Interim Results 8 December 2004

1
Interim Results8 December 2004

2
Robert SpeirsChairman
3
Highlights

• Strong set of results for 6 months ended 31
  October 2004
• Organic growth in bus and rail operations in UK
  and overseas
• Innovative growth ideas fuelling good underlying
  performance at UK Bus
• Strong revenue and passenger growth at South West
  Trains
• 241.4m of capital returned to shareholders
• Shortlisted bids for InterCity East Coast and
  Integrated Kent rail franchises
• Interim dividend up 11.1 to 1.0p per share

4
Martin GriffithsFinance Director
5
Financial Highlights

• Turnover from continuing businesses up 6.7
• 882.0m (2003 - 826.8m)
• Up 8.3 at constant exchange rates
• Operating margin enhancement in continuing
  divisions

Oct 2004 Oct 2003 Before
goodwill amortisation 8.9 7.7 Including
goodwill amortisation 8.0 6.8
Excluding disposed Citybus, Road King and
Trainline businesses but including all of North
America before exceptional items
6
Financial Summary
October 2004 m
October 2003 m

• Turnover
• - continuing operations
• Total operating profit
• - pre exceptionals goodwill(after
  restructuring costs)
• Profit before tax
• - pre exceptionals goodwill
• Free cash flow
• Adjusted EPS
• Dividend per share

886.4 882.0 69.9 78.5 57.2 69.2 128.8 4.0p
1.0p
963.8 826.8 67.3 76.9 44.8 60.3 100.3 3.2
p 0.9p
After restructuring costs of 0.3m (2003 -
4.1m) Free cash flow comprises net cash
inflow from operating activities, dividends from
joint ventures and associates, net cash
(outflow)/inflow from returns on investments and
servicing of finance, and taxation
7
EBITDA
October 2004 m
October 2003 m

• UK Bus
• North America
• Overseas Bus - New Zealand
• - Discontinued
• Rail
• VRG
• thetrainline
• Road King
• Others
• Group overheads restructuring costs
• EBITDA before exceptionals

59.3 21.7 5.9 - 22.9 5.1 - - (0.2) 114.7
(4.5) 110.2
54.0 25.3 6.8 3.5 22.5 5.0 (1.7) 5.0
(0.7) 119.7 (8.3) 111.4
8
Movement in Net Debt
October 2004 m
Opening net debt Cash flows from operations Net
interest paid Dividends paid Net capital
expenditure and new hire purchase/finance
leases Acquisition of businesses and net debt
assumed Sale of businesses and net debt
eliminated First redemption of B shares Foreign
exchange, tax and other movements Closing net debt
(67.6) 127.7 (1.0) (26.6) (53.6) (2.4) 14.4
(220.4) 15.1 (214.4)
9
UK Bus Trading Results

• Divisional turnover growth 10.4 to 351.1m (2003
  - 317.9m)
• Passenger growth of 1.3 outwith London
• 6.3 revenue growth
• Strong contribution from London companies
• 22.1 revenue growth
• Improved operating margin
• Divisional margin, 10.9 versus 10.8 in 2003
• Outside London, 11.8 versus 11.4 in 2003

10
UK Bus Profit Analysis
October 2003 m
October 2004 m
Turnover Operating profit before lease costs,
megabus.com Taxibus Margin Operating lease
costs Saving in depreciation arising from
operating leases Operating profit before
megabus.com Taxibus Margin Megabus.com
Taxibus Reported operating profit Reported
operating margin
351.1 42.6 12.1 (4.3) 1.7 40.0 11.4 (1.8
) 38.2 10.9
317.9 36.3 11.4 (2.6) 0.9 34.6 10.9 (0.3
) 34.3 10.8
11
North America Trading Results

• Turnover 123.6m (2003- 234.0m)
• 13.8 increase in US turnover from continuing
  operations
• like for like increase 12.7
• Operating margin up from 6.8 to 11.7
• Operating profit 14.4m (2003 - 15.9m)
• US26.1m (2003 US26.0m)
• excellent revenue growth
• strict cost control
• overhead reduction

Like for like turnover increase is measured as
the change in turnover from the residual
businesses excluding the impact of foreign
exchange movements Pre restructuring costs,
exceptional items and goodwill amortisation
12
North America Turnover Breakdown By Region
October 2004
October 2003
Turnover USm
Turnover USm
Growth
118.6 63.0 30.5 212.1 8.0 4.0 224.1 m
123.6
105.8 57.5 22.5
185.8 192.1 4.1 382.0 m 234.0
12.1 9.6 35.6 14.2

• Residual businesses
• North East
• North Central
• Canada
• Discontinued
• Residual taxi business to be disposed of
• Total
• equivalent

13
North America Turnover BreakdownBy Product
October 2004 USm
October 2003 USm
Growth

• Scheduled service/Line run/Commuter
• Charter
• Sightseeing Tour
• School Bus Contract
• Total

80.9 52.1 47.6 31.5 212.1
76.7 42.0 36.9 30.2 185.8
5.5 24.0 29.0 4.3 14.2
14
New Zealand Trading Results

• Turnover 26.2m (2003 - 26.4m)
• Underlying revenue similar to last year
  (excluding currency movements)
• Operating profit 3.9m (2003 - 4.9m)
• NZ10.9m (2003 NZ13.7m)
• Operating margin 14.9 (2003 18.6)
• Increased rail competition
• More sustainable level of profitability

15
Rail Trading Results

• Rail Subsidiaries
• First full six months of new South West Trains
  franchise
• Turnover 234.8m (2003 - 216.7m), up 8.4
• Operating profit 21.6m (2003 - 21.5m)
• ahead of original expectations
• Passenger volumes up 4.2 at SWT

16
Rail Profit Analysis
October 2004 m

• Operating Profit per Bid
• Passenger income
• Miscellaneous income
• Net Sch 7/Sch 8 performance payments
• Overhaul work on behalf of ROSCOs
• Staff costs
• Other costs
• Revenue/Profit share to the SRA
• Actual SWT operating profit
• Other, including franchise bid costs
• Total Rail operating profit

12.4 19.4 2.5 (1.8) 0.3 4.0 5.5 (19.8) 22
.5 (0.9) 21.6
17
Virgin Rail Group

• Share of turnover 150.7m (2003 - 149.5m)
• Share of operating profit 5.1m (2003 5.0m)
• Committed to agreeing new long-term commercial
  arrangements on West Coast
• Awaiting decision on SRAs plans for future of
  CrossCountry

18
Taxation
October 2004
Pre-tax m
Tax m

• Pre goodwill and exceptionals
• Exceptional items
• Goodwill amortisation
• Result for the period
• Cash tax paid (net)

69.2 (4.0) (8.0) 57.2
(18.8) 1.3 0.6 (16.9) (12.6)
27.2 32.5 7.5 29.5
19
Balance Sheet Financing

• Net debt 214.4m (April 2004 - 67.6m)
• Outstanding B Shares 21.0m
• More efficient capital structure following
  completion of 241.4m return of capital to
  shareholders
• EBITDA/Interest cover 11.8 times (2003 6.7
  times)
• Progressive dividend policy

Before exceptional items
20
International Financial Reporting Standards
(IFRS)

• First IFRS results six months to 31 October
  2005, with comparatives
• Most significant adjustments will be
• Financial instruments
• Pensions
• Goodwill
• Share-based payment
• Dividends
• B Shares
• Many other less significant areas

21
Brian Souter Chief Executive
22
Group Strategy

• Delivering shareholder value through
• Focus on local transport operations with critical
  mass
• Organic growth in UK and overseas bus businesses
• Complementary bolt-on acquisitions
• Targeted opportunities in UK Rail market

23
Growth in UK Bus

• Core route development
• UK-wide telemarketing campaign
• Kickstart projects Stagecoach initiatives and
  partnerships with local authorities
• Bolt-on acquisitions
• Optical guidance development with Siemens
• Investment in megabus.com

24
Growth in overseas bus

• North America
• Bolt-on acquisitions
• Product development investment in New York
  Sightseeing
• Margin development
• New Zealand
• Deploy successful telemarketing programme
  trialled in UK
• Wellington Trolley Bus Contract expansion

25
Growth in UK rail

• New commercial deal on Virgin West Coast on
  acceptable risk profile
• Target five year extension at SWT
• Bids for commuter (Integrated Kent, Greater
  Northern / Thameslink) and inter-city (Inter-City
  East Coast, Greater Western) franchises

26
Current Trading and Outlook

• Strong trading performance across the Group
• Current trading in line with our expectations
• Progressive dividend growth
• Groups portfolio offers good potential for
  further growth

27
Interim Results8 December 2004
28
Appendices
29
UK Bus Revenue Development
London m
Outwith London m
UK Bus m
2003 Turnover Passenger volumes Tender wins/
contract amendments Fare increases Megabus.com 200
4 Turnover
- 18.8 2.9 0.4 22.1
235.0 3.1 1.7 8.1 2.0 249.9
1.3 0.7 3.4 0.9 6.3
317.9 3.1 17.3 10.5 2.3 351.1
1.0 5.4 3.3 0.7 10.4
82.9 - 15.6 2.4 0.3 101.2
30
UK Bus - London/Other
October 2004 Operating Operating Turnover
Profit Margin m m
October 2003 Operating Operating Turnover
Profit Margin m m
101.2 249.9 351.1
8.6 11.8 10.9
8.7 29.5 38.2
82.9 235.0 317.9
9.0 11.4 10.8
7.5 26.8 34.3
London Other
31
North America Revenue Development
Other USm
Total USm
Core continuing USm
2003 Turnover Impact of disposals and other
movements in non-core US/C currency
impact Underlying growth Acquisitions 2004
Turnover
196.2 (184.2) - - - 12.0
185.8 - 0.8 23.9 1.6 212.1
382.0 (184.2) 0.8 23.9 1.6 224.1
32
Turnover of North American business by Region
and Product
2004 North East USm
2004 North Central USm
2004 Canada USm
2004 Total USm
2003 North East USm
2003 Total USm
2003 Canada USm
2003 North Central USm

• Scheduled service/
• Line run/Commuter
• Charter
• Sightseeing Tour
• School Bus Contract
• Total Turnover

58.2 13.1 34.1 13.2 118.6
11.3 23.0 11.6 17.1 63.0
11.4 16.0 1.9 1.2 30.5
80.9 52.1 47.6 31.5 212.1
57.6 11.9 25.5 10.8 105.8
9.2 19.8 10.2 18.3 57.5
76.7 42.0 36.9 30.2 185.8
9.9 10.3 1.2 1.1 22.5
Note The above figures relate to turnover from
the continuing elements of the three core regions
of North America
33
Overseas Bus Revenue Development
Citybus m
New Zealand m
Total m

• 2003 Turnover
• Disposal of Citybus
• Currency movements
• Volumes
• 2004 Turnover

17.8 (17.8) - - Nil
26.4 - (0.1) (0.1) 26.2
44.2 (17.8) (0.1) (0.1) 26.2
34
Rail Revenue Development
m

2003 Turnover SWT Passenger volumes SWT Fares SWT
Other Island Line/Supertram 2004 Turnover
216.7 8.9 7.8 0.9 0.5 234.8
4.1 3.6 0.4 0.2 8.4
35
Interest/Debt Ratios
October 2004 m
October 2003 m
Finance charges (net) EBITDA pre-exceptionals EB
ITDA pre-exceptionals/finance charges
9.3 110.2 11.8 times
16.6 111.4 6.7 times
36
Finance Charges
Finance charges m
Annual Effective rate
Average balance m
Gross debt related derivatives Cash Joint
ventures associates Non-utilisation/commitment
fees Amortisation of bond issue costs/bank
charges Insurance letters of credit/guarantee Disc
ount on insurance provisions Other
17.2 (9.5) 7.7 (1.3) 0.3 0.4 0.5 1.4 0.3
9.3
6.1 4.6 10.7
561.0 (415.0) 146.0
Average of month end interest bearing debt and
cash balances
37
Fuel Hedging
Forecast 2004/05
Forecast 2005/06
Forecast 2006/07
Actual 2003/04

• of Group fuel hedged/capped at present
• Average hedge price US/barrel
• Average US/ rate
• Average unhedged floating price US/barrel
• Variable fuel costs of continuing businesses
• (excludes product margin/ delivery/tax)
• Total Fuel Cost

97 US 35 1.85 US45 35m 68m
50 US43 1.90 US45 43m 77m
0 N/A 1.90 US45 44m 78m
100 US24 1.71 US32 25m 59m
Continuing Bus divisions use 1.84m barrels of
fuel a year (292m litres) Each US10 per barrel
movement in crude oil price impacts variable fuel
costs by approximately US18m if no hedging in
place
38
Fuel Usage and Impact of Crude Price
Annual Usage litres
Annual Usage barrels
US variable costs based on 45 a barrel
US variable costs based on 35 a barrel

• UK Bus
• North America
• New Zealand

189.0m 81.0m 22.4m 292.4m
1.2m 0.5m 0.14m 1.84m
54.0m 22.5m 6.4m 82.9m
42.0m 17.5m 4.9m 64.4m
39
Capital Expenditure
Capex on new hire purchase m
Impact of capex on net debt m
Disposal Proceeds m
Net m
Cash spent on capex m
23.8 - - - 23.8
35.9 19.0 3.7 1.0 59.6
(2.3) (3.7) - - (6.0)
33.6 15.3 3.7 1.0 53.6
12.1 19.0 3.7 1.0 35.8

• UK Bus
• North America
• New Zealand
• Rail

Excludes proceeds from selling businesses
Note In addition to the above, vehicles with a
capital value of 23.5m were acquired by UK Bus
during the six months on operating leases (2003 -
7.9m).
40
Exchange Rates
October 2003
October 2004
Closing rate
Average rate
Closing rate
Average rate
US NZ C
1.6970 2.7617 2.2367
1.6324 2.7875 2.2299
1.8323 2.6784 2.2350
1.8131 2.7985 2.4114
41
Interim Results8 December 2004