Shareholder Summary 2009

Moving forward Focusing on our core strengths Shareholder Summary 2009

National Express Group is a leading transport provider delivering services in the UK, North America and Spain. Every year around 800 million journeys are made on our buses, trains, light rail services and coaches. Last year, decided that online communications would be the preferred method of contacting shareholders. The full Annual Report and Accounts and Notice of Meeting are available on our website. However, we have produced this Shareholder Summary to give you an overview of our performance and achievements in 2009.

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Annual Report and Accounts 2009

Home Overview Moving Operating review forward Performance and financial review Focusing on our core strengths Corporate responsibility

Governance National Express Group is a leading transport provider delivering services in the UK, North America and Spain. Financial statements Every year around 800 million journeys are made on our buses, trains, light rail Shareholder services and coaches. information

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Divisional Key financials reviews Revenue Normalised operating profit £2,711.1m £159.8m Print this page Operating cash Net debt Spain generation reduced by

Bookmark this page North America £281.3m £521.9m UK

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To view the full Annual Report and Accounts visit: www.nationalexpressgroup.com/ar2009

2 National Express Group PLC Shareholder Summary 2009 Dear shareholders

There can be no doubt that 2009 was a challenging year for National Express – for its people, its customers and, above all, its shareholders. We faced difficult decisions, some setbacks, a deep recession and significant uncertainty over the Group’s future direction. Nevertheless, we were able to remove our loss-making business, stabilise profitability, successfully refinance much of our debt and draw a line under a difficult period for the Group. With strong shareholder support, we have created a firm platform from which we can develop. We have an appropriate capital structure with good funding support, we retain robust market positions in our businesses from which to grow sustainably, we have a strong operational capability and cost focus from which to drive margins, and we have restored our cash generative ability. Our new Chief Executive, Dean Finch, who joined us in February 2010, has a track record of delivery in the transport industry. He will lead our management team in implementing and refining our strategy – improving margins, driving cash and delivering selective, value-creating growth. I would like to thank our team for facing and weathering the challenges of 2009 – a series of events that few would expect to meet in a single year. Each of our 41,000 employees has focused on the task at hand, delivering results in difficult market conditions, safely and with complete focus on pleasing our customers. I would also like to thank my Board colleagues for their leadership and resolute approach, particularly during a time of personnel change at the highest level. But above all, I would like to thank you, our shareholders, for your continuing support. The success of the Rights Issue, and the subsequent oversubscribed bond issue to debtholders, demonstrate our stakeholders’ commitment to the Group. I have no doubt that National Express is a robust company, with a strong future. Whilst the new year is bound to present new issues and markets will remain difficult, the Group can make good progress, building on the platform created from the challenges we successfully faced in 2009. Yours sincerely,

John Devaney Chairman

National Express Group PLC 3 Shareholder Summary 2009 Group at a glance

Group Spain North America National Express operates in the UK, Spain, and North America. The Group employs 41,000 people and operates over 21,000 vehicles. Passengers make more than 800 million journeys on our services every year.

ALSA Continental Auto Stock Transportation Our Spanish business, ALSA, Our business in North America operates long distance, regional and is focused solely on student urban bus and coach services across transportation and operates in 29 US Spain and in Marrakech, Morocco. states and two Canadian provinces. ALSA was acquired by National The business operates through Express in 2005, and our position medium-term contracts awarded by in Spain was strengthened with the local school boards to provide safe acquisition of Continental Auto in 2007. and reliable transport for students, and Apart from its market-leading position is the second largest private operator in bus and coach service, the business in North America. also operates service stations and Centralised shared services delivered other transport-related businesses, from the Illinois head office support such as fuel distribution. local operational delivery.

Revenue Revenue Revenue £2,711.1m £546.8m £444.5m Normalised* Normalised* Normalised* operating profit operating profit operating profit £159.8m £76.5m £25.3m Employees Employees Employees 41,000 6,100 21,400

4 National Express Group PLC Shareholder Summary 2009

Group revenue by market Group normalised* operating profit by market UK UK 63.4% 39.7% Spain Spain 16.4% 45.3% North America North America 20.2% 15.0% (excludes central functions)

* Normalised results are the statutory results excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon. UK

UK Coach UK Bus UK Rail

National Express Coaches National Express West Midlands National Express Coventry National Express East Anglia The Kings Ferry National Express Dundee National Express operates two rail Airlinks Midland Metro franchises in the UK, both operating is the largest National Express is the market leader in in the East of . C2c serves operator of scheduled coach services the UK’s largest urban bus market outside destinations between London and in the UK. The business operates of London. We operate more than 1,600 South Essex. National Express East high frequency services linking over vehicles and cover over 65 million miles Anglia serves routes out of London 1,000 destinations across the country, per year. We also run bus services in and across Norfolk, Suffolk, Essex including major cities and airports. Coventry and Dundee and operate the and Cambridgeshire, including the We are the UK partner in the Midland Metro light rail service between airport service. Eurolines network which serves over Birmingham and Wolverhampton. These franchises have delivered market- 500 destinations across Europe and leading operational performance and North Africa. will be managed by the Group until their return in 2011.

Revenue Revenue Revenue £242.9m £293.9m £1,190.5m Normalised* Normalised* Normalised* operating profit operating profit operating profit £34.3m £20.8m £12.0m Employees Employees Employees 1,600 5,800 6,100

National Express Group PLC 5 Shareholder Summary 2009 Business overview 2009 was a challenging year for National Express. The Group faced a succession of difficult issues – the global recession; the exit from the East Coast rail franchise; the departure of our Chief Executive; the protracted period during which we dealt with a series of potential bidders for the Group; and finally the demanding and complex refinancing we completed at the end of the year.

Against all this, we have delivered some positive results. We Cost reduction and driving efficiency are our mantra – in difficult reduced costs by £50 million on an annualised basis, secured markets in 2009 we delivered £50 million of annualised savings, and incremental cash generation of over £200 million to drive down reduced operating mileage between 3-5% by keeping our services debt, resolved the East Coast rail position, and capped the year flexible. Yet we still secured new revenue – including a major new with a strongly supported equity Rights Issue, overall delivering urban bus contract in Morocco. £520 million of debt reduction. This was followed by a successful bond issue. Together these have delivered an improved capital UK Coach structure and, as a result, National Express ended 2009 in a far Revenue for UK Coach was £242.9 million (2008: £244.7m) stronger position than it began the year. And in February 2010, and normalised operating profit was £34.3 million we welcomed Dean Finch as our new Chief Executive to take (2008: £27.0m) forward implementation of our strategy. Overall revenue in UK Coach was maintained as passenger Overall revenue in 2009 was down 2% on 2008 at £2.71 billion volumes declined by 2%, with the recession impacting discretionary and normalised* profit before tax (PBT) for continuing operations journeys. Our marketing strategy worked well to protect revenues, was £116.2 million compared to £202.4 million. But most of the with yields improving by 3.3%, and profits up by 27%. decline in profitability related to the losses incurred on the East Our important Stansted Airport routes grew by 10%, with a new Coast rail franchise. If this was excluded from our results, PBT customer centre opened; our dedicated events business grew for the rest of the business was down just £30 million on 2008. by 12%; and in response to increased competition on the Within this performance, UK Coach was the stand-out success Southampton and Portsmouth route, we introduced new services with operating profit up 27%. Spain’s performance was also resilient and grew revenue by 18%. given the difficult economic background, with operating profit down Our £15 million investment in the flagship coach station in 8%. The performances of UK Bus and North America were weaker Birmingham was completed and opened on time in December. in a tough year, but we have clear initiatives in place to recover this. This will become the new Group head office in 2010. Our remaining rail franchises increased profitability. The record profit figure benefited from cost reductions – we The two key events which have enabled us to make progress were removed duplicate services, reduced operating mileage by 4% the handing back of the East Coast rail franchise in November 2009 and reduced overheads. This shows the flexibility of our operating and reducing our debt. model, with 80% of the National Express coach services operated The East Coast franchise had, with hindsight, been too expensive, by third parties. This allows us to focus on filling the seats. reflecting passenger growth that proved unachievable in recession. Looking forward, we will continue to develop better IT systems in Faced with mounting losses, we returned the franchise to the order to improve our yields. This work is being done in conjunction government – together with the necessary penalties. East Coast with our Spanish operation ALSA. accounted for £56.3 million of the year-on-year fall in PBT. Our debt, which had been high at the start of the year, reduced by over £520 million to £657.9 million and our gearing ratio was successfully cut from 3.5 times at its peak in 2008 to 2.5 times by the end of 2009 – a financeable level. This included a Rights Issue in November and self-help cash generation measures, the latter converting £159.8 million of operating profit* into £281.3 million of operating cash** – a profit conversion of more than 175%. A £350 million bond launched in January 2010 also successfully extended our debt maturity. The progress during the year reflects our strategy of driving greater shareholder value from increased focus on the Group’s core businesses, through: • maximising cash generation; • delivering greater cost savings; and • protecting and growing revenue.

* Normalised results are the statutory results excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon. ** Operating cash flow is intended to be the cash flow equivalent to normalised operating profit. Operating cash flow is defined as the statutory cash flow including the following, as appropriate: cash generated from operations and proceeds from disposals of property, plant and equipment, and less the following, as appropriate: finance lease additions, purchase of property, plant and equipment, purchase of intangible assets, payments to associates, payments in relation to exceptional items, UK Rail franchise entry and exit cash flows and discontinued operations’ cash flows.

6 National Express Group PLC Shareholder Summary 2009

We are also improving the quality of the onboard experience, such 2009 was a disappointing year. Profit in local currency was as through the introduction of Wi-Fi, and will be introducing more significantly lower than in 2008 due to higher fuel and infrastructure direct services to key destinations, as well as continuing to grow costs, and the double running costs we incurred as part of our our events and contracts business. programme to transform the business. This programme has proved to be larger and more complex than anticipated, and, having UK Bus reviewed the various elements of the project, we have decided to Revenue for UK Bus was £293.9 million (2008: £341.0m) and progress some, refocus others and terminate ones that proved not normalised operating profit was £20.8 million (2008: £40.0m) to be cost effective. These changes will result in all double running It was a tough year for Bus with normalised operating profits down costs being completely removed in Q1 2010, and we continue to almost 50%. Despite seeing revenue grow by 2% following a fare target a US$40 million reduction in the overall cost base by 2011, increase in January 2009, we lost 3% of volume as unemployment compared to 2009. in Birmingham reached almost 13% – the highest rate in any of the We have brought a more focused approach to our North American eight major UK cities. In Dundee, a new management team has operation, which has included making changes to the senior improved the reliability and operational efficiency of our operation, leadership team. This will bring better cost control and operational although revenue was impacted by the economic downturn. management to the business, and will restore margins, while The fall in profit was due to a number of factors, including improving service to our customers. £2.3 million from the disposal of Travel London during the year. Spain We also experienced a number of cost increases, including: Revenue for Spain was £546.8 million (2008: £483.1m) • fuel – which was £4.5 million worse year-on-year; and normalised operating profit was £76.5 million (2008: • pension costs of £3.5 million; and £83.3m). In local currency, revenue was €612.9 million • the final stage of a three-year pay deal which cost £5.4 million. (2008: €608.5m) and normalised operating profit was However, we are taking steps to improve margins and have a clear €85.7 million (2008: €105.0m). plan of action to address this during 2010. We have hedged our The global recession has had a considerable impact on our Spanish fuel at a much better price than in 2009. We are in the process of business, ALSA. Unemployment has reached almost 20% in Spain, implementing £9 million of further cost savings. We are reviewing and both leisure and discretionary travel have suffered. Underlying our networks to better reflect passenger demand, and are revenue was 5% lower and Sterling profitability in 2009 was down consolidating all our head office functions to a single unit in by 8%. Yet in a challenging year, this was a resilient performance Birmingham and adding benefits from better procurement. by a business that is strong across long distance, regional and UK Rail urban travel. Revenue for the UK Rail division was £1,190.5 million In 2009, 80% of the regional concessions managed by ALSA – (2008: £1,332.5m) and normalised operating profit was worth €92 million in revenue per year – were extended by the £12.0 million (2008: £81.3m). regional authorities. These now run for periods between 2019 and 2034, and we have no concessions due for renewal before 2012. Our UK Rail business in 2009 was dominated by the handing back This allows for long-term investment in services and fleet. of the East Coast mainline franchise in November. The losses on this franchise had a major impact on the financial performance of ALSA has continued to invest in service improvements, including the Rail division, with revenue 11% lower and normalised operating new premium and value for money services, and new ways to buy profit down 85%. tickets. In 2009, three million passenger journeys were made using reservations sent by text message. But the headlines do not tell the whole story. Our two remaining rail franchises – c2c and National Express East Anglia – delivered a In maximising cash generation, the Spanish business generated strong operational and financial performance, demonstrating that some €20 million of annual cost savings, including a 5% reduction the Group remains an accomplished railway operator. During 2009, in kilometres operated to match passenger demand. revenue grew in c2c by 4%, with targeted marketing, and in East Selective organic growth continues despite the recession. ALSA’s Anglia by 1%, where we continue to benefit from the government operations in Morocco now account for 5% of the division’s meeting 80% of any revenue shortfall. c2c had the best punctuality profitability. ALSA has provided urban bus services in Marrakech of any UK rail franchise ever, while East Anglia achieved the best since 1999 and in December 2009 won a similar contract for the performance since we took over the franchise. city of Agadir, expected to add €16 million of revenue from 2011. Both franchises are scheduled to end in 2011, after which the Group Looking forward will cease to have any active rail franchise. However, we would not There is no doubt that 2010 will be another challenging year discount future involvement in rail with the right risk management for all companies in a difficult economic environment. structure in place. However, we know there is scope to continue to improve our North America business, and, having resolved the most serious issues we faced Revenue for North America was £444.5 million during last year, we will build on the platform of simple strengths we (2008: £372.5m) and normalised operating profit was have created: ensuring cash generation, delivering lower cost and £25.3 million (2008: £32.5m). In local currency, revenue securing growth through selective investment. was US$695.0 million (2008: US$690.5m) and normalised operating profit was US$39.6 million (2008: US$60.3m). We will be focusing intensely on the operational management of all parts of the group, and we expect to see continued momentum North America delivered modest revenue growth (up nearly 2%), both in UK Coach and in Spain. We will continue to reduce costs, and once again achieved good contract retention at over 90%. especially in UK Bus and in North America, in order to drive margin We won 19 new contracts in 2009, worth US$30 million annually, improvement, and will further drive the strong cash generation gaining over 500 additional routes. But we also lost, or resigned qualities of the business. due to poor margin levels, 24 contracts, reducing our overall We are committed to driving forward our performance in order network by over 500 routes. to continue delivering shareholder value.

National Express Group PLC 7 Shareholder Summary 2009

Annual Report and Accounts 2009 Moving forward Focusing on our core strengths

National Express Group is a leading transport provider delivering services in the UK, North America and Spain. Shareholder Every year around 800 million journeys are made on our buses, trains, light rail services and coaches.

Visit our download centre

Divisional Key financials reviews Revenue Normalised operating profit £2,71 1 . 1 m £159.8m Operating cash Net debt generation reduced by Information £281.3m £521.9m

Please visit www.nationalexpressgroup.com/ar2009 to view the full Annual Report and Accounts and to access PDF downloads

Shareholder electronic communications Company website By registering for electronic communications you can help us to The Company website at www.nationalexpressgroup.com has conserve environmental resources by reducing print, paper and information about the Group, including press releases, share postage costs. Log on to www.shareview.co.uk if you would like to: price data and copies of the half year and Annual Report and • register your e-mail so that future shareholder Accounts as well as corporate responsibility reporting. The information, including the Annual Report and Company no longer publishes the half year results in hard Accounts, is sent to you electronically; copy. These will now only be available via the website. • check the balance of your shareholding; ShareGift • set up a dividend mandate online; ShareGift is an independent charity share donation scheme • change your registered postal address or administered by the Orr Mackintosh Foundation (registered your dividend mandate details; or charity number 1052686). Those shareholders who hold only a • submit your vote online prior to a general meeting. small number of shares, the value of which makes it uneconomic To sign up for the first time you should click on ‘Register’ and to sell them, can donate the shares to ShareGift who will sell follow the simple instructions – you will need your shareholder them and donate the proceeds to a wide range of charities. reference number from your share certificate or dividend voucher Further information about ShareGift can be obtained from its or any other correspondence sent to you by Equiniti Limited. website at www.sharegift.org and a ShareGift transfer form Dividends paid directly to your bank account can be downloaded from www.nationalexpressgroup.com. Having dividends paid directly to your bank account has the Unclaimed assets register following advantages: The Company participates in the Unclaimed Assets Register • avoids the risk of cheques being lost and (UAR) which provides a search facility for shareholdings and incurring a replacement fee; other financial assets that may have been forgotten. For • saves you time in presenting the cheque for payment; and further information contact UAR, PO Box 9501, Nottingham • the dividend is credited to your account on the payment date. NG80 1WD. Tel: 0870 241 1713 or visit www.uar.co.uk. The tax voucher is sent to your registered address at the 2009 Rights Issue same time as the dividend is credited to your account. To On 11 November 2009, a Rights Issue was announced on the set up a new dividend mandate please log on to www. basis of seven new ordinary shares for every three existing shares shareview.co.uk or contact the Registrar, Equiniti Limited, held on 24 November 2009, at a subscription price of 105p per Aspect House, Spencer Road, Lancing, BN99 share. Dealing in the new ordinary shares commenced on the 6DA. Shareholder helpline number: 0871 384 2152*. London Stock Exchange on 15 December 2009. Shareholders * Calls to this number are charged at 8p per minute from a BT landline. who subscribed for their rights in full should, for UK tax on Other telephone providers’ costs may vary. chargeable gains (CGT) purposes, treat the existing and new Share dealing service shares as the same asset acquired at the time of acquisition of their A telephone and internet share dealing service, which provides existing shares, and the subscription monies for the new shares a simple way to buy and sell shares, is available through our should be added to the base cost of their existing shareholding. Registrar, Equiniti. For further information log on to www. Further tax information can be found in the Rights Issue section shareview.co.uk/dealing or telephone 0845 603 7037*. of the Investor Centre on www.nationalexpressgroup.com. * Calls to this number are charged by BT at the local rate.

National Express Group PLC 7 Triton Square London NW1 3HG Tel: +44 (0) 8450 130130 Fax: +44 (0) 20 7506 4320 e-mail: [email protected] www.nationalexpressgroup.com