annual report and accounts 2005
wwwnationalexpressgroupcom

a personal 
to travel…
invitation
annual report and accounts 2005 national express group plc
       investing in businesses 
with opportunities 
for growth
1 who we are and operational highlights
2 principal brands  services
3 financial highlights
4 operations by geography
6 how we operate
7 highlights of the year
8 chairman’s statement
10 chief executive’s report
13 coaches
14 buses
15 trains
16 north america
17 alsa
18 financial review
22 corporate responsibility
24 board of directors and company secretary
26 directors’ report
28 corporate governance
33 report on directors’ remuneration
40 independent auditor’s report to the shareholders 
of national express group plc
41 group income statement
42 group balance sheet
43 group statement of cash flows
44 group statement of recognised income and expense
45 notes to the accounts
110 independent auditor’s report to the shareholders 
of the company national express group plc
111 company balance sheet
112 notes to the accounts
123 five year summary
124 shareholder information
125 dividends and financial calendar
corporate information
              who w e are…
national express group is a leading public transport provider 
delivering quality public transport services to the general
public in the uk north america and spain
we are an international group but believe in local businesses
operated at a local level this means our local management
teams understand and meet the needs of their customers
and communities
operational highlights…
• alsa spain’s largest private coach and bus operator acquired in december
and integration progressing well
• disposal of north american public transit division enabling strategic
focus on school bus operations
• record bid season in united states and completion of key
strategic acquisition in canada 
• 2 passenger growth in uk coaches despite effects of
terrorist attacks
• strong operational performance in trains division
above government targets with focus for 2006
on incumbent franchises
• continued growth in london bus market
• substantial ongoing investment in fleet and
customer facilities 2
principal brands  services…
uk
coaches
national express a network of scheduled
coach services to over 1000 destinations
within the uk wwwnationalexpresscom
airlinks provides contract buscoach
services for airlines and the wider airport
community at london airports
wwwairlinkscouk
eurolines scheduled coach services from
the uk to 500 european destinations
wwweurolinescouk
buses
t ravel west midlands the leading bus
operator in the west midlands covering over
500 routes wwwtravelwmcouk
travel coventry provides 80 bus routes in
and around coventry
wwwtravelcoventrycouk
travel dundee operates a comprehensive
network of bus services in dundee
wwwtraveldundeecouk
t ravel london the group’s london and
surrey bus operations
wwwtravellondonbuscouk
the metro provides a lightrail link between
wolverhampton and birmingham city
centre wwwmidlandmetrocouk
trains
national express group operates the
following train franchises in the uk
c2c links south essex towns with 
london fenchurch street station 
wwwc2conlinecouk
central t rains provides highfrequency local
train services in the east and west midlands
and longdistance services between the
midlands east anglia north west and the
east coast wwwcentraltrainscouk
gatwick express provides services between
central london and gatwick airport
wwwgatwickexpresscom
midland mainline operates intercity
services between y orkshire the east
midlands and london
wwwmidlandmainlinecom
‘one’ provides a comprehensive rail network
of services in east anglia including commuter
services to london and the region’s cities
intercity cross country rural lines and
stansted express services
wwwonerailwaycom
silverlink silverlink county operates
between london and northampton
silverlink metro operates through north
east and west london 
wwwsilverlinktrainscom
wagn operates the great northern
services from kings cross and moorgate to
hertfordshire cambridgeshire and norfolk
wwwwagncouk
wessex trains operates local and long
distance rail services throughout cornwall
devon somerset dorsetwiltshire
hampshire gloucestershire and into south
wales wwwwessextrainscouk
north america
durham school services provides student
transportation throughout 
the united states of america
wwwdurhamschoolservicescom
stock t ransportation provides student
transportation in two provinces of canada
wwwstocktransportationcom
stewart international airport located in
new windsor new y ork 
wwwstewartintlairportcom
spain
alsa operates coach and bus services
throughout spain with operations also in
portugal and morocco wwwalsaes 3
• revenue of £22 billion 2004

 £24 billion
• group operating profit up 96 to £1095 million 2004 £999 million
• normalised

operating profit up 85 to £1555 million 2004 £1433 million
• normalised

group operating margin increased to 7 2004 61
• profit before tax up 146 to £893 million 2004 £779 million
• normalised

profit before tax up 107 to £1353 million 2004 £1222 million
• diluted earnings per share from continuing operations up 115 to 445 pence 2004 399 pence
• normalised

diluted earnings per share up from continuing operations 101 to 763 pence
2004 693 pence
• final dividend increased by 77 to 2225 pence per share 2004 2065 pence per share making 
a total dividend for the year of 3225 pence per share up 75 2004 300 pence per share
• £293 million of shares were purchased by the company in 2005 and share buyback 
programme set to recommence
• net debt of £5634 million 2004 £1366 million
financial highlights…
revenue from continuing operations £m
2001
02
03
04
05
20576
21662
23289
23545
22160
normalised operating profit from continuing operations £m
2001
02
03
04
05
1327
1209
1206
1433
1555
normalised diluted earnings per share p
2001
02
03
04
05
552
523
501
693
763
full year dividend per share p
2001
02
03
04
05
220
245
260
300
3225
cash flow from operations £m
2001
02
03
04
05
1855
1755
1828
2541
1811
total number of employees at 31 december from continuing operations
2001
02
03
04
05
33166
34277
33966
33514
40117
2005 was a strong year for the group
 as restated for the transition to ifrs 
 normalised results are defined as the statutory results before the following as appropriate profit or loss on the sale of businesses and charges for goodwill impairment intangible
amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional items and tax relief on qualifying exceptional items
the financial highlights above refer to the results of continuing businesses in compliance with ifrs 4 4
dundee
west midlands
london
birmingham
coventry
dudley
sandwell
solihull
walsall
wolverhampton
walworth 
hayes
byfleet surrey
battersea
twickenham
beddington
west midland depots
yardley 
wood
lea hall
bordesley
perry 
barr
pensnett
birmingham
central
west 
bromwich
acocks 
green
walsall
wolver
hampton
coventry
london depots
battersea
beddington  
walworth
twickenham
byfleet 
surrey
hayes
connections
to europe via
eurolines
connections
to ireland via
eurolines
connections
to ireland via
eurolines
nx coaches
nx airports
eurolines
highfrequency urban bus services operating in the west
midlands london and dundee we also operate midland
metro the lightrail service in birmingham
 travel west midlands
 travel coventry 
 travel dundee
 travel london
 the metro
revenue
£m
200
100
0
03 04
300
2398
2119
05
2686
normalised
operating profit
£m
20
10
0
40
30
03 04
50
416
05
415
475
0
2
03 04
8
6
6263
5539
total number
of employees
’000
05
7089
4
a national integrated network of scheduled and contracted
coach services in three business segments – national express
airlinks and eurolines
 national express
 airlinks
 eurolines
revenue
£m
150
100
50
0
200
03 04
250
1956
1837
05
2005
normalised 
operating profit
£m
30
20
10
0
40
03 04
50
193
155
05
215
total number
of employees
’000
2
1
0
03 04
3
1867
1943
05
1803
 as restated for the transition to ifrs 
 normalised results are defined as the statutory results before the following as appropriate profit or loss on the sale of businesses and charges for goodwill impairment intangible
amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional items and tax relief on qualifying exceptional items
operations by geography…
buses coaches 5 5
clapham junction
victoria
waterloo
charing cross
london bridge
blackfriars cannon st
liverpool st
kings cross
st pancras
euston
marylebone
paddington
fenchurch st
leeds
cleethorpes
grimsby
lincoln
grantham
woodhouse
mansfield
wakefield
doncaster
manchester
liverpool
warrington
crewe
shrewsbury
stafford
stokeontrent
matlock
derby
sheffield
nottingham
loughborough
leicester peterborough
skegness
kings lynn
telford
kidderminster
birmingham
lichfield
nuneaton
coventry
leamington
stratforduponavon
worcester
hereford
gloucester cheltenham
newport
rugby
northampton
kettering
luton
st albans
watford
milton keynes
ely
norwich
great
yarmouth
lowestoft
cambridge
stansted
airport
north woolwich
gatwick airport
ipswich
felixstowe
harwich
colchester
chelmsford
southend
harlow
burton
on trent
richmond
stockport
walsall
barnsley
cardiff
barking
bedford
brighton
worthing
portsmouth
southampton
salisbury
swindon
bristol
bath
weymouth
taunton
torquay
paignton
plymouth
truro
penzance
st ives
falmouth
newquay
looe
gunislake
westbury
avonmouth
exmouth
westonsupermare
yeovil
exeter
barnstaple
c2c
central trains
gatwick express
midland mainline
‘one’
stansted express
silverlink
wagn
wessex trains
a range of intercity commuter and rural passenger train services
 c2c
 central trains
 gatwick express
 midland mainline
 ‘one’
 silverlink
 wagn
 wessex trains
revenue
£m
1200
600
0
03 04
1800 17121
17022
05
14972
1500
900
300
normalised
operating profit
£m
30
10
0
60
40
03 04
70
613
05
642
332
50
20
total number 
of employees 
’000
10500
3500
0
03 04
14000
11536
12854
05
11565
7000
wa
or
ca
az nm
tx
ok
ms
ks
co
ne ia
mo
il
wi
ny
pa
ns
on
stock locations
 etobicoke on
 gormley on
 kingston on
 kitchener on
 london on
 metcalfe on
 oakville on
 gloucester on
 richmond hill on
 scarborough on
 sunderland on
northeast region
midwest region
central region
northwest region
north texas region
southwest region
pacific sw region
durham school 
services regions
halifax ns
 student transportation durham school services
stock transportation
 stewart international airport
the third largest operator of private school bus services in the
united states and the second largest private student bus operator
in canada
revenue
£m
200
100
0
03 04
300
2132
2311
05
2418
normalised
operating profit
£m
20
0
03 04
40
296
05
350
325
30
10
total number 
of employees
’000
12000
4000
0
03 04
16000
13776
13559
05
15880
8000
north america trains 6
how w e operate…
our markets
in the uk we provide bus and train services for key stakeholders such as the department for transport
transport for london and passenger transport executives most of our uk bus and coach operations are
unregulated allowing us the freedom to develop our own operations
our trains division is regulated and we receive government funding to run these valued public services
however we believe we can generate further passenger growth by investing in these operations
in north america our main customers are school boards for whom we provide school bus services
in spain our customers are local and regional transport agencieswe provide national and regional bus
and coach services
our values
our vision is “joining up people and places”
we do this by creating the best possible connections – thinking of the whole journey from the
moment our customers decide to travel and book their ticket to when they arrive at their ultimate
destination
we have four values
easy and simple to do business with…
we form partnerships to help us deliver joinedup and stressfree travelwe make our fares simpler
and easier to purchase by promoting a wide choice of booking channels
taking the lead…
we have invested in new trains and our services to make our customers’ journeys safer more
comfortable and enjoyablewe have also invested in stateoftheart accessible coaches and in buses
which are fitted with the latest cctv technology in order to improve security
open and honest…
we aim to be straightforward in our communications and encourage our employees to be
approachable at all timeswe welcome feedback from our customers and stakeholders and regularly
conduct customer and employee surveys
working together…
ours is a people business people talk to us – and we listenwe recognise that new ideas are best
produced by working together as partners
our principles
• delivering quality accessible value for money services to high safety standards
• continuously improving standards of punctuality and reliability
• establishing quality partnerships with local authorities
• integrating different modes of transport
• reinvesting profits for longterm growth 7
highlights of the y ear…
quarter 1
in january midland mainline achieved its best ever punctuality with 943 of trains reaching
their destinations on timethroughout 2005 mml was the most punctual longdistance train
operator
on entering the london bus market in 2004travel london worked in partnership
with transport for london to develop a new bus depot in south london in february
ken livingstone mayor of london opened the national express group walworth bus garage
in south london
in march the group sponsored a oneday ‘delivering better bus transport’
conference in birminghamthis provided a platform for key stakeholders including the
transport industry politicians and the media to discuss how the role of the bus should
contribute to integrated transport and economic prosperity in the west midlands and other
major uk conurbations
quarter 2
in june the group acquired the london bus division of tellings golden millerthese
operations in south west london and surrey have been integrated into travel london which
now has a fleet of 400 vehicles and operates from six depots
the group acquired northstar passenger services one of canada’s largest operators
in the student bus market its 800 buses and 850 employees have now been fully integrated
into the group’s canadian operation stock transportation
midland mainline launched its schools education programme – momentum –
in four cities across its sheffield to london routethrough momentum mml works with
students as part of the citizenship and personal social and health education national
curriculum module
quarter 3
after extensive research and having worked closely with the mobility and inclusion unit
of the department for transport the coach division launched its innovative dda compliant
fully integrated easyaccess vehicle the levante coach enabling wheelchair users people with
mobility impairments and the elderly to travel in comfort
to support and raise awareness of local issues around its operations in their
respective regions the group sponsored the regional west midlands and south east
receptions at the labour party conference in brighton
wessex trains in conjunction with its partners achieved great success at the inaugural
national community rail awards organised by the association of community rail partnerships
wessex trains’ devon and cornwall community rail partnership was named the overall winner
and community operator of the y ear for its innovative tamar valley carnet ticket scheme
quarter 4
in recognition of its work with local partners to improve the quality of local bus services
travel dundee signed the uk’s first statutory quality bus partnership alongside dundee city
council and the scottish executive in november travel dundee was the winner of the
scottish public transport operator of the year award at the scottish transport awards
in december the group completed the acquisition of alsa spain’s leading private
coach and bus operator gaining an immediate presence in an attractive growth market
alsa’s president jorge cosmen joined the group board as a non executive director
with a growing presence in the greater london area a group initiative supported
the greater london authority’s labour group’s annual event at city hall attended by a
number of labour mps councillors and trades union representativesthis gave the group the
opportunity to promote its london operations
here are a selection of events and initiatives which 
took place across our operations during the year
walworth bus depot opening
with ken livingstone mayor
of london and val shawcross
greater london assembly
member joined by paul
mcgowan managing director
travel london
the mml momentum project
labour party conference with
t ony blair prime minister
alsa acquired in december 8
chairman’s statement
as well as achieving organic growth across most of our operationswe extended our presence
in the public transport market through both new contract wins and acquisitions in existing
and new markets
i am pleased to report the group’s results for the
year ended 31 december 2005
this year will be remembered for the tragic events
of the london bus and tube bombingsthe group
has many operations in and around london and
many of our colleagues were close to or involved
in the aftermath of the eventswhilst our
operations were not directly affected we are proud
that many of our employees played an active role in
assisting londoners during this difficult period i
would like to take this opportunity to thank them
for their commitment and their tremendous efforts
in reassuring the public getting services back to
normal and working alongside the teams from the
emergency services during this difficult time
in december alsa spain’s largest private coach and
bus operator owned by the cosmen family joined
the group in one transaction we achieved critical
mass in a major european country which has good
growth prospects gaining sustainable earnings at
above average margins
alsa is a long established business with an
experienced management team who are keen to
drive the business forwardthe quality of its
product delivery has earned alsa a first class
reputation as both an operator and employer in the
spanish public transport market operating in the
spanish regulated coach and bus markets alsa has
extensive contracts with an average life of nine
years which provides stable earningsthese features
provide stability to the group’s earnings
recognising the opportunities that exist in the
enlarged company the cosmen family acquired a
substantial shareholding in the group and we are
delighted that jorge cosmen has joined the group
board as a non executive director
this development gives the group a significant
combined coaching operation enabling the transfer 
of best practice between two major businesses
our initial focus has been the integration of alsa’s
financial and reporting systems which is currently
on schedule our management teams are already
working well together to identify cost synergies
particularly in procurement risk management and
itwe believe there are many opportunities to
grow this business by the use of better yield
management and improved marketing in addition
we will be drawing on our experience in the uk
coach market to reduce alsa’s cost of salesthe
respective cultures of national express and alsa
have significant similarities which should enable the
integration plan to be fully delivered by the end of
this yearwe are pleased with the progress we have
made to date and are confident that we can
achieve the benefits identified when we announced
this strategic move
this year we revised our north american strategy
to focus on our highly successful school bus
operations where our strong reputation with our
customers delivers a high quality and reliable
earnings stream consequently we sold atc our
public transit business during the year
as part of the rail remapping we have agreed with
the department for transport “dft” to align our
central trains silverlink and midland mainline
franchises to run until the end of 2007we are
currently in discussions with the dft to agree the
financial arrangements around the new extensions
on the next round of bidding during 2006 we will
focus on franchises where we are incumbent and
as a consequence we have withdrawn from the
competition for the south western franchise
david ross
chairman
“we remain confident that the
foundations are in place to
enhance shareholder value
through organic and acquisitive
growth whilst maintaining
dividend and share buybacks” 9
following the announcement relating to the gnthameslink
and greater western rail franchises the employees of wagn
and wessex trains will leave the group on 31 march this
year i would like to thank them for their contribution whilst
part of the group and wish them all the best for the future
as part of our succession planning process and following a
thorough selection process i am delighted that following the
retirement of brian jackson denis wormwell was appointed
chief executive of our uk bus division in february
consequently paul bunting moved from midland mainline to
replace denis as chief executive of our uk coach division
the board 
after what will be ten years as chief executive phil white
has decided he will be retiring from the group by the end of
this year phil started his career with the group in 1994 as
finance director of travel west midlands and was appointed
chief executive of the group in january 1997 he guided the
group’s entry into north america and subsequently into
continental europe with the alsa transactionthe board is
unanimous in thanking phil for his contribution over the years
and wishes him well for what the next stage in his life will
bring on a personal level i would like to thank phil most
sincerely for his help and support since commencing my
tenure as chairman in may 2004the process to find a
successor is now underway
i am also pleased to report that this year phil white has
taken on the role as president of the confederation of
passenger transport the national trade association
representing the uk bus coach and lightrail operators
furthermore with the group’s interests in rail ray o’toole
joined the british transport police authority as an authority
member
on 21 september 2005 barry gibson was appointed senior
independent director following tim stevenson’s resignation
from the board i would like to thank tim for his valuable
contribution
results and dividend
turnover was £22 billion 2004 £24 billion and normalised
group operating profit increased by 85 to £1555 million
2004 £1433 million after interest and the group’s share
of losses from associated undertakings normalised profit
before tax was £1353 million 2004 £1222 million
normalised diluted earnings per share from continuing
operations were 763 pence 2004 693 pence
we are recommending a final dividend of 2225 pence per
ordinary share 2004 2065 pence an increase of 77 to 
be paid on 26 may 2006 to shareholders on the register at
28 april 2006 including the interim dividend the proposed
total dividend for the year is 3225 pence per ordinary share
2004 300 pencewe shall also be recommencing our
£100 million share buyback programme subject to market
conditions
current trading and outlook
the current year has started wellwe have experienced good
operational performance across all our divisions and achieved
early successes in the current us school bid seasonwe are
making good progress with the integration of alsa and believe
this division will play a key role in the group’s future growth
prospects 10
chief executive’s report
phil white
chief executive
this year the chief executive’s report takes on a new question and answer format this brings
together the questions most frequently asked of chief executive phil white and covers areas such
as highlights of the year and the strategic focus of the group 
q what have been the highlights of the 
past year
a this has been an excellent year as our results
clearly show and at the same time there have also
been some significant moves for the group
the most impressive was undoubtedly the deal
which saw us join up with alsa in the spanish
transport market alsa is not only spain’s leading
private coach and bus operator – it is also 
a quality business that i have admired for 
many years
i’m pleased to welcome the alsa management
team into the national express groupwe’ve
wanted to enter a major continental european
market for some time but we needed to find the
right way with the right purchase i believe that
alsa is that ‘right purchase’ and i’m confident that it
brings tremendous opportunities for growth both
organically and through acquisition alsa is a long
established family business with a very strong
professional management team that was keen
to join the national express family
i’m delighted that the cosmen family has taken a
large shareholding in the group with jorge cosmen
joining the board as a non executive director
it is our aim to move alsa from a family owned
business to an international organisation while
retaining its core values it is helpful that alsa like
national express believes in local autonomy for
management quality services and supporting its
employees through training and development
there is a great willingness on the part of the alsa
management team to be fully integrated into the
group demonstrated by the tremendous energy
that is being put into our integration project
another milestone which occurred this year is 
the government’s proposal to introduce demand
management of traffic congestion in our cities as
this will have a positive impact on the use of public
transport i would like to congratulate alistair
darling secretary of state for transport for 
having the courage to take this important but
tough decision
our team has turned in an excellent performance
during the year and it has been a privilege to lead
them our coach bus rail and north american
student transportation activities have all made
great strides in terms of quality performance
customer satisfaction and employee engagement
q and what have been the low points
a the tragic events of 7 july in london were
undoubtedly one of the worst events of 2005
particularly as they followed on the back of the
excitement of the 2012 olympics award to
londonthis was a devastating event for
everybody especially those connected with our
capital city and i want to put on record my
appreciation of the emergency services and our
staff who coped so admirably in very challenging
circumstances of course our difficulties pale into
insignificance compared to those who suffered loss
or injury and my greatest sympathies are with
those families affectedthe followup alerts on 
21 july which were thankfully thwarted and
subsequent alarms in major cities such as
birmingham further damaged confidence in 
public transport and it has taken many months 
to regain our customers’ trust
“i genuinely believe that
we have achieved much
this year positioning the
group well for the future” 11
like everybody in our industry i am shocked by the level of
crime that takes place on our services and around our
facilities our depots terminals and stations are part of the
fabric of the community and the safety of our customers and
employees is of paramount concernwe are actively working
with british transport police the department for transport
and other stakeholders to identify ways to cut crime and
improve security
q what has been the main management focus
this year
a in our daytoday business we focus on our customers as
they are our top priority and that’s true regardless of
whether they’re travelling by train to a meeting in london or
on a yellow school bus in toronto punctuality reliability and
safety are the keys to our businesswe’ve taken an industry
lead in managing the switch from an operations led business
to a customer focused businesswe look at the journey as a
whole experience from the moment a customer thinks
about buying a ticket it’s not just about when they’re on
board one of our services
and one key element of ensuring we understand our
customers’ expectations is being able to get the views of 
our employees who are in the frontline of our operations
they have first hand experience of what our customers 
think about the quality of our serviceswe regularly seek our
employees’ views to identify those areas where we feel we
could do better
q how does the group differ from its peers
a at national express group we have strong local management
teams running our businesses local decisions are taken by
local managers to ensure local delivery operational
performance is a priority and during this year we made great
progress particularly in our trains division as is shown by the
industry performance and customer satisfaction figureswe
constantly think of ways to work smarter our reengineering
process in north america is an illustration of thiswe always
look at new initiatives to drive our business forward –
whether it’s looking at new ways to do things such as new
pools of recruitment eg polish drivers or new technology
such as mobile ticketingthere is always a better way to
operate – and we are always looking for new ideas
q how have you grown the business
a we have seen a steady increase in patronage throughout the
yearwe are seeing more and more customers wanting niche
products such as our premier commuter bus service in
birmingham at the same time we have introduced a number
of fares initiatives – such as airlinetype fares on midland
mainline – that are designed to appeal to a broader range of
customer and encourage offpeak travelwe always aim to
provide our customers with the best value for money fares
although we have been hit by the increased cost of fuel
during the year
q how have relationships with key stakeholders
developed during the year
a good relationships with stakeholders are absolutely key if we
want to develop the quality of services that our customers
expectwe can only provide this if we have the right rail and
road infrastructure and this is where we need the help of
government airlines can’t operate without airports trains
need tracks and buses and coaches depend on an effective
road network
during the year we were pleased to sign a statutory quality
partnership with dundee city council and the scottish
executive to further improve bus services around dundee
we also worked closely with centro and the west midlands
passenger transport authority which are both key partners
to the successful operation of our birmingham bus business
we hosted a major bus conference in birmingham looking at
the positive initiatives that are taking place in the bus market
2005 also saw us working closely with central government
on the rail remapping and helping with the establishment of
the dft as the new body responsible for rail refranchising
q what does the group want to be known for
what does it stand for
a our business values are all about being easy and simple
being open and honest taking the lead and working together
these are the foundations for our reputation as a quality
business – and that’s something we’re committed to
maintaining and improving
we aim to deliver for all our stakeholders especially our
passengerswe want to be open and honest and not let
people downwe want to be ahead of the game in terms 
of innovation – introducing new concepts such as the easy
access levante coach and implementing new technology
such as mobile ticketing machines plus a variety of other
initiatives that help our customers when they travel with us
we want to earn the reputation for being good to do
business with whether as a partner supplier or customer
for shareholders we want to be known for providing value
for running a dynamic business efficiently and for achieving
solid and sustainable growth
we aim to be an employer of choice and we need to ensure
that we do our best to attract and retain top quality people
q how does the group intend to get from where
it is to where it wants to be
a we will continue to focus on giving customers more and
better reasons to travel with us more oftenwe will also
continue to test new markets where we can add value to
existing businesses and grow them
as always our employees will play a vital – in fact the most
vital – role in this processthis is a people business and our
frontline employees such as bus and coach drivers and
the ontrain teams are the face the eyes and the ears
of our business 12
we greatly value the information that our annual employee
survey brings to the business and we use it to make sure that
we meet customer and employee needs in our experience
when our employees are happy our customers are happy
training and development remain central to our businesswe
have a good track record of investing in our people and this
will continue in 2006 making full use of our new customer
service academies in birmingham derby and london which
provide centres of excellence where skills can be transferred
across our peoplewe are also introducing new training
initiatives including a new leadership development programme
q what are the key risks for the group
a we aim to be transparent with all our stakeholders
our annual report and corporate responsibility report
highlight the key issues for the group
in common with all companies in the transport sector we
face the risk of disruption to our business through
circumstances beyond our control
of those risks that are directly related to our business
the greatest is that we cease to offer the products that 
our customers want no customers means no revenue
profit or ultimately no businesswe regularly carry out
customer satisfaction surveys to make sure we understand
their changing expectations
we also need to ensure that we have the right people in
place to build our business therefore we are investing in
recruiting and retaining high quality people
q what are the challenges for the year ahead
a i believe the key challenges for 2006 are
– developing the customer base across our businesses and
having a better understanding of our customers’ needs
– seeking to grow the business particularly in the offpeak
leisure market
– ensuring that alsa is effectively integrated into the business
– transferring best practice between both our coach
operations
– aiming to keep ahead of our rivals and to anticipate
changes in customer demand
– and finally continuing to manage our cost base
from a strategic point of view we will continue to focus on
growing the business both organically and also by acquisition
we remain open to opportunities wherever and whenever
they are presentedwe have to seize opportunities when they
arise as we did with alsa i believe we are well placed to
achieve these goals
q where will the group be in five years’ time
a on a personal level i have announced my intention to retire
this year after twelve years with the group with ten years as
chief executive it has been both a challenging and rewarding
experience and i am indebted to my colleagues for their
support over the years
in five years’ time i think we will have a bigger and better
national express groupwe will continue to grow in uk
buses and coaches with a larger presence in london our uk
train portfolio will be balanced and deliver quality earnings
we are aiming to be a leading market player in north
america and to have a growing business in spain in addition
we will seek other opportunities in new markets where our
core skills can be exploited
i genuinely believe that we have achieved much this year
positioning the group well for the future
chief executive’s report continued 13
the division experienced an encouraging
year as we focused on our core scheduled
coaching businessthe first half saw good
growth on our london bound and airport
routes however the terrorist incidents in
july and the subsequent reduction of
inbound leisure journeys into london saw a
softening of this growth in the second half
nevertheless in the full year passenger
growth of 2 was achieved
following a detailed market segmentation
analysis undertaken early in the year we are
working on strategies to increase further
the appeal of coach travel our promotion
of dynamic pricing continues to play a key
role enabling customers to buy value for
money ticketswe repeated our successful
£9 “go anywhere” fares as well as the
“million seat sale”these along with our
continued rollout of funfares from as little
as £1 each way backed up by national
advertising campaigns have heightened an
awareness of coach travel amongst existing
and potential customerswe have further
extended our sales channels through the
increased promotion of the internet which
now accounts for 21 of total sales eticket
and mticket sales increased up to nine
out of ten purchases on the web are now
etickets with up to two thirds of all tickets
sold via our customer contact centre
distributed by either e or mtickets
our investment in coach stations continues
working in partnership with baa we
invested £2m to improve heathrow central
bus stationthe new customer facilities
include improved waiting and refreshment
areas and a new ticket office and
information desk further investment is
taking place at key locations at cardiff
cheltenham manchester airport and
southampton with plans for further
improvements at bournemouth leicester
milton keynes and wolverhampton
we have drawn up plans for the total
redevelopment of digbeth coach station 
in birmingham our major hub for
connecting services and we anticipate
construction starting later this year
we are improving the quality of our
product and serviceswe have been 
rolling out our stateoftheart “wow”
coaches used currently on the london to
birmingham route onto other key corridors
such as bristol cheltenham and gloucester
nxtv has been fitted on over 40 vehicles
and will be rolledout further by the end of
2006this year we were proud to launch
our first fully accessible coach the caetano
levante enabling wheelchair users and
people with mobility impairments to travel
by coachthe bespoke vehicle which has
been developed in consultation with the
mobility and inclusion unit of the dft
complies with the new dda legislation
which was introduced at the start of this
yearwe aim to have a fully wheelchair
accessible fleet on the network by the
london 2012 olympic games
last year we were pleased to be awarded
contracts for the provision of coaching
services for the g8 summit and the eu
summitthis year we have extended 
our provision of transport services to 
other events including music and sporting
events at venues such as the millennium
stadium cardiff
we are investing in new technology such as
coachcom which provides satellite tracking
and improved information for customers
drivers and operational controlthe new
system will also improve seat utilisation by
‘checking in’ all tickets at the departure
point enabling all coach tickets to be
checked in coachcom will be rolledout
across the whole fleet from summer 2006
revenue for the year was £2005 million 2004 £1956 million with a
normalised operating profit of £215 million 2004 £193 million

paul bunting
chief executive
nx coach division
in february 2006
paul bunting previously
managing director
of midland mainline
was appointed chief
executive of the
coach division
coaches 14
we welcomed the early introduction of
centro’s concessionary fares scheme
providing free travel for men and women
over 60 in july 2005this move helped to
reverse the decline in concessionary fare
passenger numbers we have experienced
over the past two years
we are pleased with our improved
operational performance during the period
this has been achieved by the recruitment 
of over 400 polish drivers within our travel
west midlands “twm” business over 10 of
these drivers have already achieved their
nvq qualifications and we are starting to 
see the first polish recruits being promoted
to traffic controllersthree out of every five
drivers in the west midlands have nvq level
2 qualifications and over four out of five travel
london drivers have been awarded the 
btec accreditation
following its launch in january 2005 strong
passenger growth of over 20 continues to
be experienced on our premier 997 service
linking walsall and birmingham recent
research has confirmed that half of all users
actively choose this service over alternatives
due to its quality offering highlighting the
opportunities that product segmentation
presentswe continue to look for other
opportunities where similar growth
possibilities exist
with central government’s renewed focus
on reducing urban congestion we believe the
introduction of road pricing in london
illustrates the benefits and increased bus
patronage that can be achieved on the back
of such initiativeswe welcome the launch of
the government’s transport innovation fund
“tif” focusing on demand management
which highlights the west midlands as one 
of the tif feasibility areas
our investment in technology continues 
with the rollout of automatic vehicle location
“avl” equipment and mobile phone based
real time information for over 350 vehicles
during 2006 we will rollout avl on key
routes including the main outer circle 11
route in birminghamto improve the
attractiveness of travelling by bus we have
simplified further our ticketing and extended
some concessionary ticket offers such 
as the early bird travelcard to non
concessionary passengers
in september 2005travel dundee signed the
uk’s first statutory quality partnershipthis
will be launched in april 2006 in partnership
with dundee city council and the scottish
executive and will focus on improving bus
services within the dundee areathis has
resulted in the introduction of a new cross
city link to a major hospital in the city
providing a valuable new community service
under the government’s kick start initiative
in the last quarter of the year travel dundee
achieved investors in people status and in
november was awarded “bus operator of
the year” at the scottish transport awards
this year we achieved further growth in 
our travel london operation through new
contract wins and the acquisition of tellings
golden miller’s london bus operations which
have been integrated into our london
businessthis has resulted in a much greater
presence in the london market a regulated
market where further contract opportunities
existwe operate a fleet of over 400 vehicles
operating from six depots at which there
remains additional capacity to accommodate
future growth
the midland metro continued to perform
well with passenger growth of 2we are
continuing to discuss with centro the long
term development of this system including
line extensions and new services
buses
revenue for the period was £2686 million 2004 £2398 million and
normalised operating profit was £415 million 2004 £416 million

denis w ormwell
chief executive
nx bus division
denis wormwell was
appointed chief executive
of the group’s bus division
in february 2006
denis was previously
chief executive of the
coach division 15
2005 saw the launch of a major internal
initiative focused on improving punctuality
and reliability within the trains divisionthis
resulted in significant improvements in
performance across all our franchises
including central trains a highly complex
regional train operating company “toc”
where considerable progress was made five
of our tocs are in the top seven positions 
in the latest industry public performance
measure “ppm” figures released in 
january 2006
the division also made encouraging progress
in its customer satisfaction ratings gatwick
express consolidated its position at the top 
of the league tables for customer satisfaction
recording an overall satisfaction rating of 
93 in the dft’s december 2005 national
passenger survey marking the fifth
consecutive period when gatwick has 
been rated first in the survey in addition 
c2c improved its results from 83 to 90
and midland mainline showed the greatest
increase yearonyear rising 10 points to 89
this year overall the trains division improved
its customer satisfaction scores by three
points from 79 last year to 82
during the first half of the year we
experienced substantial patronage growth
however following the terrorist attacks in july
demand for discretionary travel in and out of
london was badly affectedwe are pleased
that passenger numbers returned to prejuly
levels towards the end of the year
midland mainline made good progress in the
year with passenger growth of 3 and was
the most punctual long distance operator for
2005 in the january 2006 ppm figuresthis
performance was assisted by the introduction
of the new meridian nine car trains growth
was also achieved through new marketing
initiatives including a summer promotion
offering 200000 seats to london for £15 per
person and a new pricing structure launched
in october offering travel from sheffield to
london for £6with sheffield station being a
key hub for our mml services we have
worked in partnership with key stakeholders
in sheffield to improve the ambience and
quality of the station in june a new dda
compliant travel centre was opened including
extra ticket windows and a new electronic
queuing process
gatwick express performed well despite the
impact of 7 july strong revenue and cost
control ensured the solid performance of the
businesswe will be discussing the future of
this franchise with the dft following
publication of the brighton main line route
utilisation strategy
in december‘one’ introduced its new
timetable on the west anglia routethe
changes the biggest on this route for fifty
years seek to optimise route utilisation to
meet the growth at stansted airport whilst
also catering for growth on the domestic
commuting traffic to the city stratford and
on to canary wharf due to the complex
nature of the changes stakeholder
consultation has been extensive and the
majority of users have benefited from the
improved scheduling
trains
revenue for the period was £14972 million 2004 £17121 million
with normalised operating profit of £642 million 2004 £613 million

david franks
chief executive
nx t rains division 16
2005 was a watershed year for our north
american business as well as selling our
public transit business we experienced our
best ever bidding season and won contracts
in connecticut missouri and rhode island
we achieved a retention rate of contracts
of approximately 95 highlighting strong
levels of customer satisfaction all
operations experienced a smooth school
startup a significant feat given the amount
of new business won during the year
we are pleased to report that we
increased our margins despite the cost
pressures that we face
in september we completed the sale of 
our public transit operations for cash
consideration of us93 million before
working capital adjustments enabling the
division to focus on the provision of and
growth in school bus transportation in
august we strengthened our presence in
the school bus market in canada through
the acquisition of northstar which services
school boards northstar operates 800
school buses and has 850 employees it
serves 12 school boards and provides entry
into new areas such as simcoe county
north of toronto in october we completed
the acquisition of jones bus service which
has 650 buses in wisconsin and illinois
during the year we relocated the
headquarters of our us operation from
texas to chicago providing a better
location to manage and grow the division
our reengineering project focusing on
improving the cost effectiveness of our
operations has been launched across the
whole north american divisionthe key
objectives are to improve the cost
effectiveness of our operations by reviewing
the efficiency of employee rotas the use 
of technology and better management of
our assets such as fleet
we believe we are well positioned to
capitalise on further growth opportunities
at the bid table and through acquisition
revenue in the division for the year was £2418 million 2004 £2132
million and normalised operating profit was £350 million 2004
£296 million in local currency revenue was us4405 million
2004 us3910 million and normalised operating profit was
us637 million 2004 us543 million

brian stock
chief executive officer
nx north america
division
north
america 17
alsa is spain’s leading private operator of coach and bus services
operating 90 coach and 19 bus concessions within the spanish
market

javier carbajo
chief executive
alsa group
alsa joined the group on 1 december
providing immediate scale in an attractive
european growth marketwe have
consolidated revenue of £182 million and
operating profit of £26 million into the
group’s 2005 results
alsa is spain’s leading coach and bus operator
with annualised turnover of £218 million
it operates exclusive national and regional
coach concessions and urban and suburban
bus services with 75 of its revenue
generated by its coach operations it also
operates 65 international coach routes 
in europe
spain is europe’s fifth largest passenger
transport market and the third biggest coach
market approximately double the number of
passengers travel by coach on long distance
concessions in spain than by rail with coach
representing 11 of the total public transport
market alsa is the clear leader in coaching
with nearly 10 of the market alsa’s long
distance concessions are granted on an
exclusive basis by the national government for
each route with durations varying between 
8 – 20 yearsthe regional coach network
concessions are awarded by regional
government
as spain’s second largest private bus
operator alsa operates 19 urban bus
concessions primarily in oviedo and leon
northern spain it also operates buses in
porto portugal and marrakech morocco
alsa is a quality business run by an
experienced and long standing management
team known to the group through the
eurolines partnershipwe believe that through
close working between alsa and our national
express sales marketing and operations teams
we can bring further value to both
businessesthis acquisition gives the group
critical mass in the spanish transport market
where we believe further opportunities for
public transport growth exist
alsa
valencia
madrid
benidorm
valencia
alicante
murcia
granada
jaen
barcelona
zaragoza
vitoria
burgos
sevilla
cordoba
algerciras
malaga
marbella
cadiz
lagos
faro
lisbon
badajoz
caceres
oporto
vigo
santiago
tordesillas
salamanca
zamora
ponferrada
la coruna
orense
gijon
lugo
santander
bilbao
san sebastian
irun
valladolid
narbonne
toulouse
biarritz
bordeaux
nimes
marseille
nice
rome
genoa
florence
valence
clermont ferand
poitiers
tours
paris
lyon
chambery
geneva
lausanne
berne
basle besancon
monaco
metz
mons
liege gante
brussles
ostende
calais
frankfurt
eisenach
cologne
besancon
dover london
turin
milan
venice
lubjliana
nuremberg
prague
brno
vienna bratislava
budapest
zgorzelec
zurich
berlin
wroclaw
poznan
bydgosc
wasrsaw
czestochowa
katowice
krakow
rzeszow
przemysl
bialystok
brest
braniewo
gdansk
szczcecin
belgrade
istanbul
tangiers
fez
rabat
casablanca
marrakech 18
financial review
year at a glance
we have achieved another strong set of results
increasing profit before tax by 146 to £893m
2004 £779m driven by a 96 increase in
operating profit to £1095m 2004 £999m
basic earnings per share from continuing operations
improved to 452p 2004 405p
for the remainder of this report we will refer to
normalised results which we feel reflect the
performance of the business more appropriately
normalised results are defined as the statutory 
results before the following as appropriate profit or
loss on the sale of businesses and charges for goodwill
impairment intangible amortisation plant property and
equipment impairments profit or loss on the disposal
of noncurrent assets exceptional items and tax relief
on qualifying exceptional items
normalised group operating profit was up by 85 
to £1555m 2004 £1433m on revenue of
£22160m 2004 £23545m resulting in an
increased operating margin of 70 2004 61
normalised profit before tax increased by 107 to
£1353m 2004 £1222m driving up normalised
diluted earnings per share from continuing operations
to 763p 2004 693p an increase of 101 net
debt increased by £4268m to £5634m principally 
as a result of the acquisition of alsathe proposed 
full year dividend per share will be increased by 75
to 3225p 2004 300p
divisional review
coaches
our uk coach operations delivered another year of
strong performance increasing normalised operating
profit by 114 to £215m 2004 £193m a 2
increase in passenger numbers was driven by
promotions such as our ‘million seat’ campaign and
improved customer service initiatives increasing
revenue by £49m to £2005m 2004 £1956m
the terrorist events in july caused passenger decline
on key routes going into london during our busy
summer months nevertheless the normalised
operating margin improved to 107 2004 99
reflecting continuing controls over costs including
working with our contractors to mitigate the rising
cost of fuel and the disposal of our low margin
heathrow airport airside operation
during the year we started a rail replacement division
and a special events division to broaden the reach 
of our coaching product
buses
revenue increased by 120 to £2686m 2004
£2398m and we generated normalised operating
profit of £415m 2004 £416m divisional operating
margins are being diluted by a greater presence in 
the regulated london market revenue excluding
travel london increased by £50m however this 
was offset by increased driver costs and the final 
share based payment charge of £21m in 2005 for 
the appropriation of shares from the twm share
incentive plan
the acquisition of the london bus operations of
tellings golden miller contributed normalised
operating profit of £08m and revenue of £124m
this brings our share of the london bus market 
to 5
the early introduction of the national concessionary
fares scheme in birmingham by centro has helped to
reverse the recent decline in patronage from this key
part of our passenger groupthe group’s fuel hedging
policy has mitigated the impact of rising prices in 2005
however 2006 will see an increase in fuel costs as new
hedges have been put in place fuel costs will increase
by £7m this year and are the principal reason why we
introduced an above inflationary fares increase this
year
trains
normalised operating profit increased to £642m
2004 £613m on reduced revenue of £14972m
2004 £17121m as a result of changes in our
portfolio of tocsthis resulted in improved margins
of 43 2004 36
adam w alker
finance director
“we have achieved another
strong set of results
increasing profit before tax
by 146 to £893m”
 as restated for the transition to ifrs 19
the terrorist activities in july had an impact on discretionary
rail travel over the summer months however this loss in revenue
was partly mitigated by existing revenue and profit share
arrangements with dft rail as a result rail passenger revenue
was up 33 on a likeforlike basis having been 54 ahead at
june our franchises continue to appear at the top of the toc
league tables for performance and customer satisfaction which
has contributed to our ability to stimulate customer demand
on 31 march 2006 our wessex and great northern franchises
will leave the group as part of the dft current remapping
exercise central trains silverlink and midland mainline will run
until november 2007we are currently negotiating new financial
arrangements for these franchises
north america
in local currency north america increased normalised operating
profit to us637m 2004 us543m revenue has increased
by us495m to us4405m 2004 us3910m improving 
our margins to 145 2004 139the strengthening dollar
increased revenue by £49m year on year and operating profit 
by £08m
revenue in our student transportation business increased by
127 through the benefit of new routes operated and
acquisitions during the yearthe 2005 us bid environment
remains competitive but we were delighted with our best 
ever bid season winning new business with annualised revenue 
of us29mwe achieved high retention of existing contracts
showing our mix of value for money and customer service is
proving successful with the school boards our canadian
operations continued to perform well boosted by the acquisitive
growth in the ontario and ottawa regions existing fuel hedges
continue to the end of 2006
the acquisitions of aboutown northstar and jones consolidates
the group’s position as the third largest student transportation
operator in north america annualised turnover for these
acquisitions is £262m
we relocated our us head office from austin to chicago 
during the summer and are pleased that such a move was 
well controlled given the large number of recruitment systems
and timing issues it presented
in accordance with ifrs 5‘noncurrent assets held for sale and
discontinued operations’ the trading results for public transit have
been reclassified into one line in the income statement
alsa
alsa’s results were consolidated from 1 december in local
currency it contributed €38m £26m to normalised operating
profitthe government have announced a tariff increase of 
33 on concessions from 1 december 2005 to cover the 
above inflation impact of fuel costs which have been fully 
hedged in 2006
our integration programme has commenced and is proceeding
in line with expectations initial focus has been on financial and
reporting systems and we are pleased with the efforts being
made to ensure a seamless transitionvaluation work on
intangibles and key assets is underway and we will complete 
the work for inclusion in our next financial statements
joint ventures and associates
the total charge for associates was £88m 2004 £34m
at the year end we held a 33 investment in altram lrt
limited “altram” altram has operated the midland metro since
june 1999 our share of the operating loss for 2005 was £02m
2004 £02m on 2 march 2006 we received clearance from
the office of fair trading regarding our acquisition of the
outstanding 67 shareholding completion is expected to occur
by the end of march altram’s results will be disclosed within the
bus division in 2006
we hold a 40 investment in intercapital and regional rail
limited “icrrl” icrrl is contracted to manage the operations
of eurostar uk to 2010 our share of the operating loss for the
year was £86m 2004 £32mthe cash outflow of £17m in
2005 comprises the group’s share of funding for the 2004 losses
on 1 march 2006 the secretary of state made a statement
requesting expressions of interest for london and continental
railways “lcr” which owns eurostar uk if a sale is concluded
we would expect to recover the book value for our preference
shares in the lcr group
the results of the joint ventures and associates acquired 
with alsa were immaterial for the period from acquisition 
to 31 december 2005
finance cost 
net interest payable decreased to £114m 2004 £177m
principally reflecting a lower level of net debt in the first half of
the year when compared to 2004 and the termination of a
us200m interest rate swap as reported in our annual report
and accounts 2004this was offset by the strengthening of the
us dollar which increased the cost of servicing our us dollar
denominated financing
after excluding £51m 2004 £159m for discontinued
operations continuing normalised operating profit before
depreciation and other noncash items “ebitda” was 
£2125m 2004 £1947m and continuing ebitda finance 
cover improved to 202 times 2004 115 times
divisional review
normalised
revenue operating profit
2005 2004 2005 2004
£m £m £m £m
uk coach 2005 1956 215 193
uk bus 2686 2398 415 416
uk t rain 14972 17121 642 613
intersegment sales 103 62 – –
north american bus 2418 2132 350 296
alsa 182 – 26 –
central functions – – 93 85
22160 23545 1555 1433 20
financial review continued
goodwill and intangibles
the impairment charge for the year on the goodwill arising from
the acquisition of prism rail plc in september 2000 was £333m
2004 £333m although ifrs 3‘business combinations’
prohibits the amortisation of goodwill the train franchises
acquired with prism have finite lives and therefore the goodwill
will be impaired in line with the remaining cash flows
amortisation of £49m 2004 £24m was charged on the
intangible asset that arises from the group’s right to operate 
its rail franchises £24m 2004 £19m and on contracts
acquired in uk bus £09m 2004£nil and north america
£16m 2004 £05m
the goodwill and intangible assets of £4214m arising on the
alsa acquisition are provisionally classified as goodwill at 31
december 2005 and these will be allocated during 2006 after
the valuation work is complete
exceptional items
exceptional items totalled £78m 2004 £77m of which 
£35m was incurred in relation to restructuring and redundancies
in the uk trains division following a review of our rail franchise
portfolio
in north america £28m was incurred in respect of the
relocation of the divisional head office from texas to chicago in
the yearthe balance comprises £15m of costs incurred in a
reorganisation of our birmingham operations
discontinued operations
as disclosed in the annual report and accounts 2004 the
group’s remaining bus operations in australia are now in
administration and are no longer controlled by the group
the group received proceeds of £254m from the administrator
in december and it is possible that further amounts will be
received but it is not practicable to forecast the amount or 
timing of any receipt
as anticipated in our interim report our public transit business
was sold on 1 september 2005 for net proceeds of £496m
taxation
the total tax charge of £275m 2004 £228m on profit before
tax of £893m 2004 £779m represents an effective rate of
308 2004 293the tax charge on normalised profit of
£1353m 2004 £1222m was £295m 2004 £264m which
represents an effective rate of 218 2004 216
we expect our normalised tax rate to increase over the medium
term to reflect the higher tax rates in overseas jurisdictions
cash flow
the group continues to generate strong cash flow with a cash
inflow from operations of £1888m 2004 £2479mthe fall
reflects the working capital timing reversals highlighted last year 
in connection with performance and profit share paymentsthis
cash flow was used to maintain high levels of investment across
the group particularly in north america where most of the
capital expenditure relates to new bidding work
operating cash flow
operating cash flow represents “cash generated from
operations” plus “proceeds from disposal of property plant and
equipment” less “finance lease additions” and “purchase of
property plant and equipment” as set out in note 39 and the
cash flow statement
operating cash flow
north
uk uk uk american central
bus coaches trains bus alsa functions total
£m £m £m £m £m £m £m
normalised operating profit 415 215 642 350 26 93 1555
normalised operating profit 
of discontinued operations – – – 38 – – 38
depreciation 122 53 154 225 09 05 568
amortisation of leasehold 
property prepayment 01 – – 07 – – 08
amortisation of fixed asset grants – – 09 – – – 09
profit on disposal 12 05 – 03 – – 20
share based payments 22 01 03 02 – 08 36
ebitda 548 264 790 619 35 80 2176
working capital movement 28 01 202 20 41 35 271
eurostar –––––1717
net cash inflow from 
operations 576 263 588 599 06 132 1888
net capital expenditure 445 82 248 333 06 08 1106
operating cash flow 
before oneoffs 131 181 340 266 12 124 782
exceptional items 77
operating cash flow 705 21
net capital expenditure was £1106m 2004 £665m including
£570m 2004 £162m of additions purchased under finance
leases offset by £81m of proceeds from disposalsthe finance
lease expenditure included £378m 2004 £02m in uk buses
that arose from the conversion of operating lease arrangements
to finance leases in the year
net interest paid of £220m comprising the cash outflow of
£218m adjusted for loan fee amortisation of £02m increased 
in the year following the termination of a us200m interest rate
swap during the year
the receipt of tax rebates in respect of prior years in 2004
resulted in reduced tax payments last year
acquisitions and disposals includes the acquisition of the alsa
group of £3674m other acquisitions of £655m net proceeds 
of £496m from the sale of atc £254m from the disposal 
of bosnjak group and other items including cash disposed
of £12mthe 2004 inflow includes £264m from the disposal 
of three australian bus subsidiaries in october 2004
dividend
an interim dividend of 100p per share was paid in october
2005 and a final dividend of 2225p per share will be paid in may
2006 bringing the total dividend for the year to 3225pthis is a
75 increase in total dividends declared compared to 2004this
dividend is covered 25 times 2004 23 times by normalised
profits after tax
pensions
the group’s principal defined benefit pension schemes are all 
in the ukthe most recent triennial actuarial valuations were
carried out at 31 march 2004 and 31 march 2002 for the two
bus schemes 5 april 2004 for coaches and 31 december 2004
for the train schemesthese valuations showed funding levels of
88 to 107 on the bus schemes 65 on the coach scheme
and 86 to 95 on the train schemes approximately 1400
20 bus division employees are members of the two schemes
which have been closed for some years and some 450 members
of staff are members of the coach division scheme which was
closed in june 2002 new employees in the bus and coach
division are offered membership of defined contribution pension
schemes in the trains division approximately 11000 employees
are members of the train schemes
the balance sheet includes provision for the deficits of the
defined benefit schemes in the group which includes the railways
pension scheme “rps” where our main obligation is to pay 
the contributions agreed with the scheme actuary over the life 
of our franchise
overall the ias 19‘employee benefits’ deficits have increased as
the increased values of the financial assets reflecting the
improvements in global equities have been offset by increased
liabilities arising from decreases in the discount rate and in the
case of the rps an increase in the longevity assumptions in the
coach scheme the deficit increased to £149m 2004 £110m in
the bus schemes the deficit has increased slightly to £378m
2004 £362mthe rps deficit increased by £163m to £342m
mainly due to the change in the longevity assumptions and the
reduction in the discount rate
facilities
one of the group’s banking facilities expires in october 2006
we are working with the group’s banks to put in place a new
banking arrangement over the next two to three months
accounting policies
ifrs
the group’s annual report and accounts for the year ended 
31 december 2005 has been prepared using accounting policies
that comply with international accounting standards “ias” and
international financial reporting standards “ifrs”
we released our restated 2004 results under ifrs on 27 june 2005
and issued our first set of interim results under ifrs on 28 july
2005 it has been a significant additional workload for the group
finance team and shareholders will note a number of changes in
presentation of our primary statements and significant additional
disclosure due to the length of the disclosures required under
the new financial standards the group will prepare a summary
report and accounts for the 2006 year end shareholders will
have the option whether to receive the full annual report and
accounts or the summary version
we believe that one of the principal benefits of ifrs is to
provide consistency in accounting standards across geographic
areas and industrieswith this in mind we have worked with our
peers to produce a consistent approach to the unique difficulties
generated by the rps to the requirements of ias 19
adam walker
finance director
reconciliation of net debt
2005 2004
£m£m
operating cash flow 705 1875
net interest 220 203
taxation 267 32
share buy back 293 –
financial investments  shares 84 26
acquisitions and disposals 3591 228
dividends 416 364
net funds flow 3998 1530
foreign exchange 270 182
funds flow post exchange 4268 1712
opening effective net debt 1366 3078
closing effective net debt 5634 1366 22
corporate responsibility is at the heart 
of the national express group it’s about
what we do and how we do it during
2005 we continued to make a positive
contribution to the quality and accessibility
of public transport in the communities
where we operated
transport is fundamental to the success
of communities it affects productivity
stability and growth and by influencing the
movement of people and goods it has a
wide social impact on the economy
at national express group we provide a
socially inclusive service with environmental
benefitswe believe we provide a solution
to many of the sustainability issues that
concern key stakeholders by the very
nature of what we do we contribute to
communities
we recognise that we need to legitimately
influence the views of policy makers by
promoting policies that benefit public
transport in february we held our first bus
conference which focused on ways in which
we can stimulate further growth in the bus
marketwell attended by a range of key
stakeholders with interests in the growth of
public transport the conference provided
an excellent platform for the sharing of best
practice across the industrythis year we
have worked with the department for
transport to develop the uk rail system for
the future through its “making the case for
rail” initiative operationally we believe that
improving service performance which was
a key focus in 2005 will encourage more
customers onto the rail network overseas
our north american and spanish divisions
pride themselves on the provision of first
class services
safety
in 2005 we continued to reduce the risk 
of passenger and employee injuries across
our operations following the launch of the
group’s first combined health safety and
environment plan in 2004 the 200506 
plan seeks to encourage continuous
improvement during 2005 the group’s
safety philosophy policy and resources were
reviewed by an independent third party
arthur d littlethis report concluded that
there were many positive aspects to the
group’s approach
the london bombings in july 2005
illustrated that public transport remains a
target for terrorist attack however
supported by many selfless contributions 
to passenger safety by our employees and
backed by the determination of customers
travel patterns have on the whole returned
to normal
operations
we operate a devolved business with all
our operations managed locallywe are
committed to constant improvement in our
services and track our performance
through both independent and industry
monitoring a wide range of key
performance indicators are used to manage
the businessthe major issues are
punctuality reliability safety value for money
accessibility and comfort of our customers
we also continue to focus on how
technology and innovation can make public
transport more accessiblethrough the
development of our new ‘levante’ vehicle
coach travel is for the first time easy for
customers with mobility issues
corporate responsibility
reliable resourceful 
and responsible…
“corporate responsibility is at the heart of the group
it’s about what we do and how we do it” 23
environment
on a per passenger kilometre basis the 
train coach and bus services operated by 
our group are significantly more
environmentally friendly than journeys
undertaken using a car using public
transport instead of the car is the single
best way in which to reduce our individual
environmental footprint
new technology can play a key role in
helping us to improve our environmental
performance however bus and coach
prioritisation on roads and the efficient
running of the rail network can also have a
dramatic impact on emissions performance
in addition if we can reduce journey times
then more people will be attracted to our
services – which will further improve our
performance on a per passenger kilometre
basisthe significant environmental issues
which impact our business are emission of
greenhouse gases emission of local
atmospheric pollutants incidents and
prosecutions and depot infrastructure 
land contamination
people
during 2005 our primary objective was 
to engage more actively with employees 
at all levels understanding our employees
in greater depth will enable managers to
develop the businesswe believe there is 
a strong correlation between employee
satisfaction and customer satisfaction and
during the year we placed greater focus on
analysing the results from these two areas
although contact with employees is
generally undertaken at a local level we
have developed initiatives which we believe
benefit all our subsidiaries our human
resources forum shares best practice across
the group our key people challenges are
employee satisfaction succession planning
training and development recruitment and
retention industrial relations diversity and
equal opportunities
planning for the future
in developing transport for the future we
must consider the requirements of users
whether business commuter or leisure
travellerstransport planning requires long
term strategy as demonstrated by the way
in which a quality transport network was
instrumental in winning the 2012 olympics
as a major service provider and employer
in the area we look forward to playing an
important part in this
we constantly look for ways to improve
our products however we believe there
are still further opportunities to improve
the utilisation of the existing infrastructure
such as through the use of ‘smart’
technology and through the increased 
rollout of priority schemes for public
transport and better use of road space
we also believe that as national and
regional transport infrastructure is
developed the planning system needs to
show greater linkage between the provision
of housing and the location of jobs
for a full account of our progress on the
social ethical environmental employee 
and community challenges that face 
our business please see our 2005
corporate responsibility report
it is available for download at
wwwnationalexpressgroupcom
“there are considerable economic
social and environmental benefits of
using public transportwe believe
encouraging customers to use these
services is good for society as a whole”
t op
the new easyaccess levante coach
middle
winners of the express awards
the group’s reward and
recognition scheme
bottom
crystaleye technology providing
onboard monitoring 24
board of directors and company secretary
clockwise from top left
david ross
phil white cbe
ray o’toole
sir andrew foster
t ony mcdonald
tim score
barry gibson
sue lyons obe
adam walker
jorge cosmen 25
david ross chairman david ross joined the board in february 2001
as a non executive director and became chairman in may 2004
he is non executive deputy chairman of the carphone warehouse
group plc chairman of gondola holdings plc and a non executive
director of trinity mirror plc big y ellow group plc and cosalt plc
david is a chartered accountant aged 40
phil white cbe chief executive phil white has extensive experience
of the transport business gained over many years he is a chartered
accountant and worked for south and west yorkshire passenger
transport executive and y orkshire rider in various senior finance roles
in july 1994 he was appointed group finance director of west
midlands travel limited becoming managing director in november
1995 he was appointed to the board of national express group in
january 1996 and became the group’s chief executive in january 1997
he is the 2006 president of the confederation of passenger transport
aged 56
ray o’t oole chief operating officer ray o’toole joined the board
in november 1999 as chief operating officer he has 30 years’
operational experience in transport he spent the early part of his
career in various engineering management positions at greater
manchester passenger transport executive he joined national express
from firstgroup plc where he was responsible for its operations in
yorkshire and the north west as both divisional director and group
engineering director he has been elected a member of the british
transport police authority this year aged 50
sir andrew foster non executive director sir andrew was appointed
to the board in august 2004 he has had an extensive career in the
public sector having served as chief executive of the audit commission
for england and wales between 1992 and 2003 before this he was
deputy chief executive of the nhs and is currently deputy chairman
of the royal bank of canada europe limited and a non executive
director of the sports council nestor health care pruhealth and
liberata it outsourcing aged 61
tony mcdonald company secretary tony mcdonald was appointed
company secretary in may 2000 prior to joining the group he held
senior legal positions with the inhouse legal teams at guardian royal
exchange and bp and in private practice with slaughter and may
he is a qualified solicitor aged 45
tim score non executive director tim score was appointed to the
board in february 2005 he is chief financial officer at arm holdings
plc before joining arm he worked as finance director of rebus group
limited which he joined in 1999 between 1997 and 1999 he was
group finance director of william baird plc which he joined from
lucasvarity plc he is a chartered accountant aged 45
barry gibson non executive director barry gibson joined the board
in november 1999 and became the senior independent director
in september 2005 he served on the board at baa plc as group
retailing director until october 2001 he was the group chief
executive of littlewoods organisation plc he is also a non executive
director of william hill plc and homeserve plc aged 54
sue lyons obe non executive director sue lyons joined the board
in may 2001 her career has been principally with rolls royce which
she joined in 1975 and where she held the position of managing
director defence europe in 1998 she received an obe for services
to the engineering industry and in 1999 she was awarded the european
woman of achievement award – business category sue is also a
non executive director of wagon plc and awg plc aged 53
adam walker finance director adam walker joined the board in
march 2003 as finance director he joined the group in october 2001
as corporate development director working closely with the group’s
operational subsidiaries on developing their financial strategies prior to
joining the group he was director of corporate finance at arthur
andersen and an associate director at natwest markets he is a
chartered accountant aged 38
jorge cosmen non executive director jorge cosmen was appointed
to the board on 1 december 2005 at the time of the alsa transaction
he was corporate manager for the alsa group from 1995 becoming
chairman in 1999 between 1986 and 1995 he worked in sales
distribution and banking he is a business administration graduate and
has an international mba from the instituto de impresa in madrid
aged 37
divisional heads
paul bunting chief executive coach division paul bunting joined
the group in 2004 as managing director at midland mainline from
stagecoach where he was business development director for the
uk bus division prior to that paul has held a number of senior
positions within the rail industry principally in planning and marketing
roles in both intercity and regional railway businesses aged 46
javier carbajo chief executivealsa group javier carbajo joined the
group in december 2005 when national express acquired alsa
a graduate in economics and with an mba javier has been with alsa
for 27 years during which time he has held management positions in
most areas of the business in 1999 he was appointed chief executive
of enatcar following its acquisition by alsa in 2003 he was appointed
ceo of alsa group aged 53
david franks chief executivetrains division david franks joined the
group in january 2003 as trains divisional director north he was
appointed as chief executive of the trains division in february 2004
david has over 30 years’ experience in the rail industry and immediately
prior to joining national express he was managing director of south
central at the goahead group aged 48
brian stock chief executive officer north america brian joined
the group in 2002 through the acquisition of stock transportation
he has overseen the north american student bus operations since
march 2003 and was appointed as chief executive of the group’s
north american operations in october 2004 brian has had over 25
years in the bus industry prior to joining the group brian was president
of stock transportation and responsible for guiding the business to
become the fifth largest school bus company in north america
aged 46
denis w ormwell chief executive bus division denis wormwell joined
the group as chief executive coach division in january 2002 in
february 2006 he was appointed as successor to brian jackson as chief
executive of the group’s bus division prior to joining the group denis
spent many years within the holiday industry both overseas and in the
uk building successful leisure brands such as club 1830 and jmc he
joined the company from thomas cook group where he was sales
and uk service delivery directoraged 44
  26
the directors are pleased to present their annual report and the audited
accounts for the year ended 31 december 2005
principal activities
the principal activity of the group is the provision of mass passenger
transport services
review of the business
a review of the group’s activities the principal events during the year and
the future development of the group is given in the chairman’s statement
the chief executive’s report and the operating and financial reviews set
out on pages 8 to 21
results and dividends
the profit before tax for the year ended 31 december 2005 was £893m
2004 £779m restated and a lossprofit attributable to equity shareholders
of £28m loss 2004 £622m restated was transferred to reserves
the directors recommend a final net dividend of 2225p per share which
together with the interim net dividend of 100p per share paid on 
7 october 2005 gives a total net dividend for the year of 3225p per
share 2004 300p if approved by shareholders the final dividend will be
paid on 26 may 2006 to shareholders on the register at 28 april 2006
directors
the directors of the company who served during the year were
david ross 
phil white
jorge cosmen appointed 1 december 2005
sir andrew foster
barry gibson
sue lyons
ray o’toole
tim score appointed 21 february 2005
tim stevenson resigned 21 september 2005
adam walker 
ray o’toole and adam walker will retire by rotation at the annual
general meeting and being eligible will offer themselves for reelection
jorge cosmen will stand for election at the annual general meeting
following his appointment to the board on 1 december 2005 tim
stevenson resigned as a director of the company on 21 september 2005
the names and brief biographies of the current directors appear on pages
24 and 25 details of the remuneration of the directors their interests in
shares of the company and service contracts are contained in the report
on directors’ remuneration on pages 33 to 39
directors’ liability insurance
the company maintains directors’ and officers’ liability insurance in
respect of legal action that might be brought against its directors the
companies audit investigations and community enterprise act 2004
came into force on 6 april 2005 this act extends the indemnities
allowable by a company to its directors at this years’ agm the company
is asking shareholders to approve an amendment to the company’s
articles of association to allow the granting of indemnities in line with the
new statutory provisions
employment policies
the group strives to meet its business objectives by motivating and
encouraging its employees to be responsive to the needs of its customers
and continually improve operational performance the group is
committed to providing equality of opportunity to employees and
potential employees this applies to appropriate training career
development and promotion for all employees regardless of physical
ability age gender sexual orientation religion or ethnic origin all uk
businesses report diversity data and are responsible for benchmarking
against their local population
full and fair consideration is given to applications for employment
received from disabled persons according to their skills and capabilities
the services of any existing employee disabled during their period of
employment are retained wherever possible
employee involvement
the group encourages employee involvement in its affairs subsidiary
companies produce a range of internal newsletters and circulars which
keep employees abreast of developments in addition the groupwide
express magazine is aimed at keeping employees in touch with the
worldwide activities of the group senior management within the group
meets regularly to review strategic developments in december 2005 a
management conference entitled ‘the way we work together’ was held
to listen to feedback given from employee focus groups dialogue takes
place regularly with trade unions and other employee representatives 
on a wide range of issues
employee satisfaction is tracked through an annual employee survey
results from the 2005 survey have been fed back to employees and action
plans at local level rolledout a number of group initiatives were launched
in 2005 for frontline staff for example the ‘express awards’ reward
outstanding employee activities in and out of the workplace and the
‘express benefits’ package gives uk employees competitive discounts 
with leading retailers
directors’ report 27
environmental policy
details of the group’s environment policy and environmental initiatives are
to be found in the separate corporate responsibility report issued with
the annual report and accounts
charitable and political contributions
charitable donations made during the year totalled £286000 2004
£328000 which included a donation of £40000 to the asian tsunami
appeal it is the group’s policy not to make political donations and
accordingly none were made in the year
creditors’ payment policy and practice
it is the company’s policy to agree terms of payment prior to
commencing trade with any supplier and to abide by those terms based
on the timely submission of satisfactory invoices
trade creditor days of the company for the year ended 31 december 2005
were 24 days 2004 26 days based on the ratio of company trade
creditors at the end of the year to the amounts invoiced during the year
by trade creditors
substantial shareholdings
the company has been notified of the following holders of 3 or more
of its issued share capital for the purpose of section 198 of the
companies act 1985 as at 7 march 2006
barclays bank plc 20358394 1492
european express enterprises ltd 16580175 1102
standard life group 13752075 1008
aviva plc 5573333 407
legal  general group plc 4528145 300
 percentages as at date of notification
annual general meeting
the annual general meeting will be held on 24 may 2006 shareholders
will be asked to approve five items of special business details of which are
given in the notice of meeting accompanying this report
purchase of own shares
the company was granted authority at the annual general meeting in
2005 to purchase its own shares up to an aggregate value of 10 of the
issued nominal capital this authority expires at this year’s annual general
meeting and a resolution will be proposed for its renewal
a limited share buy back programme was implemented in 2005 and
during the period 28 february 2005 to 17 may 2005 the company made
the following purchases of its ordinary 5p shares
 age
of
number issued average
of share nominal purchase 
shares capital value price
shares purchased 3300000 239 £165000 £880
shares cancelled 2900000 210 £145000 –
shares put into 
treasury 400000 029 £20000 –
going concern
it should be recognised that any consideration of the foreseeable future
involves making a judgement at a particular point in time about future
events which are inherently uncertain nevertheless at the time of
preparation of these accounts and after making enquiries the directors
have a reasonable expectation that the group has adequate resources to
continue operating for the foreseeable future for this reason they
continue to adopt the going concern basis in preparing the accounts
by order of the board
t ony mcdonald
secretary
9 march 2006
directors’ report 28
the board and its principal committees
details of the board and its principal committees are set out below
attendance at meetings by individual directors during 2005 is shown next
to the director’s name all of the committees are authorised to obtain
legal or other professional advice as necessary to secure the attendance
of external advisers at its meetings and to seek information required from
any employee of the company in order to perform its duties the full
terms of reference of the committees are available on the company’s
website at wwwnationalexpressgroupcom
the board of directors
fifteen meetings were held during the year
david ross chairman 15
jorge cosmen non executive director 1
sir andrew foster non executive director 13
barry gibson senior independent director from 21 sept 2005 15
sue lyons non executive director 15
tim score non executive director 13
tim stevenson senior independent director to 21 sept 2005 10
phil white chief executive 15
ray o’toole chief operating officer 15
adam walker finance director 15
company secretary tony mcdonald also acts as secretary to the board
committees
 tim score and jorge cosmen were appointed to the board on 21 february 2005
and 1 december 2005 respectively
 tim stevenson resigned from the board on 21 september 2005
there is a formal schedule of matters reserved for the board’s attention
which includes the review and approval of group strategy and policies
major business acquisitions or disposals major capital projects group
budgets significant changes to accounting policies capital structure and
dividend policy
audit committee
five meetings were held during the year
tim score chairman appointed chairman april 2005 4
tim stevenson chairman resigned as chairman april 2005 2
sir andrew foster 5
barry gibson 5
the committee oversees the process for selecting the external auditor
assesses the continuing independence of the external auditor and
recommends approval of the audit fee to the board it will ensure that
provision of non audit services does not impair the external auditors’
independence or objectivity it will discuss with the external auditor the
nature and scope of the audit and any issues or concerns arising from the
audit process the committee reviews the internal audit programme
considers major findings of the internal audit investigations and reviews
management’s financial reporting and risk management the committee
reviews the halfyear and annual financial statements and the effectiveness
of the company’s internal control and risk management systems
remuneration committee
eight meetings were held during the year
barry gibson chairman 8
sue lyons 8
tim score appointed to committee 14 dec 2005 0
tim stevenson resigned sept 2005 6
the committee is responsible for determining broad policy for the
remuneration of the executive directors including the chief executive
the divisional chief executives the chairman of the company and the
company secretarywithin the terms of the agreed policy the committee
will determine the total individual remuneration package of each executive
director including where appropriate bonuses incentive payments
pension arrangements and share options the committee will select
appoint and set the terms of reference for any remuneration consultants
who advise the committee the committee will ensure that contractual
terms on termination and any payments made are fair to the individual
and the company that failure is not rewarded and the duty to mitigate
loss is where appropriate fully recognised
nomination committee
two meetings were held during the year
david ross chairman 2
sir andrew foster 2
sue lyons 2
the committee is responsible for identifying and nominating for the
approval of the board candidates to fill board vacancies as and when they
arise it will give full consideration to succession planning and keep under
review the leadership needs of the organisation both executive and non
executive the committee will review the time required from a non
executive director and use performance evaluation to assess whether the
non executive is spending enough time to fulfil their duties
safety and environment committee
four meetings were held during the year
sue lyons chairman 4
jorge cosmen appointed to committee 1 dec 2005 1
sir andrew foster 3
barry gibson 4
david ross 3
tim score appointed to committee feb 2005 4
tim stevenson resigned from committee sept 2005 3
the committee reviews the group’s safety and environment practices
procedures and record
corporate governance 29
the board supports the highest standards of corporate governance and
ethical practices within all its operations and continues to review its
policies on an ongoing basis the board has endorsed a set of principles
which establish the framework for how its businesses operate key to
these is working in an open and honest manner the company supports
the combined code on corporate governance published in july 2003
the ‘combined code’
statement of compliance with the combined code
in the opinion of the directors the group has complied with the
combined code throughout the year apart from
• the audit committee did not have a member with recent and
relevant financial experience from 5 may 2004 when david ross
resigned from the committee until the appointment of tim score
to the committee in february 2005
• the board has not completed a performance evaluation process
during the current year it has however undertaken preliminary work
in preparation for an evaluation exercise involving external consultants
in 2006 and led by the senior independent director
applying the principles of good governance
the board of directors chairman and chief executive
the directors believe it is essential for the group to be led and controlled
by an effective board that provides entrepreneurial leadership within a
framework of sound controls the board is responsible for setting the
group’s strategic aims its values and standards and ensuring the necessary
financial and human resources are in place to achieve its goals
the board consists of the chairman three executive and five non
executive directors the offices of chairman and chief executive are held
separately and the division of responsibilities between the chairman and
chief executive is shown below
main responsibilities of the chairman include
• chairing and managing the business of the board
• together with the chief executive leading the board in developing the
strategy of the business and ensuring this is effectively implemented by
the executive management team
• ensuring that there is effective dialogue with investors concerning
mutual understanding of objectives
• in conjunction with the nomination committee taking responsibility
for the composition and replenishment of the board
• periodically reviewing with the board its working practices and
performance and
• ensuring there is effective contribution from the non executive
directors and a constructive relationship between the executive and
non executive directors
main responsibilities of the chief executive include
• the development and implementation of management strategy
• the day to day management of the group
• managing the executive management team and 
• fostering relationships with key stakeholders
barry gibson is the senior independent director the board considers
all of the non executive directors to be independent other than jorge
cosmen and considered david ross to be independent prior to his
appointment as chairman mr cosmen is not considered to be
independent by the board due to his close links with the alsa business
and significant interests in the shares of the company the non executives
bring a variety of different experiences and considerable knowledge to
assist with board decisions non executive directors do not participate in
any of the company’s share option or bonus schemes and their service is
nonpensionable short biographies of the directors are to be found on
page 25
the board meets at least eight times during the year in 2005 the board
held an off site strategy meeting and visited businesses in canada there is
a formal schedule of matters reserved for the board’s decision the main
terms of which are shown on page 28 together with the attendance
record of the directors during the year the chairman met on several
occasions with the non executives without the executive directors
present to allow informal discussions on a variety of issues
the executive directors are responsible for the daytoday management
of the group’s businesses implementation of its strategy policies and
budgets and its financial performance executive management meetings
involving the executive directors and senior management from the
divisions are held regularly to discuss current issues
the company purchases liability insurance to cover the directors and
officers of the company and its subsidiaries
committees of the board
the board has established a number of committees with defined terms 
of reference and receives reports of their proceedings the principal
committees are the remuneration committee the nomination
committee the audit committee and the safety and environment
committee the members of each committee attendance and main 
duties are shown on page 28 in addition there is an executive committee
with authority to approve routine matters of business and a treasury
committee which reviews the group’s banking facilities treasury reports
and tax matters
appointments to the board
the nomination committee leads the process for board appointments
and makes recommendations to the board the committee will prepare
a description of the role and requirements for any particular appointment
based on its evaluation of the board as a whole
the terms and conditions of appointment of the non executive directors
are available for inspection at the company’s registered office during
normal business hours and at the annual general meeting of the
company the non executive directors disclose to the board their other
significant commitments
external advisers are normally appointed when recruiting board members
they use as a basis for their search a description of the role and
capabilities required for a particular appointment proposed by the
nomination committee
corporate governance 30
the work of the nomination committee
before making a recommendation for an appointment to the board the
nomination committee will
• prepare a job specification and a description of the capabilities
required for a particular post
• consider the current composition of the board and mix of skills and
experience and
• where appropriate and in particular where a vacancy for a non
executive director arises use an external search consultancy andor
open advertising
tim score was appointed as a new non executive director in february
2005 following the recognition by the committee that there was a need
for a non executive with recent and relevant financial experience external
consultants were used for this appointment
on completion of the spanish alsa transaction in december 2005 jorge
cosmen was appointed to the board as a non executive director the
board considers his appointment to this position as key in facilitating the
successful integration of alsa within the group in providing an interface
between the two businesses and in providing input to the board on the
spanish market it was therefore not appropriate to use an external search
agency for this appointment
during the year the committee has undertaken work in relation to 
both succession planning and skills assessment of senior management
throughout the group for which purpose external consultants were
retained
information and professional development
reports from the executive directors which include indepth financial
information are circulated to board members prior to every board
meeting senior management and advisers give presentations to the board
on significant matters during the year
under the direction of the chairman the company secretary is
responsible for ensuring board procedures are followed and applicable
rules and regulations are complied with and advises the board on
governance matters all directors have access to the advice and services
of the company secretary and the appointment or removal of the
company secretary is a matter for the board as a whole there is a
procedure in place for any director to take independent professional
advice where considered necessary
on appointment directors are offered an appropriate training course
and are thereafter encouraged to keep abreast of matters affecting their
duties as a director and to attend training courses relevant to their role
a formal induction process is in place for new directors the aims of which
are to
• build an understanding of the nature of the company its business and
the markets in which it operates
• establish a link with the group’s employees
• build an understanding of the group’s main relationships including
stakeholders and customers
the induction process includes
• a series of meetings with directors and senior management tailored
to the individual’s needs including site visits and meetings with
divisional chief executives
• provision of key information on group policies and procedures
• an appropriate director’s training course
• an opportunity if requested by the individual or shareholders for the
director to meet with major shareholdersfund managers
performance evaluation
the board undertook preliminary interviews during 2005 with the
directors in preparation for an external evaluation process which is
scheduled to take place in the first half of 2006 this exercise covers the
performance evaluation of the chairman the board and its committees
reelection
in accordance with the company’s articles of association all directors
submit themselves for election at the annual general meeting following
their appointment and thereafter by rotation at least once every three
years non executive directors are appointed for specific terms subject 
to reelection non executive directors will only be put forward for 
reelection if following performance evaluation the board believes the
director’s performance continues to be effective and demonstrates
commitment to the role
remuneration and service contracts
the report on directors’ remuneration including details of remuneration
policy and service contracts is set out on pages 33 to 39
accountability and audit
statements of the respective responsibilities of the directors and auditors
are set out on pages 32 and 40
internal control 
the board’s responsibilities
the board has overall responsibility for the group’s system of internal
control and for reviewing its effectiveness the board maintains full control
and direction over appropriate strategic financial operational and
compliance issues and has put in place an organisational structure with
formally defined lines of responsibility delegated authorities and clear
operating processes the systems that the board has established are
designed to safeguard both the shareholders’ investment and the assets
of the group and are described below
corporate governance 31
key elements of the control framework
strategic and financial planning – an annual budgeting and strategic planning
process has been established whereby each division and constituent
operating companies assesses its competitive position and goals taking
account of the strategic risks faced this strategy is translated into a
financial plan with clear milestones and performance indicators
performance management – the performance of each division and
operating company against its plan is closely monitored by a formal
monthly reporting process and by the attendance of the executive
directors at monthly divisional board meetings
annual fitness check process – a self assessment review takes place at
each operating company to assess the integrity of the balance sheet and
to challenge the effective operation of key financial and information
systems controls within each material accounting cycle this process is led
by divisional finance directors and is closely monitored by group finance
and validated by the internal audit department
capital investment – a clear process is in place for the approval of capital
expenditure which includes detailed appraisal of the benefits of the
proposed investment and any associated key risks material capital
expenditure requires board approval
health and safety – health and safety standards and benchmarks have
been established in all our businesses and the performance of operating
companies in meeting these standards is closely monitored
risk management reporting process – each division and operating
company evaluates its internal control environment and key risks and the
results are cascaded through management levels and the audit committee
before being presented to the board this process is reviewed on a regular
basis to ensure the validity and relevance of the key risks reported and
presented to the board on a quarterly basis unless exceptional issues
arise the review covers strategic financial compliance and risk
management controls these procedures are mandated and designed to
manage the risk in order to ensure that the operations achieve their
business objectives
internal audit – the internal control system is independently monitored
and supported by an outsourced internal audit function the internal audit
function reports to management and the audit committee on the
group’s financial and operational controls and reviews the extent to which
its recommendations have been implemented
boardlevel reporting on internal control – during the year the audit
committee has reviewed regular reports from the internal audit
department the external auditors and executive management on matters
relating to internal control financial reporting and risk management the
audit committee provides the board with an independent assessment
of the group’s financial position accounting affairs and control systems
in addition the board receives regular reports on how specific risks that
are assessed as material to the group are being managed
review of internal control effectiveness
the system of internal control and risk management described above has
been in place for the year under review and up to the date of approval
of this annual report and accounts such a system is designed to manage
rather than to eliminate the risks inherent in achieving the group’s
business objectives and can therefore provide only reasonable and not
absolute assurance against material misstatement or loss the effectiveness
of this system has been regularly reviewed by the directors in line with
the guidance for directors on the combined code published by the
financial reporting council turnbull guidance
audit committee and auditors
the members of the audit committee attendance and main duties are
shown on page 28
the work of the audit committee
the committee meets at least three times a year and receives papers for
consideration in advance of the meeting the papers reflect the agenda
prepared by the secretary in conjunction with the committee chairman
there are a number of standing items considered during the year such as
consideration of the internal and external audit reports review of the
preliminary and interim announcements and review of the annual report
and accounts
other items that were considered and discussed during the year included
a review of progress on implementation of the new international financial
reporting standards and the resulting restatement of the accounts annual
fitness checks within the subsidiaries the external auditor plan for 2005
and the external auditor’s fees
at the invitation of the committee and as appropriate to the matters
under discussion meetings may be attended by the executive directors
and internal and external auditors full minutes are kept by the secretary
of the matters considered and decisions taken by the committee outside
of the meeting process the committee chairman has regular contact with
the executive directors other committee members and the auditors on a
variety of topics
corporate governance 32
the audit committee assesses and reviews on a regular basis the
independence of the external auditors as part of their determination the
audit committee considers a report by the external auditor on the firm’s
independence which is required in order to carry out their professional
duties and responsibilities as auditors the majority of non audit work
undertaken by the external auditors during the year relates to three items
these were tax advisory services advice on the implementation of
international financial reporting standards and financial due diligence work
on the alsa transaction all of these items the committee believes would
be impractical and costly to provide through another party the committee
has an approved policy on the provision of nonaudit services the policy
sets the approvals policy for the following types of service
• services that are considered to have ‘general preapproval’ by the
audit committee by virtue of the approval of the policy
• services that require ‘specific preapproval’ on a casebycase basis
before any work can commence and
• services that cannot be supplied by the external auditors ‘prohibited
services’
in deciding whether or not to grant approval for the provision of specific
services by the external auditors the audit committee includes in its
consideration the following factors
i whether the external auditing firm is best placed to provide an
effective and efficient service given its familiarity with the company’s
processes systems and people and
ii the level of nonaudit fees paid to the external auditors in the year
as a proportion of the annual external audit
whistle blowing policy
a group ‘whistle blowing’ policy has been issued to all group companies
to ensure a consistent approach across the group
relations with shareholders
dialogue with institutional shareholders
the company maintains regular dialogue with its institutional shareholders
and fund managers through a variety of meetings and presentations
throughout the year presentations are given by the executive directors
following the full year and half year results to institutional investors analysts
and brokers which the non executive directors may attend in addition
the company’s brokers provide confidential feedback to the company on
the views of the major institutions following the interim and final results
a biennial independent review of the company’s major investors is
undertaken which asks for feedback on financial performance and
management the next review will be in 2006
during the year written responses are given to correspondence received
from shareholders and all shareholders receive copies of the annual
report and accounts and interim report the company has introduced
an electronic communications facility to enable shareholders to receive
documentation such as the annual report and accounts electronically and
also to cast their votes by proxy electronically the company has also
introduced an electronic proxy appointment service for crest members
the company’s website wwwnationalexpressgroupcom houses wide
ranging information about the group including the final and interim
announcements annual report and accounts press releases share price
data and links to subsidiary company websites
the annual general meeting
the annual general meeting provides an opportunity for all shareholders
to question the chairman and directors on a variety of topics and
information is provided at the meeting on different aspects of the group’s
activities all of the company’s directors are present at the meeting proxy
votes including the number of abstentions are displayed on the resolutions
following the result on a display of hands notice of the annual general
meeting and related papers are sent to shareholders at least 20 working
days before the meeting
statement of directors’ responsibilities
the annual report contains the accounts and directors’ remuneration
report in accordance with applicable united kingdom law and
international financial reporting standards as adopted by the european
union the directors are required to prepare accounts for each financial
year that present fairly the financial position of the company and of the
group and the financial performance and cash flows of the group for that
period in preparing those accounts the directors are required to
• select suitable accounting policies and then apply them consistently
• present information and accounting policies in a manner that provides
relevant reliable and comparable information and
• state that the company has complied with applicable accounting
standards subject to any material departures disclosed and explained
in the accounts
the directors confirm that these accounts comply with the above
requirements
the directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial position
of the group and enable them to ensure that the accounts comply with
the companies act 1985 they are also responsible for safeguarding the
assets of the group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities
corporate governance 33
this report has been approved by the board and the remuneration
committee the report will be put to shareholders at the 2006 annual
general meeting for consideration and approval
remuneration committee
the members of the remuneration committee the committee
throughout the year all of whom were independent and their attendance
at meetings are shown on page 28 the terms of reference of the
committee are available on the company’s website at
wwwnationalexpressgroupcom
the committee is responsible for determining the fees of the chairman
and the remuneration and conditions of employment of the executive
directors it also approves the remuneration and conditions of
employment of the divisional chief executives and company secretary
and reviews the remuneration of the senior management team
the committee has appointed independent remuneration consultants
new bridge street consultants llp nbsc to advise on all aspects of
senior executive remuneration nbsc has no other connection with the
group other than in the provision of advice on executive and employee
remuneration in addition the committee has appointed an independent
consultant graham abbey of 7days limited to assist the committee
particularly with the development of strategy on remuneration policy
the chief executive provides guidance to the committee on remuneration
packages for senior executives employed by the group but not in respect
of his own remuneration
the committee’s recommendations in 2005 were all accepted and
implemented by the board
remuneration of non executive directors
the fees of the non executive directors are set by the board as a whole
following an annual review the review takes account of fees paid for
similar positions in the market the time commitment required from the
director estimated as 20 days per year for non executive directors
other than the chairman and any additional responsibilities undertaken
such as acting as chairman to one of the board committees or senior
independent director non executive directors are not eligible to receive
pension entitlements or bonuses and may not participate in share option
schemes for 2005 the basic fee for acting as a non executive director
was £35000 a year an additional fee of £5000 was paid for chairing one
of the board committees an extra fee of £5000 is paid to the senior
independent director the chairman david ross has elected to take all
of his fees as national express shares
remuneration policy for executive directors
the committee’s remuneration policy is based on the following broad
principles
• to provide a competitive remuneration package to attract and retain
quality individuals
• to align remuneration to drive the overall objectives of the business
• to align the interests of management with the interests of
shareholders and
• to provide the foundation for overall reward and remuneration
beyond the specific roles governed by the remuneration committee
the objective of this policy is aligned with the recommendation of the
combined code on directors’ remuneration that is to provide a level
of remuneration “to attract retain and motivate directors of the quality
required to run the company successfully but avoid paying more than is
necessary for this purpose a significant proportion of executive directors’
remuneration should be structured so as to link rewards to corporate and
individual performance”
the policy in relation to subsequent years will be kept under review to
ensure that it reflects changing circumstances in implementing its policy
the committee has given full consideration to the principles of good
governance of the combined code with regard to directors’
remuneration
a substantial proportion of the executive directors’ pay is performance
related the table below shows the balance between fixed and
performance related pay at target and maximum performance levels
maximum performance assumes achievement of maximum bonus and full
vesting of shares under the ltip 
report on directors’ remuneration
target maximum
value of shares vesting
performance related
bonus
basic salary excluding
pension contributions
and benefits
0
20
40
60
80
100
 34
i basic salary
the salary of individual executive directors is reviewed at 1 january
each year account is taken of the performance of the individual
concerned together with any change in responsibilities that may have
occurred and the rates for similar roles in a comparator group of
companies the comparator group for the 2005 financial year was
made up of three distinct groups of companies these were a group
of transport sector companies drawn from the ftse 250 with a
median market capitalisation of £900m a group of companies drawn
from the ftse 250 generally with a market capitalisation range from
£530m to £1500m and a subsector of the transport sector
containing companies more directly comparable to the company in
terms of turnover staff numbers andor scope of operations for 2006
the comparator groups will be based on a similar group of transport
sector companies drawn from the ftse 250
ii performancerelated bonus
bonus payments for 2005 were based on the group’s normalised
profit with the maximum bonus payable at 60 of basic salary for
achieving 112 of budget between 100 of budget and 112 the
amount of bonus payable was on a straightline basis with a 25
bonus payable for achieving budget no bonus was payable if budget
was not achieved an additional bonus of up to 15 of basic salary
was payable dependent upon the group meeting certain customer
service objectives
following a benchmarking exercise undertaken by new bridge street
consultants the maximum bonus payable to executive directors has
been increased from 75 to 100 of basic salary for 2006 70 of
the bonus payable is based on financial targets and 30 on non
financial targets no bonus is payable unless the group’s normalised
profit before tax budget is achieved
iii pensions
under the terms of their service agreements executive directors are
entitled to become members of one of the group pension schemes
or if preferred to receive payment of a fixed percentage of salary
the committee reviewed the pension arrangements of the executive
directors during the year in light of the new pension regime coming
into force from april 2006 and the introduction of an overall
£15 million indexed life time allowance
phil white is a member of an approved defined contribution pension
scheme the pension received on retirement will depend on the total
contributions paid the investment return and the cost of buying an
annuity ray o’t oole and adam walker are members of the national
express group staff pension plan which is a defined benefit scheme the
benefits from approved pension plans are subject to inland revenue limits
benefits agreed with the directors which exceed these limits are provided
through unfunded unapproved arrangements for ray o’t oole and adam
walker and a funded unapproved arrangement for phil white life
assurance of four time’s basic annual salary is provided spouse’s pensions
are provided in accordance with the terms of the appropriate scheme
iv incentive scheme and share options
a long term incentive arrangements
the committee reviews the incentive arrangements offered to
directors on an annual basis to ensure they remain in line with
emerging best practice in corporate governance and are appropriate
to the needs of the business as a result of the review in 2004 the
committee recommended the implementation of a new long term
incentive plan ltip to replace the previous annual award of share
options which the committee considered no longer met the goals of
retention and incentivisation the ltip was approved by shareholders
at the 2005 annual general meeting the ltip consists of annual
awards of performance and matching shares details of the plan are
provided below
report on directors’ remuneration
elements of remuneration
summary of the components of the executive directors’ remuneration
performance 
objective period policy 
basic salary to position at a competitive level for similar annually individual pay levels using comparable midmarket
roles within comparable markets data for guidance are determined by reference 
to the individual’s performance experience in post
and potential
performance related bonus incentivise delivery of performance objectives 1 year a discretionary bonus scheme is in operation with
payments based on the group’s normalised profit
with the extent to which budget is exceeded
determining the level of bonus payable
pension to provide competitive benefits inline with ongoing the policy is to provide market competitive
with market practice and to act as a retention retirement benefits only basic salary is pensionable
mechanism and reward long service
long term incentive plan to drive performance aid retention and 3 years half of any award is subject to eps growth the 
align the interests of executive directors remaining half is subject to the relative shareholder
with shareholders return of the company tsr compared against a
bespoke peer group
other benefits t o provide competitive benefits in line ongoing executive directors receive a fully expensed car
with market practice private health and long term sickness insurance
a cash alternative may be provided according to
individual circumstances
 normalised profit is profit before tax goodwill intangible amortisation and exceptional items 35
performance shares
executive directors are eligible to receive a conditional award of shares up
to an equivalent of 1 x their annual basic salary the vesting of the award is
conditional on meeting the performance conditions set out below
matching shares
executive directors are also eligible to receive awards of matching
shares that are based on a personal investment in national express
group shares funded either through a personal investment for
example using an annual bonus award or through pledging of shares
already held the maximum “investmentpledge” is 30 of gross salary
per annum matching awards are based on the ratio of 100 shares for
every 30 shares purchased this is a two for one ratio on a gross of
income tax basis matching share awards are also conditional on the
performance conditions set out below
if a participant ceases employment before vesting for a “compassionate”
reason eg redundancy retirement sale of business out of the company’s
group his awards will ordinarily vest the extent of vesting will be
determined by the prorata application of the performance conditions
up to the date of cessation unless the committee determines that it
would be inappropriate to apply a prorata reduction awards lapse on
cessation of employment for any other reason
performance conditions
there are two distinct performance conditions applying to each
award first the performance condition attached to onehalf of an
award part ‘a’ is based on the company’s normalised diluted
earnings per share ‘eps’ growth performance in excess of inflation
over a fixed three year period three financial years commencing with
the financial year in which the award is made the performance
condition attached to the other half of an award part ‘b’ is based on
the company’s total shareholder return performance over the same
fixed three year period relative to the total shareholder return of a
comparator group of over 20 transport companies taken
predominantly from the ftse industrial transportation and ftse
travel  leisure sectors the companies comprising the comparator
group have been chosen on the basis of their comparability to
national express group based on their size and scope of business
operations there is no ability to retest either performance condition
for the awards made in 2005 parts a and b will vest in accordance
with the tables below
average annual growth in the 
company’s normalised diluted
eps in excess of inflation ‘cpi’ percentage of part a that vests
less than 3 0
3 30
6 100
between 3 and 6 30 – 100 prorata
note cpi is a weighted measure of inflation calculated to reflect the scope of the
group’s international operations and is currently based twothirds on uk cpi and
onethird on us cpi
rank of the company’s total shareholder 
return against a comparator group percentage of part b that vests
below median 0
median 30
20th percentile 100
between median and 20th percentile 30 and 100 – prorata
eps and tsr were chosen for the ltip as the most appropriate
measures of national express’s long term performance since eps
remains an important growth measure and driver and tsr improves
shareholder alignment and is consistent with company objectives of
providing long term returns to shareholders
b executive share options – plan discontinued
the executive share option plan has been used on an annual basis
to grant options to executive directors and senior executives in the
group following a review in 2004 of incentives provided to senior
management the remuneration committee recommended that the
executive share option grant should be replaced by an annual award
made under the long term incentive plan described above the last
grant of executive share options was made in 2004 executive share
options are normally exercisable between three and ten years
following its grant but only if the specified performance condition has
been satisfied there are a limited set of circumstances such as leaving
employment due to injury disability or redundancy when performance
conditions will not apply to the exercise of an option
the performance conditions that apply to existing executive share
option grants are shown below
performance conditions attaching to the grant of executive
share options to executive directors made in 2004
value of option grant compound normalised 
as a percentage diluted eps growth
tier of option grant of salary target per annum
1 up to 50 rpi plus 4
2 51100 rpi plus 5
3 101150 rpi plus 6
4 151200 rpi plus 10
straightline vesting of options will occur if normalised eps growth falls between the
above targets to the extent that the performance condition is not met in full over
years 03 the option will lapse and there will be no retesting
performance conditions attaching to the grant of executive
share options to executive directors in 2002 and 2003
value of option grant compound normalised 
as a percentage diluted eps growth
tier of option grant of salary target per annum
1 up to 50 rpi plus 4
2 51100 rpi plus 6
3 101150 rpi plus 8
4 151200 rpi plus 10
straightline vesting of options will occur if normalised eps growth falls between the 
above targets in relation to tier 1 and 2 awards if the performance condition is not
met in full over years 03 performance can be retested annually over years 04 and
05 but measured from a fixed base of the financial year immediately prior to grant
to the extent that the performance condition is not met in full by then the option
will lapse there will be no opportunity to retest tier 3 and tier 4 grants
no variations were made to the terms and conditions or performance
targets of any existing awards of share options during the year
c savings related share option scheme sharesave scheme 
the company operates an inland revenue approved sharesave
scheme which is open to all uk employees including the executive
directors who have completed at least six months’ service at the date
of grant the options are exercisable after three years at a discount of
10 of the market value of the shares at the time of grant
report on directors’ remuneration 36
performance criteria
the committee believes that budgeted profit andor earnings per share
eps growth as performance measures for the discretionary bonus
scheme and long term incentives provide a transparent and accessible
method of gauging the performance of the company the company
calculates performance against these performance measures by reference
to the profit or earnings per share figures appearing in the company’s
audited accounts which the company believes to be the most transparent
and objective measure of the company’s profit or earnings per share the
committee also monitors the group’s total shareholder return tsr
against both the transport allshare index as a measure against its peer
group and the ftse mid 250 index representing a broad equity market
index of which the company is a constituent member for 2005 the
company has used tsr as a second performance measure for the long
term incentives of executive directors as outlined above
the following graphs show a comparison of national express group plc
total cumulative shareholder return against that achieved by the transport
allshare index and the ftse mid 250 index these graphs have been
selected because the company is a constituent of each index and the
committee therefore feels that these are the most appropriate indices
to represent the company’s relative performance
directors’ service contracts
executive directors
the service contract of phil white is dated 21 may 2003 and the service
contracts of ray o’toole and adam walker are dated 11 september
2003 these contracts are terminable on 12 months’ notice from the
company and six months’ notice from the director thereby reflecting
market practice and the balance that should be struck between providing
contractual protection to the directors that is fair and the interests of
shareholders the service contracts contain a provision exercisable at the
option of the company to pay an amount on early termination of
employment equal in the case of ray o’toole and adam walker to one
year’s salary and in the case of phil white one year’s salary and benefits
the company will use the payment in lieu of notice provisions when the
speed certainty and protection of restrictive covenants afforded by such
clauses are thought to be in the best interests of the company and the
circumstances surrounding the departure of the relevant director justify
their use the service contracts of ray o’toole and adam walker have a
further provision that where the company initiates a termination other
than for cause within six months of a change of control taking place the
company will exercise its option to make a payment in lieu of notice of
an amount equal to the salary and benefits that the director would have
received during the notice period in any event the committee’s policy
is that payments to directors on termination should reflect the
circumstances that prevail at the time also taking account of the director’s
duty to mitigate if appropriate
under the terms of their service agreements board approval is required
before any external appointment may be accepted by an executive
director
non executive directors
the non executive directors do not have service contracts with the
company but are appointed for fixed threeyear terms all directors are
required to stand at least once every three years for reappointment by
shareholders the appointment dates of the non executive directors are
jorge cosmen – 1 december 2005
sir andrew foster – 1 august 2004
barry gibson – 17 november 1999
sue lyons – 23 may 2001
david ross – 1 february 2001 
tim score – 21 february 2005
senior executive remuneration
the remuneration committee reviews and notes the salaries of senior
executives within the group the salaries of this group of employees by
band are as follows
number of executives
salary band 2005
£150001 – £200000 4
£100001 – £150000 22
£70000 – £100000 53
report on directors’ remuneration
national express group ftse allshare transport sector index
160
120
80
40
0
31dec 00 31dec 01 31dec 02 31dec 03 31dec 04 31dec 05
value £
total shareholder return versus ftse allshare transport index
graph 1 looks at the value by end of 2005 of £100 invested in national express
group on 31 december 2000 compared with £100 invested in the ftse allshare
transport sector index the other points plotted are the values at intervening
financial yearends
national express group ftse mid 250 index
160
120
80
40
0
31dec 00 31dec 01 31dec 02 31dec 03 31dec 04 31dec 05
value £
total shareholder return versus ftse mid 250 index
graph 2 looks at the value by the end of 2005 of £100 invested in national 
express group on 31 december 2000 compared with the value of £100 invested 
in the ftse mid 250 index the other points plotted are the values at intervening 
financial yearends 37
information subject to audit directors’ remuneration
directors’ emoluments
performance
related t otal t otal
salaryfees bonus benefits
1
2005
2
2004
2
£000 £000 £000 £000 £000
executive directors
phil white 450 337 223 1010 991
ray o’toole 325 179 24 528 560
adam walker 300 166 23 489 468
non executive directors
david ross chairman 150
3
–– 150 112
jorge cosmen 3 3 –
sir andrew foster 35 35 15
barry gibson 41 – – 41 40
sue lyons 40 40 40
tim score appointed 21 feb 2005 34 – – 34 –
former non executive director
tim stevenson resigned 21 september 2005 34 – – 34 45
1 benefits in kind include a company car fuel and health insurance and pension contributions payable above the earnings cap to phil white of £182272
2 total remuneration excludes pension contributions which are shown below
3 david ross has elected to take his chairman’s fees as national express group shares
pensions
pension benefits earned by directors in the year to 31 december 2005 from both the approved and unapproved plans were
movement
in transfer employer
accrued increase accrued value during contribution to
benefit in period transfer value benefit transfer value transfer value period less defined
at 1 jan net of of increase at 31 dec at 1 jan at 31 dec director’s contribution
2005 indexation in period 2005 2005 2005 contributions plan
age nra £000 £000 £000 £000 £000 £000 £000 £000
ray o’t oole 50 60 209 70 864 285 2293 3518 1096 –
adam walker 38 60 159 84 608 248 987 1793 651 –
phil white 56 62 – – – – – – – 427
 normal retirement age
directors’ shareholdings
directors’ interests and transactions
the beneficial and non beneficial interests of the directors in office as at 31 december 2005 are shown below
at
31 december at change from
2005 1 january 31 december 
or date 2004 or on 2005 to 
of leaving appointment 7 march 2006
executive directors
ray o’t oole 19236 14500 –
adam walker 9700 5300 –
phil white 165408 165408 –
non executive directors
jorge cosmen appointed 1 december 2005 18506130 15665329 18997483
sir andrew foster –––
barry gibson 3000 3000 –
sue lyons 2072 2072 –
david ross 634926 603393 636666
tim score appointed 21 february 2005 – – –
in order to align the interests of the directors more closely with the shareholders the remuneration committee has also determined that the executive
directors should build up a share fund equal to at least one year’s salary over a period of five years
report on directors’ remuneration
  38
executive share option awards
market
at during year at price date
1 jan 31 dec option at date of from which expiry
note 2005 granted exercised lapsed 2005 price exercise exercisable date
phil white
i 12870 – 12870 – – 5400p 8880p 270403 270410
ii 5128 – – – 5128 5850p – 050705 050712
iii 97436 – – 34188 63248 5850p – 050705 050712
iii 169598 – – – 169598 3980p – 180306 180313
iii 132159 – – – 132159 6810p – 120507 120514
ray o’toole
i 8415 – 8415 – – 5400p 8880p 270403 270410
ii 5128 – – – 5128 5850p – 050705 050712
iii 62820 – – 22649 40171 5850p – 050705 050712
iii 113065 ––– 113065 3980p – 180306 180313
iii 92511 – – – 92511 6810p – 120507 120514
iv 453 – 453 – – 4170p 9220p 011205 010606
adam walker
ii 5128 – – – 5128 5850p – 050705 050712
iii 14530 – – – 14530 5850p – 050705 050712
iii 75377 – – – 75377 3980p – 180306 180313
iii 76358 – – – 76358 6810p – 120507 120514
iv 453 – – – 453 4170p – 011205 010606
notes
i options granted under the 1996 national express group executive share option scheme
ii options granted under the 2002 national express group executive share option plan part 1 approved
iii options granted under the 2002 national express group executive share option plan part 2 unapproved
iv options granted under the national express group savings related share option scheme
 performance hurdle not yet passed as at 31 december 2005
report on directors’ remuneration 39
long term incentive plan ltip awards
in 2005 performance shares of 1 x salary were awarded to executive directors as nil cost options under the long term incentive plan ltip in addition
100 matching shares were awarded for every 30 investment shares pledged or invested by the director under the share matching element of the ltip 
further details of the ltip and the applicable performance conditions are shown on page 35
market market
ltip at during year at price price date
share 1 jan 31 dec on date of on date of from which expiry
awards 2005 awarded exercised lapsed 2005 award exercise exercisable date
phil white
performance shares – 48859 – – 48859 9210p – 270608 271208
matching shares – 116580 – – 116580 9210p – 270608 271208
ray o’toole
performance shares – 35287 – – 35287 9210p – 270608 271208
matching shares – 56613 – – 56613 9210p – 270608 271208
adam walker
performance shares – 32573 – – 32573 9210p – 270608 271208
matching shares – 32333 – – 32333 9210p – 270608 271208
note for the purposes of the eps performance conditions cpi has been calculated to have been 25 during the year ending 31 december 2005
in addition to their individual interests in shares the executive directors were for companies act purposes regarded as interested in the 340055 shares
held at 7 march 2006 by the national express group employee benefit trust in respect of the long term incentive plan
the register of directors’ interests maintained by the company contains full details of the directors’ holdings of shares and options over shares in
the company the aggregate gain between the option price and market price on date of exercise of share options by the directors during the year
was £76359
the midmarket price of the company’s ordinary shares at 31 december 2005 was 86625p 2004 8255p and the range during the year ended 
31 december 2005 was 74127p to 937p
by order of the board
j m b gibson
director and chairman of the remuneration committee 
9 march 2006
report on directors’ remuneration 40
we have audited the group financial statements of national express
group plc for the year ended 31 december 2005 which comprise the
group income statement the group balance sheet the group cash flow
statement the group statement of recognised income and expense and
the related notes 1 to 40 these group financial statements have been
prepared under the accounting policies set out therein
we have reported separately on the parent company financial statements
of national express group plc for the year ended 31 december 2005
and on the information in the directors’ remuneration report that is
described as having been audited
this report is made solely to the company’s members as a body in
accordance with section 235 of the companies act 1985 our audit work
has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditors’ report and
for no other purpose to the fullest extent permitted by law we do not
accept or assume responsibility to anyone other than the company and
the company’s members as a body for our audit work for this report
or for the opinions we have formed
respective responsibilities of directors and auditors
the directors are responsible for preparing the annual report and the
group financial statements in accordance with applicable united kingdom
law and international financial reporting standards ifrss as adopted by
the european union as set out in the statement of directors’
responsibilities
our responsibility is to audit the group financial statements in accordance
with relevant legal and regulatory requirements and international
standards on auditing uk and ireland
we report to you our opinion as to whether the group financial
statements give a true and fair view and whether the group financial
statements have been properly prepared in accordance with the
companies act 1985 and article 4 of the ias regulationwe also report
to you if in our opinion the directors’ report is not consistent with the
group financial statements if we have not received all the information and
explanations we require for our audit or if information specified by law
regarding director’s remuneration and other transactions is not disclosed
we review whether the corporate governance statement reflects the
company’s compliance with the nine provisions of the 2003 frc
combined code specified for our review by the listing rules of the
financial services authority and we report if it does notwe are not
required to consider whether the board’s statements on internal control
cover all risks and controls or form an opinion on the effectiveness of the
group’s corporate governance procedures or its risk and control
procedures
we read other information contained in the annual report and consider
whether it is consistent with the audited group financial statements the
other information comprises only the chairman’s statement the chief
executive’s statement the financial review the corporate governance
statement the statement of director’s responsibilities the unaudited part
of the report on directors’ remuneration and the directors’ report
we consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the group financial
statements our responsibilities do not extend to any other information
basis of audit opinion
we conducted our audit in accordance with international standards on
auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts
and disclosures in the group financial statements it also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the group financial statements and of
whether the accounting policies are appropriate to the group’s
circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the group
financial statements are free from material misstatement whether caused
by fraud or other irregularity or error in forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
group financial statements
opinion
in our opinion the group financial statements
• give a true and fair view in accordance with ifrss as adopted by the
european union of the state of the group’s affairs as at 31 december
2005 and of its profit for the year then ended and
• have been properly prepared in accordance with the companies act
1985 and article 4 of the ias regulation
ernst  young llp
registered auditor
london
9 march 2006
independent auditor’s report to the shareholders
of national express group plc 41
total before total before
goodwill goodwill goodwill goodwill
impairment impairment impairment impairment
intangible intangible intangible intangible
amortisation  amortisation  amortisation  amortisation 
exceptional exceptional exceptional exceptional
items items t otal items items t otal
2005 2005 2005 2004 2004 2004
note £m £m £m £m £m £m
continuing operations
revenue 4 22160 – 22160 23545 – 23545
operating costs before goodwill impairment
intangible amortisation  exceptional items 20605 – 20605 22112 – 22112
uk trains goodwill impairment 5 – 333 333 – 333 333
intangible amortisation 5 – 49 49 – 24 24
exceptional items 5 – 78 78 – 77 77
total operating costs 20605 460 21065 22112 434 22546
group operating profit 1555 460 1095 1433 434 999
loss on disposal of noncurrent assets ––– – 09 09
profit from operations 1555 460 1095 1433 443 990
share of post tax results from associates and joint 
ventures accounted for using the equity method 88 – 88 34 – 34
finance income 9 108 – 108 132 – 132
finance costs 9 222 – 222 309 – 309
profit before tax 1353 460 893 1222 443 779
tax expense 10 295 20 275 264 36 228
profit after tax for the year from continuing operations 1058 440 618 958 407 551
lossprofit for the year from 
discontinued operations 11 38 683 645 93 58 35
lossprofit for the year 1096 1123 27 1051 465 586
lossprofit attributable to equity shareholders 1095 1123 28 1061 439 622
profitloss attributable to minority interests 01 – 01 10 26 36
1096 1123 27 1051 465 586
lossearnings per share
– basic lossearnings per share 13 20p 457p
– diluted lossearnings per share 13 20p 450p
earnings per share from continuing operations
– basic earnings per share 13 452p 405p
– diluted earnings per share 13 445p 399p
 results are restated for the transition to international financial reporting standards see note 40
dividends of £416m were paid during the year 2004 £364m dividends of £470m were proposed for approval during the year 2004 £409m
group income statement
for the year ended 31 december 2005 42
2005 2004
note £m £m
assets
noncurrent assets
intangible assets 14 7194 3528
property plant and equipment 15 5072 3335
investment property 16 – –
financial assets – other investments 18 114 102
financial assets – derivative financial instruments 18 06 –
investments accounted for using the equity method 19 48 –
other receivables 21 262 305
deferred tax asset 28 230 183
12926 7453
current assets
inventories 22 187 161
trade and other receivables 23 3018 3018
financial assets – derivative financial instruments 18 67 –
current tax assets 113 –
cash and cash equivalents 24 1455 1431
4840 4610
disposal group assets classified as held for sale 11 – 338
total assets 17766 12401
noncurrent liabilities
financial liabilities – borrowings 29 4955 2518
– derivative financial instruments 29 83 –
deferred tax liability 28 271 45
other noncurrent liabilities 26 61 30
defined benefit pension liability 36 888 657
provisions 27 413 364
6671 3614
current liabilities
trade and other payables 25 5331 5145
financial liabilities – borrowings 29 2144 303
– derivative financial instruments 29 134 –
current tax liabilities 240 368
provisions 27 123 234
7972 6050
liabilities directly associated with disposal group assets classified as held for sale 11 – 69
total liabilities 14643 9733
net assets 3123 2668
shareholders’ equity
called up share capital 33 75 70
share premium account 34 1742 475
capital redemption reserve 34 02 –
own shares 34 51 51
other reserves 35 245 133
retained earnings 34 1081 2032
total shareholders’ equity 3094 2659
minority interest in equity 29 09
total equity 3123 2668
 results are restated for the transition to international financial reporting standards see note 40
p m white chief executive
a c walker finance director
9 march 2006
group balance sheet
at 31 december 2005 43
2005 2004
note £m £m
cash generated from operations 39 1811 2541
tax paid 267 32
net cash from operating activities 1544 2509
cash flows from investing activities
payments to acquire businesses net of cash acquired 2188 126
deferred consideration for businesses acquired 03 45
purchase of property plant and equipment 617 692
proceeds from disposal of property plant and equipment 81 188
payments in respect of businesses disposed – 15
receipts from disposal of businesses net of cash disposed 713 247
interest received 108 131
receipts from sale of shares for employee schemes 35 01
net cash used in investing activities 1871 59
cash flows from financing activities 
proceeds from issue of ordinary shares 49 25
purchase of own shares 35 –
share buy back 258 –
interest paid 326 316
repayment of maintenance bond at scotrail – 187
finance lease principal payments 200 158
repayment of loan notes 67 09
loans advancedrepaid 1481 931
dividends paid 416 364
net cash fromused in financing activities 228 1940
decreaseincrease in cash and cash equivalents 99 510
opening cash and cash equivalents 24 1472 968
decreaseincrease in cash and cash equivalents 99 510
foreign exchange 27 06
closing cash and cash equivalents 24 1400 1472
 results are restated for the transition to international financial reporting standards see note 40
group statement of cash flows
for the year ended 31 december 2005 44
2005 2004
note £m £m
income and expense recognised directly in equity
exchange differences on retranslation of foreign operations 503 280
exchange differences on retranslation of foreign currency borrowings 455 298
actuarial losses on defined benefit pension plans 36 320 23
gains on cash flow hedges taken to equity 145 –
127 05
transfers to the income statement
exchange differences on disposal of foreign operations 15 –
on cash flow hedges 94 –
79 –
tax on exchange differences on retranslation of foreign operations 71 41
deferred tax on share based payments 14 08
deferred tax on actuarial gainslosses 90 02
deferred tax on cash flow hedges 14 –
tax on items taken directly to or transferred from equity 161 35
net losses recognised directly in equity 45 40
lossprofit for the financial year 28 622
profitloss attributable to minority interests 01 36
total recognised expenseincome for the year 72 546
expenseincome attributable to equity shareholders 73 584
incomeexpense attributable to minority interests 01 38
72 546
effects of changes in accounting policy
equity shareholders
net loss on hedges on firsttime adoption of ias 39 184 –
tax recognised on hedges on firsttime adoption of ias 39 56 –
128 –
 results are restated for the transition to international financial reporting standards see note 40
group statement of 
recognised income and expense
for the year ended 31 december 2005 45
1 corporate information
the consolidated accounts of national express group plc for the year ended 31 december 2005 were authorised for issue in accordance with
a resolution of the directors on 9 march 2006 and the balance sheets were signed on the board’s behalf by pm white and ac walker national
express group plc is a limited company incorporated in england and wales whose shares are publicly traded on the london stock exchange
the principal activities of the group are described in the operating review and the financial review that accompany these accounts
2 accounting policies
statement of compliance
these accounts have been prepared in accordance with international financial reporting standards “ifrs” and the international financial 
reporting interpretations committee’s “ifric” interpretations as adopted by the european union “eu” and with those parts of the companies
act 1985 applicable to companies reporting under ifrs the group is required to comply with international accounting requirements under ias 1
‘presentation of financial information’ except in extremely rare circumstances where management concludes that compliance would be so misleading
that it would conflict with the objective to ‘present fairly’ its accounts on this basis the group has departed from the requirements of ias 19
‘employee benefits’ and has accounted for its constructive but not legal obligations for the railways pension scheme “rps” under the terms of its
uk rail franchise agreements details of the background and rationale for this departure are provided in note 36 including the impact on the group’s
reported financial performance and position of adopting this accounting treatment as required by ias 1 the company has taken advantage of the
exemption provided under section 230 of the companies act 1985 not to publish its individual income statement and related notes
basis of preparation
as a company registered and listed in an eu country national express group plc has been required to adopt ifrs with effect from 1 january 2005
the results for the year ended 31 december 2005 represent the group’s first annual report and accounts prepared in accordance with its accounting
policies under ifrs previously the group reported under uk generally accepted accounting policies “uk gaap” uk gaap to ifrs reconciliations
of equity for 1 january 2004 and 31 december 2004 and of profit for the year ended 31 december 2004 are summarised in note 40
as noted above the group has taken the extremely rare decision to depart from the requirement of ias 19 ‘retirement benefits’ so as to present
fairly its financial performance position and cash flows in respect of its obligation for the rps the details of this departure and impact on the
group’s accounts are set out in note 36
a summary of the group’s accounting policies applied in preparing the accounts for the year ended 31 december 2005 are set out below the most
significant accounting policy changes arising on the transition to ifrs along with the policies applied on the transition to ifrs on 1 january 2004 are
set out in note 40
the preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting
period although these estimates are based on management’s best knowledge actual results ultimately may differ from those estimates
the key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities
within the next financial year are the measurement and impairment of indefinite life intangible assets including goodwill and measurement of
defined benefit pension obligations the measurement of intangible assets other than goodwill on a business combination involves estimation of
future cash flows and the selection of a suitable discount rate the group determines whether indefinite life intangible assets are impaired on an
annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated this requires
estimation of future cash flows and choosing a suitable discount rate see note 14 measurement of defined benefit pension obligations requires
estimation of future changes in salaries and inflation as well as mortality rates the expected return on assets and the choice of a suitable discount
rate see note 36
the consolidated accounts are presented in pounds sterling and all values are rounded to the nearest one hundred thousand £01m except where
otherwise indicated
basis of consolidation
the consolidated accounts comprise the accounts of national express group plc and all its subsidiaries drawn up to 31 december each year
adjustments are made to bring into line any dissimilar accounting policies that may exist
all intercompany balances and transactions have been eliminated in full
on acquisition of a business the acquisition method of accounting is adopted and the group income statement includes the results of subsidiaries and
businesses purchased during the year from the date control is assumed purchase consideration is allocated to assets and liabilities on the basis of fair
value at the date of acquisition on the sale of a business the group income statement includes the results of that business to the date of disposal
notes to the accounts 46
2 accounting policies continued
basis of consolidation continued
minority interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the group and is presented separately from
parent shareholders’ equity in the consolidated balance sheet
interests in joint ventures
the group has a number of contractual arrangements with other parties which represent joint ventures which take the form of agreements to
share control of other entities
the group recognises its interest in the entity’s assets and liabilities using the equity method of accounting the group balance sheet includes the
appropriate share of these joint ventures’ net assets and the income statement an appropriate share of their results after tax
accounts of jointly controlled entities are prepared for the same reporting period as the group and where necessary adjustments are made to
bring the accounting policies in line with those of the group adjustments are also made in the group’s accounts to eliminate the group’s share of
unrealised gains and losses on transactions between the group and its jointly controlled entities the group ceases to use the equity method from
the date it no longer has joint control over or significant influence in the joint venture
interests in associates
companies other than subsidiaries and joint ventures in which the group has an investment representing not less than 20 of the voting rights and
over which it exerts significant influence are treated as associates the group accounts include the appropriate share of these associates’ results and
reserves based on their latest accounts under the equity method
revenue recognition
rendering of services
revenue comprises income from road passenger transport train passenger services airport operations and related activities in the uk north
america and europewhere appropriate amounts are shown net of rebates and sales tax
revenue is recognised by reference to the stage of completion of the customer’s travel or services provided under contractual arrangements as a
proportion of total services to be provided
uk trains revenue includes amounts attributed to the train operating companies “tocs” based principally on agreed models of route usage by
railway settlement plan limited which administers the income allocation system within the uk rail industry in respect of passenger receipts in
addition franchise agreement receipts from the strategic rail authority “sra” the department for transport rail division “dft rail” and local
passenger transport executives “ptes” are treated as revenue franchise agreement payments to the sra dft rail are recognised in operating
costs uk coach revenue comprises amounts receivable generated from ticket sales uk bus and european coach  bus alsa revenue comprises
amounts receivable generated from ticket sales and revenue generated from services provided on behalf of local transport authorities which is
recognised as the services are provided the attributable share of season ticket or travelcard income is deferred within liabilities and released to the
income statement over the life of the relevant season ticket or travelcard north american bus revenue from local authorities and similar contracts
is recognised as the services are provided
rental income
rental income is accounted for on a straightline basis over the lease term
interest income
revenue is recognised as interest accrues using the effective interest method
government grants
government grants relating to property plant and equipment are included in noncurrent liabilities as deferred income and are credited to the
income statement over the expected useful economic life of the assets concerned other grants are credited to the income statement as the related
expenditure is expensed
segmental reporting
each of the group’s business and geographical segments provide services that are subject to risks and returns that are different from those of the
other business segments due to the nature of the group’s operations the distinct business segments align directly with distinct geographical
segments which are operating in separate economic environments
the group’s segments comprise uk buses uk coaches uk trains north american bus european coach  bus alsa and central functions these
segments are described in more detail in the operating review and the financial review accompanying these accounts operations in our north
america – public transit segment and our australia bus segment were discontinued in 2005 and 2004 respectively the assets of the operations are
disclosed in ‘disposal group assets classified as held for sale’ and liabilities disclosed in ‘liabilities directly associated with disposal group assets classified
as held for sale’ reflecting the fact that the carrying amount will be recovered principally through a sale and not through continuing use
notes to the accounts 47
2 accounting policies continued
leases
leases of property plant and equipment where substantially all the risks and rewards of ownership of the asset have passed to the group are
capitalised in the balance sheet as property plant and equipment finance leases are capitalised at the lower of the fair value of the leased property
or the present value of the minimum lease payments the capital element of future obligations under hire purchase contracts and finance leases is
included as a liability in the balance sheet the interest element of rental obligations is charged to the income statement over the period of the lease
and represents a constant proportion of the balance of capital repayments outstanding property plant and equipment acquired under finance leases
are depreciated over the shorter of the useful life of the asset or the lease term
leases of property plant and equipment where a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases rentals paid under operating leases are charged to the income statement on a straightline basis over the term of the lease
incentives received under operating leases and initial direct costs in negotiating the lease are amortised to the income statement on a straightline
basis over the term of lease
borrowing costs
borrowing costs are recognised as an expense when incurred in accordance with the benchmark accounting treatment under ias 23‘borrowing
costs’
exceptional items
exceptional items are material items of income or expenditure which due to their nature and infrequency require separate identification on the face
of the income statement to allow a better understanding of the financial performance in the year in comparison to prior years exceptional items
include but are not restricted to reorganisation redundancy and startup costs for significant contracts
property plant and equipment
all property plant and equipment is stated at historic cost less accumulated depreciation and any impairment
land and buildings comprise mainly vehicle depots and garages and offices freehold land is not depreciated other property plant and equipment
are depreciated on a straightline basis over their estimated useful lives as follows
freehold buildings – 30 to 50 years
long leasehold property improvements – 15 to 40 years
public service vehicles – 8 to 15 years
plant and equipment fixtures and fittings – 3 to 15 years
the carrying value of items of property plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the
current carrying value may not be recoverable and are written down immediately to their recoverable amount useful lives and residual values are
reviewed annually and adjustments where applicable are made on a prospective basis repairs and maintenance are charged to the income
statement during the financial period in which they are incurred
an item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset any gain or loss arising on the derecognition of the asset is included in the income statement in the period of
derecognition
investment property
any of the group’s properties that are surplus to requirements are classified as investment properties being held for longterm investment to earn
rental income
investment properties are measured initially at cost and subsequently remeasured to fair value reflecting market conditions at the balance sheet
date gains or losses arising from the changes in fair values of investment properties are included in the income statement as they arise
notes to the accounts 48
2 accounting policies continued
intangible assets
intangible assets acquired separately are capitalised at cost and when acquired in a business combination are capitalised at fair value at the date of
acquisition following initial recognition the historic cost model is applied to intangible assetswhere amortisation is charged on finite life assets this
expense is taken to the income statement through operating expenses
finite life intangible assets have a residual value of nil and are amortised on a straightline basis over their estimated useful lives as follows
customer contracts – over the life of the contract between 1 and 5 years
right to operate toc franchises – over the life of the franchise between 1 and 7 years
intangible assets with indefinite lives are tested annually for impairment and the useful lives of finite assets are examined on an annual basis and
adjustments where applicable made on a prospective basis finite life assets are reviewed for impairment where indicators of impairment exist
the group’s indefinite life intangible assets include customer relationships and goodwill customer relationship intangible assets are recognised only
on contracts which are presumed to automatically be renewed based on historical experience of the market in which the contract operates
goodwill
goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the group’s interest in the net fair
value of the identifiable assets liabilities and contingent liabilities following initial recognition goodwill is stated at historic cost less any accumulated
impairment in value if an acquisition gives rise to negative goodwill this is credited directly to the consolidated income statement
in accordance with ifrs 3‘business combinations’ goodwill is not amortised all goodwill is subject to an annual test of impairment and an
impairment charge recognised as required the net book value of goodwill that was capitalised in the restated balance sheets at both 1 january 2004
the date of transition to ifrs and 31 december 2004 has been tested for impairment
fair value accounting adjustments are made in respect of acquisitions fair value adjustments based on provisional estimates are amended within one
year of the acquisition if required with a corresponding adjustment to goodwill in order to refine adjustments to reflect further evidence gained post
acquisition
where goodwill forms part of a cashgenerating unit and all or part of that unit is disposed the associated goodwill is included in the carrying
amount of the operation when determining the gain or loss on the disposal of the operation
impairment of noncurrent assets
property plant and equipment intangible assets financial assets and other noncurrent assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable except for indefinite life intangible assets and goodwill which are
reviewed annually an impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount
which is the higher of an asset’s fair value less costs to sell and its value in use for the purposes of assessing impairment assets are grouped at the
lowest level for which there are separately identifiable cash flows
in assessing value in use the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset impairment losses are recognised in the income statement in
expense categories consistent with the function of the impaired asset
a review is made at each reporting date of any previous impairment losses to assess whether they no longer exist or may have decreased if such
indication exists the asset’s recoverable amount is estimated and any previously recognised impairment loss is reversed only if there has been a
change in the estimates used to assess the recoverable amount since the last impairment loss was recognised if that is the case the carrying amount
of the asset is increased subject to a limit of the asset’s net book value had no previous impairment loss been recognised such reversal is
recognised in the income statement unless the asset is carried at a revalued amount in which case the reversal is treated as a revaluation increase
future amortisation is then adjusted to allocate the asset’s revised carrying amount over its remaining useful economic life
financial assets
the group determines the classification of its financial assets at initial recognition and reevaluates the designation at each year end when financial
assets are recognised initially they are measured at fair value as explained in note 40 the group followed the transitional provisions of ifrs 1 to
adopt ias 32‘financial instruments disclosure and presentation’ and ias 39‘financial instruments recognition and measurement’ from 1 january 2005
prior to 1 january 2005 the group held investments at historic cost less any provision for impairment
notes to the accounts 49
2 accounting policies continued
financial assets continued
held to maturity investments
nonderivative financial assets with fixed or determinable payments are classified here when the group has the intention and ability to hold to
maturity these financial assets are held at amortised cost using the effective interest method gains and losses are recognised in the income
statement when the investments are derecognised or impaired as well as through amortisation
loans and receivables
nonderivative financial assets with fixed or determinable payments that are not quoted in an active market do not qualify as trading assets and have
not been designated as either fair value through profit or loss or available for sale such assets are carried at amortised cost gains and losses are
recognised in the income statement when the loans and receivables are derecognised or impaired as well as through amortisation
available for sale financial assets
available for sale financial assets are nonderivative financial assets that are designated as such or that are not classified in any of the other categories
after initial recognition these assets are measured at fair value with gains or losses being recognised as a separate component of equity until the
investment is derecognised or the investment is determined to be impaired at which time the previously reported cumulative gain or loss is included
in the income statement
fair values
where there is no active market for the group’s financial assets fair value is determined using valuation techniques including recent commercial
transactions and discounted cash flow analyses otherwise assets are carried at amortised cost
inventories
inventories are valued at the lower of cost and net realisable value after making due allowance for obsolete or slow moving items
trade and other receivables
trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts doubtful debts
are provided for when collection of the full amount is no longer probable whilst bad debts are written off when identified
precontract costs
precontract costs associated with securing new rail franchises are expensed as incurred except where it is virtually certain that a franchise will be
awarded in which case they are recognised as an asset and are expensed to the income statement over the life of the franchise costs associated
with the commencement of all new contracts other than rail franchises are expensed as incurred
cash and cash equivalents
cash and cash equivalents as defined for the cash flow statement comprise cash in hand cash held at bank with immediate access other shortterm
investments and bank deposits with maturities of three months or less from the date of inception and bank overdrafts in the consolidated balance
sheet cash includes cash and cash equivalents excluding bank overdrafts bank overdrafts that have no legal right of setoff against cash and cash
equivalents are included within borrowings in current liabilities all are carried on the balance sheet at cost
interestbearing loans and borrowings
all loans and borrowings are initially recognised at cost being the net fair value of the consideration received after initial recognition interestbearing
loans and borrowings are subsequently measured at amortised cost using the effective interest method
gains and losses are recognised in the income statement when the liabilities are derecognised or impaired as well as through the amortisation process
provisions
provisions are recognised when the group has a present legal or constructive obligation as a result of past events it is probable that an outflow of
resources will be required to settle the obligation and a reliable estimate of the amount can be made provisions are measured at the directors’ best
estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is
material using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability the
amortisation of the discount is recognised as a finance costwhere the group expects a provision to be reimbursed the reimbursement is
recognised as a separate asset but only when reimbursement is virtually certain
the group’s policy is to selfinsure high frequency claims within the businesses to provide protection above these types of losses the group
purchases insurance cover from a selection of proven and financially strong insurers the insurance provision is based on estimated exposures at the
year end principally for claims arising in the uk and north america prior to the year end date subject to the overall stop loss within the group’s
insurance arrangements the majority of provisions will be utilised within six years and the provision has been discounted to take account of the
expected timing of future cash settlements
notes to the accounts 50
2 accounting policies continued
pensions and other postemployment benefits
the group has a number of pension schemes both of a defined benefit and defined contribution nature full details are provided in note 36
including the departure from ias 19 required for the group’s rps obligations as outlined in the statement of compliance
the liability in respect of defined benefit schemes comprises the total for each scheme of the present value of the relevant defined benefit obligation
at the balance sheet date less the fair value of plan assets the trustees complete a full actuarial valuation triennially separately for each plan but the
obligation is updated annually by independent actuaries using the projected unit credit method for financial reporting purposes the present value of
the obligation is determined by the estimated future cash outflows using interest rates of high quality corporate bonds which have terms to maturity
equivalent to the terms of the related liability
the current service cost and gains and losses on settlements and curtailments are recognised in staff pension costs within operating costs in the
income statement past service costs are included in operating costs where the benefits have vested otherwise they are amortised on a straightline
basis over the vesting period the expected return on assets of funded defined benefit schemes and the interest on pension scheme liabilities
comprise the finance element of the pension cost and are also included in operating costs in accordance with the amendment to ias 19 actuarial
gains and losses arising from experience adjustments changes in actuarial assumptions and amendments to pension plans are charged or credited to
the statement of recognised income or expense in the period in which they arise
our tocs participate in the rps a defined benefit scheme which covers the whole of the uk rail industry this is partitioned into sections and the
group is responsible for the funding of these sections whilst it operates the relevant franchise in contrast to the pension schemes operated by most
businesses the rps is a shared cost scheme which means that costs are formally shared 60 employer and 40 employee a liability is recognised in
line with other defined benefit schemes in the group although this is offset by a franchise adjustment so that the net liability represents the deficit
that the group expects to fund during the franchise term this represents a departure from ias 19 so as to present fairly the group’s financial
performance position and cash flow in respect of its obligations for the rps
the charges in respect of defined contribution schemes are recognised when they are due the group has no legal or constructive obligation to pay
further contributions into a defined contribution scheme if the fund has insufficient assets to pay all employees benefits relating to employee service
in the current and prior periods
sharebased payments
the group applied the requirements of ifrs 2‘sharebased payment’ with effect from 1 january 2004 in accordance with the transitional provisions
ifrs 2 has been applied to all equitysettled awards granted after 7 november 2002 that were unvested as of 1 january 2005
the group issues equitysettled sharebased payments to certain employees equitysettled sharebased payments are measured at fair value at the
date of grant including market based performance conditions fair value is determined by an external valuer using the stochastic model nonmarket
based performance related vesting conditions are not taken into account when estimating the fair value instead those nonmarket conditions are
taken into account in calculating the current best estimate of the number of shares that will vest at each balance sheet date before vesting the
cumulative expense is calculated based on the group’s estimate of the number of shares that will eventually vest and the movement in cumulative
expense since the previous balance sheet date is recognised in the income statement with a corresponding entry in equity
share capital share premium and dividends
ordinary shares are classified as equitywhere the company purchases the company’s equity share capital the consideration paid including any
transaction costs is deducted from total shareholders’ equity as own shares until they are cancelled or reissuedwhere employee share trusts
purchase the company’s equity share capital the consideration paid including any transaction costs is deducted from total shareholders’ equity as
own shares until they are issued any consideration subsequently received on sale or reissue is included in shareholders’ equity
dividends are recorded as a liability in the period in which the liability to pay shareholders arises
current tax and deferred tax
current tax is provided on taxable profits earned according to the local rates applicable where the profits are earned income taxes relating to items
recognised directly in equity are recognised in equity and not in the income statement
deferred tax is provided in full using the liability method in respect of all material temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes except on the initial recognition of nondeductible goodwill
and in respect of investment in subsidiaries where the group is able to control the reversal of the temporary difference and it is probable the
temporary difference will not reverse in the foreseeable future deferred tax is measured on a nondiscounted basis at tax rates that are expected
to apply in the periods in which the temporary differences reverse based on tax rates and laws enacted or substantively enacted at the balance
sheet date
notes to the accounts 51
2 accounting policies continued
current tax and deferred tax continued
deferred tax assets are recognised where their recovery is considered more likely than not in that there will be suitable taxable profits from which
the future reversal of underlying temporary differences can be deducted their carrying amount is reviewed at each balance sheet date on the
same basis
deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and when the group intends
to settle its current tax assets and liabilities on a net basis
deferred tax is recognised directly in equity if the underlying transaction giving rise to the temporary difference is recognised directly in equity
foreign currencies
the trading results of foreign currency denominated subsidiaries joint ventures and associates are translated into sterling the presentation currency
of the group and functional currency of the parent using average rates of exchange for the year as a reasonable approximation to actual exchange
rates at the dates of transactions
the balance sheets of foreign currency denominated subsidiaries joint ventures and associates are translated into sterling at the rates of exchange
ruling at the year end and exchange differences arising are taken directly to the translation reserve in equity on disposal of a foreign currency
denominated subsidiary the deferred cumulative amount recognised in the translation reserve since 1 january 2004 under the transitional rules of
ifrs 1 relating to that entity are recognised in the income statement all other translation differences are taken to the income statement with the
exception of differences on foreign currency borrowings and forward foreign currency contracts which are used to finance or provide a hedge
against group net investments in foreign enterprises these are taken directly to equity until the disposal of the net investment at which time they
are recognised in the income statement
derivative financial instruments
the group followed the transitional provisions of ifrs 1 and the accounting policy after 1 january 2005 is as follows
the group uses derivative financial instruments such as foreign currency forward exchange contracts fuel price swaps and interest rate swaps to
hedge its risks associated with foreign currency fuel price and interest rate fluctuations such derivative financial instruments are initially recognised at
fair value and subsequently remeasured to fair value for the reported balance sheet the fair value of foreign currency forward exchange contracts
interest rate and fuel price swaps is calculated by reference to market exchange rates interest rates and fuel prices at the period end
in relation to cash flow hedges which meet the conditions for hedge accounting the portion of the gain or loss on the hedging instrument that is
determined to be an effective hedge is recognised directly in equity and the ineffective portion in the income statement the gains or losses deferred
in equity in this way are recycled through the income statement in the same period in which the hedged underlying transaction or firm commitment
is recognised in the income statement
foreign currency forward currency contracts are used to hedge our net investment in foreign currency denominated operations and to the extent
they are designated and effective as net investment hedges are matched in equity against foreign exchange exposure in the related assets
for derivatives that do not qualify for hedge accounting gains or losses are taken directly to the income statement in the period
hedge accounting is discontinued when the hedging instrument expires is sold terminated or exercised or no longer qualifies for hedge accounting
at that date any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecast transaction occurs or
transferred to the income statement if the forecast transaction is no longer expected to occur
the accounting policy applied prior to 1 january 2005 is as follows
the group uses interest rate swaps to hedge interest rate exposures and fuel swaps to hedge fuel price exposures the group considers that these
derivative instruments qualify for hedge accounting when certain criteria are met the group’s criteria for these swaps are that the instrument must
be related to an asset liability or future obligation and it must change the character of the interest rate or fuel price by converting a variable rate to
a fixed rate or vice versa these swaps are not revalued to fair value or included in the group balance sheet at the period end
new standards adopted early
the group has implemented the following standards earlier than required and restated the prior year comparatives in line with them
ias 19 amendment eu adopted – actuarial gains and losses group plans and disclosures
ifrs 5 noncurrent assets held for sale and discontinued operations 
notes to the accounts 52
2 accounting policies continued
new standards and interpretations not applied
during the year the iasb and ifric have issued the following standards and interpretations with an effective date after the date of these accounts
international accounting standards iasifrs
ifrs 4 insurance contracts amendment to ias 39 and ifrs 4 1 january 2006
ifrs 7 financial instruments disclosures 1 january 2007
ias 1 amendment – presentation of financial statements capital disclosures 1 january 2007
ias 39 fair value option 1 january 2006
ias 39 amendments to ias 39 – transition and initial recognition of 1 january 2006
financial assets and financial liabilities day 1 profits
ias 39 cash flow hedge accounting 1 january 2006
ias 39 amendment to ias 39 and ifrs 4 – financial guarantee contracts 1 january 2006
international financial reporting interpretations committee ifric
ifric 4 determining whether an arrangement contains a lease 1 january 2006
upon adoption of ifrs 7 the group will need to disclose the fair value of its financial instruments and its risk exposure in greater detail although
there will be no effect on reported income or net assets apart from this the directors do not anticipate the adoption of these standards and
interpretations will have a material impact on the group’s accounts in the period of initial application
3 exchange rates
the most significant exchange rates to the pound for the group are as follows
2005 2005 2004 2004
closing rate average rate closing rate average rate
us dollar 172 182 192 184
canadian dollar 200 220 231 238
euro 145 147 na na
australian dollar 235 239 245 248
the 2005 average rate for euros reflects the average rate since the alsa acquisition
if the results for the year to 31 december 2004 were retranslated at the average exchange rates for the year to 31 december 2005 north
america would have achieved normalised operating profit of £299m on revenue of £2155m compared to normalised operating profit of £296m
on revenue of £2132m as reported note 5
normalised results are defined as the statutory results before the following as appropriate profit or loss on the sale of businesses and charges for
goodwill impairment intangible amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional
items and tax relief on qualifying exceptional items
4 revenue
2005 2004
£m £m
rendering of services 22088 23460
rental income 72 85
revenue 22160 23545
finance income 108 132
total revenue 22268 23677
during the year franchise agreement receipts from the sra dft rail and ptes amounted to £3370m 2004 £4970m in uk trains
notes to the accounts 53
5 segmental analysis
the operating businesses are organised and managed separately according to the geographical market they operate in and the nature of the public
transport services they provide due to the nature of the services the group provides the primary and secondary segments coincide commentary
on the segments is included in the operating review and the financial review
normalised results are defined as the statutory results before the following as appropriate profit or loss on the sale of businesses and charges for
goodwill impairment intangible amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional
items and tax relief on qualifying exceptional items
analysis by class and geography of business
external intersegment segment external intersegment segment
revenue sales revenue revenue sales revenue
2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
uk bus 2686 – 2686 2398 – 2398
uk trains 14972 – 14972 17121 – 17121
uk coach 1902 103 2005 1894 62 1956
intersegment sales elimination – 103 103 – 62 62
uk operations 19560 – 19560 21413 – 21413
north american bus 2418 – 2418 2132 – 2132
european coach  bus alsa 182 – 182 – ––
revenue from continuing operations 22160 – 22160 23545 – 23545
discontinued operations 1008 – 1008 2145 – 2145
total revenue 23168 – 23168 25690 – 25690
intersegment sales represent rail replacement services provided to uk trains by uk bus and uk coach intersegment trading is undertaken on
standard arm’s length commercial terms due to the nature of the group’s businesses the origin and destination of revenue is the same
notes to the accounts 54
5 segmental analysis continued
continuing discontinuing continuing discontinuing
goodwill goodwill 
impairment impairment
intangible intangible 
normalised amortisation  normalised amortisation 
operating exceptional segment segment operating exceptional segment segment
profit items result result profit items result result
2005 2005 2005 2005 2004 2004 2004 2004
£m £m £m £m £m £m £m £m
uk bus 415 24 391 416 04 412
uk trains 642 392 250 613 424 189
uk coach 215 – 215 193 – 193
uk operations 1272 416 856 1222 428 794
north american bus 350 44 306 296 06 290
european coach 
 bus alsa 26 – 26 –––
central functions 93 – 93 85 – 85
result from continuing 
operations 1555 460 1095 1433 434 999
result from discontinued 
operations 564 73
total result 1095 564 999 73
lossprofit on disposal 
of non–current assets –– 09 08
profit from operations 1095 564 990 65
share of post tax results 
from associates 88 – 34 –
lossgain on sale of 
discontinued operations 66 89
cumulative exchange 
differences transferred 
from reserves 15 –
net finance costs 114 02 177 04
profit before tax 893 647 779 20
tax expensecredit 275 02 228 15
profitloss for the year 618 645 551 35
exceptional items are those items of financial performance that the group believes should be separately disclosed to assist in the understanding of
the financial performance achieved by the group and in making projections of future results
notes to the accounts 55
5 segmental analysis continued
goodwill impairment intangible amortisation property plant and equipment impairment and exceptional items can be analysed by class and
geography of business as follows
intangible property plant  total 
goodwill asset equipment exceptional other 
impairment amortisation impairment items items
2005 2005 2005 2005 2005
£m £m £m £m £m
uk bus – 09 – 15 24
uk trains 333 24 – 35 392
north american bus – 16 – 28 44
total continuing operations 333 49 – 78 460
discontinued operations 600 – – 02 602
t otal 933 49 – 80 1062
intangible property plant t otal 
goodwill asset  equipment exceptional other 
impairment amortisation impairment items items
2004 2004 2004 2004 2004
£m £m £m £m £m
uk bus – – – 04 04
uk trains 333 19 – 72 424
north american bus – 05 – 01 06
total continuing operations 333 24 – 77 434
discontinued operations 106 – 61 02 169
t otal 439 24 61 79 603
in the year to 31 december 2005 exceptional items were incurred in uk bus for business reorganisation costs in uk trains for staff redundancy
programmes and business reorganisations and in north america in respect of the divisional head office relocation
in the year to 31 december 2004 uk trains exceptional items were incurred at ‘one’ integration of the three legacy tocs resulted in redundancy
charges and start up costs together with the cost of the competition commission review qjump redundancy property and pension charges
following the merger with trainlinecom and maintrain redundancy costs incurred as a result of the decision to cease tendering for external work
and focus on improving service to central trains and midland mainline the balance of exceptional items comprised the cost of reorganisations at
uk bus £04m and north america £01m
assets liabilities and capital expenditure can be analysed by class and geography of business as follows
capital capital
assets liabilities expenditure assets liabilities expenditure
2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
uk bus 2030 1748 468 1504 1378 322
uk trains 2905 4116 283 3486 4414 254
uk coach 481 451 101 443 424 48
intercompany elimination 25 25 – 07 07 –
uk operations 5391 6290 852 5426 6209 624
north american bus 4739 770 347 4693 651 237
european coach  bus alsa 5590 635 06 –––
central functions 396 557 02 424 367 02
unallocated 1995 6736 – 1726 2643 –
intercompany elimination 345 345 – 206 206 –
total continuing operations 17766 14643 1207 12063 9664 863
liabilities directly associated withdisposal 
group assets classified as held for sale – – 14 338 69 04
t otal 17766 14643 1221 12401 9733 867
capital expenditure comprises solely fixed asset additions as disclosed in note 15
notes to the accounts 56
5 segmental analysis continued
unallocated assets and liabilities comprise the following items
unallocated unallocated unallocated unallocated 
assets liabilities assets liabilities
2005 2005 2004 2004
£m£m £m£m
cash 1455 – 1431 –
other debt receivables 10 – 10 –
current tax 113 240 – 368
available for sale investments other investments 114 – 102 –
derivative financial assetsliabilities 73 217 ––
non finance lease borrowings – 6008 – 2230
deferred tax 230 271 183 45
t otal 1995 6736 1726 2643
included within each segment’s result are the following noncash charges
other other 
depreciation noncash items depreciation noncash items
2005 2005 2004 2004
£m £m £m £m
uk bus 122 20 104 07
uk trains 154 351 219 285
uk coach 53 04 59 02
uk operations 329 367 382 294
north american bus 212 31 182 10
european coach  bus alsa 09 – ––
central functions 05 08 09 03
total continuing operations 555 406 573 307
discontinued operations 13 600 63 159
t otal 568 1006 636 466
other noncash items include the following creditscharges
2005 2004
£m £m
amortisation of fixed asset grants 09 65
amortisation of longleasehold property prepayment 08 06
profit on disposal of property plant and equipment 20 06
share based payments 36 06
other noncash items within normalised operating profit 15 59
goodwill impairment 933 439
property plant and equipment impairment – 61
intangible asset amortisation 49 24
onerous contract provision in exceptional items 09 –
loss on disposal of noncurrent assets – 01
other noncash items not in normalised operating profit 991 525
t otal 1006 466
an operating cash flow by segment is included in the financial review
notes to the accounts 57
6 operating costs
2005 2004
£m £m
materials and consumables 831 1008
staff costs including exceptional items of £30m 2004 £25m 7117 7198
depreciation – owned assets 468 481
– leased assets 87 92
amortisation of leasehold property prepayment 08 06
amortisation of fixed asset grants 09 65
operating lease charges rolling stock capital element 1759 1992
rolling stock noncapital element 767 901
public service vehicles 89 86
other 66 101
– plant and equipment 2681 3080
fixed track access 1891 2968
other 824 805
– land and buildings 2715 3773
precontract bid costs uk trains 61 15
external charges including exceptional items of £48m 2004 £52m 6724 6601
operating costs before amortisation and impairment 20683 22189
uk trains goodwill impairment 333 333
intangible amortisation 49 24
total operating costs – continuing operations 21065 22546
the tocs have fixed track access contracts with network rail infrastructure limited for access to the railway infrastructure tracks stations and
depots the tocs also have contracts under which rolling stock is leased the capital element of the rolling stock lease charge is based on the
purchase price capital funded refurbishments and modifications and the noncapital element of the lease charges includes heavy maintenance
charges risk and charges based on mileage
operating costs include £731m 2004 £417m of franchise agreement payments to the sra dft rail
included within external charges are fees paid to our auditors in respect of audit services of £14m 2004 £09m in addition external charges
include fees paid to our auditors in respect of nonaudit services of £02m 2004 £05m in the uk and £01m 2004 £05m overseas £02m
2004 £05m of these nonaudit fees were in respect of tax services fees of £12m 2004 £nil were capitalised with respect to acquisitions
total depreciation of £13m 2004 £63m not included above was charged as part of discontinued operations
7 employee benefit costs
a staff costs
2005 2004
£m £m
wages and salaries 6260 6354
social security costs 547 522
pension costs see note 36 275 316
expense of equitysettled share based payments see note 8 35 06
7117 7198
in addition wages and salaries of £653m 2004 £1280m social security costs of £48m 2004 £88m pension costs of £10m 2004 £37m and
share based payments of £01m 2004 £nil were incurred in discontinued operations
the average number of employees in continuing and discontinued operations and including executive directors during the year was as follows
2005 2004
managerial and administrative 3701 4061
operational 35807 39592
39508 43653
included within wages and salaries are exceptional costs of £30m 2004 £15m and included within pension costs are exceptional costs of £nil
2004 £10m
notes to the accounts 58
7 employee benefit costs continued
a staff costs continued
included in the above costs are the following costs related to the group’s key management personnel who comprise the directors of the parent
company
2005 2004
£m £m
fees 03 03
basic salaries 11 11
benefits 03 03
performance related bonuses 07 07
pensions contributions 02 02
26 26
information concerning directors’ emoluments shareholdings and options is disclosed in the report on directors’ remuneration
b share schemes
i executive share option plan
the company operates tax approved and unapproved executive share option schemes open to group employees in senior management
positions and executive directors options granted by this plan have a maximum term of between seven and ten years the options vest after
three years subject to the satisfaction of certain performance criteria based on the achievement of a target growth in earnings per share if the
performance criteria are not met when initially tested in some instances they may be reassessed during the term of the option from 2005
executive share option grants have been replaced by awards made under the long term incentive plan as described in iii there are no cash
settlement alternatives
ii savings related share option scheme sharesave scheme
the national express group approved sharesave scheme enables eligible uk employees including executive directors to acquire shares in the
company through monthly savings over a three year period at the end of which they also receive a tax free bonus the savings and bonus may
be used to purchase shares at the option price set at the beginning of the savings contract the options mature three years after the grant date
and may be exercised for a period of up to six months after this date the latest scheme matured on 1 december 2005 there are no cash
settlement alternatives
iii long term incentive plan ltip
the ltip was introduced in 2005 on the recommendation of the remuneration committee to replace the annual award of executive share
options to executive directors and the executive committee under the ltip a performance award to acquire a specified number of shares for
free may be made to the employee in addition a matching award may be made as described in iv performance conditions are attached to the
vesting of performance and matching awards based on the achievement of target growth in earnings per share and on the relative total
shareholder return tsr of the company against a comparator group of companies if the performance conditions are met performance and
matching awards vest on the third anniversary of the grant date and remain exercisable for a period of up to six months following the vesting
date there are no cash settlement alternatives at present
iv share matching plan the plan
the share matching plan was introduced in 2005 as part of the new long term incentive plan arrangements described in iii under the plan a
matching award to acquire a specified number of shares for free may be made if the employee pledges a number of shares as investment shares
which are then matched by the company on either a 11 or 21 gross basis the matching awards vest on the third anniversary of the grant
date and remain exercisable for a period of up to six months following the vesting date there are no cash settlement alternatives at present
v deferred annual share bonus plan
the deferred annual share bonus plan is a discretionary scheme which forms part of the bonus arrangements for certain senior employees
under the scheme part of any bonus may be received in cash whilst the remainder is used to make an award of nil cost options which vest
three years after the award date the options must be exercised within three months of vesting there are no cash settlement alternatives
at present
vi west midlands travel ltd “wmt” long service option scheme
the wmt long service option scheme utilises a fixed amount of shares set aside for this purpose following the acquisition of wmt in 1995
and is open to all wmt employees who have been in service for more than 25 years the options are exercisable between three and ten years
following the grant date there are no cash settlement alternatives at present
viitwm share incentive plan the “sip”
the twm sip exists for the benefit of wmt employees at the end of the year all the national express group plc shares held for the benefit
of the trustee were fully issued 2004 206411 unissued dividends on shares held in the sip forfeited shares account are waived there are no
cash settlement alternatives at present
notes to the accounts 59
7 employee benefit costs continued
b share schemes continued
details of options or awards outstanding as at 31 december 2005 under the share schemes outlined above are as follows
number of number of 
share options share options future
2005 2004 exercise price exercise periods
executive share option plan 4196358 5454394 398p1224p 20062014
savings related share option scheme 120323 1580826 417p 2006
long term incentive plan 559485 – nil 20082009
share matching plan 75720 – nil 20082009
deferred annual share bonus scheme 81094 11002 nil 20072008
wmt long service option scheme 491027 559081 398p1224p 20062015
5524007 7605303
8 share based payments 
the charge in respect of share based payment transactions included in the group’s income statement for the year is as follows
2005 2004
£m £m
expense arising from share and share option plans– continuing operations 35 06
– discontinued operations 01 –
36 06
during the year ended 31 december 2005 the group had seven share based payment arrangements which are described in note 7
included in the charge for share based payment transactions is £21m 2004 £nil which relates to share options granted under the twm sip which
vested immediately no charge has been included in respect of options granted in 2004 under the twm sip in accordance with the transitional
provisions in ifrs 2 as these options had vested as of 1 january 2005
for the following disclosure share options with a nil exercise price have been disclosed separately to avoid distorting the weighted average exercise
prices the number of share options in existence during the year was as follows
2005 2004
weighted weighted 
number average number average 
of share exercise of share exercise 
options price p options price p
options without a nil exercise price
at 1 january
1
7594301 587 8238485 568
granted during the year 49534 883 1104346 682
lapsed during the year 979569 658 1111156 612
exercised during the year 1856558 471 637374 470
outstanding at 31 december
1
4807708 620 7594301 587
exercisable at 31 december 1632374 786 2218870 807
options without a nil exercise price
at 1 january 11002 nil ––
granted during the year 711271 nil 11002 nil
lapsed during the year 5974 nil – –
outstanding at 31 december 716299 nil 11002 nil
exercisable at 31 december – – – –
total outstanding at 31 december 5524007 7605303
total exercisable at 31 december 1632374 2218870
1
included within this balance are options over 2360125 2004 4786081 shares that have not been recognised in accordance with the transitional
provisions of ifrs 2 as the options were granted before 7 november 2002 and have not been subsequently modified
notes to the accounts 60
8 share based payments continued
the options outstanding at 31 december 2005 had exercise prices that were between 398p and 1224p 2004 between 398p and 1224p excluding
options with a nil exercise price the range of exercise prices for options was as follows
exercise price p 2005 2004
350650 2640007 4799146
650950 1870461 2446435
9501250 297240 348720
4807708 7594301
the options have a weighted average contractual life of 6 years 2004 6 years options were exercised regularly throughout the year and the
weighted average share price at exercise was 863p 2004 702p
the fair value of share options granted during the year under the twm sip was measured using the market price at the grant date the weighted average
fair value of the remaining share options granted during the year was calculated using a stochastic model with the following assumptions and inputs
share options without share options with 
nil exercise price nil exercise price
2005 2004 2005 2004
risk free interest rate 4348 4751 48 48
expected volatility 276280 280 250270 290
expected option life in years 8 years 8 years 3 years 3 years
expected dividend yield 34 3739 3337 39
weighted average share price 871p888p 685p716p 838p906p 679p
weighted average exercise price 875p888p 681p716p 0p 0p
weighted average fair value of options granted 175p183p 139p149p 561p821p 606p
experience to date has shown that approximately 15 2004 15 of options are exercised early principally due to redundancies this has been
incorporated into the calculation of the expected option life for the share options without nil exercise price
expected volatility in the table above was determined from historic volatility over the last eight years adjusted for oneoff events that were not
considered to be reflective of the volatility of the share price going forward the expected dividend yield represents the dividends declared in the
12 months preceding the date of the grant divided by the average share price in the month preceding the date of the grant
for share options granted during the year under the ltip  the tsr targets have been reflected in the calculation of the fair value of the options above
9 net finance costs
2005 2004
£m £m
bank interest payable 163 230
finance lease interest payable 47 66
other interest payable 03 05
unwind of insurance provision discounting 09 08
finance costs 222 309
finance income bank interest receivable 108 132
net finance costs 114 177
notes to the accounts 61
10 taxation
a analysis of taxation chargecredit in the year
2005 2004
£m £m
current taxation
uk corporation tax – continuing operations 195 222
overseas taxation – continuing operations 12 27
overseas taxation – discontinued operations 02 15
current income tax charge 181 234
amounts overprovided in prior years – uk 95 22
amounts overprovided in prior years – overseas – 01
total current income tax 86 211
deferred taxation see note 28
origination and reversal of timing differences – continuing operations 187 02
total tax charge 273 213
the tax charge in the income statement is disclosed as follows
income tax expense on continuing operations 275 228
income tax credit on discontinued operations 02 15
273 213
the tax expense on continuing operations is disclosed as follows
tax charge on profit before goodwill impairment intangible amortisation and exceptional items 295 264
tax credit on goodwill impairment and exceptional items 20 36
275 228
b tax on items charged to equity
2005 2004
£m £m
current taxation
creditcharge on exchange movements offset in reserves 71 41
deferred taxation
deferred tax credit on share based payments 14 08
deferred tax creditcharge on actuarial losses 90 02
deferred tax charge on cash flow hedges 14 –
90 06
notes to the accounts 62
10 taxation continued
c reconciliation of the total tax charge
2005 2004
£m £m
profit from continuing operations before taxation 893 779
lossprofit from discontinued operations 647 20
accounting profit before income tax 246 799
notional charge at uk corporation tax rate of 30 74 240
nondeductible exceptional expenditure – 02
nondeductible goodwill impairment and intangible amortisation 115 107
utilisation of unrecognised tax losses – 18
prior year adjustments within current and deferred tax 120 23
release of nontaxable grants – 17
effect of overseas tax rates 23 –
reinvestment relief 28 –
lossprofit on sale of businesses 204 27
us financing deduction 09 47
permanent disallowables 14 04
total tax charge reported in the income statement 273 213
d temporary differences associated with group investments
no deferred tax 2004 £nil is recognised on the unremitted earnings of overseas subsidiaries and associates the group has determined that
undistributed profits of its overseas subsidiaries will not be distributed in the near future in any case the temporary difference associated with group
investments is £nil 2004 £nil as a result of insufficient funds being available
e unrecognised tax losses
there is no recognition of the deferred tax asset in relation to the excess overseas tax losses on the grounds that there is insufficient evidence 
to determine that they are recoverable overseas deferred tax assets that the group has not recognised in the accounts amount to £376m 
2004 £364m of which £08m will expire between 2012 and 2020 in addition there are capital losses of £302m 2004 £24m which have not
been recognised recoverability of which is dependent on capital gains arising the majority of the increase to the deferred tax on capital losses in 
the year relates to the disposal of the north american public transit operations of £279m
f deferred tax included in the income statement 
2005 2004
£m £m
accelerated capital allowances 143 20
short term timing differences 52 09
utilisation of losses 08 27
187 02
details on the balance sheet position of deferred tax are included in note 28
notes to the accounts 63
11 discontinued operations
the group decided to exit its noncore markets in north american public transit and australia bus in 2005 and 2004 respectively
the group’s north american public transit operation trading as atc was disposed of on 1 september 2005 and has been classified in
discontinued operations
in the year ended 31 december 2004 the group sold national bus company victoria pty limited national bus company queensland pty
limited and transport management group pty limited on 1 october 2004 the group also announced the voluntary administration of the bosnjak
holdings group comprising the group’s remaining operations in australia on 31 january 2005
the results of the group’s discontinued operations are presented below normalised results are defined as the statutory results before the following
as appropriate profit or loss on the sale of businesses and charges for goodwill impairment intangible amortisation plant property and equipment
impairments profit or loss on disposal of noncurrent assets exceptional items and tax relief on qualifying exceptional items the results for the
australia bus and bosnjak group are immaterial in 2005 other than the proceeds from the administration as disclosed in note 20
2004
2005
namerican n american
public t ransit public transit australia bus total
£m £m £m £m
revenue 1008 1521 624 2145
operating expenses 970 1450 599 2049
normalised operating profit 38 71 25 96
finance income – – 03 03
finance costs 02 04 03 07
normalised profit before tax 36 67 25 92
tax on normalised profit 02 – 01 01
normalised profit 38 67 26 93
goodwill impairment 600 – 106 106
property plant and equipment impairment – – 61 61
exceptional items 02 02 – 02
602 02 167 169
profit on disposal of noncurrent assets – – 08 08
lossgain on sale of discontinued operations 66 – 89 89
cumulative exchange differences transferred from reserves 15 –––
683 02 70 72
tax – related to exceptional and other items – 14 – 14
683 12 70 58
loss profit for the year from discontinued operations 645 79 44 35
notes to the accounts 64
11 discontinued operations continued
the major classes of assets and liabilities of discontinued operations measured at the lower of carrying amount and fair value less costs to sell as at
31 december are as follows
2005 2004
£m £m
assets
property plant and equipment – 254
inventories – 02
trade and other receivables – 41
cash and cash equivalents – 41
disposal group assets classified as held for sale – 338
liabilities
trade and other payables – 42
financial liabilities  borrowings – 27
liabilities directly associated with disposal group assets classified as held for sale – 69
net assets attributable to discontinued operations – 269
cash flows and lossearnings per share from discontinued operations are as follows
2005 2004
£m £m
net cash inflow from operating activities 36 91
net cash inflow from investing activities 470 247
net cash outflow from financing activities – 25
lossearnings per share
basic from discontinued operations 472p 52p
diluted from discontinued operations 465p 51p
12 dividends paid and proposed
2005 2004
declared and paid during the year £m £m
ordinary final dividend for 2004 paid of 2065p per share 2003 175p per share 281 236
ordinary interim dividend for 2005 paid of 100p per share 2004 935p per share 135 128
416 364
proposed for approval not recognised as liability as at 31 december
ordinary final dividend for 2005 of 2225p per share 2004 2065p per share 335 281
notes to the accounts 65
13 earnings per share
2005 2004
basic earnings per share – continuing operations 452p 405p
basic lossearnings per share – discontinued operations 472p 52p
basic lossearnings per share – total 20p 457p
normalised basic earnings per share – continuing operations 774p 704p
diluted earnings per share – continuing operations 445p 399p
diluted lossearnings per share – discontinued operations 465p 51p
diluted lossearnings per share – total 20p 450p
normalised diluted earnings per share – continuing operations 763p 693p
normalised earnings per share are defined as the statutory earnings per share before the following profit or loss on the sale of businesses and
charges for goodwill impairment intangible amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets
exceptional items and tax relief on qualifying exceptional items
basic loss per share is calculated by dividing the loss attributable to equity shareholders of £28m 2004 profit of £622m by the weighted average
number of ordinary shares in issue during the year excluding those held by employees’ share ownership trusts and those held as treasury shares
which are both treated as cancelled
for diluted earnings per share the weighted average number of ordinary shares in issue during the year is adjusted to include the weighted average
number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares
the reconciliation of weighted average number of ordinary shares is detailed as follows
2005 2004
basic weighted average shares 136591474 136166921
adjustment for dilutive potential ordinary shares 2017744 2039292
diluted weighted average shares 138609218 138206213
the normalised basic and normalised diluted earnings per share have been calculated in addition to the basic and diluted earnings per shares
required by ias 33 ’earnings per share’ since in the opinion of the directors they reflect the underlying performance of the business’s operations
more appropriately
normalised profits for the financial year are
2005 2005 2004 2004
basic diluted basic diluted
2005 eps eps 2004 eps eps
£mpp £mpp
lossprofit attributable to equity shareholders 28 20 20 622 457 450
lossprofit from discontinued operations 645 472 465 71 52 51
profit from continuing operations attributable 
to equity shareholders 617 452 445 551 405 399
goodwill impairment on continuing operations 333 244 241 333 244 241
intangible asset amortisation 49 36 35 24 18 17
exceptional items 78 57 56 77 57 56
loss on disposal of noncurrent assets ––– 09 07 06
tax relief on goodwill and exceptional items 20 15 14 36 27 26
normalised profit attributable to equity shareholders 1057 774 763 958 704 693
profitloss from discontinued operations comprises the results as disclosed in note 11 net of minority interests of £36m in the year to 31 december 2004
notes to the accounts 66
14 intangible assets
customer rail finite contractual indefinite
contracts franchise life assets relationships goodwill life assets total
£m£m £m £m£m £m£m
cost or valuation
at 1 january 2005 09 130 139 25 3720 3745 3884
additions through business combinations 129 – 129 133 4422 4555 4684
attributable to discontinued operations – – – – 966 966 966
foreign exchange 08 – 08 11 314 325 333
at 31 december 2005 146 130 276 169 7490 7659 7935
aggregate amortisation and impairment
at 1 january 2005 04 19 23 – 333 333 356
charge for year 25 24 49 –– – 49
annual impairment charge for the year on 
finite life goodwill – – – – 333 333 333
impairment charge for the year – – – – 600 600 600
attributable to discontinued operations – – – – 600 600 600
foreign exchange 03 – 03 –– – 03
at 31 december 2005 32 43 75 – 666 666 741
net carrying amount
at 31 december 2005 114 87 201 169 6824 6993 7194
at 1 january 2005 05 111 116 25 3387 3412 3528
customer rail finite contractual indefinite
contracts franchise life assets relationships goodwill life assets total
£m £m £m £m £m £m £m
cost or valuation
at 1 january 2004 – 10 10 – 4046 4046 4056
acquisitions through business combinations 09 – 09 25 20 45 54
franchise entry – 120 120 –– – 120
disposal of businesses – – – – 62 62 62
included in assets held by disposal group – – – – 106 106 106
foreign exchange – – – – 178 178 178
at 31 december 2004 09 130 139 25 3720 3745 3884
aggregate amortisation and impairment
at 1 january 2004 – – – – – – –
charge for year 05 19 24 – – – 24
annual impairment charge for the year 
on finite life goodwill – – – – 333 333 333
impairment charge for the year – – – – 106 106 106
included in assets held by disposal group – – – – 106 106 106
foreign exchange 01 – 01 –– – 01
at 31 december 2004 04 19 23 – 333 333 356
net carrying amount
at 31 december 2004 05 111 116 25 3387 3412 3528
at 1 january 2004 – 10 10 – 4046 4046 4056
due to the nature of the fixed term franchise agreements we believe the goodwill that arises on the acquisition of prism rail plc has a finite life
this finite life goodwill is subject to an annual impairment charge to reflect the finite nature of the cash flows related to this goodwill
with respect to the recoverable amount of the uk trains goodwill the discount rate applied to cash flow projections is 107 2004 107 and
cash flows sourced from management plans through to the end of the franchise
notes to the accounts 67
14 intangible assets continued
indefinite life intangible assets including goodwill have been allocated to individual cash generating units for annual impairment testing on the basis of
the group’s business operations the carrying value of indefinite life intangible assets by cash generating unit is as follows
2005 2004
£m £m
uk bus 132 –
uk trains 192 525
uk coach 56 57
north american bus
us school bus 1616 1412
us public transit – 929
canadian school bus 742 489
european coach  bus alsa 4255 –
6993 3412
the useful economic lives of contractual relationships in canada are deemed to be indefinite due to the accepted market presumption that these
contracts will be renewed indefinitely whilst the customer contract and rail franchise intangible assets are to be amortised over the finite duration of
the contract or franchise as appropriate all amortisation charges in the year have been charged to operating costs
the impairment charge in 2005 of £600m relates to our north american public transit operations that were sold on 1 september 2005 
see note 11
the impairment charge in 2004 of £106m relates entirely to bosnjak holdings pty ltd and is included in the loss for that year from discontinued
operations in relation to our australian bus operations see note 11
the recoverable amount of indefinite life intangible assets has been determined based on a value in use calculation using cash flow projections based
on financial budgets and forecasts approved by senior management covering a three year period growth has then been extrapolated forward from
the end of the forecasts
the assumptions used for the other cash generating units are as follows
growth rate 
used to extrapolate 
cash flows beyond 
discount rate applied to three year period of 
cash flow projections management plan
2005 2004 2005 2004
uk bus 107 – 50 –
north america
us school bus 108 108 20 30
canadian school bus 121 121 20 30
the discount rates represent the risk adjusted weighted average cost of capital appropriate for the cash flow generated
the calculation of value in use for each cashgenerating unit is most sensitive to the assumptions over gross margin discount rates price inflation and
growth rate
the directors consider the assumptions used to be consistent with the historical performance of each unit and to be realistically achievable in the
light of economic and industry measures and forecasts
the recoverable amount of the goodwill arising on the alsa acquisition which completed on 1 december 2005 will be tested for impairment for the
first time at 31 december 2006 at 31 december 2005 the acquisition model used to support the acquisition was still appropriate for supporting
the carrying value
the carrying value of the intangible assets acquired in the alsa acquisition will be finalised in the year ending 31 december 2006 any adjustment to
the carrying value of the intangible assets will lead to a corresponding adjustment in goodwill
notes to the accounts 68
15 property  plant and equipment
plant and 
long leasehold public equipment
freehold land property service fixtures
and buildings improvements vehicles and fittings t otal
£m £m £m £m £m
cost or valuation
at 1 january 2005 283 124 3097 1446 4950
additions 37 22 800 362 1221
acquisition of businesses 161 04 782 71 1018
disposals 18 02 110 28 158
attributable to discontinued operations – – 129 68 197
foreign exchange 05 06 273 07 291
at 31 december 2005 468 154 4713 1790 7125
depreciation
at 1 january 2005 46 18 783 768 1615
charge for the year 06 06 346 210 568
disposals 05 01 70 21 97
attributable to discontinued operations – – 90 55 145
foreign exchange 01 06 102 03 112
at 31 december 2005 48 29 1071 905 2053
net book value
at 31 december 2005 420 125 3642 885 5072
at 1 january 2005 237 106 2314 678 3335
plant and 
long leasehold public equipment
freehold land property service fixtures
and buildings improvements vehicles and fittings t otal
£m £m £m £m £m
cost or valuation
at 1 january 2004 453 132 3358 1402 5345
additions 32 07 522 306 867
acquisition of businesses – – 79 – 79
disposals 41 01 99 192 333
disposal of businesses 06 – 172 88 266
attributable to discontinued operations 94 – 443 34 571
reclassification 53 10 – 63 –
foreign exchange 08 04 148 11 171
at 31 december 2004 283 124 3097 1446 4950
depreciation
at 1 january 2004 54 14 842 704 1614
charge for the year 13 07 342 274 636
impairment 12 – 49 – 61
disposals 07 – 72 142 221
disposal of businesses – – 37 46 83
attributable to discontinued operations 16 – 275 26 317
reclassification 09 01 – 10 –
foreign exchange 01 02 66 06 75
at 31 december 2004 46 18 783 768 1615
net book value
at 31 december 2004 237 106 2314 678 3335
at 1 january 2004 399 118 2516 698 3731
the impairment charge in 2004 relates to the australian bus division which was classified as discontinued during the year see note 11
notes to the accounts 69
15 property  plant and equipment continued
tangible fixed assets held under finance lease agreements are analysed as follows
2005 2004
£m £m
public service vehicles
– cost 1785 1168
– accumulated depreciation 611 600
1174 568
plant and equipment
– cost 35 30
– accumulated depreciation 22 12
13 18
net book value 1187 586
leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities
16 investment property
2005 2004
£m £m
opening balance at 1 january – 91
disposals – 91
closing balance at 31 december – –
17 subsidiaries
the companies listed below include all those which principally affect the result and net assets of the group a full list of subsidiaries joint ventures
and associates will be annexed to the next annual return to companies house the principal country of operation in respect of the companies
below is the country in which they are incorporated
national express group plc is the beneficial owner of all the equity share capital either itself or through subsidiaries of the companies unless
indicated otherwise the group’s train passenger services in the uk are operated through franchises awarded by the sra dft rail as delegated by
the uk government
incorporated in england and wales
national express limited administration and marketing of express coach services in great britain
eurolines uk limited administration and marketing of express coach services to europe
airlinks airport services limited operation of coach services
national express rail replacement services limited operation of coach services
west midlands travel limited operation of bus services
travel london limited operation of bus services
travel london west limited operation of bus services
travel london middlesex limited operation of bus services
c2c rail limited operation of train passenger services
central trains limited operation of train passenger services
gatwick express limited operation of train passenger services
london eastern railway limited trading as “one” operation of train passenger services
maintrain limited provision of train maintenance services
midland main line limited operation of train passenger services
national express trains limited holding company for train operating companies
silverlink train services limited operation of train passenger services
wales  west passenger trains ltd trading as wessex trains operation of train passenger services
west anglia great northern railway ltd trading as wagn operation of train passenger services
notes to the accounts 70
17 subsidiaries continued
incorporated in scotland
tayside public transport co limited trading as travel dundee operation of bus services
incorporated in the usa
durham school services lp operation of school bus services
swf airport acquisition inc provision and management of airport facilities
incorporated in canada
stock transportation limited operation of school bus services
incorporated in spain
dabliu consulting slu holding company for operating companies
turyexpres sa holding company for operating companies
general tecnica industrial sl holding company for operating companies
 shares held by the company all other shares held by subsidiaries
 the main holding companies of the alsa group
18 financial assets
under the exemption available in ifrs 1‘firsttime adoption of ifrs’ the group has not restated its results for the year ended 31 december 2004
for the effect of ias 32‘financial instruments disclosure and presentation’ or ias 39‘financial instruments recognition and measurement’ instead
the group has followed the requirements of uk gaap for the year ended 31 december 2004 and included disclosures prepared under frs 13 in
note 32
additional financial instruments have been recognised on the balance sheet from 1 january 2005 as reported in the group’s ifrs reconciliations
included in note 40 a summary of the effect is included below
31 december 31 december 1 january 
2005 2004 2005
£m £m £m
available for sale investments unlisted ordinary and preference shares 114 – 102
other investments – 102 –
114 102 102
derivative financial instruments – fuel swaps 06 – 14
financial assets included in noncurrent assets 120 102 116
derivative financial instruments – fuel swaps 67 – 49
derivative financial instruments – foreign exchange forward contracts – – 149
financial assets included in current assets 67 – 198
 £146m included in foreign exchange forward contracts at 1 january 2005 had previously been included in other receivables at 31 december 2004
notes to the accounts 71
18 financial assets continued
available for sale investments
available 
for sale other
investments investments
2005 2004
£m £m
cost or valuation
at 1 january 160 128
arising on acquisition of subsidiaries 12 –
additions – 32
at 31 december 172 160
accumulated impairment
at 1 january and 31 december 58 58
net carrying amount
at 31 december 114 102
at 1 january 102 70
the principal available for sale investments are as follows
proportion held
name county of registration class of share 
london  continental railways lcr england and wales ordinary shares 21
prepayment cards limited pcl england and wales ordinary shares 235
trainline holdings thl england and wales ordinary shares 14
union railways south limited urs england and wales preference shares 21
various investments within alsa spain ordinary shares 416
lcr pcl thl urs and various investments in the alsa group have been accounted for as available for sale investments in the opinion of the
directors the group is not in a position to exercise significant influence over the thl urs and alsa available for sale investments under the
definitions in ias 28‘investments in associates’ although the group holds more than 20 of the ordinary shares of lcr it does not have a
presence on the board and is not in a position to exert significant influence over this investment the group is not in a position to exercise
significant influence over pcl as its funding is entirely provided by the majority shareholder
at 31 december 2005 the directors are unable to revalue the unquoted equity instruments that form the investment in thl as a reliable valuation
cannot be prepared due to the wide range of estimates available for the valuation therefore the investment is measured at cost
19 investments accounted for using the equity method
investments accounted for using the equity method are as follows
2005 2004
£m £m
joint ventures 22 –
associates 26 –
48 –
a investments in joint ventures
the group’s interests in joint ventures are as follows
total issued
county of share capital proportion held
name registration activity £000 
ibero – eurosur sl spain holding company of deutsche t ouring 4 20
movelia tecnologias sl spain travel website 870 41
due to the proximity of the combination of alsa to the year end the financial information for the alsa companies is provisional as up to date
information is not available
notes to the accounts 72
19 investments accounted for using the equity method continued
a investments in joint ventures continued
the financial information of these joint ventures is summarised below
ibero movelia t otal
2005 2005 2005
share of joint ventures’ balance sheets £m £m £m
noncurrent assets – 04 04
current assets 37 06 43
share of gross assets 37 10 47
current liabilities 21 03 24
noncurrent liabilities – 01 01
share of gross liabilities 21 04 25
share of net assets 16 06 22
these joint ventures are both within alsa and have been provisionally classified at 31 december 2005 the results from 1 december 2005 were
immaterial to the group
the carrying amount of the investment in joint ventures matches the group’s share of the assets
b investments in associates 
the group’s interests in associates are as follows
total issued
county of share capital proportion held
name registration £000 
altram lrt limited england and wales 16500 33
intercapital and regional rail limited england and wales 1 40
alsa associates spain 6673 2050
altram lrt limited “altram” is a provider of light rapid transport systems intercapital and regional rail limited “icrrl” is contracted to
manage the operations of eurostar uk to 2010 the associates of alsa are generally involved in the operation of coach and bus services and 
similar operations
the associates’ financial information is summarised below
share of associate’s balance sheet
altram icrrl alsa t otal
2005 2004 2005 2004 2005 2005 2004
£m £m £m £m £m £m £m
noncurrent assets – – – – 38 38 –
current assets 21 21 40 31 39 100 52
share of gross assets 21 21 40 31 77 138 52
current liabilities 30 28 209 120 36 275 148
noncurrent liabilities – – – – 15 15 –
share of gross liabilities 30 28 209 120 51 290 148
share of net assetsliabilities 09 07 169 89 26 152 96
due to the proximity of the combination of alsa to the year end the financial information for the alsa companies is provisional as up to date
information is not available
notes to the accounts 73
19 investments accounted for using the equity method continued
b investments in associates continued
share of associate’s revenue and loss
altram icrrl t otal
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
revenue 20 18 18 17 38 35
loss 02 02 86 32 88 34
the group’s share of revenue and profit from the alsa associates which have been provisionally classified from 1 december 2005 were immaterial
altram icrrl alsa t otal
2005 2004 2005 2004 2005 2005 2004
£m £m £m £m £m £m £m
carrying amount of investment – – – – 26 26 –
20 business combinations and disposals
a acquisition of alsa
on 1 december 2005 the group acquired the entire share capital of general tecnica industrial sl dabliu consulting sl and turyexpres sa
which together hold the companies that comprise alsa a bus and coach operator based in spain consideration of £2686m was satisfied by the
issue of 13503600 ordinary shares of 5p at £907 £1225m being the price of national express group plc shares on 1 december 2005 and
cash of £1461m net of a provisional £26m completion adjustment that is receivable at 31 december 2005 additionally costs of £44m have been
included in total consideration
alsa
alsa fair value alsa fair
2005 book value adjustments value total
net assets at date of acquisition £m £m £m
intangible assets 1782 1782 –
property plant and equipment 592 144 736
available for sale investments 12 – 12
investments accounted for under the equity method 60 12 48
inventories 31 – 31
trade and other receivables 528 38 490
current tax 08 – 08
cash and cash equivalents 100 – 100
trade and other payables 554 – 554
defined benefit pension liability 02 09 11
provisions 10 – 10
financial liabilities – borrowings 2118 – 2118
deferred tax liability 04 65 61
net assets 433 1762 1329
less minority interest 114 41 155
group’s share of net assets 319 1803 1484
goodwill on acquisition 4214
total consideration 2730
net consideration 2686
acquisition costs 44
total consideration 2730
less shares issued 1225
add provisional completion adjustment receivable 26
less accrued acquisition costs 02
less net cash acquired 100
net cash outflow 1429
in accordance with group accounting policies provisional fair value adjustments have been made to the assets and liabilities acquired in particular
due to the proximity of the combination to the year end the group has been unable to complete a detailed valuation of the intangible and tangible
assets acquired with the business accordingly the surplus of consideration over fair value of the share of net assets 
notes to the accounts 74
20 business combinations and disposals continued
a acquisition of alsa continued
acquired has been allocated to goodwill at 31 december 2005 the group expects to identify intangible assets including brands customer
relationships and customer contracts and will complete a property valuation independent valuers have been retained by the group to complete 
this exercise and the results will be reflected in the group’s next accounts the value of goodwill will be adjusted by a corresponding amount for 
the value of intangible assets identified and the difference between the market and book values of the property assets management believes that
goodwill remaining after this exercise will comprise value to the group for which the recognition of a discrete intangible asset is not permitted 
and will represent future growth opportunities
on 15 december 2005 the group paid £127m of cash consideration to acquire the 102 minority interest of enatcar a subsidiary of alsa this
payment represented fair value and consequently had no impact on the goodwill recognised above due to the date of acquisition the profit accrued
in 2005 was not material to the group
from the date of acquisition alsa has contributed £26m to the normalised operating profit of the group as a privately owned group alsa did not
prepare consolidated financial information using the december 2005 results as being indicative of the profit for the full year if the combination had
taken place at the beginning of the year the normalised operating profit for the group would have been £1841m and revenue from continuing
operations would have been £24162m
normalised results are defined as the statutory results before the following as appropriate profit or loss on the sale of businesses and charges for
goodwill impairment intangible amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional
items and tax relief on qualifying exceptional items
b other acquisitions
the group acquired the entire share capital of tgm buses limited and tgm middlesex limited representing the london bus operations of tellings
golden miller plc tgm on 17 june 2005 in canada the group acquired the entire share capital of aboutown school transit inc a school bus
operator on 15 july 2005 and the entire share capital of northstar passenger services lp and walsh transportation lp  representing the school bus
operations of contrans income fund a canadian freight haulage company on 1 august 2005 the group also acquired the entire share capital of
jones school bus service inc on 10 november 2005 a school bus operator in the united states
book value
fair value fair value 
2005 tgm aboutown northstar jones t otal adjustments t otal
net assets at date of acquisition £m £m £m £m £m £m £m
intangible assets ––– –– 262 262
property plant and equipment 63 05 139 59 266 16 282
inventories 02 – 02 – 04 – 04
trade and other receivables 22 – 06 27 55 – 55
cash and cash equivalents 18 – – 02 20 – 20
trade and other payables 20 – 12 32 64 21 85
current tax payable – – 03 – 03 – 03
financial liabilities – borrowings 21 – 02 – 23 – 23
deferred tax liability 10 – 22 17 49 – 49
net assets acquired 54 05 108 39 206 257 463
goodwill on acquisition 208
total consideration 671
net consideration 659
acquisition costs 12
total consideration 671
less deferred consideration 19
less net cash acquired 20
net cash outflow 632
the acquisition balance sheets have been adjusted to reflect provisional fair value adjustments
the adjustments represent
a the recognition of customer contracts acquired with the tgm business £45m aboutown £06m northstar £15m and jones £63m
b customer relationships acquired with aboutown £28m and northstar £105m which reflects the presumption of indefinite renewal in
relation to school bus contracts in canada the customer contracts will be amortised over the life of the contracts whilst customer
relationships will not be amortised but will be tested for impairment on an annual basis
c an increase in the value of property plant and equipment at jones following a review of the vehicle fleet and
d an increase in payables of £16m at tgm £03m at jones and £02m at northstar
notes to the accounts 75
notes to the accounts
20 business combinations and disposals continued
b other acquisitions continued
consideration was £213m for tgm including £03m acquisition costs £41m for aboutown £262m for northstar including £03m deferred
consideration and £07m acquisition costs and £155m for jones including £16m deferred consideration and £02m acquisition costs
from their respective dates of acquisition tgm aboutown northstar and jones have contributed £08m £02m £07m and £02m respectively to
normalised operating profit and a £01m loss £01m loss £02m profit and £02m loss to the net loss of the group if these four combinations had
taken place at the beginning of the year the normalised operating profit for the group would have been £1569m loss for the group would have
been £17m and revenue from continuing operations would have been £22450m
included in the goodwill recognised above are certain intangible assets that cannot be separately identified and measured due to their nature
this includes control over the acquired businesses and increased scale in our london bus and canadian school bus operations management believes
that goodwill represents value to the group for which the recognition of a discrete intangible asset is not permitted the majority of the value 
was assessed to comprise of synergy benefits expected to be achieved by merging the businesses acquired into the group’s uk bus and north
american operations
during the year ended 31 december 2004 the group acquired the entire share capital of connex bus uk limited now called travel london
limited a bus operator in the uk the entire share capital of 1114448 ontario limited the holding company of student express limited a school
bus operator in canada and certain assets of mo bus lines handicab limited another school bus operator in canada
book value
travel student express fair value fair value 
2004 london and mo total adjustments total
net assets at date of acquisition £m £m £m £m £m
intangible assets 03 – 03 31 34
property plant and equipment 08 34 42 37 79
inventories 02 – 02 – 02
trade and other receivables 22 02 24 16 40
cash and cash equivalents 191 08 199 – 199
trade and other payables 34 – 34 05 39
financial liabilities – borrowings – 14 14 101 115
provisions 193 07 200 53 147
net assets acquired 01 23 22 31 53
goodwill on acquisition 20
total consideration 73
net consideration 69
acquisition costs 04
total consideration 73
less net cash acquired 199
net cash inflow 126 76
notes to the accounts
20 business combinations and disposals continued
c disposals
the group sold its north american public transit operations on 1 september 2005 for gross proceeds of £500m
the group announced the voluntary administration of the bosnjak holdings group comprising the group’s remaining operations in australia on
31 january 2005 and received proceeds of £254m a600m when the administrator sold the business on 30 september 2005
the group also sold its airside coach business at heathrow airport on 21 february 2005
n american heathrow
2005 public transit bosnjak group airside t otal
net assets disposed of £m £m £m £m
property plant and equipment 55 260 11 326
inventories 19 02 – 21
trade and other receivables 281 26 – 307
cash and cash equivalents 25 21 – 46
trade and other payables 119 27 – 146
provisions 100 – – 100
deferred tax 18 01 – 19
minority interest – 09 – 09
financial liabilities – borrowings – 28 – 28
net assets disposed 143 244 11 398
goodwill realised 360 – 01 361
disposal provision created 27 – – 27
deferred tax liability on disposal 32 – – 32
loss on sale of businesses 66 – – 66
net consideration 496 244 12 752
total consideration 500 259 12 771
less disposal costs 04 15 – 19
net consideration 496 244 12 752
less net cash disposed 25 21 – 46
add completion adjustment to pay purchaser 12 – – 12
less deferred consideration – 05 – 05
net cash inflow 483 218 12 713
the results of north american public transit in the year are disclosed in note 11 the results of the australian bus division in 2004 are also disclosed
in note 11 although the results for the bosnjak group in 2005 are immaterial the revenue operating result and cash flow of the uk coach business
sold are not disclosed as the amounts are not material
the administration process at bosnjak group is continuing and it is possible that further amounts will be received in relation to the outstanding loan
balance due to the group subsidiary nbc pty ltd in australia the timing and quantum of any future payment is uncertain and therefore has not
been recognised at 31 december 2005
during the year ended 31 december 2004 the group sold national bus company victoria pty limited national bus company queensland pty
limited and transport management group pty limited all of which had been part of the australian bus division for net proceeds of £247m the
group also sold qjump limited in exchange for a 14 shareholding in trainline holdings limited and a £10m loan note from the same company 77
notes to the accounts
20 business combinations and disposals continued
c disposals continued
australia
2004 buses qjump t otal
net assets disposed of £m £m £m
property plant and equipment 142 41 183
inventories 03 – 03
trade and other receivables 21 65 86
cash and cash equivalents 03 – 03
trade and other payables 53 73 126
financial liabilities – borrowings 20 – 20
provisions – 01 01
net assets disposed 96 32 128
goodwill realised 62 – 62
profit on sale of businesses 89 – 89
net consideration 247 32 279
total consideration 250 32 282
less disposal costs 03 – 03
net consideration 247 32 279
less investment in trainline holdings limited – 32 32
less net cash disposed 03 – 03
add disposal costs accrued 03 – 03
net cash inflow 247 – 247
21 noncurrent assets – other receivables
2005 2004
£m £m
other receivables 29 17
prepayments and accrued income 233 288
262 305
prepayments and accrued income includes £227m 2004 £214m long leasehold property prepayments that have been reclassified from property
plant and equipment on the transition to ifrs
22 inventories
2005 2004
£m £m
raw materials and consumables 187 161
the provision for slow moving and obsolete inventory is immaterial
23 current assets – trade and other receivables
2005 2004
£m £m
trade receivables 1606 1710
less provision for impairment of receivables 26 17
trade receivables – net 1580 1693
amounts due from associates and joint ventures 79 46
amounts owed by related parties 29 25
other receivables 623 566
prepayments and accrued income 707 688
3018 3018
the charge to the income statement in respect of trade receivables not recovered is immaterial credit risk with respect to trade receivables is low
as a large proportion of the group’s trading is with public or quasipublic organisations 78
notes to the accounts
24 cash and cash equivalents
2005 2004
£m £m
cash at bank and in hand 532 227
overnight deposits 245 241
other short term deposits 678 963
1455 1431
cash at bank and in hand attributable to discontinued operations note 11 – 41
cash and cash equivalents 1455 1472
bank overdrafts note 29 55 –
cash and cash equivalents included in group statement of cash flows 1400 1472
included in cash and cash equivalents are restricted balances of £795m 2004 £739m held by the tocs and £256m a 600m 2004 £nil held
by nbc pty ltd in australia
cash at bank and in hand earns interest at floating rates based on daily bank deposit rates shortterm deposits are made for varying periods of
between one day and three months depending on the immediate cash requirements of the group and earn interest at the respective shortterm
deposit rates the fair value of cash and cash equivalents matches the carrying value
25 current liabilities – trade and other payables
2005 2004
£m £m
trade payables 1751 1749
amounts owed to associates and joint ventures 88 30
amounts owed to related parties 17 –
other tax and social security payable 250 174
accruals and deferred income 2010 2146
other payables 1215 1046
5331 5145
trade payables are noninterest bearing and are normally settled on 30 day terms and other payables are noninterest bearing and have an average
term of two months
included within other payables are deferred fixed asset grants from governmental or other public bodies of £20m 2004 £09m
26 other noncurrent liabilities
2005 2004
£m £m
other liabilities 61 30
61 30
other noncurrent liabilities comprise deferred consideration of £35m 2004 £21m deferred fixed asset grants of £17m 2004 £06m and other
liabilities of £09m 2004 £03m 79
notes to the accounts
27 provisions
insurance 
claims other
a b t otal
£m £m £m
at 1 january 2005 486 112 598
charged to income statement 211 57 268
acquisition of subsidiaries 05 05 10
utilised in the year 214 51 265
amortisation of discount 09 – 09
attributable to discontinued operations 105 – 105
exchange difference 19 02 21
at 31 december 2005 411 125 536
current 31 december 2005 83 40 123
noncurrent 31 december 2005 328 85 413
411 125 536
current 31 december 2004 184 50 234
noncurrent 31 december 2004 302 62 364
486 112 598
a the insurance claims provision arises from estimated exposures at the year end the majority of which will be utilised in the next six years and
principally comprises provisions for existing claims arising in the uk and north america this provision has been discounted to its present value
since the effect is material
b an onerous contract provision of £158m was assumed on the acquisition of travel london limited this was prefunded by the vendor on
acquisition and £80m has been utilised up to 31 december 2005 2004 £46m other provisions total £47m
28 deferred tax
deferred tax is calculated in full on temporary differences under the liability method
the movement on the net deferred tax account is shown below
2005 2004
£m £m
net deferred tax asset brought forward 138 93
deferred tax recognised on financial instruments on adoption of ias 3239 56 –
net deferred tax asset at 1 january 194 93
acquisition of subsidiaries 110 41
chargecredit to income statement 187 11
credit to reserves 90 06
charge in discontinued operations – 13
attributable to discontinued operations 19 –
charged in loss on disposal 32 –
exchange differences 15 –
net deferred tax liabilityasset at 31 december 41 138 80
notes to the accounts
28 deferred tax continued
based on current capital investment plans the group expects to be able to claim capital allowances in excess of depreciation in future years at 
a similar level to the current year
the movements in deferred tax assets and liabilities during the period are shown below deferred tax liabilities and assets within the same
jurisdiction have been offset
accelerated tax short term
depreciation timing differences total
deferred tax assets £m £m £m
at 1 january 2004 45 165 120
credited to income statement – 10 10
credited directly to equity – 06 06
acquisition of subsidiaries – 47 47
at 31 december 2004 45 228 183
recognised on adoption of ias 3239 – 56 56
at 1 january 2005 45 284 239
charged to income statement 39 50 89
credited directly to equity – 90 90
acquisition of subsidiaries – 10 10
at 31 december 2005 84 314 230
accelerated tax losses carried short term
depreciation forward timing differences total
deferred tax liabilities £m £m £m £m
at 1 january 2004 269 105 137 27
chargedcredited to income statement 20 27 19 12
acquisition of subsidiaries 06 – – 06
attributable to discontinued operations 26 19 07 –
exchange difference 03 02 01 –
at 31 december 2004 266 111 110 45
chargedcredited to income statement 104 08 02 98
acquisition of subsidiaries 101 – 01 100
attributable to discontinued operations 98 28 51 19
included in loss on disposal 32 – – 32
exchange difference 19 04 – 15
at 31 december 2005 424 95 58 271 81
notes to the accounts
29 financial liabilities 
under the exemption available in ifrs 1‘firsttime adoption of ifrs’ the group has not restated its results for the year ended 31 december 2004
for the effect of ias 32‘financial instruments disclosure and presentation’ or ias 39‘financial instruments recognition and measurement’ instead
the group has followed the requirements of uk gaap for the year ended 31 december 2004 and included disclosures prepared under frs 13
‘derivatives and other financial instruments disclosures’ in note 32
additional financial instruments have been recognised on the balance sheet from 1 january 2005 as reported in the group’s ifrs reconciliations
included in note 40 a summary of the effect is included below
31 december 31 december 1 january 
2005 2004 2005
£m £m£m
noncurrent
bank loans 4100 2075 2075
finance lease obligations 855 443 443
financial liabilities – borrowings 4955 2518 2518
interest rate swaps 83 – 76
financial liabilities – derivative financial instruments 83 – 76
noncurrent financial liabilities 5038 2518 2594
current
loan notes 08 75 75
bank loans 1845 80 80
bank overdrafts 55 ––
finance lease obligations 236 148 148
financial liabilities – borrowings 2144 303 303
foreign exchange forward contracts 93 ––
interest rate swaps 41 – 199
financial liabilities – derivative financial instruments 134 – 199
current financial liabilities 2278 303 502
 £25m included in interest rate swaps in current liabilities at 1 january 2005 had previously been included in accruals and deferred income at 
31 december 2004 bank loans are denominated in a number of currencies and bear interest as detailed in note 30 82
notes to the accounts
30 interest bearing loans and borrowings
the effective interest rates on loans and borrowings at the balance sheet date were as follows although not required under frs 13 for uk gaap 
comparative disclosures have been provided for 2004
2005 effective 2004 effective
maturity £m interest rate £m interest rate 
current
bank overdraft on demand 55 euribor  05 – –
sterling loan notes on demand 08 libor  10 75 libor  10
short term 52 sterling bank loans january 2006 122 52 80 56
short term 48 us dollar bank loans january 2006 03 48 – –
short term 29 euro bank loans january 2006 02 29 – –
euro bank loans subject to interest hedge october 2006 1374 28 – –
euro bank loans unhedged october 2006 344 euribor  04 – –
bank loans 1845 80
canadian dollar finance leases 2006 02 77 10 77
us dollar 36 finance leases 2006 54 36 28 35
euro finance leases at floating rates 2006 20 38 – –
sterling 54 finance leases 2006 82 54 39 52
sterling finance leases at floating rate 2006 78 libor  30 71 libor  30
finance leases 236 148
2144 303
noncurrent
sterling bank loans november 2009 94 libor  04 – –
us dollar bank loans subject 
to interest hedge november 2009 581 73 1564 73
us dollar bank loans unhedged november 2009 1046 libor  04 511 libor  04
euro bank loans at floating rate november 2009 2029 euribor  04 – –
canadian dollar bank loans november 2009 350 libor  04 – –
bank loans 4100 2075
canadian dollar finance leases 2007 02 77 – –
us dollar 36 finance leases 20092012 283 36 147 35
euro finance leases at floating rate 20072013 59 38 – –
sterling 54 finance leases 20072018 375 54 69 52
sterling finance leases at floating rate 20072009 136 libor  30 227 libor  30
finance leases 855 443
4955 2518
details of the group’s interest rate management strategy and interest rate swaps are included in notes 31 and 32
the group is subject to a number of covenants in relation to its borrowing facilities which if contravened would result in its loans becoming
immediately repayable these covenants specify maximum net debt to ebitda and minimum ebitda to interest and ebitda plus fixed charges 
to interest payable and fixed charges ratios 83
notes to the accounts
31 financial risk management objectives and policies
financial risk factors and management
the group’s multinational operations and significant debt financing expose it to a variety of financial risks the most material of which are the effects
of changes in foreign currency exchange rates interest rates and changes in fuel prices the group has in place a risk management program that
seeks to limit the adverse effects on the financial performance of the group by using foreign currency financial instruments including debt fuel price
and interest rate swaps
the board of directors have delegated to a subcommittee the treasury committee the responsibility for implementing the risk management
policies laid down by the board the policies are implemented by the central treasury department that receives regular reports from all the
operating companies to enable prompt identification of financial risks so that appropriate actions may be taken the treasury department has a
policy and procedures manual that sets out specific guidelines to manage foreign exchange risk interest rate risk credit risk and the use of financial
instruments to manage these the group does not hold any financial instruments that would be classified as held for trading under ias 39
foreign currency
the group has major operations in the us canada and spain the group is exposed to foreign exchange risks primarily with respect to us dollars
canadian dollars and the euro in translation of net assets and on earnings denominated in foreign currency the group finances overseas investments
mainly through the use of foreign currency borrowings to hedge the net asset investment the group has also entered into some forward exchange
contracts to hedge the foreign currency exposure of its overseas subsidiaries these have the effect of increasing dollar or euro denominated debt and
reducing sterling debt the forward exchange contract terms run for periods up to one year the group has a policy of hedging between 50 and
100 foreign currency denominated net assets at 31 december 2005 61 of the group’s exposure to us dollar assets were hedged 94 of the
exposure to canadian dollar assets 99 of the exposure to australian dollar assets and 96 of the exposure to euro assets
the group also has transactional currency exposures and with the exception of fuel purchases we believe these exposures are immaterial
interest rate risk
the group is exposed to interest rate risk on both interest bearing assets and interest bearing liabilities it is the group’s policy to maintain an
appropriate balance between fixed and floating interest rates on borrowings in order to provide certainty as to the level of our interest expense in
the short term and to reduce the year on year impact of interest rate fluctuations over the medium term interest on the group’s debt is based on
libor or euribor and to achieve the above objectives we have entered into a series of interest rate swaps that have the effect of converting
floating debt to fixed debt the net effect of these transactions was that as at 31 december 2005 the group was hedged against interest rate
movements on £2876m of gross debt for an average of 41 years based on the year end debt each 1 increase in interest rates would cost the
group approximately £28m
commodity prices
the group is exposed to commodity price risk as a result of fuel usage it is our policy to hedge this exposure in order to provide certainty as to
the level of costs in the short term and to reduced the year on year impact of price fluctuations over the medium term this is achieved by entering
into fuel swaps and purchase contracts which are expected to be highly effective as at 31 december 2005 the group had hedged approximately
95 of its 2006 expected usage 18 of its 2007 expected usage and 14 of its 2008 usage
credit risk
the maximum credit risk exposure of the group is the gross carrying value of each of its financial assets as disclosed in note 32 and trade
receivables as disclosed in note 23 this risk is mitigated by a number of factors the majority of the group’s receivables are with public or quasi
public bodies both national the sradft rail and network rail in the uk and local school boards and city councils in north america municipal
authorities in spain portugal and morocco transport for london and centro in the uk the group does not consider these counterparties to be a
significant credit risk outside of this the group does not consider it has significant concentrations of credit risk the group has implemented policies
that require appropriate credit checks on potential customers before sales commence
financial instrument counterparties are subject to preapproval by the treasury committee and such approval is limited to financial institutions with
an a rating or better the amount of exposure to any individual counterparty is subject to a limit which is reassessed annually by the treasury
committee
liquidity risk
the group actively maintains a mixture of longterm and shortterm committed facilities that are designed to ensure the group has sufficient
available funds to meet current and forecast financial requirements as cost effectively as possible as at 31 december 2005 the group had
committed credit facilities of £841m of which £637m were undrawn the group’s loan facilities expire in october 2006 and november 2009
and the lease facilities at various times in line with their terms 84
notes to the accounts
32 financial instruments
fair values
set out below is comparison of the carrying amounts and fair values of all of the group’s financial assets and liabilities
2005
carrying fair 
value value
£m£m
financial assets
cash and cash equivalents 1455 1455
available for sale investments 114 114
amounts due from associates and joint ventures 79 79
amounts owed by related parties 29 29
other receivables current 821 821
other receivables noncurrent 29 29
fuel price swaps 73 73
2600 2600
liabilities
bank overdraft 55 55
amounts owed to associates and joint ventures 88 88
amounts owed to related parties 17 17
other payables – current excludes liabilities not to be settled by cash 2015 2015
other payables – noncurrent 61 61
obligations under finance leases 1091 1091
loan notes 08 08
bank loans 5945 5945
interest rate swaps 124 124
foreign exchange forward contracts 93 93
9497 9497
other receivables and other payables in the table above are to be settled in cash in the currency they are held in
in accordance with ias 39 the group has reviewed all contracts for embedded derivatives that are required to be separately accounted for
the fair value of foreign exchange forward contracts fuel price and interest rate swaps has been determined by the third party financial institution
with whom the group holds the instrument in line with the market value of similar financial instruments
the following table sets out the carrying amount by maturity of the group’s financial instruments that are exposed to interest rate risk
 1 year 12 years 23 years 34 years 45 years  5 years total
as at 31 december 2005 £m £m £m £m £m £m £m
fixed rate
other debt receivable 10 – ––– – 10
bank loans 1501 – – 581 – – 2082
finance leases 136 102 83 85 89 299 794
interest rate swaps 41 – – 83 – – 124
floating rate
cash assets 1455 – – – – – 1455
bank overdrafts 55 – – – – – 55
loan notes 08 – – – – – 08
bank loans 344 – – 3519 – – 3863
finance leases 100 127 25 20 10 15 297 85
notes to the accounts
32 financial instruments continued
hedging activities
interest hedges
the group has a number of interest rate swaps in place to hedge both the cash flow and fair value risk in relation to interest rate
a cash flow hedges with a total principal of us200m that were entered into in september 2000 fixed at 69 and 68545 for us100m each
until september 2010 of this amount us100m meets the criteria for hedge accounting and us100m does not
b fair value hedges with a principal of us100m were entered into in march 2004 these had the effect of fixing the accrued loss of us183m
on us100m cash flow hedges fixed at 69 entered into in september 2000 but do not qualify for hedge accounting under the rules of 
ias 39 the net effect of the two 69 hedges is immaterial in the income statement
c an interest rate swap with a principal of us200m fixed at 625 but including an embedded option that means the interest payment will
revert to libor should libor exceed 7 was in place at 1 january 2005 this interest rate swap was settled in january 2005 and did not meet
the definition of a cash flow hedge under ias 39 this resulted in a £01m credit being recognised in the income statement
d cash flow hedges with a principal of €200m that were entered into in december 2005 fixed at 284 until december 2007
the reset dates of all swaps remaining in place at 31 december 2005 coincide with the material conditions of the underlying loans
the benchmark rate for floating rate financial liabilities is the relevant interbank borrowing rate
during the year £35m has been transferred from the hedging reserve to the income statement in respect of interest rate swaps
hedge of net investments in foreign entities
included in bank loans are borrowings of us280m £1627m can70m £350m and €545m £3749m which have been designated as a hedge
of net investments in the foreign currency denominated net assets of the group and is being used to reduce the exposure to foreign exchange risk
in addition the group has synthetic debt in the form of foreign currency forward contracts in place split between usnil can1567m £783m
aud80m £341m and €160m £1101m to complete the posttax hedge of the net investment in foreign entities the portion of the gain or
loss on the foreign currency forward contracts that is determined to be an effective hedge is recognised directly in equity and to this extent offsets
any gains or losses on translation of the net investments in the subsidiaries
fuel price hedges
the group has a number of fuel price swaps in place to hedge the different types of fuel used in each division ultra low sulphur diesel and gasoil as
used in the uk bus uk coach uk trains and european coach  bus alsa divisions is hedged by swaps in the same type of fuel diesel used in the
north american division is hedged by heating oil swaps which have been determined to be effective hedges of the fuel used with a strong
correlation in price movements between the two products
during the year £129m has been transferred from the hedging reserve of which £49m was recognised in the hedging reserve at 1 january 2005
and the remainder was generated during the year due to the movement in market fuel prices
fuel price swaps can be analysed as follows
31 december 1 january 
31 december 1 january 2005 2005
2005 2005 volume volume
£m £m million litres million litres 
sterling denominated fuel swaps – uk bus uk coach and uk trains 06 30 1185 660
us dollar denominated fuel swaps – north american bus 57 19 422 416
euro denominated fuel swaps – european coach  bus alsa 04 – 420 –
fuel price swaps included in current assets 67 49 2027 1076
sterling denominated fuel swaps – uk bus uk coach and uk trains 06 – 590 –
us dollar denominated fuel swaps – north american bus – 14 – 378
fuel price swaps included in noncurrent assets 06 14 590 378
total fuel price swaps 73 63 2617 1454 86
notes to the accounts
32 financial instruments continued
fuel price hedges continued
foreign
currency 
interest forward 
rate swaps contracts fuel swaps total
2005 £m £m £m £m
liabilityasset at 1 january 275 149 63 63
closed out during year 119 – – 119
cash paidreceived in relation to hedging instruments taken to income statement 35 – 129 94
revaluation 13 01 133 145
exchange differences 16 241 06 251
liabilityasset at 31 december 124 93 73 144
2004 disclosures
the following comparatives are disclosed in compliance with frs 13‘derivatives and other financial instruments disclosures’ as applied by the group
under uk gaap for 2004 financial assets and financial liabilities are defined differently under ifrs and uk gaap and as such the amounts included
in these captions below are not directly comparable to similar captions elsewhere in the these accounts
shortterm debtors and creditors have been excluded from the disclosures below other than 32e on currency exposures
a interest rate risk and currency profile of financial liabilities
after taking into account interest rate swaps the interest rate and currency profile of the group’s financial liabilities at 31 december 2004 was 
as follows
weighted
financial weighted weighted average period
borrowings borrowings liabilities on average average until maturity 
at at which no fixed period for for financial
floating fixed total interest is interest which liabilities on which
rates rates borrowings paid total rate rate is fixed no interest is paid
2004 2004 2004 2004 2004 2004 2004 2004
£m £m £m £m £m  y ears y ears
sterling 449 112 561 177 738 51 28 15
us dollars 511 1739 2250 21 2271 69 48 35
australian dollars – 27 27 03 30 76 12 15
canadian dollars 10 – 10 – 10 – – –
970 1878 2848 201 3049 68 46 19
included within the us dollar fixed rate financial liabilities is an interest rate swap for £1042m us200m fixed at 625 until 8 january 2009 which
will revert to a floating rate should the us dollar six month libor exceed 7 the benchmark rate for floating rate financial liabilities is the libor
of the relevant currency this swap was terminated in january 2005
financial liabilities on which no interest is paid comprise other creditors of £31m falling due after more than one year provisions falling due after
more than one year of £62m and interests in provisions of associates of £108m
b analysis of financial liabilities by type and currency
at 31 december 2004 financial liabilities on which interest is paid comprised
loan notes bank loans bank overdrafts finance leases total 
2004 2004 2004 2004 2004
£m £m £m £m £m
sterling 75 80 – 406 561
us dollars – 2075 – 175 2250
australian dollars – – – 27 27
canadian dollars – – – 10 10
75 2155 – 618 2848 87
notes to the accounts
32 financial instruments continued
c maturity of financial liabilities
the maturity profile of the group’s financial liabilities at 31 december 2004 was as follows
2004
£m
expiring within one year 318
expiring within one to two years 240
expiring within two to five years 2346
expiring in more than five years 145
3049
d financial assets by currency
the group’s financial assets on which interest is receivable comprise cash at bank and in hand including deposits amounting to £1472m and a loan
note receivable of £10m which earn interest at floating rates cash deposits are placed on the money markets at commercial rates linked to the
libor of the relevant currency the currency profile as at 31 december 2004 was as follows
weighted average 
period until 
maturity for 
financial assets financial assets 
deposits and on which on which no
receivables at no interest is interest 
floating rates received total is received
2004 2004 2004 2004
£m £m £m y ears
sterling 998 193 1191 21
us dollars 98 03 101 16
australian dollars 377 – 377 –
canadian dollars 09 – 09 –
1482 196 1678 21
financial assets on which no interest is received total £196m and comprise investments of £105m and other debtors and prepayments greater than
one year of £91m
e currency exposures
as at 31 december 2004 the group did not have any material net currency transactional exposures
f undrawn committed borrowing facilities
at 31 december 2004 the group had undrawn and unused committed borrowings as follows
2004
£m
expiring within two to five years 3027
on 26 november 2004 the previous bank facility was refinanced with a new 5 year £5525m revolving credit facility
g fair values
the book values and fair values of all the group’s financial instruments at 31 december 2004 are set out below
book value fair value 
2004 2004
£m £m
cash at bank and in hand 1472 1472
other debt receivable 10 10
other financial assets 196 196
loans and overdrafts 2230 2230
finance lease obligations 618 618
forward foreign currency contracts – 03
interest rate swaps – 250
fuel price swaps – 63
other financial liabilities 201 201
the finance leases have been valued by a comparison of the portfolio interest rate against the expected rates at which the group could borrow
money at the year end over the same period there was no significant difference in value the forward foreign currency swaps interest rate swaps
and fuel price swaps have been all been valued externally by comparison with the market foreign exchange rates interest rates and fuel prices at the
year end 88
notes to the accounts
32 financial instruments continued
h hedge accounting
the gains and losses on instruments used for hedging interest rate risk currency risk and commodity price risk are not recognised until the exposure
that is being hedged is itself recognised unrecognised losses on instruments used for hedging are set out below
net unrecognised losses
2004
£m
unrecognised losses on hedges at the start of the year 350
losses arising in previous years that were recognised in the year 31
losses not recognised in the year arising before the start of the year 319
gains arising in the year that were not recognised in the year 135
unrecognised losses on hedges at the end of the year 184
of which
losses expected to be recognised within one year 24
losses expected to be recognised after one year 160
184
i market price risk – commodities
the group seeks to manage its exposure to fuel prices by entering into both a range of fixed price swaps with banks and also contracts for the
purchase of fuel
33 calledup share capital
2005 2004
£m £m
at 31 december
authorised
200000000 2004 146650000 ordinary shares of 5p each 100 73
issued calledup and fully paid
150520310 2004 139153158 ordinary shares of 5p each 75 70
number 
movement in ordinary shares during the period £m of shares
at 1 january 2004 68 136850910
exercise of share options – 509656
twm sip appropriation 02 1792592
at 1 january 2005 70 139153158
issue of shares in consideration for acquisition of alsa note 20 07 13503600
exercise of share options – 957141
twm sip appropriation – 206411
shares cancelled 02 2900000
at 31 december 2005 75 150920310 89
notes to the accounts
34 share capital and reserves
capital other 
shareshareredemptionownreservesretained minority 
capital premium reserve shares note 35 earnings total interests total equity
£m £m £m £m £m £m £m £m £m
at 31 december 2004 70 475 – 51 133 2032 2659 09 2668
financial instruments recognition – – – – 59 69 128 – 128
at 1 january 2005 70 475 – 51 74 1963 2531 09 2540
shares issued 07 1267 – – – – 1274 – 1274
shares purchased 02 – 02 35 – 258 293 – 293
acquisition of minority interest – – – – – – – 28 28
total recognised incomeexpense – – – – 171 244 73 01 72
own shares released to satisfy 
employee share schemes – – – 35 – – 35 – 35
disposal of subsidiaries – – – – – – – 09 09
share based payments – – – – – 36 36 – 36
dividends – – – – – 416 416 – 416
at 31 december 2005 75 1742 02 51 245 1081 3094 29 3123
share other 
sharesharecapitalownreservesretained minority 
capital premium to be issued shares note 35 earnings total interests t otal equity
£m £m£m£m£m£m£m£m £m
at 1 january 2004 68 451 01 52 162 1777 2407 47 2454
shares issued 02 24 01 – – – 25 – 25
own shares released to satisfy 
employee share schemes – – – 01 – – 01 – 01
transfers – – – – 08 08 – – –
total recognised incomeexpense – – – – 21 605 584 38 546
share based payments – – – – – 06 06 – 06
dividends – – – – – 364 364 – 364
at 31 december 2004 70 475 – 51 133 2032 2659 09 2668
own shares comprise treasury shares and shares held in the employee benefit trust
during the year ended 31 december 2005 the group has repurchased 3300000 shares for consideration of £293m 2900000 shares have been
cancelled and the remaining 400000 shares retained as treasury shares within equity for future issue under the group’s share schemes or
cancellation
own shares include 849456 2004 1743544 ordinary shares in the company that have been purchased by the trustees of the national express
employee benefit trust the “trust” the shares are held to satisfy potential awards or options granted under a number of the company’s share
schemes the value of shares within the trust has been recognised as an investment in treasury shares the market value of these shares at 
31 december 2005 was £73m 2004 £144m the dividends payable on these shares have been waived
35 other reserves
merger hedging revaluation translation
reserve reserve reserve reserve t otal
£m £m £m £m £m
at 31 december 2004 154 – – 21 133
financial instrument recognition – 59 – – 59
at 1 january 2005 154 59 – 21 74
hedge movements –37–– 37
exchange differences net of tax – – – 119 119
cumulative exchange differences of disposed operations – – – 15 15
at 31 december 2005 154 22 – 113 245 90
notes to the accounts
35 other reserves continued
merger hedging revaluation translation
reserve reserve reserve reserve t otal
£m £m £m £m £m
at 1 january 2004 154 – 08 – 162
transfers ––08–08
exchange differences net of tax – – – 21 21
at 31 december 2004 154 – – 21 133
the nature and purpose of the other reserves are as follows
• the merger reserve includes premium on shares issued to satisfy the purchase of prism rail plc in 2000 the reserve is not distributable
• the revaluation reserve records the increases and decreases in the fair value of land and buildings to the extent they offset one another
the reserve is not distributable
• the hedging reserve records the movements on designated hedging items offset by any movements recognised directly in equity on underlying
hedging items
• the translation reserve records exchange differences arising from the translation of the accounts of foreign currency denominated subsidiaries
offset by the movements on loans and derivatives used to hedge the net investment in foreign subsidiaries
36 pensions and other postemployment benefits 
a summary of pension benefits and assumptions
the uk bus and uk coach divisions operate both funded defined benefit schemes and a defined contribution scheme the majority of employees 
of the uk train companies are members of the appropriate sharedcost section of the railways pension scheme “rps” a funded defined benefit
scheme the assets of all schemes are held separately from those of the group contributions to the schemes are determined by independent
professionally qualified actuaries
subsidiaries in north america contribute to a number of defined contribution plans the group also provides certain additional postemployment
benefits to employees in north america and spain which are disclosed in section iii in the other category
the total pension cost for the year was £275m 2004 £316m of which £25m 2004 £34m relates to the defined contribution schemes
the defined benefit pension liability included in the balance sheet is as follows
2005 2004
£m £m
uk bus 378 362
uk coach 149 110
uk train 342 179
other 19 06
t otal 888 657
the valuations conducted for financial reporting purposes are based on the triennial actuarial valuations a summary of the latest triennial actuarial
valuations and assumptions made is as follows
uk bus uk coach uk trains
travel west 
t ayside midlands
31 march 31 march 5 april 31 december
date of actuarial valuation 2002 2004 2004 2004 
actuarial method used projected unit attained age projected unit projected unit
rate of investment returns per annum 54 5666 5260 4868
increase in earnings per annum 41 43 47 43
scheme assets taken at market value £362m £3007m £253m £6389m
funding level 107 88 65 8695
 amounts included in the income statement statement of recognised income and expense and the balance sheet are calculated using the projected
unit method
the range of funding levels for uk trains reflects the range of funding levels in the various sections of the rps the plans do not provide medical benefits 91
notes to the accounts
36 pensions and other postemployment benefits continued
a summary of pension benefits and assumptions continued
the most recent triennial valuations are then updated by independent professionally qualified actuaries for financial reporting purposes in
accordance with ias 19 the main actuarial assumptions underlying the ias 19 valuations are
2005 2004
uk uk uk uk uk uk 
bus coach trains bus coach trains 
rate of increase in salaries 37 37 42 37 37 42
rate of increase of pensions 27 27 27 27 27 27
discount rate 48 48 48 55 55 55
inflation assumption 27 27 27 27 27 27
expected rates of return on scheme assets
equities 80 80 80 85 85 85
bonds 48 48 48 49 49 49
properties 62 62 62 67 67 67
other 38 38 38 40 40 40
post retirement mortality in years
current pensioners at 65 – male 178 213 178 178 213 163
current pensioners at 65 – female 207 242 201 207 242 192
future pensioners at 65 – male 194 231 188 194 231 168
future pensioners at 65 – female 224 259 213 224 259 200
the demographic assumptions reflect those included in the most recent triennial valuation for the rps mortality assumptions are based on the
recent experience of the scheme with an allowance for future improvements in mortality
scheme assets are stated at their market values at the respective balance sheet dates the expected rate of return on assets is determined based on
the market prices prevailing on that date
b accounting for the railways pension scheme
the majority of employees of the uk train companies are members of the appropriate section of the railways pension scheme “rps” a funded
defined benefit scheme the rps is a shared cost scheme which means that costs are formally shared 60 employer and 40 employee to date
the group has experienced three changes of uk train franchise ownership where the current owner has funded the scheme during the franchise
term and the pension deficit at franchise exit has transferred to the new owner without cash settlement however although the group’s past
experience has proven otherwise our legal advice has opined that in certain situations some of the liability for the deficit on the relevant sections of
the rps could theoretically crystallise for funding by an individual toc at the end of the franchise by entering into the franchise contract the toc
becomes the designated employer for the term of the contract and under the rules of the rps must fund its share of the pension liability in
accordance with the schedule of contributions agreed with the scheme trustees and actuaries and for which there is no funding cap set out in the
franchise contractwe understand that franchise contracts entered into in the future will clarify that rps pension deficits and surpluses will not be
the responsibility of the outgoing franchisee following exit
to comply with ias 19 the group is required to account for its legal obligation under the formal terms of the rps and its constructive obligation
that arises under the terms of each franchise agreement
in determining the appropriate accounting policy for the rps to ensure that the group’s accounts present fairly its financial position financial
performance and cash flows management has consulted with toc industry peers and has concluded that the group’s constructive but not its legal
rps defined benefit obligations should be accounted for in accordance with ias 19 this accounting policy which in all other respects is consistent
with that set out in this note for the group’s other defined benefit schemes means that the group’s accounts reflect that element of the deficits
anticipated to be settled by the group during the franchise term and will prevent gains arising on transfer of the existing rps deficits to a new
owner at franchise exit
in calculating the group’s constructive obligations in respect of the rps the group has calculated the total pension deficits in each of the rps
sections in accordance with ias 19 and the assumptions set out above these deficits are reduced by a “franchise adjustment” which is that portion
of the deficit projected to exist at the end of the franchise and for which the group will not be required to fund the franchise adjustment which
has been calculated by the group’s actuaries is offset against the present value of the rps liabilities so as to fairly present the financial performance
position and cash flows of the group’s obligations 92
notes to the accounts
36 pensions and other postemployment benefits continued
b accounting for the railways pension scheme continued
the franchise adjustment increased from £676m at 31 december 2004 to £710m at 31 december 2005 the increase is caused by the interest 
on the franchise adjustment £36m offset by net actuarial movements in scheme liabilities of £02m in the prior year the franchise adjustment
increased by £52m from £624m at 1 january 2004 to £676m at 31 december 2004 the increase was caused by unwinding the discounting
£33m and net actuarial movements in scheme liabilities £281m offset by franchise exits net of franchise wins  extensions £262m
if the group had accounted for its legal obligation in respect of the rps instead of the constructive obligation the following adjustments would have
been made to the financial information
2005 2004
£m £m
balance sheet
defined benefit pension deficit 710 676
deferred tax asset 201 195
intangible asset 34 23
475 458
statement of recognised income and expense
actuarial gainslosses 02 281
tax on actuarial gains and losses 03 90
05 191
income statement
financing cost – unwind of discount 36 33
curtailment gain on franchise exit – 286
intangible asset amortisation 11 08
deferred tax creditcharge 03 87
22 174
c financial results for pension benefits
the amounts charged to the group income statement and group statement of recognised income and expense for the years ended 31 december
2005 and 2004 are set out in the following tables
year ended 31 december 2005
uk bus uk coach uk trains other t otal
2005 2005 2005 2005 2005
group income statement £m £m £m £m £m
amounts charged to operating profit
current service cost 53 16 312 02 383
past service cost – – – – –
expected return on pension scheme assets 239 21 301 – 561
interest on pension liabilities 202 22 240 – 464
interest on franchise adjustment – – 36 – 36
charge to operating profit 16 17 215 02 250
total charge to income statement 16 17 215 02 250
actual return on plan assets 592 46 845 – 1483
uk bus uk coach uk trains other t otal
2005 2005 2005 2005 2005
group statement of recognised income and expense £m £m £m £m £m
actual return less expected return on pension scheme assets 353 25 544 – 922
other actuarial gains and losses 416 73 753 – 1242
actuarial loss 63 48 209 – 320 93
notes to the accounts
36 pensions and other postemployment benefits continued
c financial results for pension benefits continued
year ended 31 december 2004
uk bus uk coach uk trains other total
2004 2004 2004 2004 2004
group income statement £m £m £m £m £m
amounts charged to operating profit
current service cost 53 14 345 – 412
past service cost – – – – –
franchise exit – – 04 – 04
expected return on pension scheme assets 215 17 331 – 563
interest on pension liabilities 191 16 263 – 470
interest on franchise adjustment – – 33 – 33
charge to operating profit 29 13 240 – 282
total charge to income statement 29 13 240 – 282
actual return on plan assets 313 34 440 – 787
uk bus uk coach uk trains other total
2004 2004 2004 2004 2004
group statement of recognised income and expense £m £m £m £m £m
actual return less expected return on pension scheme assets 98 17 109 – 224
other actuarial gains and losses 46 89 112 – 247
actuarial gainloss 52 72 03 – 23
the amounts recognised in the balance sheet at 31 december are
as at 31 december 2005
uk bus uk coach uk trains other t otal
2005 2005 2005 2005 2005
£m £m £m £m £m
equities 2185 172 6381 – 8738
bonds 1597 185 882 – 2664
property 36 – 673 – 709
other 40 – 28 – 68
fair value of scheme assets 3858 357 7964 – 12179
present fair value of scheme liabilities 4236 506 9016 19 13777
franchise adjustment – – 710 – 710
group’s defined benefit obligation 4236 506 8306 19 13067
defined benefit pension deficit 378 149 342 19 888
as at 31 december 2004
uk bus uk coach uk trains other total
2004 2004 2004 2004 2004
£m £m £m £m £m
equities 2157 141 4858 – 7156
bonds 1136 146 679 – 1961
property 36 – 500 – 536
other 51 – 307 – 358
fair value of scheme assets 3380 287 6344 – 10011
present fair value of scheme liabilities 3742 397 7199 06 11344
franchise adjustment – – 676 – 676
group’s defined benefit obligation 3742 397 6523 06 10668
defined benefit pension deficit 362 110 179 06 657 94
notes to the accounts
36 pensions and other postemployment benefits continued
c financial results for pension benefits continued
the movement in the present value of the defined benefit obligation in the year is as stated below for uk trains the rps is a shared cost scheme
which means that costs are formally shared 60 employer and 40 employee the defined benefit obligation disclosed below represents only the
group’s share of the liability
uk bus uk coach uk trains other t otal
£m £m £m £m £m
group’s defined benefit obligation at 1 january 2005 3742 397 6523 06 10668
current service cost 53 16 312 02 383
past service cost – – – – –
benefits paid 192 07 196 01 396
contributions by employees 15 05 145 – 165
finance charge 202 22 240 – 464
interest on franchise adjustment – – 36 – 36
liability movement for members’ share of assets – – 565 – 565
acquisition of subsidiary – – – 11 11
exchange difference – – – 01 01
actuarial loss recognised in statement of recognised income and expense 416 73 753 – 1242
group’s defined benefit obligation at 31 december 2005 4236 506 8306 19 13067
uk bus uk coach uk trains other t otal
£m £m £m £m £m
group’s defined benefit obligation at 1 january 2004 3620 275 6339 08 10242
current service cost 53 14 345 – 412
franchise entry – – 1281 – 1281
franchise exit – – 1954 – 1954
benefits paid 183 03 255 02 443
contributions by employees 15 06 132 – 153
finance charge 191 16 263 – 470
interest on franchise adjustment – – 33 – 33
liability movement for members’ share of assets – – 293 – 293
actuarial loss recognised in statement of recognised income and expense 46 89 112 – 247
group’s defined benefit obligation at 31 december 2004 3742 397 6523 06 10668
the group’s defined benefit obligation comprises £13048m 2004 £10662m arising from plans that are wholly or partly funded and £19m 
2004 £06m from unfunded plans
the movement in the fair value of scheme assets are as follows
uk bus uk coach uk trains t otal
£m £m £m £m
fair value of scheme assets at 1 january 2005 3380 287 6344 10011
expected return 239 21 301 561
cash contributions – employer 63 26 261 350
cash contributions – employee 15 05 145 165
benefits paid 192 07 196 395
members’ share of return on assets – 565 565
actuarial gain recognised in statement of recognised income and expense 353 25 544 922
fair value of scheme assets at 31 december 2005 3858 357 7964 12179 95
notes to the accounts
36 pensions and other postemployment benefits continued
c financial results for pension benefits continued
uk bus uk coach uk trains total
£m £m £m £m
fair value of scheme assets at 1 january 2004 3233 228 6254 9715
expected return 215 17 331 563
franchise entry – – 1161 1161
franchise exit – – 1950 1950
cash contributions – employer 02 22 269 293
cash contributions – employee 15 06 132 153
benefits paid 183 03 255 441
members’ share of asset movement – – 293 293
actuarial gain recognised in statement of recognised income and expense 98 17 109 224
fair value of scheme assets at 31 december 2004 3380 287 6344 10011
the group expects to contribute £384m to its defined benefit pension plans in 2006
history of experience gains and losses
2005 2004
uk bus £m £m
fair value of scheme assets 3858 3380
present value of group’s defined benefit obligation 4236 3742
deficit in the scheme 378 362
experience adjustments arising on liabilities 33 249
experience adjustments arising on assets 353 98
2005 2004
uk coach £m £m
fair value of scheme assets 357 287
present value of group’s defined benefit obligation 506 397
deficit in the scheme 149 110
experience adjustments arising on liabilities – 04
experience adjustments arising on assets 25 17
2005 2004
uk train £m £m
fair value of scheme assets 7964 6344
present value of group’s defined benefit obligation 8306 6523
deficit in the scheme 342 179
experience adjustments arising on plan liabilities 538 130
experience adjustments arising on plan assets 544 109
2005 2004
other £m £m
fair value of scheme assets – –
present value of group’s defined benefit obligation 19 06
the cumulative amount of actuarial gains and losses recognised in the statement of recognised income and expense since 1 january 2004 is £343m
loss 2004 £23m loss the directors are unable to determine how much of the pension scheme deficit recognised on transition to ifrss and taken
directly to equity of £519m is attributable to actuarial gains and losses since inception of those pension schemes consequently the directors are
unable to determine the amount of actuarial gains and losses that would have been recognised in the statement of recognised income and expense
before 1 january 2004 96
notes to the accounts
37 commitments and contingencies
operating lease commitments
the tocs have contracts with network rail infrastructure limited for access to the railway infrastructure tracks stations and depots they also
have contracts under which rolling stock is leased commitments for future minimum rental payments under these contracts are shown below
land and buildings plant and equipment
2005 2004 2005 2004
uk trains division commitments £m £m £m £m
future minimum rentals payable under noncancellable operating leases
within one year fixed track access 2264 1983 – –
rolling stock – – 2410 2734
other 660 668 22 06
2924 2651 2432 2740
after one year but not more than five years fixed track access 4378 3986 – –
rolling stock – – 5730 5937
other 1475 1445 74 25
5853 5431 5804 5962
more than five years fixed track access 254 1112 – –
rolling stock – – 348 1577
other 99 411 25 27
353 1523 373 1604
9130 9605 8609 10306
fixed track access agreements have an average remaining life of 40 years 2004 49 years other land and buildings have an average duration of 
49 years 2004 63 years rolling stock agreements have an average life of 44 years 2004 52 years and other plant and equipment 62 years
2004 90 years
the table above reflects the commitments up to the current franchise end dates unless an extension or new franchise agreement has been signed
the land and buildings commitments are based on charges advised by the rail regulator for the period starting on 1 april 2004
the group has entered into operating leases on certain properties public service vehicles and various items of plant and equipment commitments
for future minimum rental payments under noncancellable operating leases for the other divisions are shown below
land and buildings public service vehicles other
2005 2004 2005 2004 2005 2004
other divisions’ commitments £m £m £m £m £m £m
within one year 90 82 77 86 26 13
after one year but not more than five years 293 144 159 294 47 08
more than five years 84 85 04 15 – –
467 311 240 395 73 21
the average remaining life of operating lease commitments in the other divisions is 67 years 2004 77 years for land and buildings 32 years 
2004 44 years for public service vehicles and 29 years 2004 20 years for other plant and equipment 97
notes to the accounts
37 commitments and contingencies continued
operating lease commitments continued
t otal
2005 2004
total group £m £m
future minimum rentals payable under noncancellable operating leases
within one year land and buildings 3014 2733
plant and equipment 2535 2839
5549 5572
after one year but not more than five years land and buildings 6146 5575
plant and equipment 6010 6264
12156 11839
more than five years land and buildings 437 1608
plant and equipment 377 1619
814 3227
18519 20638
operating lease agreements where the group is the lessor
the group receives rent on properties as follows
2005 2004
£m £m
future minimum rentals receivable under noncancellable operating leases
within one year 63 70
after one year but not more than five years 167 164
more than five years 50 77
280 311
the leases have an average unexpired duration of 39 years 2004 37 years
finance lease commitments
the group has finance leases for public service vehicles and various items of plant and equipment these leases have terms of renewal but no
purchase options and escalation clauses renewals are at the option of the specific entity that holds the lease
2005 2004
minimum present value minimum present value 
payments of payments payments of payments
£m £m £m £m
within one year 284 236 185 148
after one year but not more than five years 650 541 475 406
more than five years 388 314 42 37
total minimum lease payments 1322 702
less future financing charges 231 111
present value of minimum lease payments 1091 1091 591 591
capital commitments
2005 2004
£m £m
contracted 193 53
the group is committed to vehicle purchases and various land  buildings improvements 98
notes to the accounts
37 commitments and contingencies continued
contingent liabilities
bonds and letters of credit
in the ordinary course of business the group is required to issue counterindemnities in support of its operations as at 31 december 2005 there
were uk train performance bonds of £446m 2004 £385m and uk train season ticket bonds of £1000m 2004 £903m the £56m
performance bond in respect of london eastern railway limited trading as ‘one’ which was in place at 1 january 2005 was increased to £117m on
1 april 2005 the group has other performance bonds which include the £146m 2004 £142m performance bond in respect of intercapital and
regional rail limited performance bonds in respect of businesses in the united states of america of £345m 2004 £393m and the rest of europe
of £96m 2004 £nil letters of credit have been issued to support insurance retentions of £847m 2004 £727m
38 related party transactions
amount of amounts due amounts due 
transactions from related parties to related parties
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
associates
altram 70 73 53 46 – 01
icrrl – – – – 84 29
alsa associates – – 20 – 03 –
joint ventures
alsa joint ventures – – 06 – 01 –
trade investments
trainline holdings limited – – 25 25 – –
alsa trade investments – – 02 – 17 –
property transactions
stock 03 02 – – – –
alsa 02 – 02 – – –
total associates and joint ventures 70 73 79 46 88 30
total other related parties 05 02 29 25 17 –
t otal 75 75 108 71 105 30
property transactions
brian stock was appointed as chief executive of the group’s north american operations in october 2004 stock transportation limited a school
bus operator in north america was acquired in july 2002 as part of the sale and purchase agreement the group entered into leases for eight
properties at market rents and on standard terms and conditions the rental payments of £03m 2004 £02m are made to stock properties and
stock realty limited of which brian stock is a related party
a number of alsa companies have leased properties from companies related to the cosmen family jorge cosmen is a non executive director of the
group these leases were in place before the group’s acquisition of alsa and are for appropriate market rates
compensation of key management personnel of the group
2005 2004
£m £m
as disclosed in note 7 26 26
sharebased payments 04 02
total compensation paid to key management personnel 30 28
directors’ interests in employee share plans are disclosed in the report on directors’ remuneration 99
notes to the accounts
39 cash flow statement
the net cash flows from operating activities include outflows of £77m 2004 £52m from continuing operations which related to exceptional costs
a reconciliation of group operating profit to cash generated from operations
2005 2004
total operations £m £m
net cash inflow from operating activities
group operating profit 1095 999
operating profit of discontinued operations 564 73
depreciation of property plant and equipment 568 636
amortisation of leasehold property prepayment 08 06
goodwill impairment 933 439
intangible asset amortisation 49 24
property plant and equipment impairment – 61
amortisation of fixed asset grants 09 65
profit on disposal of fixed assets in normalised operating profit 20 06
sharebased payments 36 06
increasedecrease in inventories 07 07
decrease in receivables 224 187
decreaseincrease in payables 372 347
decrease in provisions 130 27
cash generated from operations 1811 2541
2005 2004
discontinued operations £m £m
net cash inflow from operating activities
operating profit 564 73
depreciation of property plant and equipment 13 63
goodwill impairment 600 106
property plant and equipment impairment – 61
profit on disposal of fixed assets in normalised operating profit 01 –
sharebased payments 01 –
increase in inventories 01 –
increasedecrease in receivables 11 12
increasedecrease in payables 12 49
decrease in provisions 13 29
cash generated from operations 36 91 100
notes to the accounts
39 cash flow statement continued
b analysis of changes in net debt
net debt at 31 december 2005 comprises cash and cash equivalents of £1455m 2004 £1472m as disclosed in note 24 current interest bearing
loans and borrowings of £2144m 2004 £303m and noncurrent interest bearing loans and borrowings of £4955m 2004 £2518m as disclosed
in note 30 and other debt receivable of £10m 2004 £10m as disclosed in note 32
additionally net debt at 31 december 2004 includes £15m finance leases due within one year and £12m finance leases due within one to two
years attributable to discontinued operations and classified separately on the balance sheet within the “liabilities directly associated with disposal
group assets classified as held for sale” heading
at at
1january acquisitions exchange other 31 december 
2005 cash flow disposals differences movements 2005
£m £m £m £m £m £m
cash 268 250 – 14 – 532
overnight deposits 241 04 – – – 245
other short term deposits 963 298 – 13 – 678
bank overdrafts – 55 – – – 55
cash and cash equivalents 1472 99 – 27 – 1400
other debt receivable 10 – – – – 10
debt due within one year
loan notes 75 67 – – – 08
bank loans 80 1748 – 15 02 1845
155 1681 – 15 02 1853
debt due after one year
bank loans 2075 267 2040 252 – 4100
finance lease obligations 618 200 73 30 570 1091
net debt 1366 1313 2113 270 572 5634
short term deposits included within liquid resources relate to term deposits repayable within three months changes in net debt arising from
acquisitions and disposals in the year are disclosed separately in note 20
other non cash movements in net debt represent finance lease additions of £570m 2004 £162m and £02m 2004 £18m amortisation of loan
arrangement fees
c reconciliation of net cash flow to movement in net debt
2005 2004
£m £m
decreaseincrease in cash and cash equivalents in the period 99 510
cash inflowoutflow from movement in debt and lease financing 1214 1098
change in net debt resulting from cash flows 1313 1608
change in net debt resulting from acquisitions and disposals 2113 85
change in net debt resulting from non cash flows 842 02
movement in net debt in the period 4268 1525
opening net debt 1366 2891
net debt 5634 1366 101
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs
a first time adoption of international financial reporting standards
the group has applied ifrs 1‘first time adoption of international financial reporting standards’ to provide a starting point for reporting under
ifrs the group’s date of transition to ifrs is 1 january 2004 and all comparative information in the accounts is restated to reflect the group’s
adoption of ifrs except where otherwise required or permitted under ifrs 1
ifrs 1 requires an entity to comply with each ifrs effective at the reporting date for its first ifrs accounts as a general principle ifrs 1 requires
the standards effective at the reporting date to be applied retrospectively however retrospective application is prohibited in some areas particularly
where retrospective application would require judgements by management about past conditions after the outcome of the particular transaction is
already known a number of optional exemptions from full retrospective application of ifrss are granted where the cost of compliance is deemed to
exceed the benefits to users of the accounts the group has taken the following exemptions
• ias 32‘financial instruments disclosure and presentation’ and ias 39‘financial instruments recognition and measurement’ have been adopted
from 1 january 2005 with no restatement of comparative information
• business combinations prior to 1 january 2004 have not been restated to comply with ifrs 3‘business combinations’
• cumulative translation differences on foreign currency denominated operations are deemed to be £nil at 1 january 2004 any gains and losses
recognised in the income statement on subsequent disposals of foreign operations will therefore exclude translation differences arising prior to
the transition date
• sharebased payment charges will only be recognised for those awards granted after 7 november 2002 which have not vested as of 1 january 2005
where applicable the options selected by management are set out in more detail in the explanatory notes below
ifrs 2 ‘sharebased payment’
ifrs 2 requires the group to recognise an expense for employees’ and directors’ share options and other share based incentives by using an option
pricing model
the group has taken advantage of the exemption in ifrs 1 in respect of equity settled awards and has applied ifrs 2 only to equitysettled awards
granted after 7 november 2002 that had not vested on or before 1 january 2005
ifrs 3 ‘business combinations’ ias 36 ‘impairment of assets’ and ias 38 ‘intangible assets’
ifrs 3 has been applied to the accounting for business combinations from 1 january 2004 as permitted by ifrs 1
the adoption of ifrs 3 and ias 36 has resulted in the cessation of annual goodwill amortisation and the adoption of annual impairment reviews at
the cash generating unit level from 1 january 2004
intangible assets are now recognised upon acquisition at the individual asset category level they have either a finite or indefinite life and therefore
are amortised or reviewed annually for impairment as appropriate
ifrs 5 ‘noncurrent assets held for sale and discontinued operations’
the group previously presented the operating results of operations discontinued during the year separately from the exceptional profit or loss on
disposal the adoption of ifrs 5 means that the group’s interest in discontinued operations is presented after continuing operations and represents
the posttax results of operations after interest and the posttax gain or loss on disposal
any assets or liabilities remaining in the balance sheet at the period end relating to discontinued operations will be presented separately from the
assets and liabilities of continuing operations
ias 19 ‘employee benefits’
the group previously recognised pension costs on a systematic basis so that the costs of providing retirement benefits to employees were evenly
matched so far as was possible to the service lives of the employees concerned any surplus or deficit of the actuarial value of assets over the
actuarial value of liabilities of the pension scheme was spread over the average remaining service lives of employees in addition disclosures were
made in accordance with the transitional provisions of frs 17‘retirement benefits’
the effect of adopting ias 19 has been to recognise a pension liability to reflect the group’s obligations to fund its defined benefit pension plans
additionally the adoption of the standard has resulted in various changes in the income statement and the creation of offsetting intangible assets for
some of the deficits existing in certain of the group’s tocs that existed when those contracts were commenced details of the accounting for the
railways pension scheme are given in section ii of note 36 40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
a first time adoption of international financial reporting standards continued
ias 32 ‘financial instruments disclosure and presentation’ and ias 39 ‘financial instruments recognition and measurement’
the group has taken advantage of the exemption in ifrs 1 and has not restated its results for the year ended 31 december 2004 for the effect 
of ias 32 or ias 39 the main adjustments that would be required to make the prior period results comply with ias 32 and ias 39 would involve
including the group’s derivative financial instruments in the balance sheet and accounting for changes in fair value in accordance with the hedging
rules of ias 39 through the income statement
the adoption of ias 39 has resulted in additional financial instruments being recognised on the group’s balance sheet from 1 january 2005
principally derivative instruments used by the group to hedge financial risks derivative financial instruments are stated at fair value and the hedging
rules of the standard have been applied so that movements have been taken directly to the income statement or to equity depending on the nature
of the hedging relationship and its effectiveness the stricter designation documentation requirements and effectiveness testing needed to qualify for
hedge accounting under ifrs compared to uk gaap means that in certain circumstances transactions undertaken as hedges under uk gaap do
not qualify for hedge accounting under ifrs however the group’s strategy is unchanged in respect of the hedging of the net investment position of
foreign currency denominated subsidiaries certain fuel usage and interest rate variances that the group has previously hedged
the group has adopted the full version of ias 39 as issued by the international accounting standards board “iasb” for the group compliance
with the full version of ias 39 will also achieve compliance with the european commission endorsed version of ias 39
ias 10 ‘events after the balance sheet date’ 
under ias 10 the liability in respect of dividend payments is recognised when the dividend is approved on this basis dividends approved after the
balance sheet date are not recorded as a liability at that balance sheet date
ias 16 ‘property plant and equipment’ 
in previous years certain land and buildings were carried at fair value based on valuations by external independent valuers less subsequent
depreciation for buildings the last valuation was at 31 december 1995 the group will not revalue properties in the future and will use the
depreciated cost method under ias 16 under the transitional arrangements of ifrs 1 the group has elected to deem the fair value of these
revalued assets to be equivalent to cost and will adopt the cost model for depreciation in the future
ias 17 ‘leases’ 
since june 2005 the group has identified a number of longleasehold properties that require reclassification to noncurrent prepayments under 
ias 17 this reclassification has no impact on net assets and no impact on the income statement
ias 21 ‘the effects of changes in foreign exchange rates’
the group will continue to translate the results of foreign currency denominated operations at average exchange rates and the balance sheets 
at period end exchange rates under ias 21 the group will be required to separately identify translation differences for each foreign currency
denominated operation any translation differences arising under ifrs will be separately recorded in equity net of any foreign exchange movements 
on related hedging instruments on disposal of a foreign currency denominated operation the cumulative translation differences for that operation are
transferred to the consolidated income statement as part of the profit or loss on disposal this was not the case under previous accounting policies
the group will take advantage of the election under ifrs 1 not to record cumulative translation differences arising before the transition date and all
subsequent disposals shall exclude any translation differences prior to 1 january 2004
102
notes to the accounts 103
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
b income statement for the year ended 31 december 2004
effect of
under transition
consolidated income statement uk gaap to ifrs ifrs
for the year ended 31 december 2004 note £m £m £m
continuing operations
revenue a 25690 2145 23545
operating costs before goodwill impairment intangible amortisation and exceptional items b 24170 2058 22112
goodwill amortisation and impairment c 622 289 333
property plant  equipment impairment d 61 61 –
intangible amortisation e – 24 24
exceptional items d 79 02 77
total operating costs 24932 2386 22546
group operating profit 758 241 999
loss on disposal of noncurrent assets d 01 08 09
profit from operations 757 233 990
share of post tax results from associates 34 – 34
profit on sale of discontinued operations d 89 89 –
net finance costs d 181 04 177
profit before tax 631 148 779
taxation f 223 05 228
profit for the year from continuing operations 408 143 551
discontinued operations
loss for the year from discontinued operations d – 54 54
profit on sale of discontinued operations d – 89 89
profit for the year from discontinued operations – 35 35
profit for the period 408 178 586
profit attributable to equity shareholders 444 178 622
loss attributable to minority interests 36 – 36
408 178 586
a revenue has been adjusted to reclassify the £2145m of revenue generated by discontinued operations to a specific line of the income statement
for discontinued operations in accordance with ifrs 5 see note 11 for additional disclosures of the results from discontinued operations
b operating costs have been reduced by £2058m comprising £2049m of costs from discontinued operations reclassified in the income statement
see note 11 for details and a £15m credit following the adoption of ias 19 in respect of defined benefit pension schemes offsetting these
reductions is a £06m charge recognised in respect of sharebased payments
c goodwill amortisation is reduced by £289m by the ifrs 3 requirement not to amortise goodwill with a presumed indefinite life £183m and
by the reallocation of the goodwill impairment on discontinued operations £106m under ifrs 5 see note 11
d the property plant and equipment impairment charge of £61m £02m of the charge for exceptional items £08m profit on disposal of non
current assets £89m profit on the sale of discontinued operations and £04m of net finance costs are reclassified to results from discontinued
operations in accordance with ifrs 5 see note 11
e intangible asset amortisation of £24m is charged on the intangible asset £19m created upon the recognition of the uk trains pension scheme
deficit under ias 19 see note 36 and on the customer contract and relationship assets £05m acquired with certain canadian school bus
acquisitions in 2004
f the change in accounting policies does not alter the current tax charge for 2004 the charge for deferred tax increased by £05m the deferred
tax impact of ifrs 3 has given rise to a £13m charge on goodwill on certain us acquisitions which remains deductible for tax purposes
additionally the continuing group charge has increased by £15m as credits have been reallocated to discontinued operations see note 11
offsetting this the deferred tax impact of the change in the accounting for defined benefit pension schemes under ias 19 has given rise to a
£23m tax credit 104
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
effect 
under uk of transition 
group operating profit gaap to ifrs ifrs
for the year ended 31 december 2004 note £m £m £m
uk bus a 442 26 416
uk trains b 585 28 613
uk coach c 184 09 193
north american bus d 298 02 296
central functions e 85 – 85
discontinued operations f 96 96 –
normalised operating profit 1520 87 1433
goodwill amortisation and impairment g 622 289 333
property plant and equipment impairment f 61 61 –
intangible asset amortisation h – 24 24
other exceptional items f 79 02 77
group operating profit 758 241 999
a uk bus incurred additional charges of £25m in respect of defined benefit pensions schemes under ias 19 and £01m in respect of sharebased
payments under ifrs 2
b uk trains benefited from a £28m reduction in pension charges and a £01m reduction in the holiday pay charge both following the adoption 
of ias 19 offsetting this an additional charge of £01m has been recognised for sharebased payments under ifrs 2
c uk coach benefited from a £09m reduction in pension charges following the adoption of ias 19
d north american bus incurred additional charges of £02m recognised in respect of holiday pay under ias 19 £01m and sharebased
payments under ifrs 2 £01m
e the result for central functions was unchanged as the £03m charge recognised in respect of sharebased payments was offset by a £03m
reduction in pension charges under ias 19
f the £96m normalised operating profit for discontinued operations the £61m property plant and equipment impairment charge and £02m 
of the charge for exceptional items are reclassified in the income statement in accordance with ifrs 5
g goodwill amortisation is reduced by £289m by the ifrs 3 requirement not to amortise goodwill with a presumed indefinite life £183m and
by the reallocation of the goodwill impairment on discontinued operations £106m under ifrs 5 see note 11
h intangible asset amortisation of £24m is charged on the intangible asset £19m created upon the recognition of the uk trains pension scheme
deficit under ias 19 see note 36 and on the customer contract and relationship assets £05m acquired with certain canadian school bus
acquisitions in 2004 105
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
c group balance sheet as at 31 december 2004 and 1 january 2004
effect of
under transition
group balance sheet uk gaap to ifrs ifrs
at 31 december 2004 note £m £m £m
noncurrent assets
intangible assets a 3244 284 3528
property plant and equipment b 3803 468 3335
financial assets – other investments c 105 03 102
other receivables d – 305 305
deferred tax asset e – 183 183
7152 301 7453
current assets
inventories f 163 02 161
trade and other receivables g 3285 267 3018
cash and cash equivalents f 1472 41 1431
4920 310 4610
disposal group assets classified as held for sale f – 338 338
total assets 12072 329 12401
noncurrent liabilities
financial liabilities – borrowings f 2530 12 2518
deferred tax liability e 39 06 45
other noncurrent liabilities 30 – 30
defined benefit pension liability h – 657 657
provisions i 722 358 364
3321 293 3614
current liabilities
trade and other payables j 5420 275 5145
financial liabilities – borrowings f 318 15 303
current tax liabilities 368 – 368
provisions k – 234 234
6106 56 6050
liabilities directly associated with disposal group assets classified as held for sale f – 69 69
total liabilities 9427 306 9733
net assets 2645 23 2668
shareholders’ equity
ordinary shares 70 – 70
share premium account 475 – 475
own shares 51 – 51
other reserves l 154 21 133
retained earnings m 1988 44 2032
total shareholders’ equity 2636 23 2659
minority interest in equity 09 – 09
total equity 2645 23 2668
the note references above are explained after the 1 january 2004 balance sheet 106
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
effect of
under transition
group balance sheet uk gaap to ifrs ifrs
at 1 january 2004 note £m £m £m
noncurrent assets
intangible assets a 4046 10 4056
property plant and equipment b 4056 325 3731
investment properties b – 91 91
financial assets – other investments c 73 03 70
other receivables d – 269 269
deferred tax asset e – 120 120
8175 162 8337
current assets
inventories 173 – 173
trade and other receivables g 3437 145 3292
cash and cash equivalents 970 – 970
4580 145 4435
total assets 12755 17 12772
noncurrent liabilities
financial liabilities – borrowings 3460 – 3460
deferred tax liability e 68 41 27
other noncurrent liabilities 13 – 13
defined benefit pension liability h – 527 527
provisions i 520 240 280
4061 246 4307
current liabilities
trade and other payables j 5484 189 5295
financial liabilities – borrowings 401 – 401
current tax liabilities 167 – 167
provisions k – 148 148
6052 41 6011
total liabilities 10113 205 10318
net assets 2642 188 2454
shareholders’ equity
ordinary shares 68 – 68
share premium account 451 – 451
share capital to be issued 01 – 01
own shares 52 – 52
other reserves 162 – 162
retained earnings m 1965 188 1777
total shareholders’ equity 2595 188 2407
minority interest in equity 47 – 47
total equity 2642 188 2454 107
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
a at 31 december 2004 intangible assets are increased by £284m 1 january 2004 £10m
• goodwill is increased by £143m 1 january 2004 £nil on transition to ifrs the presumption of indefinite life for goodwill under ifrs 3
reduces the amortisation charge for 2004 and therefore increases the book value at 31 december 2004 by £178m offsetting this £35m has
been reclassified to intangible assets representing customer contracts and contractual relationships recognised on the acquisition of certain
canadian school bus operations in 2004
• intangible assets increase by £141m 1 january 2004 £10m as a number of intangible assets have been created and amortised during 2004
an £111m 1 january 2004 £10m intangible asset related to the recognition of the defined benefit pension scheme deficit under ias 19 has
been recognised in addition to £30m 1 january 2004 £nil representing customer contracts and contractual relationships acquired in 2004
transferred from goodwill
b property plant and equipment is reduced by £468m at 31 december 2004 1 january 2004 £325m for three reasons long leasehold
property with a net book value of £214m 1 january 2004 £234m is reallocated from property plant and equipment to noncurrent other
receivables under ias 17 property plant and equipment in the group’s discontinued operations of £254m 1 january 2004 £nil is transferred
to disposal group assets under ifrs 5 finally £91m of property is reclassified as investment properties at 1 january 2004 under ias 40 the
property in question was disposed of during 2004
c the investment in associates of £03m 1 january 2004 £03m is reclassified from investments to amounts due to associates
d other receivables increase by £305m 1 january 2004 £269m because of £140m 1 january 2004 £87m reallocated from current assets to
noncurrent assets under ias 1 and £214m 1 january 2004 £234m reallocated from property plant and equipment under ias 17 this is
offset by a £49m 1 january 2004 £52m reduction in pension prepayments at uk bus and uk coach following the transition to ias 19
e ias 12 only permits deferred tax balances to be netted off if they occur in the same tax jurisdiction this has resulted in a deferred tax asset of
£183m 1 january 2004 £120m and a deferred tax liability of £45m 1 january 2004 £27m the adoption of ias 19 has created a deferred
tax asset of £180m 1 january 2004 £159m in relation to both pensions and holiday pay adjustments the effect of ifrs 3 on goodwill
amortisation has created a £13m deferred tax liability 1 january 2004 £nil and ifrs 2 has given rise to a £10m 1 january 2004 £02m asset
f a number of adjustments are required under ifrs 5 to reclassify assets and liabilities to the disposal group categories in the balance sheet at 
31 december 2004 disposal group assets classified as held for sale of £338m were reclassified from property plant and equipment £254m
trade and other receivables £41m inventories £02m and cash and cash equivalents £41m likewise liabilities directly associated with
disposal group assets held for sale of £69m were reclassified from noncurrent interest bearing loans £12m current interest bearing loans
£15m and trade and other payables £42m
g trade and other receivables reduce by £267m 1 january 2004 £145m due to reclassification from current assets to noncurrent assets of
£140m 1 january 2004 £87m under ias 1 reclassification of amounts due from associates to trade payables £79m 1 january 2004 £49m
the reallocation of discontinued operations under ifrs 5 of £41m 1 january 2004 £nil and the reduction in pension prepayments following
the adoption of ias 19 of £07m 1 january 2004 £09m
h under ias 19 liabilities are recognised in the balance sheet for the deficits on the group’s defined benefit pension schemes further details are
included in note 36
i noncurrent provisions have been reduced by £358m 1 january 2004 £240m following balance sheet reclassifications provisions totalling
£250m 1 january 2004 £164m have been reclassified from noncurrent to current liabilities as per ias 1 provisions worth £108m 
1 january 2004 £76m have been reclassified to trade and other payables in current liabilities and amounts due from associates in trade
receivables in accordance with ias 28 since the group has an obligation to support these losses
j trade and other payables decrease by £275m 1 january 2004 £189m liabilities are reduced by the nonrecognition of the final dividend 
of £285m 1 january 2004 £236m in accordance with ias 10 reallocation of balances related to discontinued operations of £42m 
1 january 2004 £nil under ifrs 5 and a reduction in pension accruals of £08m 1 january 2004 £09m under ias 19 an additional £24m
liability 1 january 2004 £24m has been recognised in relation to holiday pay under ias 19 and £36m 1 january 2004 £32m transferred
from provisions in respect of associates
k current provisions of £234m 1 january 2004 £148m comprises the reclassification of provisions of £250m 1 january 2004 £164m from
noncurrent to current liabilities offset by £10m 1 january 2004 £08m reclassification to trade and other payables in respect of ias 28 and
£06m 1 january 2004 £08m transferred to defined benefit pension liability for the unfunded pension provisions in north america
l cumulative translation reserve of £21m relating to the period from 1 january 2004 to 31 december 2004
m the net impact of the above adjustments increases retained earnings at 31 december 2004 by £44m and reduces retained earnings at 
1 january 2004 by £188m
• cumulative profit and loss reserve adjustments of £415m charge 1 january 2004 £409m in relation to defined benefit pension scheme
deficits and £17m 1 january 2004 £17m in relation to holiday pay also recognised under ias 19
• profit and loss reserve credits have been recognised in relation to dividends not charged at period end under ias 10 of £285m 
1 january 2004 £236m
• nonamortisation of goodwill under ifrs 3 of £160m 1 january 2004 £nil
• £10m 1 january 2004 £02m in respect of deferred tax related to the adoption of ifrs 2
• additionally £21m has been transferred to the cumulative translation reserve at 31 december 2004 1 january 2004 £nil 108
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
d group balance sheet as at 1 january 2005
the adoption of ias 32 and ias 39 from 1 january 2005 has given rise to further changes in the group balance sheet
ifrs at ifrs at 
31 december adoption of 1 january 
group balance sheet 2004 ias 3239 2005
at 1 january 2005 £m £m £m
noncurrent assets
intangible assets 3528 – 3528
property plant and equipment 3335 – 3335
financial assets – other investments 102 – 102
financial assets – derivative financial instruments – 14 14
other receivables 305 – 305
deferred tax asset 183 56 239
7453 70 7523
current assets
inventories 161 – 161
trade and other receivables 3018 146 2872
financial assets – derivative financial instruments – 198 198
cash and cash equivalents 1431 – 1431
4610 52 4662
disposal group assets classified as held for sale 338 – 338
total assets 12401 122 12523
noncurrent liabilities
financial liabilities – borrowings 2518 – 2518
financial liabilities – derivative financial instruments – 76 76
deferred tax liability 45 – 45
other noncurrent liabilities 30 – 30
defined benefit pension liability 657 – 657
provisions 364 – 364
3614 76 3690
current liabilities
trade and other payables 5145 25 5120
financial liabilities – borrowings 303 – 303
financial liabilities – derivative financial instruments – 199 199
current tax liabilities 368 – 368
provisions 234 – 234
6050 174 6224
liabilities directly associated with disposal group assets classified as held for sale 69 – 69
total liabilities 9733 250 9983
net assets 2668 128 2540
shareholders’ equity
ordinary shares 70 – 70
share premium account 475 – 475
own shares 51 – 51
other reserves 133 59 74
retained earnings 2032 69 1963
total shareholders’ equity 2659 128 2531
minority interest in equity 09 – 09
total equity 2668 128 2540
details of the financial assets recognised in the balance sheet are included in note 18 and details of the financial liabilities recognised in the balance
sheet are included in note 29 109
notes to the accounts
40 reconciliation of net assets profit and cash flow under uk gaap to ifrs continued
e group statement of cash flows for the year ended 31 december 2004
the adoption of ifrs results in the following changes to the reconciliation of net profit to cash generated from operations for the year ended 
31 december 2004
effect of 
under transition
reconciliation of net profit to cash generated from operations uk gaap to ifrs ifrs
for the year ended 31 december 2004 £m £m £m
net cash inflow from operating activities
operating profit 758 241 999
operating profit of discontinued operations – 94 94
depreciation of property plant and equipment 642 06 636
amortisation of leasehold property prepayment – 06 06
property plant and equipment impairment 61 61 –
goodwill amortisation and impairment 622 289 333
intangible asset amortisation – 24 24
amortisation of fixed asset grants 65 – 65
profit on disposal of fixed assets 06 – 06
sharebased payments – 06 06
decrease in inventories 07 – 07
decrease in receivables 192 05 187
increase in payables 346 01 347
decrease in provisions 16 11 27
cash generated from operations 2541 – 2541
as would be expected the group statement of cash flows is not changed by the adoption of ifrs
effect of 
under transition
group statement of cash flows uk gaap to ifrs ifrs
for the year ended 31 december 2004 £m £m £m
cash generated from operations 2541 – 2541
tax paid 32 – 32
net cash from operating activities 2509 – 2509
cash flows from investing activities
payments to acquire businesses net of cash acquired 126 – 126
deferred consideration for businesses acquired 45 – 45
purchase of property plant and equipment 692 – 692
proceeds from disposal of property plant and equipment 188 – 188
payments in respect of businesses disposed 15 – 15
receipts from disposal of businesses net of cash disposed 247 – 247
interest received 131 – 131
receipts from sale of shares for employee schemes 01 – 01
net cash used in investing activities 59 – 59
cash flows from financing activities 
proceeds from issue of ordinary shares 25 – 25
interest paid 316 – 316
repayment of maintenance bond at scotrail 187 – 187
finance lease principal payments 158 – 158
repayment of loan notes 09 – 09
loans repaid 931 – 931
dividends paid 364 – 364
net cash used in financing activities 1940 – 1940
increase in cash and cash equivalents 510 – 510
opening cash and cash equivalents 968 – 968
increase in cash and cash equivalents 510 – 510
foreign exchange 06 – 06
closing cash and cash equivalents 1472 – 1472 110
we have audited the parent company financial statements of national
express group plc for the year ended 31 december 2005 which
comprise the company balance sheet and the related notes 1 to 20
these parent company financial statements have been prepared under the
accounting policies set out thereinwe have also audited the information
in the directors’ remuneration report that is described as having been
audited
we have reported separately on the group financial statements of
national express group plc for the year ended 31 december 2005
this report is made solely to the company’s members as a body in
accordance with section 235 of the companies act 1985 our audit work
has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditors’ report and
for no other purpose to the fullest extent permitted by law we do not
accept or assume responsibility to anyone other than the company and
the company’s members as a body for our audit work for this report or
for the opinions we have formed
respective responsibilities of directors and auditors
the directors are responsible for preparing the annual report the
directors’ remuneration report and the parent company financial
statements in accordance with applicable united kingdom law and
accounting standards united kingdom generally accepted accounting
practice as set out in the statement of directors’ responsibilities
our responsibility is to audit the parent company financial statements and
the part of the directors’ remuneration report to be audited in
accordance with relevant legal and regulatory requirements and
international standards on auditing uk and ireland
we report to you our opinion as to whether the parent company financial
statements give a true and fair view and whether the parent company
financial statements and the part of the directors’ remuneration report
to be audited have been properly prepared in accordance with the
companies act 1985we also report to you if in our opinion the
directors’ report is not consistent with the parent company financial
statements if the company has not kept proper accounting records if we
have not received all the information and explanations we require for our
audit or if information specified by law regarding directors’ remuneration
and other transactions is not disclosed
we read other information contained in the annual report and consider
whether it is consistent with the audited parent company financial
statements the other information comprises only the chairman’s
statement the chief executive’s statement the finance review the
corporate governance statement the director’s responsibilities for the
accounts the unaudited part of the report on directors’ remuneration and
the directors’ reportwe consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies
with the parent company financial statements our responsibilities do not
extend to any other information
basis of audit opinion
we conducted our audit in accordance with international standards on
auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts
and disclosures in the parent company financial statements and the part of
the directors’ remuneration report to be audited it also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the parent company financial statements
and of whether the accounting policies are appropriate to the company’s
circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the parent
company financial statements and the part of the directors’ remuneration
report to be audited are free from material misstatement whether caused
by fraud or other irregularity or error in forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
parent company financial statements and the part of the directors’
remuneration report to be audited
opinion
in our opinion
• the parent company financial statements give a true and fair view in
accordance with united kingdom generally accepted accounting
practice of the state of the company’s affairs as at 31 december
2005 and
• the parent company financial statements and the part of the
directors’ remuneration report to be audited have been properly
prepared in accordance with the companies act 1985
ernst  young llp
registered auditor
london
9 march 2006
independent auditor’s report to the shareholders
of the company national express group plc 111
2005 2004
note £m £m
fixed assets
tangible assets 4 12 15
investments in subsidiaries 5 11444 5115
financial assets – other investments 5 70 70
11526 5200
current assets
debtors 7 7153 4193
cash at bank and in hand 8 – 34
7153 4227
creditors amounts falling due within one year 9 9432 3517
financial liabilities – derivative financial instruments 6 134 –
net current liabilitiesassets 2413 710
total assets less current liabilities 9113 5910
creditors amounts falling due after more than one year 10 4100 2075
financial liabilities – derivative financial instruments 6 83 –
provisions for liabilities and charges 11 07 07
net assets 4923 3828
shareholders’ equity
called up share capital 14 75 70
share premium account 15 1742 475
capital redemption reserve 15 02 –
own shares 15 51 51
hedging reserve 15 71 –
profit and loss account 15 3226 3334
equity shareholders’ funds 4923 3828
 restated for change in accounting polices see note 1
p m white chief executive
a c walker finance director
9 march 2006
company balance sheet
at 31 december 2005 112
notes to the accounts
1 accounting policies
basis of preparation
the separate accounts of the parent company are presented as required by the companies act 1985the accounts have been prepared under the
historic cost convention and in accordance with applicable accounting standards in the united kingdom
in applying these policies management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenue and expenses during the reporting
period actual results could differ from those estimates
no profit and loss account is presented by the company as permitted by section 230 of the companies act 1985
change in accounting policies
post balance sheet events
in accordance with frs 21‘events after the balance sheet date’ the company now recognises dividends in the period they are declared the prior
year comparatives have been restated to comply with frs 21 resulting in an increase in net assets and reserves of £285m at 31 december 2004
and an increase in retained profit for the year of £49m net assets and reserves at 1 january 2004 have been increased by £236m
sharebased payments
in accordance with the transitional provisions in the standard frs 20‘sharebased payment’ has been applied to all grants made after 7 november
2002 that were unvested as of 1 january 2005 this has resulted in a reduction in operating profits in the prior year of £03m a related deferred tax
asset of £10m has also been recognised at 31 december 2004 and has been credited to reserves similarly a deferred tax asset of £02m has
increased net assets and reserves at 1 january 2004
financial instruments disclosure presentation and measurement
in accordance with the transitional provisions in the standards frs 25‘financial instruments disclosure and presentation’ and frs 26‘financial
instruments measurement’ have been adopted from 1 january 2005
under the previous uk gaap accounting policies gains and losses from derivative financial instruments used for hedging purposes were not
recognised in earnings or as adjustments to carrying value until the underlying hedged transaction matured or occurred frs 26 requires all
derivatives to be fair valued in the balance sheet as a result net assets and reserves have been restated by £173m at 1 january 2005
other standards
the company has adopted frs 17‘retirement benefits’ in the year although this has had no impact on the company which treats both its pension
schemes as defined contribution schemes see note 16 the company has also adopted frs 23‘the effects of changes in foreign exchange rates’
which has also had no impact on reported results
leases
leases of tangible fixed assets where substantially all the risks and rewards of ownership of the asset have passed to the company are classified as
finance leases and are capitalised in the balance sheet as plant and equipment finance leases are capitalised at the fair value of the present value of
the minimum lease payments the capital element of future obligations under hire purchase contracts and finance leases is included as a liability in
the balance sheet the interest element of rental obligations is charged to the profit and loss account over the period of the lease and represents a
constant proportion of the balance of capital repayments outstanding assets acquired under finance leases are depreciated over the shorter of the
useful life of the asset or the lease term
leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases rentals
paid under operating leases are charged to the profit and loss account on a straightline basis over the term of the lease incentives received under
operating leases and initial direct costs in negotiating the lease are amortised to the profit and loss account on a straightline basis over the term of
lease or to the first review if shorter
tangible fixed assets
tangible fixed assets are stated at historic cost less accumulated depreciation and any impairment
tangible fixed assets are depreciated on a straightline basis over their estimated useful lives as follows
plant and equipment – 3 to 10 years
the carrying value of fixed assets are reviewed for impairment if events or changes in circumstances indicate that the current carrying value may not
be recoverable and are written down immediately to their recoverable amount repairs and maintenance are charged to the profit and loss account
during the financial period in which they are incurred 113
notes to the accounts
1 accounting policies continued
investments in subsidiaries
investments are held at historic cost less any provision for impairment
available for sale investments
available for sale financial assets are nonderivative financial assets that are designated as such or that are not classified in any of the other categories
after initial recognition these assets are measured at fair value with gains or losses being recognised as a separate component of equity until the
investment is derecognised or the investment is determined to be impaired at which time the previously reported cumulative gain or loss is included
in the income statement
interest bearing loans and borrowings
loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs issue costs are amortised over the
expected life of the instrument after initial recognition interest bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method
from 1 january 2005 hedge accounting is adopted where derivatives such as fixed to floating interest rate swaps are held as fair value hedges against
fixed interest rate borrowings under fair value hedge accounting fixed interest rate borrowings are revalued at each balance sheet date by the
change in fair value attributable to the interest rate being hedged
provisions
provisions are recognised when the company has a present legal or constructive obligation as a result of past events it is probable that an outflow
of resources will be required to settle the obligation and a reliable estimate of the amount can be madewhere the company expects a provision
to be reimbursed the reimbursement is recognised as a separate asset but only when reimbursement is virtually certain
pensions 
the company is part of a multiemployer scheme that also incorporates other companies within the national express group in line with frs 17 the
company treats the scheme as if it were a defined contribution scheme and recognises charges as and when contributions are due to the scheme
sharebased payments
in accordance with the transition provisions frs 20 has been applied to all grants after 7 november 2002 that were unvested as of 1 january 2005
the company issues equitysettled sharebased payments to certain employees equitysettled sharebased payments are measured at fair value at
the date of grant including market based performance conditions fair value is determined by an external valuer using the stochastic model the fair
value is then expensed on a straight line basis over the vesting period based on the company’s estimate of the number of shares that will eventually
vest the amount charged to the profit and loss account is credited to reserves nonmarket based performance related vesting conditions are not
taken into account when estimating the fair value instead the vesting period is based on the company’s estimate of when those performance
features will be achieved and is revised if facts and circumstances change
deferred tax
deferred tax is recognised in respect of all material timing differences that have originated but not reversed by the balance sheet date deferred tax
is measured on a nondiscounted basis at tax rates that are expected to apply in the periods in which the timing differences reverse based on tax
rates and laws enacted or substantively enacted at the balance sheet date deferred tax assets are recognised where their recovery is considered
more likely than not in that there will be suitable taxable profits from which the future reversal of underlying timing differences can be deducted
foreign currencies
foreign currency assets and liabilities are translated into sterling at the rates of exchange ruling at the year end except where forward cover has
been arranged in which case the forward rate is used foreign currency transactions arising during the year are translated into sterling at the rate of
exchange ruling on the date of the transaction any exchange differences so arising are dealt with through the profit or loss account with the
exception of differences arising on the translation of foreign currency equity investments and on foreign currency borrowings and forward foreign
currency contracts which are used to finance or provide a hedge against these investments these are taken directly to reserves
derivative financial instruments
the company followed the transitional provisions of frs 26 and has not restated comparative figures in accordance with either frs 26 or frs 25
the accounting policy after 1 january 2005 is as follows
the company uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with
foreign currency and interest rate fluctuations such derivative financial instruments are initially recognised at fair value and subsequently remeasured
to fair value for the reported balance sheet the fair value of forward exchange contracts and interest rate swaps is calculated by reference to
market exchange rates and interest rates at the period end 114
notes to the accounts
1 accounting policies continued
derivative financial instruments continued
in relation to cash flow hedges which meet the conditions for hedge accounting the portion of the gain or loss on the hedging instrument that is
determined to be an effective hedge is recognised directly in equity and the ineffective portion in the profit and loss account the gains or losses
deferred in equity in this way are recycled through the profit and loss account in the same period in which the hedged underlying transaction or firm
commitment is recognised in the profit and loss account
forward currency contracts are used to hedge our net investment in foreign currency denominated operations and to the extent they are
designated and effective as net investment hedges are matched in equity against changes in value of the related assets
for derivatives that do not qualify for hedge accounting gains or losses are taken directly to the profit and loss account in the period
hedge accounting is discontinued when the hedging instrument expires is sold terminated or exercised or no longer qualifies for hedge accounting
at that date any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecast transaction occurs or
transferred to the profit and loss account if the forecast transaction is no longer expected to occur
prior to 1 january 2005 the accounting policy was
interest rate and fuel swaps
the company uses interest rate swaps to hedge interest rate exposures and fuel swaps to hedge the group’s fuel price exposures the company
considers that these derivative instruments qualify for hedge accounting when certain criteria are met the company’s criteria for these swaps are
that the instrument must be related to an asset liability or future obligation and it must change the character of the interest rate or fuel price by
converting a variable rate to a fixed rate or vice versa these swaps are not revalued to fair value or included in the company balance sheet at the
period end
forward exchange contracts
the rates under foreign currency contracts are used to record the hedged item and as such gains and losses on the related financial assets and
liabilitieswhere the contract is a hedge against future transactions gains and losses are deferred until the transaction occurs
2 exchange rates
the most significant exchange rates to the pound for the company are as follows
2005 2005 2004 2004
closing rate average rate closing rate average rate
us dollar 172 182 192 184
canadian dollar 200 220 231 238
euro 145 147 na na
australian dollar 235 239 245 248
the 2005 average rate for euros reflects the average rate since the alsa acquisition
3 directors’ emoluments
detailed information concerning directors’ emoluments shareholdings and options is shown in the report on directors’ remuneration 115
notes to the accounts
4 tangible fixed assets
plant 
and equipment 
£m
cost
at 1 january 2005 43
additions 02
at 31 december 2005 45
depreciation
at 1 january 2005 28
charge for the year 05
at 31 december 2005 33
net book value
at 31 december 2005 12
at 31 december 2004 15
leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities
2005 2004
tangible fixed assets held under finance lease agreements are analysed as follows £m £m
plant and equipment
– cost 02 02
– accumulated depreciation 01 01
01 01
5 fixed asset investments
investments in subsidiaries
£m
cost or valuation
at 1 january 2005 9249
additions 6329
at 31 december 2005 15578
provisions
at 1 january 2005 4134
at 31 december 2005 4134
net carrying amount
at 31 december 2005 11444
at 31 december 2004 5115
the carrying value of the investments in subsidiary undertakings has been reviewed at 31 december 2005 the carrying value of investments was
first considered at the income generating unit level and as a result a provision of £nil 2004 £630m was made this particular value in use was
calculated using future expected cash flow projections discounted at 7 on a pre tax basis and is not intended to reflect a realisable value on disposal
the information provided below is given for the company’s principal subsidiaries a full list of subsidiaries and investments will be annexed to the
next annual return to companies house the principal country of operation in respect of the companies below is the country in which they are
incorporated
national express group plc is the beneficial owner of all the equity share capital either itself or through subsidiary undertakings of the companies
unless indicated otherwise the group’s train passenger services in the uk are operated through franchises awarded by the sra dft rail as
awarded by the uk government 116
notes to the accounts
5 fixed asset investments continued
investments in subsidiaries continued
the following holdings are 100 held directly by the company
incorporated in england and wales
national express holdings limited holding company for uk coach operating companies
national express guernsey limited insurance captive
national express group holdings limited holding company for us operating companies
national express overseas limited holding company for discontinued australian business
national express trains limited holding company for uk train operating companies
national express transport holdings limited holding company for uk bus and canadian operating companies
incorporated in spain
dabliu consulting slu holding company for european coach and bus alsa operating companies
turyexpres sa holding company for european coach and bus alsa operating companies
general tecnica industrial sl holding company for european coach and bus alsa operating companies
available for sale investments
£m
cost or valuation
at 1 january 2005 128
additions –
at 31 december 2005 128
provisions
at 1 january 2005 58
at 31 december 2005 58
net carrying amount
at 31 december 2005 70
at 31 december 2004 70
the available for sale investments are shown at fair value in 2005 in order to comply with frs 26 such assets were recognised at book value in
2004 there is no difference in the fair value and book value of such assets
other investments include
county of class of proportion held
name registration share 
intercapital and regional rail limited england and wales ordinary shares 40
london  continental railways england and wales ordinary shares 21
prepayment cards limited england and wales ordinary shares 235
union railways south limited england and wales preference shares 21 117
notes to the accounts
6 financial assets and liabilities
under the exemption available in frs 26 the company has not restated its results for the year ended 31 december 2004 for the effect of frs 25
and frs 26 additional financial instruments have been recognised on the balance sheet from 1 january 2005 as below
at 
31 december at 31 dec at 1 jan
2005 2004 2005
£m £m£m
available for sale investments 70 – 70
other investments – 70 –
financial instruments held as fixed assets 70 70 70
foreign exchange forward contracts – – 149
financial instruments held as current assets – – 149
interest rate swaps 83 – 76
financial instruments held as noncurrent liabilities 83 – 76
interest rate swaps 41 – 199
foreign exchange forward contracts 93 ––
financial instruments held as current liabilities 134 – 199
 £146m included in foreign exchange forward contracts at 1 january 2005 had previously been included in other receivables as at 31 december 2004
and £25m included in interest rate swaps in current liabilities had been included in accruals and deferred income at 31 december 2004
7 debtors
2005 2004
£m £m
trade debtors 03 03
amounts owed by subsidiary undertakings 6945 3962
corporation tax recoverable 46 33
deferred tax asset 63 –
other receivables 34 149
prepayments and accrued income 62 46
7153 4193
credit risk with respect to debtors is low due to the fact a large amount of the company’s balances are with subsidiary undertakings that it controls
included within prepayments is £07m 2004 £46m which is recoverable after more than one year
8 cash at bank and in hand
2005 2004
£m £m
other short term deposits – 34
cash at bank and in hand earns interest at floating rates based on daily bank deposit rates shortterm deposits are made for varying periods of
between one day and three months depending on the immediate cash requirements of the company and earn interest at the respective shortterm
deposit rates the fair value of cash matches the carrying value
9 creditors amounts falling due within one year
2005 2004
£m £m
loan notes – 01
bank loans 1845 80
bank overdrafts 491 473
trade creditors 28 02
amounts owed to subsidiary undertakings 6981 2873
finance lease obligations 01 01
accruals and deferred income 78 55
other creditors 08 32
9432 3517
trade payables are noninterest bearing and are normally settled on 30 day terms and other payables are noninterest bearing and have 
an average term of 6 months 118
notes to the accounts
10 creditors amounts falling due after more than one year
2005 2004
£m £m
bank loans 4100 2075
11 provisions for liabilities and charges
insurance deferred 
claims a tax b total
£m £m £m
at 1 january 2005 04 03 07
provided in the year 06 – 06
utilised in the year 03 03 06
at 31 december 2005 07 – 07
 restated for change in accounting policy see note 1
a the insurance claims provision arises from estimated exposures at the year end the majority of which will be utilised in the next six years and
comprise provisions for existing claims arising in the uk
b see note 12 for further details on deferred tax
12 deferred tax
the major components of the provision for deferred taxation are as follows
2005 2004
£m £m
accelerated capital allowances – –
other timing differences 63 03
tax effect of losses carried forward ––
net deferred tax assetliability at 31 december 63 03
 restated for change in accounting policy see note 1
the reconciliation of deferred tax balances is as follows
£m
deferred tax liability at 1 january 2005 03
prior year adjustment 21
charged to profit and loss 09
credited to equity in relation to cash flow hedges and share based payments 54
deferred tax asset at 31 december 2005 63
 restated for change in accounting policy see note 1
temporary differences associated with group investments
no deferred tax 2004 £nil is recognised on the unremitted earnings of overseas subsidiaries and associates the group has determined that
undistributed profits of its overseas subsidiaries will not be distributed in the near future in any case the temporary difference associated with group
investments is £nil 2004 £nil as a result of insufficient funds being available
unrecognised tax losses
there is no recognition of the deferred tax asset in relation to the capital losses since there is insufficient evidence to determine that they are
recoverable deferred tax assets that the company has not recognised in the accounts amount to £04m 2004 £04m 119
notes to the accounts
13 interest bearing loans and borrowings
the effective interest rates at the balance sheet date were as follows
2005 effective 2004 effective
maturity £m interest rate £m interest rate 
current
bank overdraft on demand 491 – 473 –
sterling loan notes on demand – – 01 libor  10
short term 52 sterling bank loans january 2006 122 52 80 56
short term 48 us dollar bank loans january 2006 03 48 – –
short term 29 euro bank loans january 2006 02 29 – –
euro bank loans subject to interest hedge october 2006 1374 28 – –
euribor 
euro bank unhedged october 2006 344 035 – –
bank loans 1845 80
sterling 54 finance leases 2006 01 54 01 52 
2337 555
noncurrent
libor 
sterling bank loans november 2009 94  040 ––
us dollar bank loans subject to interest hedge november 2009 581 73 1564 73
libor libor
us dollar bank loans unhedged november 2009 1046  040 511  035
euribor 
euro bank loans at floating rates november 2009 2029 040 – –
libor 
canadian dollar bank loans november 2009 350  040 – –
bank loans 4100 2075
details of the company’s interest rate management strategy and interest rate swaps are included in note 31 of the group accounts
for 2005 the company has taken advantage of the exemption under frs 25 for parent company accounts for 2004 comparatives the company
has taken advantage of the exemption under frs 13“derivatives and other financial instruments disclosure” for parent company accounts
the disclosures are included in the group accounts
14 calledup share capital
2005 2004
£m £m
at 31 december
authorised
200000000 2004 146650000 ordinary shares of 5p each 100 73
issued calledup and fully paid
150520310 2004 139153158 ordinary shares of 5p each 75 70
number
movement in ordinary shares during the year £m of shares
at 1 january 2004 68 136850910
exercise of share options – 509656
twm sip appropriation 02 1792592
at 1 january 2005 70 139153158
issue of shares in consideration for acquisition of alsa 07 13503600
exercise of share options – 957141
twm sip appropriation – 206411
shares cancelled 02 2900000
at 31 december 2005 75 150920310 120
notes to the accounts
15 shareholders’ funds and statement of changes in shareholders’ equity
capital profit
share share redemption own hedging and loss
capital premium reserve shares reserve account t otal
£m £m £m £m £m £m £m
at 31 december 2004 as previously reported 70 475 – 51 – 3039 3533
prior year adjustment note 1 – – – – – 295 295
at 31 december 2004 as restated 70 475 – 51 – 3334 3828
financial instruments recognition – – – – 104 69 173
at 1 january 2005 70 475 – 51 104 3265 3655
shares issued 07 1267 – – – – 1274
shares purchased 02 – 02 35 – 258 293
share based payments – – – – – 08 08
deferred tax on share based payments 
credited to reserves – – – – – 15 15
own shares released to satisfy 
employee share schemes – – – 35 – – 35
hedge movements – – – – 33 – 33
profit for the year – – – – – 196 196
at 31 december 2005 75 1742 02 51 71 3226 4923
own shares comprise treasury shares and shares held in the employee benefit trust
during the year ended 31 december 2005 the company has repurchased 3300000 shares for consideration of £293m 2900000 shares have
been cancelled and the remaining 400000 shares retained as treasury shares within equity for future issue under the company’s various share
schemes or cancellation
own shares comprise 849456 2004 1743544 ordinary shares in the company that have been purchased by the trustees of the national express
employee benefit trust the “trust” the shares are held to satisfy potential awards or options granted under a number of the company’s share
schemes the value of shares within the trust has been recognised as an investment in treasury shares the market value of these shares at 
31 december 2005 was £73m 2004 £144m the dividends payable on these shares have been waived
the £173m restatement of reserves following the recognition of financial instruments arises from the change in accounting policy on adopting frs 26
the profit attributable to shareholders of the parent company was £612m 2004 £508m the profit and loss reserve for the company includes
£122m 2004 £51m that is nondistributable on account of own shares held and the hedging reserve
16 retirement benefits
the company participates in both the national express group multiemployer funded defined benefit scheme and a defined contribution scheme
the company is unable to identify its share of the underlying assets and liabilities of the multiemployer scheme on a consistent and reasonable
basis and therefore has accounted for the scheme as if it were a defined contribution scheme under the requirements of frs 17 contributions to
this scheme are determined by independent professionally qualified actuaries the details of the latest actuarial valuation are detailed in note 36 to
the group accounts
the pension charge for the year amounted to £11m 2004 £09m
17 sharebased payments
the charge in respect of sharebased payment transactions included in the company’s profit and loss account for the year is as follows
2005 2004
£m £m
expense arising from share and share option plans 08 03
 restated for change in accounting policy see note 1
during the year ended 31 december 2005 the company had the following share based payment arrangements which are described in note 7 to
the group accounts
• executive share option plan
• savings related share option scheme sharesave scheme
• long term incentive plan ltip
• share matching plan smp
• deferred annual share bonus plan  121
notes to the accounts
17 sharebased payments continued
for the following disclosure share options with a nil exercise price have been disclosed separately to avoid distorting the weighted average exercise
prices the number of share options in existence during the year was as follows
2005 2004
weighted average weighted average 
number of exercise price number of exercise price 
share options p share options p
options without a nil exercise price
at 1 january
1
1879335 573 1610625 570
granted during the year –– 472837 681
lapsed during the year 75352 583 202450 798
exercised during the year 44113 520 1677 567
outstanding at 31 december
1
1759870 574 1879335 573
exercisable at 31 december 295632 790 331926 765
options with a nil exercise price
at 1 january 9352 nil – –
granted during the year 455009 nil 9352 nil
lapsed during the year 2024 nil ––
outstanding at 31 december 462337 nil 9352 nil
exercisable at 31 december – – – –
total outstanding at 31 december 2222207 1888687
total exercisable at 31 december 295632 331926
1
included within this balance are options over 629339 2004 743625 shares that have not been recognised in accordance with the transitional
provisions of frs 20 as the options were granted before 7 november 2002 and have not been subsequently modified
the options outstanding at 31 december 2005 had exercise prices that were between 398p and 1224p 2004 between 398p and 1224p excluding
options with a nil exercise price the range of exercise prices for options was as follows
exercise price p 2005 2004
350650 1072093 1186965
650950 642777 647370
9501250 45000 45000
1759870 1879335
the options have a weighted average contractual life of 7 years 2004 8 years options were exercised throughout the year and the weighted
average share price at exercise was 875p 2004 654p
the weighted average fair value of the share options granted during the year was calculated using a stochastic model with the following assumptions
and inputs
share options without share options with 
nil exercise price nil exercise price
2005 2004 2005 2004
risk free interest rate – 51 48 48
expected volatility – 280 250270 290
expected option life in years – 8 years 3 years 3 years
expected dividend yield – 39 3334 39
weighted average share price – 697p 888p906p 679p
weighted average exercise price – 681p 0p 0p
weighted average fair value of options granted – 149p 561p821p 606p
experience to date has shown that approximately 15 2004 15 of options are exercised early principally due to redundancies this has been
incorporated into the calculation of the expected option life for the share options without nil exercise price
expected volatility in the table above was determined from historic volatility over the last eight years adjusted for oneoff events that were not
considered to be reflective of the volatility of the share price going forward the expected dividend yield represents the dividends declared in the 
12 months preceding the date of the grant divided by the average share price in the month preceding the date of the grant
for share options granted during the year under the ltip  the tsr targets have been reflected in the calculation of the fair value of the options above 122
notes to the accounts
18 commitments and contingencies
operating lease commitments
the company has entered into operating leases on certain properties commitments for future minimum rental payments are shown below
land and buildings
2005 2004
£m £m
operating leases which expire
within 2 to 5 years 06 –
over five years – 05
06 05
contingent liabilities
a guarantees
the company has guaranteed credit facilities totalling £998m 2004 £910m of certain subsidiaries
b bonds and letters of credit
in the ordinary course of business the company is required to issue counterindemnities in support of its subsidiaries’ operations as at 31 december
2005 there were uk train performance bonds of £446m 2004 £385m and uk train season ticket bonds of £1000m 2004 £903m the company
has other performance bonds which include the £146m 2004 £142m performance bond in respect of intercapital and regional rail limited 
and performance bonds in respect of businesses in the united states of america of £345m 2004 £393m letters of credit have been issued 
to support insurance retentions of £847m 2004 £727m
19 financial risk management objectives and policies
full details of the group’s financial risk management objectives and policies can be found in note 31 of the group accounts as the holding company
for the group the company faces similar risks over foreign currency and interest rate movements
20 related party transactions
the company has taken advantage of the exemption under frs 8‘related party disclosures’ and as such disclosures are provided in the 
group accounts 123
five y ear summary
2005 2004 2003 2002 2001
year ended 31 december £m £m £m £m £m
revenue ifrs 22160 23545
turnover uk gaap 25657 25723 24642
normalised operating profit ifrs 1555 1433
normalised operating profit uk gaap 1289 1259 1568
group operating profit ifrs 1095 999
group operating profit uk gaap 832 672 321
profit before tax ifrs 893 779
profit before tax uk gaap 541 856 1155
statistics
basic lossearnings per share ifrs 20p 457p
basic earningsloss per share uk gaap 319p 800p 884p
normalised diluted earnings per share ifrs 763p 693p
normalised diluted earnings per share uk gaap
†
501p 523p 552p
dividends per share 3225p 300p 260p 245p 220p
net assets ifrs 3123 2668
net assets uk gaap 2642 2626 4021
net debtfunds
cash at bank and in hand 1455 1472 970 937 923
other debt receivable 10 10 – – –
loan notes 08 75 84 91 100
bank and other loans 5945 2155 3244 3612 3597
bank overdrafts 55 – 02 – 05
finance lease obligations 1091 618 531 580 371
5634 1366 2891 3346 3150
net gearing 180 51 109 127 78
 restated for the transition to ifrs
normalised results are defined as the statutory results before the following as appropriate profit or loss on sale of businesses and charges for goodwill impairment intangible
amortisation property plant and equipment impairments profit or loss on disposal of noncurrent assets exceptional items and tax relief on qualifying exceptional items
† normalised diluted earnings per share figures have been restated to exclude earnings from discontinued operations 124
registrar
for information about your shareholding or dividends and to report a change of address you should contact the registrar at lloyds tsb registrars
the causewayworthingwest sussex bn99 6da shareholder helpline number 0870 601 5366
dividends paid direct to your bank account
having dividends paid direct to your bank account avoids the risk of cheques being lost in the post and saves you time in presenting the cheque for
payment the dividend is credited to your account on the payment date and the tax voucher is sent to your registered address at the same time
to set up a new dividend mandate please contact lloyds tsb registrars as above
shareholder electronic communications
log on to wwwshareviewcouk if you would like to
• check the balance of your shareholding
• register your email so that future shareholder information including the annual report and accounts are sent to you electronically or
• submit your vote online prior to a general meeting
to sign up for the first time you should click on “register now” and follow the simple instructions – you will need your shareholder reference number
from your share certificate or dividend voucher
company website
the company website at wwwnationalexpressgroupcom has information about the group press releases share price data and copies of the interim and
annual report and accounts
share dealing service
a telephone and internet share dealing service which provides a simple way to buy and sell shares has been arranged through lloyds tsb registrars
for further information log on to wwwshareviewcouk or telephone 0870 850 0852
sharegift
sharegift is an independent charity share donation scheme administered by the orr mackintosh foundation registered charity number 1052686
those shareholders who hold only a small number of shares the value of which make it uneconomic to sell them can donate the shares to sharegift
who will sell them and donate the proceeds to a wide range of charities further information about sharegift can be obtained from its website at
wwwsharegiftorg and a sharegift transfer form can be downloaded from wwwnationalexpressgroupcom
unclaimed assets register
the company participates in the unclaimed assets register “uar” which provides a search facility for shareholdings and other financial assets that may
have been forgotten for further information contact uar bain house 16 connaught place london w2 2es tel 0870 241 1713 or visit wwwuarcouk
analysis of ordinary shareholdings at 7 march 2006
per cent of number of per cent of
number of total number shares ordinary
accounts of accounts ‘000 capital
by size of holding
1 – 500 8562 56 1623 1
501 – 1000 2165 14 1626 1
1001 – 5000 3233 21 7332 5
5001 – 50000 1271 8 13420 9
50001 – 1000000 176 1 39786 26
over 1000000 30 – 87366 58
15437 100 151153 100
per cent of number of per cent of
number of total number shares ordinary
accounts of accounts ‘000 capital
by investor type
individuals 14377 13 19218 13
institutional investors 960 76 115065 76
other corporate investors 100 11 16870 11
15437 100 151153 100
shareholder information 125
secretary and registered office registrar corporate solicitors
a j mcdonald lloyds tsb registrars ashurst
national express group plc the causeway broadwalk house
75 davies street worthing 5 appold street
london w1k 5ht west sussex london
tel 44 020 7529 2000 bn99 6da ec2a 2ha
fax 44 020 7529 2100 shareholder helpline 0870 601 5366
email infonatexcouk
wwwnationalexpressgroupcom
registered number principal bankers stockbrokers
2590560 hsbc bank plc merrill lynch international limited
8 canada square merrill lynch financial centre
london 2 king edward street
e14 5hq london
ec1a 1hq
royal bank of scotland morgan stanley
135 bishopsgate 20 and 25 cabot square
london canary wharf
ec2m 3ur london
e14 4qw
auditors
ernst  young llp
1 more london place
london
se1 2af
corporate information
final dividend ex dividend date 26 april 2006
final dividend record date 28 april 2006
annual general meeting 24 may 2006
final dividend payment date 26 may 2006
interim results announced september 2006
interim dividend ex dividend date october 2006
interim dividend record date october 2006
interim dividend payment date october 2006
dividends and financial calendar
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wwwnationalexpressgroupcom

a personal 
to travel…
invitation
annual report and accounts 2005 national express group plc
      


Summary:
 who w e are…
national express group is a leading public transport provider 
delivering quality public transport services to the general
public in the uk north america and spain
we are an international group but believe in local businesses
operated at a local level this means our local management
teams understand and meet the needs of their customers
and communities
operational highlights…
• alsa spain’s largest private coach and bus operator acquired in december
and integration progressing well
• disposal of north american public transit division enabling strategic
focus on school bus operations
• record bid season in united states and completion of key
strategic acquisition in canada 
• 2 passenger growth in uk coaches despite effects of
terrorist attacks
• strong operational performance in trains division
above government targets with focus for 2006
on incumbent franchises
• continued growth in london bus market
• substantial ongoing investment in fleet and
customer facilities