Annual Results 23rd June 2004

1
Annual Results23rd June 2004

2
Robert SpeirsChairman
3
Highlights

• Strong year of growth and delivery of strategic
  objectives
• Turnover from continuing operations up 4.9
• Strong financial and operational performances at
  UK Bus and South West Trains
• Restructuring of North American business
  successfully delivered
• Net debt reduced to 67.6m from 560.0m last year
• Final dividend of 2.0p per share (giving full
  year dividend of 2.9p (2003 - 2.6p)) up 11.5
• Return of capital to shareholders 18p per share

4
Martin GriffithsFinance Director
5
Financial Highlights

• Turnover from continuing businesses up 4.9
• 1,659.4m (2003 - 1,581.4m)
• Up 5.9 at constant exchange rates
• Operating margin enhancement in continuing
  divisions

2004 2003 Before goodwill
amortisation and restructuring costs 8.4 6.6 In
cluding goodwill amortisation and restructuring
costs 7.0 4.7
Excluding disposed Citybus, Road King and
Trainline businesses but including all of North
America before exceptional items
6
Financial Summary
2004 m
2003 m

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

1,792.3 129.7 147.5 95.8 120.2 209.5 6.7p
2.9p
2,076.6 (466.2) 146.4 (500.2) 112.9 217.8 6.
4p 2.6p
After restructuring costs of 7.2m (2003 -
6.3m) Free cash flow comprises net cash
inflow from operating activities, dividends from
joint ventures and associates, net cash
inflow/(outflow) from returns on investments and
servicing of finance, and taxation.
7
Profit Reconciliation
Reported m
Exceptionals Goodwill m
Pre goodwill exceptionals m

• 2002/2003 Profit before tax
• Operating profit of retained businesses
• UK Bus
• New Zealand
• North America
• Rail underlying
• Virgin Rail Group
• Other JVs and associates
• Overheads
• Reduction in underlying finance charges
• Exceptionals goodwill
• Rail non-recurring liquidated damages
• Citybus (disposed)
• Road King (disposed)
• Trainline (disposed)
• Restructuring costs
• 2002/2003 gain on repurchase of bonds
• 2003/2004 Profit before tax

(613.1) - - - - - - - - 582.1 (31.0)
- 6.6 - - - - (24.4)
(500.2) 7.8 (0.5) 0.8 14.4 6.3 0.4 1.0 2
1.3 582.1 133.4 (8.5) (11.5) (3.5) 1.9 (0.9
) (15.1) 95.8
112.9 7.8 (0.5) 0.8 14.4 6.3 0.4 1.0 21.
3 - 164.4 (8.5) (18.1) (3.5) 1.9 (0.9) (15
.1) 120.2
8
EBITDA
2004 m
2003 m
UK Bus North America (Coach USA) Overseas
Bus Rail Virgin Rail Group thetrainline Road
King Others Overheads restructuring EBITDA
before exceptionals
117.6 30.1 18.3 46.4 13.5 (2.4) 7.0 (0.4)
230.1 (15.4) 214.7
112.0 49.5 51.8 40.9 7.2 (4.3) 10.5 (0.8)
266.8 (15.1) 251.7
9
Movement in Net Debt
m
Opening net debt Cash flows from operations Road
King dividends Net interest received Tax
paid Dividends paid Net capital expenditure and
new hire purchase finance Acquisitions/disposals
Foreign exchange and other movements Closing net
debt
(560.0) 214.3 4.1 0.5 (9.4) (35.6) (78.8)
364.2 33.1 (67.6)
10
UK Bus Trading Results

• Turnover growth 8.7 to 650.2m
• Underlying passenger growth 1.4 outside London
• Strong contribution from London companies
• 19.1 turnover growth
• Improved operating margin
• 11.5 versus 11.2 in 2003
• 12.2 versus 11.3 excluding operating lease
  impact and business development costs

11
UK Bus Profit Analysis
30 April 2003 m
30 April 2004 m
650.2 79.6 12.2 (5.0) 2.0 76.6 11.8 (1.
8) 74.8 11.5
598.4 67.6 11.3 (1.1) 0.5 67.0 11.2 -
67.0 11.2
Turnover Underlying profit Margin Deduct
increased operating lease costs Add saving in
depreciation arising from operating
leases Margin Deduct Megabus Taxibus
start-ups Operating profit as reported Margin as
reported
After 9.9m increase in pensions/NI costs
12
North America Trading Results

• Turnover 336.8m (2003 - 603.0m)
• 5.1 like for like turnover increase in second
  half
• 0.3 like for like turnover increase for year
• Operating profit 14.8m (2003 - 14.0m)
• US25.4m (2003 US21.8m)
• strict cost control
• overhead reduction

Like for like turnover increase is measured as
the change in turnover from residual businesses
excluding the impact of foreign exchange
movements Pre restructuring costs,
exceptional items and goodwill amortisation
13
North America Turnover Breakdown
30 April 2004 Turnover m
30 April 2003 Turnover m

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

213.9 109.6 41.8 365.3 17.3 193.8 576.4
m 336.8
211.7 110.2 38.4 360.3 17.0 561.7 939.0
m 603.0
14
New Zealand Trading Results

• Turnover 58.3m (2003 - 51.0m)
• 1.6 turnover growth (excluding currency
  movements)
• 2003 revenue base includes impact of Americas
  Cup
• Operating profit 10.7m (2003 - 11.2m)
• NZ29.5m (2003 NZ34.8m)
• Operating margin 18.4 (2003 22.0)

15
Rail Trading Results

• Rail Subsidiaries
• Turnover 438.9m (2003 - 413.6m)
• Operating profit 44.1m (2003 - 38.2m)
• Passenger volumes up 3.2 at SWT
• Operating profit stated after franchise bid costs

Included 8.5m of non-recurring liquidated
damages
16
Rail Profit Analysis
30 April 2004 m

• SWT operating profit per bid
• Passenger income
• Net Sch 7/Sch 8 performance payments
• Electric current for trains
• Staff costs
• Other Costs
• Revenue/Profit share to the SRA
• Actual SWT operating profit
• Other
• Total Rail operating profit

25.2 15.3 4.7 5.9 2.5 18.5 (27.6) 44.5 (0
.4) 44.1
17
Joint Ventures and Associates

• Virgin Rail Group
• Share of turnover 288.4m (2003 - 276.1m)
• Share of operating profit 13.5m (2003 - 7.2m)
• Out-performed budget set by SRA
• Trainline
• Disposed February 2004
• Share of turnover 8.1m (2003 - 11.0m)
• Share of operating loss 2.4m (2003 loss of
  4.3m)
• Road King
• Disposed January/February 2004
• Share of operating profit 7.0m (2003 - 10.5m)

18
Taxation
2004
Pre-tax m
Tax m

• Pre goodwill and exceptionals
• Exceptional items
• Goodwill amortisation
• Result for the year
• One-off exceptional tax credit
• Cash tax paid (net)

120.2 (6.6) (17.8) 95.8 - 95.8
(32.3) (0.2) 0.3 (32.2) 41.0 8.8 9.4
26.9 3.0 1.7 33.6 N/A (9.2)
19
Fuel Hedging
2003/04
2004/05
2005/06
2006/07

• of group fuel hedged
• Average hedge price /barrel
• Average US/ rate
• Average unhedged floating price /barrel
• Variable fuel costs of continuing businesses

100 24 1.7115 32 31m
40 24 1.84 38 37m
4 24 1.84 38 42m
0 N/A 1.84 38 43m
Continuing businesses use 1.81m barrels of fuel a
year (288m litres) Each 5 per barrel movement in
crude oil price impacts variable fuel costs by
approximately 5m if no hedging in place
20
Pensions

• Increased employer and employee contributions
• 32.9m total pension costs (2003 - 31.2m)
• 36.2m cash paid (2003 - 26.9m)
• FRS17 post-tax deficit of 115.8m for UK
  Bus/Group
• Down 40.4m from 156.2m
• Financial support in new SWT franchise allows for
  cost of funding the deficit for SWT
• Managed as part of overall cost base

21
Balance Sheet Financing

• Net debt down to 67.6m (2003 - 560.0m)
• EBITDA/Interest cover 7.9 times
• Net Debt/EBITDA 0.3 times
• Progressive dividend policy
• Evaluation completed of optimum balance sheet
  structure
• Return of capital of approximately 250m
• Investment grade rating confirmed after return of
  capital
• New 440m 5 year bank facilities

Before exceptional items
22
Proposed Return of Capital

• B Share Scheme
• Shareholders receive for every 24 ordinary
  shares
• 19 consolidated ordinary shares
• 24 B shares redeemable at 18p each
• All shareholders treated equally
• 2004 final dividend payable per existing ordinary
  share
• Approval at AGM 27 August 2004
• B shares issued September 2004
• Total return of approximately 250m

23
Return of Capital - Example

• Shareholder A holds 1,000 ordinary shares
• Share price 87p

1,000 existing ordinary shares (share price 87p)
VALUE 870
791 ordinary shares (share price 87p)
VALUE 868
1,000 B shares redeemable at 18p each
Redeemed for cash of 180

• shareholding unchanged

24
Current Trading Outlook

• Group trading in line with our expectations
• Expected revenue and profit growth in UK Bus and
  North America
• SWT trading under the terms of the new three year
  franchise
• New Zealand trading in line with expectations
• Virgin Rail Group
• SRA budget 2004/05
• Franchise negotiations progressing well

25
Brian SouterChief Executive
26
Group Strategy (1)

• UK Bus Margin Development Programme
• Solid foundations
• Kickstart
• Commercial
• Government assisted
• New Products
• Megabus
• Oxford Tube re-launch
• Envirox fuel additive
• Electric bus
• What next?
• Commercial Park and Ride
• Optical Guidance

27
Group Strategy (2)

• North America
• Restructured business robust business model
  with more predictable earnings
• Small add-on acquisitions
• Leisure upturn

939m
365m
Year ended 30 April 2003
Residual businesses 2004
28
Group Strategy (3)

• UK Rail
• Return to high volume growth
• Maximise potential from VRG
• Five year extension at SWT
• New franchise opportunities
• Commuter
• Inter-city

29
Summary

• Strong trading performance across the Group with
  focused management
• Strengthened balance sheet allowing return of
  capital and dividend growth
• Current trading in line with our expectations

30
Annual Results23rd June 2004

31
Appendices
32
UK Bus Revenue Development
London m
Outwith London m
UK Bus m
2002/03 turnover Passenger volumes Tender wins/
contract amendments Fare increases 2003/04
turnover
144.2 - 24.3 3.2 171.7
16.9 2.2 19.1
454.2 6.4 - 17.9 478.5
1.4 - 3.9 5.4
598.4 6.4 24.3 21.1 650.2
1.1 4.1 3.5 8.7
33
UK Bus - London/Other
2004 Operating Operating Turnover
Profit Margin m m
2003 Operating Operating Turnover
Profit Margin m m
171.7 478.5 650.2
9.7 12.1 11.5
16.7 58.1 74.8
144.2 454.2 598.4
10.5 11.4 11.2
15.1 51.9 67.0
London Other
34
Overseas Bus Revenue Development
Citybus m
New Zealand m
Australia m
Total m

• 2002/03 Turnover
• Disposal of Citybus and Australia
• Currency movements
• Volumes
• Fares/Business mix
• 2003/04 Turnover

132.3 (107.5) (4.5) (2.5) - 17.8
51.0 - 6.4 1.6 (0.7) 58.3
0.4 (0.4) - - - -
183.7 (107.9) 1.9 (0.9) (0.7) 76.1
35
Overseas BusSegmental results
2004 Operating Operating Turnover
Profit Margin m m
2003 Operating Operating Turnover
Profit Margin m m
132.3 51.0 0.4 183.7
14.4 22.0 - 16.5
19.1 11.2 - 30.3
17.8 58.3 - 76.1
5.6 18.4 - 15.4
1.0 10.7 - 11.7
Citybus New Zealand Australia Total
36
North AmericaRevenue Development
Core continuing USm
Other USm
Total USm
2002/03 Turnover Underlying growth second
half Underlying decline first half US/C
currency impact Impact of disposals and other
movements on non-core 2003/04 Turnover
360.3 8.2 (7.0) 3.8 - 365.3
578.7 - - - (367.6) 211.1
939.0 8.2 (7.0) 3.8 (367.6) 576.4
North East, North Central Canada
37
Turnover of residual North American business
North East m
North Central m
Canada m
Total m

• Scheduled service/Line run/Commuter
• Charter
• School Bus Contract
• Sightseeing Tours (incl New York)
• 2003/04 Turnover

126.1 21.1 24.1 42.6 213.9
18.3 35.4 40.5 15.4 109.6
19.4 18.2 2.7 1.5 41.8
163.8 74.7 67.3 59.5 365.3
38
Rail Revenue Development
m

2002/03 Turnover SWT Passenger volumes SWT
Fares Passenger Charter Other 2003/04 Turnover
413.6 12.9 13.5 (2.5) 1.4 438.9
3.1 3.3 (0.6) 0.3 6.1
39
Interest/Debt Ratios
2004 m
2003 m
Finance charges (net) EBITDA pre-exceptionals E
BITDA pre-exceptionals/Finance charges Net
Debt/EBITDA
27.3 214.7 7.9 times 0.3 times
33.5 251.7 7.5 times 2.2 times
2003 includes 15.1m net gain on early
redemption of bonds
40
Finance Charges
Finance charges m
Annual Effective rate
Average balance m
36.8 (10.6) 26.2 (1.2) 0.4 0.6 1.3 2.8 (2
.1) (0.7) 27.3
6.3 3.5 9.3
584 (301) 283
Gross debt related derivatives Cash on
deposit Joint ventures associates Non-utilisati
on/commitment fees Amortisation of bond issue
costs/bank charges Insurance letters of
credit Discount on insurance provisions Interest
received on Corporation Tax refund Other
Average of month end debt/interest earning and
cash balances
41
Capital Expenditure
Capex on new hire purchase m
Impact of capex on net debt m
Disposal proceeds m
Net m
Cash spent on capex m
27.0 - - - - 27.0
45.3 23.1 6.9 4.4 3.3 83.0
(2.7) (0.9) (0.6) - - (4.2)
42.6 22.2 6.3 4.4 3.3 78.8
18.3 23.1 6.9 4.4 3.3 56.0

• UK Bus
• North America
• New Zealand
• Discontinued - Citybus
• Rail

Excludes proceeds from selling businesses Note
In addition to the above, vehicles with a capital
value of 16.6m were acquired by UK Bus during
the year on operating leases (2003 - 19.6m)
42
Fuel Usage and Impact of Crude Price
Usage litres
Usage barrels
US variable costs based on 38 a barrel

• UK Bus
• North America
• New Zealand

190m 76m 22m 288m
1.2m 0.47m 0.14m 1.81m
45.6m 17.9m 5.3m 68.8m
Each 5 per barrel movement in oil price impacts
fuel cost by approximately 9m
43
Exchange Rates
April 2003
April 2004
Closing rate
Average rate
Closing rate
Average rate
US HK NZ C
1.5982 12.4648 2.8573 2.2929
1.5574 12.1464 3.1031 2.3985
1.7734 13.8317 2.8350 2.4388
1.7115 13.3188 2.7600 2.2985
Average rate used for Citybus up to date of
disposal 12.7803
44
Annual Results23rd June 2004