Half Yearly Report

9th Dec 2009 07:00



9 December 2009

Stagecoach Group plc - Interim results for the six months ended 31 October 2009

Highlights 

•	Good performance in face of economic downturn and above-inflation increases in fuel costs, pension costs and rail premia payments
•	Revenue growth in bus and rail operations in UK
•	Successful UK Rail cost-reduction programme with £70m annualised savings now identified
•	Decisive management action to respond to reduced revenue in North America
•	Strong Group financial position and well-placed for recovery
•	Interim dividend per share up by 11.1%

Financial summary

Six months ended 31 October	Results excluding intangible asset expenses and exceptional items*		Reported results
	2009	2008	2009	2008
Revenue (£m)	1,081.4	1,045.0	1,081.4	1,045.0
Total operating profit (£m)	93.5	119.8	87.8	113.3
Net exceptional gains (£m)	-	-	1.4	2.0
Net finance charges (£m)	(18.0)	(14.6)	(18.0)	(14.6)
Profit before taxation (£m)	75.5	105.2	71.2	100.7
Earnings per share (pence)	9.0	12.1	8.5	9.7
Interim dividend per share (pence)	2.0	1.8	2.0	1.8

 

*	see definitions in note 23 to the condensed financial statements

Commenting on the results, Chief Executive, Brian Souter, said: 

"We have performed well in the face of the continuing challenging economic environment and increased cost pressures. This performance has been achieved by providing safe, high quality, value-for-money bus and rail travel. 

"We have successfully taken action to control costs across the Group. We have also taken steps within our bus operations to match our transport services to changing levels of demand. 

"The Group is in a strong financial position with a balanced portfolio of businesses that will allow us to trade through the current economic cycle and we are well-positioned to benefit from future economic recovery. We believe our strategy of targeting organic growth in our greener smarter public transport services builds on the firm foundations of our business and will help ensure we continue to deliver long-term value to our shareholders.

"We have made a good start to the second half of our financial year and current trading remains in line with management expectations."

Enquiries to: 

Martin Griffiths, Stagecoach Group +44 (0) 1738 442111

Steven Stewart, Stagecoach Group +44 (0) 1738 442111 or +44 (0) 7764 774680

John Kiely, Smithfield Consultants +44 (0) 20 7360 4900

Chairman's statement 

I am pleased to report that Stagecoach Group has achieved a good set of results in a tough economic environment. Across our business, we remain focused on providing our customers with safe, high quality, value-for-money bus and rail travel.

Our strong management action to proactively control costs and match our transport services to changing levels of demand has delivered a more efficient operation. At the same time, we have benefited from effective partnership working with Government and other key stakeholders and we have made significant payments to the Department for Transport ("DfT") through our successful rail franchises.

We believe our long-term strategy of targeting organic growth in our greener smarter public transport services, combined with the strong financial position of the Group and the flexibility within our portfolio, will ensure that our business has a firm foundation for the future and is well positioned to benefit when the economy recovers.

The Group has achieved further revenue growth despite the challenging macro-economic environment affecting the transport sector. Revenue for the six months ended 31 October 2009 was £1,081.4m (2008: £1,045.0m). Total operating profit (before intangible asset expenses and exceptional items) was £93.5m (2008: £119.8m). The reduction in operating profit includes the effects of rail franchise premia payments, and increased fuel and pension costs. Earnings per share before intangible asset expenses and exceptional items were 9.0p (2008: 12.1p).

Our flexible UK bus operations, which have achieved sector-leading growth for several years, have proved resilient in the face of the economic downturn. Our value pricing strategy, combined with continued fleet investment and innovative marketing campaigns, has delivered further revenue growth. We have also taken targeted steps to match supply to demand, while ensuring we maintain an attractive network of bus services for our passengers. 

In the UK Rail division, we have made improvements to an already high standard of performance and increased passenger satisfaction with our services. While the level of revenue growth reflects trends in GDP and unemployment, we have benefited from our action to reduce controllable costs and from focused pricing promotions at our East Midlands Trains and South Western Trains franchises. In addition, we have continued to roll out the package of passenger improvements promised under our franchise agreements and delivered on our commitments to Government.

Trading in our North American operations, the smallest of the Group's divisions, has been challenging. High levels of unemployment have reduced the demand for travel and we have taken decisive action to control costs and reduce mileage.

Our joint venture, Virgin Rail Group ("VRG"), is now benefiting from the 30% increase in train services on the West Coast franchise following the mainline infrastructure upgrade by Network Rail and from recent improvements in the underlying operational performance of Network Rail on the line, together enabling VRG to achieve a significant increase in passenger volumes.

The Directors have declared an interim dividend of 2.0p per share (2008: 1.8p), consistent with the Group's policy of setting the interim dividend per share at approximately one-third of the previous year's total dividend. The interim dividend is payable on 3 March 2010 to shareholders on the register at 5 February 2010.

The Group has made a good start to the second half of the financial year and current trading remains in line with our expectations.

I am pleased that from 1 January 2010 Helen Mahy will join the Board of Stagecoach Group plc as a non-executive director. Helen brings a wide range of experience from across a range of business sectors and she will complement the Board's range of skills and experience.

I would like to take this opportunity to pay tribute to the commitment of our employees at all levels of our business. They have remained focused on delivering excellent performance and customer service at a time of considerable challenges. Putting passengers first is at the heart of our vision for public transport and our people are crucial in growing our business. We have a strong set of businesses and we are well placed to benefit from future economic recovery and to deliver increased value to our shareholders.

 

Robert Speirs

Chairman 9 December 2009

Interim management report

The Directors are pleased to present their report on the Group for the six months ended 31 October 2009.

Cautionary statement

The interim management report and the preceding Chairman's statement have been prepared for the shareholders of the Company, as a body, and no other persons. Their purpose is to assist shareholders of the Company to assess the strategies adopted by the Company and the potential for those strategies to succeed and for no other purpose. This interim management report and the preceding Chairman's statement contain forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables that could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation. Nothing in the Chairman's statement or in the interim management report should be considered or construed as a profit forecast for the Group. Except as required by law, the Group has no obligation to update forward-looking statements or to correct any inaccuracies therein.

Description of the business

Stagecoach Group is a leading international public transport group, with extensive operations in the UK, United States and Canada. The Group employs around 30,000 people, and operates bus, coach, train, and tram services. The Group has three main divisions - UK Bus, UK Rail and North America.

Stagecoach Group plc is a public limited company that is incorporated, domiciled and has its registered office in Scotland. Its ordinary shares are publicly traded and it is not under the control of any single shareholder. The Company has its primary listing on the London Stock Exchange.

Throughout this document, Stagecoach Group plc is referred to as "the Company" and the group headed by it is referred to as "Stagecoach" or "the Group".

  

Overview of financial results

The Group has achieved continued strong financial and operational performance in the six months ended 31 October 2009. 

Revenue by division is summarised below:

REVENUE	6 months to 31 October 2009	6 months to  31 October 2008	Currency	6 months to 31 October 2009	6 months to  31 October 2008	Growth
	£m	£m		Local currency (m)		%
Continuing Group operations
UK Bus	433.0	410.4	£	433.0	410.4	5.5%
North America - excluding megabus.com (see below)	124.2	142.3	US$	201.3	267.7	(24.8)%
North America - megabus.com	12.4	8.2	US$	20.1	15.4	30.5%
UK Rail	512.9	486.4	£	512.9	486.4	5.4%
Intra-Group revenue	(1.1)	(2.3)	£	(1.1)	(2.3)	n/a
Group revenue	1,081.4	1,045.0

Operating profit by division is summarised below: 

OPERATING PROFIT	6 months to 31 October 2009		6 months to 31 October 2008		Currency	6 months to 31 October 2009	6 months to 31 October 2008
	£m	% margin	£m	% margin		Local currency (m)
Continuing Group operations
UK Bus	58.9	13.6%	60.9	14.8%	£	58.9	60.9
North America - excluding megabus.com (see below)	9.0	7.2%	20.2	14.2%	US$	14.6	38.0
North America - megabus.com	(0.7)	(5.6)%	(0.4)	(4.9)%	US$	(1.1)	(0.8)
UK Rail	14.9	2.9%	31.7	6.5%	£	14.9	31.7
Group overheads	(5.8)		(7.2)
Restructuring costs	(0.4)		(1.0)
	75.9		104.2
Joint ventures - share of profit after tax
Virgin Rail Group	9.3		15.1
Citylink	0.9		0.7
New York Splash Tours LLC	(0.5)		(0.2)
Twin America LLC	7.9		Nil
Total operating profit before intangible asset expenses	93.5		119.8
Intangible asset expenses	(5.7)		(6.5)
Total operating profit: Group operating profit and share of joint ventures' profit after tax	87.8		113.3

The structure of the Group's North America interests have changed and this has affected the year-on-year comparison of the results.

On 18 March 2009, the Group entered into an agreement with Citysights NY to create a joint venture, Twin America LLC, to operate the sightseeing services of the Group's Gray Line New York business and the business of Citysights NY. In addition, during the six months ended 31 October 2009, the Group continued to expand its megabus.com operations whilst reducing operating mileage in those parts of the North American business where revenue has weakened. The overall financial performance of the North American business in the six months ended 31 October 2009 is best understood by considering all of these elements together, including the joint venture, and is analysed in the table below:

  

	6 months to 31 October 2009			6 months to 31 October 2008
	Revenue	Operating profit	Operating margin	Revenue	Operating profit	Operating margin
	US$m	US$m	%	US$m	US$m	%
Wholly-owned, excluding megabus.com	201.3	14.6	7.3%	267.7	38.0	14.2%
Share of Twin America	41.0	12.8	31.2%	Nil	Nil	n/a
Total excl. megabus.com	242.3	27.4	11.3%	267.7	38.0	14.2%
megabus.com	20.1	(1.1)	(5.5)%	15.4	(0.8)	(5.2)%
Total	262.4	26.3	10.0%	283.1	37.2	13.1%

UK Bus 

Our UK Bus Division connects communities in more than 100 towns and cities across the UK on networks stretching from the Highlands and Islands of Scotland to south-west England.

Revenue from our continuing UK Bus operations for the six months ended 31 October 2009 was up 5.5% to £433.0m, compared to £410.4m in the prior year. Like-for-like revenue growth was 4.4%. Operating profit(*) was £58.9m (2008: £60.9m). Operating margin was 13.6%, compared to 14.8% in 2008. The reduction in operating profit and margin reflects the increased operating costs, including a £8.6m increase in fuel costs and a £4.0m increase in pension costs.

We have delivered further passenger revenue growth at our UK Bus Division, which has achieved consistent sector-leading results over several years. Despite tough economic conditions and significant increases in operating costs, our business has remained resilient. Passenger volumes, incorporating full-fare and concessionary travel, were 0.7% lower than the equivalent prior year period.

We are investing strongly in our people and the quality and sustainability of our on-the-road product, as well as making our services easier to use. The first vehicles of an order for more than 430 buses and coaches have been introduced in our bus networks. This order has included investment of more than £9m in an entire new fleet of greener vehicles for our Oxford Tube network linking London and Oxford, the most frequent express coach service in Europe.

Strong partnerships with our local stakeholders, including local authorities, are continuing to support our drive for organic growth. We are particularly focused on measures that will deliver bus priority to improve reliability and journey times for passengers, as well as pressing for investment in bus park and ride. 

We are also working with our key public transport partners on a major campaign to encourage people to make less use of cars and switch to sustainable bus and coach travel instead. The Greener Journeys campaign is targeting one billion fewer car journeys over the next three years. The target could be achieved by switching one in 25 journeys by car to bus and coach, delivering a huge reduction in carbon emissions.

 

Our commitment to quality has been reflected in further awards for our UK Bus operation, including Stagecoach Bluebird being named UK Public Transport Operator of the Year at the 2009 National Transport Awards.

During the period, the Competition Commission cleared our acquisitions of Eastbourne Buses and Cavendish Motor Services. We have brought significant new investment to bus services in the area, ensuring local people have access to a sustainable, comprehensive high quality and affordable bus network, and we look forward to building on these improvements. The Commission, however, has ruled that the Preston Bus business that we acquired during the year ended 30 April 2009, should be divested. We fundamentally disagree with the decision, which in our view, is not in the best interests of bus passengers or employees, and we are appealing the decision.

 

North America

Stagecoach's Coach USA and Coach Canada businesses provide transport services in North America. Our businesses include the budget coach brand megabus.com, commuter/transit services, inter-city services, tour, charter, sightseeing and school bus operations. 

A summary of the results for all of the Group's interests in North America is provided in a table above under the heading "Overview of financial results".

As expected, high levels of unemployment have impacted our bus and coach operations in North America, particularly discretionary leisure travel. However, we have a flexible business model and have taken action to reduce costs and miles operated. Although revenue excluding megabus.com for the six months was US$25.4m below the equivalent prior year period, operating profit was only US$10.6m less, reflecting the cost reductions implemented in response to the reduced revenue.

Overall like-for-like revenue, including megabus.com, was down by 6.5%.

Converted to sterling, revenue excluding megabus.com for the six months to 31 October 2009 was £124.2m (2008: £142.3m). Operating profit excluding megabus.com for the six months was £9.0m (2008: £20.2m).

North American megabus.com operations reported revenue of US$20.1m (2008: US$15.4m) for the six months and an operating loss of US$1.1m (2008: US$0.8m). This equates to sterling revenue of £12.4m (2008: £8.2m) and an operating loss of £0.7m (2008: £0.4m).

We have been able to capitalise on the demand for low-cost travel with the expansion of our megabus.com budget inter-city services in North America. Our market research has found that 92% of megabus.com customers travel with us over other forms of transport to save money. We have seen a rapid increase in ticket sales and added more than one million customers in less than six months against a background of decline in the wider economy. This follows our investment in a new fleet of hi-spec double decker coaches as part of our growth strategy for the product.

In August 2009, we added a new megabus.com network in Canada, using a C$16m investment in a fleet of new vehicles to link Toronto, Kingston and Montreal. We anticipate that revenues from megabus.com in North America could exceed US$40m in the year to 30 April 2010.

UK Rail 

Stagecoach Group has major rail operations in the UK, operating both the South Western and East Midlands rail franchises. South Western incorporates the South West Trains and Island Line networks. South West Trains runs around 1,700 train services a day in south-west England out of London Waterloo railway station, while Island Line operates on the Isle of Wight. The South Western franchise is expected to run until February 2017. The East Midlands Trains franchise comprises main line train services running to London St Pancras, regional rail services in the East Midlands area and inter-regional services between Norwich and Liverpool. The franchise will run until 31 March 2015 assuming the Group meets agreed performance targets. Stagecoach is also Britain's biggest light rail operator. The Group runs Supertram, a 29km light rail network incorporating three routes in the city of Sheffield, on a concession running until 2024. We also operate and maintain the Manchester Metrolink tram network under a 10-year contract with Greater Manchester Passenger Transport Executive ("GMPTE"), which commenced in July 2007.

 

Revenue from our UK Rail subsidiaries for the six months to 31 October 2009 was up by 5.4% to £512.9m (2008: £486.4m). Excluding the tram businesses where revenue was boosted by income from special projects, revenue was up 1.9%. Operating profit was £14.9m (2008: £31.7m), giving an operating margin of 2.9% (2008: 6.5%). This reflects the challenging macro-economic environment, which has resulted in lower rates of revenue growth than in recent years, as well as the significant step up in premia payments to the DfT under our rail franchise contracts.

We are benefiting from the cost reduction programme at our UK Rail division, where around £70m of recurring annual costs savings have been identified while operational performance has been maintained at its high levels. Our management teams at our rail franchises are continuing to target efficiencies, while maintaining a good service to our customers.

Across our rail portfolio, we have further improved passenger service, delivering above industry average levels of punctuality and increasing customer satisfaction at both our South Western and East Midlands Trains rail franchises. Eight out of ten customers are satisfied with our service and more than nine out of ten of our services are on time(*).

Our marketing strategy has focused on responding to the demand for budget travel and this summer we offered special bargain tickets to help families benefit from "staycations" in the UK as well as generate day-trips to London. Passengers were able to travel anywhere on our South West Trains network for £10 day return or £5 for children. Our successful Red Dot Days at East Midlands Trains offered similar excellent value, encouraging many people to try rail travel for the first time. We have also launched a Best Fare Finder on the East Midlands Trains website to help our customers get our lowest prices.

megatrain.com, our budget rail product, has significantly expanded the number of low-cost seats available on the South West Trains, East Midlands Trains and Virgin Trains networks. Passenger bookings have doubled in the last 12 months and at current levels annual passenger volumes are set to hit more than 500,000.

We are also continuing to deliver on our franchise commitments to invest in our trains and stations. Our £9m refurbishment programme bringing improvements to our High Speed Trains at East Midlands Trains is well underway, delivering improved levels of comfort and other benefits such as at seat power points in First Class. We have also completed the first stage of a £22m upgrade of Derby Etches Park depot, which will deliver improved maintenance of our fleet.

Further progress has been made with our programme to assist revenue protection and improve passenger flow through gating programmes at East Midlands Trains and we are pleased with the early results from these initiatives. We have completed the roll out of our gating schemes at South West Trains as well as a major project to significantly increase the number of ticket vending machines across our network to make buying a ticket even easier.

We are progressing our plans to introduce smartcard technology on the South West Trains network and have completed the first passenger pilots. During the period, we reached agreement with the DfT on a commercial settlement in favour of South West Trains in respect of certain elements of the smartcard project which had been subject to delay. In addition, further to the DfT's High Level Output Specification, we submitted a new package of proposals to the DfT in summer 2009 regarding additional refurbished trains and the scope to make use of the Waterloo International rail terminal.

As previously reported, South Western Trains remains in dispute with the DfT over the determination of franchise payments, including revenue support payments. The disputes will be subject to the Railway Industry Dispute Resolution process and we expect a decision by the end of our current financial year in April 2010.

Stagecoach is Britain's biggest tram operator and we are continuing to work with our Passenger Transport Executive partners to improve the quality of public transport on the Sheffield Supertram and Manchester Metrolink systems. Passengers have responded well to our refreshed tram fleet in Sheffield, while in Manchester we have completed a key track renewal project in the past few months in the city centre.

The Group has a good record of high operational performance, successful project management and major investment to improve services for passengers across our existing rail networks, and we will continue to target specific value-adding franchise opportunities as they emerge.

 

 

Virgin Rail Group

Stagecoach Group has a 49% shareholding in Virgin Rail Group ("VRG"), which operates the West Coast Trains rail franchise. The other shareholder in VRG is the Virgin Group of Companies. The current franchise runs through until 2012. 

Our share of VRG's profit after tax for the six-month period amounted to £9.3m (2008: £15.1m). Our share of operating profit was £12.8m (2008: £19.4m), our share of finance income was £0.1m (2008: £1.6m) and our share of taxation charges was £3.6m (2008: £5.9m). As we expected, profit has reduced, reflecting a step-up in costs after increasing capacity by 30% and lower yield-per-journey as a result of weak economic conditions.

VRG has achieved significant passenger growth on its West Coast services following the introduction of the new high-frequency timetable 12 months ago, which added almost one-third more services. Passenger volumes are up more than 20% during the period by far the highest growth amongst long distance operators. There are also signs of business traffic returning and we believe there is potential for further growth with the delivery of a consistently reliable railway infrastructure by Network Rail. 

VRG has increased the number of passengers from 13.6 million to 22.5 million a year; replaced the entire train fleet and now runs over 50% more trains on weekdays than it did 12 years ago.

A new improved website has been launched, offering a range of useful features, including an easier booking process, best fare finder, and handy time-saving tools. VRG has also expanded the number of spaces at key car parks and became one of the first flagship Bike 'n' Ride train companies by helping provide an additional 540 cycle storage spaces at stations. 

Scottish Citylink Coaches Limited

In Scotland, Stagecoach has a joint venture (Scottish Citylink Coaches Limited) with international transport group, ComfortDelGro, to operate megabus.com and Scottish Citylink coach services. Stagecoach owns 35% of the share capital of Scottish Citylink Coaches Limited and ComfortDelGro owns the remaining 65%. The joint venture is the leading provider of express coach services in Scotland. 

Our share of Citylink's profit after tax for the six months to 31 October 2009 was £0.9m (2008: £0.7m). The business is seasonally strongest over the summer period. Citylink has achieved further passenger growth on its inter-city coach services, with particular emphasis on marketing the benefits of coach travel to music festivals, concerts and sporting events. The joint venture has teamed up with the Scottish Football Association to introduce a series of new direct services to Hampden Park for Scotland fans attending the National Stadium on international match-days. Citylink offers a comprehensive network of extensive connections, faster services and low fares under the joint venture and has also added new journeys under the Scottish Government's national concessionary travel scheme.

Twin America LLC

On 18 March 2009, the Group entered into an agreement with Citysights NY to create a joint venture, Twin America LLC, to operate the sightseeing services of the Group's Gray Line New York business and the business of Citysights NY. The Group holds 50% of the voting rights and 60% of the economic rights in the joint venture with Citysights NY holding the remaining voting rights and economic rights. Twin America commenced trading on 31 March 2009. Our share of Twin America's profit for the six-month period ended 31 October 2009 was US$12.8m (2008: US$Nil). The tax treatment of our share of profit is such that the joint venture's own profit is not taxed but that the tax effect of our share of the profit is included within "taxation" in the consolidated income statement.

Depreciation and intangible asset expenses

Earnings from continuing operations before interest, taxation, depreciation, intangible asset expenses and exceptional items (pre-exceptional EBITDA) amounted to £147.9m (2008: £156.2m). Depreciation increased from £32.0m to £38.2m. The income statement charge for intangible assets decreased from £6.5m to £5.7m, of which £2.5m (2008: £2.5m) related to joint ventures.

  

Pre-exceptional EBITDA can be reconciled to the condensed financial statements as follows:

	6 months to 31 October 2009 £m	6 months to  31 October 2008 £m
Total operating profit before intangible asset expenses and exceptional items (Consolidated income statement)	93.5	119.8
Depreciation (note 12)	38.2	32.0
Impairment charge (note 12)	12.4	Nil
Add back joint venture finance income & tax (note 3(C))	3.8	4.4
Pre-exceptional EBITDA	147.9	156.2

Exceptional items

A pre-tax gain of £2.5m was recognised in the six months ended 31 October 2009 in relation to the release of a liability related to previous disposals of businesses.

A pre-tax gain of £1.4m was recognised in the six months ended 31 October 2009 in relation to the receipt of previously unrecognised contingent consideration related to disposals of businesses.

A net gain of £4.3m was recognised in relation to the disposal of properties across the Group for the six months ended 31 October 2009.

A pre-tax loss of £4.1m was recognised in the six months ended 31 October 2009 in relation to the planned exit from certain operations in North America.

A pre-tax loss of £2.7m was recognised in the six months ended 31 October 2009 being expenses incurred in relation to the proposal to acquire certain National Express Group plc businesses from the CVC-Cosmen consortium, and in relation to the proposal to merge with National Express Group plc.

Net finance costs

Net finance costs from continuing Group operations increased from £14.6m to £18.0m. Including the net finance income from joint ventures, net finance costs increased from £13.0m to £17.9m principally because of lower rates of interest receivable on cash deposits, the effects of foreign exchange management explained in note 6 to the condensed financial statements and the effect of foreign exchange rate movements on the translated amount of US dollar interest costs. The ratio of pre-exceptional EBITDA to net finance charges (including joint venture net finance income) was 8.3 times for the six months ended 31 October 2009 (2008: 12.0 times), reflecting the reduced EBITDA but increased finance costs.

  

Taxation

The tax charge for continuing operations can be analysed as follows:

	6 months to 31 October 2009			6 months to 31 October 2008
	Pre-tax profit	Tax	Rate	Pre-tax profit	Tax	Rate
	£m	£m	%	£m	£m	%
Excluding intangible asset expenses and exceptional items	79.4	(15.0)	18.9%	111.2	(24.9)	22.4%
Intangible asset expenses	(5.7)	0.9	15.8%	(6.5)	1.1	16.9%
	73.7	(14.1)	19.1%	104.7	(23.8)	22.7%
Exceptional items	(2.5)	(0.4)		2.0	(13.5)
	71.2	(14.5)	20.4%	106.7	(37.3)	35.0%
Reclassify joint venture taxation for reporting purposes	(3.9)	3.9		(6.0)	6.0
Reported in income statement	67.3	(10.6)	15.8%	100.7	(31.3)	31.1%

The overall effective tax rate excluding exceptional items was 19.1% (2008: 22.7%).

Earnings per share

Earnings per share before intangible asset expenses and exceptional items for the six months ended 31 October 2009 decreased 25.6% to 9.0p, from 12.1p in the prior year. Basic earnings per share decreased from 9.7p to 8.5p.

Fuel costs

The Group's operations as at 31 October 2009 consume approximately 325m litres of diesel fuel per annum. As a result, the Group's profit is exposed to movements in the underlying price of fuel.

The proportion of the Group's projected fuel usage that is now hedged using fuel swaps is as follows:

Year ending 30 April	2010	2011	2012
UK Bus	96%	95%	10%
North America	89%	84%	11%
UK Rail	77%	76%	Nil

The Group has no fuel hedges in place for periods beyond 30 April 2012.

The Group's fuel costs include the costs of delivery and duty as well as the costs of the underlying product. Accordingly, not all of the cost varies with movements in oil prices.

Net debt 

Net debt (as analysed in note 18 to the condensed financial statements) increased from £340.1m at 30 April 2009 to £343.1m at 31 October 2009.

 

The Group's net debt at 31 October 2009 is further analysed below.

 

	Fixed rate £m	Floating rate £m	Total £m
Unrestricted cash	Nil	64.8	64.8
Cash held within train operating companies	Nil	102.4	102.4
Restricted cash	Nil	64.4	64.4
Total cash and cash equivalents	Nil	231.6	231.6
Sterling bank borrowings under bi-lateral facilities*	(120.0)	Nil	(120.0)
US dollar bond (matured November 2009)	(177.9)	Nil	(177.9)
Sterling hire purchase and finance leases*	(12.3)	(178.7)	(191.0)
US dollar hire purchase and finance leases	(50.8)	Nil	(50.8)
Canadian dollar hire purchase and finance leases	(3.6)	Nil	(3.6)
Loan notes*	(27.7)	Nil	(27.7)
Preference shares	Nil	(3.7)	(3.7)
Net debt	(392.3)	49.2	(343.1)

 

* The split between fixed rate and floating rate sterling bank borrowings, sterling hire purchase and finance leases, and loan notes is after taking account of the effect of interest rate derivatives that synthetically convert £150.0m of floating rate debt to fixed rate debt.

Net cash from operating activities before tax for the six months ended 31 October 2009 was £67.4m (2008: £107.8m) and can be further analysed as follows:

	6 months to 31 October 2009 £m	6 months to  31 October 2008 £m
EBITDA of Group companies before exceptional items	126.5	136.2
Loss on disposal of plant and equipment	0.8	0.6
Equity-settled share based payment expense	2.2	1.2
Working capital movements	(53.0)	(19.6)
Net interest paid	(17.5)	(14.5)
Dividends from joint ventures	16.3	19.4
Net cash from operating activities before excess pension contributions	75.3	123.3
Pension contributions in excess of pension costs	(7.9)	(15.5)
Net cash flows from operating activities before taxation	67.4	107.8

Net cash from operating activities before tax was £67.4m (2008: £107.8m) and after tax was £78.0m (2008: £107.1m). The £53.0m (2008: £19.6m) working capital movement is principally due to working capital timing in the UK Rail Division including the reversal in six months ended 31 October 2009 of favourable movements that arose in the six months ended 30 April 2009. Net cash outflows from investing activities were £34.3m (2008: £50.6m) and net cash used in financing activities was £86.9m (2008: £83.0m).

The net impact of purchases of property, plant and equipment for the six months on net debt was £87.4m (2008: £83.2m). This primarily related to expenditure on passenger service vehicles, and comprised cash outflows of £52.3m (2008: £47.3m) and new hire purchase and finance lease debt of £35.1m (2008: £35.9m). In addition, £15.8m (2008: £4.1m) cash was received from disposals of property, plant and equipment.

  

Capital expenditure

Additions to property, plant and equipment for the six-month period were:

	6 months to 31 October 2009 £m	6 months to  31 October 2008 £m
UK Bus	46.3	54.0
North America	13.8	13.6
UK Rail	21.0	19.5
Other	0.1	Nil
	81.2	87.1

The differences between the amounts shown above and the impact of capital expenditure on net debt arose from movements in fixed asset deposits and creditors. 

Acquisitions

The Group has made no material acquisitions in the six months ended 31 October 2009.

We were disappointed at not being able to capitalise on the significant opportunities to add value through a transaction involving part or all of National Express Group plc. Our existing portfolio of businesses does, however, have good prospects and any further acquisition prospect will continue to be closely scrutinised to ensure there is a compelling opportunity to create incremental shareholder value.

Liquidity

As a result of its strong financial position, the Group has not been subject to any significant problems arising from the difficulties in the banking and credit markets. Our strong financial position is evidenced by:

• The ratio of net debt at 31 October 2009 to pre-exceptional EBITDA for the twelve months ended 31 October 2009 was 1.1 times (2008: 1.2 times).

• Pre-exceptional EBITDA for the six months ended 31 October 2009 was 8.3 times (2008: 12.0 times) net finance charges (including joint venture net finance income).

• Undrawn, committed bank facilities totalled £525.3m at 31 October 2009 (30 April 2009: £508.0m) including £29.9m (30 April 2009: £17.0m) that is only available for non-cash utilisation. In addition, the Group continues to secure new asset finance.

• The three main credit rating agencies continue to assign investment grade credit ratings to the Group.

• The Group is cash generative and has the flexibility to vary capital expenditure and other cash outflows where appropriate.

The Group's US$293.1m bonds matured on 16 November 2009 and these were financed from the Group's existing bank facilities. The Group's main bank facilities are committed through to 2012, with some non-cash facilities expiring in 2010 that we expect to extend, renew or replace.

The level of support we received from lenders prepared to support a transaction involving National Express Group plc reinforced our confidence in the availability of liquidity to support the Group, albeit the terms of bank finance are significantly more onerous and the lending margins substantially higher than prior to the credit crisis.

Following the maturity of the US$ bonds in November 2009, we continue to evaluate our debt and capital structure ahead of the key facility maturities in 2012, and we will consider all options including debt capital markets.

Shares in issue

The weighted average number of ordinary shares used to calculate basic earnings per share for the six months ended 31 October 2009 was 715.5m (31 October 2008: 714.2m). The number of ordinary shares ranking for dividend at 31 October 2009 was 715.9m (30 April 2009: 715.0m), with a further 3.9m (30 April 2009: 4.5m) ordinary shares held by employee trusts and not ranking for dividend.

Net liabilities

Net liabilities at 31 October 2009 were £69.0m (30 April 2009: £9.6m) with the increase in net liabilities primarily reflecting actuarial losses on defined benefit pension schemes of £125.0m after tax partly offset by after-tax movements on cash flow hedges of £33.6m and the strong results for the six months.

Retirement benefit obligations

The reported net liabilities of £69.0m (30 April 2009: £9.6m) that are shown on the consolidated balance sheet are after taking account of post-tax net retirement benefit liabilities of £177.2m (30 April 2009: £57.7m).

Despite the strong investment performance since April 2009, the rise in pension assets has been more than offset by the effect on the schemes' liabilities of a decrease in the discount rate from 6.90% to 5.75% during the period. The Group recognised pre-tax actuarial losses of £173.5m (2008: £60.6m) in the six months ended 31 October 2009.

Seasonality

The Group's North American bus operations and the Twin America joint venture typically earn higher operating profit for the first half of the financial year (i.e. the six months ended 31 October) than for the second half. This is because leisure customers generate an element of the revenue with demand being at its strongest in the summer months.

Principal risks and uncertainties

Like most businesses, there are a range of risks and uncertainties facing the Group. A summary of these risks is described below. These matters are not intended to be an exhaustive list of all possible risks and uncertainties. In assessing the Group's likely financial performance for the second half of the current financial year, these risks and uncertainties should be considered in addition to the matters referred to above under "seasonality" and the comments made later under the heading "current trading and outlook".

Generally, the Group is subject to risk factors both internal and external to its businesses. External risks include global political and economic conditions, competitive developments, supply interruption, regulatory changes, foreign exchange, materials and consumables (including fuel) prices, pensions funding, environmental risks, industrial action, litigation and the risk of terrorism. Internal risks include risks related to capital expenditure, acquisitions, regulatory compliance and failure of internal controls. 

The focus below is on those specific risks and uncertainties that the Directors believe could have the most significant impact on the Group's performance.

Terrorism

There have been multiple acts of terrorism on public transport systems and other terrorist attacks that whilst not directly targeting public transport have discouraged travel. There is a risk that the demand for the Group's services could be adversely affected by a significant terrorist incident. Such a fall in demand would have a negative effect on the Group's revenue and financial performance. The Group has plans in place designed to reduce the financial impact of a terrorist incident and these plans take account of the Group's experience of managing the North American business during the period of depressed demand following the major terrorist attack on 11 September 2001.

Economy

The economic environment in the geographic areas in which the Group operates affects the demand for the Group's bus and rail services. In particular, the revenue of the Group's UK rail operations is historically correlated with factors such as UK Gross Domestic Product ("GDP") and Central London Employment. In North America, a greater proportion of the revenue is derived from tour, charter and sightseeing services than in the UK and these services tend to be more susceptible to economic changes. The revenue and profit of the Group could therefore be positively or negatively affected by changes in the economy.

Management monitors actual and projected economic trends in order to match capacity to demand and where possible, minimise the impact of adverse economic trends on the Group.

Rail cost base

A substantial element of the cost base in the Group's UK Rail Division is essentially fixed because under its UK rail franchise agreements, the Group is obliged to provide a minimum level of train services and is therefore less able to flex supply in response to changes in demand. In addition, a significant part of the cost base is comprised of payments to the infrastructure provider, Network Rail, and payments under train operating leases which are committed and do not vary with revenue. Accordingly, a significant proportion of any change in revenue (for example, arising as a result of the terrorism or economic risks described above) will impact profit in the UK Rail Division.

Sustainability of rail profits

A significant element of the Group's revenue and profit is generated by UK rail franchises. There is a risk that the Group's revenue and profit could be significantly affected (either positively or negatively) as a result of the Group winning new franchises or failing to retain its existing franchises.

In order to manage the risks, the Group has devoted significant management resource and financial investment to bidding for new rail franchises. Appropriately experienced personnel are retained to work on rail bids and third party consultants are engaged to provide additional expertise. The Board approves the overall rail bidding strategy and the key parameters for each bid.

Breach of franchise

The Group is required to comply with certain conditions as part of its rail franchise agreements. If it fails to comply with these conditions, it may be liable to penalties including the potential termination of one or more of the rail franchise agreements. This would result in the Group losing the right to continue operating the affected operations and consequently, the related revenues and cash flows. The Group may also lose some or all of the amounts set aside as security for the shareholder loan facilities, the performance bonds and the season ticket bonds. The Group can do more to prevent breaches of franchise where it has sole control than where it has joint control. As the holder of a 49% joint venture interest in VRG, the Group has less control over the joint venture's operations and that means the Group's management may be less able to prevent a breach of the VRG franchise agreement. 

Our UK Rail businesses are subject to complex contractual arrangements. Contractual management is an important part of our rail activities because the way in which contracts are managed can be a significant determinant of financial performance.

Compliance with franchise conditions is closely managed and monitored and procedures are in place to minimise the risk of non-compliance.

Pension scheme funding

The Group participates in a number of defined benefit pension schemes. There is a risk that the cash contributions required to these schemes increases or decreases due to changes in factors such as investment performance, the rates used to discount liabilities and life expectancies. Any increase in contributions will reduce the Group's cash flows.

Decisions on pension scheme funding, asset allocation and benefit promises are taken by management and/or pension scheme trustees in consultation with trade unions and suitably qualified advisors. A Pensions Oversight Committee, comprising the Finance Director, a Non-Executive Director and other senior executives, oversees the Group's overall pensions strategy. The Board participates in major decisions on the funding and design of pension schemes.

Insurance and claims environment

The Group receives claims in respect of traffic incidents and employee claims. The Group protects itself against the cost of such claims through third party insurance policies. An element of the claims is not insured as a result of the "excess" on insurance policies.

There is a risk that the number or magnitude of claims are not as expected and that the cost to the Group of settling these claims is significantly higher or lower than expected. In the US, in particular, there is a risk that given the size of the "excess", that a small number of large-value claims could have a material impact on the Group's financial performance and/or financial position.

The Group has a proactive culture that puts health and safety at the top of its agenda and this helps mitigate the potential for claims arising. Where claims do arise, they are managed by dedicated insurance and claims specialists in order to minimise the cost to the Group. Where appropriate, legal advice is obtained from appropriately qualified advisors. The balance between insured and retained risks is re-evaluated at least once a year and insurance and claims activity is monitored closely.

  

Regulatory changes and availability of public funding

Public transport is subject to varying degrees of regulation across the locations in which the Group operates. There is a risk that changes to the regulatory environment could impact the Group's prospects.

Similarly, many of the Group's businesses benefit from some form of financial support from government including direct financial support, the provision of equipment, government contracts and concessionary fare schemes. There is a risk that the availability of sufficient government financial support changes due to regulatory or other reasons.

In the UK, the study of the UK bus market by the Office of Fair Trading and review of the Bus Services Operators Grant paid to UK bus operators are both examples of regulatory matters affecting our business. Whilst at this stage, we do not expect either of these to have a material impact on the Group's financial performance or financial position, we continue to monitor developments closely. Also in the UK, we will scrutinise any proposals to change UK bus concessionary fare schemes and European Commission proposals on passenger rights particularly where there is a potential financial impact on the Group.

Management closely monitors relevant proposals for changes in the regulatory environment and communicates the Group's views to key decision makers and bodies. The Group actively participates in various industry and national trade bodies along with domestic and international government forums. The Group seeks to maintain good, co-operative relationships with all levels of government, by developing and promoting ideas that offer cost effective ways of improving public transport.

Stagecoach South Western Trains Limited is in dispute with the Department for Transport regarding aspects of the South Western franchise agreement. These matters relate to the timing of revenue support and the treatment of car parking revenue for the purpose of determining revenue support. The sums in question depend on future revenue, which in turn partly depends on future macroeconomic conditions. To the extent that these matters are not satisfactorily resolved, the UK Rail Division is likely to incur a significant operating loss in the year ending 30 April 2011. However, the Group has taken appropriate legal advice and considers that SSWT has a strong position.

Management and Board succession

The Group values the continued services of its senior employees, including its Directors and management who have operational, marketing, engineering, technical, project management, financial and administrative skills that are important to the operation of the Group's business.

Succession planning for the Directors and senior management is an important issue and as such is considered by the Nomination Committee and the Board. The appropriate level of management deals with recruitment and retention of other staff.

Catastrophic events

There is a risk that the Group is involved (directly or indirectly) in a major operational incident resulting in significant human injuries or damage to property. This could have a significant impact on claims against the Group, the reputation of the Group and its chances of winning and retaining contracts or franchises.

The Group has a proactive culture that puts health and safety at the top of its agenda in order to mitigate the potential for major incidents. In the unlikely event that a major incident did occur, the Group has procedures in place for responding to such incidents.

Disease

There have been recent concerns about the risk of a swine flu pandemic, which follows previous concerns over bird flu and SARS. There is a risk that demand for the Group's services could be adversely affected by a significant outbreak of disease. Such a fall in demand would have a negative impact on the Group's revenue and financial performance. The Group has plans in place to respond to any significant outbreak of disease.

Treasury risks

The Group's overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance and financial position of the Group. The Group uses derivative financial instruments to reduce exposure to foreign exchange risk, commodity price risk and interest rate movements.

A Group Treasury Committee and central treasury department ("Group Treasury") oversee financial risk management in the context of policies approved by the Board. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group's operating units. Group Treasury is responsible for the execution of derivative financial instruments to manage financial risks. Certain financial risk management activities are devolved to the management of individual business units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and investing excess liquidity.

At this time, there is a heavy focus on the liquidity risks of companies. Whilst the Group is not fully protected from changes in credit markets, it is in a strong financial position as described further in the section of this interim management report headed 'liquidity'.

Related parties

Related party disclosures are given in note 21 to the condensed financial statements.

Current trading and outlook 

The Group has made a good start to the second half of its financial year to 30 April 2010 and current trading remains in line with our expectations. We have a strong management team that remains closely focused on controlling costs and responding rapidly to changing patterns of demand and market conditions across the business. Our strategy remains centred on organic growth supplemented by targeted acquisition opportunities. In the current economic environment, the Group is also looking to maximise the opportunities from consumer demand for good value products and sustainable forms of transport. 

Our strong financial position and balanced portfolio of businesses will allow us to trade through the current economic cycle and we are well positioned to benefit from future economic recovery. We believe the prospects for the Group remain positive.

Brian Souter

Chief Executive 9 December 2009

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed consolidated interim financial information contained in this document has been prepared in accordance with International Accounting Standard 34 ("IAS 34"), "Interim Financial Reporting" as adopted by the European Union;

(b) the interim management report contained in this document includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules ("DTR") 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) this document includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of and on behalf of the Board

Brian Souter Martin Griffiths

Chief Executive Finance Director

9 December 2009 9 December 2009

  Independent review report to Stagecoach Group plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 31 October 2009, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1 to the condensed financial statements, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

  

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 31 October 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

9 December 2009

141 Bothwell Street

GLASGOW

G2 7EQ

Notes:

The maintenance and integrity of the Stagecoach Group plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

CONDENSED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

		Unaudited						Audited
		6 months to 31 October 2009			6 months to 31 October 2008
		Performance pre intangibles and exceptional items	Intangibles and exceptional items (note 4)	Results for the period	Performance pre intangibles and exceptional items	Intangibles and exceptional items (note 4)	Results for the period	Year to 30 April 2009
	Notes	£m	£m	£m	£m	£m	£m	£m
CONTINUING OPERATIONS
Revenue	3(A)	1,081.4	Nil	1,081.4	1,045.0	Nil	1,045.0	2,103.3
Operating costs		(999.0)	(3.2)	(1,002.2)	(1,051.0)	(4.0)	(1,055.0)	(1,953.3)
Other operating (expense)/income	5	(6.5)	Nil	(6.5)	110.2	Nil	110.2	22.2
Operating profit of Group companies	3(B)	75.9	(3.2)	72.7	104.2	(4.0)	100.2	172.2
Share of profit of joint ventures after finance income and taxation	3(C)	17.6	(2.5)	15.1	15.6	(2.5)	13.1	30.2
Total operating profit: Group operating profit and share of joint ventures' profit after taxation	3(B)	93.5	(5.7)	87.8	119.8	(6.5)	113.3	202.4
Exceptional items	4	Nil	(2.5)	(2.5)	Nil	2.0	2.0	(0.2)
Profit before interest and taxation		93.5	(8.2)	85.3	119.8	(4.5)	115.3	202.2
Finance costs	6	(23.0)	Nil	(23.0)	(19.7)	Nil	(19.7)	(38.9)
Finance income	6	5.0	Nil	5.0	5.1	Nil	5.1	7.5
Profit before taxation		75.5	(8.2)	67.3	105.2	(4.5)	100.7	170.8
Taxation	7	(11.1)	0.5	(10.6)	(18.9)	(12.4)	(31.3)	(37.3)
Profit from continuing operations		64.4	(7.7)	56.7	86.3	(16.9)	69.4	133.5
DISCONTINUED OPERATIONS
Exceptional items	4	Nil	3.9	3.9	Nil	Nil	Nil	Nil
TOTAL OPERATIONS
Profit after taxation for the period attributable to equity shareholders of the parent		64.4	(3.8)	60.6	86.3	(16.9)	69.4	133.5
Earnings per share from continuing and discontinued operations
- Adjusted/Basic	9	9.0p		8.5p	12.1p		9.7p	18.7p
- Diluted	9	8.9p		8.4p	11.9p		9.6p	18.5p
Earnings per share from continuing operations
- Adjusted/Basic	9	9.0p		7.9p	12.1p		9.7p	18.7p
- Diluted	9	8.9p		7.9p	11.9p		9.6p	18.5p
Dividends per ordinary share	8
- Interim				2.0p			1.8p	1.8p
- Final				-			-	4.2p

The accompanying notes form an integral part of this consolidated income statement.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Unaudited		Audited
	6 months to 31 October 2009	6 months to 31 October 2008		Year to 30 April 2009
	£m	£m		£m
Profit for the period	60.6	69.4		133.5
Other comprehensive income/(expense)
Foreign exchange differences on translation of foreign operations (net of hedging)	(1.1)	(3.8)		(4.6)
Actuarial losses on Group defined benefit pension schemes	(173.5)	(60.6)		(144.5)
Share of actuarial gains on joint ventures' defined benefit pension schemes	Nil*	Nil*		2.9
Net fair value gains/(losses) on cash flow hedges	19.2	(46.4)		(97.4)
Net fair value losses on available for sale investments	(0.2)	(0.3)		(0.4)
	(155.6)	(111.1)		(244.0)
Transfers to the income statement
Cash flow hedges reclassified and reported in profit for the period	27.4	(14.9)		(11.2)
Tax on items taken directly to or transferred from equity
Tax on foreign exchange differences on translation of foreign operations (net of hedging)	0.3	1.0		(0.9)
Tax effect of actuarial losses on Group defined benefit pension schemes	48.5	17.0		40.4
Tax effect of share of actuarial gains on joint ventures' defined benefit pension schemes	Nil	Nil		(0.8)
Tax effect of share based payments	0.3	0.1		(0.5)
Tax effect of cash flow hedges	(13.0)	17.2		31.9
	36.1	35.3		70.1
Net comprehensive expense and total comprehensive expense for the period attributable to equity shareholders of the parent	(31.5)	(21.3)		(51.6)

* The estimated share of actuarial gains on joint ventures' defined benefit pension schemes for the six months ended 31 October 2009 and 31 October 2008 is not material to the Group.

CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

		Unaudited		Audited
	Notes	As at 31 October 2009 £m	As at 31 October 2008 £m	As at 30 April 2009 £m
ASSETS
Non-current assets
Goodwill	10	93.1	113.4	99.9
Other intangible assets	11	17.9	23.9	24.5
Property, plant and equipment	12	783.7	733.8	785.7
Interests in joint ventures	13	63.3	27.5	68.7
Available for sale and other investments		1.4	1.5	1.5
Derivative instruments at fair value		4.4	4.1	0.5
Retirement benefit assets	14	Nil	20.6	Nil
Deferred tax asset		19.6	6.9	5.3
Other receivables		6.7	3.1	6.8
		990.1	934.8	992.9
Current assets
Inventories		23.7	23.1	22.0
Trade and other receivables		271.3	235.1	212.4
Derivative instruments at fair value		6.2	11.4	3.1
Cash and cash equivalents		231.6	238.5	277.3
Asset classified as held for sale		2.4	Nil	2.4
		535.2	508.1	517.2
Total assets		1,525.3	1,442.9	1,510.1
LIABILITIES
Current liabilities
Trade and other payables		537.5	501.8	530.2
Current tax liabilities		34.4	27.2	15.0
Foreign tax liabilities		Nil	Nil	0.8
Borrowings		250.0	76.0	279.5
Derivative instruments at fair value		41.4	20.9	68.2
Provisions		53.1	39.7	56.7
		916.4	665.6	950.4
Non-current liabilities
Other payables		16.7	23.2	24.2
Borrowings		331.3	544.5	347.4
Derivative instruments at fair value		7.9	17.2	14.4
Deferred tax liabilities		Nil	44.1	19.5
Provisions		75.8	84.1	83.2
Retirement benefit obligations	14	246.2	32.5	80.6
		677.9	745.6	569.3
Total liabilities		1,594.3	1,411.2	1,519.7
Net (liabilities)/assets		(69.0)	31.7	(9.6)
EQUITY
Ordinary share capital	15	7.1	7.1	7.1
Share premium account		9.5	8.9	9.5
Retained earnings		(468.3)	(366.2)	(374.9)
Capital redemption reserve		415.2	412.6	413.5
Own shares		(13.9)	(13.3)	(13.9)
Translation reserve		Nil	1.9	1.1
Available for sale reserve		Nil	0.3	0.2
Cash flow hedging reserve		(18.6)	(19.6)	(52.2)
Total equity		(69.0)	31.7	(9.6)

The retained earnings deficit of £468.3m (30 April 2009: £374.9m) is the consolidated position. The holding company's distributable reserves as at 31 October 2009 under UK GAAP were £287.2m (30 April 2009: £322.7m).

The accompanying notes form an integral part of this consolidated balance sheet.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Ordinary share capital £m	Share premium account £m	Retained earnings £m	Capital redemption reserve £m	Own shares £m	Translation reserve £m	Available for sale reserve £m	Cash flow hedging reserve £m	Total equity £m
Balance at 30 April 2009 and 1 May 2009	7.1	9.5	(374.9)	413.5	(13.9)	1.1	0.2	(52.2)	(9.6)
Profit for the period	-	-	60.6	-	-	-	-	-	60.6
Foreign exchange differences on translation of foreign operations (net of hedging)	-	-	-	-	-	(1.1)	-	-	(1.1)
Actuarial losses on Group defined benefit pension schemes	-	-	(173.5)	-	-	-	-	-	(173.5)
Net fair value gains on cash flow hedges	-	-	-	-	-	-	-	19.2	19.2
Net fair value losses on available for sale investments	-	-	-	-	-	-	(0.2)	-	(0.2)
Cash flow hedges reclassified and reported in profit for the period	-	-	-	-	-	-	-	27.4	27.4
Tax on items taken directly to or transferred from equity (for split see Consolidated statement of comprehensive income)	-	-	49.1	-	-	-	-	(13.0)	36.1
Total comprehensive income for the period ended 31 October 2009	-	-	(63.8)	-	-	(1.1)	(0.2)	33.6	(31.5)
Preference shares redeemed	-	-	(1.7)	1.7	-	-	-	-	-
Credit in relation to equity-settled share based payments	-	-	2.2	-	-	-	-	-	2.2
Dividends paid on ordinary shares	-	-	(30.1)	-	-	-	-	-	(30.1)
Balance at 31 October 2009	7.1	9.5	(468.3)	415.2	(13.9)	-	-	(18.6)	(69.0)

Balance at 30 April 2008 and 1 May 2008	7.0	8.0	(363.6)	410.8	(12.6)	5.7	0.6	24.5	80.4
Profit for the period	-	-	69.4	-	-	-	-	-	69.4
Foreign exchange differences on translation of foreign operations (net of hedging)	-	-	-	-	-	(3.8)	-	-	(3.8)
Actuarial losses on Group defined benefit pension schemes	-	-	(60.6)	-	-	-	-	-	(60.6)
Net fair value losses on cash flow hedges	-	-	-	-	-	-	-	(46.4)	(46.4)
Net fair value losses on available for sale investments	-	-	-	-	-	-	(0.3)	-	(0.3)
Cash flow hedges reclassified and reported in profit for the period	-	-	-	-	-	-	-	(14.9)	(14.9)
Tax on items taken directly to or transferred from equity (for split see Consolidated statement of comprehensive income)	-	-	18.1	-	-	-	-	17.2	35.3
Total comprehensive income for the period ended 31 October 2008	-	-	26.9	-	-	(3.8)	(0.3)	(44.1)	(21.3)
Own ordinary shares purchased	-	-	-	-	(2.4)	-	-	-	(2.4)
Own ordinary shares sold	-	-	-	-	1.7	-	-	-	1.7
Preference shares redeemed	-	-	(1.8)	1.8	-	-	-	-	-
Arising on new ordinary share issues	0.1	0.9	-	-	-	-	-	-	1.0
Credit in relation to equity-settled share based payments	-	-	1.2	-	-	-	-	-	1.2
Dividends paid on ordinary shares	-	-	(28.9)	-	-	-	-	-	(28.9)
Balance at 31 October 2008	7.1	8.9	(366.2)	412.6	(13.3)	1.9	0.3	(19.6)	31.7

CONSOLIDATED STATEMENT OF CASH FLOWS

		Unaudited		Audited
	Notes	6 months to  31 October 2009 £m	6 months to  31 October 2008 £m		Year to  30 April 2009 £m
Cash flows from operating activities
Cash generated by operations	16	68.6	102.9		269.6
Interest paid		(19.3)	(19.7)		(41.7)
Interest received		1.8	5.2		8.7
Dividends received from joint ventures		16.3	19.4		44.9
Net cash flows from operating activities		67.4	107.8		281.5
Tax received/(paid)		10.6	(0.7)		(3.7)
Net cash from operating activities after tax		78.0	107.1		277.8
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		(0.5)	(7.4)		(19.0)
Disposals and closures of subsidiaries and other businesses, net of cash disposed of		1.6	0.3		0.3
Purchase of property, plant and equipment		(52.3)	(47.3)		(94.9)
Disposal of property, plant and equipment		15.8	4.1		12.8
Purchase of intangible assets		(0.5)	(0.1)		(0.4)
Purchase of other investments		Nil	(0.1)		Nil
Movement in loans to joint ventures		1.6	(0.1)		(0.4)
Net cash outflow from investing activities		(34.3)	(50.6)		(101.6)
Cash flows from financing activities
Issue of ordinary shares for cash		Nil	1.0		1.4
VAT recovered on professional fees previously applied to share premium		Nil	Nil		0.2
Redemption of 'B' shares		(1.7)	(1.9)		(2.7)
Investment in own ordinary shares by employee share ownership trusts		Nil	(2.4)		(2.8)
Sale of own ordinary shares by employee share ownership trusts		Nil	1.7		1.5
Repayments of hire purchase and lease finance		(18.5)	(20.6)		(47.5)
Proceeds of sale and leaseback transaction		3.6	Nil		20.3
Movement in other borrowings		(39.1)	(30.1)		(96.5)
Dividends paid on ordinary shares	8	(30.1)	(28.9)		(41.8)
Sale of tokens		0.7	0.7		4.5
Redemption of tokens		(1.8)	(2.5)		(5.3)
Net cash used in financing activities		(86.9)	(83.0)		(168.7)
Net (decrease)/increase in cash and cash equivalents		(43.2)	(26.5)		7.5
Cash and cash equivalents at the beginning of the period		277.3	261.6		261.6
Exchange rate effects		(2.5)	3.4		8.2
Cash and cash equivalents at the end of the period		231.6	238.5		277.3

Cash and cash equivalents for the purposes of the consolidated cash flow statement comprise cash at bank and in hand, overdrafts and other short-term highly liquid investments with maturities at the balance sheet date of three months or less.

The accompanying notes form an integral part of this consolidated statement of cash flows.

  NOTES 

1	BASIS OF PREPARATION

The condensed consolidated interim financial information for the six months ended 31 October 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 April 2009, which have been prepared in accordance with IFRSs as adopted by the European Union. Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 30 April 2009, as described on pages 46 to 53 of the Group's 2009 annual report which can be found on the Stagecoach Group website at http://www.stagecoachgroup.com/scg/ir/finanalysis/reports/.

This condensed consolidated interim financial information for the six months ended 31 October 2009 has not been audited, nor has the comparative financial information for the six months ended 31 October 2008 but they have both been reviewed by the auditors. The comparative financial information presented in this announcement for the year ended 30 April 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006 and does not reflect all of the information contained in the Company's annual financial statements. The annual financial statements for the year ended 30 April 2009, which were approved by the Board of Directors on 24 June 2009, received an unqualified audit report, did not contain an emphasis of matter paragraph, did not contain a statement under section 434 of the Companies Act 2006 and have been filed with the Registrar of Companies.

The Board of Directors approved this announcement, including the condensed consolidated interim financial information, on 9 December 2009. This announcement will shortly be available on the Group's website at http://www.stagecoachgroup.com/scg/ir/finanalysis/reports/.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 May 2009:

IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). 

The Group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial information has been prepared under the revised disclosure requirements.

IFRS 2 (amended), 'Share-based payments - vesting conditions and cancellations'. The amendment clarifies that only service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions, which have to be taken into account to determine the fair value of the equity instruments granted. In the case that the award does not vest as the result of a failure to meet a non-vesting condition that is within the control of either the entity or the counterparty, this must be accounted for as a cancellation.

The main impact of this amendment for the Group arises from cancellations by employees of contributions to the Group's Save as You Earn (SAYE) schemes; in the event of a cancellation the Group must recognise immediately the amount of the expense that would have otherwise been recognised over the remainder of the vesting period. 

The amendment is to be applied retrospectively, however no adjustment has been made to prior-year comparatives as the adjustment would be immaterial.

1	BASIS OF PREPARATION (CONTINUED)

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 May 2009, but do not have any significant effect on the Group:

IFRS 1 (revised November 2008), 'First-time adoption of international financial reporting standards'

IFRS 7 (amended), 'Financial instruments: disclosures'

IAS 23 (revised March 2007), 'Borrowing costs'

IAS 32 (amendment relating to puttable instruments and obligations arising on liquidation), 'Financial instruments - presentation'

IAS 39 (amendment for embedded derivatives), 'Financial instruments - recognition and measurement'

IAS 39 (amendment in relation to reclassification of financial assets), 'Financial instruments - recognition and measurement'

IFRIC 9 (amended), 'Embedded derivatives'

IFRIC 13, 'Customer loyalty programmes'

IFRIC 15, 'Agreements for the construction of real estate'

IFRIC 16, 'Hedges of a net investment in a foreign operation'

2	FOREIGN CURRENCIES

The principal rates of exchange used to translate the results of foreign operations are as follows:

	6 months to 31 October 2009	6 months to 31 October 2008	Year to 30 April 2009
US Dollar:
Period end rate	1.6484	1.6158	1.4818
Average rate	1.6207	1.8811	1.6780
Canadian Dollar:
Period end rate	1.7756	1.9645	1.7605
Average rate	1.7885	1.9767	1.8955

3	SEGMENTAL ANALYSIS

The Group is managed, and reports internally, on a basis consistent with its three continuing operating segments, being UK Bus, North America and UK Rail. The Group's IFRS accounting policies are applied consistently, where appropriate, to each segment.

The segmental information provided in this note is on the basis of three operating segments as follows:

Segment name	Service operated	Country of operation
UK Bus	Coach and bus operations	United Kingdom
North America	Coach and bus operations	North America
UK Rail	Rail operations	United Kingdom

The basis of segmentation is consistent with the Group's last annual financial statements for the year ended 30 April 2009.

The Group has interests in four joint ventures: Virgin Rail Group that operates in UK Rail, Citylink that operates in UK Bus and New York Splash Tours LLC and Twin America LLC that operate in North America. The results of these joint ventures are shown separately in note 3(C).

  

3	SEGMENTAL ANALYSIS (CONTINUED)

(A)

REVENUE

Due to the nature of the Group's business, the origin and destination of revenue is the same in all cases. As the Group sells bus and rail services to individuals, it has few customers that are individually "major". Its major customers are typically public bodies that subsidise or procure transport services - such customers include local authorities, transport authorities and the UK Department for Transport.

	Unaudited			Audited
	6 months to 31 October 2009	6 months to 31 October 2008	Year to 30 April 2009
	£m	£m	£m
Continuing operations
UK Bus	433.0	410.4	830.8
North America	136.6	150.5	297.7
Total bus continuing operations	569.6	560.9	1,128.5
UK Rail	512.9	486.4	977.7
Total Group revenue	1,082.5	1,047.3	2,106.2
Intra-Group revenue	(1.1)	(2.3)	(2.9)
Reported Group revenue	1,081.4	1,045.0	2,103.3

(B)	OPERATING PROFIT

			Unaudited						Audited
			6 months to 31 October 2009			6 months to 31 October 2008
	Notes	Performance pre intangibles and exceptional items		Intangibles and exceptional items	Results for the period	Performance  pre intangibles and  exceptional items	Intangibles and exceptional items	Results for the period	Year to 30 April 2009
		£m		£m	£m	£m	£m	£m	£m
Continuing operations
UK Bus		58.9		Nil	58.9	60.9	Nil	60.9	125.6
North America		8.3		Nil	8.3	19.8	Nil	19.8	25.2
Total bus continuing operations		67.2		Nil	67.2	80.7	Nil	80.7	150.8
UK Rail		14.9		Nil	14.9	31.7	Nil	31.7	55.7
Total continuing operations		82.1		Nil	82.1	112.4	Nil	112.4	206.5
Group overheads		(5.8)		Nil	(5.8)	(7.2)	Nil	(7.2)	(11.5)
Intangible asset expenses		Nil		(3.2)	(3.2)	Nil	(4.0)	(4.0)	(8.3)
Restructuring costs		(0.4)		Nil	(0.4)	(1.0)	Nil	(1.0)	(14.5)
Total operating profit of continuing Group companies		75.9		(3.2)	72.7	104.2	(4.0)	100.2	172.2
Share of profit of joint ventures after finance income and taxation	3(C)	17.6		(2.5)	15.1	15.6	(2.5)	13.1	30.2
Total operating profit: Group operating profit and share of joint ventures' profit after taxation		93.5		(5.7)	87.8	119.8	(6.5)	113.3	202.4

  

3	SEGMENTAL ANALYSIS (CONTINUED)

(C)	JOINT VENTURES

	Unaudited						Audited
	6 months to 31 October 2009			6 months to 31 October 2008
	Performance pre intangibles and exceptional items	Intangibles and exceptional items	Results for the period	Performance  pre intangibles and  exceptional items	Intangibles and exceptional items	Results for the period	Year to 30 April 2009
	£m	£m	£m	£m	£m	£m	£m
Continuing
Virgin Rail Group (UK Rail)
Operating profit	12.8	Nil	12.8	19.4	Nil	19.4	42.7
Finance income (net)	0.1	Nil	0.1	1.6	Nil	1.6	2.3
Taxation	(3.6)	Nil	(3.6)	(5.9)	Nil	(5.9)	(11.0)
	9.3	Nil	9.3	15.1	Nil	15.1	34.0
Goodwill charged on investment in continuing joint ventures	Nil	(2.5)	(2.5)	Nil	(2.5)	(2.5)	(5.1)
	9.3	(2.5)	6.8	15.1	(2.5)	12.6	28.9
Citylink (UK Bus)
Operating profit	1.2	Nil	1.2	1.0	Nil	1.0	1.4
Taxation	(0.3)	Nil	(0.3)	(0.3)	Nil	(0.3)	(0.4)
	0.9	Nil	0.9	0.7	Nil	0.7	1.0
New York Splash Tours LLC (North America)
Operating loss	(0.5)	Nil	(0.5)	(0.4)	Nil	(0.4)	(0.6)
Taxation	Nil	Nil	Nil	0.2	Nil	0.2	Nil
	(0.5)	Nil	(0.5)	(0.2)	Nil	(0.2)	(0.6)
Twin America LLC (North America)
Operating profit	7.9	Nil	7.9	Nil	Nil	Nil	0.9
	7.9	Nil	7.9	Nil	Nil	Nil	0.9
Share of profit of joint ventures after finance income and taxation	17.6	(2.5)	15.1	15.6	(2.5)	13.1	30.2

  

3	SEGMENTAL ANALYSIS (CONTINUED)

(D)	GROSS ASSETS AND LIABILITIES

	31 October 2009 (unaudited)
	Gross assets	Gross liabilities	Net assets/ (liabilities)
	£m	£m	£m
UK Bus	677.2	(395.2)	282.0
North America	259.0	(81.2)	177.8
UK Rail	252.5	(414.9)	(162.4)
	1,188.7	(891.3)	297.4)
Central functions	22.1	(87.3)	(65.2)
Joint ventures	63.3	Nil	63.3
Borrowings and cash	231.6	(581.3)	(349.7)
Taxation	19.6	(34.4)	(14.8)
Total	1,525.3	(1,594.3)	(69.0)

	31 October 2008 (unaudited)
	Gross assets	Gross liabilities	Net assets/ (liabilities)
	£m	£m	£m
UK Bus	649.6	(143.8)	505.8
North America	293.8	(90.3)	203.5
UK Rail	195.7	(342.9)	(147.2)
	1,139.1	(577.0)	562.1
Central functions	30.9	(142.4)	(111.5)
Joint ventures	27.5	Nil	27.5
Borrowings and cash	238.5	(620.5)	(382.0)
Taxation	6.9	(71.3)	(64.4)
Total	1,442.9	(1,411.2)	31.7

	30 April 2009 (audited)
	Gross assets	Gross liabilities	Net assets/ (liabilities)
	£m	£m	£m
UK Bus	630.7	(167.7)	463.0
North America	278.2	(106.2)	172.0
UK Rail	234.9	(432.4)	(197.5)
	1,143.8	(706.3)	437.5
Central functions	15.0	(151.2)	(136.2)
Joint ventures	68.7	Nil	68.7
Borrowings and cash	277.3	(626.9)	(349.6)
Taxation	5.3	(35.3)	(30.0)
Total	1,510.1	(1,519.7)	(9.6)

  

4	EXCEPTIONAL ITEMS AND INTANGIBLE ASSET EXPENSES

The Group highlights amounts before intangible asset expenses and exceptional items as well as clearly reporting the results in accordance with IFRS. Exceptional items are defined in note 23. 

The items shown in the column headed "Intangibles and exceptional items" on the face of the consolidated income statement for the six months ended 31 October 2009 can be further analysed as follows:

	Unaudited
	6 months to 31 October 2009
	Exceptional items £m	Intangible asset expenses £m	Intangibles and exceptional items £m
Operating costs
Intangible asset expenses	Nil	(3.2)	(3.2)
Share of profit of joint ventures
Goodwill charged on investment in joint ventures	Nil	(2.5)	(2.5)
Exceptional items - continuing operations
Gain on sale of properties	4.3	Nil	4.3
Loss on exit from certain operations	(4.1)	Nil	(4.1)
Expenses incurred in relation to proposal to acquire certain businesses from, or merge with, National Express Group plc	(2.7)	Nil	(2.7)
Exceptional items - continuing operations	(2.5)	Nil	(2.5)
Intangible asset expenses and exceptional items - continuing operations	(2.5)	(5.7)	(8.2)
Tax effect	(0.4)	0.9	0.5
Intangible asset expenses and exceptional items after taxation - continuing operations	(2.9)	(4.8)	(7.7)
Resolution of certain liabilities re disposals - discontinued operations	3.9	Nil	3.9

  

4	EXCEPTIONAL ITEMS AND INTANGIBLE ASSET EXPENSES (CONTINUED)

The items shown in the column headed "Intangibles and exceptional items" on the face of the consolidated income statement for the six months ended 31 October 2008 can be further analysed as follows:

	Unaudited
	6 months to 31 October 2008
	Exceptional items £m	Intangible asset expenses £m	Intangibles and exceptional items £m
Operating costs
Intangible asset expenses	Nil	(4.0)	(4.0)
Share of profit of joint ventures
Goodwill charged on investment in joint ventures	Nil	(2.5)	(2.5)
Exceptional items - continuing operations
Resolution of certain liabilities re acquisitions and disposals	2.2	Nil	2.2
Loss on sale of properties	(0.2)	Nil	(0.2)
Exceptional items - continuing operations	2.0	Nil	2.0
Intangible asset expenses and exceptional items	2.0	(6.5)	(4.5)
Tax effect	Nil	1.1	1.1
Deferred tax charge re abolition of UK Industrial Buildings Allowances	(13.5)	Nil	(13.5)
Intangible asset expenses and exceptional items after taxation	(11.5)	(5.4)	(16.9)

5	OTHER OPERATING (EXPENSE)/INCOME

	Unaudited			Audited
	6 months to 31 October 2009	6 months to 31 October 2008	Year to 30 April 2009
	£m	£m	£m
Miscellaneous revenue	43.9	39.9	88.6
Rail franchise support, excluding incentive payments	10.4	70.3	31.5
Rail franchise premia	(60.8)	Nil	(97.9)
	(6.5)	110.2	22.2

Miscellaneous revenue comprises revenue incidental to the Group's principal activities. It includes commissions receivable, advertising income, maintenance income, railway station access income, railway depot access income, fuel sales and property income.

Rail franchise support is the amount of financial support receivable from the Department for Transport ("DfT") in respect of the operation of UK passenger rail franchises. Rail Franchise premia is the amount of financial premia payable to the DfT in respect of the operation of UK passenger rail franchises.

  

6	FINANCE COSTS AND INCOME

	Unaudited		Audited
	6 months to  31 October 2009 £m	6 months to 31 October 2008 £m	Year to 30 April 2009 £m
Finance costs:
Interest payable and other facility costs on bank loans and overdrafts	2.8	6.7	9.8
Hire purchase and finance lease interest payable	3.6	4.1	7.8
Interest payable on bonds	6.7	6.9	15.1
'B' share dividends	Nil	0.1	0.2
Fair value losses on financial instruments not qualifying as hedges
- foreign exchange derivative contracts	4.1	Nil	Nil
Unwinding of discount on provisions	1.9	1.7	3.6
Interest payable on interest rate swaps qualifying as cashflow hedges	3.9	0.2	2.4
	23.0	19.7	38.9
Finance income:
Interest receivable	(2.0)	(5.1)	(7.5)
Exchange gains on retranslation of US$ bonds	(3.0)	Nil	Nil
	(5.0)	(5.1)	(7.5)
Net finance costs	18.0	14.6	31.4

At 30 April 2009, the US$293.1m of US$ notes, and a US$20.0m foreign currency derivative contract, were designated as a hedge of overseas net investments. On 7 July 2009, this hedge relationship was de-designated. On the same day, the Group took out three US$ derivative contracts, with notional amounts totalling US$342.0m, which matured on 16 November 2009. This was done to give certainty of the sterling value of the redemption payment that would be made by the Group when the US$ notes matured on 16 November 2009. Exchange gains on the US$ notes in the period from 7 July 2009 to 31 October 2009 of £3.0m are included within finance income above. Fair value losses on the US$ derivative contracts in the period from 7 July 2009 to 31 October 2009 of £4.1m are included within finance costs above. The notional value of the derivative contracts exceeded the outstanding US$ notes (and as a result the fair value losses on the US$ derivative contracts exceeded the exchange gains on the US$ notes) in order to take account of the tax effect of the transactions.

7

TAXATION

The taxation charge comprises:

	Unaudited						Audited
	6 months to 31 October 2009			6 months to 31 October 2008
	Performance pre intangibles and exceptional items	Intangibles and exceptional items	Results for the period	Performance pre intangibles and exceptional items	Intangibles and exceptional items	Results for the period	Year to 30 April 2009
	£m	£m	£m	£m	£m	£m	£m
Group companies - UK tax	(7.6)	0.5	(7.1)	(14.3)	(12.4)	(26.7)	(36.5)
- Overseas tax	(3.5)	Nil	(3.5)	(4.6)	Nil	(4.6)	(0.8)
	(11.1)	0.5	(10.6)	(18.9)	(12.4)	(31.3)	(37.3)

  

8

DIVIDENDS

Dividends on ordinary shares are shown below. Dividends payable in respect of 'B' shares of £28,000 (2008: £142,000) are included as an expense in finance costs and are shown separately in note 6.

	Unaudited		Audited	Unaudited		Audited
	6 months to 31 October 2009	6 months to 31 October 2008	Year to  30 April 2009	6 months to 31 October 2009	6 months to 31 October 2008	Year to  30 April 2009
	pence per share	pence per share	pence per share	£m	£m	£m
Amounts recognised as distributions in the period
Dividends on ordinary shares
Final dividend in respect of the previous period	4.20	4.05	4.05	30.1	28.9	28.9
Interim dividend in respect of the current period	-	-	1.80	-	-	12.9
Amounts recognised as distributions to equity holders in the period	4.20	4.05	5.85	30.1	28.9	41.8
Dividends declared or proposed but neither paid nor included as liabilities in the financial statements
Dividends on ordinary shares
Interim dividend in respect of the current period	2.00	1.80	-	14.3	12.9	-
Final dividend in respect of the current period	-	-	4.20	-	-	30.0
	2.00	1.80	4.20	14.3	12.9	30.0

The interim ordinary dividend of 2.0p per ordinary share was declared by the Board of Directors on 9 December 2009 and has not been included as a liability as at 31 October 2009. It is payable on 3 March 2010 to shareholders on the register at close of business on 5 February 2010.

The total value of dividends proposed or declared and the total value of actual dividends recognised as distributions can differ slightly due to the number of shares ranking for dividend at the balance sheet date being different from the number ranking at the record date.

  

9	EARNINGS PER SHARE

Basic earnings per share ("EPS") have been calculated by dividing the profit attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period, excluding any ordinary shares held by employee share ownership trusts and not ranking for dividend.

The diluted earnings per share was calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares in relation to share options and long-term incentive plans. In respect of share options, a calculation was done to determine the number of ordinary shares that could have been acquired at fair value (using the average market share price of the Company's ordinary shares during the period) based on the monetary value of the subscription rights attached to outstanding share options. The number of ordinary shares calculated as above is compared with the number of ordinary shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration and no adjustment is made to earnings (numerator).

	Unaudited		Audited
	6 months to 31 October 2009 No. of shares million	6 months to 31 October 2008 No. of shares million	Year to 30 April 2009 No. of shares million
Basic weighted average number of ordinary shares	715.5	714.2	714.5
Dilutive ordinary shares
- Executive Share Option Scheme	0.7	1.7	1.3
- Employee SAYE Scheme	Nil	0.3	0.1
- Long Term Incentive Plan	1.7	4.9	2.4
- Executive Participation Plan	3.5	2.4	2.8
Diluted weighted average number of ordinary shares	721.4	723.5	721.1

	Unaudited		Audited
	6 months to 31 October 2009	6 months to 31 October 2008	Year to 30 April 2009
	£m	£m	£m
Profit after taxation including discontinued operations (for basic EPS calculation)	60.6	69.4	133.5
Intangible asset expenses (see note 4)	5.7	6.5	13.4
Exceptional items before tax (see note 4)	(1.4)	(2.0)	12.2
Tax effect of intangible asset expenses and exceptional items (see note 4)	(0.5)	12.4	4.3
Profit for adjusted EPS calculation	64.4	86.3	163.4

	Earnings per share pence	Earnings per share  pence	Earnings per share  pence
Basic	8.5	9.7	18.7
Adjusted basic	9.0	12.1	22.9
Diluted	8.4	9.6	18.5
Adjusted diluted	8.9	11.9	22.7

9	EARNINGS PER SHARE (CONTINUED)

Earnings per share before intangible asset expenses and exceptional items is calculated after adding back intangible asset expenses and exceptional items after taking account of taxation, as shown on the consolidated income statement. This has been presented to allow shareholders to gain a clearer understanding of underlying performance. The basic and diluted earnings per share can be further analysed as follows:

	Unaudited
	6 months to 31 October 2009			6 months to 31 October 2008
	Earnings	Weighted average number of shares	Earnings per share	Earnings	Weighted average number of shares	Earnings per share
	£m	Million	pence	£m	Million	pence
Basic
- Continuing operations	56.7	715.5	7.9	69.4	714.2	9.7
- Discontinued operations	3.9	715.5	0.6	Nil	714.2	Nil
	60.6	715.5	8.5	69.4	714.2	9.7
Adjusted basic
- Continuing operations	64.4	715.5	9.0	86.3	714.2	12.1
- Discontinued operations	Nil	715.5	Nil	Nil	714.2	Nil
	64.4	715.5	9.0	86.3	714.2	12.1
Diluted
- Continuing operations	56.7	721.4	7.9	69.4	723.5	9.6
- Discontinued operations	3.9	721.4	0.5	Nil	723.5	Nil
	60.6	721.4	8.4	69.4	723.5	9.6
Adjusted diluted
- Continuing operations	64.4	721.4	8.9	86.3	723.5	11.9
- Discontinued operations	Nil	721.4	Nil	Nil	723.5	Nil
	64.4	721.4	8.9	86.3	723.5	11.9

  

10

GOODWILL

	Unaudited 6 months to 31 October 2009	Unaudited  6 months to 31 October 2008	Audited Year to 30 April  2009
	£m	£m	£m
Cost and net book value at beginning of period	99.9	95.5	95.5
Acquired through business combinations	Nil	1.5	10.3
Transferred to interest in joint venture	Nil	Nil	(26.9)
Foreign exchange movements	(6.8)	16.4	21.0
At end of period	93.1	113.4	99.9

11	OTHER INTANGIBLE ASSETS

	Unaudited 6 months to 31 October 2009	Unaudited  6 months to 31 October 2008	Audited Year to 30 April  2009
	£m	£m	£m
Cost at beginning of period	55.9	47.2	47.2
Acquired through business combinations	Nil	3.0	7.1
Additions	0.5	0.1	0.4
Disposals	(4.1)	(0.4)	(0.5)
Foreign exchange movements	(0.9)	0.8	1.7
At end of period	51.4	50.7	55.9
Accumulated amortisation at beginning of period	(31.4)	(22.5)	(22.5)
Amortisation for period	(3.2)	(4.0)	(8.3)
Disposals	0.6	0.4	0.5
Foreign exchange movements	0.5	(0.7)	(1.1)
At end of period	(33.5)	(26.8)	(31.4)
Net book value at beginning of period	24.5	24.7	24.7
Net book value at end of period	17.9	23.9	24.5

  

12	PROPERTY, PLANT AND EQUIPMENT

	Unaudited 6 months to 31 October 2009	Unaudited  6 months to 31 October 2008	Audited Year to 30 April  2009
	£m	£m	£m
Cost at beginning of period	1,349.1	1,167.0	1,167.0
Additions	81.2	87.1	188.3
Acquired through business combinations	Nil	6.3	14.6
Disposals	(41.0)	(20.7)	(72.3)
Transferred to assets held for sale	Nil	Nil	(4.8)
Transferred to joint venture	Nil	Nil	(21.2)
Foreign exchange movements	(27.4)	50.9	77.5
At end of period	1,361.9	1,290.6	1,349.1
Depreciation at beginning of period	(563.4)	(514.6)	(514.6)
Charge for period	(38.2)	(32.0)	(72.1)
Impairment charge	(12.4)	Nil	(2.6)
Disposals	22.1	15.3	54.2
Transferred to assets held for sale	Nil	Nil	2.4
Transferred to joint venture	Nil	Nil	7.7
Foreign exchange movements	13.7	(25.5)	(38.4)
At end of period	(578.2)	(556.8)	(563.4)
Net book value at beginning of period	785.7	652.4	652.4
Net book value at end of period	783.7	733.8	785.7

During the six months ended 31 October 2009, we reached agreement with the DfT on a commercial settlement in favour of South West Trains in respect of certain elements of the smartcard project which had been subject to delay. In light of elements of the smartcard project not being delivered on time we have reviewed the carrying value of plant and equipment held in relation to the smartcard project and have recorded a £12.4m impairment charge.

  

13	INTERESTS IN JOINT VENTURES

	Unaudited 6 months to 31 October 2009	Unaudited  6 months to 31 October 2008	Audited Year to 30 April  2009
	£m	£m	£m
Cost at beginning of period	111.8	71.9	71.9
Transferred from subsidiaries	Nil	Nil	41.5
Share of recognised profit	18.1	15.8	35.9
Share of actuarial gains on defined benefit pension schemes net of tax	Nil	Nil	2.1
Dividends received	(16.3)	(19.4)	(44.9)
Dividend received in respect of loan settlement	Nil	(0.3)	(0.3)
Foreign exchange movements	(4.7)	Nil	5.6
At end of period	108.9	68.0	111.8
Amounts written off at beginning of period	(43.1)	(38.0)	(38.0)
Goodwill charged to income statement during period	(2.5)	(2.5)	(5.1)
At end of period	(45.6)	(40.5)	(43.1)
Net book value at beginning of period	68.7	33.9	33.9
Net book value at end of period	63.3	27.5	68.7

In addition to the above interest in joint ventures, a loan receivable from New York Splash Tours LLC of £2.7m (30 April 2009: £2.7m) is included within non-current assets under the caption of 'Other receivables'. New York Splash Tours LLC had net liabilities at 31 October 2009 of £2.7m (30 April 2009: £3.0m). The Group has not recognised its share of the net liabilities but has assessed the loan receivable for impairment and a provision for impairment of £2.7m (30 April 2009: £1.4m) was held against the receivable.

14	RETIREMENT BENEFITS

The Group contributes to a number of pension schemes. The principal defined benefit occupational benefit schemes are as follows:

•	The Stagecoach Group Pension Scheme ("SGPS");
•	The South West Trains section of the Railways Pension Scheme ("RPS");
•	The Island Line section of the Railways Pension Scheme ("RPS");
•	The East Midlands Trains section of the Railways Pension Scheme ("RPS"); and
•	A number of UK Local Government Pension Schemes ("LGPS");

The Directors believe that separate consideration should be given to RPS as the Group has no rights or obligations in respect of sections of the scheme following expiry of the relevant franchise. Therefore, the asset (or liability) recognised for the relevant sections of RPS only represents that part of the net surplus (or deficit) of the sections that the employer expects to recover (or expects to fund) over the life of the franchise to which each section relates.

14	RETIREMENT BENEFITS (CONTINUED)

In addition, the Group contributes to a number of defined contribution schemes covering UK and non-UK employees.

The movements for the six months ended 31 October 2009 in the net pre-tax liabilities recognised in the balance sheet were as follows:

	SGPS £m	RPS £m	LGPS £m	Other £m	Unfunded Plans £m	Total £m
At 1 May 2009	11.6	28.2	33.9	2.5	4.4	80.6
Current service cost	10.1	8.9	1.2	Nil	Nil	20.2
Curtailments	Nil	(0.7)	Nil	Nil	Nil	(0.7)
Interest cost	20.0	11.6	8.5	0.1	Nil	40.2
Expected return on plan assets	(20.9)	(10.8)	(7.8)	Nil	Nil	(39.5)
Unwinding of franchise adjustment	Nil	(1.3)	Nil	Nil	Nil	(1.3)
Employers' contributions	(13.9)	(10.4)	(2.1)	(0.2)	(0.2)	(26.8)
Actuarial losses/(gains)	127.4	12.0	33.9	(0.1)	0.3	173.5
Liability at 31 October 2009	134.3	37.5	67.6	2.3	4.5	246.2

15	ORDINARY SHARE CAPITAL

The ordinary share capital of the Company was as follows:

 

	As at 31 October 2009 £m	As at 30 April 2009 £m
Authorised ordinary share capital
1,221,428,571 (30 April 2009: 936,428,571) ordinary shares of 56/57 pence each	12.0	9.2

	Number of shares	£m
Allotted, called-up and fully-paid
ordinary shares of 56/57 pence each
At 1 May 2009	719,478,434	7.1
Allotted to employees and former employees under share option schemes	286,091	-
At 31 October 2009	719,764,525	7.1

 

The balance on the share capital account represents the aggregate nominal value of all ordinary shares in issue.

The Group operates two Employee Share Ownership Trusts: the Stagecoach Group Qualifying Employee Share Ownership Trust ("QUEST") and the Stagecoach Group Employee Benefit Trust ("EBT"). Shares held by these trusts are treated as a deduction from equity in the Group's financial statements. Other assets and liabilities of the trusts are consolidated in the Group's financial statements as if they were assets and liabilities of the Group. As at 31 October 2009, the QUEST held 333,372 (30 April 2009: 333,372) ordinary shares in the Company and the EBT held 3,526,606 (30 April 2009: 4,153,570) ordinary shares in the Company. The trusts have waived dividends on the shares they hold.

  

16	RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY OPERATIONS

	Unaudited		Audited
	6 months to 31 October 2009	6 months to 31 October 2008	Year to 30 April 2009
	£m	£m	£m
Operating profit of Group companies	72.7	100.2	172.2
Depreciation	38.2	32.0	72.1
Loss on disposal of plant and equipment	0.8	0.6	2.0
Intangible asset expenses	3.2	4.0	8.3
Impairment of plant and equipment	12.4	Nil	0.2
Equity-settled share based payment expense	2.2	1.2	3.1
Operating cashflows before working capital movements	129.5	138.0	257.9
Increase in inventories	(1.8)	(1.1)	Nil
Increase in receivables	(56.4)	(43.4)	(25.9)
Increase in payables	9.7	27.9	63.9
(Decrease)/increase in provisions	(4.5)	(3.0)	5.7
Differences between employer pension contributions and amounts recognised in the income statement	(7.9)	(15.5)	(32.0)
Cash generated by operations	68.6	102.9	269.6

During the period, the Group entered into hire purchase and finance lease arrangements in respect of new assets with a total capital value at inception of the contracts of £36.8m (31 October 2008: £37.3m). After taking account of deposits paid up-front, new hire purchase and finance lease liabilities of £35.1m (2008: £35.9m) were recognised.

17	RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

	Unaudited		Audited
	6 months to 31 October 2009 £m	6 months to 31 October 2008 £m	Year to  30 April 2009 £m
(Decrease)/increase in cash	(43.2)	(26.5)	7.5
Cash flow from movement in borrowings	55.7	52.6	126.4
	12.5	26.1	133.9
Debt of acquired subsidiaries	Nil	(2.0)	(6.8)
New hire purchase and finance leases	(35.1)	(35.9)	(88.6)
Foreign exchange movements	19.7	(38.1)	(58.3)
Other movements	(0.1)	(0.6)	(0.6)
Increase in net debt	(3.0)	(50.5)	(20.4)
Opening net debt (see note 18)	(340.1)	(319.7)	(319.7)
Closing net debt (see note 18)	(343.1)	(370.2)	(340.1)

  

18	ANALYSIS OF NET DEBT

IFRS does not explicitly define "net debt". The analysis provided below therefore shows the analysis of net debt as defined in note 23. The analysis below further shows the other items classified as net borrowings in the consolidated balance sheet.

	Opening	Cashflows	Preference shares redeemed	New hire purchase and finance leases	Foreign exchange movements	(Charged)/ credited to income statement	Closing
	£m	£m	£m	£m	£m	£m	£m
Cash and cash equivalents	198.7	(29.0)	Nil	Nil	(2.5)	Nil	167.2
Cash collateral	78.6	(14.2)	Nil	Nil	Nil	Nil	64.4
Hire purchase and finance lease obligations	(230.6)	14.9	Nil	(35.1)	5.4	Nil	(245.4)
Bank loans and loan stock	(183.7)	36.1	Nil	Nil	Nil	(0.1)	(147.7)
Bonds	(197.7)	3.0	Nil	Nil	16.8	Nil	(177.9)
'B' preference shares	(5.4)	Nil	1.7	Nil	Nil	Nil	(3.7)
Net debt	(340.1)	10.8	1.7	(35.1)	19.7	(0.1)	(343.1)
Accrued interest	(7.9)	8.3	Nil	Nil	0.4	(7.3)	(6.5)
Deferred swap gains	(1.6)	Nil	Nil	Nil	Nil	1.5	(0.1)
Net borrowings (IFRS)	(349.6)	19.1	1.7	(35.1)	20.1	(5.9)	(349.7)

Cash and cash equivalents includes £52.0m (30 April 2009: £53.0m) of fixed-term deposits and amounts deposited in money market accounts that are due to mature between 3 November 2009 and 12 January 2010 (30 April 2009: 1 May 2009 and 8 July 2009).

The cash collateral balance as at 31 October 2009 of £64.4m (30 April 2009: £78.6m) comprises balances held in respect of insurance provision letters of credit of £37.3m (30 April 2009: £44.9m), balances held in trust in respect of loan notes of £25.3m (30 April 2009: £31.4m) and North America restricted cash balances of £1.8m (30 April 2009: £2.3m). In addition, cash includes train operating company cash of £102.4m (30 April 2009: £142.3m). Under the terms of the franchise agreements, other than with the DfT's consent, train operating companies can only distribute cash out of retained earnings and only to the extent they do not breach any franchise liquidity ratios.

19	CONTINGENT LIABILITIES

(i)

At 31 October 2009, the following bonds and guarantees were in place relating to the Group's rail operations: Unaudited Audited As at 31 October 2009 £m As at 31 October 2008 £m As at  30 April 2009 £m Performance bonds backed by bank facilities - Stagecoach South Western Trains 55.7 33.5 55.7 - East Midlands Trains 20.2 20.2 20.2 Season ticket bonds backed by bank facilities - Stagecoach South Western Trains 41.8 39.6 43.0 - East Midlands Trains  4.7 4.8 4.6 These contingent liabilities are not expected to crystallise.

(ii)

The Group and its joint venture, Virgin Rail Group Holdings Limited, have in the normal course of business, entered into a number of long-term supply contracts. The most significant of these relate to track, station and depot access facilities, together with new train lease and maintenance arrangements.

  

19	CONTINGENT LIABILITIES (CONTINUED)

(iii)	Under UK Rail franchise agreements, the Group and its joint venture, Virgin Rail Group Holdings Limited, have agreed with the DfT annual amounts receivable or payable in respect of the operation of rail franchises for future periods. Under these agreements, there is a requirement to comply with a number of obligations. Failure to comply with these obligations would be a breach of the relevant franchise.
(iv)	The Group and the Company are from time to time party to legal actions arising in the ordinary course of business. Liabilities have been recognised in the financial statements for the best estimate of the expenditure required to settle obligations arising under such legal actions. As at 31 October 2009, the accruals in the consolidated financial statements for such claims total £8.3m (30 April 2009: £10.1m).
(v)	The Group provides details of guarantees and other financial commitments in its Annual Report.

20	CAPITAL COMMITMENTS

Capital commitments are as follows:

	Unaudited		Audited
	As at 31 October 2009 £m	As at 31 October 2008 £m	As at  30 April  2009 £m
Contracted for but not provided: For delivery within one year	43.2	113.3	116.9

21	RELATED PARTY TRANSACTIONS

Details of major related party transactions during the six months ended 31 October 2009 are provided below, except for those relating to the remuneration of the Directors and management.

(i)

Virgin Rail Group Holdings Limited - Non-Executive Directors Two of the Group's managers are non-executive directors of Virgin Rail Group Holdings Limited. During the six months ended 31 October 2009, the Group earned fees of £30,000 (six months ended 31 October 2008: £30,000) from Virgin Rail Group Holdings Limited in this regard.

(ii)

West Coast Trains Limited West Coast Trains Limited is a subsidiary of Virgin Rail Group. In the six months to 31 October 2009 East Midlands Trains had purchases totalling £Nil (six months ended 31 October 2008: £0.4m) and sales totalling £Nil (six months ended 31 October 2008: £0.3m) from/to West Coast Trains Limited. East Midlands Trains had a liability of £Nil (31 October 2008: £0.2m) owed to West Coast Trains Limited at 31 October 2009.

  

21	RELATED PARTY TRANSACTIONS (CONTINUED)

(iii)	Noble Grossart Limited Ewan Brown (Non-Executive Director) is a former executive director and current non-executive director of Noble Grossart Limited that provided advisory services to the Group during the period. Total fees payable to Noble Grossart Limited in respect of the six months ended 31 October 2009 amounted to £10,000 (2008: £10,000). At 31 October 2009, Noble Grossart Investments Limited, a subsidiary of Noble Grossart Limited, held 4,084,999 (30 April 2009: 4,084,999) ordinary shares in the Company, representing 0.6% (30 April 2009: 0.6%) of the Company's issued ordinary share capital.
(iv)	Alexander Dennis Limited Brian Souter (Chief Executive) and Ann Gloag (Non-Executive Director) collectively hold 37.9% (30 April 2009: 37.9%) of the shares and voting rights in Alexander Dennis Limited. Noble Grossart Investments Limited (see (iii) above) controls a further 28.4% (30 April 2009: 28.4%) of the shares and voting rights of Alexander Dennis Limited. None of Brian Souter, Ann Gloag or Ewan Brown is a director of Alexander Dennis Limited nor do they have any involvement in the management of Alexander Dennis Limited. Furthermore, they do not participate in deciding on and negotiating the terms and conditions of transactions between the Group and Alexander Dennis Limited. For the six months ended 31 October 2009, the Group purchased £47.8m (2008: £30.3m) of vehicles from Alexander Dennis Limited and £1.3m (2008: £1.0m) of spare parts and other services. For new orders placed with Alexander Dennis Limited for vehicles, the Group has consulted with the UK Listing Authority and taken the appropriate measures to ensure that the transactions with Alexander Dennis Limited comply with the Listing Rules.
(v)	Pension Schemes Details of contributions made to pension schemes are contained in note 14.
(vi)	Loan to New York Splash Tours LLC A net interest bearing long-term loan of £2.7m (30 April 2009: £2.7m) was outstanding from a joint venture, New York Splash Tours LLC, as at 31 October 2009.
(vii)	Robert Walters plc Martin Griffiths became a non-executive director of Robert Walters plc in July 2006 and received remuneration of £27,600 (2008: £21,600) in respect of his services for the six-month period ended 31 October 2009. Martin Griffiths holds 12,000 (30 April 2009: 12,000) shares in Robert Walters plc, which represents 0.01% of the issued share capital.
(viii)	Glasgow Income Trust plc Martin Griffiths became a non-executive director of Glasgow Income Trust plc on 8 November 2007 and received £7,000 in respect of his services for the six-month period ended 31 October 2009 (2008: £7,000).

  

22	POST BALANCE SHEET EVENTS

Details of the interim dividend declared are given in note 8.

Holders of 681,606 redeemable 'B' preference shares elected to have these shares redeemed on 30 November 2009 leaving 5,187,055 redeemable 'B' preference shares in issue.

The Group's US$293.1m bonds matured on 16 November 2009 and these were financed from the Group's existing bank facilities.

23	DEFINITIONS

The following definitions are used in this document:

• Like-for-like amounts are derived, on a constant currency basis, by comparing the relevant year-to-date amount with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods.

• Operating profit for a particular business unit or division within the Group refers to profit before net finance income/charges, taxation, intangible asset expenses, exceptional items and restructuring costs.

• Operating margin for a particular business unit or division within the Group means operating profit as a percentage of revenue.

• Exceptional items means items which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their nature, size or incidence in order to allow a proper understanding of the underlying financial performance of the Group.

• Net debt is the net of cash and borrowings as reported on the consolidated balance sheet, adjusted to exclude any accrued interest and deferred gains on derivatives.

ENDIR UUGUGPUPBGMR

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SGC.L