Highlights

A strong first half performance, building on a stable financial platform, a clear margin improvement plan, a selective investment programme and a proactive approach to meeting the needs of all our stakeholders.

• Good results in a challenging macro-economic environment
• Stable underlying revenue, with organic growth in UK Coach and success in winning new customer contracts
  in North America for the 2010/11 school year
• Improved operating margins in UK, North America and Spanish businesses
• Profit recovery as business improvement plans begin to deliver
• Continued reduction in net debt through ongoing cash generation
• Refinancing successfully completed, with funding in place until 2014
• Exploring opportunities to extend our two rail franchises
• Expect to recommence dividend at year end, subject to continued trading performance.

Financial summary

Comment

Commenting on the results, Dean Finch, National Express Group Chief Executive, said:

“Progress in the first half has been good. With a strong financial platform, National Express is now delivering the benefits from its business improvement programmes. Despite challenging economic conditions, greater operational focus is having a positive impact and we will continue to progressively drive improvement in performance and cut costs.

We have secured growth opportunities, particularly in North America and Spain, in which we will selectively invest in the second half of the year. We expect trading to remain resilient in the next six months and we look to the future with confidence.”

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Definitions

Operating margin: the ratio of normalised operating profit to revenue for continuing businesses.

Normalised result: Statutory result excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon, for continuing operations. The Board believes that the normalised result gives a better indication of the underlying performance of the Group.

Underlying revenue compares the current year with the prior year on a consistent basis, after adjusting for the impact of currency, acquisitions, disposals and rail franchises no longer operated.

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National Express Group PLC ("National Express" or the "Group"), a leading international public transport group, operates bus and coach services across the UK, continental Europe/North Africa and North America, together with rail services in the UK.

National Express updates on trading for the first half year ending 30 June 2010, ahead of its Half Year Results which are scheduled to be announced on 29 July 2010.

Overview

Trading has continued in line with expectations through the second quarter of the year, building on the good start to 2010 reported in the first quarter interim management statement released on 5 May 2010. Revenue trends have been resilient, whilst progress on cost saving programmes and delivery of a stronger operational focus across the business has accelerated. As a result, 2010 first half normalised¹ profit before tax is expected to show good progress over the prior year.

Spain

Spain continues to see an improving revenue trend in its long term concessions, with underlying² passenger revenue in the first half expected to be broadly flat on 2009. Margin has improved with the benefit of network efficiency from a reduction in kilometres operated, whilst leveraging the flexible cost base. Recent reductions in services and investment by the domestic rail operator are expected to benefit our business going forward.

UK

Overall UK profitability continues to benefit from an improved margin in Rail, following the removal of the loss-making franchise last year. In UK Bus, reduced operating mileage is driving improved network efficiency and underlying revenue is only marginally lower year-on-year. The bus margin improvement plan is now underway, with a package of fare changes, targeted fleet investment, measures to reduce driver wage costs and consultation on reducing depot capacity all in progress. These measures are expected to start to benefit margin in the second half of this year.

Underlying revenue in Coach³ has grown 3 per cent year-on-year, benefiting from strong Easter and May holiday travel. First half margin will be affected by an increase in investment in marketing and new operations and services. In Rail, we welcome the government’s review of franchising policy. The cancellation of the reletting process for our current franchises enables us to explore opportunities to continue to deliver our industry-leading rail performance beyond early 2011.

North America

In North America, the outlook for underlying revenue growth remains strong with over 1,600 new routes now secured for the new school year beginning in August/September 2010, giving a net addition of almost 750 routes after contract losses. With no erosion of bidding margin, this reflects the quality of service we deliver through our long-term customer relationships. Following refocusing of the previous transformation programme, over US$20 million of annual cost efficiencies have been identified, with the balance of our targeted US$40 million savings programme identified from fleet and scheduling optimisation plans. Initial delivery of actions is already improving margin, despite higher insurance and depreciation costs.

Financing and fuel hedging

Following the successful issue of our £225 million 10 year Sterling bond earlier in June, the Group has now received commitments from its core banking group to provide a committed unsecured £500 million revolving credit facility through to 2014, which is expected to close in July 2010, subject to final documentation. This would replace the current £800 million facility, allowing the Group to complete its refinancing ahead of schedule.

Of our hedgeable fuel consumption of 222 million litres, we are fully hedged for 2010 at an average price of 39 pence per litre, almost 90% hedged for 2011 at 41 pence and 35% hedged for 2012 at 42 pence, compared to an average price of 50 pence in 2009. This significantly reduces our shorter term exposure to oil price movements.

Comment

Commenting, Dean Finch, National Express Group Chief Executive, said:

"With fundamentally strong businesses across the Group, National Express now has a greater operational focus. The initiatives we have put in place will progressively improve our performance from the second half year onwards, driving earnings and cash generation."

Enquiries

¹Normalised profit before tax is measured for continuing operations before goodwill impairment, intangible amortisation and exceptional items

²Underlying revenue compares the current year with the prior year on a consistent basis, after adjusting for the impact of currency, acquisitions and disposals

³Express coach operation

National Express Group PLC (‘National Express’ or the ‘Group’), a leading international public transport group, operates bus and coach services across the UK, continental Europe/North Africa and North America, together with rail services in the UK.

National Express reports its interim management statement for the first quarter of 2010, the three months ended 31 March 2010, ahead of its Annual General Meeting later today.

Overview

A good start has been made to 2010 with cost saving programmes and stronger operational focus driving improved margins. As a result, the Group is on track to meet expectations for margin and profit in the full year and continues to build its financial strength.

The first quarter saw a stabilising in revenue trends, although economic conditions remain relatively difficult. Operating margins have improved across the business, reflecting successful progress in the Group’s key programmes:

• The full benefit of cost savings achieved in 2009, driving improved efficiency across the business
• Early success in delivery of cost saving plans in North America
• The successful reduction in operating mileage, improving network efficiency
• The elimination of prior year rail losses, with the remaining rail franchises profitable
• The benefit of lower fuel costs, with 100% hedged for 2010.

Spain

The Alsa business had a good first quarter. Network efficiency continued to improve, with a reduction in kilometres operated of 3% exceeding a reduction in passenger journeys of 1%. Underlying* revenue was flat on prior year, although this included a benefit from earlier Easter bookings.

While domestic economic conditions remain challenging, the previously reported passenger trend in intercity has been slowly improving and urban revenues have shown growth. Cost management continues to be strong.

Margins improved strongly in the first quarter. This reflected the increased network efficiency and the benefit of earlier overhead cost reduction programmes, supported by lower fuel costs. Further cost savings have been identified for 2010 to mitigate any residual revenue weakness.

The contract to operate urban buses in Agadir, Morocco will start ahead of schedule, in September 2010, with investment in fleet brought forward from 2011. The business has also identified several organic growth opportunities both within and outside Spain.

UK

UK performance improved in the first quarter, benefitting from a return to profitability in rail and delivery of actions to increase margin.

In UK Bus, good initial progress has been made in rebalancing the network, with operating mileage reduced by 5% in the first quarter. In comparison, underlying revenue reduced by only 1%. Passenger numbers grew overall but yield declined slightly as prices were held to encourage travel.

A detailed review of Bus operations has been completed. This has highlighted several structural areas for improvement, to address lower average revenues per journey, above average wage costs and opportunities to rebalance service provision to meet changing customer demand. An action plan has now been developed to target improvements in these areas, whilst delivering excellent customer service. This plan should enable the restoration of margins to industry average levels as a minimum, through the business working closely with its employees, regional partners and suppliers.

In UK Coach, underlying passenger revenues in the seasonally quiet first quarter increased by 1% on the prior year. Airport routes continued to show signs of improvement. April saw the successful launch of the £1.2 million Spring marketing campaign. This delivered promising results over the busy Easter period.

Rail enjoyed a steady first quarter, with underlying revenue unchanged on prior year in East Anglia but good growth reported in c2c. This has been driven through improved passenger numbers, with overall prices unchanged. Strong cost control and government revenue support for East Anglia continue to protect profitability in these two established franchises.

North America

In the North America school bus business, the change in leadership and refocusing of the Business Recovery programme are already delivering benefits. Revenue is slightly ahead of expectation and new contracts have been secured for the new school year, whilst costs have been reduced.

First quarter underlying revenue declined by 4% on the prior year. Weather-related school closures are estimated to have impacted revenue by 1.5%, most of which is expected to be recovered at the end of the school year in June. Lower contract revenues, following the previously reported loss of contracts in the last bid season, have been partly offset by organic growth from school consolidation, despite budgetary pressure on school boards. In addition, charter and field trip revenue, a key focus for future growth in the business, increased.

Contract renewals for the 2010/11 school year have been good. To date, over 1,300 buses have been added, including the first two conversion contracts for some time. Net of lost contracts, nearly 500 new routes have been added and average margin improved by replacing business with better quality contracts. These new contracts will be supported by incremental fleet investment in the third quarter of 2010.

Initial progress has been made to improve margins. Driver wages as a percentage of revenue were nearly 100 basis points lower than in the prior year period, despite increased unemployment insurance costs in the US. Reduced fuel costs are also benefitting margin. The annualised reduction of US$13 million in double running and staff costs was completed on schedule at the end of March and the consolidation of three corporate locations was completed at the end of April. These savings form the first part of a planned US$40 million annual saving to be delivered by 2011. New management is delivering a focused business recovery programme, driving cost reduction, sustainable improvement and profitable growth.

Financing

During the first quarter, the Group successfully completed its debut bond issuance, launching a £350 million 7 year Sterling bond, and secured an investment grade credit rating (Baa3/BBB-). This has strengthened the Group by diversifying our sources of finance, extending our debt maturity profile and improving access to a range of debt markets.

We expect core capital investment in 2010 to be similar to depreciation. In addition, organic growth will see investment in an additional 500 net new buses in North America and €11 million to launch the Agadir contract.

A continued focus on cash generation, together with expected growth in earnings, should allow continued investment in growth, alongside maintenance of appropriate debt ratios.

Chief Executive’s perspective

Dean Finch joined the Group as Chief Executive on 15 February 2010. He has completed a review of the business, focused on enhancing operational delivery, concluding as follows:

• The underlying strength of the Group’s operating businesses is apparent in our first quarter progress
• This reinforces my view of the considerable potential for National Express to be a major participant in public passenger transport markets internationally
• Our Spanish business is performing strongly; it has excellent management and is extremely well run. The long term concessionary model and our market leading position provide an established platform to excel both domestically and internationally
• In North America we have started a complete overhaul of the business. The transformation programme was not working and was strangling the operational life blood. We have refocused the programme, made management changes and started to reduce overhead costs. Whilst improving the operating efficiency, we are also seeing some new business opportunities emerging
• Our UK Bus division has been underperforming. Over the past five years, revenue has risen by an average of 17% and costs by 25%. Our yield management has not been strong. There is considerable scope for both revenue growth and cost improvement
• UK Coach is an excellent business and, with improved yield management and greater attention to both our existing and new customers, we can achieve future growth
• We are creating a flatter organisation with clearer management accountability and responsibility. I am taking direct “hands on” control over each of our businesses to deliver greater operational focus. We are selectively strengthening our leadership team, with the recent appointments of John Elliott and David Duke to run the North America business, and the recruitment of Group Commercial and Procurement Directors.

Dean Finch, Group Chief Executive, said, “We have made an encouraging start to 2010 as we roll out our plans for operational improvement. We are already seeing signs of progress in North America, have clear plans for our UK Bus business and continue to build on our strengths in Spain and UK Coach. Whilst we have much to do, National Express has a strong portfolio of first class transport businesses and the ability to deliver to its full potential over the longer term.”

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*Underlying revenue compares the current year with the prior year period on a consistent basis, including adjusting for the impact of currency, acquisitions and disposals.

John Devaney, Chairman of the Company, said, “Ray has been a member of our Board since joining the Group in 1999 as Chief Operating Officer. He became Chief Executive, UK Division in 2008 and, following the resignation of Richard Bowker last year, he supported the Board until Dean's arrival. He has made a tremendous contribution to the Group and, on behalf of the Board, I would like to thank him for all his efforts and wish him well for the future.”

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Warrenville, Ill. National Express Corporation (NEC), a leading provider of student transportation in North America, today announced David Duke will join the organisation as Chief Executive Officer in June 2011. Duke most recently served as Senior Vice President of Sales at FirstGroup America.

In the interim, industry veteran John Elliott will assume the role of CEO of National Express Corporation, which operates as Durham School Services in the U.S. and Stock Transportation in Canada. Before he retired in 2008, Elliott served as President and Chief Executive Officer of Durham School Services.

"We are excited to have David and John on board at National Express Corporation," said Dean Finch, Chief Executive of parent corporation National Express Group. "Both are well-respected leaders in the industry who will further strengthen our successful outlook going forward. They will bring continuity to the organization, with a strong focus on customer service and getting back to the traditional values of what we do best, making sure students are picked up and delivered on time, safely and securely, every time."

Duke has nearly 25 years’ experience in the transportation industry. Before joining FirstGroup America, he served as Senior Vice President of Durham School Services, where he was responsible for overseeing regional operations and business development. He is a member of the National School Transportation Association (NSTA) Board of Directors.

Elliott has achieved many accomplishments in his nearly 36 years in student transportation. In 2007, he was named "Contractor of the Year" by School Bus Fleet magazine and in 2006 received the NSTA Hall of Fame Award in recognition of his years of dedication and excellence in the industry. He also has been an active member of the NSTA board for more than 20 years.

About National Express Corporation

National Express Corporation (NEC) is a leader in the student transportation industry with a strong commitment to provide quality transportation, outstanding customer service, positive employee relations and the highest level of safety. NEC is comprised of Durham School Services in the United States and Stock Transportation in Canada. Together, Durham School Services and Stock Transportation operate more than 17,000 school buses and serve more than 350 school districts in 29 states and two provinces. NEC is the North American subsidiary of National Express Group, PLC, one of the premier transportation firms in the United Kingdom.

National Express Group PLC, a leading international public transport group, operates bus and coach services across the UK, Spain and North America, and rail services in the UK.

John Devaney, National Express Group Chairman, said:

"In 2009 National Express faced many challenges and resolved its major issues – reducing debt, ending our rail losses, navigating takeover interest, progressing our refinancing and recruiting a new Chief Executive to take us forward.

"Whilst 2010 will be another challenging year in a difficult economic environment, we are focused on delivering margin improvement through cost reduction, continuing strong cash generation, and building on the foundations that we have laid in 2009. With significant scope to improve our business, especially in UK Bus and North America, while building on our successes in Spain and UK Coach, we will drive forward our performance and deliver value for our shareholders."

Delivering key milestones

• Group successfully deleveraged – net debt reduced by £521.9 million to £657.9 million (2008: £1,179.8m)
• Incremental cash generation of over £200 million delivered in 2009, well ahead of £100 million target set in February 2009
• Costs cut by £50 million per annum, ahead of £40 million target
• Successful £375 million rights issue completed in December 2009
• Refinancing of reduced debt well underway; successful launch of heavily over-subscribed debut £350 million 7-year Sterling bond issue in January 2010
• Completed exit from East Coast rail franchise; remaining two profitable rail franchises retained until 2011
• Strong profit growth delivered in UK Coach; resilient performance in Spain
• Appointed new Group Chief Executive, Dean Finch, to drive forward strategy of margin improvement, cash generation and selective, value-adding growth.

Financial performance

Outlook

• Stabilised business, despite continuing challenging economic conditions
• Continued focus on cost reduction and cash generation to drive performance – full year benefit of £50 million cost saving programme, together with new efficiency savings and £24 million reduction in fuel costs
• Spain and UK Coach to build on 2009 performance
• Clear actions to improve margins in UK Bus and North America; North America recovery programme refocused on cost saving and areas of greatest value impact

Enquiries:

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

**Operating cash flow is intended to be the cash flow equivalent to normalised operating profit. Operating cash flow is normalised operating profit, plus depreciation, movements in working capital and proceeds from disposals of property, plant and equipment, less finance lease additions, purchase of property plant and equipment and purchase of intangible assets.

There will be a presentation for investors and analysts at 0900 on 25 February 2010 at Bank of America Merrill Lynch, 2 King Edward Street, London EC1A 1HQ. A webcast will be available at www.nationalexpressgroup.com

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For further information, please contact:

National Express Group - Joy Williams, Head of News on 0121 460 8419
Maitland - Neil Bennett or George Hudson on 020 7379 5151

The proceeds from the issue of the Bond will be used to repay the Group’s existing bank borrowings, with the Group’s existing €270 million Euro facility maturing in March 2011 expected to be repaid in full. The Bond will extend the average maturity of the Group’s remaining debt, reduce the Group’s reliance on bank financing and diversify and strengthen the Group’s overall funding structure.

Following the rights issue completed in December and this Bond issue, the Group will adjust its interest rate management arrangements. Certain of the Group's existing interest rate swaps (relating to hedging of the existing Euro denominated debt) will become ineffective and will be terminated, resulting in an exceptional expense and cash outflow of approximately £17.5 million.

Commenting, Jez Maiden, Group Finance Director, said:

“The successful launch of this bond marks a further step in delivering improvement at National Express. Over the past months, we have significantly reduced debt through a focus on cash generation, we have successfully completed a £360 million rights issue and we have now refinanced our maturing bank debt ahead of schedule. Leading bond investors have been strongly supportive of this debut bond issue.”

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*The Bond is being issued subject to the Group obtaining two investment grade credit ratings prior to 13 January 2011. In the event that the Group does not obtain such ratings by this date, the coupon will step up by 1.25 per cent. thereafter. The Group has begun discussions with the major rating agencies to commence the rating process. There are no financial covenants contained in the Bond.

Summary

Trading has continued in line with the trends reported in the third quarter Interim Management Statement on 22 October 2009, with full year profit expected to be consistent with the previous outlook.

Overall, the underlying revenue* trend has stabilised in the fourth quarter, in line with the previously reported rate. Both the UK and Spain continue to deliver a strong operating performance, with cost efficiencies offsetting areas of revenue weakness. Action in North America will start to address continued underperformance in operational cost management, while revenue has declined as expected on previous lower contract renewals.

During the fourth quarter, the Group has successfully delivered its key objectives:

• We have successfully completed a strongly supported rights issue to achieve a more robust capital structure and significantly reduce debt to an appropriate level;
• We have resolved our outstanding rail issues, by completing the exit from the loss-making East Coast franchise in November 2009 and with the UK government indicating that the Group will continue to operate its remaining two rail franchises to their normal termination dates in 2011**;
• We have appointed Dean Finch as Group Chief Executive, to focus on delivering our future strategy; driving cost efficiency, maximising cash generation and selectively growing the business where value is enhanced.

These developments have built on our earlier success, with annualised cost savings of £50 million secured in 2009 and strong organic cash generation reducing underlying debt.

Performance

UK Coach has returned to underlying revenue growth, of 4%, in the fourth quarter, with successful marketing and yield management offering even better value for our customers. Our new Birmingham coach station has opened for business, delivering a major improvement in customer experience. UK Bus underlying revenue growth has remained resilient at 2% year to date, despite the ongoing impact of higher regional unemployment. Fares are being held, to support customer retention and encourage travel, and we have optimised route coverage to protect profitability. In Rail, reduced demand in East Anglia continues to be offset through revenue support. The final element of the 2009 UK cost reduction programme has been announced, to deliver the Group’s full £50 million of annualised savings, and placing the UK business in a stronger position for 2010.

Encouragingly, in Spain the rate of underlying revenue decline has improved to 5%, although economic conditions remain challenging. Urban operations have been relatively stable, while there are signs of improvement in regional travel revenue. In long distance travel, operating kilometres have been reduced to match lower demand. Extensions of several concessions have been secured for a period of 10 years, reflecting a commitment by regional authorities to bus transport as a more efficient and sustainable solution.

As expected, revenue in North America has declined with the start of the new school year, reflecting previous lower contract renewals. Performance in managing costs, particularly from double-running in the centralisation of operations, has been disappointing, impacting margin. This will benefit from a stronger management action plan to be rolled out in 2010, supported by tailoring of the Business Transformation programme to optimise cost and benefit.

Commenting on the statement, Executive Chairman, John Devaney, said:

"This has been a challenging year for National Express but, as it draws to a close, I am pleased that we have tackled and resolved our significant issues. We have eliminated the loss-making elements of our rail business and restored our balance sheet through a well-supported rights issue. National Express will enter 2010 on a sound basis, enabling our new Group Chief Executive Dean Finch and the team to focus on improving the performance of our market-leading businesses and delivering shareholder value."

Enquiries:

Notes:

* Underlying revenue compares the current year with the prior year period on a consistent basis, including adjusting for the impact of currency translation, acquisitions and disposals, together with the estimated impact of advance travel.
** The UK Department for Transport said in an announcement on 26 November 2009 that its “objectives are best served by terminating NXEA’s franchise in 2011”. The NXEA and c2c franchises are scheduled for normal termination in March and May 2011 respectively.

Dean is one of Britain's most experienced transport professionals. He is currently Chief Executive of Tube Lines Ltd, the world's largest Private Finance Initiative, which is responsible for maintaining and upgrading half of the London Underground system.

Before joining Tube Lines, Dean worked for over 10 years in senior roles within FirstGroup plc. He was Managing Director of the Rail Division from 2000 - 2004 and then was appointed to the FirstGroup main board as Group Commercial Director in 2004, before being made Group Finance Director. With the completion of the Laidlaw acquisition he became Chief Operating Officer in North America before returning to the UK as Group Chief Operating Officer.

John Devaney, Executive Chairman of National Express said: “I am delighted to welcome Dean to National Express. His extensive experience of the transport sector, in Europe and North America as well as the UK makes him uniquely qualified to run a business of this scope and scale. He has a proven track record of improving operational performance and delivering financial success in bus, coach and rail businesses.

"Now the group has completed its recent rights issue, the Group's strategy is to focus on delivering excellence from its existing operations and Dean is ideally placed to provide the necessary insight and leadership to our experienced management team."

Dean Finch added: "National Express is a leading international transport company and it operates a series of first class businesses in Britain, Spain and North America. I am looking forward to strengthening all parts of the group, fostering a culture of operational excellence enabling us to deliver real shareholder value."

National Express confirms that there are no further details to be disclosed pursuant to paragraph 9.6.13R of the Financial Services Authority's Listing Rules in relation Mr. Finch's appointment.

For further information, please contact:

National Express Group

John Devaney, Chairman:  0207 506 4324
Nicole Lander, Director of Communications:  0121 460 8401

Maitland:  0207 379 5151

Neil Bennett
George Hudson