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

Overseas Bus Australia Hong Kong New Zealand Portugal

Coach USA New England Region West Region North Central Region Canada North East Region Taxi Division South Central Region Transit Division South East Region

Rail Supertram (Joint Venture)

Prestwick Airport

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

Canada

USA Portugal

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 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

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