MAKING TRAVEL SIMPLER ANNUAL REPORT ANNUAL REPORT & ACCOUNTS 2006 NATIONAL EXPRESS GROUP PLC NATIONAL NATIONAL EXPRESS GROUP PLC ANNUAL REPORT & ACCOUNTS 2006 oup.com oup PLC essgr ess Gr .nationalexpr el: +44 (0)20 7529 2000 National Expr 75 Davies Street London W1K 5HT T Fax: +44 (0)20 7529 2100 e-mail: [email protected] www HIGHLIGHTS DIVIDENDS AND FINANCIAL CALENDAR CONTENTS OPERATING HIGHLIGHTS Final dividend ex dividend date 25 April 2007 1 OUR BUSINESS > PASSENGER GROWTH OF OVER 4% IN COACHES Final dividend record date 27 April 2007 2 CHAIRMAN’S STATEMENT AND 6% IN TRAINS Annual General Meeting 1 May 2007 Final dividend payment date 4 May 2007 3 CHIEF EXECUTIVE’S REVIEW > RAIL BUSINESSES LEADING THE INDUSTRY Interim results announced July 2007 12 DIVISIONAL OVERVIEW PERFORMANCE TABLES Interim dividend ex dividend date September 2007 Interim dividend record date September 2007 14 OPERATING AND > FINANCIAL REVIEW INVESTMENT IN NEW TECHNOLOGY INCLUDING YIELD Interim dividend payment date September 2007 > GROUP STRATEGY MANAGEMENT AND CUSTOMER RELATIONSHIP MARKETING > STAKEHOLDER RELATIONSHIPS > EXCELLENT NORTH AMERICAN BIDDING SEASON WITH > RESOURCES $30.0M NEW BUSINESS WON WITH CONTRACT > DESCRIPTION OF EXPANSION INTO FLORIDA, NEW JERSEY, LOUISIANA THE BUSINESS > OPERATIONAL REVIEW AND ARKANSAS > FINANCIAL REVIEW > CORPORATE INFORMATION > PRINCIPAL RISKS AND SUCCESSFUL INTEGRATION OF ALSA WITH GROWTH IN UNCERTAINTIES ALL AREAS OF THE BUSINESS IN FIRST FULL YEAR OF > CORPORATE RESPONSIBILITY OPERATION AND THE AWARD OF NEW CONTRACTS 28 BOARD OF DIRECTORS AND > COMPANY SECRETARY SALE OF STEWART AIRPORT LEASE FOR $78.5M AGREED, SUBJECT TO REGULATORY APPROVALS, 30 DIRECTORS’ REPORT SECRETARY AND REGISTERED OFFICE REGISTRAR CORPORATE SOLICITORS WITH COMPLETION ANTICIPATED LATER THIS YEAR A J McDonald Lloyds TSB Registrars Ashurst 32 CORPORATE GOVERNANCE National Express Group PLC The Causeway Broadwalk House 38 REPORT ON DIRECTORS’ 75 Davies Street Worthing 5 Appold Street REMUNERATION FINANCIAL HIGHLIGHTS London W1K 5HT West Sussex BN99 6DA London EC2A 2HA 45 INDEPENDENT AUDITORS’ REVENUE Tel: +44 (0)20 7529 2000 Shareholder helpline: 0870 601 5366 REPORT TO THE MEMBERS OF Fax: +44 (0)20 7529 2100 AUDITORS NATIONAL EXPRESS GROUP e-mail: [email protected] FINANCIAL ADVISORS Ernst & Young LLP PLC (GROUP) www.nationalexpressgroup.com Merrill Lynch International Limited 1 More London Place Merrill Lynch Financial Centre London SE1 2AF 46 GROUP INCOME STATEMENT REGISTERED NUMBER 2 King Edward Street 47 GROUP BALANCE SHEET £2.5bn 2590560 London EC1A 1HQ PRINCIPAL BANKERS (2005: £2.2bn) 48 GROUP STATEMENT OF HSBC Bank plc CASH FLOWS STOCKBROKERS 8 Canada Square NORMALISED OPERATING PROFIT* Merrill Lynch International Limited London E14 5HQ 49 GROUP STATEMENT OF Merrill Lynch Financial Centre RECOGNISED INCOME 2 King Edward Street Royal Bank of Scotland AND EXPENSE London EC1A 1HQ 135 Bishopsgate 50 NOTES TO THE CONSOLIDATED London EC2M 3UR ACCOUNTS +19% Morgan Stanley 96 INDEPENDENT AUDITORS’ TO £184.8m (2005: £155.5m) 20 and 25 Cabot Square REPORT TO THE MEMBERS OF Canary Wharf NATIONAL EXPRESS GROUP PLC NORMALISED DILUTED London E14 4QW (COMPANY) EARNINGS PER SHARE* 97 COMPANY BALANCE SHEET 98 NOTES TO THE COMPANY ACCOUNTS 107 FIVE YEAR SUMMARY 76.5p 108 SHAREHOLDER INFORMATION (2005: 76.3p) 109 DIVIDENDS AND FINANCIAL CALENDAR NORMALISED PROFIT BEFORE TAX* 109 CORPORATE INFORMATION This Annual Report and Accounts is printed on Revive 50:50 Gloss and Revive 50:50 uncoated, both papers are produced from 50% recovered waste and 50% virgin fibre. +15% Both the paper mill and printer involved in the production TO £156.1m (2005: £135.3m) support the growth of responsible forest management and are both accredited to ISO14001 which specifies a process for continuous environmental improvement and both are TOTAL DIVIDEND FOR THE YEAR FSC certified. If you have finished reading this report and no longer wish to retain it, please pass it on to other interested PER SHARE readers or dispose of it in your recycled paper waste. *Normalised results are the statutory results Thank you. excluding the profit or loss on the sale of businesses, exceptional profit or loss on sale This annual report is available at www.nationalexpressgroup.com/nx/ic/reports of non-current assets and charges for goodwill impairment, intangible asset amortisation, Designed and produced by Radley Yeldar (London) exceptional items and tax relief on qualifying +8% Printed by CTD exceptional items. TO 34.75p (2005: 32.25p) NATIONAL EXPRESS GROUP PLC 109 NATIONAL EXPRESS GROUP PLC ANNUAL REPORT & ACCOUNTS 2006 ANNUAL REPORT & ACCOUNTS 2006 OUR BUSINESS NATIONAL EXPRESS GROUP IS A LEADING TRANSPORT PROVIDER DELIVERING SERVICES IN THE UK, NORTH AMERICA AND SPAIN. OUR AIM IS TO MAKE TRAVEL SIMPLER OUR VISION WE WILL ACHIEVE THIS BY: > DELIVERING ORGANIC GROWTH IN TO BE A LEADING OUR OPERATIONS THROUGH THE PROVIDER AND RETAILER DEVELOPMENT OF OUR COMMERCIAL OFFER AND THE INNOVATION OF NEW OF TRANSPORT PRODUCTS PRODUCTS AND SERVICES > BIDDING FOR NEW CONTRACTS IN EVERY SECTOR AND WHICH PLAY TO OUR EXISTING COUNTRY IN WHICH WE STRENGTHS OPERATE > ACQUIRING COMPLEMENTARY BUSINESSES TO DELIVER IMPROVED EFFICIENCY AND GROWTH WE ARE COMMITTED TO: > OPERATING THE COMPANY ON A SOUND FINANCIAL BASIS CREATING VALUE FOR OUR SHAREHOLDERS AND OUR STAKEHOLDERS > RECOGNISING OUR WIDER RESPONSIBILITIES TO SOCIETY BY ENSURING WE DO EVERYTHING SAFELY AND RESPONSIBLY 1 NATIONAL EXPRESS GROUP PLC ANNUAL REPORT & ACCOUNTS 2006 CHAIRMAN’S STATEMENT In the UK, Midland Mainline retained its Above all, National Express Group has position as the best performing Inter the objective of “Making Travel Simpler”, City rail operator as well as being by listening to our customers and wider awarded the prestigious “Operator of stakeholders and then delivering what the Year” Award for 2006 at the they want. To do that, we recognise our National Rail Awards. c2c was once people are our most important asset. again named Britain’s best performing We ask great things of them day after train company. Our coach business, day and the Board would like to thank Britain’s No 1 coach operator, goes all our employees for their efforts in from strength to strength with strong 2006 and looks forward to their support volume growth and innovative fare in the future. promotions. Our award winning Levante In early January 2007 a National DAVID ROSS coaches are fully accessible to all our Express coach accident occurred on CHAIRMAN customers including those with the M25/M4. The safety and security of wheelchairs. We have committed to our customers and employees making our entire fleet similarly accessible is of paramount importance to us and EXCELLENT by 2012. Despite increased fuel costs, we were deeply saddened by the RESULTS AND our Bus division produced another events of that night. Our condolences go strong contribution. to those involved in this incident and A PLATFORM The publication of the Stern Review particularly those who lost loved ones. highlighted the pivotal role that transport This year will be a period of change FOR GROWTH can play in tackling climate change. and growth at National Express. We will During 2007, National Express Group continue utilising the skills and values RESULTS AND DIVIDEND will be launching and participating in a such as operational excellence that Revenue was up 14% to £2.5bn number of initiatives aimed at maximising have made this Group so successful (2005: £2.2bn) and normalised Group the role bus, coach and rail can play in but we will build on them. We will apply operating profit increased by 19% to reducing the impact of climate change. an entrepreneurial approach to our £184.8m (2005: £155.5m). After GROUP STRATEGY product and business development interest and the Group’s share of and most of all we will listen to our 2006 was also a year of change for the losses from associated undertakings, customers, our stakeholders and Group. We welcomed Richard Bowker normalised profit before tax was up our people. 15% to £156.1m (2005: £135.3m). as Chief Executive in September. Normalised diluted earnings per share Richard has reviewed our businesses OUTLOOK AND and with the Board concluded that: CURRENT TRADING from continuing operations were 76.5 > pence (2005: 76.3 pence). We have a strong and diversified I am very pleased to report that we We are recommending a final portfolio of businesses. The Group will have started the year well. We have dividend of 24.0 pence per ordinary grow them through acquisitions and prequalified for the Inter City East Coast share (2005: 22.25 pence), an increase new developments, both in the franchise and have recently submitted of 7.9%, to be paid on 4 May 2007 to UK and overseas. We are now actively our bids for the East Midlands and New shareholders on the register at 27 April seeking opportunities to do this and Cross Country franchises. 2007. Including the interim dividend, have a number of potential All of our businesses are performing the proposed total dividend for the opportunities under consideration; well. We believe we can do more in > We are a leading provider of year is 34.75 pence (2005: 32.25 2007 and beyond by offering new integrated transport solutions both in pence). services, putting our customers and the UK and other geographies. Our long stakeholders at the forefront of term commitment to rail is demonstrated am pleased to report that 2006 everything we do and bringing an even in our submissions for the East Midlands was another excellent year for the greater focus to sales and marketing. and New Cross Country franchise bids Group with a strong finish to the Our plans are designed to stimulate and, later this year, the Inter City East year delivering results ahead of repeat business and attract new Coast franchise; our expectations. This was customers to our services thereby > We will invest in the necessary achieved through sustained maximising the growth of our revenue.