Annual Report and Accounts 2008
Directors' Report
The Directors are pleased to present their annual report and the audited financial statements for the year ended 31 December 2008.
Principal activities
National Express Group PLC is the holding company of the National Express Group of companies. Its subsidiary companies provide mass passenger transport services in the UK and overseas.
Business review
Reviews of the business, likely future developments and details of principal risks and uncertainties as required by Section 417 of the Companies Act 2006 and paragraph 4.1.8R of the Disclosure and Transparency Rules of the Financial Services Authority (the "DTRs") can be found in the following pages and are incorporated into this report by reference:
Results and dividends
The profit on ordinary activities before tax from continuing operations for the year ended 31 December 2008 was £109.9 million (2007: £149.3 million) and a profit attributable to equity shareholders of £118.8 million (2007: £105.1 million) was transferred to reserves.
The Directors recommend a final dividend of 10p per share which, together with the interim dividend of 12.72p per share paid on 26 September 2008, gives a total dividend for the year of 22.72p per share (2007: 37.96p). Subject to shareholder approval, the final dividend will be paid on 3 July 2009 to shareholders on the register at 19 June 2009.
Directors
The Directors of the Company who served during the year were:
David Ross (resigned 9 December 2008)
Richard Bowker
Miranda Curtis (appointed 1 June 2008)
Jorge Cosmen
Roger Devlin
Sir Andrew Foster
Barry Gibson (resigned 31 May 2008)
Jez Maiden (appointed 17 November 2008)
Ray O'Toole
Tim Score
Adam Walker (resigned 26 March 2008)
Directors are appointed by ordinary resolution at a general meeting of ordinary shareholders. The Directors have the power to appoint a Director during the year but any person so appointed must be put up for appointment at the next Annual General Meeting. One-third of the Directors, or the number nearest to but not exceeding one-third, must retire from office at each Annual General Meeting. A retiring Director is eligible to stand for re-appointment. Any Director who has held office for three years or more since their last appointment must retire and offer themselves for re-appointment.
In accordance with the above provisions Ray O'Toole and Jorge Cosmen will retire by rotation at the 2009 Annual General Meeting and, being eligible, will offer themselves for re-election. Miranda Curtis will stand for election at the 2009 Annual General Meeting following her appointment to the Board on 1 June 2008. Jez Maiden will stand for election at the 2009 Annual General Meeting following his appointment to the Board on 17 November 2008. Adam Walker resigned as a Director of the Company on 26 March 2008. Barry Gibson resigned as a Director of the Company on 31 May 2008 and David Ross resigned as a Director of the Company on 9 December 2008. The names and biographies of the current Directors appear in Board of Directors and Management. Details of the remuneration of the Directors, their interests in shares of the Company and service contracts are contained in the Directors' Remuneration Report.
Directors' interests in contracts
Except as stated in note 37, no contract existed during the year in relation to the Company's business in which any Director was materially interested.
Directors' Liability Insurance
The Company maintains Directors' and Officers' Liability Insurance in respect of legal action that might be brought against its Directors. Under the Company's Articles of Association the Company may indemnify its Directors and Officers in accordance with the provisions of Section 233 of the Companies Act 2006 although during 2008 it has not done so. In 2005 indemnities were provided by the Company to Ray O'Toole who has been joined as a defendant in proceedings being brought before the Supreme Court of New South Wales. These proceedings relate to a period of time when Ray O'Toole was a Director of Bosnjak Holdings Pty Ltd, which was a subsidiary of the Group. These indemnities remain in place. Copies of the Articles of Association and the indemnity for Ray O'Toole are available for inspection at the Company's registered office.
Employment policies
The Group strives to meet its business objectives by motivating and encouraging its employees to be responsive to the needs of its customers and continually improve operational performance. The Group is committed to providing equality of opportunity to employees and potential employees. This applies to appropriate training, career development and promotion for all employees, regardless of physical ability, gender, sexual orientation, religion, age or ethnic origin. All UK businesses report diversity data and are responsible for benchmarking against their local population.
Full and fair consideration is given to applications for employment received from disabled persons, according to their skills and capabilities. The services of any existing employee disabled during their period of employment are retained wherever possible.
Employee involvement
The Group encourages employee involvement in its affairs. Subsidiary companies produce a range of internal newsletters and circulars which keep employees abreast of developments. Senior management within the Group meet regularly to review strategic developments. Dialogue takes place regularly with Trade Unions and other employee representatives on a wide range of issues. Employees are able to share in the Group's results through various employee share schemes.
Employee satisfaction is tracked through an annual employee survey. Results from the 2008 survey have been fed back to employees and action plans at local level rolled out. A number of Group-wide initiatives have been established for employees. For example, the "Express Awards" reward outstanding employee activities in and out of the workplace. In the Directors' view the current initiatives are deemed to be effective.
Environmental policy
Information on the Group's environmental initiatives can be found in the Corporate Responsibility Review and in the separate Corporate Responsibility Report which is published later in the year on the Company's website, www.nationalexpressgroup.com.
Charitable and political contributions
Charitable donations made during the year totalled £366,000 (2007: £374,000). It is the Group's policy not to make political donations and accordingly none were made in the year. However the Company did attend and sponsor various political events during the year for which total expenditure was £13,000 (2007: £27,900).
Creditors' payment policy and practice
It is the Company's policy to agree terms of payment prior to commencing trade with any supplier and to abide by those terms based on the timely submission of satisfactory invoices.
Trade creditor days of the Company for the year ended 31 December 2008 were 21 days (2007: 22 days) based on the ratio of Company trade creditors at the end of the year to the amounts invoiced during the year by trade creditors.
Financial instruments
Details of the use by the Company and its subsidiaries of financial instruments can be found in the Notes to the Consolidated Accounts.
Major shareholdings
As at 26 February 2009 the Company had been notified of the following interests in its shares which represent 3% or more of the voting rights in the Company:
| Ordinary shares | Percentage ofshare capital | Nature of holding | |
|---|---|---|---|
| European Express Enterprises Ltd | 13,503,600 | 8.73 | Direct |
| 13,100,610 | 8.47 | Indirect | |
| Barclays Bank PLC | 6,429,425 | 4.16 | Indirect |
| Barclays Global Investors | 6,058,928 | 3.92 | Indirect |
| Legal & General Group Plc | 6,037,172 | 3.90 | Direct |
| Newton Investment Management Ltd | 6,831,739 | 4.42 | Direct |
| Prudential PLC | 10,176,423 | 6.58 | Direct |
These holdings include the Directors' holdings which are shown on page 54 of the Directors' Remuneration Report.
Share capital and rights attaching to the Company's shares
Under the Company's Articles of Association, any share in the Company may be issued with such rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Company may from time to time by ordinary resolution determine (or, in the absence of any such determination, as the Directors may determine).
At 31 December 2008, the Company's issued share capital consisted of a single class of ordinary shares with a nominal value of 5p. At a general meeting of the Company every member has one vote on a show of hands and on a poll one vote for each share held. The notice of general meeting specifies deadlines for exercising voting rights either by proxy or present in person in relation to resolutions to be passed at a general meeting. Details of the authorised and issued share capital of the Company and details of shares issued during the year can be found in note 32.
No shareholder is, unless the Board decides otherwise, entitled to attend or vote either personally or by proxy at a general meeting or to exercise any other right conferred by being a shareholder if he or she or any person with an interest in shares has been sent a notice under Section 793 of the Companies Act 2006 (which confers upon public companies the power to require information with respect to interests in their voting shares) and he or she or any interested person failed to supply the Company with the information requested within 14 days after delivery of that notice. The Board may also decide that no dividend is payable in respect of those default shares and that no transfer of any default shares shall be registered. These restrictions end seven days after receipt by the Company of a notice of an approved transfer of the shares or all the information required by the relevant Section 793 notice, whichever is earlier.
The Directors may refuse to register any transfer of any share which is not a fully-paid share, although such discretion may not be exercised in a way which the Financial Services Authority regards as preventing dealings in shares of that class from taking place on an open or proper basis. The Directors may likewise refuse any transfer of a share in favour of more than four persons jointly.
The Company is not aware of any other restrictions on the transfer of ordinary shares in the Company other than:
- certain restrictions that may from time to time be imposed by laws and regulations (for example, insider trading laws); and
- pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the Company require approval of the Company to deal in the Company's shares.
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities or voting rights.
Resolutions will be proposed at the 2009 Annual General Meeting to authorise the Directors to exercise all powers to allot shares and approve a limited disapplication of statutory pre-emption rights. Details are set out in the Notice of Meeting accompanying this document.
The Company was granted authority at the Annual General Meeting in 2008 to purchase its own shares up to an aggregate value of 10% of the issued nominal capital. The authority was not used during the year. The authority is renewed annually and approval will be sought at the Annual General Meeting in 2009 for its renewal. Further details are set out in the Notice of Meeting accompanying this document.
As at 26 February 2009 the Company held a total of 1,825,000 ordinary 5p shares (nominal value £91,250) in treasury equal to 1.2% of the issued share capital.
Share schemes
The IFG Trust (Jersey) Limited, as Trustee of the National Express Group Employee Benefit Trust, as at 26 February 2009 held 0.1% of the share capital of the Company for employee share schemes. Further details of the Company's employee share schemes can be found in note 7. The Trustee may vote the shares held by the Trust at its discretion.
Annual General Meeting
The Annual General Meeting will be held on 6 May 2009. Shareholders will be asked to approve six items of special business, details of which are given in the Notice of Meeting accompanying this report.
Articles of Association
The Company's Articles of Association may only be amended by a special resolution at a general meeting of shareholders.
Powers of the Directors
Subject to its Articles of Association and relevant statutory law and to any direction that may be given by the Company in general meeting by special resolution, the business of the Company shall be managed by the Directors, who may exercise all powers of the Company which are not required to be exercised by the Company in general meeting.
Material contracts and change of control agreements
The Company is party to a number of banking agreements which allow for notification of change of control within five days of becoming aware of the event following which repayment of outstanding commitments is to be made within thirty days.
TThe Group's UK rail portfolio currently comprises three DfT franchises: National Express East Coast, National Express East Anglia and c2c. Each of the three rail franchise agreements with DfT contains termination rights for the benefit of DfT which would be triggered by a change of control in National Express Group PLC.
The Group's rail franchisees lease their rolling stock. National Express East Coast's rolling stock leases with HSBC Rail (UK) Limited and with Porterbrook Leasing Company Limited both contain termination rights for the benefit of the lessor which would be triggered by a change of control in National Express Group PLC.
All of National Express East Anglia's rolling stock leases with HSBC Rail (UK) Limited and its more significant leases with Porterbrook Leasing Company Limited contain termination rights for the benefit of the lessor which would be triggered by a change of control in National Express Group PLC.
The Group's UK bus business operates routes in London under a framework agreement with TfL. That agreement contains a termination right for the benefit of TfL which would be triggered by a change of control in National Express Group PLC.
The Group's North American business operates school bus services under contracts with school boards. Those contracts invariably contain a change of control clause for the benefit of the board which would be triggered by a change of control in National Express Group PLC. While no one single school bus contract could be considered significant in the context of the Group turnover, the impact on that turnover in the event that each school board exercised its termination right on a change of control would be significant.
Directors' and employees' service contracts
Ray O'Toole has a provision in his service contract which provides that, where the Company initiates a termination other than for cause, within six months of a change of control taking place the Company will exercise its option to make a payment in lieu of notice of an amount equal to salary and benefits that the Director would have received during the notice period. There are no other agreements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid.
Auditors
Resolutions to appoint Ernst & Young LLP as auditor of the Company and to authorise the Directors to fix their remuneration will be proposed at the 2009 AGM.
Disclosure of information to auditors
The Directors confirm that, so far as they are aware, there is no relevant audit information of which the Company's auditors are unaware and that each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Going concern
It should be recognised that any consideration of the foreseeable future involves making a judgement, at a particular point in time, about future events which are inherently uncertain. Nevertheless, at the time of preparation of these accounts and after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts. Details of borrowings, liquidity risks and committed facilities can be found in note 29 and note 30 to the Group financial statements and in the OFR.
Post balance sheet event
On 24 October 2008, the Group announced that it planned to exit the Dot2Dot business. On 9 January 2009, the Group concluded the sale of the Dot2Dot business and it has been classified as a discontinued operation for the year ended 31 December 2008. Further details are included in note 11.
Directors' responsibilities for the financial statements
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards as adopted by the European Union or, in the case of the Company's accounts, UK GAAP.
The Directors are required to prepare financial statements for each financial year that give a true and fair view of the financial position of the Company and of the Group and the financial performance and cash flows of the Group for that period. In preparing those accounts the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- present information and accounting policies in a manner that provides relevant, reliable and comparable information;
- provide additional disclosures where necessary to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance; and
- state that the Company and the Group have complied with applicable accounting standards, subject to any material departures disclosed and explained in the accounts.
The Directors confirm that these accounts comply with the above requirements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the accounts comply with relevant legislation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' responsibility statement pursuant to DTR 4
The Directors confirm that, to the best of each person's knowledge:
(a) the financial statements, which have been prepared in accordance with applicable United Kingdom law and International Financial Reporting Standards as adopted by the European Union or, in the case of the Company's accounts, UK GAAP, give a true and fair view of the assets, liabilities, financial position and profit of the Company and of the Group taken as a whole; and
(b) the Operating and Financial Review contained in this report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Tony McDonald
Secretary
26 February 2009