1 Accounting policies

Basis of preparation
The accounts are prepared under the historical cost convention, modified to include the revaluation of certain land and buildings and are prepared in accordance with applicable accounting standards.

The true and fair override provisions of the Companies Act 1985 have been invoked in respect of investment properties (see page 51).

Basis of consolidation
The Group accounts consolidate the accounts of National Express Group PLC and all its subsidiary undertakings drawn up to 31 December each year. No profit and loss account is presented for National Express Group PLC as permitted by Section 230 of the Companies Act 1985.

On acquisition of a business, the acquisition method of accounting is adopted, and the Group profit and loss account includes the results of subsidiary and business undertakings purchased during the year from the date of acquisition as set out below. Purchase consideration is allocated to assets and liabilities on the basis of fair value at the date of acquisition.

Undertakings, other than subsidiary undertakings, 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 associated undertakings. The Group accounts include the appropriate share of these undertakings' results and reserves based on their latest accounts.

Goodwill
Goodwill in respect of acquisitions made prior to 1 January 1998 has been set off directly against reserves.

In accordance with Financial Reporting Standard 10, goodwill arising on acquisitions made after 1 January 1998 is capitalised within intangible fixed assets and amortised over its useful economic life up to a presumed maximum of 20 years or the life of the rail franchise, if shorter.

If a subsidiary, associate or business is subsequently sold or closed, any goodwill arising on acquisition that was written off directly to reserves or that has not been amortised through the profit and loss account is taken into account in determining the profit or loss on sale or closure.

Finance lease obligations
Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives. 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. Rentals paid under operating leases are charged to income on a straight-line basis over the term of the lease.

Stock
Stocks are valued at the lower of cost and net realisable value after making due allowance for obsolete or slow moving items. In the case of finished goods, cost consists of direct materials, labour and an appropriate proportion of overheads.

Investment properties
Certain of the Group's properties are held for long-term investment. Investment properties are accounted for in accordance with SSAP 19, as follows:

(i) investment properties are revalued annually and the aggregate surplus or deficit is transferred to a revaluation reserve unless a deficit, or its reversal, on an individual investment property is expected to be permanent, in which case it is recognised in the profit and loss account for the year; and
(ii) no depreciation or amortisation is provided in respect of investment properties.

Although the Companies Act 1985 would normally require the systematic annual depreciation of fixed assets, the Directors believe that this policy of not providing depreciation or amortisation is necessary in order for the accounts to give a true and fair view, since the current value of investment properties, and changes in that current value, are of prime importance rather than a calculation of systematic annual depreciation. Depreciation or amortisation is only one of the many factors reflected in the annual valuation, and the amount which might otherwise have been shown cannot be separately identified or quantified.

Depreciation and revaluations
Investment properties and freehold land are not depreciated. Other tangible assets are depreciated on a straight line basis over their estimated useful lives as follows:

Financial Reporting Standard 15, "Tangible Fixed Assets", was adopted during the year ended 31 December 2000. FRS 15 requires that each class of tangible fixed assets is either revalued regularly or not at all. The policy that has been adopted is not to revalue in the future, although as permitted by the standard, properties that have been revalued in the past have been retained at their existing book value. The last valuation was as at 31 December 1995. Adoption of this standard does not have a material impact on the Group.

Deferred taxation
Provision has been made for deferred taxation using the liability method on all timing differences to the extent that it is probable that the liability will crystallize.

Pension costs
Pension costs are recognised on a systematic basis so that the costs of providing retirement benefits to employees are evenly matched, so far as is possible, to the service lives of the employees concerned. Any excess or deficiency of the actuarial value of assets over the actuarial value of liabilities of the pension scheme is allocated over the average remaining service lives of current employees. Differences between the amount charged in the profit and loss account and payments made to schemes are treated as assets or liabilities in the balance sheet.

Certain East Midlands Airport employees are required to retire from their current positions in advance of the normal retirement date, due to the physically demanding nature of their employment. On early retirement, these employees are entitled to receive one-off lump sum payments. Provision for the estimated cost of the early retirement of these employees is made on a systematic basis over their remaining service lives.

Foreign currencies

Group
The trading results of overseas subsidiary undertakings are translated into sterling using average rates of exchange for the year.

The balance sheets of overseas subsidiary undertakings are translated into sterling at the rates of exchange ruling at the year end and exchange differences arising are taken directly to reserves. All other translation differences are taken to the profit and loss account, with the exception of differences on foreign currency borrowings which are used to finance or provide a hedge against Group equity investments in foreign enterprises. These are taken directly to reserves.

The most significant exchange rates to the pound for the Group are as follows:

Company
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 and loss account.

Derivatives and other financial instruments
The Group uses interest rate swaps to hedge interest rate exposures. The Group considers its derivative instruments qualify for hedge accounting when certain criteria are met. The Group's criteria for interest rate swaps are:
- the instrument must be related to an asset, liability or future obligation; and
- it must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa.

Interest differentials are recognised by accruing the net interest payable. Interest rate swaps are not revalued to fair value or shown on the Group balance sheet at the year end. If they are terminated early, the gain or loss is spread over the remaining maturity of the original instrument.

2 Turnover and segmental analysis

				Turnover				Operating profit before goodwill and exceptional items				Net assets
				2000		1999		2000		1999		2000		1999
Analysis by class of business				£m		£m		£m		£m		£m		£m
Buses      - continuing				200.1		196.4		50.6		47.6		119.8		104.0
Trains      - continuing				929.0		921.8		27.0		28.0		(45.8)		(21.1)
- acquisitions				129.6		-		7.1		-		2.1		-
				1,058.6		921.8		34.1		28.0		(43.7)		(21.1)
Coaches  - continuing				186.8		168.2		11.3		11.0		37.6		33.5
Airports   - discontinued				34.0		33.9		13.1		12.9		173.8		165.0
UK operations				1,479.5		1,320.3		109.1		99.5		287.5		281.4
USA         - continuing				259.6		64.6		26.0		9.5		371.0		288.0
- acquisitions				42.0		-		6.7		-		213.3		-
				301.6		64.6		32.7		9.5		584.3		288.0
Australia  - continuing				221.5		91.8		13.3		4.2		73.5		66.2
				2,002.6		1,476.7		155.1		113.2		945.3		635.6
Exceptional items (see table below)								(30.6)		(14.7)
Goodwill								(22.7)		(3.3)
								101.8		95.2
Unallocated net liabilities												(572.5)		(372.8)
												372.8		262.8
Equity minority interest												4.5		4.2
Total net assets												377.3		267.0
Exceptional items can be analysed as follows:
	Buses £m				Trains £m		Airports £m		USA £m		Australia £m		Other £m	Total £m
2000
New Trains	-				2.4		-		-		-		-	2.4
Reorganisation	1.6				5.6		-		1.5		2.4		-	11.1
Abortive bid costs	-				-		-		0.6		-		-	0.6
Atlantic Express	-				-		-		-		-		16.5	16.5
	1.6				8.0		-		2.1		2.4		16.5	30.6
1999
New Trains	-				4.9		-		-		-		-	4.9
Year 2000	-				-		-		-		-		2.1	2.1
Reorganisation	1.5				5.8		0.2		0.2		-		-	7.7
	1.5				10.7		0.2		0.2		-		2.1	14.7

3 Other operating income

Included in rents receivable is £1.2m of income from acquisitions during the year and £5.3m (1999: £5.0m) from discontinued operations.

4 Operating costs

					2000 £m	1999 £m
Materials and consumables					92.8	72.9
Staff costs					649.5	393.4
Depreciation - owned assets					40.7	24.4
- leased assets					3.2	2.2
Operating lease charges - plant and equipment					141.5	129.5
- land and buildings					441.8	387.1
External charges					522.0	379.2
Operating costs before goodwill amortisation					1,891.5	1,388.7
Goodwill amortisation					22.7	3.3
Total operating costs					1,914.2	1,392.0

Operating costs relating to acquisitions amount to £171.3m, including materials and consumables £9.0m, staff costs £60.7m, depreciation £5.2m, operating lease charges £22.2m, external charges £64.8m and goodwill £9.4m.

Operating costs relating to discontinued operations amount to £26.2m (1999: £26.2m), including materials and consumables £1.4m (1999: £1.4m), staff costs £11.0m (1999: £10.9m), depreciation £4.3m (1999: £3.6m), operating lease charges £0.2m (1999: £0.2m) and external charges £9.3m (1999: £10.1m).

Operating costs include £11.8m (1999: £9.8m) of franchise agreement payments to the Strategic Rail Authority.

Operating costs include exceptional costs of £30.6m (1999: £14.7m) being staff costs £9.5m (1999: £10.1m), external charges £21.0m (1999: £4.6m) and materials and consumables £0.1m (1999: nil).

Included within other external charges are fees paid to our auditors in respect of:

A further £1.4m (1999: £1.4m) has been capitalised with respect to acquisitions.

5 Staff costs

	2000 £m	1999 £m
Wages and salaries	593.7	357.7
Social security costs	43.5	26.0
Pension costs (see note 28)	12.3	9.7
	649.5	393.4

The average number of employees (including Executive Directors) during the year was as follows:

	2000 Number	1999 Number
Managerial and administrative	4,305	1,581
Operational	34,997	17,641
	39,302	19,222

6 Directors' emoluments

The emoluments of the Directors are as follows:

	2000 £m	1999 £m
Fees	0.2	0.2
Basic salaries	1.0	0.7
Benefits	0.1	0.3
Performance related bonuses	0.7	0.3
Pension contributions	0.3	0.3
Termination of employment	-	0.1
	2.3	1.9

More detailed information concerning Directors' emoluments, shareholdings and options is shown in the report on Directors' remuneration.

7 Net interest payable

	2000 £m	1999 £m
Interest payable and similar charges:
Bank loans and overdrafts	(36.9)	(9.5)
Other loans	(0.9)	(1.5)
Finance lease charges	(1.6)	(0.8)
	(39.4)	(11.8)
Interest receivable	5.4	6.0
Net interest payable	(34.0)	(5.8)

8 Taxation

	2000 £m	1999 £m
Current taxation:
UK corporation tax	22.9	25.4
Overseas	5.1	2.2
Prior years	(2.3)	-
	25.7	27.6
Tax relief on goodwill and exceptional items:
UK corporation tax	(8.2)	(4.7)
Overseas	(4.6)	(0.1)
Tax on profit on ordinary activities	12.9	22.8

9 Profit atributable to members of the parent company

The profit dealt with in the accounts of the parent company was £393.7m (1999: £23.5m) of which £318.5m (1999: nil) is non-distributable.

10 Dividends

	2000 £m	1999 £m
Ordinary - interim (paid) of 6.5p per share (1999: 5.75p)	7.6	6.6
- final (proposed) of 14.2p per share (1999: 12.45p)	18.7	14.4
	26.3	21.0

11 Earnings per share

	2000	1999
(i)             Basic earnings per share	43.4p	58.3p

	2000	1999
(ii)            Normalised basic earnings per share	78.5p	69.7p

	2000	1999
(iii)           Diluted earnings per share	39.7p	51.9p

	2000	1999
(iv)           Normalised diluted earnings per share	71.7p	62.1p

Normalised profits after tax and minority interest are:		2000 £m	1999 £m
Profit after tax and minority interest		51.4	66.6
Exceptional operating costs		20.8	10.7
Profit on sale of investments		-	(0.2)
Loss on termination of business		0.7	-
Goodwill		20.0	2.5
		92.9	79.6

The reconciliation of weighted average number of ordinary shares is detailed as follows:	Number of shares 2000	Number of shares 1999
Basic weighted average shares	118,393,605	114,232,918
Adjustment for dilutive potential ordinary shares	11,191,236	14,034,080
Diluted weighted average shares	129,584,841	128,266,998

12 Intangible assets

Goodwill arising on the acquisitions in the year, except Prism, is amortised evenly over the Directors' estimate of their useful economic life of 20 years. The goodwill arising on the acquisition of Prism is amortised evenly over the weighted average life of the franchises (nine years).

Group	Goodwill £m
Cost:
At 31 December 1999	246.1
Additions	284.5
Exchange adjustments	19.3
At 31 December 2000	549.9
Amortisation:
At 31 December 1999	3.5
Charge for the year	22.7
At 31 December 2000	26.2
Net book value:
At 31 December 2000	523.7
At 31 December 1999	242.6

13 Tangible assets

	Freehold land and buildings	Long leasehold property	Short leasehold property	Infrastructure	Public service vehicles	Plant and Equipment	Total
Group	£m	£m	£m	£m	£m	£m	£m
Cost or valuation:
At 31 December 1999	179.2	34.0	9.6	-	269.9	62.8	555.5
Additions	10.5	1.1	15.1	18.4	22.7	20.0	87.8
Acquisition of subsidiary undertakings	4.3	25.7	1.0	-	48.6	31.6	111.2
Disposals	(2.2)	-	(0.1)	-	(8.7)	(1.6)	(12.6)
Reclassifications	(0.4)	(0.6)	(1.7)	2.7	-	-	-
Exchange adjustments	(0.7)	0.9	(0.6)	(0.2)	1.7	-	1.1
At 31 December 2000	190.7	61.1	23.3	20.9	334.2	112.8	743.0
Depreciation:
At 31 December 1999	7.5	1.2	0.8	-	27.6	14.6	51.7
Charge for the year	2.1	0.4	1.1	0.6	28.2	11.5	43.9
Disposals	(0.1)	-	-	-	(7.8)	(1.4)	(9.3)
Exchange adjustments	-	0.1	-	-	2.7	0.3	3.1
At 31 December 2000	9.5	1.7	1.9	0.6	50.7	25.0	89.4
Net book value:
At 31 December 2000	181.2	59.4	21.4	20.3	283.5	87.8	653.6
At 31 December1999	171.7	32.8	8.8	-	242.3	48.2	503.8

The net book value of freehold land and buildings and long leasehold property includes £69.8m (1999: £70.3m) in respect of investment properties and £18.7m (1999: £16.6m) in respect of land which is not depreciated.

The Directors have reviewed the valuation of the Group's investment properties at 31 December 2000 and are of the opinion that the open market value of these properties at 31 December 2000 is fairly stated in these accounts.

		2000 £m	1999 £m
Particulars relating to revalued assets are as follows:
Land and buildings valuation at end of year		78.0	78.9
Historical cost of revalued assets		64.7	64.7
Aggregate depreciation based thereon		(4.2)	(3.7)
Historical cost net book value		60.5	61.0
Tangible fixed assets held under finance lease agreements are analysed as follows:		2000 £m	1999 £m
Public service vehicles		18.2	21.8
Plant and equipment		1.3	0.9
Net book value		19.5	22.7
Company	Short leasehold property £m	Plant and equipment £m	Total £m
Cost:
At 31 December 1999	0.6	0.9	1.5
Additions	0.2	2.5	2.7
Disposals	-	(0.3)	(0.3)
At 31 December 2000	0.8	3.1	3.9
Depreciation:
At 31 December 1999	-	0.4	0.4
Charge for the year	-	0.3	0.3
Disposals	-	(0.2)	(0.2)
At 31 December 2000	-	0.5	0.5
Net book value:
At 31 December 2000	0.8	2.6	3.4
At 31 December 1999	0.6	0.5	1.1

14 Investments and interests in associated undertakings

	Loan to associated undertaking	Interests in associated undertakings	Other investments	Own shares	Total
Group	£m	£m	£m	£m	£m
Cost or valuation:
At 31 December 1999	-	1.4	14.1	8.3	23.8
Additions	4.4	-	8.7	1.6	14.7
At 31 December 2000	4.4	1.4	22.8	9.9	38.5
Share of post-acquisition reserves:
At 31 December 1999	-	(0.5)	-	-	(0.5)
Share of results of associated undertakings	-	(0.8)	-	-	(0.8)
At 31 December 2000	-	(1.3)	-	-	(1.3)
Provisions:
At 31 December 1999	-	-	(6.0)	(2.3)	(8.3)
Provisions for diminution in value	-	-	-	(1.6)	(1.6)
At 31 December 2000	-	-	(6.0)	(3.9)	(9.9)
Net book value:
At 31 December 2000	4.4	0.1	16.8	6.0	27.3
At 31 December1999	-	0.9	8.1	6.0	15.0

(i) Interests in associated undertakings are as follows:

Name	Country of registration	Total issued share capital £000	Proportion held %
Altram LRT Limited	England and Wales	4,000	33
Inter-Capital and Regional Rail Limited	England and Wales	1	40

Altram LRT Limited is a provider of light rapid transport systems. The investment is held by a Group subsidiary undertaking. Inter-Capital and Regional Rail Limited is a train operator management company. The investment is held by the Company.

(ii) The principal other investments are as follows:

Name	Country of registration	Total issued share capital £000	Proportion held %
London & Continental Railways Limited ("LCR")	England and Wales	Ordinary shares	21
Prepayment Cards Limited ("PCL")	England and Wales	Ordinary shares	20

LCR and PCL have been accounted for as trade investments. In the opinion of the Directors, the Group does not exercise significant influence over LCR nor PCL as required under the definitions in Financial Reporting Standard 19.

(iii) Own shares are as follows:
Prior to the year ended 31 December 1999 ordinary shares in the Company were purchased by the Trustees of the National Express Employee Benefit Trust using interest free loans advanced by the Company. The shares are held to satisfy potential awards or options granted under a number of the Company's share schemes. In accordance with UITF Abstract 13, "Accounting for ESOP Trusts", the amount of the loan outstanding at the year end has been recognised as an investment in own shares.

During the year the QUEST purchased shares in the marketplace with a market value of £1.6m (1999: £7.8m) in order to satisfy the requirements of the NEG Savings Related Share Option Scheme. A contribution of £0.3m (1999: £3.3m) has been gifted to the QUEST by the Company to reflect the difference between the market price at the time of purchase and the option price. In accordance with UITF 13 the value of the shares has been recognised as an investment in own shares.

Details of own shares held are given in note 24.

	Loan to a subsidiary undertaking	Investments in subsidiary undertakings	Other investments	Own shares	Total
Company	£m	£m	£m	£m	£m
Cost or valuation:
At 31 December 1999	-	425.2	11.5	8.3	445.0
Additions	255.9	315.6	8.6	1.6	581.7
Disposals	-	(97.0)	-	-	(97.0)
At 31 December 2000	255.9	643.8	20.1	9.9	929.7
Provisions:
At 31 December 1999	-	(9.9)	(6.1)	(2.3)	(18.3)
Provisions for diminution in value	-	(1.2)	-	(1.6)	(2.8)
Disposals	-	6.7	-	-	6.7
At 31 December 2000	-	(4.4)	(6.1)	(3.9)	(14.4)
Net book value:
At 31 December 2000	255.9	639.4	14.0	6.0	915.3
At 31 December1999	-	415.3	5.4	6.0	426.7

The loan represents an investment in a convertible bond of a subsidiary undertaking.

Incorporated in England and Wales

Incorporated in The Netherlands

Incorporated in Belgium

Incorporated in the USA

Incorporated in Australia

*Shares held by a subsidiary undertaking

National Express Group PLC is the beneficial owner of all the equity share capital, either itself or through subsidiary undertakings, of the above, with the exception of Westbus Pty Limited in which it has a 57% shareholding.

The principal country of operation in respect of all the above companies is the country in which they are incorporated.

The companies listed above include all those which principally affect the amount of profit and assets of the Group. A full list of subsidiary and associated undertakings at 31 December 2000 will be annexed to the next annual return.

During the year ended 31 December 2000 the Fregata Travel operation was terminated at a cost of £1.0m.

15 Acquisitions during the year

During the year the Group acquired the entire share capital of Forsythe (6 January 2000), SS&L (31 August 2000) and Prism (19 September 2000). The Group also acquired the net assets of Blue Ribbon (2 February 2000), Stewart (1 April 2000) and various coach businesses.

	Prism	SS&L	Other	Total
	£m	£m	£m	£m
Tangible assets	22.1	53.3	36.2	111.6
Stock	4.0	0.3	0.1	4.4
Debtors	48.6	3.4	1.4	53.4
Cash at bank and in hand	49.2	1.8	1.6	52.6
Creditors and provisions	(118.7)	(9.1)	(11.1)	(138.9)
Net assets acquired	5.2	49.7	28.2	83.1
Special dividend to Prism shareholders	10.8	-	-	10.8
Adjusted net assets	16.0	49.7	28.2	93.9
Goodwill on acquisition	155.4	92.6	28.6	276.6
Total consideration	171.4	142.3	56.8	370.5
Total consideration	171.4	142.3	56.8	370.5
Shares issued as consideration	(80.5)	-	-	(80.5)
Deferred cash consideration	-	-	(7.0)	(7.0)
Payments to acquire subsidiary undertakings	90.9	142.3	49.8	283.0
Less net cash acquired	(49.2)	(1.8)	(1.6)	(52.6)
Net cash outflow	41.7	140.5	48.2	230.4

	Book value	Fair value adjustments	Total
Prism	£m	£m	£m
Tangible assets	30.4	(8.3)	22.1
Stock	4.5	(0.5)	4.0
Debtors	48.5	0.1	48.6
Cash at bank and in hand	49.2	-	49.2
Total assets	132.6	(8.7)	123.9
Creditors: amounts falling due within one year	(105.1)	(6.8)	(111.9)
Creditors: amounts falling due after more than one year	(3.7)	(3.1)	(6.8)
Total liabilities	(108.8)	(9.9)	(118.7)
Net assets acquired	23.8	(18.6)	5.2
Special dividend to Prism shareholders	10.8	-	10.8
Adjusted net assets	34.6	(18.6)	16.0

The adjustment to tangible assets was made so that costs are capitalised consistently with the Group. The adjustments to creditors represent reassessments of liabilities to align with the Group's accounting policy.

	Book value	Fair value adjustments	Total
SS&L	£m	£m	£m
Intangible assets	5.0	(5.0)	-
Tangible assets	51.1	2.2	53.3
Stock	0.3	-	0.3
Debtors	3.9	(0.5)	3.4
Cash at bank and in hand	1.8	-	1.8
Total assets	62.1	(3.3)	58.8
Creditors: amounts falling due within one year	(8.0)	(1.1)	(9.1)
Net assets acquired	54.1	(4.4)	49.7

The adjustment to intangible fixed assets eliminates goodwill in SS&L's own balance sheet and tangible assets have been revalued.

Fair value adjustments for other acquisitions in the year ended 31 December 2000 were not material. Fair value adjustments made in the year ended 31 December 1999 have been revised by £7.9m to reduce tangible assets by £0.4m and, following a reassessment of liabilities under the Group's accounting policy, to increase creditors by £9.2m, offset by an adjustment for the associated taxation of £1.7m. These adjustments primarily relate to the acquisitions made in December 1999 (namely MultiSystems and ATC).

Prism made a loss after tax of £1O.7m from 1 April 2000 to the date of acquisition and reported a profit after tax of £7.7m in the year ended 31 March 2000.

SS&L made a loss after tax of £3.1m (before change of control bonuses paid of £18.3m) from 1 August 2000 to the date of acquisition and reported a profit after tax of £7.7m in the year ended 31 July 2000.

The post acquisition turnover and operating profit from acquisitions made during the year are separately disclosed in the profit and loss account, except where the amounts involved are not material.

16 Stock

Group	2000 £m	1999 £m
Raw materials and consumables	20.7	8.5
Finished goods	-	6.3
	20.7	14.8

17 Debtors

	Group		Company
	2000 £m	1999 £m	2000 £m	1999 £m
Trade debtors	155.9	103.8	-	-
Subsidiary undertakings	-	-	512.1	299.5
Other debtors	108.8	85.6	1.8	5.6
Prepayments and accrued income	60.4	24.7	0.5	8.4
Amounts due from associated undertakings	2.0	2.5	1.0	1.0
	327.1	216.6	515.4	314.5

Included within other debtors of the Group is £2.6m (1999: £5.3m) which is recoverable after more than one year.

Included within prepayments of the Group is £2.2m (1999: £2.1m) in respect of pension contribution payments made in advance of their recognition in the profit and loss account. Of this amount £1.9m (1999: £2.0m) will be recoverable after more than one year.

18 Cash at bank and in hand

	Group		Company
	2000 £m	1999 £m	2000 £m	1999 £m
Cash	21.0	20.9	-	-
Overnight deposits	20.2	45.0	-	22.3
Other short term deposits	12.6	32.0	7.2	9.7
Bank deposits relating to loan notes	-	3.1	-	-
	53.8	101.0	7.2	32.0

Cash at bank and in hand of the Group as at 31 December 1999 included £13.2m in respect of the outstanding element of train passenger season tickets which was used as cash collateral for season ticket bonds held by the Strategic Rail Authority. This arrangement did not apply at 31 December 2000.

19 Creditors: amounts falling due within one year

	Group		Company
	2000 £m	1999 £m	2000 £m	1999 £m
Loan notes	5.5	5.5	1.5	1.6
Bank loans	156.2	1.9	149.0	-
Other loans	0.3	0.3	-	-
Bank overdrafts	0.4	4.5	59.7	15.5
Trade creditors	201.9	118.8	3.2	1.8
Amounts owed to associated undertakings	0.1	0.1	-	-
Amounts owed to subsidiary undertakings	-	-	65.5	33.2
Finance lease obligations	3.6	4.1	-	-
Corporation tax	28.3	42.0	3.6	9.7
Social security and other taxation	18.6	13.6	-	0.1
Accruals and deferred income	317.5	189.7	11.3	7.7
Proposed dividend	18.7	14.4	18.7	14.4
	751.1	394.9	312.5	84.0

20 Creditors: amounts falling due after more than one year

	Group		Company
	2000 £m	1999 £m	2000 £m	1999 £m
Loan notes	4.8	4.8	-	-
Bank loans	428.8	381.0	428.8	362.8
Other loans	0.1	0.2	-	-
Finance lease obligations	10.7	14.6	-	-
Accruals and deferred income	13.8	8.2	-	-
	458.2	408.8	428.8	362.8

21 Net borrowings

	Group		Company
	2000 £m	1999 £m	2000 £m	1999 £m
Due within one year
Loan notes	5.5	5.5	1.5	1.6
Bank loans	156.2	1.9	149.0	-
Other loans	0.3	0.3	-	-
Bank overdrafts	0.4	4.5	59.7	15.5
Finance lease obligations	3.6	4.1	-	-
	166.0	16.3	210.2	17.1
Due within one to two years
Loan notes	0.6	0.6	-	-
Bank loans	42.6	9.3	42.6	8.2
Other loans	0.1	0.2	-	-
Finance lease obligations	3.6	3.5	-	-
	46.9	13.6	42.6	8.2
Due within two to five years
Loan notes	1.8	1.8	-	-
Bank loans	386.2	371.7	386.2	354.6
Finance lease obligations	6.2	6.6	-	-
	394.2	380.1	386.2	354.6
Due by instalments after five years
Finance lease obligations	0.9	4.5	-	-
Due other than by instalments after five years
Loan notes	2.4	2.4	-	-
Total borrowings	610.4	416.9	639.0	379.9
Cash at bank and in hand	(53.8)	(101.0)	(7.2)	(32.0)
Net borrowings	556.6	315.9	631.8	347.9

During the year ended 31 December 1999, the Company agreed a part term (£550.0m), part revolving (£250.0m) syndicated loan facility for a total of £800.0m. The terms were subsequently altered in advance of the disposal of the Airports division to enable the Company to repay £150.0m of the term facility out of the sale proceeds and the Group's cash resources. Therefore, £150.0m is repayable in 2001, £43.6m is repayable in 2002, £70.4m is repayable in 2003 and the balance is repayable in 2004. Bank loans are shown net of the unamortised loan facility arrangement fee that was incurred during the year ended 31 December 1999.

Secured borrowings within the Group total £14.3m (1999: £16.0m).

22 Provisions for liabilities and charges

	Early retirement costs (a)	Unfunded pension provision (b)	Insurance claims (c)	Other	Total
Group	£m	£m	£m	£m	£m
At 31 December 1999	0.9	1.8	20.2	0.2	23.1
Provided in the year	0.1	-	5.5	-	5.6
Utilised in the year	-	(1.3)	(7.6)	-	(8.9)
Released in the year	-	-	(0.7)	-	(0.7)
Exchange difference	-	-	0.5	-	0.5
At 31 December 2000	1.0	0.5	17.9	0.2	19.6

	Insurance claims (c)
Company	£m
At 31 December 1999	8.4
Provided in the year	3.7
Utilised in the year	(4.0)
At 31 December 2000	8.1

(a) The early retirement costs provision relates to a scheme for certain East Midlands Airport employees who are required to retire from their current positions in advance of the normal retirement date, due to the physically demanding nature of their employment.
(b) The unfunded pension provision relates to commuted pensions not provided within the pension schemes.
(c) 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:

(i) the existing claims under the insurance programme for UK operations relating to 2000, 1999, 1998, 1996 and prior years;
(ii) the existing claims of the National Express Group insurance programme held within National Express Guernsey Limited, the Group's captive insurance company, and relating to 1997; and
(iii) the existing claims arising in the USA.

23 Deferred taxation

The major components of the provision for deferred taxation and the amounts not provided for are as follows:

	Provided		Not provided
Group	2000 £m	1999 £m	2000 £m	1999 £m
Potential capital gains on properties	-	-	7.4	5.5
Accelerated capital allowances	-	-	53.6	29.1
Short term timing differences	-	-	(7.6)	(4.7)
Tax effect of losses carried forward	-	-	(13.9)	(2.0)
	-	-	39.5	27.9

No provision has been made or quantified in respect of any additional taxation liabilities which would arise if retained profits of overseas undertakings were remitted to the UK.

24 Called-up share capital

	2000 £m	1999 £m
At 31 December
Authorised:
146,650,000 (1999: 146,650,000) ordinary shares of 5p each	7.3	7.3
Issued called-up and fully paid:
129,658,233 (1999: 115,918,625) ordinary shares of 5p each	6.5	5.8

	£m	Number of shares
Movement in ordinary shares during the year
At 31 December1999	5.8	115,918,625
Exercise of share options	0.1	1,305,678
Issue of shares to Prism shareholders	0.5	9,715,912
West Midlands Travel Limited ("WMT") appropriation	0.1	2,718,018
At 31 December 2000	6.5	129,658,233

(i) Option schemes
At 31 December 2000 options to purchase ordinary shares had been granted to and not exercised by participants of National Express Group PLC ("NEG") share option schemes as follows:

	Number of shares 2000	Number of shares 1999
NEG Executive Share Option Scheme	2,878,117	1,522,099
NEG Savings Related Share Option Scheme	2,592,035	4,110,844
WMT Share Option Scheme 1991
(holders of WMT options who accepted the NEG Replacement Option Offer)	3,240	3,240
WMT Long Service Option Scheme
(available to WMT employees who served 25 years)	628,180	553,980

(ii) NEG Employee Benefit Trust
The Trust holds 745,421 shares (1999: 815,725 shares) on behalf of two NEG share schemes. The dividends payable on these shares have been waived. At 31 December 2000, the shares held under these schemes were as follows:

	Number of shares 2000	Number of shares 1999
WMT Long Service Option Scheme	720,627	763,747
NEG Long Term Share Incentive Scheme	24,794	51,978

Details of the exercise prices and conditions of exercise of NEG option schemes are contained in the report on Directors' remuneration.

(iii) WMT: Approved Profit Sharing Schemes ("APSS")
The APSS exists for the benefit of WMT employees. The Trustee of the APSS has the right to acquire WMT shares and to convert them into NEG shares for appropriation to individual beneficiaries over the remaining life of the scheme. These rights have been accounted for as part of the consideration paid for WMT in 1995 and are dealt with in the share capital to be issued reserve. At the end of the year there were 8,299,753 (1999: 11,017,771) NEG shares held for the benefit of the Trustee which remained unissued.

Details of the various WMT schemes were set out in the Listing Particulars issued on 28 March 1995, copies of which are available from the Company Secretary's office.

(iv) QUEST
During the year the QUEST purchased 305,000 (1999: 1,040,000) shares in the market for £1.6m (1999: £7.8m). In addition to an interest free loan of £1.3m (1999: £4.5m), a contribution of £0.3m (1999: £3.3m) has been gifted to the QUEST by the Company to reflect the difference between the market price on issue of the shares and the option price. All rights to dividend on these shares have been waived. The trustee of the QUEST is National Express QUEST Trustees Limited, which is a wholly-owned subsidiary of the Group.

At the year end the QUEST holds 1,108,656 shares (1999: 1,043,917 shares) on behalf of NEG share schemes. The market value of these shares at that date was £8.Om (1999: £7.6m). During the year, options over 240,261 (1999:112,563) shares were exercised by employees.

(v) Prism Rail PLC Profit Sharing Scheme (the "Prism Scheme")
The Prism Scheme exists for the benefit of employees of the four train operating companies owned by Prism. Three appropriations have been made to employees under the scheme in 1998, 1999 and 2000. There are a total of 122,979 NEG shares held in Trust under these appropriations. No further awards will be made under the Prism Scheme.

25 Reserves

	Share Premium	Share capital to be issued	Merger reserve	Capital reserve	Revaluation reserve	Profit and Loss account	Total
Group	£m	£m	£m	£m	£m	£m	£m
At 31 December 1999	35.7	0.5	-	17.0	17.9	185.9	257.0
Shares issued during the year	4.8	(0.1)	80.0	-	-	-	84.7
Transfers from revaluation reserve	-	-	-	-	(0.4)	0.4	-
Other transfers	-	-	(22.7)	-	-	22.7	-
Exchange differences	-	-	-	-	-	(0.5)	(0.5)
Retained profit for the year	-	-	-	-	-	25.1	25.1
At 31 December 2000	40.5	0.4	57.3	17.0	17.5	233.6	366.3

The merger reserve arises in the year on the acquisition of Prism in accordance with Section 131 of the Companies Act 1985. An amount equal to the total goodwill amortisation charged in the profit and loss account during the year was transferred from the merger reserve to the profit and loss account.

As at 31 December 2000, the cumulative amount of goodwill on acquisitions made prior to 1 January 1998 which has been set off against the capital reserve is £249.2m (1999: £249.2m).

Included within the revaluation reserve is £3.5m (1999: £3.5m) which relates to investment properties.

	Share Premium	Share capital to be issued	Merger reserve	Capital reserve	Profit and Loss account	Total
Company	£m	£m	£m	£m	£m	£m
At 31 December 1999	35.7	0.5	205.8	60.5	10.8	313.3
Shares issued during the year	4.8	(0.1)	8.4	(8.4)	-	4.7
Retained profit for the year	-	-	-	-	367.4	367.4
At 31 December 2000	40.5	0.4	214.2	52.1	378.2	685.4

The retained profit for the year for the Company includes £318.5m (1999: nil) that is non-distributable.

26 Capital commitments

Group	2000 £m	1999 £m
Contracted	11.7	19.3

27 Other financial commitments

The Trains division has contracts with Railtrack plc for access to the railway infrastructure (tracks, stations and depots). It also has contracts under which rolling stock is leased. Commitments for payments in the next year under these operating leases are shown below.

Trains division commitments	2000 £m	1999 £m
Operating leases which expire:
Within one year	104.9	5.4
Between two and five years	877.3	471.7
Over five years	77.3	56.5
	1,059.5	533.6

Commitments for payments over the next year for the other divisions are shown below:

	Land and buildings		Other
Other divisions' commitments	2000 £m	1999 £m	2000 £m	1999 £m
Operating leases which expire:
Within one year	2.1	1.5	0.3	0.4
Between two and five years	4.2	3.8	1.3	1.5
Over five years	11.0	8.8	0.4	0.2
	17.3	14.1	2.0	2.1

	Land and buildings
Company	2000 £m	1999 £m
Operating leases which expire:
Between two and five years	0.2	-
Over five years	0.5	0.4
	0.7	0.4

28 Pension commitments

The pension charge for the year amounted to £12.3m (1999: £9.7m) of which £6.8m (1999: £1.9m) related to overseas schemes. Outstanding contributions at the year end amounted to £0.7m (1999: £1.1m). The Group operates a number of pension schemes and the principal schemes are listed below:

(i) Coaches and Airports divisions
Benefits are provided based on final pensionable earnings. The assets of the schemes are held separately from those of the Group, being invested in managed funds. Contributions to the schemes are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the Group. The contributions are determined by qualified actuaries using the projected unit method. The latest actuarial assessment of the principal scheme was at 6 April 1998.

The aggregate market value of the assets in these schemes at the dates of the latest actuarial valuations was £21.6m. The actuarial value of those assets represented approximately 95% of the liability for benefits that had accrued to that date, after making full allowance for future earnings increases.

The principal assumptions made when valuing the principal scheme are that the rate of investment returns will be 6.50% per annum and that earnings will increase at 4.5% per annum.

The contributions of the Group and the employees are calculated such that there is no significant anticipated surplus or deficit for the schemes on a long term basis and accordingly there is currently no variation between contributions paid and the pension cost recorded in these accounts.

(ii) Buses division
West Midlands Travel Limited and its subsidiaries operate a number of pension schemes providing benefits both on a defined benefit and a defined contribution basis. The assets are held separately from those of the companies. Contributions to the schemes are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the companies. Valuations of the schemes are undertaken by independent qualified actuaries and contributions paid in accordance with their recommendations. The latest actuarial assessment of the principal scheme was at 31 March 1998.

The aggregate market value of the assets in these schemes at the dates of the latest actuarial valuations was £365m.

The actuarial value of the assets in the principal scheme represented approximately 130% of the liability for benefits that had accrued to that date, after making full allowance for future earnings increases. This surplus will be recognised as a variation from the regular cost over the remaining service lives of the employees.

The principal assumptions made when valuing the principal scheme are that the rate of investment returns will be 7.0% per annum and that earnings will increase at 4.5% per annum.

(iii) Trains division
The majority of the employees of the ten train companies are members of the appropriate shared-cost section of the Railways Pension Scheme ("RPS"), a defined benefit scheme. The last actuarial valuations for the RPS sections of the train operating companies owned by the Group were at 31 December 1998. The aggregate market value of the assets in these schemes at the date of the last actuarial valuation was £599m. The actuarial value of the assets for the schemes represented a range of approximately 104% to 123% of the liability for the benefits that had accrued to that date, after making full allowance for future earnings increases. Any available surpluses are dealt with in accordance with recognised distribution limits.

The principal assumptions made when valuing the schemes are that the rate of investment returns will be 6.75% per annum and that earnings will increase at 4.5% per annum.

(iv) USA and Australia divisions
Subsidiaries in the USA contribute to a number of defined contribution and employee savings plans.

The Australian subsidiaries contribute to a number of pension schemes providing benefits both on a defined benefit and a defined contributions basis. The principal defined benefit schemes are State run, comprising a large number of participating companies, and are not controlled by the Group. In accordance with the franchise agreements, the Group is not responsible for any shortfall in funding prior to the date when the franchises were awarded.

29 Related party transactions

In respect of services provided, the Group received £5.1m (1999: £4.9m) from Altram LRT Limited, an associated undertaking. Included in debtors due from associated undertakings is £1.0m (1999: £1.5m) due from Altram LRT Limited and a loan of £1.0m (1999: £1.0m) to Inter-Capital and Regional Rail Limited. Included in investments is a loan of £4.4m (1999: nil) to Altram LRT Limited.

30 Contingent liabilities

(i) Uncalled share capital and guarantees
The Company has amounts of uncalled share capital relating to eight of its subsidiary undertakings. The amounts uncalled total £34.8m (1999: £31.1m) and are unlikely to be called in the near future. The Company has also guaranteed credit facilities totalling £13.4m (1999: £12.0m) of certain subsidiary undertakings.

(ii) Bonds and letters of credit
In the ordinary course of business, the Group is required to procure performance bonds, season ticket bonds and letters of credit in support of its operations. As at 31 December 2000, the Company had issued counter-indemnities relating to these amounting to £154.0m (1999: £75.6m). These contingent liabilities are not expected to crystallize.

31 Cash flow statement

(a) Reconciliation of operating profit to net cash inflow from operating activities