INTERIM REPORT 2000 UK Bus East Manchester South Midlands East Midlands North East South West East Scotland North West West and Wales London South East West Scotland

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Strategic Investments Prepayment Cards Road King Infrastructure thetrainline.com United Kingdom

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Hong Kong & China

Australia / New Zealand

FINANCIAL HIGHLIGHTS

Turnover – continuing operations £1,085.5 million, up 30%

Operating proﬁt * – continuing operations £128.7 million, up 14% “Stagecoach aims to provide Proﬁt before tax* £91.8 million (1999 – £130.2 million) long-term shareholder value by creating a global transport Earnings per share * 5.3p (1999 – 7.6p) business, focused on innovation and quality, which benefits both Interim dividend 1.3p, up 8% our customers and employees.”

* before goodwill amortisation and exceptional items CHAIRMAN'S STATEMENT

Brian Souter Executive Chairman

I am pleased to present the Group's results Since mid-October, rail operatingperformance for the six months ended 31 October 2000. has however been significantly impacted by the emergency engineering work being carried The disposal of Porterbrook in April 2000 out by Railtrack followingthe tragicaccident reduced the Group's earnings. Earnings per at Hatfield and the subsequent flooding. share before goodwill amortisation and Conditions for customers and staff have been exceptional items was 5.3p (1999 ^ 7.6p). extremely difficult and we have been working However, excludingthe contributions made by hard with Railtrack and the shadow Strategic Porterbrook and Swebus to our results for the Rail Authority (sSRA) to get services back to equivalent prior-year period, turnover has normal as quickly as possible. This has been increased by 29.8% and profit before interest, largely achieved at South West Trains but we tax and goodwill amortisation has increased by still have some way to go at Virgin with full 12.5%. Turnover from continuingoperations services on the West Coast expected to for the six months was »1,085.5m (1999 ^ resume by January. »836.4m) and earnings before interest, tax and amortisation from continuingoperations Initial revenue reductions have largely been was »126.6m (1999 ^ »112.5m). These offset by the compensation payments which increases include a full six-months' we have received from Railtrack but it is too contribution from Coach USA. early to predict the overall financial impact on each of our businesses. The directors have declared an interim dividend of 1.3p per share which is an 8.3% At South West Trains, we recognise the need increase on last year (1999 ^ 1.2p per share). for innovative solutions to the capacity The interim dividend is payable to constraints which are presently being shareholders on the register at 23 February encountered. Deliveringtimely and effective 2001 and will be paid on 14 March 2001. solutions to this problem is a key aspect of our proposal to the sSRA for an extended Our UK Rail business and Virgin Rail Group franchise. Recent events on the railways in have both delivered strongfinancial the UK have again highlighted the need to performances in the first six months of the strive much harder if this country is to have a year with increased revenues of 7.3% in our modern railway to satisfy passenger UK Rail subsidiaries and 13.3% at Virgin Rail requirements in the 21st century. The Group over the prior year. technical complexities of re-engineering the

2 South West Trains franchise are very Our other overseas bus operations continue to significant but as the incumbent operator I am perform well with both underlyingrevenue confident of our ability to both identify and growth and improved profitability. implement value for money solutions to these problems. Our final bid for an extended On 20 April 2000 we disposed of Porterbrook franchise was submitted on 30 November. realising»773.3 million of cash proceeds for the Group, in addition to a reduction in net The Virgin-Stagecoach proposals for the East debt of »361.6 million. This provided the Coast Main Line franchise are also innovative Group with substantial financial flexibility and and offer an attractive proposition to rail we advised shareholders of our intention to passengers and the sSRA as well as to our buy back up to »250 million of share capital in shareholders. We await an announcement on the next 12 months, subject to there beingno this franchise in the near future. significant investment alternatives to enhance shareholder value. To date the company has Duringthe period we restructured our UK Bus repurchased 333.9 million shares for a total division and, despite a challenging operating cost of »221 million. The Board will continue environment, I am confident that the changes to look at value enhancingopportunities that that we have implemented will benefit the demonstrate long-term returns for division in the medium term. shareholders. If such opportunities are not forthcomingthe company may buy back At Coach USA our focus has been on further shares in excess of »250 million. restructuringand consolidation of the business. The restructuringis progressingto Barry Hinkley left the Board in July 2000 and plan, and we expect to realise the first Graham Eccles was appointed to the Board in significant cost savings from this in the next September 2000. Barry Hinkley had been a financial year. The demographics in North major contributor to the success of the Group America remain positive for our business and over many years and I wish him well for the we believe the market still offers good growth future. Graham has an outstandingtrack opportunities. We have completed a number record in the UK Rail industry and his of small acquisitions so far this year that are expertise and experience is an undoubted complementary to our existingbusiness and asset to the development of our Rail we shall continue to pursue such businesses at this time. opportunities movingforward.

3 CHAIRMAN'S STATEMENT

With the exception of the rail situation, the second half of this financial year has started satisfactorily with the trends we experienced in the first six months largely continuing. In common with the rest of the industry we are monitoringthe financial impact of the current rail disruptions. We also recognise the current volatility in world-wide oil prices and we will continue to evaluate our hedging position and long-term cost base in the light of oil price movements.

We have a solid asset base together with the financial resources required to support the continued development of our bus and rail businesses.

BRIAN SOUTER Executive Chairman 5 December 2000

4 CHIEF EXECUTIVE'S REVIEW

Keith Cochrane Chief Executive

Followingthe highlevels of acquisition and key priority for management is to target disposal activity in the last financial year, my investment into those parts of the business priority has been to consolidate our existing where growth can be achieved. operations and put in place a strategy for growth. The overall results of the Group in the To support this strategy a new management six months ended 31 October 2000 reflects and business structure has been established this and demonstrates a solid business for the UK Bus division with Brian Cox as full performance on which we can build with a time Executive Director supported by an degree of confidence. experienced bus manager, Les Warneford, as Managing Director for the whole division. The UK BUS new structure includes 12 operating Turnover in UK Bus was »270.8m, an increase companies (reduced from 19) each with a of 2.1% from »265.3m in the previous year. Commercial Director to focus on the top-line Operatingprofits were »37.9m, compared to revenue growth strategy, freeing up »41.6m in 1999, representinga fall in Operations Directors to concentrate on operatingmarginsfrom 15.7% to 14.0%. improved service delivery.

The UK Bus division has continued to This new structure is aimed to deliver both a experience revenue and cost trends that were stronger centre and stronger companies and highlighted last year. Within our portfolio, we will be further supported by a new IT strategy have continued to see passenger volume for the division, for which appropriate capital growth in the South but this has been offset expenditure was committed earlier in the year. by declines in the North. Excludingthose This will give us significantly better and more companies where total passenger numbers timely information about our operations and were impacted by strike days, passenger markets so that we can continue to improve numbers have increased by 0.2%. Including service delivery to customers. the effect of industrial action, passenger numbers have fallen by 1.4%. Costs have Our growth strategy will also be supported by risen ahead of inflation principally due to the our joint-venture investments in Prepayment impact of the tight labour market. Cards Ltd whose objective is to develop the use of Smart Cards in the UK transport sector Against this background, our priority is to and our venture with RTI, established to grow revenue to improve margins. There are capture developer contributions for guided many parts of the business where there are busway systems, initially in Northampton and excitingrevenue growthopportunities and a Cambridge.

5 CHIEF EXECUTIVE'S REVIEW

COACH USA and West Regions. Total savings of over $6m Coach USA reported turnover of »361.7m, up have been identified to date as a result of from »157.0m in 1999 with operatingprofit of personnel savings, facility consolidations, »49.5m, up from »34.2m. The prior year service changes, new maintenance amounts represent a three-month period. This procedures and procurement savings. Delivery represents an operatingmarginof 13.7% action plans have been implemented or are in compared to 19.7% for the equivalent progress although significant benefits are six-month period in the prior year. unlikely to accrue in the current year.

Revenue growth of 9% has been achieved We have also made further management over the equivalent period last year with changes at regional and company level. In underlyinggrowthof 2% after eliminating particular I am pleased to report the the impact of new acquisitions. Market appointments of Roger Bowker and Ian conditions remain positive and demand for Mitchell (both formerly senior UK Bus our services is strongparticularly in the Taxi executives) as Senior Vice-Presidents and West Regions. However, as we Operations reportingdirectly to Frank highlighted in our AGM Statement in Gallagher, Chief Executive. Both Roger and September, the tight labour market in North Ian have many years experience in the bus America has led to driver shortages in some industry and will be workingwith Frank and parts of the business, which resulted in lost the eight regional vice-presidents to continue revenue opportunities in the peak summer the restructuringprogrammeand put in place months. We have also seen price the necessary structures to support the competition from other major operators for further development of the business. new tender awards but we continue to adopt a realistic approach to these new Further investment of $39.7m in our fleet has business opportunities. been undertaken to support the future development of the business. We have also The tradingresults at Coach USA reflect the ordered 30 new, environmentally- friendly, cost trends that we set out at the end of last double-deck sightseeing buses for our New financial year. Our like for like cost base has York City operations at a cost of $12m. We increased by approximately 9% over the are continuingwith our roll-out of new equivalent period last year. To offset these maintenance and inventory management and trends we continue to make progress with our charter bookingsystems across the business. restructuringprogrammesboth in the North These will aid the development of best East Region and now also in the New England practice maintenance procedures and improve

6 the effectiveness of our fleet utilisation and of the use of environmentally friendly `green' yield management. diesel in HongKong.

In the period from 1 May 2000 to 31 October A mid-term franchise review was scheduled to 2000, we have completed acquisitions with a take place on or after 1 September 2000. It is total enterprise value of approximately »45m now expected in early 2001. We have a good which have contributed approximately »3m to relationship with the HongKongauthorities operatingprofit in the period. These are and, since acquiringCitybus, we have worked smaller purchases that complement our core closely with the government in developing the business and I am pleased to report that they transportation system in HongKong. are all performingahead of expectations. Accordingly, we approach the mid-term review There remain a number of acquisition with confidence havingdemonstrated our opportunities, although we are applying rigid commitment to improvingpublic transport and financial and non-financial criteria in to the long-term future of Citybus. determiningtheir suitability. We shall continue to complete acquisitions of this In New Zealand and Australia there has been nature where they meet our strict investment good revenue growth brought about by a fare criteria. increase in Wellington and increased patronage in Auckland. We are continuing to OVERSEAS BUS work with the New Zealand Government on Excludingthe contribution from Swebus in the initiatives to further grow patronage and this is prior year, turnover from our other overseas our challenge for the future. bus operations has increased by 12.0% from »85.6m to »95.9m and operatingprofit has Our Portuguese operations continue to deliver increased from »12.8m to »17.8m. This consistent operatingprofits. The outlook for represents operatingmarginsof 18.6% our business in Portugal continues to be compared to 15.0% in the equivalent positive with a number of ongoing projects to six-month period last year. enhance service and revenues.

The results reflect passenger growth in Hong Kongof 4.7% and 4.3% in New Zealand/ Australia and the full year impact of last year's restructuringprogrammes.The outlook for both businesses remains encouraging although we continue to examine the impact

7 CHIEF EXECUTIVE'S REVIEW

UK RAIL corrective engineering work following the Turnover for our UK Rail subsidiaries has Hatfield derailment and subsequent severe increased by 7.3% from »186.4m to »200.0m, weather conditions. For the four-week period whilst operatingprofit has increased from to 11 November revenue growth reduced to »19.5m to »24.3m. 1% over the prior year although this, together with passenger compensation and Continued strong growth in passenger performance payments to the sSRA, will be volumes has underpinned the revenue growth compensated for in part by recoveries from that has been achieved in the six-month Railtrack. Whilst we are now runninga more period. Includingthe effect of reduced normal service, we have not yet seen off-peak patronage following the accident at Hatfield in passenger volumes return to the levels enjoyed late October like for like passenger volumes before the accident at Hatfield. We are for the six months have increased by 8.0% confident that, in the medium term, revenue relative to last year with growth in passengers trends will revert but it is too early to predict in both the peak and off-peak sectors. Costs the overall financial impact for the business. have increased by 5.3%, in part due to increased resource requirements, although the Longer term, we expect that the demand for full introduction of our new trains continues to rail travel to and from London will continue to be delayed pendingthe resolution with the rise. This emphasises the need for positive manufacturer of certain quality-related defects. action to be taken to address the capacity constraints that are currently faced by South We remain committed to ensuringpassenger West Trains. A critical part of our franchise safety as a priority. Recent high-profile proposal to the sSRA is a package of solutions incidents on the UK rail network have to address the capacity issues on a timely underlined the importance of safety and this basis. In particular, increasingcapacity at remains an area of critical focus for our Waterloo is a key focal point of our bid for a management teams. We continually review new South West Trains franchise and our our safety standards and processes throughout proposals would produce capacity all of our operations, regularly conducting improvements as soon as 2002. extensive internal and external safety audits. We have also submitted an indicative tender Since mid-October operatingperformance has for the Thameslink franchise and we are fallen significantly as a result of disruption hopeful of beingincluded on the short-list to arisingfrom the emergencyspeed restrictions submit a final offer for this excitingnew imposed by Railtrack and the necessary franchise.

8 VIRGIN RAIL GROUP For the four-week period to 11 November Our share of profits from Virgin Rail Group's 2000, we estimate that revenues were down train operations has increased from »5.9m to approximately 33% on the equivalent prior »7.6m against an increase in turnover from year period although the unique revenue »128.3m to »145.3m. These amounts are sharingagreementand performance payments before takingaccount of »4.0m (1999 ^ »4.0m) from Railtrack will substantially offset the of goodwill amortisation and »0.8m (1999 ^ profit impact of this downturn. Looking »Nil) of exceptional costs. forward, we would expect to see continuing revenue shortfalls as further engineering work Prior to the tragic accident at Hatfield, like for takes place but it is too early to predict the like revenue growth was 14.4%, which overall financial impact on the business. reflects an underlying growth in passenger volumes of 2.6%. Revenue and passenger Despite these problems the new rollingstock growth has been achieved despite increased and Railtrack infrastructure upgrade work competition from low-cost airlines and we remains on target and we therefore remain remain convinced that the significant product optimistic for the longer-term outlook. The first enhancement that will come from the new train for Cross Country, named `Maiden introduction of new trains and infrastructure Voyager', will be launched tomorrow and we improvements on the West Coast mainline recently announced a further order for 44 will be very attractive to passengers. vehicles to extend each train to nine car operations. In the short term, however, the operations have been severely disrupted by the The joint Virgin-Stagecoach bid for the East emergency speed restrictions and subsequent Coast Main Line franchise offers an exciting emergency engineering work being alternative to the existingfranchisee and a undertaken by Railtrack followingthe Hatfield visionary proposal for a future high speed line derailment. We are now operatinga special slashingjourney times alongthe East Coast timetable for West Coast services route. Negotiations regarding this franchise are representingabout 75% of normal services continuingand we await a decision from the and a similar robust special timetable has now sSRA in the near future. been introduced for Cross County operations. Currently, we expect full services to be operatingagainon the West Coast by January, but we do not expect Cross Country to be in this position until the early Spring.

9 CHIEF EXECUTIVE'S REVIEW

OTHER INTERESTS PrestwickAirport thetrainline.com As anticipated, turnover at Prestwick Airport We have continued to bear our share of fell by 14.5% from »13.8m to »11.8m and marketingand initial operatingcosts in respect operatingprofits fell from »2.0m to »1.3m. of thetrainline.com. We believe that the long-term outlook for this business remains Road King Infrastructure encouraging despite recent events in the rail Our investment in Road KingInfrastructure industry and we regard the business as an continues to deliver good returns. Our results integral part of the ticketing solutions required to 31 October 2000 reflect Road King's to provide a modern railway in the 21st performance for the six months to 30 June century. 2000. Our prior year share of operatingprofit included a one-off gain of »3.4m on the sale thetrainline.com currently has more than two of Road King's interest in Shenzhen Meiguan million registered users. In the first half, our Expressway. Excludingthis gain,our share of share of marketingcosts was »3.7m together operatingprofit increased by 9.2% from with our share of operatinglosses of »3.7m. »6.5m to »7.1m for the six-month period. The The majority of these costs were incurred to growth in like for like operating profit reflects establish the trainline brand and achieve a year on year traffic and revenue growth of critical mass of users. 14% and 16% respectively for the six months to 30 June 2000. The business generates revenue from the Internet ticket bookingsystem and two call centres located in Scotland. At this time, the call centres produce the larger part of total revenue but this proportion is gradually falling KEITH COCHRANE as use of the Internet site grows. Chief Executive 5 December 2000

10 FINANCIAL REVIEW

Martin Griffiths Finance Director

OVERALL REVIEW ongoing restructuring at Coach USA and Turnover for the six months increased by »1.4m relates to the management 1.6% to »1,085.5m and operatingprofit restructuringwithin our UK Bus division. decreased by 45.9% to »92.0m. These trends reflect the disposals of Porterbrook and Earnings before interest, taxation, depreciation, Swebus partly offset by a full six months' amortisation and exceptional items amounted contribution from Coach USA. Excluding to »185.5m (1999 ^ »291.9m). Porterbrook and Swebus from last year's figures, turnover and profit before interest, tax Overall, earnings per share before goodwill and goodwill amortisation have increased by amortisation and exceptional items amounted 29.8% and 12.5% respectively. to 5.3p (1999 ^ 7.6p) reflectingthe disposals of Porterbrook and Swebus in the prior financial The first-half results reflect Coach USA's year, a full six-month's contribution from seasonally stronger six months and include Coach USA and the impact of our share the benefits of continued passenger growth at buyback programme. South West Trains, and in our bus operations in Hong Kong, Portugal, New Zealand and ACQUISITIONS AND DISPOSALS Australia. Duringthe six months ended 31 October 2000, Coach USA has acquired new Depreciation for the period decreased from businesses with a total enterprise value of »103.5m to »56.8m, largely as a result of the approximately »45m which have contributed Group no longer bearing depreciation on the approximately »3m to operatingprofit in the rollingstock owned by Porterbrook. Goodwill period. These have largely been `tuck-in' amortisation increased from »18.2m to acquisitions that complement the established »32.2m, reflectingthe full six months' impact business. of the acquisition of Coach USA completed duringthe prior year period. SHARES IN ISSUE Since commencingour share buyback Exceptional losses before tax of »2.1m (1999 ^ programme in April 2000, we have »Nil) were reported. This reflects repurchased and cancelled 333.9 million thetrainline.com marketingexpenditure and shares at a total cost of »221.0m, Virgin Rail Group arbitration costs offset by representingapproximately 20% of the shares gains made on property disposals. in issue when our buyback programme commenced. Of these, 85.7 million shares at Restructuringcosts amounted to »2.6m a total cost of »58.9m were repurchased in (1999 ^ »3.8m), of which »1.1m relates to the the current financial period.

11 FINANCIAL REVIEW

The weighted average number of shares for Our strongnet assets and historically low the six months ended 31 October 2000 was gearing ratios mean that we are well 1,374.8 million. The number of shares ranking positioned to take advantage of future for dividend at 31 October 2000 was 1,311.8 investment opportunities. million. If no further shares are issued or repurchased in the remainder of this financial INTEREST year, the weighted average number of shares The ratio EBITDA (earnings before interest, for the full year will fall to 1,343.5 million. tax, depreciation, amortisation and exceptional items) to interest is our primary interest cover OPERATING CASH FLOWS AND CAPITAL measure and was 5.0 times (six months EXPENDITURE ended 31 October 1999 ^ 5.0 times). Operatingcash flows fell from »226.0m to »152.6m followingthe disposal of Porterbrook Our total interest charge amounted to »36.9m. and free cash flow decreased from »149.4m This represents an average effective interest to »115.8m. rate of 9.4% which reflects the higher interest rate environment over the last six months, the Capital expenditure in the six-month period lower rate earned on cash deposits together was »75.4m reflectingthe purchase of 156 with costs of amortisingissue costs and non- buses in the UK, 116 vehicles in North utilisation facility fees. America and an investment in land and buildings. At 31 October 2000, a total of 71% of the Group's gross borrowings were covered by NET ASSETS AND NET DEBT fixed and capped interest rates (30 April Net assets increased by »10.2m in the six 2000 ^ 53%). months from »1,391.2m at 30 April 2000 to »1,401.4m at 31 October 2000. This TAXATION represents net assets per share of 106.8p The tax charge for the six months of (30 April 2000 ^ 99.7p). Net debt increased »17.3m represents an effective tax rate of from »549.6m at 30 April 2000 to »840.6m, 30.1%. This is an increase from 22.7% in and primarily reflects the impact of the share the year ended 30 April 2000, and reflects buyback programme and the impact of foreign the fact that the prior year tax charge currency movements on our predominately included the benefits of capital allowances US dollar denominated debt. This represents on the ongoing investment in rolling stock a gearing ratio of 60% (30 April 2000 ^ 40%). by Porterbrook.

12 FUEL HEDGING for pensions and other post-retirement We have hedging arrangements in place to benefits. cover 100% of our expected fuel consumption until 30 April 2001. For the In particular, the AccountingStandards Board financial year ending30 April 2002, we are issued Financial ReportingStandard Number approximately 20% hedged at the current 17 (`FRS 17'), `Retirement Benefits' on time and our hedging position is under 30 November 2000. FRS 17 will require a constant review. change in the Group's accounting policy for defined benefit pension schemes. The ACCOUNTING POLICIES Standard's requirements are to be applied on There have been no changes in the Group's a phased basis with the first impact on the accountingpolicies duringthe six months Group's accounts beingfor the financial year ended 31 October 2000. Our policies have ending30 April 2002. been reviewed against recent accounting pronouncements and the most significant changes expected in the medium term are in MARTIN A GRIFFITHS respect of deferred taxation and accounting Finance Director 5 December 2000

13 CONSOLIDATED PROFIT AND LOSS ACCOUNT

Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 Notes »m £m £m

A TURNOVER: GROUP AND SHARE OF JOINT VENTURE 4 1,085.5 1,068.0 2,179.1 Less: Share of joint venture turnover 4 (145.3) (128.3)(255.6)

A GROUP TURNOVER 4 940.2 939.7 1,923.5

A Continuinggroupoperations 940.2 708.1 1,528.2 Discontinued operations Nil 231.6 395.3 A940.2 939.7 1,923.5 Operatingcosts excludingasset impairment (includinggoodwillamortisation »27.9m (6 months to 31 October 1999 ^ »14.0m; year to 30 April 2000 ^ »39.2m)) (889.8) (826.1)(1,710.0) Impairment of assets at Prestwick airport Nil Nil (30.0) Other operatingincome 3 49.9 54.7 109.5 Group overheads (includingESOP charge) (10.4) (9.7)(21.7)

A OPERATING PROFIT OF GROUP COMPANIES 4 89.9 158.6 271.3

A Share of operating(loss)/profit from interest in joint venture (0.6) 5.9 6.4 Goodwill amortised on joint venture (4.0) (4.0)(8.0) Share of operatingprofit from interest in associates 7.0 9.9 15.2 Impairment of investment in associates Nil Nil (85.0) Goodwill amortised on associates (0.3) (0.2)(0.2)

A TOTAL OPERATING PROFIT: GROUP AND SHARE OF JOINT VENTURE AND ASSOCIATES 92.0 170.2 199.7

A Represented by: Continuinggroupoperations 89.9 82.7 114.3 Joint ventures and associates 2.1 11.6 (71.6) A92.0 94.3 42.7 Discontinued operations Nil 75.9 157.0

A TOTAL OPERATING PROFIT: GROUP AND SHARE OF JOINT VENTURE AND ASSOCIATES 92.0 170.2 199.7 Profit on sale of properties ^ continuingoperations 2.4 Nil 2.4 Profit on disposal of Porterbrook Nil Nil 135.5 Loss on disposal of overseas operations Nil Nil (10.7)

A PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 94.4 170.2 326.9 Finance charges (net) (36.9) (58.2)(144.6)

A PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 57.5 112.0 182.3 Taxation on profit on ordinary activities 5 (17.3) (25.2)(41.4)

A PROFIT FOR THE FINANCIAL PERIOD 40.2 86.8 140.9 DIVIDENDS (1.3p PER SHARE (1.2p ^ 31 OCTOBER 1999; 3.6p ^ 30 APRIL 2000)) (16.7) (19.7)(54.0)

A RETAINED PROFIT FOR THE PERIOD 23.5 67.1 86.9

A EARNINGS PER SHARE ^ Basic 6 2.9p 6.3p 9.4p

A ^ Basic before goodwill amortisation and exceptional items 6 5.3p 7.6p 13.4p

A ^ Diluted 6 2.9p 6.2p 9.3p

A The accompanyingnotes form an integralpart of this profit and loss account.

14 CONSOLIDATED BALANCE SHEET

Unaudited Audited As at As at As at 31 October 31 October 30 April 2000 1999 2000 Restated »m £m £m

A FIXED ASSETS Intangible assets 1,035.5 913.7 953.0 Tangible assets 1,199.9 2,125.3 1,127.7 Investments ^ Investment in joint venture Goodwill 91.8 100.2 96.2 Share of gross assets 88.8 92.3 106.3 Share of gross liabilities (57.3) (60.8)(74.4) Shareholder loan notes 10.0 20.0 10.0

A 133.3 151.7 138.1 ^ Investment in associates 66.0 109.5 59.1 ^ Other investments 2.3 4.6 2.7

A 2,437.0 3,304.8 2,280.6

A CURRENT ASSETS Stocks 44.6 34.9 37.4 Debtors and prepaid charges ^ due within one year 225.4 260.4 199.0 ^ due after more than one year 31.9 35.6 34.4 Cash at bank and in hand 170.0 373.8 816.0

A 471.9 704.7 1,086.8 CREDITORS: Amounts fallingdue within one year (538.8) (846.2)(836.0)

A NET CURRENT (LIABILITIES)/ASSETS (66.9) (141.5)250.8

A TOTAL ASSETS LESS CURRENT LIABILITIES 2,370.1 3,163.3 2,531.4

CREDITORS: Amounts fallingdue after more than one year (863.1) (2,141.6)(1,039.4) PROVISIONS FOR LIABILITIES AND CHARGES (105.6) (237.1)(100.8)

A NET ASSETS 1,401.4 784.6 1,391.2

A CAPITAL AND RESERVES Equity share capital 6.6 7.0 7.1 Share premium account 781.2 393.6 779.7 ESOP distribution reserve 0.9 1.2 1.8 Capital redemption reserve 1.7 Nil 1.2 Profit and loss account 611.0 382.8 601.4

A SHAREHOLDERS' FUNDS ^ EQUITY 1,401.4 784.6 1,391.2

The accompanyingnotes form an integralpart of this balance sheet.

15 CONSOLIDATED CASH FLOW STATEMENT

Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 Restated Notes »m £m £m

A NET CASH INFLOW FROM OPERATING ACTIVITIES 7 152.6 226.0 511.7 DIVIDENDS FROM JOINT VENTURE AND ASSOCIATES 3.6 3.6 6.7

A RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid (43.0) (57.0)(138.3) Interest element of HP and lease finance (4.6) (4.4)(9.6) Interest received 9.5 10.7 26.9

A NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (38.1) (50.7)(121.0)

A TAXATION (2.3) 2.4 (49.9)

A CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets (59.9) (116.9)(258.6) Maintenance capital expenditure Nil (31.9)(63.6) Sale of tangible fixed assets 7.9 6.3 17.4

A NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (52.0) (142.5)(304.8)

A ACQUISITIONS AND DISPOSALS Acquisition of subsidiaries (29.4) (728.2)(768.0) Net cash acquired with subsidiaries 0.5 47.3 49.2 Purchase of goodwill (0.1) Nil (0.8) Purchase of investments in joint venture and associates (1.8) (0.3)(9.8) Repayment of shareholder loan Nil Nil 10.0 Purchase of other investments Nil (12.5)Nil Cost of disposed subsidiaries Nil Nil (196.1) Disposal of subsidiaries Nil 0.3 872.2 Disposal of other investments 0.4 Nil Nil

A NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS (30.4) (693.4)(43.3)

A EQUITY DIVIDENDS PAID (33.2) (27.7)(47.4)

A NET CASH INFLOW/(OUTFLOW) BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING 0.2 (682.3)(48.0)

A FINANCING Sale of tokens 6.1 5.8 14.5 Redemption of tokens (7.5) (8.4)(14.6) Issue of share capital for cash 0.1 0.1 400.4 Costs of issuingnew shares Nil Nil (12.6) Repurchase of own shares (172.4) Nil (45.3) Decrease in collateral balances 23.9 3.7 3.6 Repayment of loan notes (12.5) (0.3)(28.5) (Decrease)/increase in borrowings (421.6) 771.3 295.1 Cost of bond redemption (15.4) Nil Nil Repayments of hire purchase and lease finance (25.4) (32.9)(68.2)

A NET CASH (OUTFLOW)/INFLOW FROM FINANCING (624.7) 739.3 544.4

A (DECREASE)/INCREASE IN CASH IN PERIOD 8 (624.5) 57.0 496.4

A FREE CASH FLOW 115.8 149.4 283.9

A FREE CASH FLOW PER SHARE 8.4p 10.8p 18.9p

A The accompanyingnotes form an integralpart of this cash flow statement.

16 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 Restated »m £m £m

A PROFIT FOR THE FINANCIAL PERIOD 40.2 86.8 140.9 Translation differences on foreign currency net investments 44.9 (9.4)13.5 UK tax effect of translation differences on foreign currency net investments Nil Nil (1.4)

A TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE PERIOD 85.1 77.4 153.0 PRIOR PERIOD ADJUSTMENT Nil (5.6)(5.6)

A TOTAL RECOGNISED GAINS AND LOSSES RECOGNISED FOR THE PERIOD 85.1 71.8 147.4

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 Restated »m £m £m

A PROFIT FOR THE FINANCIAL PERIOD 40.2 86.8 140.9 Dividends (16.7) (19.7)(54.0)

A 23.5 67.1 86.9 Goodwill previously written off to reserves Nil 0.3 339.5 Other recognised gains and losses relating to the period (see above) 44.9 (9.4)12.1 New share capital issued less costs 1.6 2.1 389.7 ESOP distribution reserve decrease (0.9) (0.9)(0.3) Shares repurchased (58.9) Nil (162.1)

A NET ADDITIONS TO SHAREHOLDERS' FUNDS 10.2 59.2 665.8

A OPENING SHAREHOLDERS' FUNDS AS PREVIOUSLY STATED 1,391.2 731.0 731.0 REVERSAL OF UNREALISED REVALUATION SURPLUS RECOGNISED IN PREVIOUS PERIODS Nil (5.6)(5.6)

A OPENING SHAREHOLDERS' FUNDS AS RESTATED 1,391.2 725.4 725.4

A CLOSING SHAREHOLDERS' FUNDS 1,401.4 784.6 1,391.2

17 NOTES TO THE INTERIM REPORT

1. BASIS OF PREPARATION The financial information for the six months ended 31 October 2000 has not been audited, nor has the restated financial information for the six months ended 31 October 1999. However, the interim report includes a review report, signed by the auditors. The figures for the year ended 30 April 2000 do not constitute the company's full statutory accounts, which received an unqualified audit report and have been filed with the Registrar of Companies. This interim report was approved by the Board of Directors on 5 December 2000.

There have been no changes in accounting policies since those used in the annual accounts for the year ended 30 April 2000. There have been certain changes in classification and policy since the interim report for the six months ended 31 October 1999.

Followinga review of groupaccountingpolicies, the presentation of parts and consumable stocks was modified in the annual report for the year ended 30 April 2000. Parts and consumable stocks were previously reported as prepaid stocks within debtors due within one year and are now separately disclosed in the balance sheet. Stocks of parts and consumables are stated at the lower of cost and net realisable value after makingdue allowance for obsolete or slow movingitems. Prior year comparatives for October 1999 have been restated on a consistent basis.

The Group has restated its results for the six months ended 31 October 1999 to reflect the accountingpolicy adopted in the 30 April 2000 audited accounts in respect of the QUEST (one of the group's employee share trusts). There is an absence of any authoritative accounting guidance in this area and the policy adopted at 30 April 2000 better reflects common practice in this area. The restatement has no impact on the reported profits of the six month period ended 31 October 1999.

2. EXCEPTIONAL ITEMS The followingitems have been treated as exceptional: Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A Impairment of assets at Prestwick airport Nil Nil (30.0) Impairment of investment in associates Nil Nil (85.0) Profit on disposal of Porterbrook Nil Nil 135.5 Loss on disposal of overseas operations Nil Nil (10.7) Finance charges Nil Nil (20.6) Profit on sale of properties 2.4 Nil 2.4 thetrainline.com marketingcosts (3.7) Nil (6.2) VRG arbitration claim ^ legal and professional fees (0.8) Nil Nil

A (2.1) Nil (14.6) Tax effect of exceptional items 0.6 Nil 1.1

A (1.5) Nil (13.5)

18 NOTES TO THE INTERIM REPORT

3. OTHER OPERATING INCOME Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A Miscellaneous revenue 24.1 23.5 50.2 (Losses)/gains on disposal of assets, other than properties (0.3) 0.5 0.7 OPRAF franchise support 26.1 30.7 58.6

A 49.9 54.7 109.5

4. SEGMENTAL ANALYSIS (A) TURNOVER Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A UK bus 270.8 265.3 527.0 Overseas bus 95.9 85.6 176.8 Acquisitions ^ 1999/2000: Coach USA 361.7 157.0 424.9

A Total bus continuingoperations 728.4 507.9 1,128.7 Rail 200.0 186.4 376.4 Prestwick airport 11.8 13.8 23.1

A Total continuingoperations 940.2 708.1 1,528.2

A Discontinued operations Swebus Nil 112.7 159.3 Porterbrook Nil 138.2 275.0

A Discontinued operations Nil 250.9 434.3 Elimination of intra-segment turnover Nil (19.3)(39.0)

A GROUP TURNOVER 940.2 939.7 1,923.5 Share of joint venture turnover 145.3 128.3 255.6

A GROUP TURNOVER AND SHARE OF JOINT VENTURE TURNOVER 1,085.5 1,068.0 2,179.1

19 NOTES TO THE INTERIM REPORT

4. SEGMENTAL ANALYSIS (CONTINUED) (B) OPERATING PROFIT Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A UK bus 37.9 41.6 80.8 Overseas bus 17.8 12.8 29.1 Acquisitions ^ 1999/2000: Coach USA 49.5 34.2 60.1

A Total bus continuingoperations 105.2 88.6 170.0 Rail 24.3 19.5 39.3 Prestwick airport 1.3 2.0 2.3 Prestwick airport ^ impairment of fixed assets Nil Nil (30.0)

A Total continuingoperations 130.8 110.1 181.6

A Discontinued operations Swebus Nil 5.5 6.7 Porterbrook Nil 70.5 150.4

A Discontinued operations Nil 76.0 157.1

A Group overheads (includingESOP charge) (10.4) (9.7)(21.7) Goodwill amortisation (27.9) (14.0)(39.2) Redundancy/restructuringcosts ^ 1999/2000 acquisitions (1.1) Nil (0.8) ^ Other continuing (1.5) (3.7)(5.6) ^ Discontinued Nil (0.1)(0.1)

A TOTAL OPERATING PROFIT OF GROUP COMPANIES 89.9 158.6 271.3

A Share of operating(loss)/profit of joint venture ^ train operatingcompanies 7.6 5.9 14.0 ^ train operatingcompanies exceptionals (0.8) Nil Nil ^ thetrainline.com (3.7) Nil (1.4) ^ thetrainline.com exceptionals (3.7) Nil (6.2) Goodwill amortised on investment in joint venture (4.0) (4.0)(8.0) Share of operatingprofit of associates 7.0 9.9 15.2 Impairment of investment in associates Nil Nil (85.0) Goodwill amortised on investment in associates (0.3) (0.2)(0.2)

A TOTAL OPERATING PROFIT: GROUP, JOINT VENTURE AND ASSOCIATES 92.0 170.2 199.7

20 NOTES TO THE INTERIM REPORT

5. TAXATION The taxation charge comprises: Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A Group companies 17.4 23.2 39.3 Share of joint venture's tax (0.2) 1.9 1.9 Share of associate's tax 0.1 0.1 0.2

A 17.3 25.2 41.4

6. EARNINGS PER SHARE Earnings per ordinary share have been calculated in accordance with FRS 14 `Earnings per Share', by calculating group profit on ordinary activities after tax divided by the weighted average number of ordinary shares in issue duringthe period based on the following: Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000

A Basic weighted average share capital (number of shares, million) 1,374.8 1,382.7 1,505.2 Dilutive shares ^ Executive Share Option Scheme 0.5 1.8 2.0 ^ Employee SAYE Scheme 0.5 7.8 5.7

A Diluted weighted average share capital (number of shares, million) 1,375.8 1,392.3 1,512.9

»m £m £m

A Profit after taxation (for basic EPS calculation) 40.2 86.8 140.9 Goodwill amortised on subsidiaries 27.9 14.0 39.2 Goodwill amortised on joint venture 4.0 4.0 8.0 Goodwill amortised on associates 0.3 0.2 0.2 Exceptional items (see note 2) 2.1 Nil 14.6 Tax effect of goodwill and exceptional items (1.4) Nil (1.1)

A Profit for adjusted EPS calculation 73.1 105.0 201.8

21 NOTES TO THE INTERIM REPORT

7. RECONCILIATION OF OPERATING PROFIT TO NET CASHFLOW FROM OPERATING ACTIVITIES Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 Restated »m £m £m

A Operatingprofit of groupcompanies 89.9 158.6 271.3 Depreciation 56.8 103.5 218.7 Impairment of assets at Prestwick airport Nil Nil 30.0 Loss/(profit) on sale of tangible fixed assets 0.3 (0.5)(0.7) Goodwill amortisation 27.9 14.0 39.2 ESOP distribution 0.9 0.8 1.4 (Increase)/decrease in stocks (4.7) 2.0 (0.8) Increase in debtors (17.1) (33.0)(20.3) Increase/(decrease) in creditors 0.9 (13.0)(30.0) (Decrease)/increase in provisions (2.3) (6.4)2.9

A Net cash inflow from operatingactivities 152.6 226.0 511.7

A During the period the group entered into hire purchase arrangements in respect of new assets with a total capital value at the inception of the contracts of »17.2m (31 October 1999 ^ »25.2m).

8. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Unaudited Audited 6monthsto 6 months to Year to 31 October 31 October 30 April 2000 1999 2000 »m £m £m

A (Decrease)/increase in cash (624.5) 57.0 496.4 Bond issues Nil (468.0)(468.0) Cash flow from increase/(decrease) in debt and lease financing 459.5 (270.1)269.6

A (165.0) (681.1)298.0 Loans and finance leases of acquired/disposed subsidiaries (23.1) (515.5)124.2 New HP and lease obligations (15.5) (22.7)(53.3) Sterlingbond issue costs Nil (0.1)(1.3) Translation adjustment (63.5) 19.5 (8.7) Movement in cash collateral (23.9) (3.7)(3.6)

A (Increase)/decrease in net debt (291.0) (1,203.6)355.3 Openingnet debt (549.6) (904.9)(904.9)

A Closingnet debt (840.6) (2,108.5)(549.6)

22 REVIEW REPORT

INDEPENDENT REVIEW REPORT TO STAGECOACH HOLDINGS PLC

INTRODUCTION We have been instructed by the company to review the financial information set out on pages 14 to 22 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

DIRECTORS' RESPONSIBILITIES The interim report, includingthe financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparingthe interim report in accordance with the ListingRules of the Financial Services Authority and applicable United Kingdom accounting standards. The Listing Rules require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the precedingannual accounts except where any changes,and the reasons for them, are disclosed.

REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued in the United Kingdom by the Auditing Practices Board and with our profession's ethical guidance. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessingwhether the accountingpolicies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with AuditingStandards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.

REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2000.

ARTHUR ANDERSEN Chartered Accountants 191 West George Street Glasgow G2 2LB 5 December 2000

23 SHAREHOLDER INFORMATION

STAGECOACH INDIVIDUAL SAVINGS ACCOUNTS

The company has appointed Bank of Scotland as an ISA provider and shareholders who would like further information should contact the help desk on 0131 442 8271.

LOW COST SHARE DEALING FACILITY

The group has set up a low cost postal execution only share dealing facility with Stocktrade exclusive to Stagecoach shareholders. The commission is 0.6% subject to a »15 minimum. Shareholders who would like further information should write to Stocktrade, PO Box 1076, 10 George Street, Edinburgh EH2 2PZ. Telephone 0131 529 0101. Stocktrade is a member of the London Stock Exchange.

FINANCIAL CALENDAR

Interim dividend 14 March 2001 Final report June 2001 Annual General Meeting31 August2001 Final dividend October 2001

The paper used for this report is manufactured in the UK from 75% post-consumer recycled waste, the remainder beingmade from virgin pulp from sustainable forests overseas. The manufacturing process is totally chlorine-free.

Designed and produced by McKinstrie Wilde Millhouse, Edinburgh. Printed by Pillans and Wilson, Edinburgh

24 DIRECTORS AND ADVISERS

Brian Souter, Chairman Keith Cochrane, Chief Executive Martin Grifﬁths, Finance Director Brian Cox, Executive Director Frank Gallagher, Executive Director Graham Eccles, Executive Director Ewan Brown CBE, Non Executive Director Ann Gloag, Non Executive Director Barry Sealey CBE, Non Executive Director Robert Speirs, Non Executive Director Russell Walls, Non Executive Director

REGISTRARS Lloyds TSB Registrars Scotland 117 Dundas Street Edinburgh EH3 5ED

MERCHANT BANKERS Noble Grossart Limited, 48 Queen Street, Edinburgh EH2 3NH

STOCKBROKERS Credit Suisse First Boston 1 Cabot Square, London E14 4QJ

PRINCIPAL BANKERS Bank of Scotland, Uberior House, 61 Grassmarket, Edinburgh EH2 3NH

The Royal Bank of Scotland, Drummond House, 1 Redheugh Avenue, Edinburgh EH12 9JN

SOLICITORS Shepherd & Wedderburn WS, Saltire Court, 20 Castle Street, Edinburgh EH1 2ET

Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS 10 DUNKELD ROAD PERTH PH1 5TW SCOTLAND

TEL : +44 (0)1738 442 111 FAX: +44 (0)1738 643 648

WEBSITE stagecoachgroup.com