- -------- -------- ------- Earnings/(loss)per share:- basic earnings/(loss) per share 7 50.7p (2.0p)- diluted earnings/(loss) per share 7 50.4p (2.0p) Normalised earningsper share:- basic earnings/(loss) per share 7 77.0p 77.4p- diluted earnings/(loss) per share 7 76.5p 76.3p Earnings pershare fromcontinuingoperations:- basicearnings pershare 7 52.8p 45.2p- dilutedearnings pershare 7 52.5p 44.5p ---- ------- -------- ------- -------- -------- ------- Dividends perordinary share:- interim 6 10.75p 10.00p- final 6 24.00p 22.25p ---- ------- -------- ------- -------- -------- ------- 34.75p 32.25p Dividends of £50.1m were paid during the year (2005: £41.6m). Dividends of£52.5m were proposed for approval during the year (2005: £47.0m). NATIONAL EXPRESS GROUP PLC GROUP BALANCE SHEET At 31 December 2006 Note 2006 2005* £m £m ------ ----------- ------------Non-current assetsIntangible assets 697.6 766.3Property, plant andequipment 501.9 514.4Financial assets -Available for sale 13.5 11.4- Derivativefinancial instruments 0.3 0.6Investments accountedfor using the equitymethod 8.7 4.8Other receivables 4.1 26.2Deferred tax asset 10.6 23.0 ------ ----------- ------------ 1,236.7 1,346.7 ------ ----------- ------------Current assetsInventories 15.5 18.7Trade and otherreceivables 272.3 301.8Financial assets -Derivative financialinstruments 8.1 6.7Current tax assets 26.4 11.3Cash and cashequivalents 143.6 145.5 ------ ----------- ------------ 465.9 484.0 ------ ----------- ------------Disposal group assetsclassified as heldfor sale 20.1 - ------ ----------- ------------Total assets 1,722.7 1,830.7 ------ ----------- ------------Non-current liabilitiesFinancial liabilities - Borrowings (538.4) (495.5)- Derivative financial instruments (8.3) (8.3)Deferred taxliability (84.3) (81.9)Other non-currentliabilities (3.0) (6.1)Defined benefitpension liability 8 (52.8) (88.8)Provisions (61.3) (41.3) ------ ----------- ------------ (748.1) (721.9) ------ ----------- ------------Current liabilitiesTrade and otherpayables (518.4) (532.4)Financial - Borrowings liabilities (43.6) (214.4)- Derivative financial instruments (6.4) (13.4)Current taxliabilities (40.9) (24.0)Provisions (17.4) (12.3) ------ ----------- ------------ (626.7) (796.5) ------ ----------- ------------Liabilities directlyassociated withdisposal group assetsclassified as heldfor sale (2.4) - ------ ----------- ------------Total liabilities (1,377.2) (1,518.4) ------ ----------- ------------Net assets 345.5 312.3 ------ ----------- ------------Shareholders' equityCalled up sharecapital 9 7.7 7.5Share premium account 9 189.8 174.2Capital redemptionreserve 9 0.2 0.2Own shares 9 (16.7) (5.1)Other reserves 9 7.9 24.5Retained earnings 9 153.3 108.1 ------ ----------- ------------Total shareholders'equity 342.2 309.4Minority interest inequity 9 3.3 2.9 ------ ----------- ------------Total equity 9 345.5 312.3 *Adjusted for Alsa fair value movements as required by IFRS 3. NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF CASH FLOWS For the year ended 31 December 2006 Note 2006 2005 £m £m ----- ---------- ----------Cash generated from operations 11 254.5 181.1Tax paid (9.0) (26.7) ----- ---------- ----------Net cash from operating activities 245.5 154.4 ----- ---------- ----------Cash flows from investing activitiesPayments to acquire businesses, net of cash acquired (19.8) (218.8)Deferred consideration for businesses acquired (3.0) (0.3)Purchase of property, plant and equipment (73.5) (61.7)Proceeds from disposal of property, plant and equipment 24.3 8.1Payments to acquire investments (4.6) -Payments to acquire associates (1.5) -Receipts from disposal of investments 13.2 -Receipts from disposal of businesses, net of cashdisposed - 71.3Receipts from disposal of intangible assets 1.5 -Interest received 12.4 10.8Receipts from sale of shares for employee schemes - 3.5 ----- ---------- ----------Net cash used in investing activities (51.0) (187.1) ----- ---------- ----------Cash flows from financing activitiesProceeds from issue of ordinary shares 15.8 4.9Purchase of treasury shares (11.6) (3.5)Share buy back - (25.8)Interest paid (32.1) (32.6)Finance lease principal payments (21.5) (20.0)Repayment of loan notes - (6.7)Net loans (repaid)/advanced (89.9) 148.1Loans receivable repaid 1.0 -Dividends paid (49.7) (41.6) ----- ---------- ----------Net cash (used in)/from financing activities (188.0) 22.8 ----- ---------- ----------Increase/(decrease) in cash and cash equivalents 6.5 (9.9) ----- ---------- ----------Opening cash and cash equivalents 140.0 147.2Increase/(decrease) in cash and cash equivalents 6.5 (9.9)Foreign exchange (2.9) 2.7 ----- ---------- ----------Closing cash and cash equivalents 10 143.6 140.0 NATIONAL EXPRESS GROUP PLC GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2006 Note 2006 2005 £m £m ------ ---------- ----------Income and expense recognised directly in equityExchange differences on retranslation of foreign operations (55.3) 50.3Exchange differences on retranslation of foreigncurrency borrowings 46.8 (45.5)Actuarial gains/(losses) on defined benefit pension plans 20.6 (32.0)(Loss)/gain on cash flow hedges taken to equity (12.1) 14.5 ------ ---------- ---------- - (12.7) ------ ---------- ----------Transfers to the income statementExchange differences on disposal of foreign operations - 1.5On cash flow hedges 1.6 (9.4) ------ ---------- ---------- 1.6 (7.9) ------ ---------- ----------Tax on exchange differences on retranslation offoreign operations (1.3) 7.1Tax on share based payments 2.4 1.4Deferred tax on actuarial (gains)/losses (6.2) 9.0Deferred tax on cash flow hedges 3.7 (1.4) ------ ---------- ----------Tax on items taken directly to or transferred (1.4) 16.1from equity ------ ---------- ---------- Net losses recognised directly in equity 0.2 (4.5)Profit/(loss) for the financial year 76.5 (2.8)Profit attributable to minority interests 0.8 0.1 ------ ---------- ----------Total recognised income/(expense) for the year 9 77.5 (7.2) Income/(expense) attributable to equity shareholders 76.7 (7.3) Income attributable to minority interests 0.8 0.1 77.5 (7.2) ------ ---------- ----------Effects of changes in accounting policy:Equity shareholders:Net loss on hedges on first-time adoption of IAS 39 - (18.4)Tax recognised on hedges on first-time adoption of IAS 39 - 5.6 ------ ---------- ---------- - (12.8) NATIONAL EXPRESS GROUP PLC NOTES TO THE ACCOUNTS For the year ended 31 December 2006 1. Basis of preparation The results have been prepared in accordance with International FinancialReporting Standards ("IFRS") and the International Financial ReportingInterpretations Committee's interpretations as adopted by the European Union,and with those parts of the Companies Act 1985 applicable to companies reportingunder IFRS. These results have been prepared using the accounting policies set out in theGroup's 2005 statutory accounts. Normalised results are defined as the statutory results before the following asappropriate: profit or loss on the sale of businesses, exceptional profit orloss on the sale of non-current assets and charges for goodwill impairment,intangible asset amortisation, exceptional items and tax relief on qualifyingexceptional items. 2. Exchange rates The most significant exchange rates to UK sterling for the Group are as follows: 2006 2006 2005 2005 Closing rate Average rate Closing rate Average rate ----------- ----------- ------------ -----------US dollar 1.96 1.85 1.72 1.82Canadian dollar 2.28 2.09 2.00 2.20Euro 1.48 1.47 1.45 1.47Australian dollar 2.48 2.44 2.35 2.39 The 2005 average rate for Euros reflects the average rate since the Alsaacquisition. If the results for the year to 31 December 2005 had been retranslated at theaverage exchange rates for the year to 31 December 2006, North America wouldhave achieved normalised operating profit of £35.0m on revenue of £241.7m,compared to normalised operating profit of £35.0m on revenue of £241.8m asreported, and Alsa would have remained the same with normalised operating profitof £2.6m on revenue of £18.2m. 3. Segmental analysis Analysis by class and geography of business Operating Operating Revenue result Revenue result 2006 2006 2005 2005 £m £m £m £m ------- -------- ------- -------UK Bus 300.8 40.7 268.6 41.5UK Trains 1,497.6 49.1 1,497.2 64.2UK Coach 207.3 23.7 200.5 21.5Intercompany elimination (13.2) - (10.3) - ------- -------- ------- -------UK operations 1,992.5 113.5 1,956.0 127.2North American Bus 283.7 39.1 241.8 35.0European Coach & Bus (Alsa) 249.3 44.3 18.2 2.6Central functions - (12.1) - (9.3) ------- -------- ------- -------Result from continuing operations 2,525.5 184.8 2,216.0 155.5Goodwill impairment (20.2) (33.3)Intangible asset amortisation (27.8) (4.9)Exceptional items 4.8 (7.8) ------- -------- ------- -------Group operating profit 141.6 109.5Profit on disposal of non-current 16.9 -assets ------- -------- ------- -------Profit from operations 158.5 109.5Share of post tax results from (29.5) (8.8)associatesNet finance costs (24.9) (11.4) ------- -------- ------- -------Profit before tax 104.1 89.3Tax expense (23.6) (27.5) ------- -------- ------- -------Profit for the year from continuingoperations 80.5 61.8Loss from discontinued operations (3.2) (64.5) ------- -------- ------- -------Profit/(loss) for the year 77.3 (2.7) Intercompany sales only occur between the Group's UK Divisions. 3. Segmental analysis (continued) Goodwill impairment, intangible asset amortisation, property and exceptionalitems can be analysed by class and geography of business as follows: Intangible Goodwill asset Exceptional impairment amortisation items Total 2006 2006 2006 2006 £m £m £m £m -------- --------- -------- ---------UK Bus 1.0 1.6 (4.9) (2.3)UK Trains 19.2 1.6 - 20.8UK Coach - - (1.3) (1.3)North American Bus - 4.5 - 4.5European Coach & Bus (Alsa) - 20.1 1.9 22.0Central functions - - (0.5) (0.5) -------- --------- -------- ---------Total 20.2 27.8 (4.8) 43.2 In the year to 31 December 2006 exceptional income arose in UK Bus, UK Coach andCentral Functions for a past service pension credit. Integration costs of £1.9mwere incurred in Alsa. The profit on disposal of non-current assets of £16.9m (2005: £nil) comprises£7.5m (2005: £nil) of profit on the disposal of property and £9.4m (2005: £nil)of profit on disposal of investments. Both profits relate to the UK Trainsdivision. Intangible Goodwill asset Exceptional impairment amortisation items Total 2005 2005 2005 2005 £m £m £m £m -------- --------- -------- ---------UK Bus - 0.9 1.5 2.4UK Trains 33.3 2.4 3.5 39.2North American Bus - 1.6 2.8 4.4 -------- --------- -------- ---------Total continuing operations 33.3 4.9 7.8 46.0Discontinued operations 60.0 - 0.2 60.2 -------- --------- -------- ---------Total 93.3 4.9 8.0 106.2 In the year to 31 December 2005 exceptional items were incurred in UK Bus forbusiness reorganisation costs, in UK Trains for staff redundancy programmes andbusiness reorganisations and in North America in respect of the divisional headoffice relocation. 4. Net finance costs 2006 2005 £m £m -------- --------Bank interest payable (28.2) (16.3)Finance lease interest payable (7.0) (4.7)Other interest payable - (0.3)Unwind of provision discounting (2.1) (0.9) -------- --------Finance costs (37.3) (22.2)Finance income: Bank interest receivable 12.4 10.8 -------- --------Net finance costs (24.9) (11.4) 5. Taxation Analysis of taxation charge in the year 2006 2005 £m £m -------- --------Current taxation:UK corporation tax - continuing operations 10.0 19.5Overseas taxation - continuing operations 8.8 (1.2)Overseas taxation - discontinued operations - (0.2) -------- --------Current income tax charge 18.8 18.1Amounts overprovided in prior years - UK (4.8) (9.5)Amounts overprovided in prior years - Overseas (0.2) - -------- --------Total current income tax 13.8 8.6 Deferred taxation:Origination and reversal of temporary differences -continuing operations 9.8 18.7 -------- --------Total tax charge 23.6 27.3 -------- -------- The tax charge in the income statement is disclosed asfollows:Income tax expense on continuing operations 23.6 27.5Income tax credit on discontinued operations - (0.2) -------- -------- 23.6 27.3 -------- -------- The tax expense on continuing operations is disclosed asfollows:Tax charge on profit before goodwill impairment, intangibleasset amortisation and exceptional items 39.2 29.5Tax credit on intangible asset amortisation and exceptionalitems (15.6) (2.0) -------- -------- 23.6 27.5 6. Dividends paid and proposed Declared and paid during the year 2006 2005 £m £m --------- ---------Ordinary final dividend for 2005 paid of 22.25p per share(2004: 20.65p per share) 33.9 28.1Ordinary interim dividend for 2006 paid of 10.75p pershare (2005: 10.0p per share) 16.2 13.5 --------- --------- 50.1 41.6 --------- --------- Proposed for approval (not recognised as a liability at 31December) --------- ---------Ordinary final dividend for 2006 of 24.00p per share(2005: 22.25p per share) 36.3 33.5 7. Earnings per share 2006 2005 --------- ---------Basic earnings per share - continuing operations 52.8p 45.2pBasic loss per share - discontinued operations (2.1p) (47.2p) --------- ---------Basic earnings/(loss) per share - total 50.7p (2.0p) --------- ---------Normalised basic earnings per share - continuing operations 77.0p 77.4p --------- ---------Diluted earnings per share - continuing operations 52.5p 44.5pDiluted loss per share - discontinued operations (2.1p) (46.5p) --------- ---------Diluted earnings/(loss) per share - total 50.4p (2.0p) --------- ---------Normalised diluted earnings per share - continuing operations 76.5p 76.3p Basic earnings per share is calculated by dividing the earnings attributable toequity shareholders of £76.5m (2005: loss of £2.8m) by the weighted averagenumber of ordinary shares in issue during the year, excluding those held byemployee share ownership trusts and those held as treasury shares which are bothtreated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue during the year is adjusted to include the weighted average number ofordinary shares that would be issued on the conversion of all the dilutivepotential ordinary shares into ordinary shares. 7. Earnings per share (continued) The reconciliation of basic and diluted weighted average number of ordinaryshares is as follows: 2006 2005 --------- ---------Basic weighted average shares 150,847,303 136,591,474Adjustment for dilutive potential ordinary shares 915,923 2,017,744 --------- ---------Diluted weighted average shares 151,763,226 138,609,218 The normalised basic and normalised diluted earnings per share have beencalculated in addition to the basic and diluted earnings per shares required byIAS 33 since, in the opinion of the Directors, they reflect the underlyingperformance of the business's operations more appropriately. The reconciliation of the earnings and earnings per share to their normalisedequivalent is as follows: 2006 2006 2005 2005 Basic Diluted Basic Diluted 2006 EPS EPS 2005 EPS EPS £m p p £m p p ------- ------- ------- ------- ------- -------Profit/(loss) attributableto equity shareholders 76.5 50.7 50.4 (2.8) (2.0) (2.0)Loss from discontinuedoperations 3.2 2.1 2.1 64.5 47.2 46.5 ------- ------- ------- ------- ------- -------Profit from continuingoperations attributable toequity shareholders 79.7 52.8 52.5 61.7 45.2 44.5Goodwill impairment oncontinuing operations 20.2 13.4 13.3 33.3 24.4 24.1Intangible assetamortisation 27.8 18.5 18.3 4.9 3.6 3.5Exceptional charge forassociate onerous contractprovision 25.7 17.0 16.9 - - -Exceptional items (4.8) (3.2) (3.1) 7.8 5.7 5.6Profit on disposal ofnon-current assets (16.9) (11.2) (11.1) - - -Tax relief on goodwill andexceptional items (15.6) (10.3) (10.3) (2.0) (1.5) (1.4) ------- ------- ------- ------- ------- -------Normalised profitattributable to equityshareholders 116.1 77.0 76.5 105.7 77.4 76.3 8. Pensions and other post-employment benefits The UK Bus and UK Coach divisions operate both funded defined benefit schemesand a defined contribution scheme. The majority of employees of the UK Traincompanies are members of the appropriate shared-cost section of the RailwaysPension Scheme ("RPS"), a funded defined benefit scheme. The assets of allschemes are held separately from those of the Group. Contributions to theschemes are determined by independent professionally qualified actuaries. Subsidiaries in North America contribute to a number of defined contributionplans. The Group also provides certain additional unfunded post-employmentbenefits to employees in North America and Spain, which are disclosed in theOther category below. The total pension cost for the year was £23.9m (2005: £27.5m), of which £3.4m(2005: £2.5m) relates to the defined contribution schemes. The defined benefit pension liability included in the balance sheet is asfollows: 2006 2005 £m £m ---------- ----------UK Bus (17.3) (37.8)UK Coach (12.7) (14.9)UK Train (21.1) (34.2)Other (1.7) (1.9) ---------- ----------Total (52.8) (88.8) 9. Share capital and reserves Capital Share Share redemption Own Other Retained Minority Total capital premium reserve shares reserves earnings Total interests equity £m £m £m £m £m £m £m £m £m ------ ------ ------- ------- ------- ------- ------ ------- ------At 1January 2006 7.5 174.2 0.2 (5.1) 24.5 108.1 309.4 2.9 312.3Shares issued 0.2 15.6 - - - - 15.8 - 15.8Sharespurchased - - - (11.6) - - (11.6) - (11.6)Totalrecognised income/ (expense) - - - - (16.6) 93.3 76.7 0.8 77.5Sharebased payments - - - - - 2.0 2.0 - 2.0Dividends - - - - - (50.1) (50.1) - (50.1)Paymentstominority interests - - - - - - - (0.4) (0.4) ------ ------ ------- ------- ------- ------- ------ ------- ------At 31December 2006 7.7 189.8 0.2 (16.7) 7.9 153.3 342.2 3.3 345.5 Own shares comprise treasury shares and shares held in the Employee BenefitTrust. Treasury shares include 1,825,000 (2005: 400,000) ordinary shares in theCompany. During the year, the Group repurchased 1,425,000 (2005: 3,300,000)shares for consideration of £11.6m (2005: £29.3m). 1,425,000 (2005: 400,000)shares have been retained as treasury shares within equity for future issueunder the Group's share schemes or cancellation. No shares were cancelled duringthe year (2005: 2,900,000). Own shares include 663,351 (2005: 849,456) ordinary shares in the Company thathave been purchased by the Trustees of the National Express Employee BenefitTrust (the "Trust"). During the year, the Trust purchased no (2005: 5,329)shares and 186,105 (2005: 899,417) shares were used to satisfy options grantedunder a number of the Company's share schemes. The value of shares within theTrust has been recognised as an investment in treasury shares. The market valueof these shares at 31 December 2006 was £7.5m (2005: £7.3m). The dividendspayable on these shares have been waived. 10. Net debt Net debt at 31 December 2006 comprises cash and cash equivalents of £143.6m(2005: £145.5m), current interest bearing loans and borrowings of £43.6m (2005:£214.4m) and non-current interest bearing loans and borrowings of £538.4m (2005:£495.5m) and other debt receivable of £nil (2005: £1.0m). At 1 At 31 January Cash Acquisitions/ Exchange Other December 2006 flow Disposals Differences movements 2006 £m £m £m £m £m £m ------- ------- -------- ------- ------- --------Cash 53.2 (8.1) - (1.4) - 43.7Overnightdeposits 24.5 (2.9) - - - 21.6Other shortterm deposits 67.8 12.0 - (1.5) - 78.3Bank overdrafts (5.5) 5.5 - - - - ------- ------- -------- ------- ------- --------Cash andcash equivalents 140.0 6.5 - (2.9) - 143.6 ------- ------- -------- ------- ------- --------Other debtreceivable 1.0 (1.0) - - - - ------- ------- -------- ------- ------- --------Borrowings: Loan notes (0.8) - - - - (0.8) Bank loans (594.5) 89.9 (2.6) 30.0 (0.9) (478.1) Finance lease obligations (109.1) 21.5 - 5.2 (20.7) (103.1) ------- ------- -------- ------- ------- -------- (704.4) 111.4 (2.6) 35.2 (21.6) (582.0) ------- ------- -------- ------- ------- --------Net debt (563.4) 116.9 (2.6) 32.3 (21.6) (438.4) Short term deposits included within liquid resources relate to term depositsrepayable within three months. Changes in cash and cash equivalents arising fromacquisitions and disposals in the year are disclosed separately on the face ofthe cash flow statement. Other non cash movements in net debt represent finance lease additions of £20.7m(2005: £57.0m) and £0.9m (2005: £0.2m) amortisation of loan arrangement fees. 11. Cash flow statement The net cash inflows from operating activities include outflows of £2.0m (2005:£7.7m) from continuing operations which related to exceptional costs. The reconciliation of Group operating profit to cash generated from operationsis as follows: Total Operations 2006 2005 £m £m ---------- ----------Net cash inflow from operating activitiesGroup operating profit 141.6 109.5Operating loss of discontinued operations - (56.4)Depreciation of property, plant and equipment 81.7 56.8Amortisation of leasehold property prepayment 0.6 0.8Goodwill impairment 20.2 93.3Intangible asset amortisation 27.8 4.9Amortisation of fixed asset grants (2.0) (0.9)Profit on disposal of fixed assets (in operating profit) (3.1) (2.0)Share-based payment 2.0 3.6Decrease/(increase) in inventories 2.9 (0.7)Decrease in receivables 27.3 22.4Decrease in payables (21.1) (37.2)Decrease in provisions (23.4) (13.0) ---------- ----------Cash generated from operations 254.5 181.1 12. Financial information The financial information set out above, which was approved by the Board on 1March 2007, is derived from the full Group accounts for the year ended 31December 2006 and does not constitute the full accounts within the meaning ofsection 240 of the Companies Act (as amended). The Group accounts on which theauditors have given an unqualified report, which does not contain a statementunder section 237 (2) or (3) of the Companies Act 1995, will be delivered to theRegistrar of Companies in due course. Copies of the Preliminary Results may be obtained from the Company Secretary at75 Davies Street, London, W1K 5HT. Copies are also available viawww.nationalexpressgroup.com. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
NEX.L