22/07/2002

FINANCIAL HIGHLIGHTS

• Turnover £2,111m (2001 - £2,084m)
• Profit before tax¹ £107m (2001 - £123m²)
• Free cash flow £184m (2001 - £228m)
• Earnings per share¹ 6.3p (2001 - 7.5p²)
• Dividend per share re-based to 2.6p (2001 - 3.8p)

¹ Profit figures are stated before goodwill amortisation and exceptional items
² Prior year comparative figures have been re-stated for FRS 19, "Deferred Tax"

BUSINESS HIGHLIGHTS

• Agreement with Strategic Rail Authority on Virgin Rail Group underpins viability of CrossCountry franchise and long-term shareholder value on West Coast franchise
• South West Trains deed of amendment signed
• Discussions continuing on long-term franchise
• New franchise agreement to be signed later this year
• New rolling stock deliveries progressing on our three major rail franchises
• UK Bus sees strong growth in London and regional partnership centres
• Rail development strategy on course; first international partnership with Wellington Regional Council
• Continued strong performance from Overseas Bus
• Coach USA costs under control; May/June revenues 8% below the prior year; full year operating profits expected to be no better than 2002
• Full business review of Coach USA to be undertaken by December 2002

BOARD CHANGES

• Keith Cochrane resigns as Chief Executive
• Brian Souter, Executive Chairman, to become acting Chief Executive
• Robert Speirs, Senior Independent Director, to become acting Non Executive Chairman

Brian Souter, Acting Chief Executive, said:

"I am pleased to report that results for the year ended 30 April 2002 are in line with expectations but we are disappointed with trading at the start of this financial year in Coach USA. As a result of this further setback at Coach USA the Board has asked for a full review of our North American business. Keith Cochrane, who has had responsibility for the management and strategy of the Coach USA operations, has resigned as Group Chief Executive and the Board has accepted this with regret.

The Board has asked me, as acting Chief Executive, to initiate this review and report the findings by December 2002.

Keith Cochrane has made a significant contribution to Stagecoach during his eight years with the Group and I would like to record my personal thanks for his hard work and dedication during that time.

I am pleased that Virgin Rail Group has reached an agreement with the Strategic Rail Authority that helps secure the future viability of both its rail franchises."

ACTING CHIEF EXECUTIVE’S STATEMENT

In common with the transport sector as a whole, Stagecoach Group has faced unprecedented challenges over the past year. The economic aftermath of the tragic events of September 11 in the USA and the well-documented problems of the UK rail infrastructure network resulted in a difficult trading environment.

Turnover for the year was £2,111.4m (2001 - £2,083.5m). Operating profit before goodwill amortisation and exceptional items was £166.6m (2001 - £198.9m). Earnings per share on an equivalent basis were 6.3 pence (2001 – 7.5 pence).

The Board of Directors are recommending that a final dividend of 1.3 pence per share (2001 – 2.5 pence) is proposed, giving a total dividend of 2.6 pence (2001 – 3.8 pence). This rebasing of the dividend reflects the reduction in current year profitability and the current outlook.

The new financial year has begun with a major step forward in each of our two main rail businesses. At South West Trains, we signed a deed of amendment in June 2002 to the existing franchise which is due to expire in February 2003. This provides for additional funding to be made available by the Strategic Rail Authority to facilitate work on a number of new projects that will form part of the new long-term franchise at South West Trains. The signing of the new franchise agreement is expected later this year.

At Virgin Rail Group, we have reached an agreement with the Strategic Rail Authority that ensures the ongoing commercial viability of the West Coast Main Line and CrossCountry franchises. While discussions are continuing over the longer-term structure of both franchises, this is a very positive development in the delivery of a new inter-city rail network. Together, Virgin Rail Group and South West Trains account for around 25% of the revenues of the UK Rail network and these two developments will help to secure our long-term presence in that market.

During the year, passenger services at South West Trains were disrupted by industrial action. We felt the disputes were unjustified and unnecessary. We had a clear strategy to protect our passengers’ interests and this proved to be successful. I believe the strong management action adopted will make the process easier to manage in the future and we will continue to seek to create an improved industrial relations climate.

I also believe that the train operating companies must be involved with the Strategic Rail Authority in the development of its strategy for the UK rail network. Earlier in the year, we issued a document entitled “A Platform for Change”. This document was intended as a discussion paper that advocated vertical integration for the railways, which would be achieved by bringing the trains and the track under a single management structure. I continue to believe that a more integrated rail industry would not only further support the delivery of a safe and reliable rail network but would also align with the interests of passengers and shareholders alike.

In North America, we were encouraged by the way Coach USA was moving forward prior to September 11. Our challenge is to regain that momentum against a backdrop of global uncertainty and a difficult operating environment.

The cost base of Coach USA is firmly under control but revenues and therefore operating profits for the first two months of the financial year were below our expectations. Reported revenues were disappointing across Coach USA. The uncertain economic environment in North America has lead to reduced spending by organisations and individuals on leisure activities and this has impacted our charter, tour, airport, taxi and sightseeing related businesses. Our scheduled line run operations have also been disappointing as commuter traffic has fallen reflecting the economic down-turn. As a result of this further setback at Coach USA the Board has asked me to initiate a full review of our North American business. I will report to the Board the findings of this review by December 2002.

I am deeply saddened that Keith Cochrane has resigned as Chief Executive of the Group. Keith has worked very hard for Stagecoach as Chief Executive and previously as Finance Director. As a result of Keith’s resignation, the Board has appointed me as Acting Chief Executive and our senior non-executive director, Robert Speirs, as Acting non-executive Chairman. Following the completion of the business review of Coach USA, the Board will agree the most appropriate management structure for the Group going forward.

During the year, Iain Duffin joined our board as an independent non-executive director. His considerable managerial experience gained on both sides of the Atlantic is already benefiting the Group.

Brian Cox retired as Executive Director - UK Bus on his 55th birthday. Brian was instrumental in the reorganisation of our UK Bus operations and he has played a key role in the strengthened marketing and re-branding of our bus services. I would like to put on record my personal thanks for his strong and valued contribution to Stagecoach over the past 15 years.

It has been a particularly difficult and challenging year for the people who manage and deliver frontline services to customers. I want to record my grateful thanks for their energy, loyalty and hard work. We will continue to invest in our people; they have a crucial role to play at all levels in an increasingly competitive marketplace.

Stagecoach is focusing on innovative solutions to passenger transport needs in all its global operations. At Citybus, our excellent operational performance to date has put us in a good position to capitalise on new franchise opportunities which the Hong Kong Government has announced; in New Zealand we are working closely with Government and have introduced new services that are already delivering organic growth; in UK Rail we are working in partnership with the Strategic Rail Authority and others to deliver long term benefits to our passengers at Virgin Rail and South West Trains; and in our UK Bus division we continue to work closely in partnership with Transport for London and a number of local authorities and make significant investment in equipment and our people to deliver long-term growth.

It is vital that the entrepreneurial drive that private ownership delivers is maintained and harnessed to keep on delivering safety and service for the travelling public and value for our shareholders.

Brian Souter
Acting Chief Executive